Dave:
Hey, what’s going on, everyone? Welcome to On The Market. I’m your host, Dave Meyer. I hope you all had a great Thanksgiving, and had the opportunity to spend some time with friends and family, hopefully eat some amazing food, and take some time to reflect on all the things that all of us have to be grateful for. I have so many things that I am thankful for, friends, family, getting to work at BiggerPockets. But one of the things that came up this year for me when I was thinking about the things I am thankful for is all of you. We started On The Market just seven months ago. We’ve already surpassed 50 episodes.
We have more than a million downloads already, and it’s all because of all of you. So, thank you all so much for being a part of our community, for listening, for sharing the episodes, for writing us great reviews. We greatly appreciate everything that you do to be a part of On the Market community. Today, we have a great episode for you. It’s just going to be me today. We gave the rest of the panel the holidays off, but I have some really important updates about the two biggest topics of 2022, which is inflation and interest rates. If you’ve been paying attention over the last couple of weeks, some big news has come out about both inflation and interest rates.
I actually think there’s a lot of evidence that inflation has peaked, which I’m going to talk a lot about. We’ve seen mortgage rates go down in the last few weeks, then they’re back up. They’re all over the place, and we’ve seen the Fed come out with some additional guidance on what they’re thinking for the next couple of years. Get ready for a great episode. I do have one suggestion for you if you are going to listen to this episode, and that is to take this opportunity on the day after Thanksgiving to make what is possibly the greatest sandwich of the entire year.
If you follow me on Instagram, my handle is called the data deli. the reason I do that is because two things I really love are data and sandwiches. I love the day after Thanksgiving, which is the day this episode comes out, because it gives you the only opportunity of the year to make the Thanksgiving leftover sandwich, which is basically you take everything you got in your fridge from the day before, and stick it on some bread. I like going and getting a huge Italian loaf of bread, throw in some Turkey. You got stuffing, mashed potatoes.
You got carrots. Whatever you got, throw it on there. Drizzle some grazing on it. Have yourself a sandwich. Sit down and listen to this episode of On The Market about inflation and interest rates, which we’ll get to in just a second. But first, we’re going to take a quick break.
So first things first, back on November 10th, we got new inflation data. Inflation data comes out once per month in terms of the CPI at least. On November 10th, we got data for October. The news was very, very encouraging. This is one of the best, most encouraging inflation reports that we’ve seen in quite a while. The top line consumer price index, which is measured on a year over year basis fell from 8.2%. That’s what it was back in September to 7.7% in October. Now, make no mistake about it. 7.7% inflation is still incredibly unacceptably high. It is way, way, way too high.
Remember, the target for the Fed is about 2%, so 7.7% is nuts. But this is really encouraging, because it’s the lowest it’s been since January of 2022, and was a pretty significant beat for what people were expecting. A lot of experts were thinking that inflation would go down just a little bit, and having it go down from 8.2% to 7.7% in just one month is very, very encouraging. The other thing I love to see is that the core CPI, which is basically a subsection of the consumer price index, but it removes food prices and energy prices like gasoline and electricity, because it’s really volatile.
Those go up and down a lot, and so just to understand what core prices are doing, they have this number called the Core CPI. That is really, I think, what the Fed cares the most about. The Core CPI also fell. It had gone up in September, and it fell in October from 6.6% to 6.3%, so both very encouraging things. But just remember, I just want to be very clear that 7.7 is still very, very unacceptably high. No one should be cheering about 7.7% inflation, but we can be cheering the fact that inflation seems to be on a downward trend, and it is quite possible that the worst of inflation is behind us.
I’m going to take a few minutes now just to explain that, because I think a lot of people are probably wondering what am I basing that off of. There’s three things, but the biggest thing is just math. I’m not projecting any policy changes, that anything in the political climate or economic climate is really even going to change. I’m just going to explain the math behind how the consumer price index is calculated, and why it is probably going to go down in 2023. First, let’s talk about the first two things. I said there are three reasons why I think inflation has peaked and is going to start to come down.
The first is, of course, interest rate hikes. Back in March, we saw the Federal Reserve start to raise interest rates. They’ve been doing it really, really rapidly, and it went from a federal funds rate, which is what the Federal Reserve controls. The federal funds rate went from 0% up to 4% where it is now. That is one of the fastest rate hikes in history, but the truth is that rate hikes, which are designed to help curb inflation, take a little bit of time to ripple through the economy. The whole idea about raising interest rates to cool inflation is that it slows down demand.
When money is cheap, when interest rates are low, people want to buy, right? If you can borrow money at almost no interest, it makes a lot of sense to buy a new car that you’re financing, or to buy a house, or if you’re a business to expand and hire people, and acquire a new company, whatever it is. There’s a lot of demand when interest rates are low. When interest rates go up, that dissuades people from buying things, and that lowers demand, but demand doesn’t just turn off overnight. It’s not like all of a sudden, “Oh, the Fed raises interest rates 75 basis points. We’re no longer spending money.”
That takes time, and it usually takes at least six months or even longer for the impact of interest rate hikes to hit the demand side of the economy, and cool inflation. Now, we are probably now, because rates started rising back in March, just starting to see the first effects of the first rate hikes. Now going forward, we’re going to continue to see the impact of more and more rate hikes. They’re still raising rates. They raised rates two weeks ago in the beginning of November. The impact of that most recent rate hike is not going to be felt until probably the second quarter of 2023.
So, we should expect demand to continue to taper off in a lot of areas, particularly for leveraged assets, so things that you use a loan to buy is a leveraged asset like real estate or a car or for businesses if they’re going to take on a small business loan to expand or whatever. Demand for those leveraged assets should continue to decline for the foreseeable future as long as the Fed keeps raising interest rate. When there’s less demand, that cools inflation. We’re also starting to see the effect of these rate hikes in the labor market. This is a really important thing, because having really tight labor market like we have right now is one of the core drivers of inflation.
The Fed has stated that they basically want the unemployment rate to go up. I know that sounds terrible, because no one really wants people to lose their jobs, but the Fed believes economically that it is important. It is so important to lower inflation that they are willing to accept job losses, and they are going to keep pushing the boundary of how much they can raise rates until the labor market starts to crack, and we see significant job losses. They’ll tolerate a bit of job losses, but probably not a lot. The data that we’ve seen so far is that the labor market is still really, really strong.
I know there have been a lot of media headlines about some high-profile layoffs. Companies like Meta, and Amazon, Twitter, Stripe, really big tech companies, banks, are laying off a lot of people. Those are big high-profile things,` but in the aggregate in the country, the labor market is still really strong. The last numbers that came out showed that there is still 1.9 jobs available for everyone who is looking for a job. The labor market still has a long way to go, but the sign that we’re starting to see high profile layoffs and specifically in the tech industry might be a sign of things to come.
That could mean that we’re going to see more layoffs tick up in the unemployment rate, probably not anytime in the next one or two months, but maybe in 2023, and that could further cool inflation. That’s the first reason why I think inflation has peaked is that the impact of interest rate hikes have only just started to be felt, and it’s probably going to keep intensifying the impact of those interest rate hikes over the next at least six months. The second reason has to do with supply shock. Now, inflation goes up for a few reasons, but it’s often described as too much money chasing too few goods.
What the Fed is doing in raising interest rates is trying to address the too much money part. By lowering demand, they’re pulling money out of the system, and that will help inflation, but there’s a whole other side of this equation, which is the supply side, right? Too much money chasing too few goods. A big part of why inflation has been so high over the last year is that too few goods part, right? Everyone’s experienced this, right? We’ve had back orders on everything from garage doors to appliances to just regular everyday items like baby formula or all sorts of different things.
A lot of this is really nothing to do with America. Yes, we had shut downs in the United States that caused lags in manufacturing, but so much of American goods are manufactured overseas in places like China, which has continued to have a no-COVID policy, and they’ve continued with lockdowns well beyond much, much longer than the United States has. That means that China and their manufacturing, which supplies a lot of the United States, has continued to have supply side shock, which means we have fewer goods in the U.S. than we would want that would meet demand. That has continued, but is tapering off.
We’re seeing the cost of goods to ship stuff from China to the U.S. has gone down. We’re seeing a lot more output from China so we’re going to see an easing of the supply side shocks. The second thing about supply side shocks is the Russian invasion of Ukraine created havoc, particularly on the energy and food markets. Ukraine and Russia are huge exporters of wheat in particular and a lot of other food products. With the sanctions that the U.S. and western country and NATO basically have put on to Russia, we no longer have access to those large markets, and so that creates more supply shock.
Just at the time back in February when we were starting to see some supply shock start to ease, then Russia invaded Ukraine. Now, we’re seeing huge supply issues both in food and energy, which is a big reason why the CPI spiked up so much in the second quarter, third quarter of 2022. Those are not going away right away, but the world and the economy eventually adjusts to that. The other manufacturers, other producers start to produce more when there’s a supply shock. Now that the Russian invasion is nine months old, we’re starting to see the world react. Other producers are producing more, and so across the board supply shock is starting to come down.
Those are the first two reasons why I think inflation has peaked. One is, again, the Fed raising interest rates, the effects are starting to be felt. The second is that supply side shocks are starting to come down. Now, the third and perhaps most important reason is because of what is known as the base effect. This is just basically math, right? It’s regardless of policy, geopolitical situations like what’s going on in Russia and China. This doesn’t even factor in any of that. It’s just basically the way that the consumer price index is measured, and how the numbers work out.
Let me just explain this quickly, because this is super important and, I think, is perhaps the most compelling of any of the reasons why I think inflation has peaked. When we talk about inflation, when I say that inflation was at 7.7%, what I’m really saying is that inflation went up 7.7% year over year. Year over year basically just means comparing the same month for two years. What happened is in October of 2022, the prices in the United States as measured by the consumer price index were higher by 7.7% than they were the previous year in October 2021. They went up 7.7 over the course of a year.
Because of that, it doesn’t just matter what inflation is right now, right? That’s one part of the equation. What’s inflation in October 2022? It also matters what inflation was a year ago. What happened in October of 2021? In 2021, inflation started to tick up, and it was starting to go up, then it started to go crazy. Prices really started to get insane towards the second half of 2021. So for most of 2022, so most of this year, when we were comparing this year to last year from inflation, we were comparing really high numbers for 2022 to relatively low numbers in 2021.
They weren’t super low. They were well above what they should be, but they were relatively lower. That makes the gap, the difference really high. Now as we’ve gotten into later 2022, we’re comparing high numbers in October of 2022 to numbers in October of 2021 that were already high. That makes the comparison relatively lower. Hopefully that makes sense to you guys. Basically, we were comparing a high number to a low number. Now, we’re comparing a high number to a high number, and so the difference between the two numbers, which is how we measure inflation, is going down. It’s important to note that what I’m not saying, I am not saying that prices are going to go down, and that’s not actually what we’re expecting.
It’s not what you want. Inflation is not a good thing for an economy. You don’t want prices across the board to go down. If it goes down for housing, or it goes down for cars in an individual sector of the economy, that’s fine, but you don’t want widespread deflation. We could talk about that in another time. The Fed actually wants 2% inflation. That’s what we’re trying to get to is 2% year over year inflation. What I’m saying is that if we continue at the pace that we are at right now, year over year inflation is going to keep going down because we’re already at these high numbers, and the rate of inflation, of price increases is not going up.
I actually did the math to figure out what this looks like over the next year or so. Let me explain to you why I believe so strongly that inflation has peaked is because the math really checks out. Over the last month, just this past month, inflation, prices went up. Not year over year, I’m talking about month over month. Now, they went up 0.4%. Just in a month from September to October, prices in the CPI went up 0.4%, right? If we continue at that monthly trajectory, the CPI, the year over year CPI will get down to about 4.9% by this time next year.
I want to be clear about what I’m saying here. If we continue at the same rate of price increases as we are doing right now, we will be at a 4.8 inflation rate a year from now. Remember, we’re at 7.7% right now. As long as we stay even, we’re going down to 4.8, 4.9%. That is why I think it’s going to decline, because it would actually take inflation to accelerate on a monthly basis for inflation on a year over year basis to go up above where we are right now. Now, that .4% month over month inflation that I’m talking about is high. Over the last couple of months, we’ve actually averaged closer to 0.3%.
I did the math for that too. If we averaged 0.3% like we have for the last quarter, if we average that going forward for a year, a year from now, we’ll have inflation of 3.66%. That is still higher than the Fed’s target of about two to 3%, but way, way, way better than where we are today. Now, if inflation actually starts to fall, which is what people are expecting due to the supply side fixes and the interest rate hikes that I was just talking about, if they fall 2.2%, which is not that crazy, we’re at 0.4% right now. If it goes down to 0.2%, then year over year inflation will get down to 2.4% next year.
That’s right in the Fed’s target rate. All that really needs to happen is if we stay at current inflation rates, or go slightly lower than we are right now, we should expect that inflation ends somewhere between the 2% to 4.5% by the end of next year. Now, that’s not saying necessarily we’re going to get to the Fed’s target rate. In fact, we would have to see inflation month over month go to about 0.15% to get to the Fed’s target rate next year. But over the course of 2023, we should expect inflation to go down. That is just simple math. It has nothing to do with anything else.
Just to summarize why I think inflation is going down or has peaked is, one, it has actually peaked because it hit its highest point year over year back in June where it was about 9%. Now, it’s at 7.7%, and the math and all of the major indicators are showing that it’s going to continue to go down. That’s our inflation update. But next, let’s move on to mortgage rates and interest rates, because what everyone wants to know is, “Are mortgage rates going up or down?” We all know that the housing market is in a correction. The reason the housing market is in a correction is because mortgage rates continue to skyrocket. That lowers demand. That lowers affordability, and that sends housing prices down.
Now, I personally believe that this housing correction will last as long as mortgage rates continue to go up or stay above 6% or 7%. If they start to come back down, that will probably end the housing correction. That’s just my opinion. But the question is, “What is going to happen to mortgage rates next year?” Now ,the prevailing logic, the prevailing belief is that mortgage rates are going to go up, because interest rates for the Fed are going up. We’ve seen the Fed started raising rates in March, and since then, interest rates have more than doubled. There are 3.1% was the average 30-year fixed rate loan back in January.
Now, we’re at some time… I’m recording this on November 16th. The average 30-year fixed rate today is about 6.7%, which is down from where it was a few weeks ago, which was 7.1% or 7.2%. Most people believe that the interest rates will at least stay this high or keep going up. There’s definitely logic to that, right? It seems to make sense. The Fed has said they’re going to keep raising interest rates, and so perhaps mortgage rates will stay where they are right now, or continue to go up. The idea there is that as the Fed raise interest rates, bond yields tend to go up.
Mortgage rates are based off bond yields, and so over time, if the Fed keeps raising rates, bond yields will actually continue to increase, and therefore mortgage rates will go up. Now, a lot of people think that mortgage rates will go up to 9% or 10%. I personally don’t. I think that if they continue to go up, they’ll probably go somewhere around… They could surpass 8%, maybe get somewhere between 8% and 8.5%, but based on what the Fed has said, and where they intend to pause interest rate hikes, it makes more sense that it will peak somewhere around 8%, presuming bond yields continue to go up.
Now, that’s the prevailing logic, and a lot of people think that, but over the last couple of weeks, there’s actually been more and more economists and housing market analysts who believe that mortgage rates are actually going to go down next year. I know that’s super confusing, because I just said the Fed was raising interest rates well into next year. But there is actually some very sound economic logic to this, and let me just take a couple minutes to explain it, because I think it’s super important and could really impact prices in the housing market next year. Let me just quickly recap how mortgage rates are set. The Fed does not control mortgage rates.
They control the federal funds rate, which is the interest rate at which banks lend to each other. It’s wonky. It doesn’t matter, but right now, it’s up to 4%. That 4% is not dictating mortgage rates or car loans or student loans or whatever. It basically sets the baseline for interest rates across the entire economy. So if the federal funds rate is at 4%, it is almost impossible to find a loan less than 4%. That’s just how it works. Now, mortgage rates are correlated to the federal funds rate. When the federal funds rate goes up, mortgage rates tend to go up too, but they’re actually not directly tied together.
In fact, mortgage rates are much more closely tied to the yield on a 10 year treasury. A 10 year treasury is a U.S. government bond, and a U.S. government bond is basically you or an investor lending money to the U.S. Government. A 10 year treasury specifically is you’re lending the U.S. government money for 10 years. Now, mortgage rates and the yield, which is the interest rate, the profit that you earn on a 10-year bond are almost exactly correlated. They have a 0.98 correlation. That means they move together. When bond yields go up, so do mortgage rates. When bond yields go down, so do mortgage rates. They work in lockstep.
It’s pretty incredible how closely tied they are to each other. This happens for a very logical reason. It’s basically because of the way that banks make their money. Imagine for a second that you’re a bank. Imagine you have billions and billions and billions and billions of dollars to lend out. It must be very nice. You choose who to lend it to. That’s how you make your money. Now, the bank is sitting there thinking, “All right, I can lend my money to the government, the U.S. government, at 4% interest.” Remember, the yield on a 10 year treasury right now is 4%. I can earn 4% with basically no risks.
Lending to the U.S. government in the form of treasury bills is basically the safest investment in the world. Generally speaking, the U.S. has never defaulted on its loan. It’s the most creditworthy entity in the entire world according to all the credit rating agencies. Therefore, a bank can say, “I’m going to lend my money to the U.S. government for 4% interest.” Now, they want to earn more than 4%, don’t we all? So, they take riskier loans. They’re going to also make riskier loans, but to make a riskier loan, they’re going to charge more in interest. They have to have more potential for reward to take on that risk. That’s how risk and reward work.
So when someone goes and applies for a mortgage, let’s just say me, Dave goes and applies to a mortgage, the bank is thinking, “I can lend…” Let’s say I want a mortgage for $500,000.” I can lend Dave $500,000, or I can lend the government $500,000, and earn 4% interest. I know the government’s going to pay me back 4% every single… 4% a year. That’s locked in. That is guaranteed. Dave, even though he has a good credit score, and he’s paid his mortgage rate every single month that he’s had a mortgage, which is a long time, I still think he’s just a normal dude.
He could default on his mortgage. So because of that increased risk, we’re going to charge him more. This is why they move in lockstep. Basically, when the opportunity to lend to the government goes up, banks are like, “Well, that’s great. We can earn 4% lending to the government. Now, we have to raise interest rates on mortgages to compensate for the additional risk on top of that 4%.” That’s why the 10 year treasury and mortgage rates are almost directly correlated with one another. There is typically a spread, right? Yields are 4% right now.
Normally, the difference between a 10 year yield and a mortgage rate is about 1.9%. So if you had a yield of 4% like we have now, you would expect mortgage rates to be 5.9%, but they’re at 6.7% or 7% right now. That’s because there’s all sorts of uncertainty. This difference between the yield and mortgages are due to uncertainty. When there is a lot of uncertainty in the economy, banks are basically saying, “We have to charge even more than normal for that risk premium. We don’t know what’s going to happen to the economy. Are people going to lose their jobs? Is there going to be more inflation?
To cover our asses, instead of charging 1.9% above yields, we’re going to charge 2.5, or we’re going to charge 3%. Actually right now, the spread between a yield and a mortgage rate is the highest it has been since 1986. Normally, remember, it is 1.9%. Right now, it is about 2.9%, so significantly, significantly higher. That’s how mortgage rates are basically set. Now, remember at the beginning of this rant than I am on, I said that there are two reasons why interest rates might actually fall this year. Now that I’ve explained that, you should be able to understand this.
The first scenario where interest rates fall in 2023 is because of a global recession. We don’t know if we’re in a recession right now. The National Bureau of Economic Research gets to decide that. A lot of people believe we were in a recession, because we had two consecutive quarters of GDP decline. Now, GDP went up. It’s all very confusing. Honestly, I don’t really know what to even say about it at this point, but the idea here, and the reason that a lot of prominent economists and analysts are saying that mortgage rates can go down next year is because we enter a global recession where the entire global economy takes a big dip, and that will have these serious impacts on interest rates.
Here’s how it works. When there is a recession, investors from across the globe tend to seek really safe assets. Remember, I just said that treasuries, government bonds are the safest investment in the entire World. So when there is a global recession, there tends to be this flock, this huge increase in demand for bonds. Everyone around the world wants to get into bonds because they can earn 4% guaranteed when no one knows what’s going to happen with the stock market, the real estate market, the crypto market, whatever. When there is an increase in demand, just like for anything else, it actually sends up prices. When demand goes up, prices go up.
The thing about bonds, which I’m not going to get into, is when prices go up, the yield goes down. Just in short, basically, more people want the bonds, so the government’s like, “Great. Everyone wants these magical bonds that we’re giving out. We’re going to give you less interest rate. We’re going to pay you less to borrow the money from you,” and people still want it, so they’re like, “Okay,” and they’ll take a lower yield, and yields tend to go down. Just to recap, recession means there’s more demand for bonds. When more demand for bonds, yields go down. Now remember when I said when yields go down, so do mortgage rates, right?
The Fed does not control mortgage rates. What controls mortgage rates almost directly is the yield on a 10 year treasury. So, that’s scenario number one. There’s a global recession. People from around the world are like, “Give me some of that safe, safe bond yield from the U.S. government that drives up demand, sends down yields, and takes down mortgage rates with it.” That’s scenario number one. Scenario number two is that the spread declines. Remember, I just said that the spread between bond yield and mortgage rates are at the highest they have been since 1986, and that is because we’re in this period of extreme economic uncertainty.
The spread between these two things between yields and mortgage rates really spiked during uncertainty. There have actually been only three times in the last 22 years since the year 2000 where the spread is above 2%. That’s during the great recession, the first few months of COVID, and right now. So, hopefully, let’s all hope that over the course of 2023, the economic picture, the economic outlook becomes a bit more clear. That means the spread could come down. This could come from the Fed deciding to pause their interest rate hikes. It could come from inflation continuing to trend downward or perhaps the end to the war in Russia or something like that.
Any of these reasons, if for any reason over the course of 2023, the economic picture becomes more clear, and banks have a better sense of what’s going to happen over the next couple of year, the spread might start to come down. Although I’m not saying interest rates are going to come down next year, I think it’s important for everyone listening to understand that there are two very, very plausible scenarios where mortgage rates do come down next year. That’s because a recession comes, and then bond yields fall, or because the uncertainty in the economy starts to be mitigated, and the spread between bond yields and mortgage rates comes down.
Now, make no mistake about this. I am not saying that any of this means that the Fed is going to pause raising interest rates anytime soon. They have been very, very clear that they are going to keep raising interest rates. And for that reason, mortgage rates could go up. I just want to explain that it is not as cut and dry as people are saying. A lot of people say, “See, interest rates… The Fed raising their federal funds rate,” and say, “oh my God, the mortgage rates are going up to 8%, 9%, 10%.” It is not clear. That, personally, I don’t see them hitting 9%, nevermind 10%. I could see them hitting 8%, but I could also see them going down to 6%.
It is really unclear. If you want to follow this, I highly recommend you keep an eye on the yield on a 10 year treasury and what is going on there. That is one of the most important things you can do to understand what’s going to happen in the housing market over the next couple of years. Because if the yield on 10 years stays where they are or starts to decline, mortgage rates will probably go down, and that will really help us end the housing correction, and maybe send prices the other way. If bond yields continue to rise, we will see mortgage rates continue to rise, and that will put more downward pressure on housing prices, and deepen the housing correction, so really important thing to watch.
Now, another thing to watch is the Fed is going to meet, again, in December just a couple weeks from now, and most analysts expect a 50 basis points hike rather than the 75 basis point hikes we’ve seen over the last couple of months. That’s nice. It’s cool, whatever, but it doesn’t really matter, right? To me, what really matters is where the federal funds rate ultimately settles, and where bond yields ultimately settle in the next year. That is going to dictate mortgage rates, and that is going to dictate bond yields. What happens with bond yields is going to dictate mortgage rates.
So, just pay attention to this stuff, guys. I know everyone wants to know what’s going to happen, and you want just someone to tell you. Unfortunately, no one really knows, but you can look at some of these lead indicators that will help you predict what’s going to happen over the next couple months. To me, the two things that you need to be looking at are inflation, which we talked about, and the yield on a 10 year treasury, because that is going to dictate what happens to mortgage rates and affordability in the housing market.
All right, that is the end of my rant. I hope you all learn something. Hopefully you ate a delicious Thanksgiving sandwich while we were listening to this, and you learned something, filled your belly, had a great time off from work, hopefully. Thank you all so much for listening to this. If you have any questions about this… I know this is a wonky, complicated topic. If you have any questions about it, you can hit me up on BiggerPockets, or you can find me on Instagram where I’m @thedatadeli. If you like this episode, please share it with a friend, or give us a five-star review on Apple or Spotify. We really appreciate it. Thank you so much for listening, and we’ll see you next week for more episodes of On The Market.
On The Market is created by me, Dave Meyer, and Kailyn Bennett, produced by Kailyn Bennett, by Joel Esparza and Onyx Media, research by Pooja Jindal, and a big thanks to the entire BiggerPockets team. The content on the show, On The Market, are opinions only. All listeners should independently verify data points, opinions, and investment strategies.

Speaker 2:
Come on.

David:
This is the BiggerPockets Podcast, Show 692.

Josh:
I think the biggest fear was trusting people that I didn’t really know. I was meeting these people through Facebook groups, or through different online platforms, and it’s hard to trust, especially when you’ve never done a deal before, what they’re saying. And so, I think being able to verify, and again, in your book you kind of give resources on how to double check things, and how to circle back. I think that helped so much, in terms of my trust in them.

David:
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast, here today with my co-host, Henry Washington, as we interview Josh Goldstein, an out-of-state investor who has a pretty amazing story, and a very simple solution to problems we all have. We want to make money in a way that we like more than our job, and we want to be to travel, and have freedom, and not be stuck in one location doing things that we don’t like. Today’s episode is awesome, and you’re going to learn a ton about long distance investing, overcoming problems, analyzing properties, decorating them to maximize your return, and more. Henry, I know I probably just took the big stuff, but was there anything I didn’t mention that you liked about today’s show?

Henry:
Yeah, no, you did take the big stuff. My favorite part of the show is just, honestly, I love hearing stories of people that are doing things that a lot of folks would say is difficult, or impossible to do. So, being able to stay positive when you get bad news, and then giving… Not just saying, “Hey, I remain positive,” but giving some practical steps on how he does that, which is super cool. And then, just changing your life, deciding to invest, and then doing it when everybody thinks you can’t. You live inexpensive market? Okay, I’ll go buy a property somewhere else. And then putting the action behind those steps to actually do that in a way that is financially beneficial. So I love it.

David:
Absolutely. This is a very easy to listen to episode. Josh has a really cool story. I don’t want to give it all the way, but make sure that you check this one out, because you’re going to love it. Before we get into the interview with Josh, today’s quick tip is, consider things to be grateful for. It’s so easy to focus on things that are going wrong, and no one knows this more than me. In business, I am frequently, as the leader, the person that has to deal with all the problems that nobody else wanted to, or chose to deal with, and it’s easy to get upset. But there’s always a solution to these problems, and if you take the stance of, “I will look for the answer, or the solution,” instead of, “I will look for the reason to not have to solve it,” you will often find that most of the problems, or the obstacles that are stopping you from making progress, are not nearly as significant as you think. Henry, any last words before we bring in Josh?

Henry:
Yeah, I just kind of want to add into that. When I get in the same situation as you were just talking about, I sometimes have to remember to be grateful for the problems that I do have. Because yes, even though they may be infuriating, there are loads of people who would trade places with me in a heartbeat, who would love to have the problems that I have. And so, I just try to keep that in mind, and it helps me stay focused.

David:
I bet you that you 10 years ago would’ve loved to have the problems that you today has, versus the problems you had 10 years ago, right?

Henry:
You’re right, buddy.

David:
Isn’t that funny? If you went back 10 years and said, “Hey, I can give you the life you have right now,” then, they’d be like, “I hit the lottery. This is everything I wanted.” But we get used to it, and every day we wake up, and we’re like, “Oh, another problem I got to solve. My life sucks.”

Henry:
Right.

David:
That’s exactly right.

Henry:
That’s right.

David:
Love that perspective. All right, let’s bring in Josh. Josh Goldstein, welcome to the BiggerPockets Podcast. How are you today?

Josh:
I’m doing great. How about yourself?

David:
I am doing very good. I appreciate you waiting. I had to take a last minute phone call there before we started recording, so you’re very gracious, and I appreciate that. And Henry stayed awake the entire time, so I also appreciate that from you, Henry. I know listening to me talk can be very boring. But today we want to hear about Josh. So Josh, I understand you have a very interesting story of how you got started in real estate, so we’re going to ask you about your first deal, but before I do, take me back to where you were emotionally, and what was happening in your life, before you got that deal.

Josh:
I started in the entertainment industry, and I went along working. As I rose up and made more money, I was spending more money, I was kind of doing it, now that I know, wrong. And I got to a point where I was making decent money. I love what I did. I didn’t see anything changing until in 2015 I was diagnosed with pancreatic cancer, and obviously everything changed from there.
I, at the time was renovating our dream house that I’m living in right now, and the doctor said, “You’re not going to be able to work for a while.” They didn’t say a timeline. And basically, I was in debt going in, renovating this house, and I kind of freaked out, and I didn’t know what I was going to do. I did have a great support system. My family, and friends kind of rose up and helped me financially while I battled this thing, and I changed my mindset. I knew at a certain point I had to make a change, and make money elsewhere, and not just rely on my actual job.

David:
Okay. So, I mean, life hit, and the comfort level, the routine, the way you’d always known, isn’t going to work anymore. You may not be able to work those hours you were working, those opportunities might not be there. I mean, if you think about it, most jobs in American Works is within the framework of a W2 environment, which means in general, you are servicing a lead, or a revenue source that somebody else has created.
So, if you’re an actor in a movie, somebody else has secured the revenue for that movie. They’ve written a script, they’ve done all this stuff. They just need a person to play a role in the bigger picture. And that’s every job. If you’re working at Walmart, if you’re working at a landscaping company, in general, not many people work in sales. They’re servicing sales somebody else has done, which means you’ve got to serve at the pleasure of whoever your boss is. That’s how this thing works.
And when something happens to you like it did, you physically can’t meet the demands that this person would have, and you’ve got to be creative with finding a way to make money. So, I love hearing these stories of someone who didn’t just give up and say, “Well, I guess that’s it. I’m just going to be a burden on everyone else.” You found another way to do it. So what were some of the concerns or fears you had as you started to realize, “Okay, I think I can make money investing in real estate, but obviously there’s no safety net here in a W2 job?”

Josh:
The one thing I should say is I was actually freelance. So that was the big difference, is I had a background in maybe not having the most secure amount of money, but as I worked in production for a long time, I’d felt like I was secure, because jobs kept coming, and I knew enough people, that I was pretty sure in getting jobs over and over again.
The one problem, even outside of me getting sick, was it was hard to take time off. I mean, if I was taking time off to go on vacation with my family, I’d have to turn down a big job, lose that money, and then spend the money on going on vacation. And mentally that was really tough for me. And I always felt like if I turn down jobs, what if it’s a big commercial campaign, and I lose multiple jobs from that? Which I know does happen. So, there was definitely fear based in that.
So, during that year, I read Rich Dad, Poor Dad as many investors have, and it was kind of like a brick to the head. I mean, it’s something where, I was always interested in real estate, I was always interested in properties, and values, and looking at it, but I just never realized that I could make money off of it. I don’t know, I thought maybe you needed to have a top hat, and a monocle to be a real estate investor.
I don’t know. I still might buy that, just so I have it. But, during that year, after I read it, I was very focused on healing, and getting through the treatments, so mentally I couldn’t really do much more than that, but I knew once I recovered, that I needed to make a plan and actually change things. During that time, I mean, I think it was the smart move. It takes so much time, and effort, and energy on healing, and focusing on my family, and getting through this, and that’s basically all I was able to do that year, that I went through it.

Henry:
Man, I am smiling as I’m hearing you tell this story, because it is very similar to my story, outside of the illness. It’s not an illness, that wasn’t my wake up moment. Well, nothing near what you had. My wake up moment was I had a panic attack, similar thought processes as you prior to that, is that I was starting to realize some life events were happening that were making me realize that the traditional way I was making money wasn’t going to be enough to even live a reasonable life, nonetheless an extraordinary life.
And I had a wake up call after a panic attack, and I like that you mentioned you had this mindset shift once you got sick, that you needed to find a way to make money. But, I would imagine that that mindset shift was around… Because you have to have a mindset shift about healing, and getting better, as well as a mindset shift around what I need to do to change my financial landscape. Can you talk a little bit about, were those two different mindset shifts? Or did your positive outlook on healing help you change your mind about investing, and how actually achievable it is? Because I think a lot of people are in a place where they know they want to invest, but just saying, “Change your mindset,” it’s hard for them to grasp that. What about these mindset shifts made that easier for you?

Josh:
Yeah, I mean I guess I should start… I am naturally a positive person, but I have to say my wife is even way above me in that scale. So, when I got diagnosed, I was actually in the hospital, she was home with the kids, and I woke up from some painkillers, and there are two doctors sitting there, and they told me that I had pancreatic cancer. And I think this actually relates a little bit towards my job as a producer, where problems come to me all the time. Obviously this is a different problem that I never thought in a million years I’d have to deal with. But, I took a breath, and I paused, and I said, “Okay.” And the doctors looked at me again and said, “Do you understand what we’re saying?” And I said, “Yes.”
And so, I said I wanted to call my wife and I did. And her response from the get go was, “Okay, let’s figure this out.” So that was the baseline of our mindset going into this. I feel like it is something that I did in my production career, whereas when problems come instead of freaking out screaming, whatever, take a breath, figure out how to solve it, because screaming isn’t going to actually solve it. So, throughout that year we kept that going, and I feel like that mindset helped tremendously, because it relates to so many things in life, but real estate is one of them. Problems come up all the time. It’s how you deal with it, how you solve it.

Henry:
100%. And I love that you’re saying like, she said, “Okay, let’s figure this thing out.” And you’re right, the mindset is very similar, because I feel like success in investing, especially if you’ve never done a deal, or if you’ve only done a couple of deals, you may not know the exact steps, or have them all laid out in front of you, to know exactly the play that you’re going to run. “I’m going to do step A, that’s going to lead me to step B, and step C.” And you don’t know them all ahead of time.
One of the things that helped me be successful when I started off investing, was that I just decided I was going to figure it out. I didn’t decide I was going to go learn every single step, and then figure, and then take some action. I just decided I was going to figure this out. It’s a similar mindset to what you had about be getting healthy again. You said, “Okay, we will figure this out. I have no idea what the next step is, but I know I’m going to stay positive about it, and I know that I’m going to figure out all the things that I need to do.” And you solved the problem that’s in front of you. Man, that’s super inspiring.

Josh:
Well, and it’s funny, I’ve heard not just from you, that similar things have happened in people’s lives that change their mindset. And obviously, pancreatic cancer is an extreme version, but that thing, whatever it is, can relate to so many people, because it could be something little, it could be something big, it doesn’t matter. It’s just that little switch, making you think, “I need to do this differently.” And I think that helps a ton, and it relates to a lot of people.

David:
Did you have any nagging little thoughts, or ideas before the diagnosis came, where you were kind of like, “Yeah, probably this isn’t going to work forever?” Or like you mentioned, that’s such a good point. “If I want to take a vacation, I actually have to pay for it twice, because I have to pay for the vacation, but then I lose the money that I would’ve made at work.” We call that opportunity cost in economics, and it’s something that people don’t factor into their financial picture, is when you have a job that you have to be in a location to earn money, when you take a vacation, you also lose the money you would’ve made working. So there was some inner just ideas that were in your head saying, “Hey, this isn’t great.” Do you feel like the diagnosis was the spark that jump started this? Do you think you’d have got there eventually? Or was it just you had no idea at all until this news hit?

Josh:
I think there was something in me that knew something. I mean, in terms of research for real estate, I watched HGTV, and the flip shows, and stuff like that. But again, it’s more entertainment. But like I said, I’d always been drawn to real estate and design, and locations, and values and stuff like that. I just never, stupidly, realized that I could make money off of it.

David:
No, I appreciate you saying that.

Josh:
Yeah, no, so I just feel like I knew I needed something. I just didn’t know what that was until I had my diagnosis, and read Rich Dad, Poor Dad, and everything came way more clear.

David:
Yeah, I mean that book is the portal from one world to another for so many people. And it’s funny, it’s good to hear this, because there was a time I didn’t know you could make money investing in real estate. And when I got into it, it was 2009, late 2009, it was not considered a thing you did to make money. It was considered a thing you did to lose money. That’s all everybody talked about, is, “You’re a real estate investor? That’s the dumbest thing ever. Why would you?” It was almost mocked at the time. So, it’s good to hear this. We have a big listener base that’s new. They’re like, “What? You could buy a duplex and get $500 a month?” It’s not known to everyone out there. So, I appreciate you sharing that part of the story. Now, how did your first deal work out? Did you know what you were going to do? Did you fall into it bass ackwards? How did you end up buying your first property?

Josh:
So, I was definitely in analysis paralysis for a couple years, and after I healed, and was working like crazy to get out of debt, I really dove into BiggerPockets with the podcast, webinars, books, everything. I just lived and breathed that as much as I could. But, the one thing that I did, is this is all theoretical. So I know didn’t know any of this actually worked. It was all in theory.
So, I looked at different markets, I tried different… I actually made some offers on properties, and backed out of them over as little as $500, which I’m embarrassed to say right now. But, I thought in my head, “I’m sticking to my guns, these are my numbers, and I am not going to waiver one bit.” And so, when I first started, I thought that was the right thing.
I think that what really changed that, is I actually listened to one of your guys’ episodes with Whitney Hutton, and she was talking about turnkey rentals, and it was something that I had never really wanted to do because I wanted to capture everything. I wanted the equity, I wanted the whole shebang. I wanted it all. But I realized as she broke it down, at least starting off, this is such a good… It’s like training wheels. I had purchased a house, or two houses before just to live in, so I kind of knew the process of that, but the investing side of it, it was still so foreign to me, and this was just a very low barrier to entry. And so, that’s what really got me into it. I actually reached out to her, and she gave me a property management recommendation, and they started sending me turnkey deals.

Henry:
I think that’s super cool, because this whole story is starting to piece together, and it’s… Because what happens a lot of the time is people say, “Well, I want to be an investor.” And they start looking and researching, and they get overwhelmed in analysis paralysis, and then they never actually take any action. A couple of things that you did, which were super cool, is you made some offers. Even though you backed out of the offers, actually analyzing the property, and making the offer is a form of action. And so, you’re training your mind to say, “All right, we’re doing this.” You were double Dutching your way in, and back out.
But the super cool part is, you made a decision when you got sick, that you were going to figure a way out. And when we make decisions like that, we tell our brain, “Hey, I’m going to figure this thing out.” And that doesn’t mean you’re going to know exactly what to do next once you make the decision, but you’ve told your brain to listen for it. And then what happened was, as you started to research, or listen to other podcasts, you heard someone say something, and you went, “Hey, that’s the thing. I think this is what I can do.”
And then you dive into the research on that part and then you take the action. And I think that’s what a lot of new investors need to hear. It’s not that you’re just going to start investing and the plan’s going to perfectly unfold, It’s okay. But if you can truly make that decision and mean it, you’ll start to hear and see the things that are going to guide you down the path, that will get you started. I think that’s a good, realistic way for people to think about investing. Make the decision, even if you don’t know how, even if you don’t know how… I don’t have the down payment, or whatever the obstacle may be, just tell yourself, you will figure it out, and be sincere about it, and then immerse yourself in the information, in the culture around other investors, and how starts to reveal itself. Man, that’s just really cool.

Josh:
I think also within those two years of me being in analysis paralysis, things did shift, because when you’re first starting to learn, I was like, “Okay, let’s say I buy a single family rental, and I start cash flowing 150 bucks, 200 bucks after all expenses.” It’s not a ton of money. And then it’s really overwhelming to think about, “Gosh, how many of these houses do I actually need to make a dent in my life?”
And my question was, “Well, how am I going to get money over, and over, and over again to buy these houses?” And then I found Burr method, and really do dove into that, and that really sparked some interest, and made so much sense to me. And so, from that, I moved into researching that. That’s when I started making some more offers, and backing out over minuscule amounts. But I feel like where I was going just was shifting as I was learning more. I was adding more tools to the belt, so that even though without the practice of it, I just knew more, and was able to talk the talk, and kind of progress from there.

David:
All right. So, you had several deals you backed out of, you mentioned. Now was this to buy your first deal, or was this later in your career that was happening?

Josh:
First? Yeah.

David:
Okay.

Josh:
The very first one.

David:
And that was basically just a defense mechanism, right? “I don’t want to get taken advantage of, so if anything’s wrong…” And when you’re new, that’s normal. We all have things that we look back on our first day of school, or your first time doing something, where you were ultra hyper aware, and you look back, you’re like, “Okay, I was overacting. But that’s just how life is. You don’t know what to expect. So, eventually you did buy one. Tell us about the deal you bought, why you liked it, and how you decided to move forward.

Josh:
So, it was a turnkey deal, but it actually… I call it my accidental Burr. It was a three bedroom house in Kansas City, Missouri. It was $70,000. They sent it out in December, 2019, and it said, “Holiday special.” And they said that the comps were around $90,000. And so, I looked on my own, and I agreed, I’m like, “Yeah, it does look like it’s around 90,000.”
So I went forward, already had a renter in there for $800 a month, and they fixed some things through the inspection, and by the time we closed, I just started getting checks. And one thing that did happen, is my lender actually backed out two weeks into the process. And so, I had a choice of backing out, or using a line of credit to actually pay for it in cash. And so, I decided to move forward, and I basically paid cash with someone else’s money. And a month afterwards, I went to go refinance, and without doing anything to it, it appraised for I think $116,000, and I pulled out $74,000, which was my initial amount, plus closing costs.

David:
What was the reason that the lender backed out?

Josh:
Because it was through a property management company. They said that the underwriter didn’t feel like it was a traditional deal, and so they felt not comfortable about it. And so, I didn’t question it that much. I mean, the property management company did have a real estate license. So, in retrospect, I probably could have pushed back and said, “Well, here’s their license here. This is the reasons why it’s legit.” But, I felt like it was all happening so fast that I just needed to react, and luckily I did have that cushion to be able to still make it, and move forward.

Henry:
So there’s a lot to unpack there. First of all, having the wherewithal, after you’ve made a couple offers and backed out over $500, and then boom, you do your first deal and your lender backs out two weeks into it, and you’re stuck with that deal, man. So I’d assume you felt more committed then, right? You felt more trusting of those numbers. But, I think there’s a lot of people that may be interested in turnkey as an option. You’d mentioned that you did your own research, right? So, tell us a little bit about how you felt comfortable buying it, by doing your own research. What did your own research look like? Because a lot of these turnkey companies will tell you what the value is, but if you’re brand new, how do you then take that information, and go try to discern that for yourself, so that you feel like you’re actually buying a good deal?

Josh:
Yeah, I mean I basically looked at the neighborhood. I even walked on Google Streets, to kind of see what it was like. I looked at Zillow, I looked at recent sales, I looked at listings that were active, and tried to compare to my house, and the square footage, and the bed count, and the bathroom count, just to see what it looked like. And it seemed like it was really solid. And yeah, it is a funny one, that I felt like I was committed, and didn’t back out, and pulled out a much larger chunk, versus I thought I was going to be putting $14,000 into this as a down payment.
And it was kind of a blessing in disguise, because I was able to refinance much quicker because of it. But yeah, I think it goes to me looking at the numbers, and seeing how good of a deal this actually was. And especially for a first deal, I just felt like… I had looked at other deals that they had sent, and nothing was close to this.

Henry:
Also, and I think that’s great, 100% totally agree. That’s a phenomenal way to do it. It used the resources you have access to. We all have access to Zillow, we have access to Realtor, we have access to be able to look at some of these things. There’s valid information in there to be able to do some level of your own analysis. The other thing to think about is, you don’t live in St. Louis, right? You said you did the walking on Google Maps. And so, what made you… I’m sorry, Yes, I’m sorry. You don’t live in Kansas City, right?

Josh:
Kansas City. Yeah.

Henry:
So, what made you comfortable with Kansas City as a market overall, to then go ahead and buy a property there?

Josh:
Well, someone that we might know wrote a book about long distance real estate investing, and that book really broke down any fears that you have. And to this day, I’ve actually never been to Kansas City, Missouri, and I feel like the only reason for me to go at this point, is maybe to meet the people that I’m working with, and just to get more of a personal feel for that. But other than that, I felt like at a certain point when I was starting to make these relationships with local people, the boots on the ground, I needed to trust them. Because if I wasn’t able to trust them, then this wasn’t going to work at all. And so, of course, I would do what I can to verify the things that they were saying, like the comps, going on Zillow, walking through the neighborhood virtually, stuff like that. But, it just kind of solidified what they said, and kind of proved that they were being truthful.

David:
So, were you nervous about doing this before the book? Did the book help get over some of the hurdles? Or were you already committed to doing it, and the book maybe just provided a framework for the right way to go about it?

Josh:
I mean, that was during my analysis paralysis time period. But it was another one of those notches that solidified… Because I live in the Los Angeles area, everything’s very expensive, and maybe that was part of the reason why I never knew that I could be a real estate investor, is because I felt like, “Oh, well I have to buy it down the street, and I can’t afford that, so I just won’t do it.” But it’s like the book was great at just breaking down every concern, and how to walk through, and actually make a deal happen, without ever going to a place. So, I think that it was invaluable in that sense.

David:
All right. So, when it comes to long distance investing, what was something that you maybe were afraid was going to be the case, or you thought was going to make it difficult, and then once you did it, you look back and you’re like, “Oh, that wasn’t that big of a deal, or it’s different than what I thought it would be?”

Josh:
I think the biggest fear was trusting people that I didn’t really know. I was meeting these people through Facebook groups, or through different online platforms, and it’s hard to trust, especially when you’ve never done a deal before, what they’re saying. And so, I think being able to verify, and again, in your book, you kind of give resources on how to double check things, and how to circle back. I think that helped so much, in terms of my trust in them.

David:
There needs to be a word in the English language for this concept. I don’t know why it’s such a hard thing. But frequently, when you’re a business owner, which you are if you’re buying a property, it’s just a… You mentioned the word mindset. Mindset comes up so much. When you’re the person in charge of the endeavor, and you have to solve the problems, you think differently than when you’re the W2 person in the business and you’re like, “It’s my job to just do a thing.”
Frequently people will come up to me, and they’ll say, “We have a problem. This just happened, we can’t do it.” I mean literally, we’re going through, in my own portfolio… I created a spreadsheet to track all the properties I have, what I owe on those properties, what the payment is. I’m systemizing everything so I can ultimately share this spreadsheet with other investors, and it tracks like, “Hey, these are all the properties you have, these are the offers that you’ve written, these are the ones you have in contract.”
And somebody on my team was saying, “For months we’ve been trying to find your login information for this bank on these properties you bought eight years ago. Can’t be done. And it’s literally been four months I’ve been waiting.” And so, I get on the website, and there’s a chat option, and I click the chat option, and I talk to a person, and within 30 seconds I’m in there. And I was like, “I am not the smartest person on this team.” I’m looking at it, “How can I do it?” And they’re looking at it like, “Oh, I can’t do it, so it’s not my job, I don’t have to do it anymore.”
There’s some magic that happens when you get shifted into this position of, “I have to figure this out,” and you become a superhero. I’m not saying I’m a superhero. In this case, the superpower was thinking to use the chat option, instead of just trying to reset a password when it’s not working. Can you talk a little bit, Josh, about, when you’re afraid to invest long distance, you can think of all the reasons that it’s a bad idea, and you don’t take action, you get analysis process. But when it has to happen, you start finding solutions, you start living this empowered life, you start to feel good about yourself. You start to gain confidence, because stuff that to other people seems impossible, to you, isn’t really that difficult. Do you feel like almost a different person now that you’re investing in real estate, and you’re having to come up with solutions where others are just seeing impossibilities?

Josh:
Absolutely. I mean, people that I know that are not in real estate, they don’t understand how I own a handful of units in a state that I’ve never been to, or a city that I’ve never been to. And I feel like my production background, my producer background is about solving problems. And every job that I do in that world, people come up with an idea, a script, a commercial, whatever it is. Problems are different every single time.
So I feel like because of that, me being able to solve those problems, and I’ve been doing it for a long enough time that I usually know someone that can pull something off. But sometimes they surprise me and they’re like, “Look, we want to do this,” and I nod my head, take a breath, and then think about it, and figure out how to solve it. And so I think that skill really relates to any issues that do come up with real estate as well. And I think taking a breath, and looking at it logically, and like you said, you did the chat button.
I mean, it triggered me a little bit because I’m going through and organizing all my logins as well. But, I’ve done that. Sometimes I’m like, “Well, I’m not going to be able to recover this password, but how can I get a new one?” Because they obviously want me to have access to this. They’re not cutting me off in that sense, because they want me to keep paying, and I have auto pay. So, if my banking information changes or something, they want me to have this. So, it’s just a matter of figuring out how to get there.

David:
Yeah, and the way I’ve tended to look at this is, your heart will be the rudder that steers the decisions that you make. If there’s fear in your heart, you will find the reasons to say, “This is impossible, this can’t be done. I’m not going to take action.” If there’s a drive, and ambition in your heart, you’ll probably find the answers. For you, being diagnosed with pancreatic cancer, with your family’s future on the line, you’re getting over the fear that at one point kept you stuck in analysis paralysis. And all of a sudden thinking, like clicking the chat button, I don’t need to be Elon Musk to think of a solution like that. I just had a strong drive to get logged in, whereas the people on my team had a strong drive to get that off their plate, say, “Ah, it can’t be done. I’ll go do the next thing that I would rather be doing.”
And so, I’m frequently talking to people who are having a hard time getting started, or scaling, or whatever they’re doing, and asking, “What’s in your heart? Is this not for you? Are you terrified, you don’t want to do it? Are you looking for an answer to solving life’s problems that real estate was never meant to solve?” If you’re not good at your job, or you’re not good with money, man, you’re going to get worse with money when you get into real estate, because things go wrong, like you’ve mentioned. There may be some other things you got to fix before you jump into this. The older I get, not that I’m an old man or anything, but I’m starting to recognize, the position of your heart, what is in there plays such a big role in where things end up. Henry, you’re smiling right now like you’ve got something you want to add onto this. Do you want to elaborate there?

Henry:
Nah, I 100% agree. I’m smiling because you’re right. It’s what’s in your heart, and that drives your decisions. And not only does it drive your decisions, but when you think about putting yourself in a position to… Because that’s essentially what you’re doing. When you’re leading with your heart, you may not know what the next exactly step it is that you need to take. But you know in the grand scheme, “This is the direction that I’m looking to go.” And so, you will start to think of creative ways to push yourself in that direction. And I’m just a big proponent of, you steer the ship with the heart, and you’re 100% right man. So, that’s always going to make me happy.

David:
Now, can you tell us, Josh, we see how you got that first deal. What does your portfolio look like now? Where have you scaled to?

Josh:
I’m up to 20 doors. 11 of them are short-term rentals, and the other are long-term rentals. Of those 11, six of them I am renovating. So, only five are live right now. And then the other six are major renovations.

David:
And how are you managing this many properties, especially nine short term rental doors?

Josh:
So, on the long term, I do have a property management company for that. So, once I get it stabilized and set, it’s quite easy to just answer some emails to them every once in a while. All the short term rentals, I am managing myself. I have systems in place where, automated messaging, price strategies, et cetera, et cetera. I did just recently hire a virtual assistant to help me with messaging, so that when these renovations are done, and I more than double my short term rental portfolio, I don’t drive it into the ground without having enough help.

Henry:
That’s awesome man. Tell us too, where in the country the short term rentals are, and versus your long term rentals, and what made you go, “This is the market where I want to do short term, versus long term?”

Josh:
Well, the majority of them are in Smokey Mountains, Tennessee. And so I think what spawned me to that was listening to Avery Carl on BiggerPockets, and I reached out to her, and we had a great conversation. Everything she said just made so much sense. And so, I jumped in, and found a deal that was two cabins on two acres of land. It was way more expensive than my Kansas City place, but it was $635,000, and I wound up using my HELOC for the down payment. We closed March of 2020, the day that everything shut down.
And so, it forced me to do several things. I was planning… I went out there for the inspection. That was the first time I’d ever been to Smokey Mountains. But I was planning on going back as soon as I closed, to help set it up, change the linens, swap out a couple things here and there, whatever. And the day that I was signing, I didn’t even know if I was going to be able to get to a notary. I didn’t know what was going to be open.
So, I did close, and took my time interviewing cleaners, prop maintenance people, stuff like that. And what it did, was it forced me to use them to set up my property remotely. And I thought I had to be there, but it worked, and bookings started coming in. And so I went pretty heavy in the Smokey Mountains. I have nine units there, six of them are the ones that are being renovated. But I did invest one cabin in Idyllwild, California. And the reason why we did that is because we wanted something that maybe we could use every once in a while. It’s a couple hour drive from where I live, and then another one at Big Bear, California. And that for the same kind of reason, it’s good market, but we wanted to potentially use it every once in a while as well.

Henry:
So, it sounds like you’re picking short term rental locations that have a long standing history of being short-term rental locations, even prior to Airbnb being a thing, which I think is a smart move when you’re looking to get into the short term rental game. And your long terms, where… Are most of those in the Kansas City market?

Josh:
Yeah, they’re in Kansas City. I mean, I do have two mobile homes that are on a property that I own in Smokey Mountains, Tennessee. So, I count those as a couple doors, because I have two tenants in there. But yeah, the majority of my units are in Kansas, Missouri, for long term.

David:
What are your concerns with the short term rental market becoming oversaturated? This is something we hear a lot of people talk about. It speaks to that fear thing like, “Ah, everybody’s getting into short term rentals, I’m not going to be able to get the bookings I’ve been getting.” It’s obviously a volatile market. You get changes with municipalities, you get regulation that comes in, Airbnb changes their algorithm, the whole thing gets turned on its head.
It’s clearly a market that has not set it and forget it, which is… I bring it up because for so long we’ve hyped real estate investing as passive income. The idea is it’s just money that comes to you. And at some point in life, that might have been partially true, but with the level of competition that we have now, there’s nothing passive about this. I was working this job, and now I’m working this job. And it’s better, I think all of us would agree, it’s a better way to work and it’s more freedom to it, and it involves more creativity, but it’s still a form of work, and there is still some risk. So, what are some of the things that concern you about the short term rentals that you have, and how are you mitigating that risk?

Josh:
Yeah, this is actually coming from someone who just purchased what, 15 short-term rentals in how short of a time, David?

David:
Well yeah, that’s exactly why we’re talking about this.

Josh:
I think it still comes down to the core basics of real estate, and if you buy it right. And my strategy with short-term rentals is improving them. I like the value add strategy. I love design. It actually gave my wife an excuse to buy some really cool design furniture, and decor that we don’t even have at our house, and put it in a place that we could make money off of it. Yeah, I mean there are going to be ups and downs with short-term rentals, in terms of occupancy, and rates, and whatnot.
I think people still need to go on vacation. So, whether it’s a lot of people are going on vacation, or less people are going on vacation, if you buy it and you analyze it right, conservatively, you’re going to be okay. Now, how much you’re actually making from that is going to vary. But to me, if I could cover my costs, and then make some profit off of it, that’s really the main goal. And then hopefully over time, all of this stuff is going to appreciate anyways.

David:
Henry, what about you? You’re involved in several different kinds of real estate endeavors out there in Arkansas, a bit of a connoisseur of real estate, kind of dabbling in many different things here. What concerns do you have with the short term rental market specifically?

Henry:
Yeah, I mean the normal concerns everybody has. My main concern is… Well, speaking specifically, so I have short term rentals, but they’re all here in my local market. Well, I say I have them, I have three of them. And my concern, or the thing that I’m keeping an eye on is, the reason I bought in the market, or turned the properties into short-term rentals that are in the market that I’m doing it in, is because it is a travel destination for both corporate, and for leisure, but there’s not a lot of hotel options. There’s just a shortage of places for people to stay, in conjunction with the amount of people that come here, and need a place to stay for a short period of time.
And so it’s currently what I would call a safe option, but I am paying attention to what’s happening in the future. And so, if you stay connected to your local cities, and municipalities, and you are connected to the people in the city council meetings, and following them on social media, people think you got to do a lot of… There’s so much technology now, you don’t have to be in city council meetings to understand what’s going on in your local market. You can follow the cities and municipalities on social media, on Facebook, on Instagram. They post a lot of what’s coming through those channels.
And so, you can stay connected that way, and I am starting to see that a lot of the families, and institutions that have money around here are building hotels to solve for that issue. And so, my concern, or the thing I’m keeping an eye on is, when are these hotels supposed to be completed? How many are they building? How many rooms are going to be in them? So that I can try to understand if it makes sense for me to continue to grow a short-term rental portfolio in this market, because my 2 cents, or my thought process goes to, if I am a wealthy person, or persons, and I want to build hotels, and I have that kind of money, I probably have influence as well over the city, and maybe some of the rules, and laws. And so, I would assume there may be some sort of regulation that comes down the pike once those hotels are up. So, those are some of the market specific things I’m concerned about, and keeping an eye on.

David:
Josh, what about the future? Where do you see yourself investing from this point going forward, and what types of asset classes?

Josh:
I do like the hospitality area, which is short-term rentals, and I’ve actually joined with several other investors, and we are creating a fund to buy short-term rentals, and small boutique hotels. And so, this is new to me, but some of the people in the group have done several boutique hotel deals. I guess five of the six cabins that I’m renovating, that was my first commercial deal, because it was five cabins at one time, and the renovation costs were built into that. So, that’s my limited knowledge about commercial loans, and that kind of world. But, I’m learning a ton, and the people that I partner with are great at what they do, and what I could bring to it is finding where that market is, and what the experiences that people are looking for, and what we could put into those short-term rentals, or hotels, to make the guest experience great.

David:
The last question I want to ask you about is with your story, with the Nest lock that ran out of batteries. Tell us what happened in that situation with your tenant.

Josh:
Yeah, so I am in California, which is three hours behind Smokey Mountains, Tennessee, but this guest for some reason didn’t arrive till 2:00 AM, or 3:00 AM, which even for me that’s past my bed time. I go to sleep early. But for some reason I was up, and I was about to go to bed, and I get this message saying, “We can’t get in.” Which is never something that you want to hear, especially that late, in a market. “How am I going to solve this?”
And I had to call a maintenance person that I was using quite regularly, so I felt like we became pretty friendly about five times to wake him up, and have him go over there. What I realized, and something that I have in my process now is, first of all, I have someone checking my batteries once a month, because I never want to be in that situation again. Second of all, it was a Nest lock. So, what I realized is you could take a nine volt battery, put it at the bottom, and it gives it enough power to unlock it, and then you could solve the problem later. So, I actually have lock boxes on all of my cabins that I keep a nine volt battery in. And in an emergency I could give the guest that code to get the nine volt, to get in temporarily, and then actually fix it when it’s working hours, and not have to wake up a poor maintenance man that was dead asleep at three in the morning.

Henry:
That is the physical manifestation of, “Never again. Never again is that going to happen.”

Josh:
I learned my lesson.

Henry:
Awesome. Before we transition to the next part of our show, I heard you mention a few times you kept saying, “Hey, you just need to breathe,” or, “I just had to breathe, and give this some space, and think about the problem.” And I interpret that as taking a step back, removing your personal feelings out of it, and looking at the situation logically. Can you talk to us a little bit about some of these steps that you’ve implemented into your life to deal with both real estate, and health, and how that’s helped you?

Josh:
Yeah. Especially being in the short term rental business, I’d say the majority of my guests are great, but there are those guests that really can get to you. And so, when they write those messages, or send you something that your immediate response is infuriating, and you want to just strike back right away, I’ve learned through production really, because so many problems do come up, that before I send that message back, before I send that text back, whatever it is, I take a beat.
I might have to walk away from my phone for a couple minutes, until I get control of myself. I mean, this is something I even implement into my children, where I say, “Go get control of yourself, and come back, and then we’ll talk.” And sometimes I do it myself, in my family. It’s like I feel myself getting worked up, I say, “I have to give myself a minute,” and I walk away, and then come back, and then you can actually deal with the actual problem, and be a little more logical about it. And that goes for anything, any part of life. It’s like just take a beat. Don’t be so reactionary, don’t be so emotional, because that’s not always the best response that you could do to solve the problem.

Henry:
You know how many times… I allow myself to write the message. I’ve just got to bang on the keyboard for a minute, and give the keyboard a piece in my mind, and then I delete all the stuff, and then come back a little later. But, that is a wise approach.

Josh:
Instead of banging on the computer, I think I’m in my head going through all those responses, and that’s like part of my minute or two that I’m like, “Okay, I got those out, now let’s actually deal with this, and what’s going to solve this? And how should I actually respond?”

David:
All right. Well this has been fantastic Josh. I love hearing your story. I’ve loved hearing about how you’re taking on the challenges that are coming your way. When you were talking about that nine volt thing, it brought up the whole W2 versus 1099, “I’ve got to figure this out,” mindset. I can absolutely see somebody who doesn’t care about finding the solution saying, “Oh, the battery’s dead, there’s nothing that we can do, the guests can’t get in. I guess they’ve got to sleep in their car. There’s nothing that can be done.”
Versus you probably went and Googled how to open a Nest lock when the batteries are dead, and there’s something on there about this nine volt battery trick, and then you could have looked up the closest place to go buy a nine volt battery, and texted the guests, and been super apologetic like, “Look, go do this. We’ll get you in there.” There’s always a solution. It’s just, are you looking for the solution, or are you looking for the reason to not have to look for the solution? It just depends where your heart’s at. So, thank you for sharing that. That’s been great.
The next segment of our show is the Deal Deep Dive. At this segment of the show, Henry and I are going to take turns firing questions at you as we dive deep into one particular deal that you’ve done. Question number one, what kind of property is this?

Josh:
This is an A-Frame cabin.

Henry:
How did you find it?

Josh:
It was actually on… I found it originally, someone posted it on Instagram, and then I looked up the listing, so it was on the MLS, but there is a community of A-frame lovers all over the world, and I do follow some of those accounts, and this popped up in a market couple hours away from me, and that’s what spawned me to go check it out, and have something a little bit closer that I could use.

David:
Those A-frames are very cool. I bought one of them myself in the Smokey Mountains, and the pictures just really stand out for some reason when you’re looking at that A frame cabin.

Josh:
Absolutely.

David:
All right, question number three. How much was it?

Josh:
So it was listed for $300,000. This was June of 2020, where everyone was still very unsure about the real estate market. It had been sitting there. I offered 250, they came back at 275, and that’s where we closed.

Henry:
Whoa, fantastic. You are a savant, because the next question was, how did you negotiate it?

Josh:
Yeah, I think it’s just because it was sitting there, and being still the beginnings of COVID, no one knew where the real estate market was going to go. I at least had those Smokey Mountains cabins that were up and running, and I saw how valuable it was. So, I just wanted to jump on, and get as many as I possibly could. So yeah, I think it worked my advantage for sure, when we made that offer, low ball offer.

David:
Okay. And how did you fund it?

Josh:
So I use my HELOC, actually purchase the whole thing, and do renovations. Because again, I had another lender back out on me. It was something where I got the lender from my real estate agent, and I thought that there was just something off, and it was something where they would ask me for a certain document, and I would send it within an hour or so, and then two days later, they would ask me for the same document. So, I would send it again.
I just felt like there’s something that’s going to be missed. And we got down to the wire, and so in my head I needed a backup plan, got down to the wire and they’re like, “Well this isn’t going to work.” And they basically pulled the rug from under me, or we had to go back, extend the contract even more, and potentially lose it, and provide way more paperwork. So, I used my HELOC to buy the whole thing cash.

David:
Now do you refinance after that?

Josh:
I did. So, that one we actually put $80,000 on top of it, into renovations, and that was building a bigger deck for the view, adding a deck for the hot tub, adding a hot tub, air conditioning, and then décor, and stuff like that. So, yeah, so afterwards we did raise the value quite a bit, and then we refinanced to pull the money out.

Henry:
Awesome. Well, we know what you did with it, but we assume you did a short term rental, but the next question is what did you do with it?

Josh:
Yeah, so we did make it a short-term rental. I think the first year it grossed $100,000, which is tremendous for… I mean, I was all in at $355, and after the refinance, we pulled out about $330,000. So, I was maybe in it for $20,000 total, and grossed about a $100,000 the first year, which was pretty phenomenal.

Henry:
That’s a good cash for cash return.

David:
Yeah. Remind us where we are?

Josh:
I closed June, 2020.

David:
2020. Holy cow, man. You made a hundred grand in the first year on a $20,000 investment.

Henry:
I’d take that ROI.

Josh:
It wasn’t too bad.

David:
Yeah, what’s funny is there was a lot of people in 2020 saying, “Oh the market’s going to crash, it’s too hot, these prices.” Can you believe that someone’s paying $250,000 for a cabin? And that cabin’s probably… What do you think it’s worth right now? I mean, I’m skipping ahead, but…

Josh:
I would maybe say 500-ish, I would imagine.

David:
How big is it?

Josh:
It’s a little smaller than a thousand square feet.

David:
Okay.

Josh:
So it’s pretty small. It’s a two one, but it’s an A-frame that, the top level is is a really nice bedroom loft, A frame area.

David:
That’s what’s tricky about short-term rentals, is like you might look at the traditional metrics like size, and sleep count, and not expect it to perform well, but it’s got something unique about it that makes it stand out on Airbnb, and it’s at the top of the list, and everyone books that little sucker.

Josh:
Well, part of the reason why I loved that cabin in particular, besides it being an A-frame, and we kind of fell in love with the style of it, is it seems like it’s remote. We are at the end of a dirt road. When you’re there, you feel like you’re completely alone. So, it’s really for couples, and small families, and us as a small family, we went up there, and we would just have a blast, and you just feel at such a peace. And we decorated it with pretty high end furnishings, so because of that, I think we attract people from Los Angeles that want better style, and are willing to pay for it a little bit more.

David:
I look for that as well, especially when I’m in buying cabins. I don’t like it when you look out your window, and there’s another cabin right next to you. You’re sitting in the hot tub, and you’re looking at the other person sitting in their hot tub. I always skew towards the ones at the end of the road, or the elevation’s different, so you’re sitting above the other cabin, there’s trees in the way. You’ve got to look a little bit harder, but I absolutely feel like if you’re going to the woods, you want to feel like you’re isolated. You don’t want to feel like you’re in a HOA.

Josh:
It’s part of that experience.

David:
Some of them literally are like track houses, but they’re just cabins. They just have wood everywhere, and a little bear figurine.

Josh:
Absolutely.

David:
But they’re sitting on a concrete pad that a bunch of other ones are built on, all next to each other. It’s the most bizarre thing. I always think this is like what a ghost town’s going to look like. At some point they’re all going to be vacant. People are going to like, “Here’s a community of homes that no one’s lived in for 30 years.”

Henry:
Is it a requirement?

Josh:
Well, and I know this only from production cause I’ve scouted it a couple times, and I don’t know if it still exists or is like this, but right by LAX, there was a community of track homes that was abandoned. And so, literally, it’s all these houses. You go to this neighborhood and it’s completely empty, and you can walk around, and it’s this weird kind of vibe, and a lot of people do wind up shooting there, filming there. But yeah, it kind of exists. Maybe, this was a while ago.

David:
All right, my last question that Henry’s got one more. What lessons did you learn from this deal?

Josh:
I learned that this was a new market for me, in short term rentals, and what I learned was how to look at the market as an individual market, and what to bring to that market, versus the other markets. Because people that visit those markets are different than that visit the Smokey Mountains. And so what I really focused on was making a cabin an experience that really calls towards those guests.

Henry:
And the last question is, who was the hero on your team for this deal?

Josh:
It’s got to be my wife on this one. I mean, she helped design the cabin, and we get so many compliments, and people just love it. I mean, it’s so comfortable, and it looks great.

David:
Awesome. That’s very cool to hear. Remember, you too can find the hero for your next deal, and maybe through BiggerPockets. Head on over to the BiggerPockets nav bar on biggerpockets.com, and find all the ways that the BiggerPockets marketplace can help you. All right, Josh. Moving on to the last segment of our show. This is the Famous Four. I’m sure you’ve heard this before, pardon the pun.

Speaker 4:
Famous Four.

David:
In this segment of the show, we ask every guest the same four questions every episode. Question number one, what is your favorite real estate book?

Josh:
Not to blow you up too much, but I’m going to have to say Long Distance Real Estate Investing by David Greene.

David:
First time anyone’s ever said that. I love it.

Josh:
I know that’s not true, but yes, sure.

Henry:
Awesome. And what is your favorite business book? I haven’t written one, so you can’t flatter me.

Josh:
I was trying. I looked, looked, I’d have to say a Shoe Dog by Phil Knight. I just feel like it’s really inspiring, and to see a company, how big it is now, and where they started and how they struggled and how they built up to where they are was really fun to read.

Henry:
Awesome, thanks. And tell us a little bit about what are your hobbies?

Josh:
I love playing tennis, and I’ve gotten my whole family into it. The kids started learning, my wife felt like she was going to be left out, so she started learning. So, all four of us play a lot of tennis. And other than that, we like to travel together.

Henry:
Do you play a little mixed doubles as a family?

Josh:
Sometimes. She’s a little more… I grew up playing in high school, and before, so she’s a little more self-conscious. We’ve done it. I keep telling her that she’s 100% in her games, because we’ve beaten all the couples that we’ve played against, but we’ve only played maybe three nights. So, she wants to keep that 100% statistic going.

David:
She picks opponents very carefully.

Josh:
She does. They’re not very good.

David:
Tennis hustlers. All right.

Josh:
Exactly.

David:
Next question. In your opinion, what sets apart successful investors from those who give up, fail, or never get started?

Josh:
I think it’s taking action. I’ve heard so many times while I was learning, that your first deal’s the most important, and it’s hard to understand theoretically when you’re just learning, but when you put your learnings into action, everything becomes clear, and you start to see, “Oh, this actually works. This isn’t just a theory.” So I think you have to take action.

Henry:
So, tell us where people can find out more about you.

Josh:
Well, I’m on BiggerPockets, obviously. You could follow me on Instagram at Bunk House Worldwide, and we show some of the deals that we’re going through, and some of our cabins, and struggles that we go through when we’re renovating, maybe. And you could DM me there. Also you could reach out to me at [email protected], is my email address, and yeah.

David:
All right, Henry, where can people find out more about you?

Henry:
Best place to find me is on Instagram. I’m @theHenryWashington on Instagram.

David:
All right, Josh, this has been fantastic. I appreciate you sharing some time with us. Do you have any last words that you want to share before we get you out of here?

Josh:
I would just say go out there and do it. What you’ve learned works, and just trust your instincts, trust the numbers, and go, go, go.

David:
That is great advice. Thank you very much, Josh. And also thank you for sharing your story with us. Everybody likes to talk about the success points in their struggle. They don’t always like to share the parts that were not as good, but those are very important to hear. So, props to you for sharing that. I appreciate it. We’re going to get you out of here. If you guys would like to follow me, I am DavidGreene24 on social media, and that is the same on YouTube. You can now put @DavidGreene24. You should find me there. All right. This is David Greene for Henry the Hulk Washington, signing off.

Hidden deep below some of New York City’s most luxurious apartment buildings is an exclusive world of futuristic parking spaces where high-end vehicles are parked and retrieved by robotic parking machines. CNBC’s Ray Parisi shows you what it’s like to drive a car into an intelligent-parking system where a single spot starts at $300,000.

Ashley:
This is Real Estate Rookie episode 237.

Daniel:
I think I like going the residential way, getting a house or two, a duplex, some small. It builds you a little bit of portfolio, it gives you a little bit of experience. And then like I said, I wouldn’t have been able to buy a commercial business if I didn’t have rentals because I need to use it as collateral. So it’s a great way to buy a property and if you can make it cash flow and somebody else is paying down your mortgage and building you equity, that’s just going to help you when you want to try to buy something bigger in the future.

Ashley:
My name is Ashley Kehr and I’m here with my co-host, Tony Robinson.

Tony :
And welcome to The Real Estate Rookie Podcast where every week, twice a week, we bring you the inspiration, information and stories you need to hear to kickstart your investing journey. And this week I want to shout out one of the folks in our rookie audience. His name is Zach and he loved a podcast review saying, “Love this podcast. I’ve been a listener for the last two years and have really soaked up a ton of information from these two. I’ve learned so much. I’m a full-time agent since the pandemic and have done two flips since then and just purchased my first buy and hold already looking for the next. Because of this podcast, I had the motivation to take action.”
So Zach, congratulations, brother, super pump for you. And for all of our rookies that are listening, Ash and I would be so deeply appreciative if you could also leave us an honest rate and review on whatever podcast platform it is you’re listening to. The more reviews we get, the more folks we can help. And that is always our goal here at The Real Estate Rookie. So Ashley Kehr, what’s up? How you doing today?

Ashley:
I was panicking for a moment there thinking about what I was going to say, what has been going on that I can talk about. But actually here’s something really exciting. I hired a consultant to help me refine my systems and processes. I use monday.com in my business and so I just signed them on yesterday and they are going to build out my Monday boards along with help me with hiring a couple people and I can’t say what for yet, but it’s like a big project I’ve been working on that will be implemented the beginning of next year, but they’re going to help hire the people that I need to put into place for that. So yeah, I’m excited.

Tony :
This wouldn’t happen to be the company that Brit used also, is it?

Ashley:
Yeah, it is.

Tony :
Oh, that’s so cool.

Ashley:
Yeah. Yeah, so [inaudible 00:02:26], I think I can say their name, I can talk about whatever on here, right? So I just hired them, so we’ll see how it goes.

Tony :
That’s so cool. She was actually telling me about them at BPCON and she made an intro and I think I have a call with them coming up here soon as well. So I’m excited to hear what they have to offer. Well that’s awesome, Ash. I’m excited to hear what this super secretive project is that you’re working on.

Ashley:
Yeah, thanks. And what about you? What’s new with you?

Tony :
Keeping busy as usual. We got a bunch of properties that we’re bringing online here at the end of the year, but I think our goal is to try and pretty much pause acquisitions. And I think I actually mean it this time, at least with the-

Ashley:
I know you told Sarah this 10 times.

Tony :
So many times. But we want to at least through the end of the year to pause acquisitions because we’ve added so many properties over the last couple of months that we just need some time to stabilize our existing portfolio. And I think scale is a good thing. If you’re not growing, I think you’re shrinking, but you also want to make sure that every once in a while you tap the bricks at least momentarily to make sure that you’re not building on a shaky foundation.
We have some VAs we brought online that we really want to get them trained up. Our operations manager, we want to get them trained up. We really want to start refining our process for managing our rehabs. That’s been a pain spot for us. So as we look to really ramp up our acquisitions next year, the value add will be a big part of that strategy. And we know that there’s a lot of gaps in our rehab process right now, so we’re trying to refine that process a little bit. So sewing down a little bit, but almost like the whole slingshot thing, you got to pull back to be able to launch forward. Hoping that the next couple of months here will be a good start for us for 2023.

Ashley:
Yeah. And that’s what the company’s going to help too with Darrell is taking what he does as far as the project manager on the rehabs and help him build out. He has a really nice Monday board actually built out right now as to the process and tracking it and stuff. But they’re really going to help him define that more and get better systems in place for the whole rehab process.

Tony :
I love that and that’s a big part. I think what a lot of real estate investors lack is the awareness that they are still building a business. Even though we’re real estate investors, we’re still entrepreneurs. And when people ask me what I do, I don’t necessarily say I’m a real estate investor, I say I run a real estate business. And it’s a slight nuanced difference, but it really does change how you approach what you do on a daily basis. If your goal is just to be an investor, all you’re going to be focused on is buying properties. But if your goal is to build a real estate business, there’s a different kind of focus that comes along with that and that plays into the systems, the processes, the team building and all those other things that typical businesses do.

Ashley:
Well, let’s get into the guests that we have on the show today. So we have Daniel on the show today and he is an extremist, skydiving, biking, snowboarding, all these things. And he actually makes me remember this fond memory I have of my mother telling me during my childhood that when she was younger she actually was skydiving solo and got stuck into a tree. So of course the whole time we’re recording this, she’s re-texting me all of the details of this experience for. So if you want to know the full story, slide into my mother’s DMs and she will tell you. But yeah, so Andrew is really awesome to talk about because we’re doing something a little bit different on this episode. Daniel has investment properties and he shows how he leveraged them to actually purchase businesses. So he goes through a car wash he purchased and then also a self storage facility.

Tony :
And I think that ties into the whole building of business thing and it leans into a lot of what Daniel talked about because he was a traditional real estate investor and then made the transition into buying these businesses that had real estate as one component of it. And he talked about what that transition looked like for him and his business partner.
There’s also a part in the episode where we talk about how he was able to find some of these off market commercial deals. So make sure you listen for that part because I think there’s some instruction in that for pretty much all of our rookies that are listening. And at the very end, we talk about whether or not rookie should start in commercial or maybe start in residential. So listen for what Daniel’s advice is on that as well. So Daniel, brother, why don’t you tell us, man, I think everyone has that moment in their life where they’re real estate investing is what I need to do. So what was that moment for you? If you think back on your journey, what was that one moment when you said I need to become a real estate investor?

Daniel:
So I fell into it when I graduated college, I’d read a book called Automatic Millionaire and it just talked about paying yourself first. You don’t need to go buy coffee and lunch every day. That’s where you’re going to spend a lot of your money. And then one point I talked about in the book was that a lot of people spend more than half their paycheck on their living expenses, so a mortgage or rent. So I’ve always tried to live cheaper. When I first graduated college, I had roommates renting an apartment with a roommate and then when I moved to Charlotte it was cheaper to buy a house than it was to get an apartment. So I fell into buying a house because I had a friend that was a realtor and it was cheaper and then ended up getting a roommate house hacking. And then that’s actually when I fell on BiggerPockets and that’s when I was like, “Oh, that’s what I’m doing. This makes a lot of sense, I want to do more of that.”

Tony :
So you had the proof of concept with this house hack first and then you fell into real estate investing afterwards. But what was that moment that made you say, “This is what I need to continue doing.”?

Daniel:
So when I bought my first house, had a 30 year mortgage, my play was if I can buy a house every year or two, by the time I’m 60, because I bought my first house when I was 29, I think by the time I’m 60 all these houses will be paid off and I know what they’ll rent for. So that’s like a retirement right there. That was my retirement plan when I first started.

Ashley:
Before we get any further, what does your portfolio kind of look like today?

Daniel:
So right now I have a townhouse, a duplex, the townhouse that I live in. And then my brother and I own a five self service bay and one automated car wash and a 18,000 square foot storage facility.

Ashley:
Okay. So let’s go into that. You told us you decided real estate is what you want to do, but then where was that moment where you’re like I want to get into these businesses or as Codie Sanchez says, the boring businesses that she calls them but are actually pretty profitable?

Daniel:
So in 2020, actually right as the world was shutting down for COVID, a car wash came for sale and my brother’s a professional dirt bike mechanic and he knows some people that have owned car washes in the past. And because I had been buying rentals on my own and talking about real estate, he’s like, “Hey, we got to figure out how to buy that thing.” And I was like, “All right, well let’s take a look.” There’s a broker side on the side of the road and we called the broker, “Hey, we’re interested in looking at this.” He sent us all the financials and we started looking at it and we’re like, “Looks like it makes sense.” That was our first look at what a business was and we thought we could handle it. So we started to jump into it.

Tony :
So Daniel, I mean I think first kudos you’ve having the courage to jump into this totally different asset class because it is still investing, but buying a business that is very different than buying a piece of property. So I think Ash and I both know really well how to analyze rental properties to determine if they’re profitable or not. But if you’re looking at something like a car wash, how do you determine whether or not it’s actually a good deal? Are you looking at how many cars are driving by every single day or what the population is around that car wash? How do you tell if it’s a thumbs up or a thumbs down?

Daniel:
So I think with any commercial business you want to look at what town it’s in, the traffic counts on the road, what type of projects are coming, are there more homes being built in that town? Is it getting busier or are people moving out of that area? So the area that this was in, we knew it’s been growing like crazy. Housing development’s going everywhere, apartment complexes, big like a rec center just got built right next door. So we just saw all that development coming to the area. So that made us feel like it was a very good piece of real estate and be a successful business.

Ashley:
So you had said that your brother found the deal and brought the idea to you?

Daniel:
Yeah, he’s the one that first brought it to me.

Ashley:
Okay. And can you talk about partnering with family? How did you guys structure this? Has it caused any conflict and any advice you can give to rookies who are maybe thinking about partnering with their family members?

Daniel:
Yeah. So the way we were able to do the deal is we had inherited a house that we grew up in Vermont. So when we first looked at it, we knew what the purchase price was. The only way we can get that down payment is to do a cash-out refi on that house. And I was like, “If you’re comfortable with that, then we can actually start having conversations with the broker and lenders and things like that.”
As for partnering with my brother, I think any partner you have, one has to have a strong suit and one you have to compliment each other, not be exactly the same. I feel like me and my brother are that way. I’m a lot better with the books, the back end talking to the lenders and he was a mechanic so he can fix anything. So we knew the day to day operations he could handle any of that. It’s made us grow closer but because we complement each other, I feel like it’s made the business side of it way easier.

Tony :
So obviously we’re real estate investors so my mind goes back to this piece, but when you guys bought the car wash, Daniel, were you also buying the land that the car wash was on or are you leasing that from some other owner?

Daniel:
We own the land as well, which is what made it more enticing.

Tony :
That’s awesome, brother. So when you purchased this business, it was one transaction for the actual car wash itself and for the land or was it two separate transactions for both of those?

Daniel:
No, it was just one transaction. The owners had talked about that they wanted to almost lease the land back to themselves and they had talked about it but they never did it. So when we bought it, it was just one transaction.

Tony :
That is awesome, man. And I feel like that gives you flexibility down the road as well because say that you guys want to get out of maybe the car wash business, you can sell the car wash but still keep the land I would assume, right?

Daniel:
Exactly. Yeah. If we decide to sell a few years out, we would probably break the land off and start paying ourself rent in that way. So then when we sold it, we could keep the land, because the land value has grown crazy in that town as well. So we see the value of it.

Ashley:
So let’s talk about that purchase. So you’re purchasing an investment property, the real estate itself, and then you’re also purchasing the business of operating the car wash. What are some things that rookies should look for when purchasing these two things together that may be different if they’re just going to purchase an investment property to rent out where there’s actually an operating business that you’re purchasing along with it?

Daniel:
So purchasing any commercial business is not going to be nearly as passive as just owning. If you have a rental and you set up a property management company, you’re going to have to be a little bit more involved. What drew us to the car wash is that we knew we could do it while still working our full-time jobs, but you’d something you have to take into account, especially upfront, you’re going to have to be somewhat involved making sure that all the day to day operations are happening, all the bills get paid and then at some point potentially you can put a manager in place if the business does well enough.

Tony :
So just following up on that piece, I’m thinking about the financing options that you guys had, Daniel. So did you guys just pay cash for the entire business plus to land? Was there some kind of debt involved? And if there was debt, who did you all go to secure that financing?

Daniel:
So we did an SBA loan for it and prior to even looking into this, I didn’t really know what an SBA loan was. So it’s a small business loan and there’s actually a few different options, but they allow you to get into businesses with only 10% down. So we only had to put 10% down on this business when originally we were trying to put 20% down or 25% because that’s just what we thought we had to do. But the bank actually wanted us to only put 10% down and then have a certain amount in reserves just because it’s a car wash, it’s our first business and there’s a lot of equipment. So they would rather us have money in the bank to make sure that we could take care of anything if something were to break.

Tony :
So just going along the SBA route, I’ve never personally used any SBA debt. Ash, have you ever used SBA for anything for the liquor store? Did you guys use an SBA loan?

Ashley:
No, because we started it ourselves, so we just paid cash for everything to start it up. We didn’t actually purchase it, but I have… So the first campground I ever put an offer in on, I went to a bank to get almost the seller wanted almost a pre-approval letter. And commercial banks usually really don’t give a pre-approval. They’ll say like, “Yes, we’re interested in lending on it,” but the seller rejected it saying, “No, we’re not doing SBA lending. My agent has advised me that it can take a really long time to close because you’re jumping through different hoops.” And so I had to go back to the bank and I had to get them to hold the in-house as a portfolio loan and say that they would lend on it that way that they would not do an SBA loan.

Tony :
Well, with the SBA debt, Daniel, when you look at buying like a traditional single family residence or even small multi-family, typically banks are going to look at you as the borrower, what’s your debt to income ratio, things like that. When you’re doing an SBA loan, are they looking at your own debt to income ratio or are they just looking at the business itself and the profits and revenue that it generates?

Daniel:
They look at both. Especially this was our first commercial business, they looked a little more heavily on our personal debt to income ratio just as if for some reason the business didn’t make the money that it was making, they wanted to know that we’d still be able to cover the payment. And another thing that they wanted in order to complete the loan was collateral. So luckily having had a few rental properties that had been performing and having equity in them, I was able to use one of my rental properties as collateral.

Tony :
And can you just elaborate for maybe the rookies that aren’t familiar with what that means? What does it mean that you use your rentals as collateral?

Daniel:
So you get the loan and then the lender that you’re using for the commercial business, they get basically a second position on the other rental property. So if you were to default on the commercial loan, then they could go try to pull any money lost out of that rental property.

Ashley:
My one business partner, Joe, he actually bought five Subways and after you said that, I remembered he did that, he purchased it with an SBA loan and he had two rental properties that he owned free and clear. And they actually took those two properties as collateral too for the SBA loan when he went and purchased those. And then he went to sell one of the properties I believe, and he had to have show that the property that he’s paid down enough of the debt for the Subways that he could pull this off that they didn’t need it as collateral anymore.

Daniel:
Yeah, we’ve been since been able to refinance out of the SBA loan to free up collateral so that we could do things without like I want to sell one of my rentals. But yeah, it’s crazy. I’ve learned that people that do big things like Elon Musk, when he wanted to buy Twitter, he was going to use Tesla stock as collateral to buy Twitter, which that’s a whole huge scale of it.

Tony :
Same concept. Same concept. Right. So just one other follow up question for me, Daniel, on the car wash piece, so neither you nor your brother had any experience running, managing your car wash. So on day zero when you guys closed, what was the process like or the experience for you guys, A, educating yourself on how to run something like this? And then B, were you doing the day to day management yourself or did you have a manager in place?

Daniel:
So prior to closing and what actually got us interested is luckily the sellers did a tour with us. Basically they brought us on site and showed us basically day to day operations because we wanted to make sure that we could handle it while still working full-time jobs. But day one that we closed, they left us with as much information and they’re like, “This is how we started, things break, you’ll figure it out. If you have any questions, you can call us.” And that was kind of it. And then you started watching cars come through and see how everything was going on. But we did all the management ourself and we still actually do. We have some help if we’re out of town so people can take trash out, things like that. But yeah, we basically learned by doing. It’s not as complicated as it seems.

Ashley:
So Daniel, like car washes, laundromats, some of these, what are cash cow considered businesses in some case, I’m sure if you run your numbers correctly, but how does someone find deals like this? I mean, did your brother find this by sending out mailers? Was this listed on some kind of website where businesses are for sale?

Daniel:
So this one was actually literally, we just drove by it on our way to work and there was a broker sign right next to the business sign and that’s how we started it. We called the broker and that actually the same broker the one that led us to our second business. But once we got this one, we actually started looking on sites like there’s LoopNet, Crexi, BizBuySell, which is a great place. When I first started, I would go on the MLS and I would just analyze deals all day long, not all day long, but I’ve analyzed hundreds of deals and so now I’ll go on those websites, even though they’re not the best place to look for deals, it’s good to go on there and analyze them. You can usually send a broker, sign an NDA and they’ll send you stuff and then you can analyze the deal.

Tony :
Do you have a calculator or anything that you use, Daniel, for analyzing those things? Or is it just kind of hodgepodge of Excel files and things like that?

Daniel:
Part of my old W2 job, I actually got into accounting a little bit. So typically when you get a business, you’re going to get the profit and loss, the balance sheet. So you can look over a profit and loss and you want to know where that profit’s coming from, where the expenses are coming from. And then when you subtract your expenses from your profit, you know what your net operating income is, then you can figure out what you could afford for debt. And then in looking at the different categories on the expenses, you can see maybe I could cut that out, maybe I could spend less here. And then maybe on the profit side, oh, they spend nothing. That was one thing we saw on ours. They spent no money on marketing on the car wash and they were already profitable and the way we were going to purchase it, it was still at a cash flow day one. So we saw room for improvement and that was one of the things was like they didn’t spend any money on advertising.

Tony :
So Daniel, I think you have a penchant for maybe taking calculated risks, right? Because outside of your business, your entrepreneurial endeavors, you also have a passion for some of these extreme sports. So we chatted a little bit before we started recording about you jumping out of planes and being a solo skydiver and things like that. So we know that you have the courage to do that and I think it plays a role in your business life too, because you bought the car wash with no experience, which is awesome. But then eight months later you found the self storage opportunity and now you venture into this second new space of real estate investing. So I guess just walk us through, A, why you decided to move forward with the self storage and then once you made that decision, you had to restart that whole education process all over again. And what did that journey look like for you doing that the second time around?

Daniel:
So a week after we closed on the car wash, the broker that represented the sellers sent us a deal and it was a storage facility and I was like, “I just bought the biggest investment of my life. There’s no way I can do another deal like this.” And so I just pushed it aside and didn’t really do anything with it. About a month later, AJ Osborne was on BiggerPockets podcast and I reheard about storage and it got me interested and again, and so I started looking into the storage side of it.

Ashley:
For those that don’t know, AJ Osborne is the self storage king. If you want to learn about self storage or you want to get excited about it, definitely listen to his podcast or his episode on the BiggerPockets podcast. Follow him on Instagram, @ajosborne. So Daniel, you got excited from it, listening. So walk us through then what were the next steps to analyze the self storage deal because that is different from analyzing a car wash and even still for analyzing an investment property as a long-term rental.

Daniel:
So we did the same thing. We got the broker to send us the profit and loss, so how much income it was making and what the expenses were and on storage it was actually a little bit simpler. And then the next thing was to get the unit breakdown, so how many units of what size are there and what are their current rates? So one of the things that made it appealing is that it was way under market value. So you could see from there, I just started Googling storage in the town that it’s in and looking at what market rates were, what other places we’re getting and made a few phone calls like, “Hey, do you happen to have this unit?” And they’re like, “No, sorry, we’re full.”
Call another place, “Yeah, sorry, we only have one unit available and it’s a small one.” So did a little bit of that and you’re like, “Wow, there actually is opportunity here.” And then so getting an average of what the market value was for those units and we had the unit mix, I know what we could bring the rent currently what it was at, what we could potentially bring it up to by doing a small rental raise. And then it just made complete sense and then that’s how I learned how you can create massive value in the commercial business like that.

Ashley:
Okay. So Daniel, to find out what your competition is and also what was the vacancy rate in the area and what people were charging for units. You Googled different self storage facilities in the area and you got on the phone and you just called them and basically asked those questions as to do you have the size unit available or what do you have available and how much does it rent for? And then just took that data and you pulled your own comps for the area just by taking the time to do a simple Google search and to get on the phone. And I think some people sometimes over complicate as to how do I find out the comps, all this stuff when really it’s just as simple. You Google, you get on the phone, you ask for the information.

Daniel:
Yeah, there’s a lot of stuff on Google and the bigger companies, everything’s right on their website so those are easy. And then the more mom and pop ones, you just get a phone call and maybe you don’t get all the pricing but you have a quick conversation say, “Hey, I’m looking for a bigger unit, what do you have available and what are the prices?” And then pretty simple conversation and they usually give you the information.

Tony :
Dan, I think it’s super interesting that you said the day after you close on the car wash, you got this deal presented to you by the broker. And I think there’s a big lesson to be learned in that for our rookie listeners, because it’s like you had zero experience in commercial real estate, but as soon as you prove to that broker that you could close a deal, now you’ve got this inroads to get more deals in the future.
And the same thing happens to so many other investors. Before you have your first deal, it’s almost like there’s a gatekeeper to find the right things. But once you get that first deal close, now you start to build a reputation for yourself. You start to build relationships, you start to build networks. And that’s why that first deal is so critical and so important. It’s not just because of the cash that you’re going to get, but it’s because of the reputation that you build for yourself and the network that you build and the relationships you build and the future deals that are given to you because you’ve proven that how to close and how to get the deal done. So has that broker sent you any other deals since?

Daniel:
Yeah, he sent some more storage deals. None of them were really as appealing or they’re too far away. And then just from buying storage, there’s brokers out there that are looking for people that have bought storage and we’ve got started getting calls from people everywhere. So we got on a few more lists and there’s deals that flow through all the time.

Tony :
So I want to talk a little bit about the financing for the self storage. We know you went the SBA route for the car wash. Was it the same approach for the self storage and if so, was it the same mortgage broker and lender that you went with to help facilitate that or was it someone different?

Daniel:
So we actually ended up using a different company. Basically when I heard AJ’s podcast, he had tons of information out there, so I consumed tons. And he actually had Live Oak Bank as a lender on his podcast. And the guy that he had on the podcast was actually from the town that we were buying our store facility in. So he left his contact information, I immediately sent him a message or I basically wrote a two page business plan, a brief summary of me and my brother were and what we were trying to do and why we thought it was a good property to buy. And then I had a call with him the next day and I was like, “I just bought a car wash. This is the biggest loan I’ve ever had to get. Can I even qualify to do this again?” He’s like, “Yeah, you can get up to five million in SBA loans and it doesn’t all have to be on the same business.” So I was like, “Oh, well that’s cool.”

Ashley:
Well let’s talk about that business plan first before we go any further. I mean, at least when we’ve talked on this podcast and myself included, when I first reach out to a lender, usually it’s just an email like, “Hey, I’m interested in purchasing this property, what kind of terms do you have?” Or I call a bank and ask to speak to the loan officer, I say that. But just presenting your entire business plan right away, can you just walk through exactly what exactly a business plan is and some of the key things that you should include in it?

Daniel:
Yeah, so what I had sent then was a summary version I had to do a little bit more in depth, but it’s basically they want to know who the buyers are, what their background is and why they’re a good fit for a business like that. They want to learn about the property, why you see value in it, what you think you can do to make more income, and that it’s going to be something appealing for the bank to loan on. They want to know a little bit about the area where it’s in. So just the big overall plan of what you want to do. So it’s basically a big summary for them.

Ashley:
So along those lines, you submitted your business plan to the loan officer, go through the SBA loan, did you partner with your brother then too?

Daniel:
Yep, the two commercial businesses were 50/50 partners on.

Ashley:
Okay. And then as far as the operations, so you said you’re still pretty doing a lot of operations on the car wash. Is that the same for the self storage? And how do those two differ as to how much time you actually have to put into them?

Daniel:
So the storage was, we lucked out, it was full mom and pop, everything was on pen and paper. So we were able to go in, start on day one with a management system. So we got to get all the tenants transferred into a management software, started accepting credit cards and then we were able to automate our gate so that it ties in with our management software. So with the storage, it was very busy up front, but now it’s a lot more hands off because we’ve been able to add a lot of automation or I can answer phone calls and take payments from home. Now is the car wash, since we really like to keep it clean and make sure everything’s functioning, usually one of us goes by once a day or we make sure somebody goes by to take up garbage. So the car wash is a lot more involved and the storage is more automated now. You know what you have to do in different parts of the month and it’s just a lot more steady, brings in basically the same income every month.

Ashley:
So what is the difference for you managing the commercial businesses compared to being a property manager on your long term buying holds?

Daniel:
I like the commercial businesses, they definitely are more involved, but if something breaks, like if a toilet breaks or I have a water leak at one of my houses, I need to get that fixed right away. It’s going to cause a lot of damage. It costs a lot of money. If a hose breaks at the car wash and I have to shut down the bay for a day, I’m not going to lose a ton of money because there’s still other bays for people to use. Same with storage. If somebody moves out and a door’s broken and it’s going to take me a week to get up there and fix it, I may lose out on 50 bucks, but it’s not the end of the world. So I like the time freedom that comes with owning the commercial businesses. I know the bigger you get then they may take up a little bit more time, but also when you get to a bigger point then you can usually have operators in place that can handle those things.

Ashley:
So Daniel, when you opened the self storage you took over, did you have a grand reopening where you were skydiving down, holding like a flag grand reopening, new management in place, new owners?

Daniel:
We did not, but we updated Google my business and updated the pictures and actually had a website. So those were the biggest things and that’s how a lot of the new customers that we’ve had have found us.

Ashley:
Okay. So I think right there is just three tips that somebody listening could take away if they’re looking to get into self storage or even just a business in general. This is those three things changing that can add value is putting some marketing in there, having a website where people can actually find you. I mean, think about it, you guys, for those of you listening, you need a storage unit, what’s the first thing you’re probably going to do? You’re going to Google the storage unit. And even if you know where storage unit is and you’ve driven by it, well if you aren’t driving that way within the next day, you’re still going to Google it and look for it. And if you can find one with a website. And Daniel, did you say that you have direct booking online where they can actually reserve it online?

Daniel:
Yep.

Ashley:
How convenient. Nobody wants to talk to anyone or have to stop in anywhere.

Daniel:
We don’t actually let people rent by coming in the office. We make them do it through the website.

Tony :
I love that you made the jump pretty quickly to commercial real estate. I think a lot of new investors have that on their vision board or their future goals, but they feel like they have to graduate up towards commercial real estate. So for the rookies that are listening, what’s your advice to those that have zero deals that eventually want to get into commercial real estate? Should they start with the townhouse, the duplex first, and then move into some of the commercial stuff? Or is it okay for them to start on day one by going after the commercial assets?

Daniel:
I like going the residential way, getting a house or two, a duplex, some small, it builds you a little bit of portfolio, it gives you a little bit of experience. And then like I said, I wouldn’t have been able to buy a commercial business if I didn’t have rentals because I needed to use it as collateral. So it’s a great way to buy a property and if you can make it cash flow and somebody else is paying down your mortgage and building you equity, that’s just going to help you when you want to try to buy something bigger in the future.

Ashley:
So Daniel, we have talked about your commercial businesses, but what about your investment properties? Do you have one of your investment properties where we could maybe go through the numbers on it?

Daniel:
Sure.

Ashley:
I’m going to do just some rapid fire questions and then you can get into the story of it. So where is this property located?

Daniel:
Concord, North Carolina, just outside of Charlotte.

Ashley:
And how did you find the property?

Daniel:
I had a friend that was a real estate agent and he helped me. He knew what the price range was for the first house I was looking for, so he helped me find it.

Ashley:
And what was the purchase price? What did you end up buying it for?

Daniel:
108,000.

Ashley:
And did you have to do any rehab on the property?

Daniel:
Nope, just some minor cosmetic stuff.

Ashley:
Okay. Did it have tenants in place or did you have to place tenants and what are the current rents?

Daniel:
It was my first house.

Ashley:
Oh, okay. That you first lived in. Okay. Okay, so go into the story then since, what has happened to the house since you first bought it?

Daniel:
So I lived there for one year. I had a roommate for six months of that time, so I was paying personally like $300 a month toward my mortgage and then I moved out. Then my mortgage with HOA is $750 and I rent it for $1,250 now.

Tony :
Wow.

Ashley:
How did you finance the deal? What percentage did you put down on the property or did you purchase it?

Daniel:
It wasn’t 20%, it was 15% down at the time. And so I had PMI for a little while and then once I got to 20% equity, I was able to get rid of that.

Ashley:
And how did you get rid of that? Because we don’t really talk about that enough is if you buy a property and you put less than 20% down, you’re paying that PMI, the insurance on it, so you can get rid of that once you have at least 20% equity in the property. And what kind of steps did you take?

Daniel:
I just reached out to the lender and said I knew that I had 20% equity in it based on what the remaining balance was versus the purchase price. And they had to send somebody through to do a site walkthrough and then they’d removed the PMI. So it took about a month to get somebody out there, but it wasn’t too difficult. Just had to reach out.

Ashley:
And did they charge you to do any of that?

Daniel:
I believe I had to pay for the person to come do a walkthrough. I think it was only 150 bucks.

Ashley:
Well, worth it to get rid of that PMI because how much are you spending a month. Yeah.

Tony :
Yeah. Well congratulations, Dan, that seems like a great property. And you said that was the first real estate deal you’d ever done, right?

Daniel:
Yep, yep.

Tony :
Man, that’s fantastic. You got to live for almost free for an entire year and now you’re out of it and you’re cash flowing like what, five, 600 bucks a month? So dude crushing it, man. Crushing it, brother. All right. So for all of our rookies, listen, if you want to get your question featured on the show, give us a call at 8885-rookie, if your question is a good one, we just might feature it on the show. So Daniel, are you ready for today’s question?

Daniel:
Yep.

Benjamin Allen:
Hi, my name is Benjamin Allen. I reside in Geneva, New York. I have 16 units, just closed on my four unit actually in the 1st of May. And my question is directed towards reserve or capital expenditures areas. I have approximately about 12 grand for covering major expenses like roofs, furnaces, boilers, major expenses like someone destroys the units or things of that nature.
And I’m just wondering, should I continue to build that up and just have that as a general reserves fund for big large items? Or should I just only keep it at a much lower amount to where I only handle the general maintenance throughout the year for that fund? Or should I have two separate different accounts? My bigger question is, do I just leave a big account with a lot of money in it for maintenance costs and big for repairs? Or should that be two separate accounts for maintenance versus big, large purchases like roofs, furnaces, boilers? I hope that wasn’t too confusing, I apologize, but I really appreciate your content and your show. I learned a lot from it. Thank you so much, and I look forward to hearing from you guys. Thanks, bye.

Daniel:
So I actually just have all my rental stuff in one account for my personal rentals, but I have a spreadsheet that I keep track of everything. So if you don’t want to do the spreadsheet route, I would consider having a separate bank account and that way you can see what you have saved up for repairs and maintenance. But if you’re going to keep track of it in a spreadsheet, I don’t see any reason why you can’t have it in one bank account.

Tony :
Yeah. That’s a great call out. I mean, we actually do a little bit of a mix in our portfolio. We have four, I don’t know why we do it this way, but four of our properties all share one reserves account and then every other property from there on out has its own reserves account. And then that’s just for big CapEx expenses. And then usually the ongoing repairs and maintenance we just pay out of the OpEx account. How do you do it for your portfolio, Ash? Do you have a separate for repairs and maintenance and then a separate for CapEx?

Ashley:
No, there’s pretty much one checking account for each LLC. So for me and each of my partner or properties I own myself, it’s just one, but I don’t take any cash flow out. I feel like I’m just constantly moving money around to buy more properties or to invest in this or that or to fund my own rehabs and stuff. I just never let it get below a certain amount.
And plus I have a couple lines of credit too that I keep available so that if I really needed to pull, if for some reason all of my properties needed new roofs, then I would definitely have to go to my lines of credit. But I think you get to… We always have six months reserves when starting out on that first property for your mortgage payment, so your principal interest, your taxes, your insurance, and then also if you have an HOA like Daniel did on his first property. But as you grow in scale, I think that, at least I have figured for myself that as I’ve grown and scaled, I don’t need to have six months for every single property because the chances of all my properties going vacant or all needing huge repairs are pretty slim. And if that does happen, I have the lines of credit to cover that.

Daniel:
Yeah, I did the same… I didn’t take money out of my rentals for the first few years. I just let it build up an emergency fund and I knew what it would cost to pay rent for both of those units or to cover the mortgage for six months of both of those units and knew what that number was and then had a number that I wanted for reserves for each unit. So then I knew what my total number was that I wanted to have in that bank account.

Tony :
And Daniel, I think that’s a really good call out that the longer you can delay taking money out of your real estate business, the faster it’ll grow. Because if you’re able to reinvest those funds into maybe improving the rehab or maybe purchasing that next property or whatever it is, you’ll have a better chance of continuing to scale. And it was very similar for us in our business. We didn’t start taking any money out of our Airbnbs until we had 13 properties live. So for properties one through 12, we were reinvesting all of that capital back into the business. And that was hiring people, getting more software, your bookkeeper, your whoever, but just reinvesting back into the business. And I feel like that made all the difference in our ability to scale. So I want to keep us moving, Daniel, into our next segment. This is the Rookie Exam, the most important three questions you’ll ever be asked in your life. So are you ready for the exam, Daniel?

Daniel:
Let’s do it.

Tony :
All right, brother. So first question, what’s one actionable thing rookie should do after listening to your episode?

Daniel:
I would make a move on whatever you’re trying to do, whether if you’ve been studying, trying to buy your first single family or first short term rental, go analyze some deals and see what you want to do. If you’re in that space where you’re actually trying to look at the commercial, like I said, go on Crexi, BizBuySell, one of those, analyze a few deals, maybe reach out to a broker and see where you’re at. Maybe if you’re at the point, then maybe reach out to a lender and see what you could even qualify for in financing.

Ashley:
Daniel, what is one tool, software, app, or system in your business that you use?

Daniel:
Google everything. So Gmail, Google Drive, Google Sheets, Docs. We basically have a shared email for each that my brother and I can access, so that way whenever we store documents or whatever, we can both access them. So it’s an easy filing system for us both.

Ashley:
Yeah, I use the same, it’s so convenient and works so well, especially if there’s multiple people working on something together or needs to access that.

Tony :
All right, Daniel, last question. Where do you plan on being in five years?

Daniel:
I would like to own a larger portfolio of commercial businesses, ideally more storage, but that market’s getting harder and harder to get into, but I would like to grow that portfolio and then I technically hit financial freedom this year and left my W2 job, but I would like to be at a next level of financial freedom where it’s just continuing to make money to invest in bigger projects.

Tony :
Congratulations.

Ashley:
Congratulations on that.

Tony :
That’s amazing, brother.

Daniel:
Thank you.

Tony :
And I love the way you phrased that. And the way that I’ve come up with this framework in my mind is that you have financial disparity, which is where you’re living paycheck to paycheck or worse than that, right? Then you have financial dependents where you have a W2, you’re able to cover all of your basic expenses. And then once you break free from that, you have financial independence and that’s where you’re able to cover all of your basic living expenses, but with your own business, with your own revenue that you’re generating. And that’s like where you’re at right now, where I am too. And the next layer after financial independence is financial freedom, and that’s where you’ve got the few money to go live, whatever kind of life it is that you want to live. So a lot of people, I think, get those layers confused, but I like the idea of shoot first for financial independence. And once you get there, now you’ve got the time and the flexibility to really focus on financial freedom.

Daniel:
Yeah, that’s a good way to put it.

Tony :
Cool, Jeffrey. So as we round things out, I want to go to our rookie rockstar. This week’s rookie rockstar is Jeffrey Brusho. And Jeffrey says that he’s been following Codie Sanchez for a while and was wanting to buy maybe more recession resistant commercial real estate. And he said after six months, he came across a property that was on the market and checked all the boxes. The seller had this property listed for 1.5 million. Jeffrey wrote an offer initially for 1.1, seller said no. Jeffrey countered at 1.2, seller said no again.
After listening to the BiggerPockets episodes, he said that he learned that it wouldn’t be a bad idea to reach back out. So he checked in with the listing agent again and said, “Hey, how are things moving?” The property was under contract with another buyer. So Jeffrey ended up reaching back out and seven days later he got a call from the listing agent saying that that initial buyer dropped out and the seller was now willing to accept Jeffrey’s 1.2 million offer. So Jeffrey, I’m super pumped for you for being able to get this property in a contract, but even more so, it’s a great lesson for all of our rookies that just because a property goes under contract with the buyer, that doesn’t mean that they’re going to close. Deals out of escrow all the time. So if you can be the second person in line, that is a great position to be in.

Ashley:
Yeah. Congratulations, Jeffrey. That’s awesome. And way to stick with it. Well, Daniel, thank you so much for joining us today to do this recording. Can you let everyone know where they can reach out to you and possibly learn some more information about your crazy skydiving and other adventures that you do?

Daniel:
Yeah, you can reach out to me on Instagram, it’s Free Fly Kid. On Facebook, Daniel.Schiermeyer. Those are the main two. I respond to everybody on there.

Ashley:
Well, Daniel, thank you so much for coming on today. We really appreciated you taking the time and providing value to us and all of our listeners. I’m Ashley at Wealth From Rentals and he’s Tony at Tony J Robinson. And we will be back on Saturday with a Rookie Reply.

Michael Rehaut, JPMorgan senior analyst, joins ‘Closing Bell’ to discuss the company’s call to upgrade the homebuilders.

David:
This is the BiggerPockets Podcast, show 691.

Ryan:
I developed initially an app just for myself and friends to apply and quickly had landlords coming back to me, some of which were BiggerPockets members as well along the way, saying, “Wait, our side’s just as bad if not worse.” You’re seeing the trickle down effect of me, an independent investor who’s put my life savings into acquiring a property or two to put a kid through college or retire early. And I’m doing it all in spreadsheets. So if you can make it easier for me, I can make it easier for you too. So that began the journey of saying how do we make something that makes it really easy for an independent landlord, independent investor, and then also creates a great experience for their tenant at the same time?

David:
What’s going on everyone, this is David Green, your host of the BiggerPockets Real Estate Podcast, the best, the biggest, the Baddest real estate podcast in the world here today with my super talented cohost, Rob Abasolo. Rob, how you doing today?

Rob:
Hello, hello. It’s Wednesday and I’m feeling good, man, my back… I survived a minor back injury and I feel like I’m at the end of it. I can finally twist… I’m not ready for a golf lesson quite yet. I’ve been saving that for a little bit, but I’m close. I’m close to being able to go to Top Golf again.

David:
Which is how everybody golfs these days. No one actually goes to a golf course unless they’re over 50 years old.

Rob:
No, I actually bought 10 golf lessons. I bought them, I went to the first one, and then I threw out my back. So they’ve just been collecting dust. And that’s how they make the money on you. They want you to bank it and just forget about it. And that’s kind of me at this moment.

David:
I think about that with gift cards all the time. It’s the worst thing ever that you go spend money on a gift card and then you give it to someone. The number of gift cards I’ve actually used is very low compared to the number I’ve been giving. You lose them, you don’t think about it. I’ve had one for In-N-Out Burger in my wallet for four years and I still pay with my credit card every single time because I just forget.

Rob:
Well, there’s a little bit of a psychology there because someone at BP Con, actually two people at BP Con gave me Chipotle gift cards, and I never want to use them because I’m always like, “Oh, I don’t know. Is today the day? Do I want to use my gift card?” Because you just feel like you’re… It’s like credit card points. I’ve got a lot of credit card points I’m just too scared to use.

David:
And who knows why we are… I do that same thing with credit card points. I’m like, “You never know. I might run into a situation where I have no cash and I’m just going to need it,” so they build, they build, they build. Speaking of building, today’s guest is amazing. Ryan Barone built RentRedi, property management software that makes your job as a landlord much easier and frankly makes managing real estate more fun. If you thought that that wasn’t possible, you could be wrong. And Rob and I interview Ryan, getting into how he solved these problems, what the software does, how it makes landlording better, and what’s even cooler is it doesn’t just help landlords, but this software actually helps tenants as well. Makes it easier to be a tenant of a rental property, which only helps your real estate business.
And even more if you wait for the very end of the show, we are going to give you a discount code that you can get access to this thing through a Pro membership, which makes it free for you. Pretty cool stuff. Before we get into the show with Ryan, today’s quick tip is there’s one thing that you shouldn’t be afraid to use and that’s the BiggerPockets tools we have available for you. Be part of the community, manage your properties, start, scale, and manage your entire portfolio with what BiggerPockets has. You got to check it out. We’re more than just a podcast. Go to biggerpockets.com, hover over the little tools bar and you’re going to see there’s tons of stuff that will help you build your business.
Not to include the forums we have where you can read questions that other people have asked and answers that they got. You get a chance to ask your own questions. A very extensive blog. Man, I used to sit there and work in graveyard shifts and do nothing but read the blog all night long until there’s something I actually had to do. I love that thing. So if you’re a fellow reader, check it out. Rob, anything you’d like to add before we bring in Ryan?

Rob:
No, I’m genuinely pretty stoked about this one because Ryan had a really cool origin story for how he even came up with RentRedi, so I always find that these stories are really inspiring because he had a problem, so he’s like, “I’m going to solve it.” And because of that it became this insane platform that really helps people. So let’s hop in.

David:
You got a problem? Yo, I’ll solve it. Ryan Barone, welcome to the BiggerPockets Podcast. How are you today?

Ryan:
I’m doing great. Thanks for having me David.

David:
I am good to hear that. If anyone doesn’t know, Ryan here is the CEO and founder of RentRedi, which is now part of Bigger Pocket’s suite of tools to help you become a better real estate investor, frankly. So if you’re a Pro member, you get free access to RentRedi and I’ve looked at it, it’s very cool, I will say. One of the things that I look at when I’m looking at a sophomore, and I may be like everyone else, but I don’t think I am, is how easy is it to use? Is it intuitively I look at it and I know what to do? If that software makes me work, I hate that. Now some people, nerds, love that. They’re like, “Oh, it’s like a Rubik’s Cube and I get to figure out how to make this software work,” and they get very excited.
I’m the opposite. If I got to try to figure this thing out, I don’t want to put the energy towards it because I don’t make money figuring out software. I make money hitting my KPIs. So for instance, I got Mint for the first time, I’m working on a new book for BiggerPockets, it’s going to have a FI component to it and I’m coming up with a system people use to track where their money’s going. And I was so impressed by Mint, it’s like, “This is…” It works. It just automatically budgets what I’m spending money on, it knows how to classify it, it tells me how much I should be spending and how much I am. It made it easy. And I got to say RentRedi gave me the same vibe the first time I looked at it. So well done creating software that is as friendly to use as your face is to look at.

Rob:
Yeah, and Ryan, I also heard that BP had somewhat of an early tie to help you get the right feedback for the concept. Is that right?

Ryan:
Oh yeah, in many ways, and all along the way. In the very early days I was actually trying to build an app for myself and friends to apply to units, and BiggerPockets played a part in that because I was going to a whole bunch of meetups and trying to talk to landlords about what issues were they having and how could that be solved maybe with some software that made things easier for them or streamlined processes they had. So that played a huge part. In fact, the very first partnership we ever did with BiggerPockets years ago, we only had two subscribers. So it’s been, for me, a long journey of feeling like we were trying to help the same person in a lot of ways just from different angles. From BiggerPockets’ perspective, for me it was always the place you go to get information about how to manage better or how to acquire that property or whatever that might be. And then from my perspective, it was trying to provide some sort of software to streamline those things you were supposed to be doing yourself manually.

Rob:
Dude, that’s awesome. Okay, I love that, because you said you in the early days you had two subscribers and then how many active users are on the platform right now?

Ryan:
So we have tens of thousands of landlords actively managing on RentRedi today. All 50 states, Virgin Islands, Guam, Puerto Rico. So it’s grown a lot.

Rob:
Well congratulations. Let’s back up a little bit, okay. So tell us the idea of how RentRedi came into fruition. What’s the origin story here?

Ryan:
So I was actually in college at the time. I had gotten my first internship and I was all excited to stay in… At the time I was in New York City for college at Pace University. So it meant I got to move out of dorms, get my first apartment, which was going to be really exciting for me. So I went through that application process trying to apply, and I ended up not getting that apartment. They needed letter of employment, W2, bank statements, tax returns. I had two roommates, all of which had guarantors as well. So we ended up not getting that unit and I left that thinking to myself, could I just make a way to make things easier actually for us on the tenant side, to apply to units quicker and more easily?
So I developed initially an app just for myself and friends to apply and quickly had landlords coming back to me, some of which were BiggerPockets members as well along the way saying, “Wait, our side’s just as bad if not worse. You’re seeing the trickle down effect of me, an independent investor who’s put my life savings into acquiring a property or two to put a kid through college or retire early, I’m doing it all in spreadsheets. So if you can make it easier for me, I can make it easier for you too.”
So that began the journey of saying, how do we make something that makes it really easy for an independent landlord, independent investor, and then also creates a great experience for their tenant at the same time? And it grew over time from what was initially saying, “Hey, can we try to solve applications,” to being this completely end to end platform for anything that you have to do in terms of managing the property. And honestly, truly, from those individual stories, pretty much everything on the platform today is from at least one person’s story of a problem they were trying to solve in some way, we were trying to fix that for them.

Rob:
Okay, so if I remember this correctly, you said that you were trying to get an apartment, you were having a tough time qualifying I guess, and you’re like, “I’m going to create a software that solves this for every tenant that’s in this problem.” You do that and then landlords on the other side are like, “Whoa, wait a minute.” I want to even know they find out. Was it because you were presenting the software to landlords and they’re like, “Hey Ryan, this is really cool.”

Ryan:
Yeah, yeah, that’s exactly what it was. I was trying not to disrupt the landlord side of things at first. So everything was sending over email initially at that point. So I said, “Great, I’ll build an app where you enter all of your information, you take photos of all your documents and I still send it over email.” So they were getting this basically packet in the same fashion they had asked for it through just typical pen and paper means, and then saying, “Wait, but the system of managing that in email is not ideal, it’s just what I have. So can you give me…” Initially it was a way to manage all of those in a platform.
And from there it grew to things like pre-qualifications. Initially it was just applications, but it grew to things like pre-qualifications where someone said, “Hey, I had a couple come view my unit, I loved them, I’d love to rent to them, but as soon as I ran the full tenant screening on them, I realized I couldn’t rent to them, so can we get a pre-qualification that lets me figure out how to basically meet with the best five people instead of the first five people that want to view one of my units?”

Rob:
And then do you still have the tenant component of the software or did you completely pivot at this time?

Ryan:
Oh yeah, so it’s still both, still the mobile app for tenants, and in fact it’s grown in a tremendous amount from just applications to paying your rent through the platform, even submitting video maintenance requests through the platform, seeing all of your lease documents and running your tenant screening. Really is trying to help them make everything better. Even during COVID, we had some tenants say, “Hey, can you help me build my credit score because I’m already paying rent through the platform?” So we built in credit boosting so that they basically enable this. They pay on time, they’re building their credit. Landlords are happy because they’re getting their money on time and that’s really what you want at the end of the day. So it became a win-win from everybody, even if it was, in that case, an idea coming from a tenant side of things.

Rob:
That’s amazing, man. So it wasn’t really a pivot, it was just an expansion. So at this time when you were concepting and bringing it and developing it and minor pivots and expansion and everything, what was the marketplace even like for landlords at the time?

Ryan:
Oh, I mean at the time it was, I mean, truly just pen and paper spreadsheets. For me, I wasn’t interacting with anyone that was doing anything other than sending everything over email, paying with checks and cash. So it was truly trying to give something that could streamline a lot of those issues. Even the paying rent portion of that, of dropping a check off to a specific location or paying cash and having to meet someone somewhere just felt like something we could make easier for everyone involved.

Rob:
Yeah, so you were basically solving a bunch of the pain points that a landlord or maybe even a tenant was having on that journey. Obviously there was a software gap here if so many people were excited about what you had to offer. What did you identify at the time as one of the bigger needs that smaller landlords needed?

Ryan:
Yeah, what I ended up realizing was needed was truly an end to end solution that took a lot of the tasks that were manual and tried to automate those without cutting into the margins of a landlord’s business. So the options that it seemed like they had that they were presenting to me at least were either I hire a property manager for 10 to 12%, and that might cut into my margins or I want to manage it myself for whatever reason, or I do it all on spreadsheets, I kept that margin, but now I’m pulling my hair out because I’m doing just absolutely everything myself. So what we were trying to figure out was how do we let you control it all so it does whatever you want it to do, whatever you would do physically yourself manually, but let that basically be a software, almost like a person that you tell to do what you want them to do and they go do it exactly how you want it done.

David:
That brings up a big piece of building a business, is typically I’ve found it starts on the back of the founder. We’re running as hard as we can. At a certain point we’re like, “This is as fast as I can run with all this weight on my back.” The weight is the work, the tasks that have to get done. Josh Dorkin had this issue with BiggerPockets itself when he was working 15 hour days just sitting there writing code or working in the forums. I think there’s an urban legend that to get the forum started, he would create a fake profile and write a question that he would then answer with a different alter ego just to show people like, “This is how the thing should be looking.”
And then there’s this rhythm of, “Let me give it to someone else to do,” because we’ve all heard Who Not How, and we’ve listened to all these podcasts that talk about how you build a company and you got to leverage and you’re like, “Okay.” And then you do and that person sucks. They don’t do a good job. I mean, if you hit it out of the park on your first try, hats off to you, that’s awesome. I never have, and I don’t know many people that did. It’s usually, “Oh, that’s not how I did it at all, and that’s not a very good effort, and why do you need this much time off, and how come you’re never focused, and why is there always a new drama happening in your life every single time you come into work?”
So you take it back on and you start running again, but now you’re trying to do other things that you started when you gave it to someone else and you go through maybe five or six iterations of this, you finally get a good person that can do the work. How did you transition out of, “I do everything,” into, “I’ve outsourced the majority of the tasks that need to be done and I focus on the vision,” and then my follow up question will be what stuff did you focus on once you got it outsourced?

Ryan:
Yeah, so everything that… When we started scaling the team, I think the first thing is trying to get everything out of your head. When you’re doing it yourself or with a partner, a couple partners, whoever you started, whether it’s your real estate business or in my case and myself in RentRedi, you have so much knowledge about what you’re doing yourself, may not be the best way, but it’s the way that. Trying to document that as much as possible so that you can lower what I would call the hit by a bus metric. If you disappear tomorrow or if you were unable to do that particular part of that job, could your team do it?
It’s really hard to do, I’ll be honest. It’s not easy. And it’s not an overnight thing. I think it is a gradual starting of documenting that. But at first I would say get rid of or try to bring on people that are good at the things you’re the worst at. So in the early days for us, we brought on a designer, I’d like to say I’m a pretty good designer, but I’m not nearly as good as some of the designers on our team. We brought on a content writer, brought on a head of growth, and one engineer and one mobile developer was basically the hiring we did.

David:
Did you hire these people [inaudible 00:16:12]?

Ryan:
We did. We did, yes. Yeah.

David:
So how did you find the people that you decided to hire?

Ryan:
For us, it was mostly Angel, angel.co, and the reason I liked that at the time was a lot of people that were looking there were looking for a mission that they were trying to solve. So it made it great that we were all able to come together and honestly feel like we’re a team building that same mission together. And that honestly has stayed really a part of the company I’m really proud of today. I think everyone that’s part of the team I’m really proud of and how much they love what we do and that we get to build it together, and there’s a lot of hard work that goes into it, but a lot of fun that happens along the way. And that’s something that I think anybody can carry into their own business.

Rob:
Yeah, that’s really cool, man. So it sounds like you were staffing up appropriately and then you were hiring people that were doing the things that you were bad at, and this is something that I’m now… I’m starting to hire a lot more people and that is how I approached it too. I hire people to do what I can’t and then once I’m not stressed out about that and I’m not scrambling as much, then I hire people that are good at what I’m good at. That way I can start managing those people and actually focusing on the vision. But obviously in the early days of any startup, I’m sure you were in the trenches a bit, so can you tell us a little bit about what a typical day was when you were building out the entire platform?

Ryan:
Yeah, I mean in the early days it was truly building the apps. I was our first developer for the first two and a half, three years. So it was building out our iOS app and our Android app and our backend, our front end for landlords. My co-founder Ed and myself were answering every chat so a lot of days looked like answering any questions that people had along the way when they were setting up their accounts, fielding any ideas that they had for us that they thought should be built into the platform, and then turning around and making those a part of the platform. So that was at least the very early days of what an average day looked like.

Rob:
And who was running support for you whenever you were building it out? Because I’m sure when you’re developing any kind of service or software like this, there will be a lot of people that are always pointing out bugs or things that need to be optimized. Who is doing all that for you?

Ryan:
I mean, in the very early days it was my co-founder Ed and myself that were answering chats and then we eventually brought on a chat support teammate to help with that, and now we have a team of about five on chat support that answer any questions that both landlords or tenants have along the way, we’ll help… Even if you’re getting set up and your tenant has a question, we’ll help them with any questions they’ll have as well.

Rob:
I’m sure it felt pretty gratifying or pretty relieving when you hired your first chat specialist or support specialist that took yourself out of that role, huh?

Ryan:
I mean it was exciting. Honestly, one thing that I’ve learned, even from one of the people that we’ve brought onto our team is kind of this strategy, they describe it really nicely, of I do, you watch, you do, I watch, then you do. And I think that really was what we naturally did with the chat support side of things. Ed and I were doing chat support, we brought on a chat support person and for a while we were still answering chat with them every day. It was just that we had more capacity because there were more of us to answer, so there was an opportunity for them to see how we would answer certain questions, us to talk about what the best way was to help people along the way. And then eventually now I feel like I learned things from them, the way they answer things.

Rob:
Yeah, that’s right. The student has become the teacher and the teacher has become the student, right?

David:
I’m curious, when it came to the feedback you got from landlords, when they were saying, “Hey, I need this to do this better or I need software that will do this,” what were some of the most frequently requested issues or the biggest problems that you had to solve to get landlords to be more successful so they would use the software?

Ryan:
Yeah, I think some of the most surprising were in the little details. Things like rent collection in general. We added collecting rent to the platform, but then we had a landlord that was in Texas at the time and called us up and said, “Hey, if I have a tenant that pays even a dollar and I’m going through an eviction proceeding with them, it could reset the eviction clock for me. So I need the ability to prevent partial payments so they either pay me in full or they don’t pay me on a unit or a tenant by tenant basis.” So that was a case of us saying, “Oh wow, there’s more to this than just collecting rent.”
And then others that came to us and said, “Hey, I own properties in different states, and in different states there’s different late fee rules about what maximum late fee you can charge, and sometimes it’s a percentage or sometimes it’s a dollar amount. So I need the ability to, on one of my properties, say it’s a 5% cap and on another one I need to be able to say $10 a day up to $50.” And honestly, a lot of those little details that people brought to us along the way have, I think, made the biggest difference because it enables other landlords coming onto the platform to learn from things that they maybe haven’t heard about yet or haven’t read about yet, but other landlords have. And if we can continually incorporate everyone’s, you get the wisdom of the crowd working together on what’s the best way to do this.

David:
So in your opinion, as far as your software, what do you think RentRedi does, what is it that best at compared to your competition?

Ryan:
I would say it’s actually not in the software itself. I would say it’s probably listening to the people that are using it. I think everybody on the team really prides themselves on continually taking ideas and feedback that we’re getting from landlords and tenants both, and incorporating that into the platform so that what we’re building isn’t coming from me or coming from Ed or coming from anybody else on the team. It’s really coming from the people that we’re trying to help. And if they tell us what to build and frankly what not to build at different times, we can make something that’s better for them. We’ll spend our time more efficiently, we’ll build the things that they need. And that’s really where I think the biggest focus is. And I think that applies to anything, whether you’re building a real estate portfolio or a rental platform or anything you’re doing, the people you’re trying to help have the answer of the right way to do it.

David:
So that’s something I find fascinating about what you’ve done because if you look at… People ask the wrong questions a lot of the time. So as an investor, people will say, “How should I buy? What strategy is the best one? Where should I buy it?” As opposed to, “How do I solve a problem? What is the problem I’m trying to solve?” If the problem is people want to travel somewhere, they don’t want to stay at a hotel, the solution becomes, or the questions you’d ask is, what type of property do I want to buy, own, upgrade, whatever, so that someone wants to stay there and would pay more money to stay there? If the problem is how do I keep a tenant happy so they don’t ask for discounts, you ask questions like what can we do to screen tenants better or how can we avoid things that would cause mistakes to happen later?
The people that I find don’t do well with real estate investing are irritated by the fact they have to solve problems in the first place. Their expectation was, “I buy a house, money rolls in, I shouldn’t have to do anything.” And when things go wrong, they take it as a sign from God. I think that’s funny that so many people, as soon as something goes wrong, they say, “That’s a sign from God that I’m not supposed to be doing this,” because there was a problem, which to me is kind of like saying, “I went to the gym, I put the weight on the bar, I tried to lift it and it was so heavy. That’s a sign from God, I shouldn’t be working out. This is a bad idea.”
But what you’re describing are that the obstacles that you encountered were literally what helped RentRedi, ascend and pass a lot of this competition is the way that you answered them. What advice or perspective can you offer on the mindset that the obstacle is the way?That if you approach problems that happen with enthusiasm and joy in solving, you will become wealthy, versus if you just look at these things with resentment and irritation, you’re going to fail?

Ryan:
Well, I think the happiness part of what you’re saying there is huge. You have to love what you do first and first and foremost. You can turn issues into opportunities, and I think that’s the biggest thing, that in a perfect world, nothing would ever go wrong, but in reality, things will always go wrong and at some point something will go wrong. But you can turn that into something that actually is a good thing. Whether it’s someone that is reaching out to us on a rental platform saying, “Hey, here’s a problem I have. Here’s why it is an issue for me.” We turn around and we figure out a good way to apply that not just to them, but for anybody that would have that issue in the future, and we add that. They walk away from that going, “Wow, you just solved my problem.”
And I think the same thing that applies for a tenant. If they call you up saying, “Hey, I have a leaking sink in my apartment,” you could look at that as, “Okay, hey, something’s going wrong, there’s an issue.” But at the same time, if you have a good way to manage that in terms of being able to have a quick response time with them and them being able to understand that there’s effort that goes into your side of actually getting that done and they see the updates along the way, it feels like things are moving faster because they just have a little more insight into that. And then when things are fixed, they walk away from it going, “Wow, if something ever goes wrong, I have someone there for me. I’m not on my own.” And I think that same thing applies whether it’s us or it’s a landlord working with their tenants. I think you can turn all of those into a time where people feel like you’re there for them if something ever does go wrong, and if it doesn’t, then great, no worries.

Rob:
Yeah, totally. So growing this company, I’m sure you’ve honestly probably faced a lot of the similarity that newer landlords go through, a lot of the struggles and really just trying to figure stuff out. And obviously there’s always going to be a steep learning curve when you’re getting into something new. I’m sure there’s a steep learning curve for developing an awesome software the way there’s a steep learning curve for becoming a new landlord. So is there anything that RentRedi does specifically to help lessen that difficult learning curve of becoming a real estate… Like a landlord or a real estate investor?

Ryan:
Yeah, we try to intentionally implement things that you may not think about if you’re doing everything manually yourself. So one of those, for example, is automatically depositing funds to different bank accounts. A lot of landlords will create a different LLC for each bank account, and they’re trying to separate the funds for that. If you’re doing it on pen and paper and spreadsheets, you might not consider that. And when you’re coming onto the platform, that becomes a question we ask you, do you want it to go to a different account because this is a different property, it innately triggers that question for you. Or even depositing, for example, security deposits to a different bank account than rent, which is sometimes required in certain states.
So we try to build those learnings into the platform that may be along the way when you’ve gotten scrapes and bruises and you’ve gone through the ringer of managing so many properties that you have these things that you know, but honestly a little bit back to the documentation point of earlier, can we try to pull that knowledge out of all of these experiences that landlords have had on our platform or even before our platform and try to say, “This is just part of your onboarding experience,” that we ask you the questions about sending funds to different places or setting up auto pay and having insight into that, or even letting you know if a tenant doesn’t have renter’s insurance when your lease says that they should.

David:
Now I understand one of the things that RentRedi does well is it will actually create a profit and loss statement for each property. Can you talk to us a little bit about that feature?

Ryan:
In the early days we were exporting to spreadsheets because we knew that’s what people were already using and they loved. And then we next integrated QuickBooks to allow them to export the information that was coming into RentRedi into QuickBooks. But what we found was it still took a decent amount of setup to actually get that P&L by property, so we eventually today integrated with REI Hub, which is accounting built for landlords, and out of the box gives you the P&L by property and the Schedule E at the end of the year, any tax forms that you may need. So the intention there is can we make it easier and easier to get all of the information you need on your properties just by using the platform that you’re collecting rent through?

Rob:
So I have a question here, just even on the P&L. Is there still a bookkeeping component here that’s necessary to run your rental business or is that effectively the function that you’re using to get to your P&L?

Ryan:
Yeah, so you don’t have to. Certainly if you want to just collect rent through the platform, we have a lot of people that do that and you certainly can, but we provide the option to streamline that further if you’d like to. And even, frankly, if you have even an accountant that you want to have access to that information, you can invite them for free and they can just log into the platform, only see the properties and rent that you want them to see, and they’d be able to do anything they need there, but it’s a lot easier for them. We’ve even had some accountants tell us, “I would pay for my clients to use this because it makes the accounting side that much easier for me at the end of the year.”

Rob:
This is one of those things where when I was first getting started, even in just short term rentals, I didn’t have any of this. I was basically tracking everything on a little dinky Google spreadsheet and I wasn’t automating anything. So just the use of automation, very simple things like how to direct where your money is getting deposited to and then P&Ls and being able to track everything like that, had that when I started. I probably would’ve saved a lot of money in invaluable mistakes that I made over time. So it’s really cool that you’re figuring out not just how to make it a good experience for the landlords, but I know that it’s very important to have a really good experience for the tenants too. I mean, I think the fact that it’s a two-sided software and focusing on both of those components really is going to just make it that much better in the end.

Ryan:
Yeah, absolutely. So if you’re an independent landlord that has three or four tenants and two of those have issues, that matters a lot. Each individual tenant has a lot of importance to you. So making sure that you can have a good experience for them without a lot of effort from you is really important because you ultimately have lower turnover in those units. It’s less headache for you. It should make everything easier for you, even.

David:
As every property manager knows, decreasing the amount of time, attention, back and forth you have to have with a tenant is what lowers the friction in the entire experience of being a landlord. If you can get ahead of problems, if you can give them a way that is easy for them to use. Everybody wants to tell someone, “Just go here and do it.” But when you send someone say, “Hey, go call this number for your answer,” and they get put on a phone tree and a robotic voice asks a bunch of questions and keep saying they can’t hear you, and then you end up with a virtual assistant in another country and you’re just screaming, that wrath is coming back your way at a certain point. So it needs to be smooth if it’s going to be automated.
I personally think automation is a… We talk about it in theory and it sounds amazing, but in practice it is so difficult to do. If you just listen to the people, in this case, the tenant, what they say is, “I just want to talk to a human. I’ve got emotional pain, the sink is clogged, the air conditioner won’t work. I need someone to fix this. I don’t want to have to go through all these hoops. So making it easy for them is incredibly important because if it’s not, it’s coming back to you. As we wrap this up, Ryan, I want to ask you, what was your relationship like with BiggerPockets and how did they play a role in the way that RentRedi was developed as well as where it stands today?

Ryan:
Yeah, so in the early days when we reached out to BiggerPockets for the first time, we had two subscribers on the platform, so we were very, very small. We’ve grown to tens of thousands today, but a lot of that came from the feedback of landlords in the forums or landlords that talked to us that were using the platform. So that really has shaped, we wouldn’t be in the same place today if it weren’t for all of the landlords we worked with, and frankly all of the people at BiggerPockets we worked with. And the really exciting thing today is now that it really feels like we’re joining forces in a big way where basically every Pro member now just has it included.
When they go to biggerpockets.com, they don’t even have to come to RentRedi anymore, they can go to biggerpockets.com and just click manage my rentals, and they’re jumping in to actually manage the rentals through RentRedi. And it feels to me like combining that initial side of things in the early days of feeling like, “We’re both trying to help the same person. You’re trying to provide all the knowledge of what’s the right way to do things, and we’re trying to provide, in the right places the automation and in other ways just guidance of how to manage everything.” But now today, they really join forces and you can just access it by basically being a BiggerPockets Pro member.

David:
Well, I am excited to see this bad boy in action, so I’m looking forward to seeing what it looks like. Before we jump into that, Rob, did you have any last questions or words?

Rob:
No, man, I’m excited to see the tool. Let’s dive

Ashley:
That was really cool to hear and understand how RentRedi got started, but even more exciting, Ryan, I can’t wait to show everyone how it actually works. So you guys, my name is Ashley Care and I have the honor of working alongside Ryan today to show you guys how RentRedi Works. So Ryan, let’s start out at the BiggerPockets page. How do we even get into RentRedi?

Ryan:
So the greatest thing is if you’re a Pro member, you can just go to BiggerPockets.com. It’ll bring you right to the Pro welcome page here where one of the options is to manage my rental properties. The top left option there is to jump in and manage those. From that point, it actually takes you right into RentRedi, it lets you get started, it links together BiggerPockets and RentRedi, those two accounts. So if you already have an account with RentRedi, you’ll be able to just use that as your login anytime. But if you’re starting new, you can actually come into here and you’ll be able to start getting set up and adding in all of your properties.

Ashley:
Ryan, the first thing I love about RentRedi is you have this dashboard that you can customize. So do you want to start telling us a little bit about that first as to what are some of the things as an investor that you want to see right away that you guys can show on your dashboard?

Ryan:
So the dashboard is really intended to be your place to understand anything you might need to do at any time, whether it’s any tasks that you have pending or completed, any pre-qualifications, which are really tenants reaching out saying, “I’m interested in your unit, but us trying to help you meet with the best five tenants rather than necessarily the first five that reach out.” Any applications and screenings. And we automate that screening process for you to make that easy. Or any maintenance or rent that’s coming up. So it’s really your hub, your place for you to see if there’s anything that you might have to do at any given time.

Ashley:
Before we even get more into the software and all of the amazing benefits that it does have to being an investor and using this. Basically just looking at the dashboard now you can tell this is already eliminating other software or platform that you need to have. So you have your calendar on there, you have a task list on there, you have your maintenance request. Instead of going out there and getting all these different apps that do what you have in RentRedi that does all of this for you. So do you think you could take us through actually getting a tenant and what it looks like putting the tenant in place?

Ryan:
Yeah, absolutely. So the top right here of the dashboard is for properties. So that’s really where I would start. This is your place to see anything that’s occupied, even something expiring in the next 90 days, which I think is a perfect case for your point of do I need to go get a tenant? Or anything that’s vacant. So I could come in here and see that, “Hey, 1 BiggerPockets Drive, the lease is ending in the next 90 days.” I could reach out to this tenant and find out if they’re going to renew.
But if they’re not, one of the really nice things is I can jump right into this unit. And to your point about platforms, we’ll actually syndicate out to Zillow, Trulia HotPads, Doorsteps, Realtor.com. We’ll even give you a RentRedi site that you can go throw up on Facebook Marketplace or Craigslist or anywhere else you’d like. But the idea is to make it easy for you to put together this listing of whatever you would like, any photos you want along the way, the rent and anything like that, and basically be able to start getting applications or pre-qualifications in from a tenant.

Ashley:
And this is going out to multiple websites, as you mentioned. So it’s saving you from having to manually go and put each listing onto each website, which can be a huge time saver. And I think that’s going to be a common theme for using RentRedi is just saving time in maximizing your efforts and being just more efficient and effective in what you’re doing.

Ryan:
Yeah, absolutely. And you can always come back in and see… We have these indicators here, they’ll light up in green if you have something listed so you have a nice overview of what’s listed, what’s not, even what units are… Do I have more advanced maintenance coordination features on or do I not? But really the next step in that getting a tenant process would be the pre-qualification. So back on the dashboard, that top right box there is any pre-qualification that someone submitted. So I have one here from DJ who’d like to come to the unit. Says he has a pet, he has a Corgi.
A great point on this one is if I don’t don’t accept pets in my unit, then I might not be able to rent to DJ even if I love DJ. And vice versa, maybe pets are fine, he’s in a good credit and income range is what he reports, so probably a great fit for my unit. So I can accept DJ here if I think DJ is a great fit for this unit, and I can even customize this template here so that every time I come in and I’m accepting a tenant or rejecting a tenant, it says what I want it to say, but this will let them continue on to the next step of actually coming and viewing my unit, booking it on that calendar that you were mentioning and then actually applying to the property with a full credit, criminal, and eviction check.

Ashley:
And with this template, this template is provided by RentRedi, correct?

Ryan:
Yeah, absolutely. So right out of the box when you’re coming in, you have to enter the properties that you want and obviously the information about them and where you want to list to. But the template, like you’re saying of what goes into the pre-qualification and application, is something we’ve already pre-built for you. And I say we, but to be honest, has been a lot of BiggerPockets landlords that have built it for you and a lot of other landlords that have been on the platform before saying, “What are the critical things that I need to ask for in an application to screen somebody and make sure I have the right person in a unit?” So the idea is that whether you’re a veteran landlord or just getting started, you have at least the starting point with minimal effort to be able to get everything up and running and do it at least the way that a lot of other landlords are doing it today successfully.

Ashley:
And it gives you a starting point. Why recreate the wheel and create all of these emails or documents from scratch when you have a starting point right in front of you and you can always tweak them and change them so that they are customized to you and your property, but having that template is just a huge advantage and can save you so much time.

Ryan:
Yeah, absolutely. And to that point on the time saving, one of the things that we try to do along the way is reuse anything we can, cut out any extra work, and this goes for both the independent landlord managing on the platform and also for the tenant. So anything they’re doing in that pre-qualification carries over to the application. So they’re not duplicating any of that work, it’s automatically done for them. In fact, if they’ve applied to other units that are also using RentRedi in the past, they may already have a lot of your applications set up and ready to go, which just makes it that much faster for them to apply.

Ashley:
So let’s talk about if we actually screen a tenant. Can we do that right through RentRedi and what’s that process like?

Ryan:
Yeah, so by default, when you’re coming in and setting up your unit, we have it in there that the tenant will do a credit, criminal, and eviction check when they’re applying to your unit. I can come into one of the applications here just to show that. So you can always turn it off. And for example here I have an example where I had it off for this particular time when they applied, and you can manually request a screening afterwards if you’d like, but most of the landlords on our platform want that as part of the application that comes across. So as just an example of that, I can switch over to, and any landlord can as well, if I come back to the dashboard and go to the demo over here, you can actually see what would it look like when someone gives me an application with a screening and everything included.
So when I come into the credit report here, I can see this is the rental score provided by TransUnion, here are the factors that are going into them ranking in that, and even the things that play a part in their trade lines on their credit report. And then if I go down the left side again, there’s also eviction report and criminal report where I can see anything across the US that has applied to this particular tenant that might be relevant to my decision making process.

Ashley:
And then what is the charge, and is it to the tenant or the landlord or can you choose who picks up the tab on this?

Ryan:
Yeah, so there’s no charge to the landlord at all. We partnered directly with TransUnion on this and we actually get a discount for the tenant in the process. And this is an approach that we’ve tried to take with everything on our platform of trying to take all of this massive group of independent landlords and use that collective bargaining power to go to people like TransUnion and others in the space and say, “Hey, treat us as if we were one massive portfolio.” We’re able to get discounts in the process because of that. So a tenant paying for a tenant screening through RentRedi will only pay $35, whereas they might pay 40 or 45 even going direct to TransUnion for that. So we’re getting a discount even for your tenant along the way when they’re doing this process.

Ashley:
And that’s definitely attractive to a tenant for the application fee to you than to somebody else’s rental. Okay, so let’s say we’ve accepted this tenant. What does it look like collecting rent? Because there’s probably some people listening that are actually receiving checks in the mail, meeting their tenants to pickup cash. How does the process work through RentRedi?

Ryan:
Yeah, absolutely. So there’s a couple different options of how you can get there, whether you want to do it right here from the dashboard with this plus button next to rent, or if you want to go into a particular renter, into a particular property, I’ll do it right here from the dashboard. But I can say, “All right, I want to set up a lease to start collecting some rent for one of my properties.” We can do it for 1 BiggerPockets Drive. So I’ll continue here. It’ll automatically see that I already have Ed Barone in that unit as a tenant. So I can continue here and then I can actually select what I want the start date to be for this particular lease or anything like that. If I want to select, maybe they’re moving in over the weekend even, that’s totally okay. I can even set it up so that it’ll go out to the end of a 2023 and I can customize anything in here.
So we try to have smart defaults along the way. So by default when you’re coming in, we’ll default to the first of the month, we’ll automatically remind your tenant if they’re late on rent and they’ll get a push notification to the mobile app that they have for paying rent, and they’ll also get an email for that. But you can always come in here and customize this as well. For example, if you have somebody that you know always is late, you could add an additional rule to notify them a couple days before, or if you have a grace period and you don’t want to notify them until you’re almost to the end of that grace period, you can always come in here and change this to be when rent is due or when it’s late or days before it’s due or anything like that along the way. But out of the box, you don’t have to change any of that if you don’t want to. We try to set it up in a way that will make you most successful just by going through this process.

Ashley:
And once again, what a huge advantage, especially to a rookie investor just starting out as a landlord, not knowing exactly what to do. This helps give them the default so they can at least see what the norm is or what most people do. And then they can go and tailor it if needed.

Ryan:
Right, absolutely. So it’ll even generate all of the rent for me. And you can see, for example, I chose to have them move in this weekend, tomorrow, which isn’t quite the end of the month, but it’s getting pretty close. Typically if I was doing this on pen and paper and spreadsheet, I’d be doing the prorating of how much I should be charging them for those couple days. But RentRedi will do that for you right out of the box and it’ll mark it as prorated too, just so it’s clear to you and to them that that is a partial month.
But it’ll generate all of the rent that will be due for this tenant over the course of the next year so that you don’t have to think about it. It’s automatically set up within the app, and in fact, the tenant coming into the app when they’re onboarding, which I can pull up here with the mobile app on the right hand side, they’ll have this nice onboarding to set up a payment method, set up auto pay, and they don’t have to even necessarily go into the app every month to pay that then.

Ashley:
And Ryan, think about how many people are probably leaving that $72 on the table just because they don’t want to do the math and figure it out and just be like, “Oh, it’s only a couple days.” But that’s $72.

Ryan:
Right, it adds up. It really does. So even for the tenant along the way, we also try to provide some additional benefits to them too. One of them was credit boosting, and this actually came from both the landlord side and the tenant side during COVID. Tenants were saying, “Hey, rent is my biggest expense. Can I try to use that to my advantage in some sort of way?” And landlords were saying, “Hey, can you give me a way to try to encourage my tenants to pay rent on time more often?” So that’s what we came up with here with the credit boosting. Basically we report on time payments to the credit bureaus if the tenant opts into it. So it becomes a big benefit to landlords because they’re getting their rent on time more often, and it becomes a benefit to tenants because they’re building a better credit score, so then when they go get a car loan or any other kind of loan, they’re maybe getting a much better rate than they would have otherwise.

Ashley:
Yeah, I think that’s another advantage to both sides, as you mentioned, the landlord and the tenant, having this capability because this is kind of something new that’s really hasn’t been done a lot in the past where a landlord could report the payments to a credit bureau.

Ryan:
Yeah, absolutely. And same thing on the renter’s insurance side. If they have renter’s insurance, they can certainly upload it, but if they don’t have it and they need help with that, they can actually get that renter’s insurance directly through us. And if I jump over to a particular unit, say the one I was just adding information for, I can do it either if I’m on the unit or if we go back to the dashboard, there’s the option for renters in the top middle of the screen here, and I can see who has renter’s insurance and I can notify them too. So say it’s built into your lease that they’re supposed to have renter’s insurance. If they get renter’s insurance through RentRedi, we’ll actually keep track of that for you. So you’d come in here and see that either Ed has insurance on the property that he’s living in or he doesn’t, and you can notify him to get that if he doesn’t have it or see that he already has that set up if he already does.

Ashley:
And way to make it easy for the tenant, they really have no excuse now not to go get that renter’s insurance.

Ryan:
Yeah, absolutely. And same thing is true for auto pay. For this particular unit, I had mocked up you and Ed in One BiggerPockets Drive. So if you were splitting rent, saying, “We each pay half of the rent,” I’d be able to come in as a landlord and see Ed’s paying $400 of the 750 a month, or you’re paying $400 and he’s paying 350 of that. So I can see what day of the month is it going to run, how much is it going to run? So I have an idea of when I’m getting my money for anybody that has auto pay set up as well.

Ashley:
That’s super cool too. So what are some of the ways that a tenant can pay? I mean can they pay by credit card, debit card, electronic payments?

Ryan:
Yeah, so all three. So when they come into the app, they’ll have the option for rent here and that’ll take them into anything that’s going to be due. So they can choose anything they’d like to pay or they can set up auto pay for that, and they’ll have the option to either add a bank account, a credit card, or even they can link a Chime account and pay with cash at over 90,000 locations across the US. So they have that option along the way to do whatever they would like.

Ashley:
And the Chime, can you explain how that works? That’s where they’re going into a drug store that’s affiliated with it, paying in cash, and then they’re actually sending the funds.

Ryan:
Yeah, exactly. So the Chime account’s something that a tenant can get just online, so they don’t even have to go anywhere in person. And then they’d be able to go into, like you said, like a 7-Eleven or they have about 90,000 other locations across the US that the Chime app will show you or your Chime account will let you know when you’re getting the account where you can go in your area, and you’d be able to basically walk in with cash and deposit that and be able to pay right through the RentRedi app. So people that are, for example, working jobs where they mostly get paid in cash, it gives them an easy way to still pay their rent without you necessarily having to meet them in a particular place, so then be somewhere to give you the money for rent. It just makes it easy for them to pay you no matter where you are or where they are.

Ashley:
Yeah, I had an investor friend who the first Sunday of every month would drive around and collect rent from his tenants, and my gosh, that sounded awful to have to spend one Sunday a month having to do that.

Ryan:
We hear that so often, too. It’s so common.

Ashley:
So this definitely makes it a lot easier. And I’m sure just there’s a lot of people that are introverted and don’t want you coming to their house to have to collect rent every month. They’d rather just send it electronically. So in our scenario, we have our tenant, they’ve got our lease in place, they’ve paid their first month’s rent, they moved in. Now the long awaited, the 2:00 AM phone call that the toilet is overflowing, all the things are breaking, every landlord’s worst nightmare. How is the maintenance handled through RentRedi?

Ryan:
So there’s a few different options, so we try to make it flexible even though we try to give you some way of doing it your own way. So the three options are basically to do it yourself. We have some landlords that say, “I am the maintenance person as well.” So you get a notification that comes directly from the mobile app. Since tenants have that mobile app on their phone, they can take a video of the issue and submit it in. So you’d be able to come in and see, “I have a leaking faucet.” At 2:00 AM That could mean it’s destroying your kitchen floor and you need to rush out of bed and go fix it. That could mean there’s a little drip.
Being able to actually see a video of what that is, if you get maybe not the most descriptive message coming across, you could come in here and see, “Okay, this is a little drip going into the sink itself. It’s not going to destroy the unit if I come in the morning.”Or vice versa if it is really important that, “Hey, maybe need to hop out of bed and run over there.” So really the first option is being able to see these yourselves. The second is we let you add teammates for free. So if you have a maintenance person, even on one property versus another. Say you have some properties in New York and other in Texas, so clearly different people helping in those different scenarios, you can invite them to only see maintenance in only those units and they’ll get notified for those. They’ll update everything here. It’ll show in real time for you and for the tenants.
Or the third option is you say, “Hey, I don’t have anybody. I don’t want to do it myself. I just want it to be fixed when it happens.” So we have the option, whether you’re on the dashboard here, to come into the maintenance side of things and add maintenance coordination, which is a partnership that we have with a company called Latchel, which will basically source the maintenance person for you. They’ll work within budget constraints that you have. They’ll come fix it, mark it complete for you and everything. So along the way you’d be able to come in and just see the status updates of basically what’s happening on a particular request from the point of a tenant submitting it to the point of it being completed.

Ashley:
So you are saying that you are making it more passive to be a real estate investor of a long term buy and hold property, which is amazing. Not having to take those dreaded calls that something is wrong or even to have to try and figure out, “Oh my gosh, I don’t know who I’m going to call for this. I’ve never had this issue happen before,” is having another option for people to sign up for.

Ryan:
Yeah, absolutely. And this was just another case of those where in the past independent landlords in general weren’t able to access this service. If they had less than 72 units, they weren’t able to get access to Latchel. So we were able to make that same type of move we did with TransUnion and say, “Hey, let’s get access to all of these independent investors that also want to make things more passive for themselves.” So it was one of those great partnerships where any landlord now, if they want to, coming in can say, “Hey, it’s time.” And they can even turn it on and off. We’re coming up on the holidays and some people say, “I just don’t want that call during Thanksgiving,” and they could have it on for that time just to make things easier for them and off another time if they feel like they want to handle it at that point as well.

Ashley:
That’s really interesting. I didn’t know that piece of it, but how convenient. If you do want to be a full self-managing landlord but you’re going out of the country for two weeks, you can go ahead and turn this on for that to take over while you’re on vacation and not have to line somebody up to take your calls. So let’s jump to the last piece of this that I want to know about is the communication. I think having good communication between you, the landlord, and your tenants can really build a good relationship. So an example of this is with the maintenance that we were just talking about. If there’s a maintenance issue and you can’t get it solved, keep your tenant updated on what’s happening with the issue that maybe you’ve contacted the vendor, you’ve set up the showing or set up the repair for this date, or you’re waiting for a part. That constant communication I think is really beneficial. So what are some ways that you can communicate with your tenant through RentRedi?

Ryan:
Yeah, you’re absolutely right. Communication is so, so important, and you have the option right here on the dashboard, notifications at the top middle here. You can send out a notification, and you can choose. Again, they have that mobile app on their phone, which a lot of the time they’ll see those push notifications before even emails, where other people are sending things along. But you have the option to send that either as just an email notification to them, as a push notification, or both. And you can choose, even within there, do I want to notify just a particular unit, do I want to notify everybody at a particular property, or do I want to notify all of my tenants? So for example say garbage day is changing in your county and all of your units are in that area, you could update them on that, or say that leaking faucet turns out that you have to shut off water in a particular property one morning and you want to notify everyone that, “Hey, don’t try to take a shower between 10:00 and 12:00 because there isn’t going to be any water.”
Instead of you having to go door by door and putting up notes for them or things like that, you can send out one of these push notifications and emails to all of your tenants and you can even customize exactly what you want it to say in the header in the body or what you want it to say in the email. You could even link things into the email if you want a link in the email to say anything else that you’d like them to have access to. But that will let all of your tenants know about anything you need them to at any given point and keep that good line of communication open.

Ashley:
And it also avoids having to get on the phone too, because you have everything in writing. Having those records and the log of all of that communication with a tenant can… If something unfortunate does happen down the road, that you have all the communication recorded and in one place to see what that communication was.

Ryan:
Yeah, you’re absolutely right.

Ashley:
Well, Ryan, I just got to say, going through this and I use it for my bootcamp, the Real Estate Landlord Bootcamp that I do with BiggerPockets, and everybody has loved using this, especially as rookie landlords getting started, jumping into this, all of the tools and features it has to really help you get started as a landlord, because there’s so many things you don’t even think of that can make your life easier and RentRedi really has all of those things.

Ryan:
I appreciate you having me on. It’s been a lot of fun and I love hearing about all of your master classes as well.

Ashley:
Thank you, Ryan, for doing the demo and now I’m going to send it back to you guys.

David:
Well thank you very much. That was very cool to see. I feel a lot more confident about if I ever had to be a landlord myself. I’m a proponent of using property managers, but I bet you they would love having a platform like this to do their job a little better. Rob, what were your thoughts?

Rob:
Yeah, man. Very cool. Very easy to use it seemed like. Excited to dive into the tool a little bit more. Ryan, thank you so much for your time, man. If people want to learn more about you or more about RentRedi, where can they find you on the internet?

Ryan:
Yeah, so they can find us at rentredi.com. It’s R-E-N-T-R-E-D-I dot com. We have to spell it wrong because we’re a startup. Or they can honestly now even just go to BiggerPockets.com if they’re a Pro member and log into that Pro account and click manage my rental properties.

David:
I want to give you some props on being a startup and not putting the letters “ly” at the end of a word associated with the industry like 99%. You could’ve called it Rently. That’s exactly right. That was probably staring you in the face. You probably workshopped it. You’re like, “You know what, we’re edgy, We’re not like everyone else. We’re just going to spell it different.” There was no way to work an X into it. That’s another thing that people will do to seem cool and edgy is if you can-

Rob:
In the future.

David:
Yeah, maybe at some point you’ll be able to do that, but thank you for not calling it-

Rob:
[inaudible 01:00:04] version.

David:
Rently or Landlordly or Wealthly or Housely or any other form of “ly.” That’s how you know. I’m in the San Francisco Bay Area, Silicon Valley is very close, so everything just becomes, “Oh, you have a problem? Let’s try to find an app for it and end it with ‘ly.’” And it’s worked. I don’t know why, but it definitely has been happening. So thanks for that. Rob, if people want to find out more about you, where would they go?

Rob:
You can find me at Robly on YouTube. You can find me at Rob [inaudible 01:00:45]. Oh, find me on [inaudible 01:00:47]. Rob Quafly Abasolo. I haven’t had my Quafly this morning, but feeling good, feeling good. Robuilt on YouTube, on Instagram, and then Robuilto on TikTok. What about you Davely? Where could people find you?

David:
Davely, yeah. You could check out my website, it’s davidgreen24.com. It’s going to be remade. I should probably have you look at it, Ryan, since you do coding. You could probably make it way better. So what I need is for everyone to look at it and then message me with what you think it should be different or better, and then maybe I’ll have one of Ryan’s contacts or maybe Ryan himself make the website better for me. Or you could follow me on social media at DavidGreen24, or on YouTube at David Green Real Estate. Thank you for asking, Rob.

Rob:
Let me just say something real fast. In this time that you said that, I just went to your website. It’s pretty good. You really made this seem like it was going to be like 1992 Geo Cities, but it’s actually a pretty nice website. Don’t be so hard on yourself.

David:
Thank you for that. It is going to be remade though, again. I had been so frustrated, if I can vent for a second with… I hired a person and he was a full-time tech person, he was supposed to work for me and about seven months went by and all I got out of it was a website that we then had to redo. So this website’s been 12 months in the making to get that, and now I’m like, “Oh, this isn’t going to work. We have to redo it again to show the…” Because I have so many things going on. It’s confusing. If you’re like, “Well, I’ve heard of the One Brokerage, I’ve heard of the David Green Team, I’ve heard of BiggerPockets, I’ve heard of his books. It’s very difficult to understand what’s the stuff David’s doing.”
And now we have these imposters that are floating around pretending to be me and Public Service Announcement. They’re not just pretending to be me. Now that people on my team are having fake accounts made. So yesterday I got a text message from someone saying, “Hey, is Ricardo Carillo on your team?” And I said, “Well, yes he is.” And they said, “Okay, good. I thought it might be a scam.” And then it turns out someone was impersonating Ricardo Carillo, who’s one of the main loan officers at the One Brokerage, and trying to scam this person out of money pretending to be a person that works for me. So the levels of crap that we are getting into now with these scam artists are significant. So don’t ever go to davely.com. That’s a scam. That’s not me. It’s going to be David Green 24, not david.green, not _David, not David Grene, not Daveed. They always change a little tiny thing on there. So yeah, I have to make a new website so it’s obvious what I’m up to.

Rob:
Well, hey, one final thing before we turn in here, David. If everyone at home enjoyed this episode, if you enjoy us, if you like listening to our weird voices and our weird antics every single week, would you do us a huge favor and consider leaving us a five star review on the Apple Podcast website or wherever you listen to your podcast? It helps us, it helps us rank, it helps us in the podcast algorithm, get fed to new people that are wanting to get into real estate and into financial freedom. So please do us a solid, leave us a five star review, and that’s it. That’s it. That’s my last plug.

David:
Well thank you for that, Ryan. Any last words before we let you get out of here?

Ryan:
No, just thank you again for having me and excited to have RentRedi and BiggerPockets working together.

David:
Great to meet you and thanks for the partnership that you’ve done. You’ve definitely helped make the experience better for our listeners. And hey, if it’s better and it makes some more money, I’m all for it, so you rock. And that was our interview with Ryan Barone, CEO and founder of RentRedi. Rob, what’d you think?

Rob:
Oh man, that’s awesome. And I’m honestly happy for all of the people out there, all the BP Pro members that are going to get this included with their membership if they enroll.

David:
Yeah, it’s a significant portion of any business that you’re running, which real estate is, is what CRM are you going to use? So for me, Real Estate Team, One Brokerage, my portfolio, the CRM’s sort of like… It’s like the language that you speak, it’s very significant. A lot of the way that I’ve built the businesses is off of the foundation of the CRM. So when you get that thing in place, which RentRedi is for landlords, it gives you a lot of clarity on what you need to do. All these questions like, “Oh, what am I supposed to do? What if I forget something?” When you’re working off of a CRM, it’s asking you the stuff and there’s a little box that needs to be filled out so you know you need to go do it. So this is going to be a big stress reliever for a lot of people.
Now, if you’re one of the people who is listening to this and said, “I think I’d like to get into this real estate space here. I think I’d like to buy a property, manage it, and become a millionaire.” Well, we’re going to help you do that. If you go to biggerpockets.com/newpro and you use the code NEWPRO, N-E-W-P-R-O, you can get 20% off your first year of a Pro annual membership, which includes RentRedi. Rob, what say you to that?

Rob:
Yeah, and you’re not just getting RentRedi, Dave. You’re also getting access to the new Rehab Estimator tool as well. So when you’re in there, you’re running your comps, you can actually do it on our calculator and just make sure that you’re dialing in your numbers that much more.

David:
How often do you get asked that question? How do you estimate the rehab?

Rob:
Several days? Several days a week?

David:
Yes, it’s right up there with should I get an LLC or should I own it in my own name? This is one of the trickiest parts is how do I estimate the rehab? Well now BiggerPockets Pro members have a calculator and it’s very cool. I’ve looked at it. You literally put in bathroom, this level of finishes, include shower, sink, and towel rack, and it’s like… Like you do. Or how do you do… There it is. And then boom, here’s a number. And it even asks you by area. So if you’re in Kentucky, it’s going to be cheaper than it is out in California. You get a rental estimator tool. So if you’re like, “I don’t know if this property’s going to cash flow or not,” well the calculator does.
You get a rent estimator tool? “I don’t know what it’s going to rent for.” The calculator knows. This was what made real estate investing hard and it’s now been made so easy by technology and software. So like we say, there really is no excuse. The technology is doing all the heavy lifting for you. And if you like off market deals as a Pro member, you’re also going to get access to the Invelo app that helps you put together campaigns to contact off market sellers and find the ones that are most likely to be motivated. So if you’re interested in this, use the code NEWPRO that you get because you’re listening to the podcast. We love you for that. Also, please consider giving us a rating or review. We really appreciate that. All right, Rob, that’s all I got. Anything else for you?

Rob:
Nope, nope. That’s all. I’ll see everybody, all the new pros on the forums and excited for everybody to automate their life and get their time back. That’s all really want, Dave, is to get our time back.

David:
That’s right. You may have all the watches, but do you have all the time? This is David Green for voice is on a 2 but shirt is on a 10 Abasolo signing off.

Kyle Bass of Hayman Capital Management says the country has allowed its property sector, now the “most speculative sector in China,” to run “unabated.”

Dave:
Hey, what’s going on everyone? It’s Dave. Welcome to On The Market, and joined here by the full force of the On The Market podcast. We have Kathy Fettke. Kathy, how are you?

Kathy:
Wonderful. Glad to be here with you guys.

Dave:
Henry, what’s up, man?

Henry:
What’s up, buddy? How are you?

Dave:
Doing well. Jamil, what’s up?

Jamil:
How you doing, handsome? I’m great. Good to see you.

Dave:
Aw, thanks, man.

Kathy:
Sounds like a dating show.

Dave:
Oh, yeah. James, flatter me. What’s going on with you?

James:
That kind of caught me off guard.

Dave:
Me too. I’m blushing now.

James:
I’m kind of blushing for you.

Dave:
Oh yeah, I know. Jamil, you’re really charming our pants off here.

Jamil:
You know, I try.

Dave:
Well, today we have a great show. We did a version of the show, I think it was back in May, where we asked you all to bring us deals that you are currently working on, and we’re going to do a version of that. So I mean, we’ve all been talking about how there’s a lot of opportunity in the market right now, and we figured it was a good time to bring this concept back so you can share the types of deals that you’re seeing in the market, that you’re actually working on in the market. And I’m pretty excited to hear from all of you guys.
Is everyone ready to go?

James:
Yes.

Jamil:
Let’s do it. I love talking deals.

Dave:
All right. Well, Kathy’s the only one who didn’t respond to that, so let’s start with Kathy. What deals are you looking at right now?

Kathy:
Well, we have a single family rental fund, as I’ve mentioned, and we are rapidly acquiring properties. So one of them is in Gainesville, Texas, purchase price a whopping $80,000, and the rehab about 50,000, so we’re looking at an ARV of 160. This property will rent for about $1,325 right now, but the area is growing so rapidly with all the chip manufacturing that we expect to see rents go up. Plus we’re doing a A-class renovation because a lot of the jobs out there are six figure jobs, so they’re wanting a nice place to live. So believe it or not, $135,000 property will actually be A-class in this area.
So it’s kind of like a BRRRR strategy, but within a fund. So we’ll be raising the money, raising the capital in the syndication, acquiring these properties with cash, renovating with cash. And then I do expect, at least the bank that we’re talking to is expecting rates to come down by the middle of next year, at which point we’ll refi this part of the fund and go do it again. But I don’t know next year if the deals will be as good as we’re getting right now. So the bank may be… it may make sense to just buy some points down and do a refi sooner to be able to take advantage of the market, but that’s just one of what will be a few hundred of the same.

Dave:
Wow, that’s incredible. I mean, that sounds like a really good deal. Just eyeballing it meets the 1% rule roughly there and that 1% rule is assuming usually that you’re putting 80% leverage on it, but you’re holding this in cash, so that must be throwing off a lot of cash.

Kathy:
Yeah, well, initially, yeah. Initially we’re purchasing with cash. The rates just kind of don’t make sense for a fund at this point. But my partner in Texas has a really good banking relationship with a local bank that’s excited to lend to this fund and is quoting in the fives. So we’ll see.

Dave:
That’s great.

Kathy:
Yeah.

James:
What kind of term is that on the five?

Kathy:
I don’t know for sure, I would need to find out, but I’m going to say a five year. But I’ll have the details. We don’t know what the market lev-lending environment will be in six months, which is when we would be doing the refi. So I don’t know the specific terms, but this is at least what that local bank is saying that they would do.

Dave:
And how do you find this deal, Kathy?

Kathy:
Through my partner. As you know, I’m, I guess, a lazy investor, is that what you’d call it? We have people all-

Dave:
That’s called smart investment.

Kathy:
We have teams all across the country, that’s been our business at RealWealth for almost 20 years. So we have partners in different markets who do the work, they find the property. It’s usually a property management company. So they have the teams in place, they have the repair teams, the acquisition process. I think on this particular one it was a wholesale deal and she is just getting bombarded with wholesalers calling, negotiating, and if you got the cash, you’re in business.

Dave:
You mentioned a little bit about chip manufacturing, is that the main draw to the area?

Kathy:
There’s so much technology moving into that, the Texas Instruments and every single day…

Dave:
The calculator people?

Kathy:
Yeah. If you go to growdevelopments.com where there’s a video of this fund and what we’re doing, you’ll see every single day, there’s… I don’t know if it’s every single day, but almost where a company is moving, usually from California to Texas, because it’s just a better place to do business at this time. So many… Caterpillar is moving there. So there’s just all kinds of different companies. But in this specific area, there’s really… They’re just kind of calling it the Silicon Valley of the… I don’t know, it was kind of a funny term, but of Texas.

Dave:
Well, they call everything silicon something.

Jamil:
I know, I’m so tired of Silicon Valley.

Dave:
Silicon Mountains, they call Amsterdam Silicon Canals. It’s so stupid.

Kathy:
I know, and Park City is the Silicon Slopes. But there’s a lot of tech companies moving there just because the cost of labor is so much cheaper and then your employees can live better. Imagine that, living in a… well, renting $1,325 in rent for somebody who would be paying three or four times that in the actual Silicon Valley.

Dave:
And why specifically single families?

Kathy:
Such a good question. It’s an asset class I’m just really comfortable in, and there’s so many deals right now. It is being hit hard with the higher interest rates. So we are able to get great deals and a lot of times that’s where people want to live, they want to live in a single family home. But we’re not walking away from duplexes or fourplexes. We’re just kind of keeping it in the one to four unit.
There’s just a lot of people who prefer to live in a and rent a single family home. And of course as a fund manager, we can sell off homes that really just aren’t performing the way we want them to. You can sell them off individually. So the loans to a fund are unique in that way that you can sell off assets that just really aren’t performing, whereas that obviously more difficult to do in an apartment. But I know James is going to talk about an apartment. I’m kind of jealous about it.

Dave:
I know, it does look pretty good.

Kathy:
It looks really good.

Dave:
We’ll have to hear about that. Well, any other questions for Kathy? Kathy, it sounds like a great deal. Congratulations on this and the larger fund. Love the strategy. I know a little bit about North Texas. I know you’ve been bullish on that for a long time, so I’m sure it will work out well for you.

Kathy:
20 years, 20 years in… Texas is my happy place.

James:
I love this deal. It’s totally bulletproof right now. You’re buying it for 50% off, the rent covers no matter what. If the property goes down by another 30% it doesn’t matter because your rent’s going to cover and if you decide you don’t want to keep it, you can sell it and rack a return. That’s your bullet-proof safe deal in a recession market right now.

Kathy:
I mean, you just nailed it. I’m older than you guys. I don’t know if you noticed, but we’re conservative and a lot of our members at RealWealth are conservative. We underwrote this fund extremely conservatively. We barely accounted for any appreciation at all. We expect it will be there, but I just didn’t want to underwrite it or promise that. But I’m going for conservative right now and I know a lot of other people are looking for that. And that’s why I like it too.

Jamil:
I think Dolf de Roos said, “The deal of a lifetime comes around every week,” but I feel like this is one of those deals of a lifetime, Kathy, it’s a great deal, I would absolutely do it myself so good find.

Kathy:
It means a lot coming from you guys.

Henry:
Oh yeah, that’s a buy all day. Multiple exits, that’s what you need right now.

Kathy:
Yes.

Dave:
All right, Henry, let’s move on to you. What are you working on there in Northwest Arkansas?

Henry:
Yeah, my deal’s actually not too dissimilar from Kathy’s deal. This one is a single family home. It’s in Fayetteville, Arkansas, so it’s in an area of Northwest Arkansas that people love. It’s a little further out than maybe most of the homes around the area. But I’ve actually done, this will be the third deal I’ve done in this little street. And so I’m very familiar with the area, I’m very familiar with how well or not well it does and so that gave a level of comfortability.
But we’re buying a single family home; purchase price is 70,000. It is a two bed, one bath. And again, I talked about this on a previous episode and I just kind of mentioned it with Kathy. I’m looking for multiple exit strategies right now. If I can buy it and underwrite it where there are multiple exits, I’m typically going to buy that deal because I know I can pivot one of two to three ways and still make a profit. So purchase is 70,000, ARV is 180,000. And what we’re doing with this property is we’re going to go… we’re taking a three-pronged approach.
The first approach we’re taking is the wholetail approach, so this means we would just clear the property out of all the stuff that the seller leaves behind, make sure it’s got floor coverings and make sure that the HVAC, all the appliances are working, plumbing works, electrical works, and we stick that thing on the market. The plan would be to stick this on the market at about $125,000. And when you look at the median home price around here, being up close to 300,000 or just under 300,000, more like 200, 250,000, finding a house that’s livable where everything works and you can pay 125,000, that’s still hard to find, even-

Jamil:
And you’re putting it into a condition where it’s financeable?

Henry:
Financeable, 100%. Financeable, buying it for 70, make sure it can pass conventional loan standards and then put that on the market for $125,000. That’s a steal. And then if for some reason that doesn’t work, option two would be to go ahead and do that renovation and do that flip. So to do the wholetail, we’ll probably spend between 2 and $5,000 just depending on what needs to be done. If we were going to flip it, we would probably spend somewhere close between 25 and $30,000, and then we would sell it for the 180. And then if neither one of those work out, we can always just put a tenant in it.
So we’d spend about 20 grand, 15 to 20 grand, put a tenant in it and rent that sucker out for between 1,200 and $1,300 a month. So I’m fairly confident that the wholetail strategy will work. I am not a hundred percent confident that we’ll sell it at 180 given the interest rates keep rising and that buyer’s pool kind of shrinks, that first-time home buyers pool is shrinking and shrinking when that happens. We’d sell it, but we may not sell it for that 180 that we’re thinking, but obviously we underwrote it so that we have a lot of room if we need to come down.
And then very, very confident in being able to rent it out and get that 1,200 to $1,300 a month. So that’s why I like this deal because there’s multiple exit strategies, but there’s a bonus with this deal that made me really love it.

Dave:
And there’s more.

Henry:
But wait, there’s more. So this house, when I bought it, when I was looking at the property, it’s a house, it’s on almost about an acre, just under an acre and part of it is just kind of a lot that was next door. And so I said, “Hey, is this a part of your property too, right?” And she was like, “Yeah, I think it’s a separate parcel.” So when I did look into it, it’s two parcels and it’s already split into two parcels, so we closed on both. I will sell the house without the parcel that it came with because I can get the same ARV with or without that parcel attached to it. And then I own that parcel now free and clear.
And so I can sell that parcel to somebody who wants to either just have the land, to somebody who wants to build something on it because it is a very build-able lot. You have to clear some trees, but it’s super build-able and there’s obviously utilities. And so the plan is we do the strategy we talked about with the house and then sell the lot probably on terms to someone where we take a 2, 3, 4, $5,000 down payment and then have them make payments to us as the bank for owning that lot. So I get to cashflow the lot and/or sell it and make an additional profit, plus the strategies we talked about with the house.

Jamil:
Henry, how do you make that decision when you come to the fork in the road on whether or not to renovate it for retail or renovate it for rent?

Henry:
Yeah, we just go with the easiest first. I want a quick turnaround if I can, so we’re going to stick it on the market as a wholetail first. We’ll leave it on the market for two to three weeks, see what happens. If we don’t get what we want, then we’ll talk about what’s the best strategy given the current environment. Things are changing so fast that things could be different in a month when we look at making a pivot. But the first strategy we’re going to do is to try that wholetail strategy because it doesn’t take much money to renovate it, we don’t have to do anything, we just get it on the market. If that doesn’t look like it’s working, then we’ll either pivot to a rental or a flip.

Dave:
Well, Henry, things are changing so fast that since we started recording this episode, the Fed raised 75 basis points since we… That’s not a joke, that actually just happened.

Henry:
100% true, yes.

Jamil:
Geez.

Kathy:
Well, it was expected, I guess.

Dave:
It was, it was.

James:
Love this deal. Great, great buy. If you can go through any different channel… I mean, these are no brainer deals. Everyone is freaked out by the market right now. This is the definition of a deal where you can get in and out, rack a return, make money, it’s safe in all different aspects. This is the recession deal. I think it’s awesome. I mean, anytime you can go in and wholetail it, that’s a win because you’re buying… A lot of over the last couple years people have been buying on the performa, whereas if you can wholetail it, you bought on the now. You’re buying so deep that you’re buying below the as-is condition and that’s a safe deal to get into, right? If it’s only worth 125 as is and you’re buying it at that 70 grand, that’s a win. And so buy that way it’s safe through any kind of metrics. I think this is a fantastic deal.

Kathy:
And talk to my lender and just keep them all in your own commercial fund. Don’t sell.

Henry:
Okay, give me some money, we’ll do it.

James:
Hey, I’m in.

Dave:
And for anyone who’s listening to this who’s trying to get their first deal as well, I just want to point out that the two deals so far, Kathy’s was for 80 grand? And Henry’s was for 70 grand. So just pointing out that although houses have gotten very expensive, is more expensive to finance, even if you don’t have a lot of cash saved up, it is still possible to get into the market and do deals like Kathy and Henry are doing.

James:
But I do want to say this would not be a great property for a new investor because it’s a pretty deep rehab as well.

Dave:
But still, even still rented, you said what, the ARV is like 160?

Kathy:
Mm-hmm. Yeah.

Dave:
So still achievable for people who might not have a ton of cash.

Kathy:
It’s just hard to do a renovation on a property that’s not where you live. You need a really good team that you trust and you need to be able to oversee it. So obviously in Henry’s case, he’s going to make sure that it’s being done well and he knows the business. What do you think, Henry? Do you think somebody new to the business could do your deal?

Henry:
My deal? Absolutely. It doesn’t need much work at all. I mean, it’s-

Kathy:
Oh okay.

Henry:
We just need to cover up some of the floorings or replace some of the carpet and then that thing would be… I mean, somebody was living in it right now and it was in decent shape, so. I wish we could show pictures of these things so people could get an idea of what these look like.

Dave:
We probably could in the show notes, if someone wants to… if you send them over. And on YouTube we could do that.

Henry:
Yeah, I’ll send pictures.

Dave:
And we could [inaudible 00:16:51] them in the show notes.

James:
Oh yeah.

Dave:
All right. James, let’s move on to you. You’re switching it up, talking multi-family. What you got?

James:
So my deal’s a lot different than the first two that we talked about. Actually our assignment fee is the total of the two purchase together on this deal. But yeah, so this is actually a building that my business partner locked down. It’s a syndication deal that we are closing on tomorrow. Actually the docs were just on my table. I was signing them right before the show. It’s a great purchase. So it’s 58 units in Everett, Washington, which is where Boeing is, great location. They just opened a new airport called Paine Field, which is actually more… it feels like a private airport, but it’s the airport of Snohomish County.
So we’re right next to the airport, it’s 58 units, we paid 11.35 million for this building. We’re going to put in two and a half million into the renovation, which is actually an all-cosmetic turn. It’s very simple. We get in and out. That’s one thing that we do like to do on our bigger projects or syndication deals, is stick to the cosmetics, not the heavy, heavy value add. It just gets a little too complex at that point. So the total project cost with rehab’s going to be 14 million and after it’s all renovated and stabilized, it’s going to have a 16.9 million stabilized value at a 5.2 cap.
So at a cap rate, that’s very reasonable. These buildings we’re trading for the last two years around a three and a half to four cap. And so what we’ve seen is… My partner, he does a lot more of the syndicating and the packaging of the deals and it’s been hard for us to get in that 50 to 100 unit quantity because all the hedge funds have been buying this stuff up at ridiculous margins. And so since we’ve seen the decompression in the market and the market get a little unstable, it has great opportunities in there.
So we syndicated the deal, we raised roughly about 3.5 million to take it down. And then what we were able to do, and this is key for any of these type of deals, is my partner was able to lock the financing on this. For me, I want to stay away from variable rate loans right now, especially in any kind of syndication deal or anything on a variable rate. And so we were able to lock the financing and to get 5.7 on a five-year term and then it can kick up to plus two over a 10 year. But we plan on actually refinancing this out or selling it at the five year because it yields a 19.7 IRR or it’s going to be a 15.8 IRR to our investor clients. So it hits numbers we have not been able to get in a really long time for this kind of location.
It’s a great purchase. It’s kind of funny, as the market gets worse and people get more afraid, we’re actually taking down bigger deals now because we want to go where the margins are. We don’t really care about the money. If we need to raise the money, we’ll raise the money. If we need to put the money up ourselves, we’ll put the money up ourselves. But these bigger deals are actually coming to be more profitable again and they’re giving really good yields. And so it’s opened up a whole another investment window to where we’re kind of getting out of the lower end and we’re going to the high because that’s where the gaps are right now. A lot of people are calling us with bigger buildings to move around, but we’re stoked about the purchase. We’d never be able to get this in two years and now we’re closing tomorrow.

Kathy:
That’s incredible. What are the terms for the investor? How do you carve that out?

James:
Okay, so they’re getting a 6… So this thing stabilize, one thing I forgot, it stabilizes out as 6.19 cap too, which again, we have not been able to get over the last couple years. So then investors are on an 80/20 split and then they get a 6% pref return and then we don’t waterfall this deal. So they’re going to keep the upside in the IRR at that point, so they get a lot of extra kicker on the deal.

Kathy:
Wow. How do we get on your list?

James:
You have to know us. We are not a not big raiser. For us, we’ve been investing for a long time, we like to invest with people that are like-minded. They know us really well, they trust us. So luckily we’re all on a podcast together, we’re all friends so you’re invited to that group. But we do keep it pretty tight. I think that’s important for anybody raising money, needs to realize, is they better be like mind, they better be on your side. They better have the same understanding and the same goal in their investments or don’t take the money; it turns into a absolute headache. Just because someone wants to give you money, don’t always take it.

Henry:
Great advice.

Dave:
James, just curious, with your business, you do a lot of single families, you do a lot of flipping, how big or small can you scale your renovation and construction effort? This seems like a pretty big deal. Can you just keep doing this for as many deals as you can get or do you hit a point where you can’t scale your operations much further?

James:
That is a great question. So what we’ve had to do, because we are in multiple different construction aspects, we build town homes and single family homes. We have our apartment renovations and then we have our fix-and-flip. Those are actually three different segments of construction teams for us. We keep them completely isolated so they don’t share, they’re not mixtures. So our fix-and-flip team, typically we can handle about 20 projects at a time and we don’t go any more than that. But what I’ve done recently is I’ve actually gotten out of third party and brought in more labor on that side to where we’re actually controlling the schedules, which has allowed us to do more projects and keep them moving more efficiently.
Our town homes are all built in-house, so it’s done… we don’t hire out builders, we build them all ourselves, so we manage that process. We have superintendents, project managers and general labor staff. And then we also staff our syndication deals. And typically, depending on the size of the complexes, we do have one roughly about… it’s roughly about 200 doors, down in south King County, that’s actually staffed with its own construction team.
So we have numerous different project managers and then we bring on labor staff behind that, so we can handle quite a bit of projects at one time. Like right now we’re turning about 200 apartment doors right now across different sites. But what’s key to that is making sure that we’re buying in similar locations. We don’t want to stretch out. So if we’re finding deals all in the same geographical location, our team can’t… we are targeting those areas like projects that we already are working on. So we have another 35 unit up in Everett right next to this one so that team can pop right over.
And so that’s kind of where myself and my partner are targeting, “What is efficient?” It’s not about just being able to buy the right buy, what is efficiently work with inside your teams at that point? So we can scale up. I mean at the same time, as the market started coming backwards, we were like, “Well, do we need to cut our staff back because we won’t be buying as much,” but it turns out we’re getting amazing buys so now we’re going to staff up on labor. But by not hiring it out and doing it ourselves in-house, my partner’s been able to reduce our cost per unit by at least 20%. They’re going faster, and then we can staff up and staff down to control the timetables a lot better.

Dave:
Sounds very effective. That’s awesome. Henry, is it the same for you? I know you do a lot of flipping and you do a lot of renovations. Are you scaling? What are you doing these days in terms of your renovation teams?

Henry:
Yeah, so for me running a much smaller operation, the contracting aspect has been difficult. I’ve been looking actually at bringing a couple of the guys that are currently… that we’re currently contracting through on staff to see if that’s going to increase our efficiency at all. We are finding more and more deals. Plus when I’m keeping rentals I’m typically buying undervalue as well, and so those need work too. So it’s not just renovating the flips, but I have rentals that need renovations as well.
And so right now I’ve got more work than my guys can handle. And so we are in the market looking to hire new people, but I’m also trying to think creatively on how can I leverage the people that I have to have them working more efficiently. Dealing with contractors or, said differently, the contracting aspect of the business has always been a more difficult part of the business and it absolutely can limit your ability to scale. Right now I feel like we’re in an okay place. I’d like to have three crews at all times if I’m going to outsource it and right now I have one.

Dave:
Yeah, I mean, I would imagine, as James was saying, it might be easier to start hiring a little bit for these things too. As a lot of construction, at least large scale construction, multi-family is slowing down a little bit, at least in terms of new permits.

Kathy:
And better pricing.

James:
Yeah, better pricing, then look into how you can exchange out your expenses. So what we did on our fix-and-flip, and it’s a new program for me, is I got rid of all my… over the last 90 days, we’ve completely leveled out our construction teams and we rebuilt it in the last 90 to be more efficient for this new market. And what we did is we took our management staff, which is our project managers, which were heavy salaries, they’re around 100 grand a year up in Washington, it’s expensive. But they don’t reduce your bottom line, they just make it efficient.
So what we actually did as the construction slowed down is I replaced my project managers with hands-on general contractors that I’m paying a hundred grand a year. They’re happy to get that money now because they’re sick of running their own business and their workload’s going down, and now they’re project managering and doing labor for me. So I’m sending subs out, they’re coordinating the subs for me at the same time they’re installing windows, flooring, millwork, doors and light framing.
And so what it does is it reduces down my cost, replaces my management cost with labor and management and reduces my overall expense there and things are going substantially faster. I don’t know why I didn’t do this a year ago. We’re just basically right now recruiting generals to be our project managers and then having more of them, but we can run our sites more efficiently.

Dave:
That’s awesome. I mean it sounds like you’ve found some very good people. I’ve never met a contractor that efficient but good for you.

James:
But if they’re on payroll, you can actually tell them what to do every day. It’s amazing.

Dave:
All right. Jamil, let’s get to you. What are you up to?

Jamil:
Well, I just feel like the lazy one here on the panel because my deal’s easy. It’s easy. So I live in a beautiful neighborhood in Phoenix, Arizona. The neighborhood’s called Arcadia. It’s on the border of Scottsdale and Phoenix. Just lots of activity, lots of people, lot of short term rental activity, great hotels. So I like to be in the short term rental game where there’s luxury five star hotels nearby because that tells you that’s where there’s demand for people to want to stay in that type of property.
Well, we are going to be hosting the next Super Bowl here in Phoenix, Arizona. And it just so happens that the first time I ever got into the short term rental game was the last time we had the Super Bowl here in Phoenix. So I’m familiar with what happens to a town when you get Super Bowl activity. We’ve got the Barrett-Jackson Auction that comes every year. We have Waste Management which happens every year and now the Super Bowl. So I feel that for the next, at least 12 months, we’ve got strong demand in the short term rental space.
So I am purchasing a very beautiful home that’s been sitting on the market on my block actually. It’s about five houses to the east of where I live. And it’s a gorgeous 3,800 square foot house that was remodeled in 2010. Now, 2010, if you guys remember it was slate central, so it has really terrible slate floors, gray and purple walls. I understand why the house didn’t sell, the sellers needed to do just a little bit in order for the house to hit that price point. It just so happens that the house was just recently appraised at $1.7 million, which is in line with the comps for the neighborhood.
But these sellers are really motivated, they’re both attorneys and they just want out. They want to downsize, they may be leaving the state, and so they were ready to make a deal. I basically just called off the sign and I shot them the number that I wanted to pay and that was a million dollars and I was very firm with my number and they took it. So now looking at that, at a million dollar purchase with a 1.7 million current appraisal, I believe I’m walking into some equity. Even if we do slide down even further, I’m going to be in a tremendous position when the market rebounds.
But in addition to that, if I leverage and put 20% down, I’m looking at around a $4,800 a month mortgage payment at 6%. My estimate right now after running some numbers is I should be able to net about $500 a night at 20 nights per month, so I should be getting about $10,000 a month in gross rents for a short term rental. Now, because we had been in the space before, my wife was running our short term rental business in the past. Our daughter, who is almost 17 years old, really doesn’t want anything to do with us anymore. So my wife has taken a little bit of a… She’s like, “What do I do?”
And so this would be a great opportunity for her to get back into the short term rental game. So our goal is for her to manage it, [inaudible 00:30:22] going to reduce our expenses on it. I’m expecting to be running it around 25% expenses. So my goal is to cashflow roughly $2,000 a month on this property. And if I’m putting down $200,000 as a down payment, I’m getting $2,000 a month in cashflow and when the market rebounds, I have a few hundred thousand dollars in equity, I think it’s a pretty decent deal.

Kathy:
Sounds like it. Sounds pretty decent.

Dave:
Did I just hear Jamil say he was going to hold onto something and he used the word leverage in the same sentence?

Jamil:
Yeah, both things I’m typically allergic to, but.

Henry:
I was wondering if anybody else was as blown away as I was.

Jamil:
I’m really tempted to buy it out in cash, but my accountants have said, “Jamil, stop it. This is irrational. You need depreciation, we need to spread your money out further so that you can get,” because I wrote another ridiculous cheque to the IRS this year, so I’ve got to do better. And so this is going to be a part of that process.

Dave:
Well, all joking aside, I mean, you have been on the show, said many times that you’re adverse to holding debt. You’re primarily a trader, you’re flipping stuff, you’re not holding onto things. But in this market I think most people would assume you’d keep doing that, not wanting to hold onto something. Obviously the tax implications are big for you, but what is it that changed your mind and makes you feel confident doing it in this market? Is it just such a good deal?

Jamil:
It’s such a good deal and I really believe in the neighborhood. First and foremost, Phoenix, Arizona, the average lot size for our properties is like 7,000 square feet. It just so happens that these two streets where I live, my street and then the one street north of me, we all have half acre lots. And it’s really rare in our neighborhood to get huge lots like this, so there’s a lot of demand for properties on these large spaces. Secondly, I get family coming into town all the time. I thought this would be a great spot for them to stay at when they do come to town. They don’t have to stay in my house, they can stay down the road.
But $700,000 walking in equity. And this wasn’t a friend of theirs who appraised it. It was one of the foremost appraisers in town that gave them an appraisal and so at $1.7 million current appraisal, I think what happened for these guys is they just didn’t… they had the house so customized to their liking that if they had just done maybe 30 or $40,000 in updates to the house, they would’ve gotten their number or they would’ve gotten close to it. They probably would’ve sold this for a million five.
But they didn’t want to spend any money, they didn’t want to do the work. And so I’m looking at it as though I can put in a little bit of cash, update the house so it’s beautiful for a short term rental. And I know as soon as the market comes back, I can put that thing right back on the market and probably make a few hundred thousand. So I’m playing an educated timing bet, like I’m timing the market right now. I know we always say, “Don’t time the market,” but I feel like I’m timing it well, I’m buying this deep and my goal… I’m not going to hold this forever, but I probably will hold it until the market rebounds and then I’ll sell it for a big payday. And in the meantime, I’m going to make great cash flow and my wife’s going to have a good time managing the short term rental.

Kathy:
I just looked up some of the tax benefits you can get from this, so be sure to talk to your CPA about the Qualified Improvement Property, the QIP. It says in 2017 The Tax Cuts and Jobs Act created a class of property called the QIP. So big bonus depreciation there and then cost seg strategies, that some of them will disappear or be lessened next year. So great year to be doing that and to try to be claiming some tax benefits. We’re doing the same thing with one of the Park City properties that we bought and I’ve been furnishing… I’m going this weekend to finish furnishing it and all of that is like accelerated depreciation. Talk to your CPA because it’s different for everybody, but this is a really good year to take advantage of those cost seg strategies and QIP.

Henry:
I think I’m taking this a little personal. The last episode I recorded with Jamil, he said, “Hey, come stay at my house,” and then this episode I’m here like, “Ugh, I got to buy a house down the street because I got to stick people like Henry in it when they come visit.” I’m taking it a little personal.

Jamil:
I didn’t know you were going to pick up on that.

Dave:
Yeah, Jamil, how much did you say it’s going for a night?

Jamil:
I’m expecting 500 a night.

Dave:
All right, Henry, you’re getting charged 500 a night to stay at Jamil’s house.

Jamil:
It’s resort-like though, guys. Half an acre, there’s a beautiful pool, they got a jacuzzi. The entire second floor is only the primary bedroom.

Dave:
Wow.

Jamil:
It’s got mountain views. It’s delicious.

Dave:
Who needs a bedroom that big?

Henry:
If you don’t want me to stay at your house, you don’t have to pitch me on this one, it’s fine, I’ll get a hotel, Jamil.

Jamil:
I really do want you to stay at my house because I’m expecting you to tan by my pool.

Henry:
I’m absolutely getting a hotel.

Dave:
Oh man, that’s the second time today, Jamil. It’s become clear how bad it is to be a seller of unique properties today. Like those weird houses that need a little bit of love, man, they’re sitting on the market for a long time and sounds like you’re getting what, 30 or 40% off because of it.

Jamil:
And I’m just obnoxious on those calls too. Listen, there is tact in how you find alignment with a listing agent. So first and foremost, just for everybody listening, very quickly the strategy I used, I used the listing agent as my agent. So I had them do dual representation, which aligned the listing agent to my side and gave me some extra leverage, because now she’s getting a 6% commission and I’m playing on the fact that I know that she probably hasn’t closed a lot of deals recently, and so a 6% commission right now is going to be huge for her. So she’s really going to bat to help me get this deal done.
Secondly, I actually disclosed that I was the guy… I actually live on their block and because they know me, they know who I am, they’ve seen the production vans and the things in front of my house when the TV show is being filmed, they know that I had the financial capacity to close. And so for them, they’re looking at it like this guy, he can close, he’s legitimate, he’s real. I really played my hand firm and I wasn’t attached to it. So when I gave them my number, they tried to negotiate with me multiple times to try to edge that price up and each time I just swatted back and said, “Nope, firm. Nope, firm. Nope.” And finally it got done.

Kathy:
Well done.

Dave:
All right, well, thank you all for sharing these. This has been super fun.

Kathy:
Well, I just have to share that I found out what it is, it’s not the Silicon Slopes, it’s not the Silicon Beach, it’s the Silicon Prairie. Okay. So maybe where I’m investing isn’t super sexy, but the numbers work.

Dave:
Prairie.

Henry:
Silicon Prairie, I don’t even know what that means.

Dave:
Nothing, Henry, it means nothing.

Jamil:
It means absolutely nothing.

Kathy:
And it means it’s out in the middle of nowhere. It’s the boonies. But that’s where these tech companies are moving, to the boonies, to the prairie.

Jamil:
Sounds nice.

Henry:
For those Silicon Prairie dogs.

Dave:
All right, well, we’re going to take a quick break and after that we’re going to answer a question from someone on the BiggerPockets forums. All right, we have a question from the BiggerPockets forums and a reminder as always, if you have questions for the panel, want us to answer them, you could do that by going to the BiggerPockets forums and posting a question.
So this one comes from Ryan Williams who asks max market rent or stable rent? “Hello. I have a lease ending on my rental property here in Denver and I’m debating whether I should re-list my rental at a max market rate, 200 or $300 more per month than my current tenant’s rent. Or if I should put it close to what I had rented out before, a little below the market rate and hope to fill the vacancy as quickly as possible?” Henry, going to you with this one, I think you usually have a great perspective on this kind of thing.

Henry:
So the question is, do I go for the top dollar rent or do I stay a little above the average and fill the vacancy quickly?

Dave:
Yeah.

Henry:
Yeah. I’m all for the latter in this strategy. Vacancies just cost too much money and the longer it sets, the more it’s going to cost you. And what we’re finding right now and what we’re seeing is when we put properties out there at top dollar, they sit a little longer and then we end up coming down off of those prices anyway having to lower rents. Because we do a strategy where we’ll post it and if we don’t get what we want within a certain time period, we drop about 50 bucks off until we hit that sweet spot. But if you feel like you know where your sweet spot is or you feel like you know where somebody’s going to rent it at, I think that’s where you should try to get it.
But don’t just rent to the first person; you want to rent to the first person who meets all of your qualifications because it doesn’t matter what your rent rate is, if you don’t get a quality tenant, it’s going to cost you more money in the long term. So your tenant selection process needs to be rock solid. But I’m all for coming in a little under that top dollar rent price and getting somebody in at a price where they want to stay.
Because if you get them in a top dollar and rents come down a little bit right now because rents are trailing, are starting to do what prices are doing in some parts of the country, if you get them in a top dollar now and in 12 months they can get a place similar or better than yours for 50, 100, 200 bucks less. Yeah, it costs them a little bit of money to move, but you don’t want to be dealing with that turnover because then that costs you more in the long run anyway.

Dave:
Totally agree. I actually just did this in Denver two weeks ago. I had put it at max rent and wasn’t getting the quality applicant that I was looking for and just like Henry, I just lowered it like 150 bucks, and within a week found a great tenant. No vacancy, worked out really well. Kathy, did you want to jump in?

Kathy:
Yeah, I was going to say it really just depends on the area, and I usually talk to my property manager to see what kind of demand that they have and what they think because if they’re seeing tremendous demand, then it might go quickly at the market rate or a bit above market. That’s what we’re seeing still in parts of Tampa and Florida, where there’s still so much demand. But I generally, as a rule, do like to stay a little bit below the market rent because that does make your tenants so happy that they’re appreciative and want to stay generally a little bit longer.

Dave:
And it just protects you, especially going into a potential recession or job loss, you don’t want your tenants to be stretched. It’s just not a good situation for anyone.

James:
And it always comes down to what Kathy said, it’s just market conditions. What is the supply and demand? Even though it’s just a rental, every asset class is this way. We just listed a flip the other day and we went on the higher side of the market because it’s in a neighborhood where there’s no inventory. Yes, there’s a lot of inventory all around us, but if you want to be in this one specific neighborhood, you are buying our house, that’s it. And it’s a high demand neighborhood. And same with rentals. The first thing is look at where your supply and demand is, what’s your absorption rate, and then how do you… don’t overprice it to where you’re losing a month of income, but also don’t under-price it because you don’t want to give money up if you don’t need to give money up. And if there is no demand or there’s a high demand, you can get that high rent.
Also, dig into the data a lot. A lot of times that high rent comparable may have a unique feature that yours might not have. Is it more walkable? Does it have a better yard? You do want to dig into those things and make sure you’re comparing apples to apples because there is always that outlay or comp for selling, for renting, for whatever it is. And so really dig deep into that comparable and see what the deficiencies are. If your product’s more deficient, then go with the lower rent comp. If you have the same walkable features or upside, then go for that higher number. People will pay for quality of living and we’ve seen that the last two years. And so just dig into the data. The data will guide you on how you should price up your asset for rent, sale or whatever it is.

Dave:
All right. Good advice from everyone. Well, thank you all for bringing your deals. I really appreciate it and this was a lot of fun hanging out with you all today. I’d love to hear how all these work out. So definitely track the performance of each of these deals and maybe we’ll revisit this in a couple of months and see how you’re all performing.

Kathy:
Sounds good.

Henry:
Love it.

Jamil:
Happy to share.

Dave:
Well, on the show you all are performing great. You all did an excellent job. Thank you for being here and for everyone listening, we appreciate you. If you appreciate this show, make sure to share it with a friend, we would really appreciate that. Thanks for listening again, and we’ll see you next time for On The Market.
On The Market is created by me, Dave Meyer, and Kaylin Bennett, produced by Kaylin Bennett, editing by Joel Esparza and Onyx Media, researched by [inaudible 00:43:59] and a big thanks to the entire BiggerPockets team. The content on the show, On The Market, are opinions only. All listeners should independently verify data points, opinions, and investment strategies.