Stoicism is an ancient Greek school of philosophy founded in Athens by Zeno of Citium in the early 3rd century BC. The philosophy has been popularized within entrepreneurship in the last ten years, and many prominent figures now use it as their personal operating system. Stoicism emphasizes personal virtue and wisdom, it teaches self-control and fortitude, it promotes rationality and restraint. These are not qualities ordinarily associated with entrepreneurs, who you probably know can be irrational, impulsive and hot-headed at times.

Channeling Stoicism could not only give an entrepreneur superpowers, it can help them navigate business challenges with grace and resilience, finding inner peace within external chaos. Use these prompts to apply Stoicism to your business. Copy, paste and edit the square brackets in ChatGPT, and keep the same chat window open so the context carries through.

Stoicism for entrepreneurs: 7 prompts for ChatGPT

View obstacles as opportunities

Notable stoic Marcus Aurelius once wrote, “The impediment to action advances action. What stands in the way becomes the way.” Challenges, therefore, are not setbacks, but opportunities for growth and learning. The obstacle is the way. What obstacles are crossing your path and how can you see them as favourable? What growth do they hold, what opportunities could overcoming them unlock? Use this prompt to get ChatGPT’s help in finding their secrets.

“Assume the role of a business coach with a deep understanding of stoic philosophy and its application to modern business. In my current entrepreneurial endeavors, I’m facing specific obstacles such as [describe the immediate challenges or situations you’re dealing with]. Can you help me reframe these current challenges as opportunities for growth and learning? How can I leverage these situations to benefit both my business and personal development?”

Hold less emotional attachment

On any given day you’ll be taken on a rollercoaster of emotions. Huge joy from a big client win or a great bit of press, followed by feeling like all is lost after some adverse news, then apathy, impatience and frustration when results don’t happen as fast as you want. Stoicism teaches emotional resilience, which every entrepreneur could use. Don’t be swayed by fleeting emotions. Maintain a calm demeanour throughout the most intense business volatility with this simple prompt.

“During my business activities, I often face situations such as [describe specific events or scenarios that trigger intense emotions]. Provide two simple exercises, based on the stoic principle of emotional detachment, that will help me cultivate emotional resilience and maintain a calm demeanor during these challenging times.”

Focus on what you can control

You can control what you put in, but not what you get out. It doesn’t matter how long you spent on that pitch, how much knowledge you have of that process, or how much effort you put into the marketing plan, you still cannot control the results of your actions. For entrepreneurs, this is frustrating. Stoicism teaches that we should focus on what we can control and accept what we can’t.

“In my business, I often find myself fixated on outcomes, especially in scenarios like [describe specific endeavors or efforts where the outcome was uncertain]. Can you provide guidance, drawing from Stoic principles, on how I can enjoy the process of doing the work rather than being fixated on the outcome? Additionally, suggest how I can change how I think about inputs to make them more enjoyable, so I become more indifferent to the results they may lead to.”

Pursue personal virtue

If you do the right thing for the right reasons, over a number of years you’ll build a reputation of integrity and fairness. People will trust you. Stoicism emphasizes personal virtue and integrity as the highest good. That means conducting business ethically and being excellent in everything you do. It sounds straightforward, but when the opportunity arises to cut some corners or score a quick buck, will your personal virtue hold out? Find ways to strengthen it with this prompt.

“Recently, I’ve been working towards achieving [specific goal], and I’ve encountered a situation where I could potentially achieve more by [action that might compromise personal virtue], even though I know the right approach would be [ethical alternative]. Drawing from Stoic principles, can you guide me on how to navigate this situation while upholding my personal virtue and integrity? How can I make decisions that align with ethical conduct and long-term excellence, even when faced with tempting shortcuts?”

Practice regular reflection

Learning from the past requires paying it some attention. We can’t carry forward its lessons without understanding what they are. Reflection, therefore, is essential for every entrepreneur. Stoics like Seneca engaged in regular reflective practices, analyzing their actions at the end of each day to become a better person tomorrow. Assess your decisions and improve future actions by following his lead. Create a reflection habit with ChatGPT, by asking it for your personal set of reflection questions.

“In my business, I’m working towards the following goals [list your goals] and it’s important that I [describe how you want to show up, and the values you want to live by]. To ensure continuous growth and learning, I want to adopt a daily reflective practice inspired by Stoic philosophy. Create a personalized set of five reflection questions based on what’s important to me, so I can assess my decisions and actions at the end of each day.”

Value simplicity

When something is too complicated it wastes energy. Complicated prospecting loses customers along the way. Complicated apps cause people to leave and never return. Complicated things to do every day cause headaches, cost motivation, and lead to inaction. Stoicism advocates for simplicity and the removal of unnecessary materialism and distraction. When entrepreneurs focus on what truly matters, processes are streamlined and complexity is eliminated, so they are free to secure results and move forward.

“In my business, one process that could be unnecessarily complex is [describe the specific business process in detail]. Given the Stoic emphasis on simplicity and removing unnecessary elements, can you provide suggestions on how to streamline and simplify this process, ensuring it’s more efficient and effective for both my team and our customers?”

Adopt a global mindset

If done right, entrepreneurship can be a great leveler. It doesn’t matter where you live, what you look like or what language you speak. Whatever your background, you can start a business and serve a customer base. You can serve people beyond those in your town. Cosmopolitanism is a big part of Stoicism. The Stoics believed in a shared brotherhood among all humans, which entrepreneurs can follow. Adopt a global mindset and view your business as a way to serve the broader community and not just local interests with this simple prompt for ChatGPT.

“Currently, my business focuses on [describe your business and its primary offerings or target market]. I want to think bigger and explore ways to serve a broader and more diverse community, inspired by the Stoic principle of cosmopolitanism. Can you provide insights and strategies on how I can expand my business’s reach and impact, ensuring it resonates with a global audience?”

Apply Stoic philosophy to your business with ChatGPT

Stoicism isn’t just a philosophy; it’s a roadmap for entrepreneurial excellence. Boost your business with these prompts from ChatGPT, inspired by Stoic thinking. Turn problems into chances to learn, keep your emotions in check, and focus on things you can change. Make tasks simpler, think about your day’s choices, and see your business as something that can help people everywhere.

Use these prompts to perform better in your business and feel closer to your goals. When you’re closer to your goals, you can do more for your customers. Simple ideas make big success.

Ashley:
This is Real Estate Rookie, Episode 336. My name is Ashley Kehr, and I’m here with my co-host, Tony J. Robinson.

Tony:
Welcome to the Real Estate Rookie Podcast where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kick start your investing journey. Today, we’re doing a Rookie Reply, which means we’re answering questions from you, our audience. Ashley and I love doing these episodes because we get to talk to you guys. We get to answer the questions that are most pressing in your brains and your minds. Today, we talk a lot about ARV. I’m not even going to tell you what that is yet because you guys need to listen through. We talk about the pitfalls of ARV, how to make sure you’re doing it the right way, common mistakes we see new investors make, and pretty much just give you a masterclass on all things ARV.

Ashley:
Then we’re going to talk about repairs and maintenance and capital expenditures, what the difference is, what those things are, and different ways to navigate it. Plus, we’ll tell you a couple personal stories of things that are going on with us and especially dealing with it on your short-term rentals. I want to give a shout out to Grant Warrington. That is Grant W-A-R-R-I-N-G-T-O-N. You can find him at Instagram on his name. He does a great job of teaching how to buy and fix apartments. He has some really cool Reels about different stuff, like the lights he uses for rehabs, why you should not paint the electrical outlets, and things like that. So go give him a follow and learn some stuff about doing a rehab.

Tony:
Last thing I’ll say before we jump in, I’m not going to read a review today, but I just want to encourage all of you guys, if you’re a part of the rookie audience and you want to help us spread the message of financial independence through real estate investing, please do leave an honest rating and review on whatever platform it is that you’re listening to.
Also, make sure to follow or subscribe. Those are triggers that platforms, like Apple Podcasts and Spotify, look at to gauge the popularity of a show. So if you are listening, make sure you actually subscribe within the platform that you’re listening to so that Apple and Spotify know that you actually do enjoy the show. Because, again, the more folks that know about the Rookie podcast, the more folks we’re able to help and hopefully inspire to go on this journey with us.
Not only do we want you guys to leave reviews, but we also want you to be a part of the Rookie podcast. So if you want to apply to be a guest on this show with me and Ashley, head over to biggerpockets.com/guest, put in your application, and you just might be one of the stories that we get to share.

Ashley:
And we love it when you include your wins or something you learned from the amazing guests that we have on the show. So please feel free to add that into the review. Okay, let’s get into today’s questions. The first question is from TC Cohen. “What are ways or available software that a rookie can find comps in order to estimate a potential ARV of a property?” ARV is the after-repair value, and the comps are other properties that are comparable in size, finishes to the property that you are looking for the after-repair value. So what this process is, this is where you’re going to look at a property and you want to estimate how much it’s going to cost to rehab, but you also want to estimate how much it’s going to be valued at after the rehab is done. Because you don’t want the rehab to cost $50,000, you’re buying the property for $100,000, but after it’s repaired, it’s only going to be worth 120, but you put 150 into it. That’s why it’s important to find the ARV, the after-repair value.
One of the ways to do that is to look at other properties that have sold in the area that are comparable to the one you’re going to be fixing it up. You also want to compare it to what the property will be after you do the rehab. So if you’re putting in an extra bedroom, you want to find comparables that will be three bedrooms compared to two bedrooms as the property is now.
To start us off, one of the great resources that actually BiggerPockets has is Invelo. If you are a BiggerPockets Pro member, you get like $50 free to spend on there. They also have some free resources on there for you to find comparables in the area. That would be a great starting point. There’s also similar software such as PropStream where you can get a free seven-day trial to actually look up a property that sold in your area. Tony, what are some of the resources that you’re using?

Tony:
I think a free way for a new investor who’s maybe never done this before is to ask your realtor or your agent. If you have an agent in that market, ask them, “Hey, I’m looking at buying this property and doing this kind of rehab with it. What would your opinion be of the after-repair value?” Depending on how busy the agent is, sometimes they might be able to give you an idea of, “Hey, here are some properties I’ve sold recently, that I’ve seen sell recently that are similar to your property that went for this dollar amount.” So asking your agent.
If you know other real estate investors in that market, I think potentially getting your hands on an appraisal is one of the best ways to get that idea of the ARV for a property. Because not only do you get the appraised value of a property in that neighborhood, but you also get to see the methodology that the appraiser used to come up with that value. You can also see then the comps that the appraiser used inside of that appraisal. So I think some free ways are going to a realtor or going to other investors in that market that maybe have appraisals that you can use.
Then the other thing is you can look through Zillow. Zillow is definitely not perfect, but it does show you recently sold properties. You can kind of filter Zillow to look at properties that have sold in and around that area. So you can definitely use Zillow as a free tool. You just have to know how to tweak the data. Then a third software, Ash, I actually just got a free trial of this or maybe not even a free trial, I think I’ve ended up paying for it a week ago, but it’s Privy. Have you heard of Privy?

Ashley:
I’ve heard of it, but I’ve never used it.

Tony:
I was just trying to do some comp work, and I said, “Let me try out Privy.” I haven’t tried it before. It’s similar to PropStream and I’m sure Invelo as well. But I like the user interface just a little bit more, and it has a little bit of… I don’t know if it’s AI. I feel a lot people use the term AI pretty loosely these days. Basically, it has this kind of model that says, “Hey, I’m looking for fix-and-flip properties that are at 70% of the ARV.” It’ll look at the properties in and around that subject property and estimate, where can I get to 70% of the ARV? So Privy’s actually a pretty cool one as well.

Ashley:
The only other ones I would mention are a couple free resources. Your local newspaper for your city might actually put out recent sold transactions. Here in Buffalo, it’s the Buffalo News, and I think Buffalo Business First does it, too. They go back six weeks or whatever. So when you get the newspaper, it’ll be from transactions from six weeks ago, I think. It will list all of the sold properties by town that their newspaper covers. It doesn’t tell you how many beds, how many baths, anything like that. But you could take those properties, and then you’d have to go and type in the address into Google. Especially if it was a property that was listed on the MLS, you’ll be able to find how many bed/baths, and if it’s comparable. But you can check out the newspaper for that. Also, it’s available online. Sometimes after you visit the newspaper website so many times they make you actually buy it. You can’t just get the transactions for free.

Tony:
Ash, are you telling me you have the Sunday newspaper dropped off at your doorstep every week right now?

Ashley:
No, I don’t because that’s why I try and go find it online so I don’t have to pay for it. But I do get the Business one, that one I do. Then the other one is the OARS, which is O-A-R-S. A lot of cities and towns have this software available. The town actually chooses that they have this software. I had no idea what it stood for, but I googled it, and it’s OPI Authorization and Reporting Systems. It’s a information system that is actually created by the US government, and it puts out data about properties. So if you go to your town assessor’s webpage, it may have a link to this. You can type in your property address. There will be a button there to pull comps, and it will actually give you a suggestion of what comparables are in the area based on approximate location to your property and bedroom/bathroom count, and square footage. So I think that’s a great starting point, especially for rookies who are maybe just looking for a couple of deals. They’re not trying to run comparables on 50 properties a day. You can use these free resources or free trials before actually committing and paying for a subscription.

Tony:
Ash, should we talk a little bit about common mistakes that folks make when it comes to estimating your ARV, pulling your comps? Because I think it’s easy to kind of get overly excited, I think, to start to pull comps for a property. So I think there’s a few things to kind of button down. First is that when you’re searching for comps, you want to make sure that your subject property and the comparable property… When we say comps, guys, we’re talking about comparable properties. You want to make sure that your comps are like-kind, that they’re similar to your subject property. So you want to make sure that there’s the stories. You ideally want to take a one-story to another one-story, so you don’t want to have a one-story home that’s a ranch to a two-story Victorian or something. I don’t know all my house types like that. One-story to one-story is ideal.
The years that they were built a lot of times can be a big factor. You don’t want to take a house that was built in the ’50s and compare it to new construction from 2023 because those are two totally different types of builds. Square footage, so if your subject property is 1,000 square feet, you don’t want to compare that to a house that’s 2,500 square feet or even 1,900 square feet. Lot size, if you’re sitting on an eighth of an acre, like the houses are in my neighborhood, I can’t compare that to Ashley who’s sitting on 200. Two totally different value propositions there. Then obviously, bedroom and bath count are important as well.
Now there is some ways that you can up-adjust or down-adjust the numbers a little bit to say that, as you’re looking for comps, maybe your subject property is a three-bedroom, one-bath, but there’s a comp next door that’s a three-bedroom, two-bath, so there’s a little bit of… You want to decrease your value just a little bit because you’re missing a bathroom. The amount you should decrease is hard to know. You got to guess a little bit unless you have some appraisers you can talk to or maybe real estate agents who point you in the right direction. But basically, if you’re close, you can use it, but you still have to decrease it a little bit. So like-kind is one thing. Ash, what other common mistakes do you see when it comes to estimating the ARV?

Ashley:
Yeah, those are all great points. I think another thing to add on to that is to really understand how assessors in your area are actually assessing the property value. If you’re going to refinance or you’re selling the property and somebody’s going to be buying it, they will most likely have to have an appraisal done by the bank or you will if you’re refinancing. You want to have some kind of comprehension of how they’re actually calculating it.
If you’ve seen on Instagram maybe before the memes of, “Oh, here’s how a appraiser calculates,” and it’s just like, “I’m going to guess this number. There is no try and trued method they have.” If you’ve ever looked at an appraisal, it’s almost like a chart. It will tell you what they are actually looking at as far as the appraisal. So they’ll grade the kitchen as to is it poor condition, good condition, excellent condition. They’ll also do that for the other ones. Then sometimes they’ll put dollar amounts to it. This parcel has 10 more acres than the other one. Maybe they’ll add $20,000 in value to the one with the 10 acres instead of the one acre, things like that.
But that can help you estimate and gauge what’s going through the appraiser’s mind. Obviously, you’re not going to have the same exact appraiser as if you’re looking at a appraisal report, but at least you’ll get an idea of what’s the list of things they’re actually going to be paying attention to. For example, I did an appraisal on a property and they didn’t count any of the sheds because they actually are removable. When you leave this property, you could lift those sheds up on a forklift, put them on a flatbed, and take them away with you to the next location. So since they weren’t actually fixed to the property, they weren’t counted into the appraisal and did not add any value as additional structures. So looking at those kind of things.
I recommend going onto Facebook right now or even Instagram and just, “Hey, does anybody I know in blah, blah city,” where you want to invest in, “have a copy of an appraisal?” If you have real estate agent friends, ask them, “Hey, do you know anyone that has had an appraisal done?” and you know them well enough they would give you a copy of it, whatever it is, and just go through and look at it. It’s super informational to take a look at that.
Then the last thing I would suggest is, especially with how the market is changing so much within the past couple of years with going up and down, up and down and all over the place, make sure you are looking at actual sold properties and not pending. Just because the property went pending doesn’t mean it has sold. It could fall out of contract. Also, you don’t know what the actual sales price is when it’s pending. Because even if they were asking $200,000, it doesn’t mean that it actually sold for $200,000 or it sold for more than that. The last thing you want to find out is it actually sold for $150,000. So make sure it’s a sold property, and it’s within a good window of time.
If you have to expand your reach a little bit when you’re looking at comps and go out a wider, what’s the word I’m looking… radius from where your property is, it’s better to do that than to look at a property that sold two years ago when everybody was getting top dollar before interest rates shot up. So definitely taking a look at those things and making sure it’s actually a sold property and not pending.

Tony:
Ash, you bring up two other important points about mistakes. It’s the search radius, and it’s the date range. I think you said it exactly in the same way that I view it in my mind and what my appraisers have told me as well is that the sequence is you want distance, similarity, and then date range, or, I guess, really similarity, distance, then date range. You want the similar properties and then as close you can get them within the most recent time possible. So similarity, distance, date range.
Like Ashley said, if I am buying in a suburban area where, again, each house is sitting on an eighth of an acre, I can’t go out into a five-mile radius because there’s way too many properties that are closer than that that would be good comps to mine. For me, when we had our house appraised when we refinanced a few years ago, it was in my neighborhood. All walking distance from my house was the radius that they used. Now, in a place like Joshua Tree where the majority of the properties are sitting on acreage, I think one of our closest comps or one of the comps that was included in our appraisal report was like four miles away. It’s because the parcels are so big, the number of comparable listings was significantly smaller, so they had to go a little bit wider. Ideally, you want to start as tight and small as possible with your radius and then expand out only if you can’t find good properties.
Then to Ashley’s point, you definitely want to focus on your date range. I know for me, Ash, typically when I’m looking, especially now, I try and start with the previous 90 days, and I don’t want to go anything greater than 90 days to begin with. Only if I feel like my radius is getting too big, then will I start to push it out to maybe six months. I feel like anything beyond six months is going to be tough, especially in this climate. Because the markets in a lot of places are shifting so much where if you try and go back, like you said, a year, the market’s completely different in summer of 2022 than it is in summer of 2023. So I think just those things, distance and date range, are incredibly important as well.

Ashley:
Another thing after you said that that reminded me is the time to close, too, on a property. In California, you can do a pretty quick close. You’re doing closes in 21 days, right?

Tony:
Mm-hmm, yeah.

Ashley:
In New York State, that’s almost impossible. So sometimes you are looking at 90 days to close on a property. During that time period, a lot of things can change during those 90 days. So that’s also something very important to look at, too, as to, when did the property go under contract? When did it actually go pending compared to when it actually sold? So you can see, okay, this property actually went pending, so they made that offer, weren’t going to buy it at that price six months ago, and then they went and closed on it. But the appraiser is going to still look at that closed price, like when the property actually closed, not when it went under contract.
But if something went under contract six months ago, and the interest rates were a little bit better and it was spring, everybody’s out house hunting, and they bought it for half a million, well, now they closed six months later because of different issues, whatever. But then the other comparables, their interest rates went right back up. It’s starting to become winter. People aren’t wanting to move in the winter, and the sold prices have dropped. So now you have one comp that’s really good, but then you have your two other comps that are bringing the properties down. So make sure you are taking that range of comps and not just relying on one or two. You have at least three of them, too, because there’s all these different factors that can come into play.

Tony:
Ashley, just out of curiosity, because I forget that sometimes it can take that long for you guys to close on stuff in New York. Do you have anything in your purchase agreements where it’s like, “Hey, if the market values shift by X percentage during our closing period, then we have the ability to renegotiate,” or are you at the mercy of the market?

Ashley:
Yeah, because most of our offers are all cash purchases, no contingencies. So if there was a contingency put on it, our offer probably wouldn’t.

Tony:
Gotcha, interesting.

Ashley:
I did actually just put an offer in this weekend. I was at my kids’ football game. Right before their game was starting, they’re doing their warmups, and I’m just scrolling Zillow. It’s better than Instagram.

Tony:
Yeah, [inaudible 00:19:31] what all real estate investors do.

Ashley:
So I see this property and I’m like, “I feel like that’s really close to another property we own.” I look and it’s two parcels away. Our other one is a little cabin, a little goat barn, a pond, and it’s 10 acres, and this was five acres with a little one-bedroom cottage on it. Part of the cottage had this beautiful glass room that’s off of it. It was listed for $124,000. I’m like, “Oh my god, we can rent this on Airbnb for this much money. At this price, this is great.”
So I texted it to Daryl, who was somewhere there at the game doing something before it started. I texted it to him. I’m going through, and I was like, “We need this, if we can get at this price.” So I texted my agent, and I said, “Make an offer at whatever they want. No contingencies, no expend… uh, I can’t talk, inspection, and we’ll just take it.” She texted me back, she said, “Okay, I asked the agent about verbal offers and she said they have gotten so many requests for showings they are three days booked out for showings already. So she’s not going to take any offers, and they’re now going to put a deadline on offers.”
So Daryl comes back over. He’s like, “Oh, that house sounds pretty good.” I was like, “Yeah, I already put an offer in. Sorry, I didn’t tell you.” So now the deadline is actually right now. It’s 1:02 p.m. right now on Tuesday, and the offers were due at 1:00 p.m. We just went $1,000 over asking because it’s a great deal even at that. If we don’t get it, there’s other properties, things like that. But I only want it if it’s a great deal.

Tony:
It makes me think, though, Ash, is there a time and place where maybe the ARV isn’t as important? For example, we’re working on a commercial deal right now. It’s a seller financed deal. We’re picking it up for 950, but they gave us a 30-year amortization period. For our rookies that are listening, that means that, just like a traditional mortgage, those payments are being stretched out over 30 years. It’s a 10-year term, so we either have to sell or refinance at the end of 10 years. It’s a 7% interest rate on a commercial property, which is pretty good given where we’re at. And I want to say, I think it was like 200K down, so our payment on this 13-unit motel is going to be like, I don’t know, four grand a month or something like that.

Ashley:
There’s no balloon payment or anything over [inaudible 00:22:15]?

Tony:
At year 10.

Ashley:
Year 10, okay.

Tony:
Year 10, yeah.

Ashley:
So you don’t have to refinance for 10 years.

Tony:
We don’t have to refinance for 10 years, so we got 7%-

Ashley:
[inaudible 00:22:22] years.

Tony:
… interest rate locked in for 10 years.

Ashley:
So any comp now is not going to be valid anyways.

Tony:
And it’s just like, does it even matter what the property’s going to appraise for right now? Because it’s like we have an entire decade to get this… Even if we did nothing in most markets for a decade, you’re going to see some level of appreciation. It’s just like, in that situation, we’re not necessarily super concerned about the comparables because we’ve got this really good fixed debt. I bring that up to say, if you’re a rookie and you’ve got a good deal like that, maybe there’s some creative finance involved and you don’t necessarily have to worry about going out and getting an appraisal at any point in time, then does it really matter what the property’s going to appraise for? As long as you’re cash flowing, I think that’s… Obviously, you don’t want to go too far underwater, but in the short term you can probably weather that storm.

Ashley:
When we talked to Pace Morby on here… Actually, I think we’ve talked to him a couple of times, went on BP, and then we had him on an actual episode. That’s a lot of what he talks about is that the purchase price isn’t always the most important thing. That if you can get seller financing or subject to and you don’t even have to go to a bank to refinance, who cares, to a certain extent, what your purchase price is if your payment is going to be zero percent interest and it’s going to make you cash flow on the property?
To your point, that’s exactly… One thing when I looked at that property, I didn’t sit there and actually analyze it. I have an EZ Calculator app on my phone, and I was like, okay, this is what my mortgage would payment would be if I actually put a bank loan on it or whatever. Then I looked at, this is my daily rate for Airbnb. I’m going to do conservative, do 65% occupancy, and this is how much it’d make month. I’m like, okay, I know property taxes would be about this. On my little phone calculator figuring this out in my head, and I’m like, okay, it would cash flow. So it doesn’t matter how much we’re paying for it because I know I can get terms at this price for it. So if it doesn’t refinance at a certain amount, this is what I get my… Well, we would be using private money, not bank lending on that one. Yeah, that’s a great point about the purchase price.

Tony:
Just, if you guys want to waste a bunch of time, for our rookies that are listening, just play around with a mortgage calculator and see how different the interest rates impact things. It’s like, if I were to buy a million-dollar home at a 2% interest rate, that’s about 3,700 bucks a month. At 7%, that’s 6,600 bucks a month. So just imagine the kind of leverage you can get if you are able to get some of this creative financing. Even if the purchase price is super high, your actual return is relatively low. Not to go too far off on a tangent, but just something to consider, that sometimes the ARV isn’t as important if the terms that you’ve got for that deal are incredibly strong.

Ashley:
Since part of the question was what kind of software can a rookie use to find comps, the calculator software that I use is called EZ Calculator. Where did I go? So it’s like, fncalculator.com is the actual website for it. It has one, two, three, four, five, six, seven, eight, nine, 10, 11, 16 different calculators on here. You could do a compound interest calculator, so if you want to figure out how much interest your money would make in the bank compared to investing it in real estate, you could figure that out. The currency converter, in case you’re buying something in Mexico. But all these… retirement 401(k) calculator. But the loan calculator is on there. A credit card payoff calculator. This is a calculator app that I use all the time for playing with mortgages to see what they would be based on down payment, or what the interest rate might be if I do bank financing or private money and things like that.
Oh, and actually, another couple apps that I’ll tell you, too, is a hunting app called onX Hunt. It’s actually for hunters. So if you’re tracking a deer, you know whose property you’re on, so if you need to ask permission to track the deer on their property, things like that. You can actually see the parcels. You can also see the satellite view of the land. It will actually tell you this is 80% forest, this is 10% field, this is 10% structure, whatever it may be. But that’s a super helpful app, too, for looking at a property to compare it to others. Another one is LandGlide, which is actually for real estate investors. They have a parcel view, and then they also have that satellite view, too, and give you a bunch of information about who owns it, things like that.
Let’s go on to our next question. This one is from Daniel Dow. “Curious, what mid-range repairs do you classify as CapEx versus general maintenance?” So CapEx is capital expenditures. Then he goes on to say, “For example, I would think we would all consider a clogged drain as maintenance and a new roof as CapEx. What about things, replacing a water heater, a garage door or toilet? Secondly, do you distinguish between these expenses in your books?”
So here’s one big way is if the vendor that’s actually doing this for you charges you sales tax or not, or they give you a capital improvements form. So if you are doing a capital improvement, you don’t have to pay sales tax on that expense. If you’re getting the new roof put on and you’re going to write it off as a capital expenditure, depreciate it over so many years, you don’t have to pay sales tax on it. So the vendor, the contractor will actually give you a form to fill out saying that you’re going to be using this improvement as a capital improvement, and then they will not charge you sales tax on having that service done. So if a vendor gives you that, you do fill that out and give it back to them, then you are obligated to report that in your books as a capital expenditure. You do, you do have the option to actually pay sales tax on it, though, and not do it as a capital expenditure, I suppose.

Tony:
I wasn’t aware of that, though. Actually, Ashley, you just educated me and taught me something new. I-

Ashley:
That’s at least in New York State, I would assume.

Tony:
I’ve never-

Ashley:
Yeah, maybe that’s just New York.

Tony:
I’ve never been charged sales tax for our service-related type expenses, at least not that I know of. Maybe they’re baking it in somehow.

Ashley:
Yeah, maybe that is just New York then.

Tony:
I think you do bring up a good point about the tax piece. It’s like, I know when I do a cost segregation study on my properties… For our rookies that are listening, a cost segregation study is basically you taking all the different parts of your house and separating out the depreciation schedule for each individual part of your home. So on a typical home purchase, they depreciate everything evenly over, what is it, like 27 and a half years or something like that, some really odd number, and everything’s equally depreciated over that time schedule. When you do a cost segregation study, you’re able to depreciate some things in a year or in 12 months, I’m sorry, or in five years or in some other period.
So when I think of capital expenditures, I’m thinking of replacing things that would show up on that kind of report. It’s like, hey, my roof, it’s going to have to be replaced at some point in time, major HVAC systems, things that they have a given use of time and it’s typically not something that’s super short. For example, the way that we split it up in our business, if a guest checks into one of our properties and they break the handle on the toilet, that is typically something we’re going to categorize as repairs. If we have to, like I said, replace the entire roof, that’s something…
Let me give a better example. If a single shingle comes loose from our roof, we’ll call that repairs and maintenance. If we’re replacing the entire roof, we’re calling that CapEx. So for me, it’s the size of the job. Then like I said, I don’t know if this is just the way that my brain processes it, but it’s like, what are the things that I’m going to depreciate over a long period of time is the stuff that I consider as CapEx. How does it work in your brain, Ash?

Ashley:
Here’s two dead giveaways. You’re adding value to the property, so maybe it’s something you didn’t have before that you’re adding value. You’re putting an addition on. You’re turning a bedroom into a bathroom or something like that. You’re adding something new to the physical property. The next thing would be is you are replacing something, such as the mechanics, you’re replacing the roof, things like that. Kind of the definition in accounting terms as far as for the depreciation, if it has a useful life of less than one year, it is a repair or maintenance. So if it’s something that’s going to have a longer life, you’re supposed to write it off as a capital expenditure.
But if it’s something that’s only going to be useful for less than a year, so like your HVAC filter, you have to put new filters in. They usually last three to six months, so that is not something that would be repair or maintenance on the property. I think generally looking at, is it adding value to the property? Are you replacing something that’s already in the property? Then also the gray area as far as the repairs and maintenance of how big is that repair or that maintenance. Is it going to add value for more than a year?

Tony:
In terms of setting money aside, every person listening should be setting money aside for capital expenditures, your CapEx, and your repairs and maintenance. Because our properties do tens of thousands of dollars a year and revenue sometimes over six figures, so we typically just have one bucket that we dump all of our repairs and maintenance and our CapEx into. Usually, for most of our properties, that tends to work pretty well. But we’ll take 5% of our gross revenue and put that aside for repairs and maintenance and CapEx. Honestly, that’s actually not even really true. Typically, we’ll just put aside 5% for CapEx really for the bigger expenses. Then because our properties and short-term rentals generate more revenue, we typically just handle the repairs and maintenance with whatever money was generated during that month. So that’s typically how we set things up. How do you do it on the short-term side, Ash?

Ashley:
I don’t have a ton of partners, so I know, for you, with all of your partners, you have to have that 5% for each property and saved separately because you have the different bank accounts. But for me, I just have three partners, and we each pretty much… We keep a minimum balance in our LLC accounts. We don’t go under that minimum balance. Then also, we each have our own accounts that have a good chunk of money. That’s where we each… It’s kind of our obligation to each other where, “You know what? We need to put this new roof on. Our reserves won’t cover it. We need to put in each $2,000 or whatever.” Then we go ahead and pull that money from our separate property savings. It used to be we would do 15%: 5% for vacancy, 5% for CapEx, and 5% for repairs and maintenance. Then it got to the point where you kind of grow and scale, and it’s like, wow, that’s a lot of money to be sitting-

Tony:
Sitting in reserves.

Ashley:
… in reserves. To have bad things happen at every property at once, that might not happen. Then same is true, if for some reason that did happen where something bad happened to every single property, we would just have to use the cash flow from that month to put towards taking care of it.

Tony:
That actually did happen to us where we had to just… I think it was earlier this year. We installed a bunch of hot tubs at our properties sometime in 2022. So over the course of 2022, we installed a bunch of hot tubs, and we had a less-than-stellar electrician install everything for us. You have to do electrical hookup, and it’s like a few thousand bucks to get the electrical done for a hot tub depending on where it is from the panel, and you got to run and maybe even dig, conduit, all that good stuff.
Anyway, for whatever reason, that electrician wasn’t available when we got a new hot tub, so we hired another guy. This guy was a little bit more sophisticated of an electrician. The properties just happened to be next door to each other, and he went to the wrong property first. He was looking at the electrical. He’s like, “Guys, I think something’s wrong here, the way this electrical was done.” So just by chance he ends up seeing the other guy’s work, and he was like, “I honestly would not let anyone get into these hot tubs until I fixed the electrical.” So we had to turn off the power to all the hot tubs, and we had to redo electrical on, I don’t know, I think it was eight or nine properties in the span of a month. Each one’s like a few thousand bucks per pop. Typically, that doesn’t happen-

Ashley:
And [inaudible 00:36:20] it’s like, having to do that, coordinate that around guests. Tell guests they can’t use the hot tub.

Tony:
Totally, they can’t use the hot tub. Yeah, that was a bit of a nightmare. But there are times, I guess, where, the quote/unquote, stuff can hit the fan all at the same time. It is good to have those reserves.

Ashley:
Well, with that coordinating guests, things like that, too, that’s one thing that stinks about short-term rentals is that when guests come, they’re on vacation. They don’t expect to have somebody there doing maintenance.

Tony:
Totally.

Ashley:
Where a long-term tenant, it’s like, “Yeah, come do maintenance because we live here.

Tony:
Yeah, come get it.

Ashley:
We want this space, like take care of it.” Once again, at my son’s football game this weekend, the person that manages our short-term rentals, she was on vacation. I knew she was on vacation, but she had never said like, “I’m going on vacation. Is it okay if I don’t respond? Can you watch over it, whatever and stuff?” because she was going to do that. But I still get the Airbnb messages that pop up on my phone, and I saw it. It was something about the WiFi. I was just like, “Oh, you know what? She’s on vacation.” But she actually started texting our group texts and she’s like, “Daryl, the WiFi’s not working.” So he called the service company, and they said, “We don’t have any outages, whatever.” So then she’s having them reset the modem and everything and can’t get it to work.
So Daryl calls back, and they’re like, “Okay. Well, we’ll send a service technician out,” and they end up sending a service technician out. Daryl’s like, “I’ll leave the game. I’ll go. I’ll check it out.” I’m like, “No, we have to learn to let these [inaudible 00:38:00] handle. It’s okay. Just wait.” Like, “If we get a four-star review…” I’m like, “Well, I’ll give her $75, okay? I’m going to say, ‘I’m so sorry for the inconvenience.’ I’ll send her back $75. Will that make you sit okay during this game?” So I sent her the credit. I was like, “I apologize. They’re going to send a service guy out to check it out. They shouldn’t need the interior access.” She’s like, “Okay, we won’t be here. Thank you so much.” The service technician gets there, and he is like, “Actually, I do need access.” So it was really nice. We just let the guests know he was going to go in. They were fine with it. We unlocked it from our phone, and he went in.
The breaker was off. That’s why the internet wasn’t working. This company is so amazing, and this internet provider, it definitely wasn’t some household name internet provider. The guy, he’s like, “Oh, it must’ve popped. I just turned it back on. Now everything is working, and you’re all set.” This is Saturday afternoon, and this technician is coming out to fix the WiFi. It’s like, here, we should have sent Daryl out or something to just turn the breaker on.

Tony:
Yeah, just a [inaudible 00:39:07].

Ashley:
Or, which in all the long-term properties, anytime an outlet isn’t working, whatever, we always have them check the breaker. For some reason with the internet, we just didn’t make that connection and ask them to check the breaker and stuff. Yeah, that was a-

Tony:
It’s crazy how there’s always little things that happen as you’re running your properties. But it’s kind of cool because, exactly what you said, it reinforces you… or I guess it reminds you that you need to always be optimizing your systems and processes.

Ashley:
Yeah, keep updating them.

Tony:
Totally. One of the things I do daily, or I try and do daily, but with our VA team, is I review the messages between my VAs and the guests who are checking out that day. A lot of times nothing happens. It’s just like, “Hey, cool, thanks. I’m in. Hey, I’m out.” But sometimes things happen, and I get to see how the VAs are handling those situations, and then I can give them feedback and say, “Hey, this is what we should be doing next time. Make sure you update the SOPs,” or, “Hey, we actually don’t have an SOP for this, but here’s what I want you guys to be doing moving forward.” So identifying those moments and then really updating them I think is-

Ashley:
The same with reviews. Are you looking at the reviews? Because we don’t really get a lot in the messaging of people telling us different things, but we get a lot of private feedback of different things. I’m actually surprised of how many people will still give you a five-star review and amazing things, and then they are actually really considerate and say, like this person with the internet, it’s just like, “It really was an inconvenience to us to not have the internet,” because there’s no cable or anything. That’s the only way to watch TV. Thankfully, it was a beautiful day out. They just said that was, but they did appreciate that. Then I think there was one other issue that came up, and we were like, “We just want to let you know,” and stuff like that. But I find that very helpful, too, to review those private notes that they send and use that, too, to update things that you wouldn’t even think of.

Tony:
We love looking through the messages on a more frequent basis, and then we try and look at the reviews weekly. It’s good to look at both. Because sometimes a guest, like you said, you’ll see something in the messages that doesn’t show up in the review, and then the inverse is true. Well, the guests won’t say anything at all during their stay, but then they’ll just rail on you in the review. It’s like, “Oh my gosh.” I think the absolute worse, and we see this sometimes, it’s where the messages are clean. The guests said they had a really good time, the public review is glowing, the private review is blank, and then they still give us a four-star. We’re like, “What the heck happened?”

Ashley:
Yeah.

Tony:
You have nothing to work with. But, yeah, it is good practice to review all that stuff.

Ashley:
Okay. As far as the last question, “Do you distinguish between these expenses in your books?” Your capital expenditures actually go on your balance sheet as an asset, and then your repairs and maintenance are actually an expense on your profit and loss statement. What this means is that, if you pay a roofer $10,000 and you have $50,000 in revenue and say that roof was your only expense for some reason, so you have that $50,000 revenue and then you’re subtracting that $10,000, you’re like, “Okay, I have a profit of $40,000. I’ll report it on my taxes.” But, no. Because it’s a capital expenditure, it’s not. It’s going to be depreciated, and your accountant will take a portion of that $10,000 and write it off for this year because the useful life of that roof is 27 and whatever years, and it’ll be depreciated over that amount of time, so you’re only writing off that portion of it.
That’s where cash flow comes in. When you’re actually calculating cash flow, you do take in those kind of expenses to calculate your cash flow. It’s just not taken into account for your profit and loss statement. This is why it’s so great to do tax planning so you can talk to your CPA. You’re doing all these capital improvements, but then you find out that you can only depreciate a portion of it. Now you have to pay taxes on part of that money that was actually spent in this year.

Tony:
I did just look it up and validate. Yeah, 27.5 years is the typical depreciation schedule for residential real estate.

Ashley:
Thank you guys so much for listening to this week’s Rookie Reply. If you have a question that you want answered, please go to biggerpockets.com/reply, or you can send a DM to Tony or I. I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson. We will be back on Wednesday with a guest. See you guys then.

Dave:
Hey, everyone. Welcome to On the Market. I’m your host, Dave Meyer, joined by Kathy Fettke, Henry Washington, James Dainard, fresh back from BPCON 2023.
Henry, what was your favorite memory of the conference this year?

Henry:
Oh wow. My favorite memory of the conference? Man, I had a lot of favorite memories. I think one of the best moments was getting to meet so many fans of On the Market. So I had a couple of pieces of feedback. One, tons of people said, “Hey, this is the show. This is the one I listen to. This is the one that gives me the information I need,” which is great feedback. And the other thing I heard multiple times was that there’s a lot of people in my camp about investing in the unsexy markets, as much crap as y’all give me about it. They were like, “No, we’re with you. We get it. We like these unsexy markets. There’s cashflow out there.” And I’m like, “That’s what I’m trying to tell people.”

Dave:
Well, if people agree with that feedback, they’re going to really like this episode because we’re going to be talking about a bunch of unsexy markets today.
Kathy, what about you? Any favorite memories from the conference?

Kathy:
Dave, your keynote was fabulous. You just looked like a pro up there and you simplified complicated topics and put them in little cartoons. It was a big comparison from last year where it was very heady and big graphs that no one understood. So just loved it. Loved it.

Dave:
James the emcee did a great job emceeing the conference. Do you have any highlights?

James:
Well, I agree with Kathy. Your keynote speech was incredible. You absolutely killed it.

Dave:
Oh, thank you.

James:
But it was hard to compete against the Velociraptor and Universal Studios.

Dave:
Dude, I can’t believe no one else said that yet.

Kathy:
That was amazing.

James:
I was talking about it, watching everybody scream, be terrified. Best ride I’ve ever been on. When I heard BiggerPockets rented out Universal Studios, I was like, okay, this will be kind of cool. I thought it was going to be like a mellow kind of meetup group thing. Way better. No lines. We got to rip the roller coaster. I don’t know if my voice was blown out from talking in the hallways too much or screaming on the Velociraptor, but either way, it took a full day for me to recover from BPCON.

Dave:
If you guys didn’t see this on Instagram or anything, BiggerPockets, for the conference this year, literally rented out all of Universal Studios. So I guess, probably normally, 50,000 or a hundred thousand people are there in a day, and we had 2,500 people. The whole place was open. There was bars everywhere. Free food, free games. It was so much fun. And the whole On the Market crew, we were obsessed with rollercoasters and we were just lapping rollercoasters for four straight hours. It was extremely fun.
Well, if y’all didn’t hear, BiggerPockets Conference was awesome this year. Next year, they’re doing it in Cancun. It’s going to be at an all-inclusive resort, and every year, they just keep getting better, so highly recommend it if you haven’t been yet. And if you have feedback similar to Henry’s where you think that On the Market is the best real estate podcast, best BiggerPockets podcast, best anything, we really appreciate reviews. So if you love this show, please give us a review on either Spotify or Apple.
Now today, we are going to get into a really, I think, helpful topic for a lot of people. We’re going to be talking about a boring old strategy, long-term rental property investing, and we’re going to identify eight different markets where you can still find cashflow. They also have really strong fundamentals like population growth and being under the median home price for the United States right now. And so these are markets that, honestly, most investors can get into. So hopefully, this information will help you if you’re sort of stuck trying to figure out how to invest in 2024. We have some markets and strategies that are going to work for you.
Before we get into this, all of these markets, the eight markets that we pulled, have to be under the median home price in the United States because, at least if you agree with me and a lot of us on this show, affordability sort of reigns right now. I want to quiz you all about what you think the median home price in the country is right now, according to HUDD, the Housing and Urban Development Department.
James, so what do you think the median home price is in the US right now?

James:
I think, last time I checked, it was around $410,000. But that was a few months ago when I looked, but $410k to $415, right in there.

Dave:
Henry?

James:
$475,000.

Dave:
Kathy?

Kathy:
I’m just going to go with a clean $420k.

Dave:
Classic California answer.

James:
Malibu lifestyle.

Dave:
Kathy, you won though. It is $430,000, according to HUDD. And these estimates, just so you all know, they vary a bit based on the source. So HUDD has one. Zillow has one. NAR has another. But they’re all, from my observation, between about $400k and $440k right now. And that is up somewhere between one and 3% year over year. And so when we get into the eight markets we’re covering today, all of them will have the median home price, and I think all of them are pretty well under that mark, so they’re relatively affordable for people to get into.
We are going to take a quick break, but then we’ll be back with our eight excellent markets for investing in 2024.
All right, James, kick us off with your first market. And again, just to remind everyone, these are markets that we think work for most investors, even in a high interest rate, somewhat riskier environment like we’re in right now, because they are highly affordable, they have great fundamentals, and they offer cashflow. So, James, what’s your first one?

James:
All right. So I’m excited to talk about this one because I was just there. I was on my conquest of the Carolinas and I was checking out North Carolina, South Carolina, all the coastal communities. And my first market I want to talk about is Myrtle Beach, South Carolina. I was there with my daughter and my family. We had an absolute blast. She got henna tattoos, great time. But more importantly, it’s a very solid market to look at.
And what we’ve seen is we’ve seen a lot of these coastal community towns, the vacation towns, after the pandemic, people have just been like, “Forget it. I’m just moving to where I want to hang out and have fun.” And this is one of those towns that people have been moving to. It is a very, very strong investing market. The average home price is at $336k, so it’s below the median home price. I feel like it has growth and it could easily get to the median home price over the next couple of years.
And the population is growing. It is grown nearly 4%, 3.87% year over year. And it is that whole pandemic lifestyle. People are like, “I want to live where I want a vacation, I think,” and it is growing. And I don’t blame them. When we were there, the beaches were awesome. The weather was great. It was very good people watching on the strip, had a good time. So I think people have learned that they want to live where they want to live and that’s why it’s growing so much.
And as far as an investor goes, back to that 1% rule, we all know about that 1% coverage rule and it’s been very hard to achieve the last couple of years with the pricing going up, and then interest rates are helping a little bit. And it’s kind of became an outdated metrics, but it’s close. It’s at 0.67%. It’s closer than most market is to get you to that 1% rule. So it’s got high growth. It’s got good income. And not only that, it’s below the median home price and it’s a great place to live. So based on quality living, I think it has a lot further growth and we’re really seeing this in these coastal community towns.

Dave:
Nice. That’s a great one. I just want to provide two points of clarification for everyone. First of all, population of growth of 4% is insane. The national average is about 1%, so four times the national average. And, James, I think in your research, you said that it was named the fastest growing city over the last year by US News and World Report, so that is obviously strong fundamentals.
Then I just wanted to follow up on the 1% rule that James just mentioned. What he’s referring to, if you haven’t heard, is something called the rent to price ratio. You divide one month of median rent by the median home price for a given market, and what you get is usually somewhere between 0.5% and 1.5%. And back in 2010, 2012, some investors came up with this rule called the 1% rule where you had to get it above 1%, which signified that you could probably get great cashflow. Now we all know, it’s not 2010 anymore, and so finding markets that average 1% on that rent price ratio is exceedingly rare. There are probably less than 10 in the entire country.
That doesn’t mean that you can’t find cashflow in these markets. You still can, because we’re in a different type of market environment. And I’ve actually done some research into this, and if you have a rent to price ratio of anywhere from 0.6 to 0.7 or above, there’s usually cash flowing properties in that city. Now remember, if I’m saying that the rent to price ratio for that market is 0.6 to 0.7, that is the average. So that means there are deals worse than that, and there are deals better than that in that market. And as an investor, it is your job to go find the ones that are better than the average one. So just when we say a rental price ratio is 0.7%, go out there and find yourself the 0.9% one because that means that they exist there. So I just wanted to go on that diatribe and explain those things.
But, Kathy, I think you had something to add here.

Kathy:
Oh, I just want to say I had to rewrite my book because of that 1% rule. People were like, “I’m not going to buy anything because I can’t get it.” But I wrote that in 2014, so I had to revise it, came out with a new one.
We are actually getting 1% in our fund, but that’s active. If you’re an active investor, you can probably still get it, meaning you’re buying something that’s not very expensive. You can improve it and still get it way under market, but they’re strong rents. It’s just not easy to do, especially if you’re investing from afar. That can be difficult to do. Unless you’re someone like Henry, he’s probably finding that, but it’s probably harder.
Anyway, Myrtle Beach, back to that. Love Myrtle Beach. The southeast is my jam. This is so underpriced. The entire southeast coastal market is so cheap. Find me somewhere in California where the median price is $336,000 for a coastal property. It doesn’t exist. So that’s why it’s growing so quickly. And the Carolinas specifically, they’re kind of referred to as the boomerang states because, a lot of times, the northeastern people who are just done with cold weather and they’re able to retire or live remotely, they’ll go to Florida and then sometimes think, “Wow, it’s too hot and too humid,” and so they boomerang back a bit to the Carolinas where it’s a little bit less hot and humid and still so affordable.
Darling town. I surfed there when I went to check it out. It’s still so affordable. Considering what we just said, that the median home price in the US is higher than that, and you could get coastal property in a really cute town, I mean, it’s great. I don’t invest there, but I could see where that would be a great opportunity.

James:
Yeah, and the beaches are awesome. I know we’re talking about unsexy markets, but definitely, beaches are stacked full of good looking people. I don’t know how that works for investing, but it’s a bonus. It is growing. Rents are up 33% over the last three years. I mean, it’s a growing town, it’s quality living, and it’s fun to go to. So I definitely will be back.

Dave:
I’ve always wanted to go because I’ve heard there’s great golf there. And I’m not great at golf, but I enjoy playing, so maybe-

James:
That is not true. Dave said he didn’t golf, and Dave crushed the ball all day long. I was lucky I was paired up.

Dave:
Very, very inconsistent. But James and I played two other investors and we crushed them. So that’s all that matters. We crushed them.
All right, James, what is your second market that you’re bringing us today?

James:
So the second market is Tallahassee, Florida, which I have never been to. To be honest, I don’t have a whole lot of desire to go there unless it’s for an FSU football game. I think that would be pretty fun. But it’s a very affordable market in Florida, and as we know, Florida has gotten very expensive and it’s been hard to get cashflow in a lot of these locations. Pricing’s way up in Florida. It’s hard to make deals pencil, but there’s still a lot of good markets around, like Tampa, Tallahassee, that you can invest in.
And what I like about it is the average home price is $272,000, so it’s really, really affordable. And as these rates keep staying persistent and the money seems like it’s going to be a lot higher than we thought, a lot of us were predicting that the rates were going to be down middle of next year, that might not happen. It’s a good market to be looking at because the pricing is so below the median home price and the quality of living is really good. So it has some runway, in my opinion.
The population growth, not as strong as Myrtle Beach, doesn’t have the same trend. It’s 0.72%, so it is growing below the national average. I don’t really like that as much, but it does have steady growth and the overall investment. But I think there is other potential here. The rent to price is at 0.54, so it’s below Myrtle Beach, half of the 1%. But like Dave said, that’s the average and who wants to be average?

Henry:
Yeah.

James:
You can find value in any market, but I do believe that this market has growth potential because it’s so affordable. The quality of living’s good. They would rank the ninth best quality of living in Florida. And so people do want to live there.
In addition to, there’s a lot of college there. College towns are great for steady rent income. And as college pricing and the cost of college goes up, so will housing. They’re going to go up one and the same. We’ve seen that in our Seattle market, we own a lot of rooming houses. So I do like college towns. I like the quality of living, and I think it’s very dependable for an investor to be looking at.

Henry:
Yeah, I like this because of, I just think college towns are great investment areas, especially when those college towns are surrounded by other major metropolitan areas. And so Tallahassee definitely ticks those boxes. People think of Florida State when they think of Tallahassee, but you’ve also got Florida A&M University and a host of other small universities that are out there. And so you’ve got a large student population. That means the universities are employing a large percentage of the people who are working there. And so housing, affordable housing is needed.
And when you can get property in a college town, the average home price retail is $270k. That means if I go in there and start looking for deals, I’m going to be buying stuff for sub a hundred, just over a hundred thousand dollars for properties because I want to get really good at finding good deals. And so going out to a college town and buying a property for between 100 and 150 grand, and being able to get the rent you’re looking for because college students need a place to live, man, that’s a dream.

Dave:
Knowing what I know about being a tenant in a college town has always scared me away from being a landlord in a college town.

Kathy:
Totally.

Dave:
But what you’re saying makes sense.

James:
And I think they rage at FSU. I heard they like to have a good time, so you kind of want to get bulletproof rental specs. Just make sure it can handle the durability.

Dave:
Yeah. I went to a pretty nerdy engineering school and we destroyed properties, so I can’t imagine what it would be like at FSU.
All right. Well, it sounds like a very interesting market. Again, yeah, so it sounds like Myrtle Beach has growth potential and a little bit more cashflow. Tallahassee may be lower cashflow potential, still possible, but might have more room to run because it’s really just very affordable in a state that is absolutely booming right now.

James:
Yeah, I think the equity can grow a lot quicker, and that’s going to make a big difference in your overall return. And if you can get that equity growth, that will offset your cashflow that might be a little underperforming.

Kathy:
100% in Myrtle Beach for sure. But I think also in Tallahassee, you might look at short-term and midterm rentals. We actually have a college in my town, and what I’ve noticed is that a lot of parents want to come and visit their kids. And so having a short-term rental, you’re still kind of getting the benefit of having students in town, but you have parents living in the rental if it’s a short-term. If you’ve got a big party house, Dave, like you do in a ski area, well, then your short-term rental might be a party house. But if it’s little, just enough for the parents, that can stay rented.

Dave:
All right. Well, moving to another state that is absolutely booming, Henry, what’s your first market?

Henry:
My first market is Jonesboro, Arkansas. So this is a town maybe not a lot of people have heard of, but the numbers are kind of ridiculous. So check it out. Average home price of $188,000. So you’re sub-200 on the average home price. So now we’re talking retail, which means if you’re looking for deals, you can get screaming deals. You’re talking sub a hundred thousand dollars, finding good deals out there. That’s crazy.
But population growth is 1.29%, so people are moving there. And that’s due to the economy. It is an economy that hosts a lot of manufacturing. So that’s what’s most of the workforce is doing out there. So you’ve got Nestle, Unilever, Frito-Lay, Riceland Foods and a couple of others. But as well as healthcare is big out there. So you’ve got a couple of big hospitals that are also employing a lot of the people out there. And so you’ve got population growth. You’re not too far from Memphis, and so you’re not too far from a major metropolis. You’ve got unemployment at 2.9% and your rent to price is 0.74. So there is cashflow.
And if you think about it, I was looking, the average rent for a two-bedroom or for a three-bedroom is just over a thousand dollars. So if you can get a deal and get average rents, then you’re going to be able to cashflow, especially if you’re finding a really good deal in this market.
The other thing about Jonesboro is, the vacancy rate is 6.7%, which means most everything is getting rented. So it’s got all the right stats. Definitely, definitely really good numbers. I’m surprised, because I’ve gotten leads for deals in Jonesboro and I’ve turned them down just because of how far it is proximity wise to where I live in Arkansas. And now, I’m thinking I might need to take a second look at some of these leads I’m getting out in Jonesboro.

Dave:
Okay. So this is not northwest Arkansas. I’m looking it up on a map right now. This is northeast Arkansas.

Henry:
Northeast Arkansas, yes.

Dave:
Yeah. Okay. And as you mentioned, closest major city is Memphis. It’s actually quite close to Memphis, yeah, as you said. So, Henry, do you hear about Jonesboro? Is it a big town? Yeah. Is it a place it’s commonly talked about in Arkansas?

Henry:
Yeah. People talk about it all the time. I’ve just avoided it because of how far it is from me. It’s about, I’d say a five-hour drive from where I currently invest. And so I just like to be able to get to my properties, it’s just a personal thing for me. But I mean, the market dynamics sound pretty good. Like I said, I get leads all the time coming through my website from this area and I just pass them on to investors I know that invest out there, but I’d never looked into it until this. This is cool.

Dave:
I mean, a market that is under $200,000, so less than half the median home price. Population growth is above the national average. The unemployment rate is below the national average. It has really good rent to price ratio. I mean, those are pretty tough to find these days. This one’s pretty good. Yeah.

Henry:
Pretty solid.

Kathy:
I’m sold.

James:
You know what also sounds nice is the price of a hundred grand. That is our earnest money check to write hundred deals. It’s like, Kathy, I think we might be doing this wrong. I’m like, I’m listening to this. I’m like, why not go out of state? But you got to get outside your comfort zone when you get to long distance investing and you got to set up the right systems. And it’s hard when you’re, like Henry says, I’m a backyard investor too, looking at these markets. But the math is saying that you should really explore it. And it’s for investors to figure out the systems that’s going to work. And so as these markets are getting more and more affordable compared to what the other markets, it is something I think everyone should be looking at. Yes, you have to set up new systems, but those are great metrics to get good cashflow.
And also, it allows you to invest very low risk. When you’re buying properties at a hundred grand and they sit vacant for a little bit, you can stomach that hit. But when you’re dealing with expensive stuff and expensive metro right now, you really have to make sure you’re on it or that debt cost, that vacancy cost, all these things can compound. I definitely think I need to get some operators in different states and just start partnering up. It’s a hundred grand. That would be nice. What’s your earnest money amount? Like $1,500 bucks. That’s awesome.

Kathy:
Oh man. The grass is always greener, right? We look it, James, but do you make hundreds of thousands of dollars on one transaction. And they’re so sexy.

Henry:
You’d have to do 10 deals.

James:
But you can also lose a hundreds of thousands of dollars on one transaction.

Kathy:
This is definitely my kind of market. I love that it’s kind of off the radar, but it’s got all the things that you need in a good buy and hold market. So yeah. Hey, Henry, James, you guys set something up there? I will be your buyer.

Henry:
I got you.

James:
Ditto.

Henry:
I got you.

James:
Yeah.

Dave:
All right. Well, Henry, you got another fire market for us next?

Henry:
Yeah. This is a market that I actually currently invest in, Joplin, Missouri. So this is about a 50-minute drive from Northwest Arkansas where I live, and I currently invest there. I have seven doors there now and I have another 16 doors under contract there now. So I am growing my portfolio in this market.
And why I’m growing my portfolio in this market is because of these pretty strong market dynamics. So average home price is just over $200,000, at $205k, $206,000. It’s got population growth of 1.1%. Now I know it’s not the highest population growth on this list, but for a small market in southwest Missouri, that’s pretty good. Low unemployment, 3% unemployment. And rent to price is at 0.65. And I’m buying cashflow deals in this market left and right. I just closed on a house in Joplin two days ago. I paid $67,000 for the house. I’m going to put $30,000 into it, and it is going to rent for over $1,500 a month. And it has an extra lot next door that I’m going to either be able to sell for about $15 to $20 grand, or I can build a new construction home on because so many builders are building homes out there to infill, because there’s not enough homes for the people who live and work in that Joplin market. And so I love Joplin.
Another reason I love Joplin that you’re not going to hear about or see about if you just do the research on your own is, because it’s about a 50-minute drive from Northwest Arkansas, as Northwest Arkansas is expanding because of all of the big companies out here, a lot of people are starting to feel like, hey, this is becoming a little bigger and busier than I like, and people are starting to spread out and go a little further out. And so, I think that that’s driving some of the population growth in the markets like Joplin as well. And so you’ve got people moving there, trying to get away from the hustle and bustle of Northwest Arkansas, if you can even say hustle and bustle in Northwest Arkansas in the same sentence. So I really, really do like this market, and I am growing and expanding in this market because of the solid dynamics.
As far as the economy goes, this is another manufacturing town, so there’s lots of different manufacturers out there. You’ve got General Mills out there. But it’s a really, really big healthcare community. So many hospitals. There’s a St John’s. We’ve got Ozark Medical. There’s Mercy clinics. There’s tons of different healthcare out there as well. So it’s a really solid market with solid market dynamics that’s growing steadily, not super fast, but growing steadily, and you’re just getting a lot of quality tenants because they have good jobs and they can actually afford the rents in the market.

Dave:
I had never heard of Joplin before the show Barry on HBO, if anyone watch that. But I’ve long liked the idea of finding a tertiary city outside a main area that’s like 50 to 60 miles away. When I was investing primarily in Denver, you saw Longmont, which is a city where Colorado State University is, but no one invested there, and Denver just got so hot. To Henry’s point, people just wanted to move somewhere a little quieter or maybe somewhere even more affordable. And these places that are sort of, they’re not like satellite cities, but it’s nice to be close to a place with a big airport, for example, or be able to go to a big city within an hour, hour and a half drive, but has more of a small town feel. So I’ve always just sort of liked that approach, and it sounds like Joplin fits the bill for that strategy.

James:
And look how wired Henry is on the market he invest in. Talk about market research. He generally passionately loves the market. He knows everything about it. A lot of times, people are just going in and buying that thing because they were told in a book or a podcast to do it. But Henry really dug into the market, knows it like the back of his hand, and that’s why he can grow is because he knows it. He believes in it so he can invest kind of carefree. So kudos to you, Henry. I mean, you definitely have this market down.

Henry:
Thank you, brother.

Dave:
All right. Well I’m going next and my first market is somewhere I’ve never really even been close to, but it is Tuscaloosa, Alabama, and the average home price there is $211,000, so less than half our median home price. Population growth, 1.4%, so just over the national average. And just as you’re saying, I think any market that’s growing is pretty good, but it’s always nice to be above the national average. The unemployment rate is at 2.4%. And the unemployment rate is pretty low everywhere in the country right now, but 2.4% is about 30% lower than the national average, so that’s great. And the rent to price ratio is excellent at 0.8%. So I think this is really strong fundamentals for Tuscaloosa.
Now, I looked all this up because I’ve never been here, but it is a small city. It is a college town, which we’ve just been talking about the benefits of. The University of Alabama is from there, so is Stillman College and Shelton State Community College, which contribute about $3 billion of economic impact to the area, which is about 25%. So that’s really interesting.
Normally, I always like to say, you want to look for an economy that’s well diversified, but when you have an economy that maybe, feel free to disagree with me, that is based on something really solid like a college or public sector jobs that are really stable, I think that is a relatively good foundation for an economy. So I really like that tourism has really been picking up. They also have one of the biggest, or maybe the biggest Mercedes-Benz assembly plant in the country. So there’s a lot that’s probably leading to that really high employment rate. And that’s all I know about Tuscaloosa. Have you guys, any of you ever been there?

Henry:
I have. I went to an Alabama-Arkansas football game a few years back.

Dave:
How awesome was that?

Henry:
At Alabama. I mean, it’s a thing. The whole everyone is there.

James:
So jealous.

Henry:
Everything else is closed. It’s only the stuff at the college that’s open. It was just a super intense environment.
But to kind of piggyback on your point, when this represents about 25%, you said, of the economy there, I think that that’s okay in this situation because University of Alabama is not going anywhere. Those people would start a war.

Dave:
Their fans are very passionate.

Henry:
If that school went anywhere. It is safe and sound there. But no, it was a great place. I enjoyed it. It didn’t feel that small to me. I was surprised to see it’s only 100k people because it felt much bigger than that.

Dave:
Well, I think a lot of times, these college towns, they don’t count students because they’re not full-time residents. I know, Boulder for example, Colorado, where the University of Colorado is, says it’s like a hundred thousand, and then when students are there, it’s like 140,000. So it goes up by like 40%. I bet Alabama’s even bigger than [inaudible 00:30:00]. But it makes you think, based on what you’re saying, Henry, that in addition to student rentals, short-term rentals probably do really well if it’s that big of a draw and people are coming for sports, among other things. The university obviously has other draws. I actually saw that they just broke ground on a $50 million performing arts center at the university. So there’s obviously a lot of attractions in the area that might warrant different types of rental strategies.

Henry:
Yeah. And I think that’s a good call out too about the short-term rentals because one of the things I like about my market, which is a college town as well where University of Arkansas is, is just, there’s not a ton of hotels. There’s a few. There’s definitely not a bunch of nice ones. And so, when you’ve got football season and people coming from all over to come to these football games, they got to have a place to stay. The hotel sell out super fast, and so these towns need Airbnbs because their economy is dependent on these people coming to visit.

Kathy:
That’s such a good point. That’s why I like these sort of off the radar markets because you don’t have builders flocking to them. They don’t even know they exist. So you’re not seeing new hotels and new homes, but when you’re seeing the kind of growth, population growth that this area is seeing, yeah, it’s going to be good for short-term, medium term, long term. It seems like, either way you go, you could make it work in this market.

Dave:
Definitely. Just make sure you have a big enough parking lot for people to tailgate in at your short-term rental.

Henry:
I wonder how much of the average home price Nick Saban’s house drives up that number.

Dave:
Add like three zeros to that number.

James:
I think we need to explore the market and do a live podcast at a football game. Like the college football set.

Henry:
Like college game day?

Dave:
That would be so awesome.

Henry:
We could put one of those school mascot hats on you when you-

James:
I’m a hundred percent in.

Dave:
Well, my next market does have a college in it. It’s the University of Wisconsin-Oshkosh. I don’t know if they have the same level football team as the other ones that we’ve been talking about.

Henry:
I feel like you just made that up.

Dave:
I actually didn’t. It’s a real thing. But the next market I have is Oshkosh, Wisconsin, which I have only heard of because, as a kid, did you guys wear OshKosh overalls or OshKosh?

Henry:
Yeah. OshKosh B’gosh, yeah.

James:
It reminds me of Chucky.

Dave:
Yes, exactly. Yes.
So Oshkosh, I’ve learned, is a really interesting town. It actually used to be known as the sawdust capital of the world because it has the most sawmills, I guess, in the world. No longer, but it did at one point. But really, they actually have really strong fundamentals. So just to go through the stats, average home price is $265,000. Population growth at 0.9%. Unemployment rate, 3.5%. And a rent to price ratio of 0.6%. It’s a small city of 67,000 people.
But I started looking at this because, I don’t know if you guys have seen this, but when you look at lists of places with hot housing markets, even during this weird market we’re in, Wisconsin is one of the places that’s always up there. Obviously, you see a lot of places in the southeast, but Wisconsin, consistently, for a year or two now, has been up there.
And so I looked into it. I literally just Googled, “why is everyone moving to Wisconsin?”, and found out that there’s just a lot to like about it and really ranks high in terms of education, in terms of healthcare and health, one of the highest states for quality of life and safe places to live. And so it seems that a lot of people are moving to Wisconsin, and I think Oshkosh is getting swept up into that. So sort of in our theory of auxiliary cities near big cities, maybe like near Milwaukee or Madison, Oshkosh is near those and also near Green Bay, and so might be one of those secondary cities where you can get cashflow now, but in a state that seems poised for growth, given the recent trends.
Wisconsin obviously is one of the hottest cities in the entire country. Sheboygan, Green Bay, it’s near all of those. So it’s kind of sandwiched in there and could sort of benefit from the tides that are raising all those ships, so to speak. It’s also on Lake Winnebago. It looks very beautiful from the pictures I saw. I really don’t know any more about it, but it seemed like an interesting market.

James:
I’m picturing a Lego town where everybody’s wearing Oshkosh, walking around.

Henry:
Everyone is a train conductor.

James:
Everybody’s a train conductor.

Dave:
Is that company still in business?

Henry:
Oh, they got to be.

Dave:
I bet it is.

James:
It’s timeless, Dave. That does not go out of style.

Dave:
Yeah. I hope not. Well, I would go check it out. I’ve been to Lake Geneva in Wisconsin. It was very beautiful, so I’m sure it’s really nice up there.

Henry:
So there is a lot of smaller cities in that Wisconsin, Illinois kind of region that are growing right now where you can get amazing cashflow, places like Racine, Wisconsin, which is smack in between Milwaukee and Chicago, which is perfect, because as those cities spread out and affordability gets worse there, you can buy duplexes there for $150 grand in cashflow. It’s insane these markets.

Dave:
And on the lake, really nice.

Henry:
Great dynamics out there.

Dave:
All right. Well, that turned into an advertisement for the entire state of Wisconsin, which we’ve barely been to, but on paper, it looks very good.
All right, Kathy, what about you? What’s your first market?

Kathy:
Well, I started to get a little hair standing up on my arms or whatever when I saw this one because I don’t like investing in places where it’s really dependent on one economy, specifically oil, as you know, my heartbreak story buying in North Dakota. So Odessa, Texas, it’s in the Permian Basin. There is a lot of oil there, so that’s good. There’s a couple of employers there you might’ve heard of. Halliburton, Schlumberger, these are massive oil companies there.
The average home price is $212,000, so that’s far below the average. Population growth, not so impressive, 0.64%. Unemployment rate, 3.8%. Though I looked at other sites and some said it’s not, it’s much higher than that. So again, it’s hard to get the actual information. Zumper said that rents increased 17% year over year, maybe in certain areas. That’s the thing about these oil towns is it’s really volatile. And right now, I don’t even know where prices are in oil, it just goes up and down.
But I know the Permian Basin is doing better than North Dakota. But here’s right off the bat why I would not personally invest in this area. 114,000 people. In the whole Permian Basin, it’s 500,000. I like to be in larger markets. I like to have a larger rental pool. So to me, it’s just too small of a market, too dependent on one economy that is an economy that is manipulated by not America. Well, also America, depending on politics, it’s manipulated. But then oil industry is manipulated in general. So I don’t like it. I wouldn’t invest there.
With that said, I bet people are making a ton of money investing in this town. So just like you said earlier, if you know your town and you know where to buy and you know where the jobs are there to stay, you’re going to do just fine. And the price point’s right.

Dave:
Just to clarify, the way that we came up with this list is, we came up with criteria, which is under the median home price, population growth, a good RTP above the national average, unemployment rate below the national average. And so what happened was, our analysts at BiggerPockets pulled that data and we were each assigned to look at one. So Kathy is presenting this, but that does not mean she is endorsing it, just to clarify.

Kathy:
And like I said, you could make money in any market, so you don’t have to worry so much about being in the right market if you know how to buy the right real estate. I know there’s locals in this market who are killing it because they know.

Henry:
You know how I know Kathy’s not into this market. Because she’s saying it wrong. Because if you’re into it, it’s not oil. It is ole. There’s an ole.

Kathy:
That’s right.

Henry:
There’s a ole town. There’s ole money out there.

Kathy:
Yeah.

Dave:
Does that mean you’ve bid down there, Henry?

Henry:
No. It just means I live in the south.

James:
But that is something to look for is the energy. We’re seeing a lot of different global things going on right now. There’s global conflicts. There’s supply chain issues. A lot of these major countries, we’re not getting along with a lot of major countries that do supply a lot of oil. And the US might need to start generating more energy. And there could be some runway in these oil towns, ole towns. There we go.

Kathy:
Are you saying I should hold onto my land in North Dakota for the day that someday we decide that we might need to have some oil here?

Henry:
Do you have minimal rights?

James:
Just hang on.

Kathy:
Okay. Because you said so.

Henry:
You’d be like the Malibu hillbillies.

Dave:
All right. Kathy, was your second market we assigned you a little bit more inspiring to you?

Kathy:
Yes. The second market is more diversified. It’s a very good, in my opinion, stable cashflow market. Oklahoma City, Oklahoma. This is a market where, if you just want cashflow and no surprises and not a volatile market, it’s going to be here. I know a lot of people who have invested in Oklahoma City and have been happy they did.
Population growth is just so, so, 0.94%, so about average. Average home price, $228,000, that’s way below what we saw in the median and you can probably make the numbers work there. Unemployment rate, 3.2%. And the rent to price ratio, about 0.6. But again, if you buy right, you can do better than that. Rent growth unfortunately has not been too impressive in Oklahoma City this past month, down 0.3%. But year over year, up 0.3%, so flat. Let’s just call it flat.
But that may be because, in 2022, rent growth was massive, one of the most and highest in the country actually, 24%. So something happened there, I would call it a pandemic. So rents went up massively. But that means that you can’t look at the past. You got to look at what’s next. And with rents going up that much so fast, it may stay flat for a bit so that wages can catch up.
But one of the issues is lack of housing and lack of affordable housing that we’re seeing everywhere. So if you are interested in more Section 8 housing, apparently there are 30,000 people on the wait list for Section 8 housing in Oklahoma City. And that can be a great investment, steady income from the government. 330,000 new jobs created over the past decade. So supply is low, but demand is high, which is why 40% of residents say they much rather rent than own because owning just doesn’t make sense for them right now. So a strong rental market, very diversified.
Now, I like to be in markets where there’s going to be a boom of some kind. I don’t want a boom market dependent on one thing, but I do want something that’s going to make it boom. And something that might make that happen and is very exciting, and one of the reasons why our new rental fund is in Oklahoma is the governor is pushing to get the state income tax to zero, like Texas, to compete with Texas. If that happens, I really think we’re going to see quite a boom.

Dave:
Interesting.

Henry:
Yep. So I love Oklahoma City. It’s another sleeper market because it is a major metropolis, but you can still get smaller city economics there, smaller city numbers there. Also, there is a little bit of a tech boom happening in Oklahoma City. Lots of tech companies are opening offices there, and so there’s lots of tech jobs which bring in younger employees. And so that creates growth over time. They did lose a lot of people to the Texas or Dallas area during the pandemic. A lot of people moved over to Texas, and that may be what’s pushing some of this. We’re trying to get to the zero income tax like Texas there. But it’s also, not only technology jobs, but it’s the home office for Sonic the fast food restaurant.

Dave:
Nice.

Henry:
So lots of good stuff happening there.

Dave:
I’ve never been to Sonic in my whole life and it’s one of my biggest regrets.

Henry:
Oh, the food isn’t worth it, but the drinks are great.

Dave:
The commercials of those two guys-

Henry:
They’re hilarious.

Dave:
Seared into my brain for the rest of my life, telling me to go to Sonic. Yeah, I’ve known a couple of people who invest in Oklahoma City and actually some of the cities around it, and it just seems like an excellent place. There’s just not a lot of downside or risk that I see. It just seems like pretty strong fundamentals everywhere.

Kathy:
Just tornadoes would be the risk and you have insurance for that.

Dave:
Just tornadoes.

Kathy:
Just tornadoes.

Dave:
Something never having lived in the Midwest or the South have ever thought about. But yeah.

Henry:
It’s about an hour and a half west of Tulsa, which is another decent market for cashflow. And then about three hours from here in Northwest Arkansas. So I mean, I like it.

Dave:
Cool. All right. Well those are our eight markets. And again, what we’re talking about here is markets where, even during a confusing market, where some markets are going to do well, some markets are not going to do as well, we think these eight markets offer strong potential, there are no guarantees, but strong potential to do well over the next year, even as affordability is low and there are some questions about what’s going to happen over the coming year.
And as we talked about a lot at the BiggerPockets Conference, if you’re going to be an investor, it’s okay to change tactics. It’s expected to change tactics based on what’s going on in the economy. But at least for, I know the four of us and for many of the people I talked to there, what people are not planning to do is to just stop investing altogether. It’s to try and figure out, like Kathy said earlier, what is working in this market and adjusting your strategy accordingly. So we hope that this is really helpful for you. We’d love to hear from you in the comments or reviews. If you invest in any of these markets, tell us a little bit more about them. Obviously, if you’re listening on YouTube, you can put those comments in there as well.

Henry:
Specifically OshKosh, is that still a thing? Can we still get overalls?

Dave:
Yes. Next episode, we are all going to be wearing OshKosh B’Gosh overalls and going to Oshkosh.

Kathy:
Really? Okay.

James:
I mean, the Minions still wear it. The Minions still rock Oshkosh. We love Minions.

Dave:
All right. Well, thank you all so much for listening. We really appreciate it, and we’ll see you for the next episode of On The Market.
On The Market was created by me, Dave Meyer, and Kailyn Bennett. The show is produced by Kailyn Bennett, with editing by Exodus Media. Copywriting is by Calico Content, and we want to extend a big thank you to everyone at BiggerPockets for making this show possible.

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Among 85 billion-dollar entrepreneurs, who built companies with sales and valuation of more than $1 billion from an idea, more than 9 out of 10 took off without VC. 18% of them got VC but stayed as CEO. 76% avoided VC. Those who delayed VC kept 2x the proportion of wealth created compared with those who got VC early, and the VC avoiders kept 7x.

These 94% of billion-dollar entrepreneurs used Entrepreneur 360 skills, i.e., 9 skills (each skill representing 40 degrees) they needed to grow from idea to billions. The set of skills include 6 skills to takeoff with control of the venture, and 3 skills to scale up from takeoff to dominance.

Skill #1 to Skill #5 to Takeoff without VC

You may not want to build a unicorn, but if you want to build a growth venture and control it to keep more of the wealth created, these 6 skills can help.

Skill #1. Technical skills in an emerging industry.

Nearly every entrepreneur from Sam Walton (Walmart) and Bill Gates (Microsoft) to Mark Zuckerberg (Facebook) and Travis Kalanick (Uber) had the technical skills to start a venture in an emerging industry. Sometimes it is possible to find the right partners, like Jobs and Chesky did, but without the tech skills, you may be left behind.

Skill #2. Sales skills for the emerging industry.

There are 2 main ways to sell in a new venture – with lots of capital, or with skills and little capital. Most billion-dollar entrepreneurs from Dick Schulze (Best Buy) to Joe Martin (Boxycharm.com) had skills to sell with little capital.

Skill #3. Venture (not corporate) finance skills to maximize productivity per dollar.

94% of billion-dollar entrepreneurs took off without VC. They knew how to use each dollar to grow and launch their unicorn. This is what entrepreneurs like Niraj Jain (Wayfair) did.

Skill #4. Venture financing skills to raise capital for an unproven venture, to keep control, and to reduce dilution.

To keep control of their venture, billion-dollar entrepreneurs need to know how to finance growth and keep control. That is what entrepreneurs like Michael Bloomberg (Bloomberg) had.

Skill #5. Bootstrap strategy skills to find the key weapon to succeed and bootstrap elsewhere.

Finance-smart billion-dollar entrepreneurs knew how to grow more with less and build a real unicorn by using their edge to dominate and by bootstrapping elsewhere. That is what Bob Kierlin (Fastenal – Bootstrap to Billions) did.

Skill #6. Bootstrap launch skills to takeoff with a limited runway.

The most difficult phase of a venture is to takeoff with limited capital. These skills involve finding the right sales driver, growing at the right speed, and controlling the industry. That is what Richard Burke (UnitedHealthcare – Bootstrap to Billions) did.

3 Skills from Takeoff to Unicorn.

The next 3 skills to build ventures from takeoff to dominate include:

· Control skills to monitor your growing venture.

· Organization skills to build a competitive business.

· Leadership skills to dominate your industry.

The Final Degree: Entrepreneurship 361

Luck. Success in an evolving industry requires more than just skill; luck plays a role. Without at least a stroke of luck, you might find yourself competing with entrepreneurs like Bill Gates, Jeff Bezos or Elon Musk.

MY TAKE: Finance-smart billion-dollar entrepreneurs acquire 360-degree skills to start growth ventures, build strong companies, and lead them to dominance. These skills are the building blocks for successful and sustainable ventures where you control the business and the wealth created.

MORE FROM FORBESFrom $375 To The Newest Unicorn In Beauty: How Joe Martin Built Boxycharm.com Without VCBy Dileep Rao

David:
This is the BiggerPockets Podcast show, 839. What’s going on everyone? It’s David Green, your host of the BiggerPockets Real Estate Podcast, the biggest, the best, the baddest real estate podcast on the planet every week, bringing you the stories, how toss and the answers that you need in order to make smart real estate decisions now in this current market. And boy, do we have a show for you. Rob, what are some of the things that people should keep an eye out for in today’s show to help them on their investing journey?

Rob:
Darius is a very relatable, very inspiring fellow. He comes from humble beginnings, and I think a lot of people will just be a little relieved to know that he was able to achieve so much by taking baby steps and scaling accordingly. He doesn’t have a crazy story where he had trust fund parents, or he didn’t raise money. I mean, he was funding all this while he was working an hourly job. So I think for everyone at home, just to understand it is a marathon, not a race. And so, for Darius, he took steps.

David:
100%. Not only did he take steps, but he actually did the work. Darius was able to do this in a market that most people would’ve said, “Don’t invest in,” at a time when everybody was saying don’t invest. Basically, he had a lot of resistance and people going against him, which is the same thing that happens when you lift a weight, and it builds strength. This will all make sense later as you get into today’s show. But before we bring in the amazing Darius to share his story, today’s quick tip is simple. Go ask a question on one of the BiggerPockets forums. This was a game changer for Darius. He talks about how it really helped him in his own journey and stay tuned for some clever ways that he optimized his forum questions. Rob, anything you want to add?

Rob:
I guess I will say, quick tip number two, make sure you always bring a sewer camera to an inspection, because one day you might walk into your bathroom and find ramen noodles in your bathtub.

David:
All right, let’s bring in Darius. Darius Keller, welcome to the BiggerPockets podcast. Very glad to have you here today. Darius has been investing for nine years, owns eight rental properties, mostly single families, lives and invests in Michigan near an Amazon center, has used the BRRRR Method to snowball his gross. Currently makes $66,000 a year in gross rents and is on track to make over $100,000 in gross rents in 2024. And as a fun fact, Darius is an elite powerlifter that also played college basketball. Darius, welcome to the show.

Darius:
Thank you. Thank you for having me today.

David:
All right, before we get into your backstory, can you paint a scene for us about what you discovered when you bought your first property?

Darius:
Yeah, so when I bought my first property, it was back in 2014, and the thing I discovered was, there was no copper in the house. Assuming that there was a sink and stuff, and there was switches, and the walls were up, you would assume that there’s electrical in the house. But when I went to the basement, there was no furnace, no hot water tank, no electrical panel. What do I do at that point?

David:
Wait, wait, wait. So they had light switches on the walls, but no electricity running to them?

Darius:
Yeah, and homepath.com is much different than today. Back then, it was an auction setting type of purchase that I did.

David:
What was going through your mind when you saw that?

Darius:
At first, I didn’t realize how expensive it was, so that was actually a good thing. I didn’t put myself into shock, but I was questioning myself, like how am I going to get this done? So what I did is, I just kept a good mindset and reached out to people. So I had my wife’s dad, who was real handy, not real handy with the mechanicals, but he knew people who knew how to put work in with mechanicals.

Rob:
Wow, that’s awesome, man. I cannot wait to hear how you resolve that and how you built your portfolio to over $1,000,000 today. It’s pretty crazy, man. But before we get there, and before we get this beautiful resolution, can you paint a scene for us about what your life looked like before you found real estate? What was your job? What was your living situation? Give us a little bit of a taste here.

Darius:
Yeah, so right before 2014, before I made my first purchase, I had to move in with family. I went from paying rent, into moving in with my wife’s dad. It was a two bedroom house, six other people in the house. You can imagine that it didn’t have a basement or nothing. So it was just one floor, two bedrooms. And during that time, I hit rock bottom financially. So I ended up totaling my car right in front of the house, and I was still a janitor at the time, so I was only making $10 an hour. I even keep my pay stubs still, just as a reminder of what it looked like before I started. That’s essentially what it looked like, and I was still getting my master’s degree at the time, so I can relate to a lot of the people that are out here watching today.

Rob:
Yeah. Well, what did it feel like? I mean, I know you said you were making $10 an hour. Was that at all a comfortable living at that time? Was it super, super tight, were you able to save money?

Darius:
I was able to save a little bit of money. I was doing little side jobs here and there, and while I was living with other people, everybody was sharing the bills, so that kind of helped me as well. So I ended up saving almost $10,000, and that’s when I went into my first home, and I purchased that at a $9,100. So it was just a single family, three bed, one bath colonial, and that was the one off of homepath.com.

David:
Did it have electricity or water?

Darius:
Yeah, so just to paint the picture of what it looked like, it had the sink, the walls were up. Like I said, there were switches in the walls. The exterior was pretty new, everything but the siding. So you had a new roof, new gutters, that kind of thing. I thought it was a move in type of situation. I bought it off the auction, I won. That’s it. Hooray, that kind of thing. But it wasn’t.

David:
Do you think the builder just decided it’s not worth putting money into it, or was it intentionally supposed to be a scam? How do you think this happened?

Darius:
I think it was listed for sale, and then somebody came in during the sale and-

David:
Stole everything.

Darius:
… stripped it out. Yeah.

David:
Okay, that makes more sense. It sounded at first somebody built a house and put light switches, but never actually ran electrical to it, because they intended just to make it look like something. But you think somebody came in and they stole the pipes, and the electrical, and everything while it was sitting there?

Darius:
Yeah, during that time, Pontiac was much different. There was a lot of vandalism in that time. It was going downhill. It wasn’t getting better during that time.

David:
This was during around the time of all the auto companies leaving or getting shut down, is that right?

Darius:
We were hit by the recession hard, so we had a lot of blight, boarded up homes, there were schools that were boarded up. It was more of that kind of situation. GM Chrysler were still here, but things got significantly better when Amazon showed up, which was in 2019 roughly.

David:
Well, I’m glad you made it through that. That’d be enough to make most people say, “I want nothing to do with real estate.” You’re clearly somebody who had been through some difficult times before, so you’re able to handle adversity like this. But I am curious, what got you willing to jump into an asset class that you didn’t know a ton about? What was going through your mind that made you want to do this?

Darius:
Well, I had a nothing to lose mindset. So getting a master’s degree, you are going to run up the debt. So I had $100,000 worth of debt at the time. So I was just trying to survive, that was literally my goal. I just needed a house to cut the cost. So I figured, if I owned my house, didn’t have to pay the mortgage every month, didn’t have to pay any rent, that was enough cushion for me to be financially stable. So I had no intentions of investing or anything like that. I was just trying to buy a home that I could live in. And that kind of pushes me into the second home, because that’s when I started to think, man, these homes are cheap. So like I told you, the first home was $9,100. The second home I bought for $2,500, which is two streets away. So what I did is, I moved my wife’s family into that home.

David:
You’re the first person I’ve talked to that actually bought real estate at that time. I remember hearing about the stories that houses were $2,000, $1,500, that basically the state just wanted someone to pay property taxes on these things. A lot of them had been foreclosed on by the state, and because they didn’t pay state property taxes, and they would give them away almost if someone’s willing to pay. What was the prevailing wisdom at the time? Were people telling you that this is a great idea to buy these houses, or were people thinking, why would you ever want to buy any of those things?

Darius:
So I had family members say, “Why don’t you just get a mortgage and pay the mortgage every month?” And actually, I couldn’t get a mortgage, it was very tough to get financing during that time.

David:
Well, yeah, you can’t get financing on anything that’s that cheap. Banks aren’t going to finance a $9,000 house. You can’t get a mortgage that low, which is also probably a big factor in how you ended up buying a house that didn’t have electricity or water, because normally that would’ve come up during the appraisal. They would’ve realized that was the case. But when you’re paying cash for it and it’s your first home, I can see that that being something that slips beneath the cracks. You were living in a two bedroom property with six people, right?

Darius:
Yeah.

David:
Was that just a powerful motivating thing that you’re sitting there, sleeping in a room with other people, and cramped that you were just thinking, “I really want to get my own spot?”

Darius:
Well, no, you don’t think of it like that. You’re living and you’re saying, “Hey, you’re a man. You’re living with your wife’s dad.” It’s like a moral kind of thing. Just, you don’t want to do that.

David:
It doesn’t feel good.

Darius:
Right. But to go back to your question, there were a lot of people that just were shaking their heads, like, “You’re just wasting your money.” There was no value to the properties I was buying at the time.

Rob:
Yeah. And Darius, you mentioned that you were $100,000 in debt. Was that all student loan debt or was it other debt as well?

Darius:
No, it was only student loan debt at the time.

Rob:
And what were you studying? What was the reason for even going and getting your master’s?

Darius:
Yep. So I started off in graphic design, and then I moved to business administration, and it was simply because I needed a boost in income. I understood that $40,000, $50,000 just wasn’t enough. And I’m one of those guys, I take things to the extreme. So somebody told me that I needed a master’s degree, so that’s what I went and did. That was my instinct. That’s what I was taught at the time, to go get as much education as possible.

Rob:
Nice. Did you end up finishing that master’s degree, just out of curiosity?

Darius:
Yeah. Yep, yep. I finished the master’s degree. The graphic design helped me get into the engineering area, in the corporate world, and then what happened is I became a design engineer. So that’s what I’m doing now at a Fortune 500 company.

David:
Okay. So you bought this first deal at an auction in 2014. You paid $10,000 for the property and you had to go through a bidding war. You show up to see your prize and you realize it’s got no water, no electricity. Walk me through what you were feeling and thinking when you go to look at the house, you’re flipping on the switch, and nothing’s coming on. You kind of realize that you’ve been had.

Darius:
Like I said, I talk to a lot of people. I don’t shy around, so I go outside my door and there’s other young guys who are investing as well. And what I did is, I was friendly to him. I asked the guy if he needed any water, I had water bottles and stuff available. If he needed anything, just let me know. His home was in the same condition as mine. Like I told you, there was a lot of vandalism at the time, there was a lot of boarded up homes, a lot of investors out there.
So what happened was when I introduced myself to him and was kind to him, he offered to look at the property. And he happened to be an engineer as well, an electrical engineer. So he ended up assisting with the furnace, the hot water tank, because this was my primary residence at the time, I was able to go through the permanent process myself. They allow that here in Pontiac if it’s your primary residence. And that’s really where, that initiated my learning experience, making friends with the guy across the street. I pretty much learned everything. Once you learn the electrical, the plumbing was like, I learned the plumbing within a day. And then I was able to learn the gas within a few weeks after that, learned how to do that as well.
So I learned all the trades pretty quickly. And then, like I said, when I bought that second house, you pay what you get, you get. So I bought a $2,500 house at the time, and it looked like a $2,500 house. And once I did that house, I pretty much could remodel the entire house by myself at that point. I had all the skill. Do I want to? No, but like I said, I had the skill. That pushes me up into 2017. It takes time to fix up the houses. I had no money at the time, I still had no money. So in 2017, that’s when I started moving up the corporate ladder. I started making a little bit more money.
I ended up quitting my janitor job at the time, and then I financed. Well, I took a HELOC on my primary residence and I bought my third property, and I bought that third property from auction.com for $35,000. And that’s also in Pontiac as well. So I’m harvesting, I’m a farmer in Pontiac, essentially. That property now is probably worth about anywhere from $150,000 to $180,000. So you can imagine purchasing that for $35,000 and the homes being worth nothing, to what you’re seeing them now. Just to give you some stats in the house, it’s like a three bedroom, two bathroom colonial. And at that time, again, back in 2017, the websites were not as sophisticated as they are today. Today they’re a lot more competitive to purchase properties on. So when I tell people the prices on the websites, they’re in shock, because they’re only seeing what the Zillows, Redfins, and auction.coms look like today.

David:
So you’re doing this sweat equity, you’re doing some of this work yourself on the property. What did that do for your confidence as a real estate investor, as you learn new skills you didn’t have before, and you realized that you could solve some of these problems?

Darius:
So once I learned how to fix everything, that took a lot of pressure off me, because like I said, I went to auction.com and I bought that property blind. I couldn’t go inside the property. So here I am, I pulled $40,000 of equity out of my primary residence, and that’s what I use to purchase the third property. So if there’s no pressure on me for repairing the property, then I can put all the money up to assume the property.

David:
So from there you use the BRRRR Method so you could get more properties. So you’ve got some confidence, you also know where to go get these properties. You kind of know what you’re stepping into at this point, so you feel more comfortable going big. What was the pace that you started acquiring properties at and how were you funding them initially?

Darius:
So I would say the second property took me almost two years to redo. Like I said, I bought it for $2,500. The third and fourth property, things got a little bit faster, but I would say on average it would take me about eight months to repair a property, then put a tenant inside, and then take maybe another month to get the financing to pull the equity out the property.

Rob:
So the order of properties, the first one was $10,000. That’s the one that you bought, I guess, at the auction that didn’t have all the stuff in it. The second property was $2,500. The third properties, did you say it was like $35,000 or $60,000? Which one of those?

Darius:
Yep, so the second property, the $2,500 property, the third one was the $35,000 property.

Rob:
Got it. Okay, cool, cool, cool.

Darius:
So that’s when I learned all the financing. I was really stuck in how the financing goes when I got to that third property. But also, I hit a wall during that third property. It had a big plumbing issue. So when I got to the third property, that’s when I assumed my actual non-family member tenant as well. So I would consider myself a real investor at that point, where I started to deal with a lot of the problems that normal investors deal with. So the plumbing issue I had was, the pipe had the snake coiled up inside of it in the yard. So we had to pay $5,200 for them to dig and put a T in the yard from the pipe. So we would call it a clean out drain.
And within that same two month timeframe, I also had another pipe break in my primary residence. And when pipes break, everything stops. The kids in the house can’t use the restroom, I can’t use the restroom in my own house. So that’s when I was like, “Okay, from now on when I buy these properties, I really have to take a sewer camera to the auctions, into these showings with me, when I do inspections.” Because I was doing my own inspections as well, just to cut costs.

David:
So what’s the process like of using a sewer camera to actually scope the line?

Darius:
So I use Forbest, it’s a cheap $500 camera. You can actually get a used one. It’s disgusting to say, but you can. It comes with a battery. You pull the screen out. As long as you have a fly trap, you can easily fish the camera from inside all the way out to the street. And you can see the cracks, you can see roots. It comes with an LED light in the front of it. You can record it and send it to the seller, to bring the price down. I mean, essentially it’s extremely important to have one, because in some cities it could cost $7,000 to $10,000 just to get the permitting, just to cut out the street if you have to repair a pipe. So that’s where I was going at with that. If I’m going to lose in this game, it’s going to become from construction, not because tenants didn’t pay me rent, or I bought a bad deal.

David:
What we’re talking about here is also called the sewer lateral. This is where the sewer line that runs to your house from where it ties into the city, typically goes under the front yard and you’ll get tree roots that can climb into that, or you can get different things that cause a problem. So when your house is trying to flush the waste out too tight into the city plumbing system to have it taken away, it could get back up. It can start leaking into the front yard and then you can’t use the plumbing at all.

Rob:
Darius, I relate a little bit to this, because when I bought the house that I’m in right now, there was an issue with the sewer. We got it scoped and they said that they agreed to fix it, and we did not get it re-scoped afterwards, because we’re like, “Well, they fixed it, so we’re good.” Well, they lied about it, and so we’re settling in, it’s been a week, we’re into this house, we’re enjoying it. And then I walk into my bathroom and there’s ramen noodles inside my bathtub, along with a few other non-aesthetically pleasing things. And man, yeah, when you don’t have a working bathroom, shower, kitchen sink or anything, oh man, it is pure agony and chaos in the household with kids.

Darius:
And of course, if they can’t use the bathroom, tenants can’t, you know they’re not paying you rent. They’re going to be fighting that.

Rob:
Which I think is not unfair.

Darius:
Right.

Rob:
So at this point, you said you had sort of learned a lot of lessons from your first properties, and you had worked on the electrical and the plumbing with your neighbor. Did that knowledge transition to this third house and this problem? Were you pretty aware of how to do it yourself, or were you outsourcing sort of right from the get go?

Darius:
Yeah, so the plumbing issue, you have to outsource that, just don’t have the tools to do that. But after the third property, that’s pretty much when I hit the ground running at that point. That’s when things got real interesting. I had an appraisal issue as well with the third house, the Quicken Loans. During that time, again, you had some houses that were appraising high and some that are low, but it’s still very tough for an appraiser when half the neighborhood is just distressed. So I would say it is like the baby Detroit. If you’re from the outside, you’re right.

David:
That’s a great point there. So you’ve got a property that you bought at a low price because it’s distressed, and now you put money into it and you fixed it up, and then it’s cash flowing really well. If you were to build it from the ground up, it would be way more expensive than what you’ve actually put into it. So there should be some equity here, but the appraiser’s looking at a whole bunch of abandoned houses in this same neighborhood that are maybe worth $2,000 or $3,000, that does look at their valuation, because how do they know what to compare this to? If you’ve got the only house that’s fixed up, is that kind of what the problem was?

Darius:
Yeah, they came back and said the house was worth $55,000. I’m looking at them, like there’s no way. Absolutely no way. And so what I did is, I went and got a second appraisal, and it was worth that little $500. It was worth the money, because they said it was worth $85,000. So I was able to take the 75% loan to value. That got me around $63,000, and I bought a fourth property, which is a condo, which was pretty much what we would call a turnkey at that point. And I bought it at HOA.
I mean, I had that thing rented out within a few months. Literally. I had issues with the HOA and the ticketing, and I didn’t understand that they were giving the tenants nearly the same amount of power as the landlord. So the tenants could actually show up to the board meetings just like the landlord could and stuff. That rubbed me the wrong way. So what I did is, I sold the condo and I replaced it with a single family home. And I got the single family home from my actual wholesaler, and I got this right on time. It was like in 2019, the same month as Amazon came in, and I bought it for $42,900. Like I said, the wholesaler got it for $10,000, and it’s worth probably about $150,000. It sits next to a $200,000 house. It’s literally less than a quarter mile away from Amazon, less than that.

David:
Now, appraisals can be tricky, and part of what makes it even trickier is, real estate is worth what someone’s willing to pay for it. Which means that that doesn’t fit in as a value on a spreadsheet very well, and people don’t like that. They want to have a number attached to what something is worth in dollars, preferably. But with an appraisal, it’s so subjective, the appraiser gets to decide. I have a cabin in the Blue Ridge Georgia Mountains that I bought, and I basically built a second cabin on the property. The appraiser came in and gave me an additional $50,000 of value when I doubled the square footage of the property that was on that lot.
It doesn’t make any logical sense, but that’s just what the appraiser gets to say. I think that they look at what you bought it for, and they try to keep the new price as close to that as they can. So for everyone that hears this, it’s easy to get discouraged by that. It’s easy to think you did something wrong. Oh man, I never should have done this. I only got $50,000 of value. That’s not true. If I were to sell this thing to someone else, they would pay way more than just $50,000 more than what I paid for it, and I’ve doubled what the property will be able to generate in revenue. So there’s lots of different ways to value property, appraisals can be tricky. What do you think, Rob?

Rob:
Yeah, definitely. When I built my tiny house in Joshua Tree, it was really tough, because I was like the first tiny house, so I actually had to fight for three different appraisals. The first one, they’re like, “No, that’s way too high.”
The second one was insanely low, and I was like, “Listen, we’re tied here. We got to get a third appraisal.”
And they were like, “Okay, that’s fine.” So third appraisal came in right at the amount that allowed me to take 100% of my money out. I would’ve been fine leaving some in, because that’s just how the nature of the game with BRRRR is. Sometimes you might leave $10,000, $15,000, $20,000 in the deal, but man, yeah, appraisals, it’s not as objective as you’d think.

David:
But in areas where there’s a lot of comps, you can start to get an appraisal that’s somewhat predictable. That’s maybe a better thing than saying accurate, because who knows what the house is worth. It’s just worth what someone will pay for it. But when it becomes predictable, it could benefit you. So areas like Phoenix or Las Vegas, they have a lot of track housing. The appraiser’s like, “There’s a million 4 bedroom, two bathroom houses for me to pick from.” They get a very tight number that comes in, and then you can kind of plan your BRRRR or your flip based off of that. That’s one of the reasons that you just want to understand the area that you’re investing in. I’ve said you don’t have to invest in your backyard, but you got to understand the backyard you are investing in if you’re going to do long distance. So Darius, you’re in a specific area. How do you feel that just buying the majority of your portfolio in that location has been a benefit to you?

Darius:
Oh, I mean, you’re creating an infrastructure around you. I’m using the same contractors though, the populating tenants in the properties, it becomes like word of mouth. I have a good eye of the rent flow, so I know exactly how much the rent is for each property that I’m buying. At that point in 2019, that’s when I took off, because I don’t have to do as much of research as anymore. I don’t have to rely on Zillow, and Redfin, and stuff for the data. I’m getting the data live, because I’m actually in it.

David:
I know you had mentioned that you were working as a janitor when you bought that first house, which I love. Because I had a same blue collar approach, where I just worked blue collar jobs, saved my money, worked as hard as I could, put it into real estate, and started to climb my way out of that hole. At what point did you switch from being a janitor to taking that corporate position that you mentioned, and did real estate play a role in helping you make that jump?

Darius:
So in 2014, I was still only making like $14 an hour. I was a contractor at the time at Chrysler. When I made the bigger jump in income, it was probably in 2017, so that was right after I bought my third property, which makes sense because you need income to qualify for the loans. Real estate helped when I refinanced that third property, because now I had the equity plus I had the monthly net profit to use for repairs and purchases.

David:
I’ve noticed that, in my journey, I think Rob’s might be a little different, because my understanding is that Rob scaled his initial portfolio with partnerships. So that might not be the best example, but I’ll let you weigh in a second here, Rob.
I noticed that there is a relationship between the money that you make at your job or your business, and the real estate that you buy. And what I mean by that is, when you develop some kind of passive income, you can take risks in the job that are not as risky. If you go for another job and it doesn’t work out, or if you leave the security of a W2 to go to a 1099 opportunity or whatever, it’s easier to do when you got a little bit of cashflow coming in.
And the same is true for some of the risks that go with real estate. They’re easier to handle when you’ve got a steady paycheck coming in and you live beneath your means, right? There’s this kind of, both hands work together to make the wealth building journey a little bit easier. Did you notice a dynamic like that, Darius, in your world, where you’re working as a janitor, you’re getting some momentum getting real estate, then you’re doing some physical labor on the house, your confidence is going up because of what you’re learning, you buy another house, you’re learning stuff about the loan process, now that’s giving you confidence in the job again, or did you see these as completely different independent tracks?

Darius:
No, I saw them completely independent tracks. I didn’t look at it that way. I looked at my nine to five as something that gives me stability, and I still look at the real estate like, okay, if this thing turns out well, it could give me the financial freedom. The job is great, but when you turn on the Instagrams and the YouTubes, and you see people buying the cars and stuff, they’re using passive income. They’re not using the money that they’re working for, earned income. So I really pushed that. I just spent over $50,000 in a year on vacations, and there’s no way my nine to five would be able to support that. The passive income is what supported that. So I look at it separately, yeah.

David:
But you were getting loans by these properties, so having some kind of steady income helps you get the financing that you were able to use to build a passive, right?

Darius:
Yes.

David:
Okay. You also have a perspective here on live data. So when you’re at an auction and you’re bidding, you’re looking at live data versus someone on Zillow that’s looking at stale data. Can you go into your perspective on that?

Darius:
Yeah, yeah. So between 2021 and 2022, I bought five properties, okay? I went to Flint, I went to entire 40 miles out from Pontiac. Flint is not, it is very distressed. They had the water crisis, they had the recession, we had COVID out there. I mean, there’s a lot of things that hit Flint. They got different kind of problems out there. So I went to a high risk area to buy properties. I had a lot of people out there who were saying, “Oh, don’t buy in Flint because it’s a bad area.”
And what I did is, I actually went to the auction, stood in line, saw how many people were waiting for the properties, and I started telling people, “Hey, that data that’s on Zillow is not real. That’s not live data.” The live data is when you’re in the auction, you’re actually seeing it happen right in front of you. The live data is when I’m in the auction online, getting beat and putting blind offers at $60,000 for two bedroom houses in rough areas.

David:
So what’s the advice that you’d give to somebody who tends to make their decisions about where to buy, what to buy, what to pay off of data that they get from the internet, like sources like Zillow?

Darius:
I would say actually go and see the properties. People think they can sit behind the computer and do everything. You can’t fully inspect a property from behind the computer, you actually get up and go to the property. And sometimes it pays off too, because you may see something to use as a negotiating factor to bring the price down with you and the seller. So sometimes I’ve been able to take the price down by like $10,000 on a property because there’s some minor repairs that are needed that are not shown online.

David:
Are you still buying properties at auctions?

Darius:
Yes. Yes.

David:
Okay, what about that? If somebody isn’t sure about it, hasn’t done it before, can you just describe how that’s different than buying properties traditionally using a loan, and maybe who this is good for and who it’s not good for?

Darius:
Yeah, so there’s some auctions where you can use a loan. The auctions I go to, generally you cannot use a loan. You have to use used hard, hard cash. The auctions, for example in Flint, the good things about those is that you can actually go and see the property. Many times the online auctions don’t allow you to physically go and see the property. So there’s a disadvantage to those types of auctions.
The prices of the properties, they’re not evaluated, so they’re just pretty much, they get the properties and they put them up for sale for whatever they’re owed to the city, because they know the city owns the properties. Where if you’re going to Zillow, or if you’re going to MLS, the open market, you look at a property, at that point, the point you’re starting at, somebody has already evaluated the property, they evaluated the condition of the property, that kind of thing. So you’re likely to not get as good of a deal.

Rob:
I mean, buying four properties, or I guess four or five properties in a year, that’s pretty crazy, man. A lot of people work their whole lives to just get four to five properties in general. So the fact that you were able to scale at that level, that quickly into your career, I think it shows that you figured it out. But from my understanding, when you were trying to figure out how to scale, you took that question to the BP forums. How did that help you?

Darius:
Yeah, so really when I go to the BiggerPockets forums, I’m looking for reassurance, and I think that’s how other people can use the BiggerPockets forums. If you’re investing in real estate, you’re already a smart person, that says a lot about you. But if you’re looking to know if you’re doing things right or if you’re organizing your portfolio correctly, you can go to the forums to find credible people for help. My issue was, I didn’t know how to scale, and somebody told me what they did is they refinanced their four unit and bought a bunch of single family homes. I didn’t have a four unit, I only had single family homes. So what I did is, I did multiple refinances and then I bought a spread of single family homes in a smaller period of time, which is what I did in 2021 and 2022.

Rob:
And can you recap for us what your cashflow in your portfolio is looking like now, and what’s on the horizon?

Darius:
Yeah, so nine total properties, one I live in, three are currently being remodeled right now. They should be finished at the end of the year, and then five are actually occupied and rented. So those five bring in about $66,000 annually. And after those other three are remodeled, we’re looking at a total of $102,000 roughly a year from the rent. And I don’t have any partners. I only partner with the bank. So generally I use the same lender for the investment properties and I go to a credit union for my primary residence.

David:
What’s the cause of why the rents are going to jump by that much? It’s like a 40% increase.

Darius:
Number one, my rent is actually, because most of my tenants still been staying in my properties for a long time, so I’m very conservative on the rent increases. And the rent is still going up, values are still going up over here. Like I said, we have GM, Chrysler, and I have Amazon that just arrived here. We also have United Shore. They’re very big as well over here. So that just happened in the last couple of years.

David:
But are rents increasing by 40%, or are you having new properties coming into the portfolio that are also going to be bringing rent?

Darius:
Oh, I see. So the current rent is, between the five properties, a total of $66,000, but those additional three properties are going to bring in another $36,000. Sorry about that.

David:
That makes sense. So you’re adding a lot more cashflow because of these remodels that you have going on.

Darius:
Yes.

David:
Pretty sweet to be coming on as we may be heading into an economic recession, you’re going to be making more money.

Darius:
And just to bring more clarity, those additional properties that I purchased, those have no debt on them.

Rob:
Whoa.

Darius:
I went to auction, I bought them pretty close to zero.

Rob:
Wow, that’s crazy. So at this moment, on the $66,000 per year, what’s the actual cashflow? Like the net profit to you?

Darius:
Yeah, I would say about 60%.

Rob:
Wow. And then will you get even more profit once those other three are live, because you own those outright?

Darius:
Yes, yes. But my plan is to refinance everything and put debt on them, number one, because it protects you. And number two, my original plan was to buy a spread of homes really quick, and then refinance all the homes once I get my cash flow up. That way my DTI is a lot lower when I go to the bank.

Rob:
So now that you’re pretty seasoned in all of this, are you still DIYing any components of your rehabs?

Darius:
Yeah, so what I try to explain to people, we look at just the houses, but I also own the refrigerators, I own the process as well. I own about $20,000 in power tools. So what I’m trying to do is build my own internal team. So right now I have one person working part-time. My plan is to make them full-time eventually in the future, just for the repairs and as my own internal property manager, to take some of the load off of myself.

David:
So you’re thinking about creating a property management slash rehab internal team to work on your properties?

Darius:
Yes.

David:
And are they going to be salaried people

Darius:
Right now? Hourly.

David:
Okay. And then they’ll just work when you have work, and then when you don’t have work, they can do something else?

Darius:
Exactly.

David:
So have you thought about extending this into a business once you’ve got these people that are working under you, that maybe you have other investors in the area that need a crew, and you just charge the difference? Or keep the difference between what you charge that person, what you pay the people?

Darius:
Exactly. And that’s where I actually got my employee from. I actually was able to refer to someone else for help.

David:
I love that. I think that’s the future, going into this new market, that’s how everyone should be thinking. It’s in Pillars of Wealth, I talk about how we have to be thinking about investing as a way to make money, but also offense. What are you actively doing in the business world, or in your job, or in a commission space, whatever it is to make more money? And you’ve got a great synergy.
You’re going to save money by having people that do the work on your own remodels, because you don’t have to pay a contractor who’s going to keep a profit. And then in addition to that, you’re going to make money by actually making that profit yourself, by having these people work on other people’s jobs, because you’re willing to build this expertise and do the work. Which, I will add, you probably have the confidence to do that because you had to step into that nightmare project in the beginning, and learn how to do it. So while that looked like a reason to quit, you turn that into a possible business that you can use to make money, and scale your portfolio even more.

Darius:
Exactly.

David:
Good job on that.

Darius:
Thank you.

David:
Yeah. What’s the total equity across the portfolio?

Darius:
So it’s $350,000 in debt, of real estate debt, and $1,100,000 is probably what the portfolio is worth.

David:
Not bad at all, man.

Rob:
That’s not bad. That’s amazing.

David:
Yeah. Do you feel proud about that? What are your thoughts? Are you trying to grow it?

Darius:
I wasn’t looking at it like that from the beginning. Like I said, I was buying $2,500 and $10,000 houses. That was not my motive originally. Like I said, when Amazon came here, that’s when things got interesting, because Pontiac was more so of a lower class city as far as the home values, the income per household, and stuff. So back in 2014, rents were probably around between $550 to $700. Now for, like I said, a two bedroom rent’s like $1,400 a month. I’m thinking that the rent is going to get to $1,800 per house for a regular three bed, one bathroom house.

David:
So in order to get to the position you’re at three quarters of million dollars of equity, massive cashflow in this portfolio. A couple of things you did really well that I just want to highlight. One, you jumped in and you took action, and when it went wrong, most people would be completely wiped out if they had found out that they bought a house that doesn’t have electrical or plumbing. You found a resource, which was the neighbor, and you jumped in and you did a lot of the work yourself, which built up a lot of skills that are now helping you at this point. You kept going. You said, “Hey, I’m going to buy another one.” And you were always finding stuff below market value that you added value to. That’s a very good principle. Just to take in mind that you were always paying less than what you could have by going to an auction, and then you were adding value to it by doing the work.
And you got in there and did the stuff. You didn’t just get frustrated that you couldn’t find a contractor, or the person that you hired didn’t do it on time. You went in there and did a lot of the stuff yourself. Then you used the BRRRR Method to scale once you had a good thing going with every single one of these properties, you’re adding equity, adding equity, snowballing, snowballing, snowballing. Now that you’ve got a really good thing going, you’re expanding. That’s the last thing that I just want to highlight. You’re looking at getting your own crew so you can buy more properties, and building a business. And then as a little bonus thing here, you picked the right location, whether it was on purpose or whether it just worked out.
Now you intentionally know, you say, “Where are the jobs going? And I want to go there, and I want to own that.” Because you’re looking at this as a property manager would, how can I get rents and how can I get a steady stream of employees? Which was buying into a market that at the time was incredibly distressed and everybody was saying to stay away from, you went against that, and you were able to build a pretty impressive snowball. So well done, my man. That’s an inspiring story. Rob, anything you want to add?

Rob:
Yeah, I mean, you’ve come a long way, man. A janitor making $10 an hour to having somewhere in the neighborhood of $750,000 in equity, plus some pretty generous cashflow here. What has this been able to afford you and your family? I know that you mentioned taking $50,000 worth of vacations, but what else has this done for you?

Darius:
So it is given me a peace of mind. And then one of the things that I’m proud of is, it helped my wife a lot. She’s been able to be a stay at home mom and assist with the real estate. She’s also a realtor as well. She’s the one who sells me some of the properties as well, and gives me some tips there. But I’m able to spend the passive money without pulling out that scrap sheet of paper every month, and seeing if I have enough money to pay my bills. It just takes a lot of pressure off me.

David:
Well, thanks for sharing your story with us today. We don’t hear about these too often. This is a great one. I am sure a ton of people are going to be reaching out to say, “I want to do what you just did.” Where’s the best place for people to go if they want to find out more about you?

Darius:
You can simply Google, Re with D. That’s Real Estate with Darius. I have my own website as well, so rewithd.com, I have coaching on there. You can also go to my Facebook, that’s RE with D, and you can also reach me on Instagram at Darius_oneofone. And that’s all spelled out, no numbers.

David:
O-N-E O-F O-N-E. Darius, O-N-E-O-F-O-N-E. All right, thanks Darius. Rob, how about you? Where can people find out more about you?

Rob:
Fine me on YouTube at Robuilt R-O-B-U-I-L-T, and on Instagram at Robuilt as well. I post content many, many times a week, and I teach you guys all this stuff and more. So go follow me there. What about you?

David:
Much like Carmen San Diego, Rob is traveling all over the place, so if you do want to find him, you’re going to have to do it on social media, not in real life. He’s recording this from a hotel room right now at a conference. Busy man, traveling all over the place.

Rob:
Hey, but I made my bed though, if you can tell, because I got in trouble on the Barbara Corkin interview by all the YouTubers. All the YouTube comments, they’re like, “Bro, make your bed.” And I’m like, listen, it’s just not the first thing I do every morning.

David:
You can find me at davidgreen24.com, or you could go online on any social media platform and find me at DavidGreen24. So please go give me a follow and reach out. Darius, thank you for being here, man. Awesome story. Love hearing this, and I just can’t help but state that you have an incredible portfolio and you’re a powerlifter, not a Fitbit Walker. I know causation isn’t necessarily creates correlation, but in this case, I really think it does. So Rob, just think about how rich you could be if you did more than just walking. Any last words for you, Darius?

Darius:
No, no. I think you covered everything. I really appreciate you for having me. I remember being on BiggerPockets back in 2015. I didn’t think I would’ve own as many houses as I own today, and having BiggerPockets is really helpful.

Rob:
Awesome.

David:
That’s it. Well, thank you for sharing your story. And if you’re listening to this, remember you too could have a result just like Darius is. It’s just about finding the right pieces, putting them all together and staying focused on the goal. All right, Darius, we’re going to let you get out of here. This is David Green for Rob. Where in the world is Carmen San Diego? Abba Solo signing off.

Hosted by Brian Sullivan, “Last Call” is a fast-paced, entertaining business show that explores the intersection of money, culture and policy. Tune in Monday through Friday at 7 p.m. ET on CNBC.

As with the natural cycle of all things, businesses are born and when the time comes, they die.

Safestyle UK, is the latest large company to enter administration in the UK.

After trading for almost 31 years, the company collapsed last Friday due to factors including poor consumer confidence. Interpath’s Advisory’s managing director Rick Harrison said “After seeing strong sales during the Covid lockdown periods, many companies are seeing trading being impacted by the cost-of-living crisis and soaring costs.”

Whilst around 70 of the company’s 750 workers are being kept on in the short term to complete closing down duties, more than 600 employees have found themselves without a job.

What Can Businesses Do To Avoid Redundancies?

When faced with financial problems, there are a number of steps to take before resorting to sudden redundancies.

Flexible Working

To save on office space and utilities costs, consider allowing employees to work flexible hours or fully remote. Continue to foster a team atmosphere through in-person and virtual team building activities, and frequent good communication practices.

Cross Training

To boost operational efficiency, and reduce the need for new hires, you could train existing employees to perform multiple tasks. Make sure your requests are reasonable or it won’t end up being an efficient solution.

Feedback And Appraisals

Identifying areas for improvement and promoting a culture of learning can be easily done by regularly assessing employee performance, and giving them constructive feedback.

Government Support

Search for and consider using government programs, loans or grants that exist to support small businesses through financial difficulties.

Raise Finance Privately

Applying for loans, grants, lines of credit or starting a crowdfunding campaign could successfully reduce the need for redundancies.

Shift Focus

Within your business, there are likely some offers that are more profitable than others. Placing more focus on selling these is a way to trim the fat and make more profit.

Improve Your Offer, Customer Experience And Advertising

Take a deep look to analyze existing strategies and update or put in place new ones. The offer, customer experience and advertising are areas of your business that have huge potential to change the balance sheet for the better.

Save Where Possible

Review your budgets. Are there areas where reducing costs won’t sacrifice quality or productivity? If so, make the required cuts.

Sometimes there is no other choice. However, if redundancies are necessary, let workers know well in advance, organize severance pay and support them in finding new employment. In the case of Safestyle UK, this didn’t happen which has added to the discontent from their now redundant workforce.

Lee Parkinson, GMB Union organizer, said, “More than 600 workers have been cruelly cut off from work, weeks before Christmas, with no guarantee that they will even get last week’s paycheck.”