David:
Welcome to the BiggerPockets Real Estate Podcast. I am the host of the biggest, the best and the Baddest Real Estate podcast where we arm you with the information that you need to start building long-term wealth through real estate today. It doesn’t take that many properties to achieve financial freedom. It just takes the right ones, and that’s what we’re talking about is how you can identify the right property so that you can get to the same place that Brandon and I and tens of thousands of other people have got to. We’re going to call this the Real Estate Investor Master Journey. This is your step-by-step guide to mastering real estate investing and it’s going to be so much more simple than you think. So glad to have everybody today. We have a bonus episode. It is the 90 Day Challenge.
In today’s episode, you’re going to be listening to me walking you through a webinar where we will go over how to achieve your goals with a 90 day plan of action, how to determine cashflow potential quickly and efficiently so you don’t waste your time. How to fund deals even with little money available and how to come up with a long-term strategy for wealth that you can execute over a shorter period of time. It’s all about building momentum and I’m going to share with you some strategies for how you can do just that.
We are heading into the last quarter of the year, as crazy as that sounds. And if you set a goal to purchase property this year, there is still time to get that done. So if you’re somebody who’s been struggling with taking action, you need a little more direction, you need a framework that you can use, you should really like today’s show because we are going to be getting into the brass tacks. Now as a little FYI, I originally recorded this earlier in the year when rates were lower, so they are a little bit higher now, but the principles, the analysis that you’re going to be learning, the way to look at real estate has not changed, but because rates are a little higher, you might just want to write lower offers or chase different deals than you would have before.
If you’re someone who struggled with taking action because you didn’t feel confident, you’re going to love today’s show. We talk about how analyzing deal after deal after deal can get you comfortable with knowing what’s going to make money and what’s going to lose money. And with that comfortability comes confidence, and with confidence comes action. And we all know what happens if you take consistent action. Now, at the end of the show today, you’re going to have an opportunity to sign up for a BiggerPockets Pro membership, if that’s something that you’d like and because you’re listening to this now I’d like to offer you a discount. So if you use the following code, you could get 20% off your BiggerPockets Pro membership. The code is YTChallenge23. Use that when you’re signing up for a BiggerPockets Pro membership and get yourself 20% off courtesy of yours truly, David Greene.
Now the code is podchallenge23. That’s PODchallenge23. If you use that code when you’re checking out, you can get yourself 20% off courtesy of yours truly, David Greene, because I appreciate you listening to my podcast. All right, let’s get into it.
All right, let’s get started with today’s webinar. Yep, my pleasure. Thank you for asking the question. The 90 Day Challenge, how to get your first or next property in the next 90 days, hosted by yours truly, David Greene, host of the BiggerPockets podcast. Please feel free to follow me on Instagram or anywhere else, @DavidGreene24. There’s a good chance that you’ll be listening to this and I have a question that I won’t be able to get to. So you can DM me or even better, you can send me a message on the BiggerPockets platform and I can get to you there.
So as you’re listening, go ahead and take your phone out because there’s going to be several times throughout this slideshow where I’m going to ask you to take a picture of, like a screenshot because you’re going to want to remember that stuff, so you’re going to want to have your phone handy when you do that. All right, thanks for coming. This should be fun. Here’s our goal. It’s very simple. I want help you build a step-by-step plan to buy your first or next property in the next 90 days, no matter how much experience, time or money that you currently have. Let’s talk a little bit about us, a BiggerPockets. Basically it’s a website that has a blog, a forum, podcasts, webinars, webinar replays, analysis tools, networking opportunities, books, videos and more that are all designed to help you use real estate investing to achieve your goals. There’s a free membership that includes education, networking, Q&A, forums and confidence to take action.
There’s a pro membership, expert education and data investment calculators, landlord legal forums and tools to take action because at BiggerPockets, we believe that real estate is the greatest wealth building tool in the world. It’s not quick and easy, but simply a business that can be learned. Anyone can invest regardless of past or current position. I, David Greene, I’m a real estate investor myself. I live in the Bay Area in California.
I own rental property, I flip houses, I invest in commercial real estate, I invest in short-term rentals. I hold some notes, basically people that pay me like I’m the bank on their mortgage. I am the host of the BiggerPockets podcast, formerly with Brandon Turner and a new co-host is going to be revealed pretty soon here. I’ve written a couple books for BiggerPockets, the BRRRR, Buy, Rehab, Rent, Refinance, Repeat, Long-Distance Real Estate Investing, as well as SOLD: Every Real Estate Agent’s Guide to Building a Profitable Business. And there’s two more books coming out after SOLD that are written towards agents to help them be better at their job and to understand how to serve clients at a higher level. I’ve been featured in Forbes, HGTV, CNN and more. And like you, I was once a newbie to real estate.
And here’s why I put all this in there. I just want you to understand that you’re listening to someone coming from my perspective because the advice I’m going to give you today, it’s good that you understand what I’m doing so you understand why I’m giving you the advice I am. But it doesn’t matter where I’m right now. At one point I was sitting right where you are. I just kept going on this journey of real estate investing. I really liked it and I ended up getting able to do all that cool stuff. And that’s what’s awesome about real estate because the more you give to it, the more it gives back to you. Succeeding in real estate is similar to succeeding in anything, and this is what I really want to highlight. There is no magic or secret to becoming an amazing real estate investor. It’s probably in my opinion, one of or the easiest ways to succeed at building wealth. I don’t think there’s a better way than real estate, at least not that what I’ve ever found.
So you shouldn’t be surprised that investing in real estate success is just like success in anything else you do. And what do I mean? Well, what do people do to succeed in general? They have a strong reason or a why for getting into shape. People have to know why they’re doing something if they’re going to stay committed to it. They then think about it, read about it, talk about it, and in other ways obsess about getting into shape. They focus on a particular set of workouts. They don’t just do anything. It’s very purposeful and intentional, what they’re going to do when they go workout, they educate themselves on the proper form so they don’t get injured. They surround themselves with others who are trying to improve their physique. They don’t fall for get ripped quick schemes or programs, but they do pay for equipment tools and gym memberships.
This one’s so important is you’re going to spend some money if you want to get into shape, but it doesn’t have to be a get ripped quick scheme, or a get rich quick scheme. You see what we did there? It’s just finding the right equipment, the right tools and the right gym to put their time into. And then this is what’s super important. They show up consistently despite not seeing immediate progress. They just keep pushing play. This is so, so big. Anything you do, like right now I’m trying to undertake juujitsu and it is super hard. I’m not seeing a lot of progress. But I have to keep going. Every single person I talk to says the secret is you just keep showing up. If you’re tired and you don’t want to actually roll or spar, then don’t. Just come to the class and learn the techniques, watch other people doing it, get in the community of people, have fun, build relationships here, but you have to keep coming. Every single person is saying the same thing and it just makes me think about all the other things I’ve been successful at.
How did I become successful? I kept going when other people stopped. This is a fourplex that my buddy Brandon bought. That’s his little daughter Rosie that he’s holding in the front door. This thing makes him $1,432 a month. This is a triplex that he owns. This makes him a little over $1,000 a month. This is a fourplex that he turned into a fiveplex. This one makes them almost $1,600 a month. It doesn’t take that many properties to achieve financial freedom. It just takes the right ones and that’s what we’re talking about is how you can identify the right property so that you can get to the same place that Brandon and I and tens of thousands of other people have got to. We’re going to call this the real estate investor master journey. This is your step-by-step guide to mastering real estate investing and it’s going to be going to be so much more simple than you think.
So go ahead, get yourself ready. We’re going to get started at the meat and potatoes of our presentation today and I hope you guys are excited because I’m not blowing smoke. This is all stuff that I’ve done and I was just a police officer that didn’t want to have to be a police officer anymore, and I worked my way right out of it. And whatever situation you’re at in life, you can do it too. Step number one, your purpose. This is the why that we talked about in the workout analogy. Why do you want to invest in real estate in the first place?
Let’s go over a couple of reasons why some people do it. They want wealth, they want flashiness, they want nice cars. They want to feel like they’re a somebody. They want to show off. They want to go to conferences and be able to say, “I have 700 units,” and use fancy phrases like cap rate and say finance instead of finance and talk about their door count, which is hilarious to me because I know quite a few investors that end up including the garage door, the front door, the side door, the back door, the bathroom door, the closet door. There’s a lot of doors that get worked into these accounts. Is that why you want to do it or are you looking for a different motive? Here’s why I say that. If your motive for working out is because you want to look good to find a romantic partner, it will usually be enough to get you in the gym and eating better and in shape. But when you find your partner, you’ll probably stop.
Your why was just to get to that point and that was all. If your reason for working out was that you wanted to be healthy so you could live longer or you wanted to find a partner and make them proud of who they’re with, you wanted to really, really serve them by being fit. When you find that partner, you’ll continue to work out. The why really, really matters. A lot of people are in a situation in life where they’re not happy. They have a lack of security. Maybe they’re insecure as a person, they’re watching other people around them doing better or they don’t like their job, they just want to get out of their job right now. Well, if that’s your reason, you’ll probably pursue real estate until you get out of that pain and then you’ll stop. And the thing that sucks about that is that real estate is designed to get better and better and better over time.
It’s like the compound interest theory. To me, real estate investing is much, much more like planting a tree. The reason this works so well but that so few people do it is the delayed gratification component of it. Every time I buy a house right now, I am serving future David. All the money that I make in real estate right now came from decisions I made in my past. You don’t get the immediate gratification of it. And so I’m bringing this up right now to just sort of make clarity to you that the reason to get into this is for the longterm. It’s just like when you first start going to the gym. You don’t see progress, you just feel sore. It just hurts all the time. And the worst thing ever is when you start going and you get in some progress and then you stop and then you got to start all over again. And you’re always in that just agony of getting started, but you never see the results.
The only reason that you should get into fitness is you’re going to consistently stick with it. You’re going to keep going to the gym, you’re going to keep eating healthy, you’re going to build good habits and then it’s impossible to not be in shape, but then you get all the benefits of being in shape. Well, we’re talking about financial fitness today. Real estate works just the same way. You’re looking at what this property is going to be doing for you in five years, in 10 years, in 30 years, not what it’s going to be doing for you immediately. So this is a good question for you to ask yourself. I think you guys should all take a picture of this. I’m going to give you a minute to take a picture of this screen here. As you ask yourself this question, why do you want to invest in real estate?
I want you to consider writing down your answer. Come up with a list of all the reasons why you want to do it. Brandon bought that house where he was holding his daughter in the picture to give to her. It’s one of the coolest things he’s going to do. He’s buying this house. He put it on a loan that the property will be paid off in 18 years. He’s going to live off the cashflow for those 18 years and when Rosie turns 18, she gets that house. At that time with the loan being paid off and the appreciation that’s happened, she should be able to pay for her college, her car, her first property, a vacation anywhere she wants to go and more, just from that one house. She will be set for life if she makes good decisions. Brandon made a decision and in 18 years after he made it, his kid will have incredible benefit which will then benefit him.
That’s a wonderful story of how real estate can work and when it works well. When it doesn’t work well is when you’re in a financial bind and you’re trying to get out of it using real estate right away. So if you guys write down all the reasons why you want to invest in real estate, you’ll start to see it’s because you want to leave a legacy for your kids because you want to put your money in a good, safe place where it’s going to grow over time, because you want something to focus on other than the stuff in life that you’re staring at right now that isn’t doing anything for you. And those are powerful whys and you will need them to get through this long-term commitment that we’re talking about.
Step number two is plan. How are you going to invest in real estate? You’ve got a lot of different what we call niches or if you want to be fancy, you could call them niches. Single family homes, small multifamily, large multifamily, office space, retail space, mobile homes, mobile home parks or raw land. Those are examples of different ways you can invest in real estate. Then you’ve got these strategies, buy and hold. I use that one all the time. Fix and flip, I use that one occasionally. Now here’s the cool thing is all of these strategies can work in most cases for any niche. Wholesaling, that’s where you put a property under contract and then you sell the contract to someone else for a profit. Development, buying turnkey properties using the BRRRR method, house hacking, student rentals, vacation rentals. There’s a lot of strategies you can use with each niche and all you got to do, it’s not important which one you pick, it’s just important that you pick one and that you start making progress on it. Pick a niche and one strategy to begin with. You don’t need to learn at all.
So where will you invest in real estate? Well, you’ve got options. You’ve got local versus long distance. And then once you pick one of those two, you’ve got neighborhood. That’s really where you got to be asking, do I want to start my own backyard and make a niche and a strategy work here or do I want to go somewhere else where I like the market better? And then once you pick the overall area, which neighborhood do you want to be in? And then study your market. You want to know the ins and outs of what type of people buy houses there, what an average house is worth, what part of town is where the best deals are going to be, where the demand for tenants is going to be, where the best school districts are.
This is why most people start where they live because they already know the market, but it’s not about where you live, it’s about what you know. So pick the market you want to know and then study it so well that it’s like you know it as if you live there. Step number three, you got to find the deals. Now, a lot of people start off with step number three as step number one, and that’s the problem. They didn’t start off with their why. What’s the reason I’m doing this? And then they didn’t come up with a plan. So every deal looks like a good deal or a bad deal. They don’t know because they don’t know what they’re looking for. That’s why you shouldn’t be doing this until step three. How are you going to find these real estate deals?
Well, here’s a few different ways. The simple way, go to realtor.com or zillow.com, sort by your criteria and then look for hidden potential. And I’m going to describe hidden potential in a second here, but I can give you an even easier way than this. Find a real estate agent that you like and have them start looking for you. Tell them what your criteria are and have them start sending you deals and then you can supplement that with Realtor or Zillow. If you live in California, you should be hitting me up because we can do this for you. If you don’t live in California, you should be trying to see if I know a realtor that I can refer you to or if you can use the BiggerPockets agent finder to find one. But going on Realtor and Zillow is only as good as what’s in the MLS. And then you’re going to have to find a realtor to ask your questions to once you find a house anyway.
So starting with the real estate agent in my opinion is the best way to go. Then supplement your search with stuff like Realtor Zillow. When I say look for hidden potential, here’s what guys like me look for in a property. There was a time 2010, ’11, ’12 where what I was looking for was the most motivated seller. There was a ton of houses on the market, nobody was really trying to buy them a deal was getting at below market value. So I would look for the seller that needed to get rid of a house and I would make the most aggressive offer I could, and that’s how I made money in real estate. We are now in a market where there’s hardly any motivated sellers. Everybody wants to own the asset. That’s why you’re here right now. You want to own real estate. Back when there were deals everywhere, there weren’t people showing up to webinars asking how to buy them.
Nobody wanted to buy them. That was why there were deals. Well, we’ve done a 180. We’re now in a position where everybody wants to buy this stuff. So instead of trying to find a motivated seller, which is isn’t going to happen because they’re not motivated if everyone wants to buy their house, I look for things that other investors are missing. So I’m looking at a house right now in Moraga, California and I wrote an offer on it and actually, you know what? I’m going to text my agent right now. I say my agent, he’s one of the agents on my team, and ask where we are with it. Just remembered.
So this is a property that sat vacant for a long time and eventually came off the market because the owners were unhappy with the lack of offers they got, and they blamed their agent for it. So I went and looked at this house and I saw it’s a weird floor plan. I can see why people weren’t wanting the home. That was the obvious answer. But then I also saw it has a huge basement that already has plumbing and electrical run to it but isn’t finished. It also has an area in the upper floor to build a loft that would massively increase the square footage of the home, and then it has a setup that it can be split up into different units and rented out individually. When I look at that house, I see the ability to create a lot of rent potential in an amazing area and add square footage.
What everyone else saw was a weird floor plan on a house that was in a gray area but they didn’t like. That’s what we mean by looking for hidden potential. If you can develop these creative eyes and see angles that other people missed, you can find deals in plain view basically where other people are looking at them but not seeing what you’re seeing. Then there’s the medium method. Get in your car and drive. Find a vacant or a rundown property and add it to your CRM, that stands for customer relationship manager. This is basically a database to attract things with. Mail letters or postcards to the prospect so you can actually say, hey, that house right there looks run down. I’m going to send a letter or a postcard to the owner of that house and tell them I want to buy it.
Continue to repeat those first three steps over and over and over and over. And then once you actually get people that are saying, Yeah, you can buy my house. What you want to pay for it?” You can start to spend your time negotiating with those people that are calling and hiring other people to drive for you. Then they go find the addresses, they tell them, and then you look them up and then you call the owners and you just spend your time negotiating. You could download a large list of prospects from Listsource, PropStream or other places. You can mail letters or postcards to thousands of people a month and then just answer your phone. We call this direct mail. So the medium method will be driving and looking for the houses yourself. The advanced method is sending out letters and letting those people come to you.
These are all ways that you’re basically just filling up a funnel of leads that you can then start to pursue, and we’re going to talk about that pretty soon. But you got to get leads however you can, whether your agent’s helping you find them on the MLS, which is my preferred method, or you’re going after them yourself, which is what a lot of people do, like wholesalers typically do that. That’s where it all starts is you start with leads. And remember that I said success in one thing is usually the same way that you’re successful at a lot of other stuff. It’s true. If I want to run a successful real estate business, I start off by looking for leads. How many people want to buy a house or sell a house that I can get to come to me?
I have a mortgage company. How many people want to get a loan that I can talk to and I can say, “Hey, you should use my company.” That’s where every single business starts, so you shouldn’t be surprised that that’s where we start now. But how do I get these leads to analyze? Well, here’s one way you go to biggerpockets.com/blogs/provideos, and why don’t you guys go ahead and take a picture here. Here’s the thing to understand about a property. Every property has a home run number. This is a price you can get it for that makes it a home run. Now, here’s a caveat I’ll add to that. Real estate markets change and shift just like economies change and shift. And what are the mistakes that I see people make when it comes to building wealth or making money… how do I want to say this? I’m about to use a sports analogy because we’re looking at a ballpark.
So if you’re not into sports, hang with me. The way you build wealth is very similar to the way you win at sports. And the thing that makes it similar is you are competing with other people who are also trying to get what you want, right? You want money, so does other people. You want the best job, so do other people. You want these best properties, so do other people, right? Sports is I’m trying to get the ball in the basket or the football in the end zone or I’m trying to get the baseball into an open space that I can hit it and the other team has a whole bunch of people that are trying to stop me. All the strategy of sports has to do with how do we do what we want and stop them from doing what they want? And that’s why I can use those analogies when we’re talking about building wealth.
So we’re talking about a home run number, because there’s other people that are trying to stop you. The thing about sports is that the rules of the game change the way the game is played, change and evolve over time, and so do economies. What worked to make money in different aspects in 2002 is different than what works to make money in 2010, which is different than 2020. And I give you examples of this. In 2001, ’02, having a website or being able to code and make websites gave you a huge advantage. At that time, computer networking was massively popular. If you could take two computers, connect them to each other and make them communicate, you could make a buttload of money. That sounds crazy right now, but technology hadn’t increased to where it’s at. So you had to have really good problem solving skills to connect two computers together in the same office.
We didn’t have just a cloud that everything would connect to. Well, at a certain point, the technology improved to where that could be done automatically, you didn’t have to manually do it. And then computer networkers were kind of out of business. Just like people that could create a webpage became much less needed when you could just go to Wix or Squarespace and have a template to make your own page. You see how that talks? Well, let’s fast forward to 2010. There’s tons of real estate out there. Nobody has the money to buy it and nobody wants to own it because we think we’re going into a depression. And buying real estate felt like buying an anchor, is going to pull you down. You’re basically just signing up for a mortgage. You’re going to have to pay. You don’t know if you’re going to have tenants that are going to want to live there because none of those people had jobs.
The way you won in that area or in that market I should say, would be to get a house way below what you thought it would appraise for. That would be your home run number. In 2020, 2022, in the future, you don’t win that. Same way. It’s not like there’s nobody that wants to buy a house. The government’s printing money, they’re handing it out to everybody. The economy’s doing relatively well. Most people have jobs and are not afraid of not having a job. In fact, a lot of them are working from home. There’s a shortage in housing. So now that your home run number has to be calculated differently, now you have to look at it more like, what is this house going to be worth in five years or 10 years and where else can I spend my money?
And in that case, real estate almost always ends up looking like the home run when you compare it to other asset classes. Step number four, analyze the deals. So you’ve got leads, now you’ve got to analyze them. This is what we call the lapse system. Guys, take a picture of this screen. This is the easiest, simplest way to understand what you’re trying to do as a real estate investor. It’s four steps. Really, it’s only three steps. The fourth step is just a result. You start with leads, we talked about that. You can get them from a realtor, you can get them from zillow.com. You can get them from telling all your friends, I’m looking to buy houses. You can get them from driving around and looking for properties that need help. You can get them from sending letters. All these things, they’re just ways to get leads.
When the leads come in, you analyze them. That’s how you look to see would this be the right property for me? And we’re going to talk about how BiggerPockets can help you do that in a little bit here. When you see one that makes it through your analysis and looks good, you pursue it. And then once you’ve pursued it, you either have success or you don’t. So it’s finding leads, analyzing them and pursuing them that we’re just doing over and over and over and over as real estate investors. And then when you do it enough times you find success. So here’s an example. You send out 300 direct mail letters.
You get back 40 people that said, “Hey, I might want to sell you my house.” So you know how 40 leads to analyze. Out of those 40, you make 12 offers. Those are the ones you pursue. So we started off by sending out 300 letters. That gave us 40 leads. We analyzed those 40 leads out of those 40, we like 12. We wrote offers on 12, and then one of them was accepted. That ends up with 1432 a month in cashflow and $100,000 in equity.
This is how simple it is. This is why I told you in the beginning you’re not a rocket scientist. But it’s not easy. You still have to send letters, you still have to find leads. Then you got to know how to analyze them. And that’s not rocket science either, but it does take some time. And then you got to pursue the ones you like and you have to be able to make that decision and pursue them correctly. So it’s not complicated, but it’s not easy, which is the best thing. It’s just like fitness. Getting fit is really not complicated. It’s eating good foods and burning calories, which is hard. That’s the thing, is we don’t like doing it. We don’t want to commit to it. So what does your process look like. As we’re talking about this, are things coming to mind that you think you could do?
How will you generate leads? Right now, what is the next actionable step that you can commit to doing that will get you leads? How many leads or how many deals will you analyze out of those leads? How many are you going to analyze in a month or a week or a day? Can you commit to that? If you were going to get in shape, you’d say how many times a week you’re going to work out, you’d plan out your workout session, right? Mine typically looks like Monday is chest and triceps, Tuesday is shoulders and biceps, Wednesday is back and usually a little bit of abs. And then Thursday or Friday would be legs, and then weekend is some form of cardio or whatever I missed during the week, that muscle group’s ready to go. And then I supplement that with juujitsu training and trail running.
So I know if I want to be in shape where I need to be. It’s in my calendar and I know what I’m working out, I have a plan. And I’m not in the best shape, but that just shows I don’t commit to this the best and I don’t eat the best. I’m slowly eating better, but I still don’t eat great. Real estate will work the exact same way. I put way more time into business and real estate, which is why I’m more financially fit than I’m physically fit. And I want you to be that way too. I want you to get financially fit. But the process of getting there is exactly the same as getting fit in anything else that you do. How many offers will you make in a month, in a week, in a day?
So let’s do one together right now, so that you can see how incredibly easy BiggerPockets makes it to do what I’m talking about, right? We’re going to analyze this deal right here. This is 185 Landings Drive in Frankfurt, Kentucky. Let me show you how easy it is to analyze a deal. You’re going to hover over tools and then you are going to go to Rent Estimator. Now we’re going to put in the address of the property we’re looking at. 185 landings Drive in, I think it was Frankfurt. Yes. Got to click on this. Don’t hit search address until you’ve clicked on the button because it won’t know what it’s searching for. Now, this property was a two bedroom, one bathroom, and I realize you guys probably didn’t see it. I just took it right off of the screen. It showed that it was eight bedrooms and it was four bathrooms and it was four units.
So we know that if it’s eight bedrooms and four bathrooms, every unit has two bedrooms and one bathroom. So we are going to tell the BiggerPockets software to look up properties near this one, 185 Landings Drive, that have two bedrooms and one bathroom. And this is what it tells us. The confidence is high that this property will generate $630 a month. That’s what those are renting for right now. Now let’s say you’re skeptical and you go, “Oh, I don’t know. How can I trust this?” Well, that’s actually good, you should be that way. You scroll down here and you can see all these other comparable areas or properties and you can see what they’re renting for. Now, I do this all the time. So I see this one here is renting for 925. That’s significantly more. It’s also a two, one, right? Well, it might have more square footage than mine, so maybe that’s why it’s renting for more. But let’s say it doesn’t.
Well, what I would do is I would Google 112 Lee Court in Frankfurt and I would look at the pictures of it and I would see, ooh, my property has dingy carpet and oak cabinets and outdated appliances. The only difference between this one is it has hardwood floors, an updated kitchen and tile shower bathrooms. So the question would be how much money would I have to spend and make mine look like Lee Court, because then I am more likely to get 925 a month instead of 630, which would significantly improve my cashflow. Now that’s assuming that it’s in the same neighborhood. You see how a lot of these properties here, I think this one’s ours right there. These are in a similar area, probably all multifamily housing. These ones are kind of spread out. These three look like they’re in the same spot, but these are kind of spread out.
This might be a better area. Maybe because it’s closer to Kentucky State University, it’s a little bit nicer. Maybe these aren’t quite as nice. And so that 930 comp is one of the properties that’s down here. If you see this one right, 902, whereas these ones don’t quite go for as much. These are more in the 600s, but this is how we real estate investors value properties. And I’m kind of better at doing this maybe than an average person because I’ve run a real estate team for a while now and I look at real estate and I understand how it’s valued, but you don’t have to be an expert to be able to understand the basics I’m going over right now. I’m really hoping that as you’re listening to this, you’re learning something and you’re seeing how you could do the same thing. And if you have any questions about this I didn’t get to, just send me a DM or send me a message on BiggerPockets, I’ll do my best to get back to you there.
So now that we can see that, we believe we would get 630 a month per unit, and we know there’s four units. I just went in my calculator and I did 630 times four, and that told me 2520. So I can expect to get a gross rents of about 2520 on this property. Now that I know what it would rent for, I’m going to go back to tools and I’m going to click on calculators, rental property, start a new report. I’m going to let software do all the work for me, and you guys are going to be amazed at how easy and how accurate analyzing deals can be once you have leads. So our lead is 180 Landings Drive, I hope it was Drive, in Frankfurt. Yep, there it is. Click on it if you want.
You can add a photo of the property. You can put it in here because you’re going to save this. You can go back to it later. We’re going to put a purchase price. What was the purchase price? 240. Put that in here. 240,000. It’s asking me for the closing costs. Well, David, I don’t know that I’m not an agent like you that buys a bunch of properties and writes books and I have better hair than you, but that’s about all. Okay, don’t worry. If you click right here on calculating closing costs, BiggerPockets has it set up so you can see what number you should put in there. Typical closing costs are 1 to 2% of the purchase price of the property, but can differ depending on location of financing. If unsure, one point a half percent of the purchase prices is a good number to begin with.
Now, when you get closer to actually buying this deal, your realtor and your title company can tell you what they’re going to be. But in the beginning, we don’t need exact numbers, we need ballparks. So we’re going to go with five grand, which is a little closer to 2% than 1%, just to be a little conservative. Then you click next and it takes you to loan details. Now, if you’re buying the house as a house hack, you might put in 10% down, maybe 0% down if it’s a VA loan. We’re going to assume that we’re buying this as investment property, which means we’re going to need to put 20% down. And because that’s what we chose, if you click on 25, this number goes up, 20 goes back down, it knows at the purchase price we said you don’t have to do the math. It’s telling you right now your down payment is going to be 48,000.
Let’s say the interest rate on an investment property I’d say is right around 4% right now on a primary residence, it’s a little closer to three and a half, but investment properties are a little more. And no points. Points would just be money that you would pay to buy your rate lower. And then for the loan term, you always want to put in 30 years because what most loans are, 30 year. And you want to go for a fixed rate, not an adjustable rate in most cases. Click on next for income. Gross monthly income, remember I said it was 2520. That was the 630 per unit times four. Now we’re going to talk about expenses.
What are the property taxes going to be? Well, you’ve got a button right here if you want to figure out how you can determine your property taxes. I know in most cases it’s about less than 1.5% a year. So I’m going to multiply 240 times 0.015, which is 1.5%. That’s 3,600 in a year. It will most likely be less than that. We’re going with a higher number here. So we have 3,600 and we’re going to click annual. That’s how much you’re going to pay for property taxes. The insurance on this thing is, I’m going to guess just based on my experience, it’s going to be about $75 a month. Now, when you actually put it in contract, if you’re pursuing this deal, you can call an insurance company and get a quote. You’re going to have to, the lender is probably going to make you do that. So if it ends up being $500 a month, you just back out of the deal, but it’s never going to be $500 a month.
It’ll probably be less than the 75. But when we’re initially analyzing a property, this is what we want. We want ballpark figures because the time it takes to go get exact numbers for every property that you haven’t even bought yet is usually not a good investment. We’re going to budget for repairs and maintenance. 5%. We’re going to budget for vacancy, 5% of the gross rent. Same for capital expenditures, and we’re going to put 8% in there for management. Now, the tenants are going to pay their own electricity and gas and their own water and sewer, and let’s say we’re going to pay the garbage. So in that case, let’s say that’s going to be $50 a month.
Click finish analysis. Here is the awesome, get ready for it. This calculator is going to do all of this for us. We don’t have to be good at math. So with the numbers that we’ve put in here, it’s telling us that we can expect a cash flow $604 a month. It’s getting that from the 2520 of income that we put in and the expenses of 1915 that it calculated for us giving us a cash on cash return of a little over 13.5%.
This is just a breakdown of how it came up with the numbers, if you like to see information presented this way, and it’s telling us the total cash needed would be 53,000. The monthly expenses breakdown looks like this. This orange part is going to be the variable expenses. That’s going to be the vacancy, the CapEx, the maintenance. This blue part, the biggest part of it, is going to be the mortgage. It’s just showing you of your expenses, this is how they’re broken down. The net operating income, that’s how much money we can expect to make this property to make in a year. And then again, we see the cash on cash return. Now, here’s my favorite part. I love this graph. This graph shows me over a extended period of time, like 20 years, what I can expect the property to do. Now, personally, I think us at BiggerPockets, we are very conservative.
We’re assuming a 3% growth rate. Most parts of the country are seeing way more than a 3%. So it should be much better than this in real terms than it is theoretically. But you can see we brought the property for 240 and the value of it is slowly going up over time. You can also see right here, this purple line, this is the loan, this is the money that we borrowed in order to get the property, is slowly going down over time. And the difference between what it’s worth and what we owe is the equity we have. You see that it really grows. And if you come down here and you look at the cashflow, the year one cashflow is going to be around $7,613. Well, that grows, it grows and grows as rents go up every single year. And so in year 30, it’s more like 22,000. I bet you it’s going to be three or four times that with the way things are going right now. But this is a conservative estimate.
Same thing for the equity, right? You see your equity that’s growing, growing, growing, growing, growing over time. Who wouldn’t want to make a decision right now that would be worth $435,000 in 30 years? What if you made 30 decisions like that, where all of them were worth 435,000? Do you think there’s any way real estate won’t make you a multimillionaire if you take action today and wait, and then take more action and wait, and you keep taking action so that your future, you becomes massively wealthy because of things that present day you did right now. So here’s what the experts know. It’s not about timing the market. This is what everybody wants to do is, “I want to wait to buy the dip.” It’s about time in the market. I, David Greene, don’t wait to buy the dip. I buy all the time.
Now, what I will say is I am more aggressive at dips. But that doesn’t mean I do nothing In the meantime. Sometimes in life I need to focus on fitness or health, and I put way more effort into it. Sometimes in life you’re going through a hard time. You’re going through a breakup, you’re having a hard time with your family, you got some bad news, and you actually got to be in the gym a lot more to work some of that out. Other times, I’m super busy and I just have to find a way to get in there sometimes. That’s how I look at real estate. When there’s a dip in the market, I’m in the gym all the time. I’m looking at deals constantly, I’m writing way more offers, I’m being way more aggressive. I think it’s a great market to buy. I really ramp up what I’m doing.
But when it’s not a dip, it’s not like I just don’t go to the gym at all. That would be crazy. I still buy, I’m just a little more careful or I use a different type of strategy or I adjust the way that I’m planning on doing this so that it’s not going to be immediate gratification, maybe it’s longer term. You guys want an example? Let me know in the chat if you want me to give an example of what this would look like in real life, what I’m describing here. If not, I can move on with the rest of the presentation. We don’t have to get into a real life analysis of time in the market versus timing the market. Anybody else want me to share what that would look like from practical terms? Okay, you want an example? There we go.
In 2010, it was… maybe I shouldn’t say that. In a market like 2010 when there’s tons of deals out there. So there was a time where I was investing in North Florida and there weren’t a lot of other investors there, and there was a ton of depressed properties. They were just distressed and depressed and they needed a lot of work. I was buying three to five properties a month at that time. I wasn’t competing with anyone else. I hadn’t been foolish, and talked about it on the podcast, to where everybody started doing what I was doing. Properties were sitting on the market for six months at a time. I had a really good contractor that was doing all the work. I was scooping them up left and I really wasn’t focusing much on real estate sales.
I didn’t have a mortgage company. I wasn’t hiring agents and training them on my teams. I was like, man, I got a great opportunity, I’m going to buy as much real estate as I can. And I went hard. And then at a certain point, because I talked about it too much, other people started investing in that same area. And then the contractors got harder and harder to use, and then the deals started to dry up, other people were going after them. And then it just got harder and harder to do, right? So when I recognized, okay, I can’t get as many deals here as I was before, I shifted my focus and I started hiring new agents and growing my team and training them and selling houses for clients and making money and building wealth in other ways. But I never stopped buying there. I just put less time towards that exercise in the gym, right? I’m not working on my biceps as much. Maybe I’m doing leg day more would be a good way to look at it.
And when I did buy, I shifted into different things. So what I would do then is I started to move into where I am now, where I’m buying luxury properties in really good markets that are very expensive because I know that if we do have a crash, those markets don’t get hit as hard. I also know my cash on cash return is going to be way lower when I first buy them. Those are long-term plays. In 10 years, they’re going to make me hundreds and hundreds, if not millions of dollars per property. In short term, it’s going to be kind of lean. That’s the way that it works. So I’ve shifted my strategy to that because it’s so competitive right now. If we get to a point where for whatever reason we hit another depression, no one wants to buy real estate, I’ll go back to the other way.
What I’m trying to highlight is it would be foolish to say, I’m not going to buy any real estate right now. There’s people that are making really good money in short-term rentals. I’ve moved into that myself a little bit, but it’s more work. You actually have to manage a short-term rental. It’s not like it used to be where it was set it and forget it. I just bought it and gave it to a property manager. Maybe you have to do the same thing. To get time in this market, you might have to go to a more active source of income where it’s not quite as passive. But then once the market shifts, maybe that house becomes just a long-term rental, you don’t have to worry about it anymore. You’ve got all kinds of options. But what I don’t want you to do is say, it’s hard to get a deal, so I shouldn’t buy right now. I’m making more money in the deals I’m buying right now in a hard market than I was when it was easy, and I don’t want you guys to miss out.
And then number two, focus on what your portfolio will look like 10 years from now. Cannot stress this enough. Everyone who, three or four years ago was telling me, maybe two to three years ago would be a better example, “David, there’s a pandemic. We have shelter in place. The economy is going to be crippled. We’re never going to recover from this. I’m selling everything. I’m not buying anything right now and I’m going to hold onto my cash.” I said, “Okay, well, I don’t think you should. I don’t think that’s going to happen. I think you’re thinking very shortsighted. This is actually a great opportunity to buy.” And a lot of people said, “Nope, I’m getting out of the game.” And they sold properties or they dropped out of escrows, or they just stopped looking. Those same people, those have lost out on over six figures of equity minimum at the market that I’m in the Bay Area.
So the houses that we had under contract for clients that backed out were over $200,000 cheaper than what they are right now. And the reason is that we didn’t go into a recession. We printed a bunch of money, we caused a lot of inflation. And so the number one thing that I see that stops people from buying is when they feel like it’s too hot, prices are going too high, and they don’t realize that it’s not just the prices are going high, it’s that the value of money is going down. A million dollars is not what it used to be. $100,000 is not what it used to be. Used to be, if you made $100,000 a year, you were set. That’s like middle income in the Bay Area right now. I don’t mean to sound, it’s just so expensive to live here, but that’s not really that much money.
And in the future, $100,000 won’t be considered hardly anything with the way inflation is going. You can’t make decisions based on the snapshot of right now because you’re not buying real estate for one year, you’re buying it for 30 years, 40 years, 50 years. So what I do is I say, in 10 years, what will this property look like? So let’s take for example, the one that I described that I just texted my agent to see if we have it under contract yet, in Moraga. I wrote an offer for 2.25 million on that property. It’s going to have an extensive rehab. In 10 years, I think that property is probably going to be more like five to $6 million. And I can say that because the rate of inflation that we’re seeing, that is not ridiculous to think about. This is even before I fix it up and before that area takes off, just off standard rates of inflation, that’s what I would think we’re going to see.
So what I’m saying is in 10 years, this will be worth five or 6 million. Now what do I have to do to make it 10 years? Well, I have to increase the cash flow. I’m going to do that by adding square footage so I can rent those areas out. All right, how do I get my money back out of this deal? So it’s not like I can’t buy more real estate. All right, well, I also have to upgrade the house, make it look nicer so that I can increase the value so I can refinance it and get my money back out. So I need a remodel that makes the house nicer, adds square footage, which makes it worth more and increases the cashflow. I can do that. Let’s move on it. So now what’s going to end up happening is I’m going to have this place, fix it up, refinance it.
I’ll probably leave 100 or $200,000 in this deal, but I’ll get most of the money back out. And then in 10 years, it’s worth five or six million. And I’ve made three to $4 million from this one property. And what if I do that three or four times a year? It’s not like I’m running around with my hair on fire. It’s funny, hair on fire because I don’t have hair. But these are examples. Now, maybe you don’t live in a market where there’s $2 million houses. I get that, but you might be where they have four or $500,000 houses and in 10 years those are going to be million dollar properties, probably more. So what are you doing right now so that you 10 years from now has 10 to 20 properties that have all gained $500,000 in equity? There’s not a lot of these assets going around.
Either you’re one of the people who get them and benefits from it or you’re one of the people who doesn’t and says, “I wish I would have,” like all the people 10 years ago from today that are saying this, “I wish I would’ve bought back then.” This is why you’re here today at this webinar. This is why God, the universe, whatever you believe has you here because it’s telling you real estate is the safest, most dependable, delayed gratification. It’s just like fitness. It takes a long time to get going, but no one ever says, “Oh, I really worked out a little too much. It was too healthy. I wish I wouldn’t have done that.” Everybody says, “I wish I would’ve built better habits for working out.” And I’m sharing with you how I did it and how I’m still doing it because I’m still into it.
I’m not trying to take your money. I’m not saying, “Hey, I want all your money. Give it to me so I can go build wealth.” I can invest your money for you. I do that and I do pay people, but I’m telling you that you need to go do this. If you’re here today, you need to get these tools that I’m showing you. You need to get into the game now so that the 10 year version of you in the future is thanking you for what you did.
Step number five, get funding. You know what? Take a picture of this one. I want you guys to really dwell on this. Did that example of how I shift strategies help you guys? Looks like most of you’re saying yes, or at least you’re sending emojis that would indicate so. Awesome, I’m glad I could help there. All right, step number five, you got to get funding. So how will you fund your real estate deals? Well, you’ve got several options. Conventional loans, partnerships, hard money lenders or house hacking. They’re similar, but these are the ways that people typically borrow money to buy their real estate. The key to financing real estate is to get a great deal. If you get a really good deal, it’s going to appraise for what you’re paying for it. You’re going to be able to raise the money easy.
Now, I have a company that can help you with this and you guys can reach out to me and I’ll connect you with them. Basically, we have loans where if your property makes enough money, it would cashflow enough, which most of them will, you can use that income to get the loan. So as long as you’re getting a good deal, as long as you’re getting a property that brings in more income than it’s going to cost to own it, the lender will let you borrow on it and then you can go to somebody else that might have more money than you and say, “Hey, do you want to cover the down payment? I’ll take care of the deal, the loan and the management. We can split it.”
The point here is if you get a good enough deal, the money will find you. The people that have trouble with financing are usually not getting very good deals. But what if I don’t have any money? Well, BiggerPockets has something for you too. The pro videos page. It includes a workshop run by Brandon Turner and me, how to Invest with No or Low Money Down. It’s this guy right up here. This is probably the best work that Brandon and I ever did together. It was magical. It was like The Beatles, what’s the best Beatles album, the white album, the black album, I’m not really a big Beatles fan. But when you know you’re in that zone and you’re just doing some great, great work, that’s how it was. And the whole thing was about how to invest in real estate when you don’t have a lot of money. And if you’re a BiggerPockets Pro member, you get access to all of these workshops, lease options, house hacking partnerships, the one I did with Brandon, you get it all if you’re a pro member, for free.
And then step number six, motivation. How long will you stay persistent for the long haul? Nobody got fit in two months of intense work. They were already fit if two months of intense work helped them. This is the long haul you’re signing up for. Are you going to get involved in a mastermind group? I run one for this exact purpose. A lot of other people do the same thing. It’s a way that you can hold people accountable, teach them, get them excited, is kind of the difference between if you have to go to the gym yourself or if you’ve got a workout partner. Man, I’ll tell you what, if I got a time in life where somebody’s working out with me, I am like 90% more likely to go and more likely to enjoy it and I get a better workout in because now I have a spotter.
What about daily journaling or tracking? Are you daily reminding yourself of what your goals are? How about performance coaching? I have performance coaches, and let me tell you, they are expensive. I spend $6,000 a month and more sometimes just on coaching for the various businesses that we have. Okay? Now that $6,000 that I spend earns me way more because of the way that they improve how well me and my team perform. But you got to spend a little bit of money sometimes to get a much bigger return, just like investing. And that’s it. That is the real estate investor master journey. It’s six steps. It’s purpose, finding your purpose, having a plan, finding the deals, analyzing the deals, getting your funding and staying motivated.
You do these six things and you’ll be successful. Why don’t you go ahead and take a picture of the wheel here so you can remind yourself of how simple this is. The 90 day challenge, plan, prepare, purchase. Complete all six phases of the master journey in the next 90 days by working on your business 15 minutes a day, five days a week for 90 days in a row.
Life doesn’t get better by chance, it gets better by change. Great, great quote by Jim Rohn. There’s two kinds of people, all right. And if you’ve ever dated somebody who’s the wrong type, you know the frustration I’m talking about, if you’ve ever had a partner with somebody like a business partner, that was the wrong type. If you’ve ever had a friend, whatever it is, you’ll know exactly what I’m talking about. There are people who wait for life to come to them and change things for them. These are often people that live by their feelings. If they’re in a bad mood or a depressed mood, they just don’t do anything. If they’re in a good mood, they’re really excited. But they wait for life to bow to them. And I know this is a deep thing, but it’s so true.
There’s people that are just waiting for their boss to come say, “You know what? We’re going to give you a promotion. Will you try harder?” They’re waiting for Prince Charming to come out of the woodwork and say, “I’ve been waiting my whole life for you.” Now is when you should actually start trying to be a better person. They’re waiting for that amazing deal to drop in their lap and then their phone to ring with a lender who says, “I’ve got a bunch of money. Do you want to use it?” And a contractor that’s like, I need work so bad, I’ll do it for cheap, and they just keep waiting for that for chance and it doesn’t happen because life doesn’t get better that way. It gets better by change. It rewards the people that go seek, right? I want a partner. I’m going to become the kind of person that a partner would want to be with. I want a business partner. I’m going to learn skills a business partner would want. I want that raise. I’m going to do a great job right now and make sure my boss sees it.
Those are the people that are rewarded and that’s what I mean by the two kind of people. If you’re attending a webinar like this, it does not matter how much information I share with you. It does not matter how much I talk about what I’m doing or I give you strategy. If you’re waiting for life to do something for you, it will never ever happen. You will dance around the dance floor but never actually find a partner. You’ll orbit the planet but never touch down. You’ll get close, but you won’t get to where you’re actually benefiting. That happens when you make a choice to change and you make it your responsibility to go get the things that you want.
Real estate investing often feels like this. This is so good. I know this because as an agent, I’ve had more people than I can count, come in my office and sit down and when we really, really, really get to what’s behind their fear, it’s, “I don’t want to end up with a house that I don’t like. I don’t want to end up with a property that I don’t realize everything is going to go wrong.” What they think is they pick a property, they jump off the cliff and they hope that they like where they land and the property that they get is where they land. That is not how it should feel. If you’re feeling that you’re doing it wrong, you have the wrong agent, you have the wrong strategy, you have the wrong mindset. It is not like this. I’ve never bought a deal that felt like this right here.
If you catch yourself hoping that you like where you land, you need to get off the hopium. Hopium is not a good strategy. It doesn’t help you. It’s a lie. What it should feel like is this… let me give you a practical example. Do you guys like that? Tell me, in the chat, if you want me to give you a practical example of how real estate should feel like walking on a trail, on a path with other people. I don’t want to belabor the point if you guys are already kind of seeing what I’m saying. But tell me if you want me to give you an example of how real estate investing should look like this. I’m seeing the yes. It should be step-by-step. Every step on this path at the end of this path is the property that you’re trying to get or the goal that you’re trying to achieve, all right?
The first thing that you should notice is you’re not doing it alone. There are other people with you, that will help you teach you be there for you when you fall. Maybe they’ve walked this path before. Like me, I’m a guide. I do this constantly. I’m up and down this path all the time. So I can tell you, here’s where you avoid the poison ivy. Here’s where the water’s going to be. Here’s where the shade is. This is where we’re going to stop. Oh, we don’t want to go that way. Oh, this time of day shouldn’t go that way. This is not the right market for that. We’re a guide, we know what to expect. But even more practical than that, it is one step at a time. You look at leads, you get leads, you analyze them. 60% of them won’t work. On those leads, you stop moving forward, you’re okay, you’re safe. You didn’t jump off the cliff on the 40% that worked. You pursue them. Out of those, maybe 10% of them get back to you.
The other 90% of those leads, you throw them away. You’re okay, you didn’t jump off the cliff. Out of the 10% that got back to you, you maybe put it in contract. That still isn’t the end of the journey. That’s just one step. After you go into contract, you order an inspection, you look at the inspection report. If it looks bad, you stop going down the path. You don’t buy it, you didn’t jump off the cliff. If the inspection report looks good, you negotiate with the other side to see if you can get a little extra money. You take another step. Now comes the appraisal. Oh, the appraisal came in low and the seller won’t come down on their price.
Okay, we stopped moving forward. I didn’t jump off the cliff. I’m okay. Right? Then we agree on the appraisal or the appraisal comes back well. You look up what the rents would be for the area. Rents are way lower than I thought. I talked to a property manager, they said, we’re not going to get that much. You’re okay. You stop. You quit walking. It is a little step after a little step, after a little step with very little actual commitment on your part to that deal. Now you have to be committed to the process of walking this path. But you don’t have to be committed to the process of every single deal taking that path. That’s why you shouldn’t be scared, it’s why I’m not scared. I routinely will have a person come to me and say, “David, here’s this amazing deal. I think you should buy it.” And I will say, “Great, write up the offer right now, put it in contract.” I’m known for this. We call it the five minute offer.
I will just wrap something up and put it in contract right away, but I will have contingencies in that contract that I can back out if I don’t like something and I know exactly what I’m looking for. And then if I move forward with it and I get the inspection report done and, oh man, it’s got some terrible termites or horrible foundations, it’s going to be $50,000 to fix, I go to the seller and I say, “I need you to give me a 50,000 credit or I need you to fix these things or I need you to drop the price. You don’t want to do it, okay, I’m just backing out of the deal. No harm, no foul.” Get my money back. I’m not scared to take this journey because I realize I’m not just jumping off a cliff and hoping that I like where I land, and that’s the same way that it should feel for you.
It’s only scary when you feel like you don’t know the path. But when you’ve got a guide with you or other people walk in the journey with you, your risk is significantly decreased and it’s not scary anymore. At BP, we build tools to help investors on their journey toward their life goals. This is not just theory. This is how thousands of real estate investors, including myself, have found financial freedom.
So here are two big questions. Are you fired up and truly committed to using real estate to obtain financial freedom? And I’m not just saying, are you interested in it? Okay, do you feel some emotion? Do you feel some passion? Are you excited? Are you like, “This is where I’m supposed to be, this feels right”? This is one of the only times in my life where I’ve been like, that’s it, I know that’s what I need to do. I just don’t know how to get there. And number two, will you take on the 90-day challenge and commit to working 15 minutes a day, five days a week for 90 days, pursuing the lapse funnel, looking for leads, analyzing them and pursuing them?
Here’s another great quote. If more information was the answer, we would all be billionaires with perfect abs. I’ve given you a lot of information. You can get a lot of information on our podcasts, on our YouTube channel. You get a lot of information anywhere. It won’t be what you need. We all know what it takes to get abs. And it’s discipline, it’s accountability, it’s passion, it’s action. It’s not information.
So what’s the key to success, if we want to get a financial six pack? It’s action. There’s no way around it. This is the only way that you get abs is you eat really, really good and you work them out. And not only action, but daily consistent action, right? You can’t get abs by eating really healthy for half the day and then the rest of the time you don’t. It has to be consistent with what you’re doing. Here is a line from Ethan, who’s a pro member in Washington. “I just put my first investment property under contract today. You’re a webinar challenged me from the planning stages to taking action. Thank you for the motivation and valuable information the BP team provides.”
This is from Dawn. “Congrats on your book. Great information as always. I wouldn’t expect anything less from BP. I did the 90 day challenge last year, which led me to my first rental property after analyzing dozens or even a hundred and placing offers on several to land the best one for me. I love BP and I love the BP books and other products. Still waiting on t-shirts.”
I don’t know why you came here today. Are you tired of working your full-time job? It could be draining if you don’t like it. Do you need to start preparing for your future retirement? Are you tired of being a wantrepreneur instead of an entrepreneur? Well, here’s what I do know. Real estate investing works If you work it. It’s just like saying exercise works, if you exercise. Our goal at BiggerPockets is to help you reach your financial goals through real estate, and that’s why we created incredible tools to help you get there faster and with less pain.
BiggerPockets Pro is the way that I recommend you go about doing that. BiggerPockets Pro helps you analyze properties and get your next deal faster. You can analyze properties in minutes, like we just did together and determine which ones are worth pursuing with unlimited access to deal analysis calculators. Those are what I walked you guys through when you saw how easy it is to work this lapse funnel. You can become a better investor with curated article and video content, webinar replays and exclusive articles covering everything you need to make smart investments and avoid bad markets. This is all the content that’s available to BiggerPockets Pro members. We’ve got multifamily investing tips with Brandon Turner and Brian Murray, investing in today’s market economic trends and the impact of the real estate landscape. You’ve got videos on how to use SEO to grow your business, finding and funding great deals with Anson Young who wrote the book of the same name for BiggerPockets. Canadian Investing, how a newbie can start building wealth through real estate, all of this cool stuff available only to pro members.
You could show the community that you mean business with your pro badge. Blaine Alger here has a pro badge. So if Blaine messages me or anyone else we know, he’s not just a lookie Lou, he’s not a wantrepreneur. He’s committed to this process. That’s a person I know that really, really, really wants to be a real estate investor. You can save time and money and minimize risk with lawyer approved lease documents for all 50 states. So BiggerPockets that’s had their lawyers put together standard lease agreements for all 50 states if you want to manage your own properties, available to you for free, if you’re a pro member. And then you get thousands of dollars on loans and other tools that you can use in your real estate business with BiggerPockets perks, you can save that money.
Plus, you can gain access to our discounted educational bootcamps. So these are all companies that have partnered with BiggerPockets to give discounts to their members. Foreclosure.com, where you find foreclosures, AirDNA where you analyze deals for short-term rentals. Open Letter Marketing, a company where you can send letters to people to find leads, all kinds of cool stuff. And then you can accurately estimate rental rates based on local property comparables, listing recency at proximity to your location using the BiggerPockets Rent Estimator tool. This is the one that I walked through with you guys where we figured out how much that property would rent for. That’s available for pro members as well, for free. Very, very powerful tool in your real estate investing world. But what’s the biggest reason to go pro? Because it works.
The BiggerPockets calculators are my go-to for analyzing potential properties. There’s no way I could analyze the volume properties I do without being a pro member. I locked up my first three unit almost a year ago that I’m now selling for a almost $70,000 profit that will go to towards something larger. The BiggerPockets calculators were a huge factor in making sure my numbers were right. This is from Aaron Caraho. Is there any of you here who don’t want an extra $70,000 just because they got a deal? I know that sounds crazy, but in many markets that’s actually not even that much. There’s bigger amounts. I bought one in Pleasant Hill, California in October, so that’s about four months, and that one’s gone up $200,000 in four months, right? There’s just so much money floating around right now that there’s so much inflation that if you’re not taking action, you’re falling behind. Back in June, I intended one of your webinars right afterwards, I signed up for Pro in the next couple of weeks.
I analyzed a bunch of deals. Eventually I found a fourplex. I got it under contract three weeks after signing up for Pro and a week later I closed on another property that was six units. Big thank you to you and the entire team. Final quick tip, sign up for Pro. I made my money back at the closing table. This is from Patrick Menifee. Now, because you sat through this webinar, I have the authorization to give you 20% off of a pro membership should you desire to do one using the code on the screen. So please take a minute to grab your phone and take a picture of the screen so you can get that code.
And there’s more. I can give you more than just 20% off. All right, so you’re going to need that code there. You have to make sure you spell it correctly. If you want a BiggerPockets Pro membership, it’s $390 a year. Now for a premium one, that’s what I have, it’s actually $1,200 a year. That’s for agents and other people that are trying to get leads out of BiggerPockets. But if you’re pro, it’s way cheaper. It’s only $390 a year. It’s not that much. But if you sign up now with that 20% off code, it’s only 312. This is a incredibly low expense for the year for your real estate investing journey. This is less than one home inspection, right? This is less than one home warranty. You’re going to spend way more than this just looking at properties that you put in contract doing your due diligence. This is less than a roof inspection in many cases. But you’re going to need this to find the properties that you even want to put into contract in the first place because it has its tools to help you figure it out.
Okay. You are also going to get the intention journal. This is proven accountability tool to keep you on track towards your next investment goal. There is weekly battle planning pages for goal review, habit tracking, taking notes and more, and a daily action pages for your morning routine, time blocking, goal review, evening reflection and more. Because this is the 90-day plan, we’re giving away the intention journal, which normally costs $40, for free. You’re going to get this workshop that I told you was the best thing that Brandon and I have ever done, a $200 value, for free. This is the Investing with No or Low Money Down Workshop. You’re going to get the Finding Great Deals Masterclass. This is where Brandon Turner sat down with four experts in four different niches, door knocking, direct mail marketing, building relationships, and driving for dollars. He interviewed people that crush it at these things, and we’re going to give them to you so that you can watch how you could do the same. A $990 value, for free.
You’re also going to get Brandon’s free ebook, The Best Ways to Find Real Estate Deals for Investing Success, for free. Now, you’re going to get access to bootcamps as well. So if you’re pro, you get exclusive access to BiggerPockets Real Estate Investing bootcamps. If you’re not pro, you cannot go to these. Pro annual members can join a la carte at a discounted price. Every week, you get access to on-demand videos from Ashley Kehr, live Q&A sessions with real estate investing experts, homework assignments to apply your knowledge and an accountability group based on your investing interest locations and more. $1,000 value if you sign up now.
So let’s talk about everything you’re going to get. It’s over $2,000 value in bonuses. You get 20% off your Pro Annual membership. You get the $40 Intention Journal. You get the workshop with Brandon and I together. You get the How to Find Great Deals Class. You get the online bootcamp access, and all you have to do is take the code I gave you and go to biggerpockets.com/proupgrade. So if this is something you guys are interested in, I’m going to give you a second to go to biggerpockets.com/proupgrade and put that code in. Biggerpockets.com/proupgrade.
Now, you have to choose the annual option if you want all the perks. You can still sign up for Pro if you want to go monthly, but annual is the one that you need to pick if you want those free perks that we talked about. Now, what if you’re already pro? Well, you’re going to get access to all the same things. If you want to watch the videos, you go to biggerpockets.com/pro/videos and you can find the online bootcamp information at biggerpockets.com/bootcamp.
And here’s our guarantee at BiggerPockets. Give Pro a try for up to 30 days. If you don’t love it, just email [email protected] and get a 100% refund just for trying it out. You’re going to go to biggerpockets.com/proupgrade, and you’re going to put in the code that was on the screen. I want to make sure that it works. So anybody here that signs up, please tell me if that code is working or if we have some kind of glitch so I can make sure you don’t miss out on the discount and you don’t miss out on the perks.
And this is a great quote that every successful person I know believes. If you really want to do something, you’ll find a way, and if you don’t, you’ll find an excuse. Very true words. If you want to become a millionaire, you will. Everyone else… not everyone, a lot of other people have done it. You can do it too. If you don’t want to do it, you’ll find a way to make an excuse not to. That’s it. That just tells you what’s in your heart. There’s people that really want for it to happen, they make a way. And there’s people that wish that it would happen, and they make an excuse.
Okay. What questions do you guys have? I’m going to see if anybody here was able to sign up. Dean, “Is a membership like this tax-deductible?” Yes, you’d have to check with your CPA, but I deduct mine. It is a business expense for your real estate investing business. Absolutely. Do the tools work for Canada? Yes, there are many Canadian members that are pro members and they use the same tools. Good question there too.
All right, what questions do you guys have for me? It looks like I’ve given you guys a lot to go on. I would highly encourage you, if you’re on the fence, to go ahead and do it, especially because there’s a guarantee that if you don’t like it, you can get your money back. And relatively speaking, it’s not that much money compared to what you are going to be spending money on as a real estate investor and what you’ll get out of it. The $312 a year when you consider how much money you’re going to make in real estate, you’re going to make more than that in one month, and you’re going to have these properties for many months, right?
12 months in a year times 30 years, you could do the math, and that’s only for one property. I would highly recommend it. Let’s see. Ian says, “That was a really motivating webinar.” Thank you so much. That is my pleasure. Dean says, “I’ve become an accidental landlord through military moves and have a good chunk of equity in two properties. Would you recommend selling to use the equity or more aggressive investing or just keeping them long-term?” Dean, you’re going to need to message me about that on BiggerPockets and let me know what area they’re in and I can give you a better idea of what to do. What it’s going to come down to is we’re going to analyze how much of a return you’re making on the equity that is in them, and then see if we can get a higher return if we invested somewhere else.
Bilal, “Pro, for sure.” Congratulations, Bilal. I love that you just took your first step towards being a real estate millionaire. That is awesome. All right, I’m going to let you guys get out of here. Thank you very much for your time. Again, if you’re in California, make sure you reach out to me because I want to meet you. If you are not in California, that’s okay. Follow me on social media, @David Greene24. Send me a message through the BiggerPockets platform. Let me know how I can help you. I have lots of different ways. You can also check out my website, DavidGreene24.com. That’s got a little bit of all the stuff I’m involved in, so go through that, see which of those things might be interesting to you, and then send me a message and I’ll see how me and my team can help you.
Really appreciate you guys. Thank you so much. Love that you’re in the BiggerPockets community now. You’re on a journey with over 2 million other people that are all searching and seeking for the same thing as you and all want to help you get there so you’re in the right place. I will see all of you on the next one, and God bless you.
And that was our show. Thank you so much for joining. If you’re not a Pro member yet, I hope that you’ll sign up with that 20% discount that I offered earlier. Again, that’s YTChallenge23. And if you’re not a pro member yet, but you want to be one, please remember you’ve got a discount code waiting for you. That is PodChallenge23. Thanks again for listening. I’ve enjoyed being able to teach you. You can find me at DavidGreene24 on Instagram, Facebook, Twitter, whatever your fancy, or you can check out my entire website at DavidGreene24.com and see all the ways that I can help you build your wealth through real estate. If you’ve got time, check out another BiggerPockets video. And if not, I will see you on the next one.

Dave:
Hey, everyone. Welcome to On the Market. I’m your host, Dave Meyer, joined today by James. James. How are you?

James:
I’m good. I’m excited to talk about, we get to hang out some deal junkies today. My kind of show.

Dave:
Yeah, this is your favorite kind of show. We are going to be doing a flippers’ panel today. So we’ve brought in three, well, two flippers on top of James, who’s obviously an expert flipper. We have Tarl Yarber, who has been around the BP sphere for a long time. So if you watch BiggerPockets YouTube, he’s been on a lot of our podcasts before. So if you know Tarl, excellent, very experienced flipper. And we also have Jessie Rodriguez joining us, host of HGTV’s Vintage Flip. He operates mostly out of Southern California.
James, given everything that’s going on, it’s an interesting time for flippers. What are you looking forward to talking to these guys about?

James:
I’m looking forward to just adjustments, right? With every market cycle you got to change all your businesses, but especially your flipping, like how you’re doing it, who you’re hiring, and how you’re [inaudible 00:01:12]. And how people are making money, because people are a little spooked right now, but it’s a good business to be in.

Dave:
Yeah. Yeah. And today I expect that we are going to hear the good, bad and ugly. There’s obviously some good stuff in here, but we both know Tarl, He likes to keep it real and explain all the sort of behind the scenes things that are going on, and it’s not all glitz and glam and some of the challenges of the business. So I think anyone who has has a preliminary interest in flipping is definitely going to want to listen to this show, because I think between the three of you there’s something like 1500 deals flipped, something crazy like that. How many of you flipped?

James:
We have done about five to 600. We’ve been involved in over 3,500 transactions with flips with our clients, blended money and ourselves. So it’s over a billion dollars in flips we’ve done.

Dave:
What?

James:
Yeah, or transactions with flips. So we hit that threshold last year.

Dave:
Wow. Oh my God, that’s insane. All right, well, I’m sorry to have said 1500. Yeah, a little tired. Just a couple deals. Wow, 3,500, that is wild.
Well, today in this episode we are going to hear a little bit about a concept called dollar cost averaging. If you’ve never heard of it before, it’s a term popularized in the stock market. And the general idea is that rather than trying to time the market, you inject capital into your portfolio at regular increments. So if it’s stock market, maybe you take some money, put it in once a month when you get your paycheck or something like that. With real estate, maybe it’s you flip a house every six months regardless of market conditions, or buy a rental every two years. And the idea is basically that because asset values accelerate over time, if you can just pin your success to the average return, you’re going to do really well. And this is sort of just this sort of humble way of admitting you can’t time the market, and you’re just going to ride the general market sentiment. So just wanted everyone to be aware of what that is before we get into that show. But with no further ado, let’s bring on Jessie and Tarl.
Jessie, can you tell us a little bit about yourself for those of our audience who don’t know you already?

Jessie:
Well, what’s up, Dave? Thanks for having us. James, Tarl, how are you, guys? So started flipping in 2010 after the market crashed. I was a big REO agent, so sold hundreds and hundreds of houses. Started seeing everybody else buy my stuff, and I said, “What the hell is going on here? Why are these people buying homes that are depressed, that are underwater, but the rest of America don’t want to buy anything?” And picked up one of the investors, started working with them, became a mentor, and taught me the game of flipping. Still one of my good friends to this day, I still lean on him. And then here I am, 12 years later after doing that very first deal that I bought for $65,000 in Southern California, which is insane when you think about it. It’s like 650,000 now.
I probably should have learned the buy and hold game in 2010, because of what I want to be right now. But over 400 flips later, still active, 17 of my pipeline today in this crazy market that we’re in. I’m terrified of it and love it. It’s an addiction. And I am flipping in Southern California, which is one of the hardest markets in the country to really do it, where my average purchase price is like a million bucks, and average rehab is 350,000. So, when you say 15 or 16 deals, all of a sudden it equals 20 million bucks out, which is a lot of money. And thank God James gives me all his money so I can do it. So yeah, it’s been fun, man. I love doing it. It’s crazy.

Dave:
Nice. Well, we can at least give you a space to talk about your addiction here today in good company.
Tarl, you’ve obviously been around BiggerPockets for a very long time and a regular on our YouTube channel. But for those of you who don’t know, can you tell us a bit about your flipping experience?

Tarl:
Yeah, sure. So I bought a seminar in 2005 when I was 20 years old, it was called How to Turn $10 Into $10,000 in 30 Days or Less. And it was about wholesaling real estate. I did three deals. And the third deal, we made a hundred grand on as a double close, and then I quit, because I hated every second of it. So I didn’t get back into it until 2010. And actually, it’s funny, Jessie, so you said you were an REO agent. Were you in Southern California at the time?

Jessie:
Yeah, Southern California.

Tarl:
Yeah. So I got associated with a company called Charter Home Alliance outside of Scottsdale, Arizona, where we were a SAM contractor for Fannie Mae. So we would do service area management. So we would do construction for Fannie Mae on REOs, and that’s how I got back into the industry, was I flew around and opened up seven different states. And basically in a nutshell, met all the REO agents, met all the contractors, set up tons of networks. And through that we got involved back into investing in real estate mainly because everything was just sitting there, and REO was insane, and we had access to all the infrastructure and operations. Me and two of my buddies basically started another company and then started buying. That went well until February 2014, and then the three of us broke up because the other two became, in my opinion, they became crazy. Money does funny things to third people.
So one of them got into drugs, it was just stupid stuff and I left immediately. Never wanted to do it again. And then in October 2014, one of the funds that we partnered with a lot hit me up in Seattle. This is when I moved to Seattle and said, “Hey, let’s partner up in JV on deals.” And I started fixating real estate at that time. That’s when I started buying a ton from Jimmy, actually, James is there on this. I think in, what, 2015 or 2016 bought 30 houses from me, I can’t remember how many, but that was how I got back into the business.
And then by mid 2015, I stopped partnering with people and started doing everything internally at that point and went crazy. If you add everything up, approaching probably 680 plus deals or so, give or take, since 2010. And that also includes all my partnership ones that I did with my buddies in 2010, 11, 12, 13, and part of 14. And then, yeah, mostly Seattle, Tacoma, since 2015, also Portland. And now I live in Austin.

Dave:
Nice. Do you still hate it?

Tarl:
Oh, I’ve never liked it.

Dave:
Not Austin, just real estate.

Tarl:
Oh, yeah. I like Austin. I’ve only done real estate for money, and I’ve never enjoyed it too much. I’ve enjoyed the bank account.

Dave:
Wait, are you being serious?

James:
Honestly, I love that.

Tarl:
I’m a hundred percent serious.

Dave:
It’s a means to an end, right? You don’t have to love it.

Jessie:
I don’t think I’ve ever heard somebody say it like that, that’s so successful. I love the, “I actually hate it, just like the money.”

Tarl:
It’s more fun to say, “Yeah, I hate real estate.” I mean, I hate moments for sure. I love holding onto real estate now, which is great, until a tenant becomes an issue and I hear about it. I do everything I can to know nothing about what’s going on with our tenants on our properties, but I know we’re going through an eviction right now. And I hate hearing about that stuff and whatnot. So it’s great when I look my balance sheet, that’s fun.

Jessie:
It’s funny you say that because I hate rentals. I’m addicted to the flip. I mean, any deal, whenever I buy a rental, and James owns a few, I look at it and I go, “Yes, $200 in cashflow. Woo, let’s go, baby.” Or flip it and make $42,000. And it’s like, now here I am 10 years later and I have eight freaking rentals. That’s it. And it’s like probably should have kept some of those.

Tarl:
We’re in the same boat on that. I didn’t keep my first rental until 2016.

James:
And at the end of the day, each property has a purpose, and that’s the purpose of flipping. We could keep them, you can buy them, but at the time you’re making a decision to increase every property. I don’t really have any regrets of the properties I sold because each flip had a purpose. And for the last 20 years as we’ve been flipping homes, it always has a purpose, and you have to kind of adapt and change with the markets. And right now, the purpose is-

Dave:
The purpose just making you as much money as possible.

James:
It’s to grow your cash. The more cash and capital you have, the more passive income you can have, and the more passive income you’ve got coming in, the more you can chill out, even though I have not figured out how to chill out yet. But it all has a purpose. And right now it would’ve been great to keep them, but in today’s market, it’s hard to keep rental properties because the rates are so high. And flipping has a really good purpose in today’s market, you can buy properties still increase your cash, and with the cost of money being very expensive and everything being expensive, it will grow the capital.
And that’s the beautiful thing about flipping in today’s market, in this market has been changing rapidly with their interest rates. And I think what we’re diving into deep today is you can flip in any type of market. I’m excited to have Jessie and Tarl in here because they’re a bunch of deal junkies, and I get along well with deal junkies. It’s not chasing that deal and growing money. With flipping right now though, Jessie, I know you’re in a very expensive market, the rates are expensive. I know for us as borrowers and flippers, cost of money has gone from 8-9% to 10 to 12%. What kind of changes have you made in today’s market with buying with the cost of money being at where it’s at your whole times, and then also with the dispos taking a little bit longer? Because it makes a huge impact when you’re buying a million bucks, that’s 10, 12 grand a month in your hold times.

Jessie:
Yeah, I mean it’s a ton. So I’m at just under one point and nine and a half still. So my rates are still pretty good on hard money with a 15% down of load to cost. So it’s decent. I loved it when it was 10% down. The key right now is I’m buying a lot less though, James, where I used to keep 25 flips going up one time, and that doesn’t mean I’m flipping 25 at one time, just means I’m holding 25 and making payments on a bunch while I’m flipping 10. So I’ve gone down to 11, 15, because I’m trying to turn them faster. I looked at the math and I said, “How many crews do I have? Let’s divide it up. How fast can I turn these? How long can I let something sit?” Because the problem when you’re a flipper is you don’t ever want to say no to a deal.
Someone brings you an opportunity, you say no, you worry that it’ll come back again. One, I’ve got some patience now and I’ve been okay to say no to some stuff and let them realize, “Hey, I’m still buying. I just need to sit tight on this one because I’m maxed out.” But it’s all about speed. Because we see rates right now are going up. What’s going to happen happen? We’re hitting the winter months. Is it going to slow down? We had a great peak this spring where everything I sold, I sold for five, 8% above list price, which was fantastic. And when you look at it, I’m looking at the average of the whole year. I hate what could be coming here in a couple of months in November and December, where I list something and I might get 5% less now, but I made up for it in the front half of the year.
The way I look at, I’m always flipping, and I’ve been flipping for 10 years straight, is, I don’t necessarily look at every deal on a deal by deal basis. Obviously, I want to win on every single deal, but I’m okay with looking at, “All right, I flipped 28 this year. I was definitely way up on all of them. Couple that didn’t work out because I went overrun on costs, or timing, or I did a bunch of projects where I’m adding accessory dwelling units, so that picked up the timeline set of six months. I’m at 12 months, I’m at 15 months on some of them.” But the value add is so big that I’m able to offset if the market adjusts a little bit.
So there’s a balance there in those that I really like. So a lot of it right now is just speed, speed, speed. And luckily, my money is still pretty good. But when I started I was at three points and 12% on my hard money. I see people like, “Oh, rates are so high, rates are so high.” I mean, I flipped a couple of hundred homes at three points and 12%. So it can still be done, just buy better.

James:
I was getting loan shark money back in the day, it seemed like in 2008 we were financed at four points at 18%, and that was the best we could do in 2008. And I’m pretty sure my legs would’ve got broke. We didn’t even turned the money.

Tarl:
To that point though, Jimmy, I mean, those of us that were in the market even that time period, I think about why Jessie didn’t buy you hold onto much. I didn’t hold on too much. It was hard to get long-term financing, but it was easy to get… You had hard money, so it was like a lot of us were flipping because money was harder to get, but deals were out there. And I think that’s just something to realize a lot of us, we can’t wait for the market to crash if it crashes at all. But when it does, money’s harder to get and people usually run away from at that point. Or they don’t keep the deals or they flip them or whatever, a wholesale or something like that.

Jessie:
Yeah, because the DSCR wasn’t around in 2008, 9, 10, 11 and 12, when you could buy everything for under a hundred grand in California and then BRRRR out of it. That’s a newer product. So you’re right, I remember having these amazing deals, having a ton of equity and then being like, “Okay, I can’t refi out of them, because I already own four or five in my name,” where there used to be a cap on conventional financing on how many you can have in your name and things like that. So it’s been good the last couple of years with all the BRRRR, and the DSCR stuff.
And James, you mentioned earlier about there’s a function for the money and right now maybe if we can’t refinance out of stuff, or it doesn’t make sense to hold the rental. So yeah, this is the capital growth phase of our business for the last few years. You guys, I mean, James, you probably held onto a lot of deals in the last two, three years when you were able to get three and a half, four and a half percent DSCR loans, I would imagine. Now, if those aren’t penciling, now you’re like, “Just turn the money, build more capital. If the market shifts in another two years and rates come down again, then you move to that cycle again and you hold more rentals.” Am I guessing that correctly?

James:
Yeah, as capital gets constrained, and I think this is a good thing to discuss, flippers have to adjust. In every market you have to adjust. And money was really loose. You had DSCR loans, which were basically loans that covered… Your income would get you qualified for the loan, right? So if you had higher rents, the lender’s going to lend your loan amounts based on the income you’re bringing in. Hard money was cheaper too. Down payments were lower. And what’s happened with hard money is it’s gone kind of back to what it was. Standard hard money downs were 20% down. And lenders have to protect themselves as the market gets riskier, and that’s what it is done for flippers is it’s tightened up the market again, but it’s just, as the money increases, that just means we have to pivot. And so Jessie and Tarl, what pivots have you guys had to make when you’re buying now, when you have an extra two to three points on your monthly interest?
I know it’s affected us quite a bit, because we’ve been flipping a lot of multimillion dollar properties. So if I got a $2 million loan, my payment is 2020 grand a month. And if I got 10 of them, it’s a big nut. And so that basically boxes me into where I can only do a certain amount of projects of that size. What pivots have you guys made to buying in today’s market? Because as the market has cooled down, it’s also created some amazing opportunities. We’ve been buying things a lot cheaper right now. How have you adjusted around? For us, we got to buy deeper, we add extra carry timelines on there. If our average flip was taken to about six to seven months, we’re running our performance at eight to nine months just to be safe. What adjustments have you made with this cost of money, because has really locked up some flippers and it’s made a lot of them go to the sidelines rather than just keep buying?

Jessie:
Well, I’m seeing, I’ve moved a lot back to the minor cosmetic when I started in 2008 and 2010. So [inaudible 00:16:52]. Trying to get into a property and see if I can flip it at four months, but not doing the additions, not doing the accessory dwelling units like I’ve done for the last couple of years. It’s not to say I won’t do one if I see a big opportunity, but I’ve got a handful of the deals that I’ve sold in the last three months that it was lipstick. I mean, it was just new cabinets, new countertops, laminate wood floors, the way I used to do it. The stuff that I don’t want to post on Instagram, the finished product looks like something that Tarl would have to flip my flip. But I’m getting in and getting out fast and make it 40 grand, and the carrying costs are very low, hard moneylenders are very happy with me right now, my private guys because turning the capital.
Because a year ago, they’re like, “Hey, man, you’re holding onto this low for 12 months, 14 months. We need you to start turning this a little bit quicker.” So I’m really glad the adjustment happened, because it kind of got me back to the beginning of when I first started flipping, and how it was just a volume game, just quick, quick, quick, instead of chasing big home runs on large purchase prices. That’s probably the biggest adjustment that I’ve made.

Tarl:
For me, I mean, full disclosure on my part, I wouldn’t say I’m one of the guys on the sidelines, but I definitely for sure am not on the starting line right now when it comes to investing out there. I’ve been looking for any excuse whatsoever for probably the last four years to stop buying properties. And last year I already moved out of Washington, all my properties I own are in Seattle and Tacoma area, and I was just looking for an excuse even before the market shifted and before rates even went up to just stop buying in that area to begin with for a period of time. I think it’s just because I was burnt out of that area and I just didn’t want to be there. That had nothing to do with markets whatsoever. It just had everything to do with personal lifestyle. But when the market changed and when the rates went up, I used that as a reason to say, “All right, I just don’t want to buy right now.”
So we closed everything out last year. And then here in the Austin area, I was really seriously looking for some time. What we instead did when it comes to finance and money, when it comes to debt wise, the stuff that we have done has been more with private capital, and also with private lenders instead of traditional lenders. And any type of financing that I’ve had to do outside of that has all been just internal stuff that I’ve already had with lines of credit and so forth. And it’s just made it a lot cleaner on our end.
Right now, I’m very seriously digging into multiple markets to jump back into. I’m still looking at Seattle/Tacoma to jump back in there again. That’s why I was like, “Hey, Jimmy, I’ll call you later.” But for the most part, there’s a few other markets that I’m more focused on, just because of cashflow purposes and being able to buy cash, raising money and so forth to be able to do that, instead as a cash hold, instead of having to deal with having to get debt and rely on DSCRs and all that stuff right now with rates being so high.
And that’s what I’m more focused on more than anything right now. It’s forced me to do what I should have done a while ago, which is focused on the long-term. I think one of the things that I’ve loved about house flipping is that, I joke about you get to weigh your money instead of count it, when you do it. But at the same time, I have a good buddy of mine that only bought and hold since basically 2009. And he does really, really well with budgets, right? He’s making 200 bucks a month on a house. He’d have to save money up and go buy another down payment, and get another down payment and save up for another down payment, or leverage and get a line of credit, and then use that to go get more down payments on the houses and then pay those off, so forth.
So he is really good at budgeting. When you look at a lot of house flippers that were making a lot of money, we were the opposite. We didn’t have to budget it as much because we were making so much cash and whatnot for it. So it also had me thinking short term all the time, like six-month increments instead of long-term increments. And for me personally, with the way rates are, I’m happy that it’s done that. I am hoping that the rates don’t ever go down anytime soon. I hope they stay up.

Dave:
Why? Because you want prices to go down?

Tarl:
I don’t think it’s going to affect single family as much as people might believe due to rates. We can talk about unemployment, I think that’ll affect single family more than the rates will. But if the rates dropped right now today, I think it would just destroy our economy in so many ways. There’s reasons for that. It’s already on track for that. But real estate shouldn’t spike up like it did the last few years. We all know that. We’ve all benefited from that. I’m thankful for it. But at the same time, if it all of a sudden just dropped dramatically right now, it’s going to create more issues than good.
And also bring more people back in the market and create more competition in the short run drive prices up again, which I don’t think is a good thing. And I got a lot to say about that, but that’s where my brain is right now. I want the rates to stay up right now.

Dave:
So, why then are you considering jumping back into the market? And are you looking at flipping or more of a buy and hold strategy?

Tarl:
Both. So the reason why I’m jumping back in is I can’t time the market, it’s at the end of the day. For me, I took a little break, and being able to just have more fun and shore up some stuff on my end, we’ve been putting more money into the deals we already have. We have some commercial properties, we’ve built up more. We have some single families, we have some build projects that we wanted to get back on track and stuff for our end. And more focusing on that to be more strategic this time, and not just reacting to just flip, flip, flip, buy, buy, buy, because you have a machine that you have to feed. That’s one of the things that is cool, is you get to build this great operation when it comes to flipping, but at the same time you got to feed that machine. And I always kind of hated having to flip to feed the machine, versus being able to keep everything and whatnot, which that’s just more my mentality lifestyle wise in my head. Dave, I’m sorry, I ranted, what was the question again?

Dave:
No, you answered my question. I was just asking about flipping or renting. It sounds like both.

Tarl:
Yeah, both opportunistically. But more on the long-term thinking of it. So dollar cost averaging houses and whatnot, being able to sit there and go, I can’t time when the best market is. I’ve thought the market was going to crash since 2016. And every single month I’m like, “This is the month we’re all doomed.” And I’ve been wrong every freaking time. So when Covid hit and your bank stopped lending, I’m like, “Get rid of everything.” We didn’t do that, but I was definitely thinking it. So I’m sure some of us were too.
But at the same time I’m like, “I can’t do that.” So instead, I think single family is still a good investment. I think that, for me, getting back in the game more hardcore over the next 18 months has a lot to do with what I think might happen in the multifamily world and commercial world later down the line, so that we’re building up our credibility still in the space in different markets. So that way when things kind of fall apart in the other asset classes, we already have the ground and operations set up in the markets we want to be in to be able to maybe grab some bank owed properties that are more in the multifamily side.

Dave:
And before we move on, Tarl, I want to ask, because I think you’re the only one here who’s actively looking at new markets. What are you looking for in those new markets for flipping or buying hold?

Tarl:
So we’re looking at everything as cash. So we’re not really caring about the interest rates as much. So things have the pencil out there. So it’s got to be, I could list some of the markets, but for the most part, if we’re buying something cash and forcing the appreciation on it through the burst strategy, but without actually refinancing instead holding a cash, then these markets have to be able to pencil out at least on an eight cap of some sort, seven to eight cap, for a rental buy and hold. But that’s also forcing the appreciation through the bird strategy. And at the same time, there’s got to be demand in those areas and have property management in those areas, and all that stuff, because we don’t self-manage inside. So there’s great markets that I’ve been looking at that are fantastic for maybe a flip, but would suck for buy and hold because property management would suck in that area.
And at the same time for us, we’re looking at where are people moving to? Where are the jobs going? What’s the sustainability? Was it one trick pony kind of town that’s out there that’s dependent on one industry? Just all the basic stuff that you’re going to want to look at for long-term growth. Versus flips, there’s tons of, I think you could flip anywhere, in my opinion. Doesn’t matter what’s happening in that market, I literally think you could flip anywhere and jump into a market and make something happen. It’s just, do you want to hold onto that property for five to 10 years in that market? That’s where the challenges come in that kind of change our thinking on things. I’ve never thought long-term in this business, ever, so it’s always been six months at a time. So it’s been an interesting game that we’ve been playing lately on my end to get rid of that thinking.

James:
And I think what Tarl mentioned is a lot of flippers did, they took a little break to look at what’s going on with their current existing business to change their strategies around reset, because this market is creating different types of opportunities to flip properties a different way. Things that have caused us issues are the cost of labor. The market has gone up dramatically over the last three years. The labor has been a nightmare getting people to work, and getting people to show up. Especially in expensive markets, like Jessie, I know you’re in LA, right? Not only was there a lot of flippers going on, there was a lot of residential purchasers buying and building their dream homes, which are sucking up a lot of our flipping talent. Jessie, how have you combated? Because I know in West Coast cities, Tarl’s there, I’m there, they’re expensive, the labor’s a lot more expensive.
As we go into this new market, rates have changed, is creating different types of opportunities that you can buy. So things that we’re looking at is, how do we also reduce the labor costs and do things a little bit differently? What have you been doing to get those costs down? Because that’s a big deal going in. Money’s expensive, labor’s expensive, and the resale’s not quite as expensive as it was. So you got to change things around. So what have you been doing to battle that labor market down? It’s been a huge nuisance for us.

Jessie:
Yeah. So I think that the fact that there was Covid and everybody started building, actually helped me, because I definitely had a laziness factor where I had my handful of crews that I’ve worked with for so long that I stopped kind of micromanaging the numbers. It’s like a roof would used to be 10 grand, then it went to 22,000 or whatever, and it was like, “Well, but my prices went up a hundred grand. So I’m making more money so it makes sense that they’re making more money.” And I just didn’t question it. Then last year’s market happened. And all of a sudden it’s like, “Oh my god, this market’s going down. What are we going to do?” And I adjusted and I said, “Okay, well, I need to just get through my inventory.” So I stopped buying for nine or 10 months total, just kind of like what you talked about.
And it was all a function of I just want capital to come back in so I can reassess. And when I was doing that, all of a sudden I’m like, “Hey, I need to go get three bids for this roof. Let’s clean up all these systems. Let’s button down the budget. Let’s make sure that we’re not just being sloppy because we’re used to doing so deals and used to making money and we weren’t watching it.” So the biggest thing we did, James, was just kind of get back to the basics of saying, “Hey, I love you and I appreciate you and I know we worked together for five years, but your prices have creeped on me a ton, so I’m just going to go get two more bids.” And then I can get those bids and I could go back to leveraging them.
And the one thing, because when you have a crew that you’ve been working with for five years, 10 years, that they’ve never had to go get another job, because they know that Jessie’s always feeding the machine like Tarl said, right? It’s like, “I got to make sure I keep buying a house, because I don’t want to lose that crew.” That is a legitimate fear, because I don’t want to have to go out there and train. Well, last year when I knew I was downsizing the business and slowing it down, I was like, “Oh, I’m starting over, essentially. I don’t mind going and interviewing new crews.” And that was huge.
I brought my cost down on these rehabs like 30, 35%. And it was kind of sad to say how loose I was for so long, because when money’s coming in, you don’t necessarily need to micromanage every little piece of it. So for the last 10 months, 11 months, we’ve been buying a ton, and scaling the business back up. But at these better margins now, at these better expense models, which has been really, really cool. So plus, making sure that I’m flipping them faster. Yesterday I did a video where I said, “I’m busting the Dave Ramsey debt model of stacking payments to chip away at one credit card, then move all that money to the next,” it’s called the flip stacking model. I’m moving three crews to a house today.
Because I’m like, “Hey, if this market’s going to adjust on us the next three months and I’ve got 11, am I working on 11 at a time and then I’m five months from now, and then they all come on the market?” I’m like, “No, I need something on the market in two weeks.” So it’s like landscape crew, exterior crew, interior crew, pulling from three different houses onto one and get everything, get that house done in two weeks, and then stack that crew to the next one. Because now I just want to make sure I’m getting something on the market every two to three weeks, instead of the last five months of like, “Oh, I’m going to have all these beautiful projects, and then you’re kind of slow because waiting for a sub.”
It’s like, “No, I’m moving everybody and I don’t care if they’re on top of each other, and I don’t care if they’re off at me, that the painter doesn’t like that the one guy’s there, and they’re always pointing fingers.” It’s like, “Deal with it. I need this house done. Everybody’s on. We need to be on the market by September 15th and then the next project by October 1st, the next project by October 15th.”
So that was I think a topic that I did, or an idea that I did, six, seven months ago when the market was different, or a year ago, and it really worked. And then all of a sudden I stopped doing it again. And then now I’m like, “Go right back to that model. Let’s push, push, push.” So just micromanaging the crews more than ever has been a huge way to get those costs down and making them realize that I’m not just a fat cat that they can always count on and that I’m not checking their budgets or their numbers anymore.

Dave:
It’s really interesting, everyone, you sort of get complacent and you start trusting people. And I mean, it’s just inevitable. But I’m curious, how big a turnover was it? You run a lot of crews, how many are you still with that were with you before you started this crackdown?

Jessie:
So last year, seven crews that I had for multiple years, and I’m down to two.

Dave:
Oh, okay. But are you still at seven total crews, but you replaced five?

Jessie:
No. So from seven down to two, up to five. Added three more. What I’m realizing is the old model of the two-man crew, or the three-man crew, that would do everything on a house, doesn’t seem to make sense today like it did seven, eight years ago. I’m actually finding that it’s cheaper to go to every single sub, than the idea where it used to be like, “Oh, this one crew does paint, laminate baseboards, they install cabinets, they do all the minor electrical, minor plumbing.” Now it’s like, “Dude, it’s cheaper for me to go with a stucco guy than to have my two-man crew,” because when you’re paying these guys 200 bucks a day, or 250 a day for a two, three-person crew, and then it takes them three weeks to do stucco versus a professional crew that comes in, the cost may be the same, but the speed. That’s the biggest thing right now. Everything is speed.
If I can have a stucco crew out there while I have the wood floor guys on the inside, while someone else is building a fence and the exterior, it’s better to go that route because I just knocked out three trades in the same week and a half than having that crew that kind of jumped, because I was trying to save 20 grand. It’s not saving me 20 grand when we have 10% interest rates on these hard money loads.

Tarl:
I think the biggest thing you just said to everybody listening to this is how much we’re all excited to be learning how to flip houses because we want to learn construction. And all of us got into this business because we love construction. And the fact that you’re just mapping out a lot of what you just said, Jessie, though, requires a lot of project coordination, project management, timing, being able to figure out, making sure the subs don’t step on each other and stuff that you don’t have electrician going in there at the wrong time. And the same thing with plumbers and HVAC guys and whatever.
But that requires a lot of, which is all true, I mean, the three of us, Dave, I don’t know if you flip, sorry.

Dave:
Nope.

Tarl:
For the three of us that do, most of us have gone to that model of hiring subs directly versus the one GC, but it is because we leveled up our construction game because we had to, right? At some point. If we all wanted to, we’d hire one GC and walk away and never see the house again until it’s done and they call us up saying, “You can list it.” That’d be freaking awesome. That doesn’t happen.

Jessie:
We just have to be better buyers to do that, right? We can get it for 30 cents on the dollar, let the builder do it, make his 25% GC fee.

Tarl:
Yeah, but that’s what happened when the market shifted. I think it brought up so much to people how bad they were at their operations in their business, in a sense. And where our business as house flippers or investors, the 80 plus percent of it is in the construction of the rehab on the day-to-day working aspect of it. The acquisition side of it, you can be like me where we don’t door knock or do direct marketing, we just go buy from wholesalers and agents. So you have to have that aspect of making sure you’re comping the properties correctly and you’re getting the right deal. Or you can be a business that’s also direct marketing, acquisition and sales, all that great stuff, and you’re buying the properties in additional to rehab. But if you’re just focusing on buying the properties and most of the business is in the construction of the rehab and making sure you’re staying that budget, and with the way things have been, I think it woke up a lot of house flippers to be how bad they were at that.
And in order to make the business work today, it’s having more sure numbers. I remember, Jimmy, I don’t know if you remember this, I remember you and I talking on the phone I think in 2022 or 2021, I can’t remember. I think it was 2021. We were just like, “Let’s just throw darts to figure out what construction cost is going to be today because it’s changing so dramatically.” But that said the other aspect of when the market shifted a lot of house flippers, there’s a number of house flippers that were terrified of losing their ass, basically, and losing money, and the way rates are and whatnot. And because their projects were behind and there’s a bunch that did, but Jimmy, not to keep bringing you up, but I remember us being at BP CON last year and we were kind of talking about that, and I agree a hundred percent with what you said, is these guys that were complaining about losing money, they’re not remembering that they made a million bucks flipping houses already. They just didn’t save any of their money.
So the reason why most house flippers lose at markets like this is because of poor cashflow. And I mean, business cashflow.

Jessie:
And how most flippers the last few years thought they were Gs is because they flipped the house and it made a hundred grand more than they expected. Even though the rehab costs went up 50,000, and they still made a hundred, right? It’s like had nothing to do with the flipper, had to do with the market, just went up a ton because of Covid. And then they started getting cocky, and then they started buying at lower spreads, because everything was like, “Well, this deal has upside.” And that’s terrible. I mean, that is the quickest way to exit this damn business as a flipper, is to break your buy box just because you want to do a deal.

Tarl:
Yeah, or spend all your money. I mean, we lost 150,000 last year on properties, but that would destroy a lot of people. But at the same time it’s like, “All right, because we have cash that we were able to handle it, and it’s also an average of all the houses we do and everything, it’s just part of the business.” But I guess the thing I’m trying to say is that if you’re in this business, make sure you’re managing your cash flow because things change, stuff happens.

Dave:
Along those lines, are you seeing people leave the business not as voluntarily as Tarl may have due to force of circumstance?

Tarl:
I have. You could see it in, I mean, I don’t know who else has access to this stuff, but you could see it in the amount of people looking for new debt. And so what I’ve noticed is that people that were the A players before Covid and during Covid, were more likely to wait and see because they’ve already built it up. That’s what I’ve seen at least from people I’ve talked to, all the event stuff that we host and everything, that they’re more likely to not be jumping head first, because from what I’ve noticed, they don’t want to lose what they built. So it’s more of a fear aspect of, “I’ve built this up, I don’t want to lose it by risking it.” So they’ve already risked it before they build it, so they don’t want to do it again. And that’s not everybody, for sure, but there’s definitely a good chunk of people out there like that.

James:
And scared money don’t make money.

Tarl:
A hundred percent, a hundred percent.

James:
People are leaving and it’s like good, I’m thankful. Because honestly, it was too oversaturated for a minute and people were making bad decisions. And what we talked about is people got lazy, including myself. It’s like you could buy anything and it was going up in value. You could mismanage your project, you were going to make money. Now it’s gotten back to the grassroots of flipping. Buy a good deal, manage the construction, manage your plan, you can make account for your cost, and you can make money at it. And what it’s done, it’s funny because you hear people say like, “Oh, flipping’s a terrible thing right now.”
I hope everyone continues to think so because the margins we are getting, we were buying at a 30% cash on cash return prior to Covid, and that’s with leverage in there. It’s about a 13 to 15% cash on cash return. Now we are hitting 50 to 60% cash on cash with big fixers in there. So the margin has doubled, so it makes it less risky, even though the market’s a little bit hairy right now. Rates keep creeping up, it’s very sergy, people show up one day, they don’t show up the next. And you kind of have to weigh it out. But as long as you can pat it and there’s enough margin in the deal, my worst case scenario on a couple of my deals is I work for free. I’m still going through the process, but if the market corrects further, there’s still enough padding in there to get the deal done.
And so there’s some really, really good opportunities if you can put your pen to pencil, and you want to figure it out, like Jessie said, bring out more people, have it bid out numerous times. We basically fired every one of our contractors from the last couple of years and we restart, because it’s either get on the ship or get off the ship. And unfortunately, a lot of them, now they’re all calling us for work too. “Hey, can I get work?” And it’s like, “Hey, no, I will give you work, but we got to talk about this.” And so the sediment, it’s funny, it goes in surges. Your flippers are no different than your consumers. Every time the rate shifts like a quarter point, they show up to your house and it goes back up, they don’t show. The flippers are the same way. They’re like, “Oh, I heard it goes well, I’m going to look for a second,” and then pull back out. So you consistently keep buying, the margins are better.

Tarl:
Yeah, that’s a dollar cost averaging aspect of it, where, I mean, you can’t time the market you just got to… But I mean, everybody’s got their personal preference with what they want to do with their money at the same time.

Dave:
But Tarl, I wanted to ask you about that because dollar cost averaging I feel like works really well for rentals where there’s less risk of principal law, actually losing money. You could underperform, but it’s kind of a paper loss. For people who are relatively new, do you still recommend that strategy? Because if they have all of this capital invested into a pretty volatile industry right now, you might not get to average it out. It might just be one and done for you.

Tarl:
Yeah. No, you got to make money on that deal.

Dave:
Your first one, you got to hit it. You got to make money on that first deal. You got to make money on the first 10, right?

Tarl:
None of my advice ever, ever, whether it’s on my Instagram or anything I’ve ever done, has ever been for new people. I just want to throw that out there.

Dave:
Okay. All right. Fair.

Tarl:
No, you got to have money to lose and be okay with it. And you’re always risking. I mean, everything at the same time, and everything we do, is educated guessing. That’s what it is. We’re like, “Hey, I feel really well-educated and I’m guessing really strong because I’ve done this enough.” You’re measuring risk. Risk equals reward. It’s all about mitigating that risk and whatever you’re comfortable with. And I’ve seen a lot of new people that when the market was going up, still lose their ass, because they didn’t know how to measure their risk associate appropriately. It doesn’t matter what’s going on with the market, it could be going up and you could lose money, and there’s plenty of people that did that, right? And there could be going down and you can make a ton of money. So I’m not really too concerned about that. But whoever’s investing, I mean, if you’re taking your hard-earned cash or other people’s hard-earned cash, I hope you know what you’re doing. That’s what it boils down to.

Jessie:
I always say, and this is going to go opposite, I always felt like flipping is not risky. There’s so much science to it if you follow the science, and you establish a really good buy box, 65% of a RV. You know what I mean? The market would really have, everything would have to go wrong, which of course it could happen, but even through the last year, there was one loss that I took in the last 10 years on a house. There was some breakevens, or made five or 10 grand. And that loss that I took was out when I went out of state, when I left my core market and I was like, “Oh, I want to buy in Park City.” I also bought it to be an Airbnb. So I had this one plan and then decide, construction went bad, everything took forever, storms hit, and then I was like, “You know what? Forget this, dude. I don’t want this rental. The rents aren’t going to be as good.”
And then I decided to sell it, and that’s when I took the hundred thousand loss. And I was honestly happy to take it, because I was like, “Just get me the heck out of this market.” I moved to something I don’t know, go back to where the science makes sense for me, where I know Southern California real estate like I know it inside and out being a realtor here for 17 years. And so I feel so comfortable and safe flipping if I stay within my parameters.

Tarl:
I do want to add to that though. It’s just not to throw it out there, but it’s for those people or anybody listening to this that’s not on the West Coast, they might not have those same experiences with flipping and feeling comfortable with it, because us on the West Coast, we definitely benefit when it comes to market appreciation versus other markets and so forth. So it’s not always the same when it comes to that market.

Jessie:
Well, and that’s why I won’t buy out of state. You see a lot of talk about go get deals in Columbus, Ohio, or rentals. It’s like, even to buy a rental in California is so expensive. But when I look at like, okay, it’s expensive, I get more depreciation, I’m going to get more of an appreciation play over years, because this is one of those markets that goes up the most, rents increase at a crazy high rate. So if you are really good at buying every great flip, or not every, most great flips are usually good rentals because you’re buying for 60 cents on the dollar. And then we have all this upside. So it’s like when I have this great debate with friends that are like, “Dude, go buy 50 units in Ohio,” and I’m like, “I’ll go buy a four unit in LA where a one bedroom rents for 3,500 bucks a month.”
But I think I stay within my comfort zone, and why I think it’s safe to be an investor, right? Follow your buy box and stay where you know the market. I bought one deal a couple of months ago in Johnson City, Tennessee. Random as all can be because I was like, I want to test a place where I’m buying something for 70 grand that if everything goes sideways, it’s like, “All right, who caress? It’s 70 grand. I’ll still make a 5% cash on cash return, no debt on it,” stuff like that. And then I’ll see if I feel comfortable and start to go in those directions and do a little bit of more out of state. But every time I do the math on it, I’m like, “Just go buy a fourplex in LA.” With ADU laws, make it six units. It’s such an easy way to make money, I feel like, in a comfortable area.

Dave:
All right. So before we get out of here, this has been a very interesting conversation. Did not go the way I was expecting it to, and I like that.

Tarl:
We could change it. What do you want us to say?

Jessie:
What was the topic?

Dave:
No, I love it. I really like the diversity of opinions here. It’s great. But I am curious if people are interested in getting into flipping. Let’s start with you, Jessie. Do you have any advice on what they should be thinking about as we head into, not just an already difficult time, going into a difficult season of the year with rates marching upward? What advice would you offer?

Jessie:
I’d say when you’re penciling something out, overestimate on your rehabs, overestimate on how long it’s going to take. Just build a buffer in every single direction, which means it’s going to be harder to buy the deal. But if you do that, then the science is going to make sense and you’re going to be safer. So, I also think that flipping, I made a lot of money through the downturn, I made a lot of money in the up. I think we’re going to be fine, and just stick to buying something and be quick with it. If you’re going to buy something and you’re going to, “Oh, it’s going to take me 15 months to do,” don’t do it. Don’t buy something that’s tenant occupied. I get people all the time, it’s like, “I’ve seen this great deal. It’s got tenants in it.”
Like, no, not in California. Do not do that, right? Buy something vacant. Buy something that could be a minor cosmetic fix. Get in and out 90 days or back on the market in 90 days, and you’ll make a little bit of money. You’ll win, you’ll feel good, you’ll learn a lot, because it’s education on the first five, 10 deals, right? You’re going to have to go through all those growing pains. And us with four or five, 600 deals, we’re still learning.
So I would just take it safe. And I’m not a big off market guy. I’m big into agent outreach. I love getting deals from realtors. I feel like I get some of the best deals I’ve ever gotten. Not necessarily the MLS, but just realtors. So it’s focusing and hitting agents like crazy, and letting them know you’re an investor, I think is one of the best places to get a deal even right now.

Dave:
All right. Tarl, I know you are against giving newbie advice, but could we ask you for one nugget?

Tarl:
What’s escrow? That’s the quick no, anyways.
No, no. I’m totally onboard with that. I think one of the very first thing is, what is your buy box? What is the deal to you? And that doesn’t mean, what’s the deal to me? What’s the deal to Jimmy? What’s the deal to Jessie? We’re all different buy boxes at the end of the day, even though Jimmy and I were in the same market forever. But still, he’ll buy stuff that I won’t buy, and vice versa. There was a period of time where I bought a ton in Tacoma for years. And I’d get the deals from Jimmy because he didn’t want them then. But now he’ll take them all, I guess. But at the same time though, it’s like, “What’s your buy box?” So if you’re looking at a lot of deals and it’s like, “I don’t see any good deals.” And most of the time when I’m talking to somebody new and is saying there’s no good deals, it’s because they don’t know what a good deal is to them yet. They haven’t really refined that buy box for themselves.
And then once you have that buy box, make sure it’s realistic in whatever market you’re in. Because that’s the other aspect. You can have a great buy box that any of us would love, but then it might not be something that exists in the market that you’re at. And additionally, if everybody’s in this game at different levels, so some people are starting out with zero capital, some people have a lot of capital. At the end of the day, it’s like you really only need three things to do any deal, and that’s time, money, and expertise. So which one do you have? Are you the person with all the time that has no expertise and no money? Well, then you’ve got to go find people that have those things and add value, or go figure out how to wholesale, or something like that.
Which is a lot harder than it looks, by the way, the wholesale. It looks like it’s easy, but it’s not. You have to know a lot about the business to be very good at wholesaling. But that said, maybe you have a lot of money, but you don’t have the time and you don’t have the expertise. Cool. Maybe you shouldn’t go flip a house. Maybe you should go lend that out to somebody or partner up in JV. So just know where you’re at in that game and know what a buy box is for you, and then start looking for that stuff.

Dave:
That’s great advice. Thank you. James, you got anything for us before we go?

James:
Yeah. I think the best advice, if I was starting over again, is, everyone’s taught to chase the deal. If you get the good deal, you’ll make money. And flipping is a business, and you got to build it backwards, right? You don’t go start selling trinkets on Amazon and just going out and buying product without understanding the cost. Build your team, then build your buy box, because your buy box is going to get built based on the resources and people you have around you. If you’re new, go get your lender locked down. How much cash you need to put in that deal? What’s your cost going to be on that? Go work with contractors, find out what they’re good at, and then based on your resources, build your buy box and go start buying.
And so everyone, don’t skip the line and go buy the deal. Go get prepared to buy the deal and buy the right one. And if you have the right people around you and you have the right systems around you, that’s where you can flip in any market. And so focus on the people and the resources, not the deal right now. Once you have that, then go start buying.

Tarl:
That’s what I meant to say. All that.

Dave:
I concur. We’ll edit it. So it sounds like you all just said that. All right. Well, thank you all so much. This has been a great conversation. We appreciate your time and expertise here. Jessie, if people want to follow you, learn more about you, where should they do that?

Jessie:
On Instagram, at Jessie Rodriguez, J-E-S-S-I-E, for the spelling of Jessie. At Jessie Rodriguez.

Dave:
Nice. What about you, Tarl?

Tarl:
At Tarl Yarber, on Instagram.

Dave:
All right. James, why don’t you just tell us where we can find you?

James:
Best way is probably Instagram at jdaineflips, or jamesdainard.com.

Dave:
All right. Well, Jessie and Charles, thanks again.

Tarl:
Thanks, guys. It was fun.

Jessie:
Dave, thanks so much. James, thank you.

Dave:
On the market is created by me, Dave Meyer and Kaylinn Bennett. Produced by Kaylinn Bennett; editing by Joel Esparza and Onyx Media; research by Puja Gendal, copywriting by Nate Weintraub. And a very special 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.

Raunaq Singh, Roam founder and CEO, joins ‘Power Lunch’ to discuss how his company takes advantage of assumable mortgages to undercut high mortgage rates.

In her series exploring how couples are navigating their marriage, money, and mindset, Jessica Abo sat down with Katie Love, the founder of Love Social Media, and her husband, Aaron Martin, who is the father behind the social media account @stayathomedad.

The Story That Changed Everything

It was Christmas Eve in Columbus, Ohio, and TV news reporter Katie Love was assigned to cover a heartbreaking story. “A family of four died in a fire when their Christmas tree fell over in the middle of the night,” Love says. Her voice trembled with emotion as she delivered the tragic news. ‘I was devastated for obvious reasons and went back to the newsroom very emotional.’ The weight of the story had clearly taken its toll.

However, when Love returned to the station, she was met with an unexpected inquiry. The news director called her into his office and asked a perplexing question: ‘Why didn’t I see that Katie Love smile on TV this morning?’ Confused and taken aback, Love couldn’t fathom what he was getting at until it became apparent that he had been watching her report on mute and was completely unaware that she had just delivered the tragic news that an entire family was gone.”

Meanwhile Love says her boyfriend at the time, Aaron Martin, was an investigative reporter in Pittsburgh, Pennsylvania, and was not dealing with feedback on his hair, wardrobe, or facial expressions. “He was getting called in for his storytelling and his writing.”

Around the time they got engaged, Love got a reporting offer in Pittsburgh, which meant she and Martin could work and live in the same city. But two weeks before she was supposed to start her job, she realized the toll working in TV news had taken on her mental health and decided it was time to do something else.

“I learned a lot about the power of social media. I’d covered a lot of missing persons cases and if a mother got me a poster that I could blast out on Facebook, Instagram or Twitter, everybody knew about that child being missing in a few hours versus waiting for the five and six o’clock news to talk about this person,” she says.

Seeing the power of how information could be disseminated on social media so quickly made Love feel alive and she realized that she wanted to bottle that up and work with female founders and their online presence.

Going Out On Her Own

When Love told Martin she was going to start her own social media agency, he told her it was a great idea. “In my head, I’m thinking, you know, small businesses take a while to succeed. I had no doubt Katie would be successful. I just figured we’d be living off of my salary for at least a couple years, maybe longer until she got things going.”

Things moved a lot faster than both expected and by the end of year one, Love was out-earning her fiancé. By year five, her business hit 7-figures and she was creating social media strategies for celebrities like Noami Watts and Bethenny Frankel.

“It was fantastic. I couldn’t have been happier because she was doing what she loved and was doing it really well,” he says.

The Realities of Startup Life

After a long day of investigative journalism, Martin would come home and just want to unwind. “We did a lot of watching TV while she worked on her laptop,” he says. So there were certainly challenges at times where I remember saying like, ‘Hey, can you log off for a little bit so we can hang out?’”

Love admits she was working, 24/7 because the success of her company was on her shoulders. “Whether I got a client or not or money came in was all on me,” she says. “But I had to figure out for our marriage, how to shut the laptop sometimes.”

Martin says his advice for other couples facing this challenge is to be vocal. “‘I would say, ‘Hey, you know, I really want you to be present for this.’”

He also shared he accepts Love for who she is and gives her grace when he knows she needs to work.

Parenting Through COVID

Six weeks into the lockdown, Love and Martin welcomed Adley into the world. Throughout the first year of their daughter’s life, Martin had long workdays, leaving home at eight in the morning and returning at eight at night. Love found herself navigating the challenges of motherhood while simultaneously scaling a company. The pressures of the ongoing pandemic weighed heavily on Martin as he ventured into the outside world, with the constant worry of exposing his wife and daughter to the threat of COVID. Additionally, he grappled with a sense of guilt, knowing that Love had an overflowing plate. “When you’re doing all that while sleep deprived, it can create a lot of tension. So we certainly had our fair share of struggles, but luckily, we’re very good at talking things out on something’s bothering us. We don’t let it simmer. We talk right away.”

In 2020, Katie’s revenue doubled and she went from three to six employees. They had been talking about moving to Miami to be closer to family and decided it was time.

#StayAtHomeDad

With Love working more, a move in the works and no nanny, Martin suggested he stay at home with Adley for a few months while he looked for a new job. “And that was two years ago,” he says. “It quickly became something that not only did I enjoy because I realized how much time I had been missing with Adley and not getting to experience it. But I realized how much I could help Katie as well, and liked how much I could take off her plate.”

While Martin took to his new role well, he and Love were caught off guard. “I don’t think either of us understood how difficult it was going to be changing our entire parenting dynamic a year and a half into Adley’s life,” she says. “Katie was working from home and doing a lot of parenting while I was gone. She had a much larger say in a lot of decisions about parenting just naturally because she was there. So things that I didn’t really care about before, now that I’m staying home with her, not only do I care about, but I have really strong opinions about. And it took several months for us to get comfortable, but I think it’s made us stronger because of it,” he says.

With Love being social media savvy, she decided to buy the @stayathomedad handle for Aaron as a fun little gift. And having that handle has opened him up to being in the New York Times and other opportunities.

It’s a system Love and Martin have figured out for their family. But it’s a lifestyle that doesn’t come without other people’s judgment. “When I went to pick up my daughter from school, a teacher said, ‘I’m not used to seeing you! Why don’t you ever come and pick her up? You should be the one picking her up. We always see your husband, you’re never here,’” she says. “It’s painful to hear that,” Love admits.

While she works on navigating life with mom guilt, her advice to other working parents is to focus on what’s making you happy and drown out the noise, “or else you’ll never get to where you want to be.”

Martin has advice to share as well.

“I just feel like the idea of people being as understanding as possible and really just accepting that there are different dynamics that are out there as long as the kids are healthy and happy and it works best for your family, then that’s what you should do.”

David:
This is the BiggerPockets Podcast Show 821.

Ryan:
Day one, when I joined Grant’s team, he used to underwrite a deal. I used to tell him two minutes, it’s actually like 43 seconds, but I’m like, man, if I could underwrite a deal like Grant, then my whole life would change. What I do is I just take the number of units times the rents in place, not like what the broker’s telling me, in place rents, and then I just use the occupancy of 94 or 95% depending on the marketplace. And then I just use rough numbers, like, okay, my expenses typically in between 40 and 45%. And so I just, okay, this is what my NOI is going to be based on here’s the income minus the expenses, here’s my NOI. And so I can solve on these bigger deals, they all traded a cap rate. And so I literally can underwrite a multifamily deal, 300 units within two minutes.

David:
What’s up, everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast, the biggest, the best, and the baddest real estate podcast in the world. Every week, we are bringing you stories, how-tos, and answers that you need to make smart real estate decisions now in this current and ever-changing market. I’m joined today by my co-host Roberto Abasolo, who does a great job today, by the way, Rob.

Rob:
Oh, thank you. I appreciate that. This was a fun one. You and I walked out of this with brand new shiny nicknames. You are the skyscraper of real estate, and I am the fire hydrant of real estate. And so I think people really going to have to stick around to the very end to find out how we got these self-dubbed nicknames.

David:
That is a great point. Make sure you check those out. This will be something funny. And when you see Rob in person, you’re going to want to call him the fire hydrant. Today’s guest is Ryan Tseko, an airline pilot turned real estate investor who started buying some single family properties, turned that into multifamily, now runs a fund and he’s crushing it. And he gives some great advice for how to do everything I just said, as well as the right way to approach somebody to get into the right situation. I thought this was fantastic. Rob, what did you think about that?

Rob:
It was really good. It was really good because he put himself out there in a way that showed value to someone else and solved the problem for them. And I think this is probably… I mean, there are so many lessons to take away from today’s podcast, but the way that he approached it and his willingness to just get in the mud, get a little dirty, figure things out and really jump in the ring, really set him apart to really have one of the most amazing career transformations I think I’ve ever heard of on this podcast. So I’m excited for people to hear his career unfold as we get into it for the next hour.

David:
Yes, sir. This is a great episode. You’re going to listen all the way through and take some notes. Before we bring in Ryan, today’s quick tip is simple. Show up with solutions and not just problems. Any human being can show up and say, “Hey, boss, there’s a problem over here.” That doesn’t help. It’s better to come and say, “Hey, here’s a problem and here’s what I’ve already done to try to fix it. What do you think? And what could I do better?” Be the person bringing the solutions in your world, not the problems.

Rob:
And by the way, and I have another quick tip. Number two, quick tip light. All right, if you ever get intimidated by RE terms, RE means real estate, by the way, real estate terms, you don’t know NOI, cap rate, LOI, go to biggerpockets.com/glossary. If you’ve ever heard us toss around abbreviations or things that really… Like terms, a lot of the times that can be found on the glossary and it could explain it for you. We do our best to always stop and rewind and explain anything that might be a little bit too much of an acronym. We get a little carried away with the eight-letter acronyms every so often. So yeah, go to biggerpockets.com/glossary if you want to brush up. Yeah, I’m excited when he talks about the GQLMIP. I think that’s one of the most standard real estate principles out there, so.

David:
Let’s bring in Ryan. Ryan Tseko, welcome to the BiggerPockets Podcast. A little background for our listeners. Ryan’s been investing for about 15 years. He started in single family and small multifamily early on in the state of Arizona. Has three million invested making 10 to 12 a month fully passive now, and we will find out why that is later. Ryan has a love of flying and leveraged that passion into a new career. The biggest hurdle he overcame was the do-it-yourself mindset, and we are excited to hear all about this. Ryan, welcome to the show.

Ryan:
Thank you so much for having me, Dave and Rob, always great to be here.

David:
Thank you for that. It sounds like a lot of your foundation is built on being a pilot, which is important. Because I’ve learned the older I get, how much the foundation of myself is built on looking at the world through the prism of a basketball player. It was like my first passion I ever had. So when I form a business, I build a team, I take an approach, I always see it analogous to playing basketball. I’m guessing that you’re probably going to have something similar to being a pilot. Is that the case?

Ryan:
For sure. And look, I actually didn’t even know I was going to be a pilot when I was growing up. My uncle, it was something that he always wanted to do. I was 17 years old, he was a builder. I wanted to buy my first house and he looked at me, he said, “Son, you don’t have any money.” And so we were flying one day and I looked at him and I’m like, “I could actually get paid to fly airplanes?” And when he said yes, I was hooked. So it was actually kind a roundabout way for me getting back into real estate. But 1,000%, I mean, aviation and flying like basketball, there’s just a lot of discipline, there’s a lot of training, there’s a lot of checklists. And so that’s helped me tremendously transfer the skillset that I’ve learned in my 20s into buying real estate and managing real estate, so 100%.

David:
Oh yeah, I imagine that’s very much like your pre-flight checklist, buying properties and knowing what needs to be done when they’re bought. You have to have great vision, know and trust your instruments, rely on the information that other people gave you, and trust that you’re getting good info. People are your priority. You value safety of others. You trust your team to get you on and off the ground and support you on this journey. In your opinion, what makes a great pilot?

Ryan:
So I think what makes a really good pilot is somebody who has the ability to learn, but also stay curious. When I was getting into becoming a pilot, there’s two different types of pilot. There’s bold pilots and there’s old pilots, but there’s no such thing as a bold old pilot. And so these are the different sayings that we have in the aviation business because we could all be bold, but at a certain point in time, you have to rely on, okay, what is the safe approach for the flight? And I really think that it’s a constant training event. As a pilot, it’s over and over and over, and so what makes a tremendous pilot is somebody who flies a lot. Same in the real estate game. Who’s the most proficient in real estate is somebody who’s doing deal over deal over deal. I just keep it simple.

David:
Ryan, you mentioned that your uncle introduced you to your love of flying as well as your love of real estate. It sounds like that’s a very influential person in your life. Can you tell me about your relationship with that person and how real estate sort of entered into the conversation?

Ryan:
Yeah. So when I was about 10 years old, my parents split. I moved from Southern California to Scottsdale. And my uncle, he was actually a builder in Scottsdale, Arizona. When I was a young man, he brought me on the job sites because for me, I was just trying to, okay, what’s next? So I wanted a car, and so he started teaching me about real estate. He was a builder. He always wanted to be a commercial airline pilot, but one day he took off, he was flying and he actually scared himself because he couldn’t find the airport, and so he literally gave up on his dream of becoming a commercial airline pilot.
And so when I was 17 years old, I didn’t have any money and we were flying and I asked him, I said, “Hey, look, can I actually get paid to do this?” And he said, “Yeah.” And so really that’s when aviation was introduced into my life from a young man and I really just started grinding. I started flying every single day. I put the real estate on hold, but I always knew that I wanted to come back to it. So that’s really how it was introduced to me from a young age and I had to wait because I didn’t have any money.

Rob:
That’s awesome. So that’s how you ended up in aviation. But what was life like in the early days of your career?

Ryan:
In aviation or in the real estate?

Rob:
In aviation.

Ryan:
So I mean, look, in aviation, when you first get started out, you’re traveling a lot. You’re not making a lot of money. My first year as a commercial airline pilot, I think I made $48,000 a year because they had to put so much time and energy and effort into training me. And so I went and got a loan student loan for 140 grand. My first year I made 48 grand. I was a first officer on a $40 million jet, and I was traveling all over the US, Canada, and Mexico. And as I built seniority, life started to become better for me and I started getting more days off. And so you fast track that to 25 years old. This is actually where 2008, 2009, 2010 happened, and it was really great timing for me because I started making money in the airline.
There was great deals in real estate in Arizona, and so that’s actually when I bought my first what I call a crash pad, which is really cool because in aviation it’s kind of like the house hacking. But in aviation, we call it a crash pad where you rent your rooms out to these other pilots. And so I bought my first home and I was able to rent out three of the rooms, collect net profit of 400 bucks. And so that was really my start in real estate. It was a single family home in Phoenix, Arizona, and I was making 400 bucks. I was living in the master bedroom, and that’s when I realized I needed to do something bigger.

David:
So why didn’t you scale and just buy a whole bunch of properties and make them all crash pads?

Ryan:
Because it’s management intensive. The reason I didn’t do that is because you had to manage it. Literally, I went home one night and it’s a common area, you share everything, and I could have scaled it with many homes and it would’ve been a great business, but it’s really management intensive. There’s a lot of people coming in and out of the homes, and it’s just really, really heavy on the time. What I started looking at is, okay, how do I buy these apartments? So my next deal was a fourplex because I didn’t want to live with the renters, I didn’t want to live with the people. And so that’s where my breakthrough happened, where I was like, okay, I could do these single family, but how do I scale?

Rob:
So how did you have the vision or the foresight to even save and invest in your first property? Do you remember how much you had saved up to even get into this crash pad, house hacking situation?

Ryan:
Yeah, so I bought that as my primary, so I needed 3.5% down, I think I put down 10 grand. I’m very frugal when it comes to money, and so even when I was making 50, 60, 70 grand, I was able to save 10 grand a year. What had happened was on my next deal, I saved up 25 grand because I actually had a car that I had bought and flipped in order to get the 25 grand to put down on the fourplex. And so I’ve always been creative, I’ve always saved my money to invest it, but I just knew that I had to keep buying deals because I wanted the cash flow. I wanted to buy a deal and actually make some passive income.

Rob:
I always thought commercial airline pilots were pretty high salaried starting right at the top, but it sounds like no matter what, you sort of have this base salary and incrementally over the years, just like any job, it kind of grows. Is there a side to that where it is super juicy, a really lucrative salary that you were sort of looking forward to? And that was kind of what was going to fuel your real estate in the future? Or did you not really have aspirations to go all in in the real estate space early on?

Ryan:
Early on, I literally thought that I’d buy a single family home and buy another one and buy another one, and then have some multifamily. I didn’t really think of it as I’d be a huge multifamily apartment owner or operator. I didn’t have the belief, I didn’t have the vision at that point in time. And I think any of us, we want to start off with our first deal and we want to kind of get our feet wet. I literally, when I bought my first deal, I didn’t even know what they were talking about when they asked me, “Hey, do you want to buy down a point? Do you want conventional? Do you want FHA?” I had no idea what any of that meant because I was never taught that in school. So for me, it was like, okay, once I found out I could do the first deal, it excited me because I was making 400 bucks.
My second deal, I was making $600, but it was a fourplex, and I actually bought that. It was a foreclosure, and I redid everything. And the biggest mistake that I did was I thought I had to do it myself. So I had no idea I’d end up with 21 units at the age of 30. I just knew that once I bought my first deal and I said, “If you could do one, you could do two. If you could do two, I could do four. If I could do five, I could do 10.” And so I literally just started reading a bunch of books. I mean, I really like to just figure things out. I’m very curious. And so once I had my first deal, I was like, okay, what’s next?

Rob:
That’s pretty cool. Yeah, so 21 by the age of 30 is really quite the accomplishment. You said you wanted to get into this and you’re like, “I’m just going to buy a single family house, single family house, single family house.” A lot of people have different reasons for getting into real estate, but what was yours? Did you have a why or a motivation that… Because it’s very, I don’t want to say rare, but it’s not like a lot of people go into real estate like, oh yeah, I’m going to buy one and on and on. Usually there’s some kind of turning point or some kind of fuel that’s firing them up. What was that reason for you?

Ryan:
So when I would go to work at the airline, what I started to realize is that when I was having these conversations about real estate with my family and with coworkers, a lot of them were saying, “Oh, be careful. Real estate’s risky.” And my turning point for me was I was going to work every single day and I was trading my time for money. And at the time I was getting paid a 100 bucks or 120 per hour, and I was like, how long can I do this for? How long can I travel for the airlines? And so I really had that turning point because I read Rich Dad, Poor Dad, Robert Kiyosaki, like, how long are you going to trade your time for money?
And that was awakening for me, and that’s really what got me on that path to real estate is like, okay, if I can make money here, put it to work in real estate, and then get the cash flow to pay off my student loans. I mean, you guys have to realize I was in debt, 140 grand. I was in debt, 140 grand, and people are like, “Pay it off as soon as you can. Pay it off as soon as you can.” And so what I did is I bought a fourplex with the 25 grand and the extra cashflow that I was getting from the fourplex, I would just pay down an extra $400 on my student loans every month.
And literally by the age of 30 years old, I had $140,000 paid off. I still had the principal, Rob and Dave, I still had the principal working for me and my student loans were paid off. So for me, it was really just that shift at 24 and 25. Although my uncle was very helpful in my early age, he didn’t understand cashflow. He didn’t understand having the assets because remember, he was a builder. He would build to sell for a profit. When I started getting my head right and my mental right, I was like, man, I want to buy it, I want to hold it, I want to cashflow it, and I want to get the benefits that real estate actually provides.

Rob:
Do you remember, just out of curiosity, because student loan payments, they aren’t very friendly. What was the student loan payment like on $140,000?

Ryan:
It was like 600 bucks for 30 years.

Rob:
What? That’s nothing.

Ryan:
But I mean, it was back in 2002 where interest rates were lower and you paid 600 or 700 bucks per month. And over 30 years, that’s a long time, right?

Rob:
It’s over 30 years. Got it. Okay, that makes a lot more sense because I was paying a thousand bucks, but it was amortized over 10 or 10 years or something like that. Okay, so 600 bucks, I mean, not super bad, but obviously if you could replace that with income, that was sort of the goal. You’re like, let’s chop that out and then let’s start figuring out how to use real estate to fuel the overall wealth of your life, right?

Ryan:
Well, yeah, and everybody was telling me I had 25 grand. They’re like, “No, you should pay off your student loan.” And I was like, “No, no, hang on, hang on. Let me go buy a four unit.” The rents were like 500 bucks so I was literally collecting two grand from four units. The mortgage and everything was like $1,200, and after expenses and everything, I had like 600 bucks. So I would literally take the 600 bucks, double it, and I would just start chipping it down so that way when the student loan was paid off, I still had this four unit or I still had that principle working for me.

Rob:
Yeah, okay. All right. That’s cool. So was there any benefit to being a pilot and getting into the real estate world and as a pilot just flying around into new markets, discovering markets? Yeah, certainly you must’ve been more privy to markets than the typical investor that never actually may get to visit a market before they invest there.

Ryan:
So I was based at Chicago O’Hare, LaGuardia, DC. My last base was actually Denver, and so I was able to go and see these cities and I was always shopping real estate on my overnights. And then also I was getting 13, 14, 15 days off because typically in the aviation space, you get four days on, four days off, four days on, four days off. And so it actually gave me time when I got back home to Scottsdale, I can go and look at real estate. When I bought my first deal, I’d have four or five days to actually renovate the units. And so for sure, I always think the biggest mistake for people is when they’re so…
When you grow up somewhere, you have to go and see other cities, you have to go and see other spots because you see the growth, you see the trends, you see different things that maybe you’re not seeing in your city. You see the path to progress. So I’ve always been a student and I’ve always loved real estate, so I used to take advantage of like, okay, the airline’s paying for my hotel, the airline’s paying for me to overnight, the airline’s paying me to eat. So when I was done doing all my job and all my duties, I would go and shop and drive blocks and shop real estate all over the US.

Rob:
That’s cool. So the thing that is always going to be like… I’d love your insight on how you can do this because you’re probably going to be a big help to a lot of the audience today, which is a lot of people get really nervous about investing long distance, and they’re like, “Man, what happens if I get called in the middle of the night,” and this and that. You were on an airplane, and it’s not like you could just take a phone call on an airplane because they make you put it in airplane mode, but mostly because you don’t have reception. So if you don’t have reception and you can’t physically answer a phone call, how can you even run a real estate business that way?

Ryan:
Well, it’s difficult and honestly, when I bought my fourplex, I was managing it myself. I’d have my girlfriend help me. When we’re all getting started out, you literally have to get creative. So my girlfriend would help me if I was traveling. But typically if they left a voicemail, I’d get back with them within four or five… My typical flights were between two and four hours so that wasn’t a huge issue. But yeah, no, it’s a big deal when you buy deals in other cities and states, you want to make sure you have boots on the ground because you have to have somebody who’s managing it very close.
And that’s actually one of my biggest fears. That’s why when I started investing in real estate, I started investing in my backyard because I was actually terrified. I was so scared to go to San Antonio in Austin because Texas was a really big market back in 2012, 2013. There was a lot of that growth between Austin and San Antonio, but I was always so terrified because I didn’t have any boots on the ground. I didn’t know any management companies, I didn’t know anybody who managed real estate. And the smaller the deal is, the harder it is to find a management company to actually manage it.

Rob:
Were you pretty good at that point? You said that you’re working with your girlfriend and she’s picking up the slack for you a little bit. Were you pretty good at turning off the real estate button while you were flying or did it take a while for you to… Because for me, when I go into the movie theaters, this is my big thing when I’m going into a movie theater, I’m like, I’m not going to get to enjoy this movie because I’m definitely going to get a text message or a phone call in the middle of this movie. And of course, it always does happen. Did that ever happen? Did you ever go through that when you were up in the air or were you able to shut that off pretty easily?

Ryan:
You can’t shut it off. I’m the same as you. I’m always looking at my phone. I was actually, I used to not go on vacations because I was like, well, what if the toilet gets backed up? What if they call me? What if they do this? What if I’m international and they can’t get ahold of me? I was the typical scared young investor in real estate and I wanted to do it and manage it all myself.

Rob:
So we haven’t covered who you actually started working for as a pilot yet. How did you go from commercial to private as a pilot?

Ryan:
So this is a crazy story. When I had 21 units, I was 30 years old and I said, “Okay, what’s next?” And I knew that I always, by this time, I knew that I wanted to own and operate and control multifamily units. I just didn’t have anybody where I was from that was doing what Grant was doing. So at 30 years old, I said, “What’s next?” And on YouTube, and actually BiggerPockets, I found Grant Cardone, and on BiggerPockets Podcasts, this is just crazy, he’s like, “Look, I’ve got 3,000 units I’m looking to grow. I’m looking to scale. If there’s anybody out there who’s listening who wants to come and join my team, call me.” And I picked up the phone and I called him, and I literally didn’t even get an interview with Grant, I got an interview with his team.
And they’re like, “Well, we don’t really have a job in the real estate yet,” because they knew I was a pilot. They’re like, “We don’t even have an airplane yet. It’s coming in two weeks, but we got a sales job,” like a sales world job. And I said, “Perfect, I’ll take it.” And so literally two weeks later, I packed all my stuff in Scottsdale in Arizona, and I moved out to Miami and I started working for Grant Cardone. And I knew the way he was talking about real estate when I heard him on BiggerPockets, when I heard him on YouTube, I just knew that he wanted to grow and scale his portfolio. And I was like, man, instead of me doing this by myself, how cool would that be to do it with somebody who has already has a huge headstart from where I was? And so that’s what I did.

Rob:
Yeah, that’s crazy. So how long ago was that?

Ryan:
That was nine years ago.

Rob:
So Grant Cardone, was he established at this point? Now, obviously he’s got a huge name, huge platform, huge portfolio. What did it look like back then? Was he super established? Because it seems like you just took a giant risk to go work for him. What did you see in kind of where he was at that moment?

Ryan:
Yeah, so I saw the opportunity in the real estate market, but I saw Grant was very passionate and he understood real estate. He had about 3,000 units at the time, so we kind of operated kind of a single family, like a family office. So he would buy the deal, invest it in himself. So he would buy a deal, he would take his money, he would invest the money, and he would hold it for long-term. We didn’t have the Cardone Capital and the crowdfunding, and the 12,000 units. We had none of that. It was literally Grant Cardone was a business and a consultant, and he had real estate on the side, and that’s it.

Rob:
Man, that’s nuts. Did you become a private pilot for him or did you join his sales team?

Ryan:
So I joined his sales team, and so two weeks later, he bought a Gulfstream G200. And Elena, I met Elena day one. I was like, “Look, I love flying airplanes.” I had almost 10,000 hours at that time. I was literally flying every single day building up my time. And so I had almost 10,000 hours. I said, “I love flying. I love real estate, and I love helping people.” And she’s like, “Does Grant know this?” I says, “No.” And she’s like, “Well, we’re buying an airplane.”
And so Grant was looking to hire these other pilots. And he called me in his office one day and he’s like, “Look, if I hire you to be my pilot, will you also work with me in my companies and in my businesses on the downtime?” And I said, “Where do I sign?” And so I literally signed a three-year contract with Grant to be his pilot, but then also work with them in whatever business, whether it’s the sales, whether it’s the real estate, whatever it was. I just knew that he was the right guy.

Rob:
Cool. Wow. What a crazy story, man. Well, first of all, I think the craziest thing is that you were like, yeah, you said to call him. So I picked up the phone and I called him. I feel like a different time.

Ryan:
Rob, I was terrified. I was on the line because it’s Grant Cardone, right? I was like, when you call anybody, if I wanted to go work for David and I’m 30 years old, it’s like, man, David’s this and you’re this. You’re like, you don’t know what you’re calling. So I was calling Grant’s office and I was like, “I want to come work for Grant.” And it was a little bit nerve-wracking because I was taking a huge risk because I was giving up my career, I was giving up the airlines, I was giving up the 401Ks. I was giving up the 18 days off. I had built an awesome career for myself, but I just knew there was something bigger.

David:
I want to ask you when you made the call, because here’s why I’m asking if I’m being transparent, this gets spoken about a lot. We just spoke with [inaudible 00:25:01] and he’s like, “You got to try. You got to reach out.” And so this gets spoken about often from influencers, and what that translates into is me getting 40 DMs a day from 23-year-old guys that are like, “I’ll do this. I’ll run your social media. I’ll build a course for you. I’ll automate something and make money off of you.” And meanwhile, this kid has 300 followers and he’s telling me he’s going to grow my brand.
And it’s exhausting having people reach out and say, “I want to work for you.” And you’re like, “What can you do?” And they’re like, “Yeah, I don’t know. Just tell me what you want me to do.” We get in this stalemate, right? So I’m sure if you spoke to Grant, you came in with a plan, you proposed something, and you thought about it. Can you share with our audience the effort you put in before you made the call? So we don’t give the impression simply making the call leads to life-changing things, and you end up on the BiggerPockets Podcast and you have this huge story.

Ryan:
Well, look, I think that I started building my resume and I started building my skillset because to your point, you have to have a skillset that adds massive value to the team. Otherwise, you just don’t add massive value. If I call up Grant, said, “Hey, I want to run your social media, I want to do this,” I don’t have any experience doing it. What I did is I said, “Hey, look,” I wanted to be super easy by the way, but I said, “Look, I’ve got a career in aviation. If you’re going to buy an airplane, I will run the entire flight department for you and I’ll do it for free.” The one thing that people don’t realize, I would’ve done this for free because when you get really close to somebody like Grant, like David, like Rob like me now, it’s so valuable because you just learn a whole new skillset.
And so my pitch was three things. I know how to fly airplanes, and Grant actually made a crack at me one day. He’s like, “Do you really know how to fly?” I’m like, “Look, in four weeks I can get type rate on your airplane and I’ll be the lead captain and I will be there every single day. I haven’t called in sick in 10 years at my current airline, and I also have 21 units in real estate that I know they’re kind of junk, but I want to grow and scale, but give me the shot at flying first and then I’ll work into the real estate piece.” And so really, I think that that was the big value add piece because number one, I was willing to come and make phone calls. I was terrible at it, by the way. I was making sales calls, but I was willing to do it.
And that showed Grant really like I’m willing to do any… Honestly, guys, I’ll sweep the floors. I’ll make the phone calls. I could be at the top, I could be at the middle, I could be at the bottom. I’m willing to do what other people are not willing to do. And he saw that from day one. And also it helped that I met Elena on day two, because Elena has been a huge part of my success, meaning that when I got in here, she’s like, “Hey, Ryan likes real estate. Hey, Ryan can fly airplanes. Hey, Ryan…” Because that’s really what led into me transitioning from being the pilot into real estate.

David:
A few things that we should highlight from that. One, you didn’t come with vagueness or ambiguity. You said, “I can help you in this way and here is why you can trust me.” When we get someone that reaches out and they’re like, “Just tell me something that doesn’t work.” You showed clear value. Two, you said, “I’ll do it for free.” Oftentimes when people reach out, they’re hoping that they get paid in some way or it’s some kind of a partnership and you don’t know who they are, so you’re not comfortable with that. So you took the smart road and said, “Let me just build trust with the person. I’ll work for free.” And three, you offered to work in a capacity where you said making phone calls in a system he already had established. Grant did not have to take you and say, “Follow me around, kid, and I’ll teach you the ropes on the first day.”
He could plug you into a team he already had and they could evaluate your character, your skills. They could see what you were good at. That would be the equivalent of someone saying, “Hey, David, I want to come be a real estate agent on your team.” I could say yes to that. I could stick them with another agent and they could tell me how they’re doing, versus I have to be the way to evaluate, which means I’m probably going to say no until I know the person better. So that, right there, is incredibly valuable.

Rob:
That’s great. I think you nailed down pain point, and you’re like a pain point is if you’re buying a plane, someone’s got to fly the plane, right? 1,000% of the time when I work with someone that reaches out, it’s because they’ve heard me say something on the podcast, they’ve heard me say something on my YouTube channel, on Instagram. That’s like, “Oh, I’m really struggling with this. I cannot figure this thing out.” Or does anyone have a recommendation when someone’s like, “Oh, hey, I’ve got the solution to that very specific problem you have.” Boom, door open immediately, right? It’s 100% what you said, David. I think you framed that up pretty correctly. Find the value, solve the pain.

Ryan:
And Rob, I didn’t negotiate too, when he said, “Here’s the deal,” I just said, “Hey, where do you want to sign?” He’s like, “I want to do a three-year deal with you.” I was like, “I’ll do a 10,” because I just knew. I hope that if people could take one thing away, if you can get around the movers and shakers, if you can get around the people who are actually doing [inaudible 00:29:43], that’s my advice to all the young guys out there. It’s like to my 21-year-old self, if you could add value to a team, if you can get around a team who’s already doing what you want, that is the fast track.

David:
Yeah, just take note there. It’s not about reaching out to someone with a terrible pitch or saying, “I just want to work with you.” You have to be clear about what you’re looking for if you want to get a clear response back from the person. But it can work out really well when they do it the way that we’re describing here. Now, we understand there was a pivotal moment when you went from flying high to being grounded. Can you share what happened in Alabama?

Ryan:
Yeah. So Elena was a huge part of my career in bringing me into what I call the circle. I literally, in Christmas, it was eight years ago, we landed the airplane in Fairhope, Alabama, which is a super cool runway. It’s like really, really small. We landed the G200 there. It’s kind of a private airstrip. And I went to the hotel and this is over Christmas, and Elena calls me, she’s like, “Hey, look, you guys are our crew.” Because the one thing about Grant and Elena is that they actually, the people who work with them and work for them, they’re really like an extended family. And so she’s like, “Hey, do you want to come over for Christmas dinner?” It’s at her parents’ house.
And I’m like, I looked at the other pilot, and Rob and David, I you not, he said, I’m like, “Hey, they just invited us to come over for dinner.” And the other pilot’s like, “No, I’ll pass. I’m going to go down the street and eat at this pub or whatever.” And I’m like, “Really? You don’t want to go in and have dinner with the boss?” And so I went over to the house and I noticed when I got there, Grant was a little bit aggravated. And I started asking him questions. I was like, “Well, what’s going on?” And he’s like, “Well, I have a property that’s 10 minutes north of here. And when I went there, the pool was dirty, the blinds were down, it was closed. There was nobody there.” And he’s like, “I pulled up a report and I had 40 units. I have 40 units that are not leased.”
And I was like, “Wow.” I was like, “That’s BS, number one.” But I was like, “Two, how can I help you?” And he’s like, “Well, what do you mean?” I’m like, “Well, how do I help you? I want to lease those units.” And he’s like, “You would do that?” And I was like, “Yeah.” I was like, “Heck, yeah. Tell me more about it.” And so he started going on and telling me about the property and everything else. And I looked at him, I said, “Well, what if I parked the airplane in Miami when we landed in three days, and I came back up here and I rented those 40 units for you? Would that be of service? Would that help you?” And he’s like, “Wow.” He’s like, “You would do that.” And I said, “Absolutely. I’m going to get a plane ticket right now and I’m going to come up here.”
And guys, you got to keep in mind, I’ve never ran a 344 unit complex before. I have 21 units, and I took a huge risk and I was like, you know what? I’m willing to do it because I knew I could lease. I knew I could call. I knew if I just got in this building, I can lease 40 units in 40 days. So I told him, “I’ll lease 40 units in 40 days. Will you give me a shot?” And he’s like, “Come up here, let’s do it.” Yes, that’s the transition. That was my transition where Grant actually gave me a shot working in the real estate and I was up there the next week.

Rob:
Okay, so a couple of things. You’ve kind of mentioned you were working with Elena was pivotal in this relationship with you and Grant. Who is that, for reference?

Ryan:
So Elena Cardone is Grant’s wife.

Rob:
Got it. Okay, cool, cool, cool. And so you’re flying for them. I guess you’re doing phone sales a little bit at the beginning of it. And then he’s like, “I got to lease all these units.” And you’re like, “I’m going to do it.” He’s like, “Wow, you would do this for me?” And like, great, and you go and you do it. How did you actually lease 40 units and how long?

Ryan:
So the task and the goal was 40 units in 40 days over New Year’s and over Christmas holiday.

Rob:
Okay, all right. So how the heck did you do that?

Ryan:
So here’s the cool thing. So I went up there the next week and he’s like, “Look, I want you to get an air mattress and I want you to live on site.”

Rob:
The high life right there.

Ryan:
Yeah. “And I want you to stay in a one bedroom apartment.” And I’m like, “Okay.” I was just willing to do whatever it took. And so I flew up there, got an air mattress, got a one bedroom, put the air mattress up. And I was literally the first day that I walked into the leasing office, I realized really quick that there was nobody leasing, there was no leadership. The manager was posting on Facebook, there was three likes. I’m like, well, clearly that’s not a lead gen. And so I called Grant, I said, “What would Grant do?” And he says, “This is what I would do, Ryan.” He’s like, “I’d go back in the last 90 days, pull out the list and print it off of all the people who came in and didn’t rent.” And I’m like, “Perfect. Done.”
He’s like, “I’d call them, I’d paint a picture, and I’d get them back in there and I’d lease them a unit.” And he’s like, “I’d just start with that.” And so without doing anything else, I pulled the list. I started calling people, cold calling them, right? “Hey, you came to this apartment complex 30 days ago, 45 days ago. Have you found a place yet?” “Nope, I haven’t.” “Perfect. I found the perfect unit for you. We actually have a discount, we have a special right now. Come back in tomorrow. I’ve already picked out your unit.” And so I started getting all these people coming in. I literally started getting all these people coming in. I said, “What else would you do, Grant?”
He’s like, “Well, I’d go put your phone number on the front side of the building, on the street I’d go and put your cell number.” I’m like, “Perfect. I’ll go get a sign made.” And so I went and got a sign made, got some new balloons, got new flowers, started cold calling people on the 90-day list, and I started going knocking on doors of all the businesses in the five-mile radius. And within 15 days I had 15 leases, each lease every single day. And by the 15th day, he called me back, he says, “Ryan, get your back here. You are now part of the real estate team.”

Rob:
Man, dude, rock and roll. I honestly am really impressed because I feel like I would be already pessimistic about that advice of call everyone who has come in the last 45 days and see if they are interested. I would’ve assumed everyone found a place and that wasn’t the case.

Ryan:
That’s what we call follow up.

David:
As a side note, that is the number one biggest area where people need improvement in almost every business. I call it lead bleed in the real estate books. I wrote the top producer series, so much of the time it’s lead bleeds what’s hurting you. You write an offer on a house, they say no, you forget to go back and check a couple weeks later. You just assume someone else bought it. The thing’s still sit in there. The sellers are singing a different tune, right? Maybe someone else tried to put it in escrow and they accepted.
And then it fell out of escrow and they’re heartbroken. And if you show up at that exact time, they’ll take an offer for 75 grand less, but you’re looking for the next deal that you can just write the offer on and try to get. We frequently give advice, you got to write a lot of offers, but we never remind people go back and write offers on houses that you were already rejected for. It’s that same principle, and yeah, he’s smart. He knows that.

Rob:
That’s crazy. That’s good. All right, so you get the 15 done, 15 days. What about the other 25 units? Was Grant no longer worried about that because you sort of figured out those systems for the rest of the team or what?

Ryan:
Yeah, so what happened was I identified who the real leadership was coming from in the community, which was the assistant manager. And so what happened was we promoted the assistant into the management role, and then also on the maintenance standpoint. Because that’s also a big thing in multifamily and apartments is you have to turn the units and make them ready because everybody, when you show an apartment, just like when you show a house, David, you know this better than anybody, you want to show the end result. You want to show the finished product. So I think 20 days, I was there for about 15 to 20 days, and that was plenty of time to identify who the players were, give them enough momentum and energy.
Because look, when a guy like myself or you or David go into somewhere, that’s great energy and you could really start building that momentum. So we got that place leased. It was like 95% within 30 days, and then the proper team members were in there. So now I could start going and focusing on, because at the time I think you had 3,000 units to 300, so you had about 10 deals. I was able to go and start working on other deals because that’s really where I started cutting my teeth in this business, is I wanted to make sure that Grant’s portfolio was running 10X. And so he started putting me on all these other deals saying, “Hey, you get in touch with this management company. You get in touch with this property manager. You go and just make sure that you’re going through all these deals.” And so I leased 15 units, I came back here, there was a team of two, it was called Grant Cardone and Ryan Tseko. That’s what we built off of. It’s crazy.

Rob:
What you’ve just showed is not only were you willing to roll up your sleeves, get your hands dirty, but you actually succeeded. That’s the thing is anyone might be willing to go out there and try it, but you actually did it. Were you already a natural leader? Was this something that you were good at? Are you particularly a charismatic salesperson or was it sort of like a fake it until you make it type of thing?

Ryan:
I think I’ve always had the ability to learn. I think back what David asked me earlier is how did the leadership and the pilot skills transfer into what you’re doing now? I was a captain for nine years of a 70-passenger jet, $40 million airplane. Leadership is highly trained in the airlines. And I think that from a piloting standpoint is I’m very systematic, I am very logical, and I am a people person. I think people are the most important part of the business. I know a lot of people are like, “Oh, it’s this, and it’s this, it’s this.” It’s the people. If a deal’s doing bad, it’s the people. If a deal’s doing good, it’s the people. Because you could have a great deal and crappy people, the deal’s not going to do great. You could have a okay deal and have great people, the deal’s actually going to do really well.
So I think that the people are super important and I think that for me, I’ve had a lot of great mentors where I’m just willing to do stuff that people aren’t. And I also had a great mentor, Grant. Grant had the ability, I was calling him every day. This is what built my relationship with Grant is I was calling him, “What would you do? What would you do? What would you do?” And also to one of David’s points too, Grant was not in the mood, Grant’s not going to teach me anything. Grant’s going to put me in the positions to learn. That’s what people are making the mistakes. They’re calling people saying…

David:
Just adjusting the expectations on that, Ryan. Grant can’t teach you anything. Even if he could, it’d be like drinking from a fire hose. You don’t have the capacity to sponge up what Grant would be able to teach you. I’ll give you an analogy. When you’re learning from a black belt and you’re first learning the martial art, they probably don’t remember what you need to learn because they were five years old when they learned that. It doesn’t make sense. They were not a grown person trying to understand these concepts. They were a kid whose brain soaked it up quickly. But we all think I want to be trained by the best person ever. That’s not the right coach for you. You want a person a step, maybe two steps ahead.
Grant has an ecosystem that he can put you in with people that are somewhat vetted, that have a standard that he upholds, that have a system that he had a hand in creating that puts you in a position to succeed. So that black belt built a school, he picked out instructors. Those people can teach you the martial art you’re trying to learn so much better. I love your saying that because there’s this idea where our ego says, “I want to learn from Grant Cardone. I want the best.”
And now you’re useless to him because you can’t keep up with the level of stuff he does. However, if you get plugged into his world, you learn something there. You prove yourself valuable. You become one of those captains at some point that he’s put in place. You’re training the new people. Now, as you gain the experience of living there, you do get to a level that you can start to rub elbows with Grant and what he needs is helpful. Would you like to add anything into just that story of how you climb the ranks?

Ryan:
Well, just to hit on that point too, Grant was never the type where he was, “Sit down and let me teach you how to do a deal or how to do multifamily.” I’ll just add this. When I got heavy in the properties, I got on these calls and I was learning from all the property managers and the regional managers and the really, really smart people in the real estate. When it comes to lending, Grant put me around a bunch of bankers and a bunch of brokers. And so I had to learn the lingo. So everything, David, that you were mentioning, like in real estate, there’s different buckets, right? You got to find a deal and you have to get with the brokers who are selling the deals. Grant put me into the cage and I learned the lingo and I learned the relationships.
You’re so right, you can’t build these relationships by yourself. You have to get around people who already have the relationships. And then you actually, by association, you become very powerful because you now have the relationships because you get spooled up quicker. Same thing with debt, same thing with property management company, same thing with all of this stuff in real estate. So I just think that for me, I understood that I wasn’t going to go back to Grant and say, “Hey, Grant, what can you teach me?” I would always go back to Grant David and say, “What’s next? What do you want me to help you? Can I take off your plate? What’s next?” And he loved that.
I’m always a guy who likes and wants more responsibility. I just kept going back because my bandwidth is there. I have bandwidth, right? We’re at 12,000 units, we have office, we have multifamily. I’m like, what’s next? I think a lot of us get bogged down and like, oh, well, this is a problem. Well, this is a problem. Leaders have solutions. Non-leaders have problems. And for me, I always wanted to come back to Grant with a solution.

Rob:
Well, we’ve kind of highlighted a lot of the skills that you said transferred over, but one thing that we haven’t really mentioned is that you are now the EVP of Cardone Capital nowadays. And so we’ve heard from your early days and what it was like, but what is your role nowadays in the business? Because obviously things have really exploded since your time at the beginning of this.

Ryan:
Well, now I run Cardone Capital with Grant. So I run Cardone Capital, and Grant is a phenomenal partner in what has happened. I mean, a lot changed in nine years. I think if people look back at what we’ve done, and this goes back to crowdfunding as well, because now Cardone Capital, we’re a crowdfunding platform where we go and find deals. We have our own platform, so we don’t use a lot of these third parties. And we’ve been really successful just going straight to investors who are looking to invest in multifamily real estate. And we’ve really built out a done for you platform where we got great, beautiful, awesome deals and we offer them to retail investors.
We’ve raised one point, almost $2 billion in capital, and our portfolio is $4.3 billion. And look, a lot of our deals are great assets, great locations. And so my day-to-day has changed a lot as we continue to grow the portfolio. But I’m always still very curious and I’m always still learning. And now the team’s different, the deals are different. They’re bigger deals, but it’s really the same thing. And I always go back to this, the people that we have on our team are phenomenal. The thing that I’ll tell people, if you’re just getting started in real estate, you don’t have to have a big team. You have to have really, really good third parties, meaning third party attorneys, third party property managers, third party bankers. You just have to have good people around you.

Rob:
So it sounds like you’re buying a lot of multifamily. Can you tell us, I mean, obviously your experience as a pilot, how does the pilot’s checklist apply to buying large multifamily as you sort of go down this route?

Ryan:
Well, the due diligence checklist on multifamily is a lot bigger than my checklist as a pilot.

Rob:
Yeah, I believe that.

Ryan:
And the checklist goes for the debt, it goes for the deal, it goes for the investors, but it’s all transferable. And this is what I always say too, it doesn’t matter if you’re in a corporate job or if you’re a pilot, because really being a pilot is really a corporate job. Everybody who has a skillset of either being a leader or managing a team, you can become a great real estate professional by transferring those skills. So yeah, look, I look at a lot of deals, and I look at a lot of markets. And so again, all of this stuff that I was telling you about earlier is I’ve been to a lot of markets. I’ve looked at a lot of deals. I’ve looked at a lot of deals with Grant. I’ve learned from the best.
I was literally with Grant, and this is what maybe if people didn’t pick up on this. I’ve literally been with Grant for nine years, but for the first six years, David and Rob, I was with him every day. I was with him every day because I was flying. When we were not flying, we were looking at deals. When we were not looking at deals, we were flying. When we weren’t flying, we were looking at deals. Everywhere we would land, we’d look at deals. And when we were overnighting somewhere, typically I would stay with him.

David:
By osmosis, you’re observing the framework that Grant sees the world through, the problems he’s anticipating before they come, and there’s a lot you’re learning in your subconscious. I didn’t think that was a problem. Or he sees opportunity where someone else wouldn’t, or he sees an order to take this deal down. It’s different than the last one in that here’s where the challenge is going to be, not there. Which now gives you the empowered ability to go out there, say, “Let me fix that,” which makes you even more crucial to him. And that’s the secret. If you want someone to become a partner with you, whether it’s romantic, whether it’s business, whether it’s friendship, whether it’s anything, make yourself such a crucial part of their life that they can’t live without you. I mean, that’s really how you take leverage in a relationship.

Ryan:
Yep. It really is, David. And then also you layer that with the rules that are changing because before 2014 and 2015, you actually couldn’t do general solicitation, which is the way you raise money. And so as we’re building this foundation in the real estate, 2015 and 2016 happened. And now the SEC, they started allowing us to go and do general solicitation. And so all of the business owners, all of his friends, all of his power base were reaching out and saying, “Hey, I see you guys are doing deals. I want to invest with you.”
Like Cardone Capital actually started because we did one deal that was $20 million. The debt was 14, the equity was six, we raised $6 million in seven days. And Grant looked at me and said, “Hey, can we do this again?” The next deal was 40 million. So all of these things, you can’t just look at Grant and Ryan and Cardone Capital, like, “Oh, these guys are overnight successes.” We literally built this thing in gradients, and I highly encourage people that are listening, you can do it, too.

David:
But you brought a skillset to the opportunity. That’s just why I really want to plant my flag here. You didn’t bring nothing and say, “Turn me into a superstar,” and then get frustrated when it didn’t happen. You had already done some things in life, and you brought those to the opportunity, and the opportunity to help you flourish.

Ryan:
And I was investing in the deals too, David. So I was at lunch one day with Grant in Chicago, and I started showing him my 21 units. And he looked at them, he’s like, “Man, these are junk.” And I was kind of offended at first. I was like, “Well, what do you mean?” I was like, “This is a A-plex. This is a single family home.” I was like, “This is good to me.” And he’s like, “Ryan,” he’s like, “look at what I’m buying.” And I’m like, “Well, what would you recommend?” And he’s like, “I would sell them all.” And I was like, “You would sell them all?” I went home the next day and I sold them all. I called Eddie, the real estate agent. I called David, I was like, “Sell them all.” And within 30 days…
I mean, Scottsdale was a great market. Within 30 days I ended up with 500 grand. I couldn’t 10-31 because Grant had already bought the deal. He buys the deal and you could roll your money in. So I paid the tax of 100 grand, but I literally took 400 grand, David. And this is really what you said, “I’m putting my flag in.” I took my 400 grand, I invested it with Grant in 826 units in Nashville, Tennessee. And I said, “I am committed to doing this. Not only am I going to time, energy, and effort, here’s my money.” And within three-and-a-half years, that 400 grand turned into 1.1. And Grant, I tell this all the time, grant actually made me a millionaire. And I’m the first millionaire from my family and I’m really proud to say that. And it’s been life-changing working for somebody. It’s been life-changing, working for Grant.

David:
I’ll bet you what Grant saw when he looked at that was the return on equity was very poor, where you were probably looking at the return on in your initial investment. They had appreciated to the point that the cash was not keeping up with how much equity you had. So he saw the inefficiency of your capital, you put it into a new deal with a value add component and stronger cashflow. And so you turn that equity into something that would give you a higher return.

Ryan:
And I didn’t have to work in the day-to-day, too. It’s like I went from 21 units being the manager. Because we all start there, right? And I actually encourage people start, do it, get a fourplex, get an eightplex, get 12 plus, get 32 units. Do it because the worst thing in the world is not doing anything. And then now you have no assets. All you have is liabilities.

David:
And sometimes it takes time. Today’s market, you’re not going to go out there and crush it. Add six figures to your net worth buying a fixer upper that nobody wanted that you found on Zillow. You may have to wait a significant period of time to build that equity up to go do what you did, but still, it’s better than not doing it right. It doesn’t make sense to cry about how easy the market used to be. So you’re not going to invest, well, this is what the market offers today. So how do you build a strategy around that?

Ryan:
Yeah, because as you buy these assets, they will over time, I truly believe, and this is my strategy, is 5, 7, 10 years even longer, you buy the best real estate, you buy great real estate that you want to hold for a long time. You don’t just buy the real estate that’s on a discount because my first deal was on a discount. I made the least amount of money on it because of the location, because of the market. The third deal that I bought, I actually paid the most, but I made 100 grand within 12 months because of the location. It was so good. So it’s interesting, as I did my first deal, second deal, third deal, fourth deal, I started learning. I started picking up on these different pieces where I was like, man, I want to go and invest in that market because the appreciation and the cashflow is better. I don’t want to just go here because it’s a discount.

David:
I’m working on a book like that right now.

Ryan:
Let me and Rob be the co-author on that book, okay?

Rob:
That’s right. I’ll write the foreword.

David:
Rob did write a foreword once and it was rejected. Nobody wanted it.

Rob:
It will be a four-word foreword.

David:
A four-word foreword. Ryan, you’ve mentioned that you’ve seen a lot of deals, you’ve underwritten a lot of them, and I understand you now have a two-minute process to underwrite a deal. Can you tell us what that’s like?

Ryan:
Yeah. I mean, so look, day one, when I joined Grant’s team, he used to underwrite a deal. I used to tell him two minutes, it’s actually like 43 seconds. But I’m like, man, if I could underwrite a deal like Grant, then my whole life would change. And so literally what I do, and as you get spooled up, you start learning these markets. And in multifamily, what I do is I just take the number of units times the rents in place, not like what the broker’s telling me, in place rents, and then I just use the occupancy of 94 or 95% depending on the marketplace. And then I just use rough numbers like, okay, my expenses typically in Florida on the East Coast are between 40 and 45%. On the West coast are 30, and so I just, okay, this is what my NOI is going to be based on here’s the income minus the expenses, here’s my NOI.
And so I can solve for on these bigger deals, they all traded a cap rate. And so I literally can underwrite a multifamily deal 300 units within two minutes. And it gives me so much power because now I’m communicating to the broker that I’ve got number one, speed. Number two, I know if it’s a good deal or a bad deal, so I don’t waste a bunch of time on bad deals. But I’ve learned that from Grant and I highly encourage people, if you’re listening, learn how to underwrite really quick. Identify bad deals, move them away from you as fast as possible so that way you could focus on really good deals.

David:
I got to give you some props, man. I’ve been asking every single multifamily operator that I know for something like that for years, and none of them will, because if they leave their spreadsheet, they get separation anxiety, they can’t handle it. We have that with single family houses. It’s called the 1% rule. Basically you throw out everything that isn’t… It doesn’t have to be exactly that, it has to be close to it. And then as interest rates are low, you can get further away from a full 1%, but as they go up, you got to get closer. And then I also learned that the higher price the asset is, the less dependent it is on the 1% rule. So a 50,000 house better rent for $500 a door, but a $900,000 house doesn’t have to bring in $9,000 a month just to cash a positive.
We’re not saying it’s a good investment, but that’s because I’ve seen enough of them that those patterns jump out. And you’re basically saying I’ve seen enough of these houses that I know expenses are X over here and Y over here. And it all goes in the algorithm of your brain and you could spit out an NOI that lets you say, “All right, if we’re trading at a six cap based on this NOI, hey, this is the ballpark we’re going to be in. Can we play ball?” And if they go, “No, no, no, it needs to be something.” All right, we’re done. We’re moving on. Not running it through a three-hour process of putting it into a spreadsheet.

Ryan:
You’re so spot on, David. And also the 1% rule, I still use it in today’s market. I looked at a deal today, it was 140 units. It was like 240 grand and rents it was like 1,900 bucks. And so I’m always looking at that 1% rule because I always know that if I could meet the 1% rule, I’m going to buy every deal. If a unit’s 100 grand and I can get a thousand bucks, I’m buying it, put it under contract, write an NOI, let’s move on. I’ll figure out the expenses, all that stuff later. And also, the bigger the deal gets, the less you have to be to the 1% rule.

David:
Same thing as you have a little bit more slack when it gets bigger.

Ryan:
Because you get economies at scale.

Rob:
Can you just define the 1% rule for anyone at home that doesn’t know exactly what that is?

Ryan:
Yeah. So if I buy a house for 100 grand, I need to get a thousand bucks per month in rent.

Rob:
Gross, not profit.

Ryan:
Gross.

Rob:
Awesome.

David:
Well, it’s encouraging to hear that that applies at the unit level of the apartment complex. So for clarity’s sake, we’re not saying if you buy it for 100 million, it doesn’t mean it has to bring in a million every single month. What we’re saying is the door count here, if it’s bought for $100,000 a door, if each average rent of these units is a thousand bucks, it’s worth putting through your analysis. I’m looking into deeper, that’s where you’re saying write the letter of intent, get that thing under contract. Let the guys then start to… The beam counters, kind of identify all the exact measurements, make sure that it’s a property you want. But if it doesn’t, you’re throwing that thing out right away. That right there is very, very useful.

Rob:
If it is 100 million, I’m just trying to understand why the 1% rule wouldn’t be proportional. Wouldn’t it still be if it’s a $100 million building, you would want it to bring in a $1 million gross?

David:
I feel like in multifamily there’s more expenses to take into account than there are with single family, and there’s more income sources, right? So with multifamily, you can have income coming in from laundry, from parking, from storage. It’s not just the rent versus with residential real estate, your only income sources.

Rob:
That’s true, though. That makes sense.

David:
When we’re spit balling how something feels to us, it makes sense in our head, but if you have to articulate how you got there, you almost got to pull apart the algorithm of your own brain to be like, “Why did I think that was a bad idea?” And hopefully there’s actually logic behind what you said. But a lot of what you’re doing, Ryan, when you’ve looked at so many deals is it will stand out like, oh, that just feels like that’s probably good. You don’t know why, you couldn’t explain it, but when you dive in deeper, you’ll be like, “Oh, that’s why. There’s inefficiency here.” They could bump rents much more than what they realize, or insurance is much higher than what they thought, so they’re not going to get this much money. Sometimes you don’t know exactly why it feels right, but you know that it does.

Ryan:
Yeah, exactly right. And to your point, David, the income in the rent is one thing, but then you also have utility reimbursements, you’ve got other income, and those are really big numbers on multifamily. That’s why it doesn’t have to meet and match the 1% rule on the door count. But what I was going with that too, David, is also knowing the numbers quick, it allows you to be the captain. It allows you to be the guy. Now, in these bigger deals where you have confidence where you could actually start using crew resource management, which is team resource management, which is actually the broker, “Hey, what numbers did you come up with? Hey, what are you showing for the going in yield? Hey, what are you showing debt guide.”
I think people overcomplicate multifamily. And really what I want to instill is saying, “Hey, look, know the numbers really quick so that way you can communicate with the brokers with confidence. That way you can communicate with the debt with confidence.” Because the bigger the deal you get, the more partners you have. And this is actually a safeguard in these bigger deals because the debt’s going to thoroughly look at the deal. My competition right now is these big institutions, whether it’s Blackstone or Starwood, you can go down the whole list. These guys are very, very professional and everything has to check a box. So the sooner you guys can get to these bigger deals, the less risk or the less chance of missing something actually occurs, which is crazy to think about.

Rob:
Man, that is kind of nuts. At what point, just out of curiosity, at what point will you be a big institution? I mean you guys are growing at such a fast pace.

Ryan:
Well, look, we slowed down our buying over the last eight, 10 months because of the shift. We think that there’s going to be a huge opportunity in the next 12 to 24 months, especially as debt and maturities and where interest rates are to buy assets at a great basis. What I mean by that is if you can buy a deal for 225 a unit and it costs 300 with inflation, everything else to build, we think that long-term over 10 years, those are great buys. But look, we’re competing with them now. It really is just a function of how do you grow and scale the correct way? We’re not in a hurry, but we know we’ll get there. So we’re just really patient. We are very conservative.
I know a lot of people look at Grant Cardinal Capital, Instagram is one thing, but when he goes and invest in money, Grant has a lot of money invested in these deals. He literally takes his money and invests in these deals. For me personally, all my net worth is invested in these deals so we know what will come. It’s just a matter of time. And the cool thing about it’s we’re doing it with retail investors, we’re doing it with partners. Like when I say retail investors, this is just everyday folks. This is just like me and my family and David and Rob and there’s no middleman. So it may take a little bit longer, but when we do get there, it’s going to be together, which is super awesome for us.

Rob:
It’s amazing, man. What a journey. What a journey. I’m excited. I want to connect with you after the podcast for sure, but we got one more segment for you if you’re willing to indulge us. We call it flight, fight, or fright. And we have three questions for you that we want you to answer that’s each one of those words. Is that cool?

Ryan:
What is it? It’s fight, flight, or fright?

Rob:
Close. It’s flight, fight, or fright. Okay, we’re going to send you some rapid fire questions here, all right? So first one, fright. What are the fears you had to overcome to get where you are?

Ryan:
I had to overcome the fear of failure. When I first started working with Grant on that 15 units are the 40 units in 40 days, I was actually terrified because I was like, what if I fail? I won’t have the opportunity, but I did it anyway.

David:
All right. Flight. When do you know to walk away from a deal, a job, or an opportunity?

Ryan:
When the numbers don’t make sense and there’s no more growth.

Rob:
Okay, last one, fight. What were the hardest lessons you had to learn in real estate?

Ryan:
The hardest lesson I had to learn was not doing it myself. So the hardest lesson that I had to learn was in my mind, my dad always taught me that I want to control 100% of everything. The hardest thing for me to undo was that partnerships are really, really good, and they actually accelerate what you could achieve if you partner with the right people.

Rob:
Awesome. I like that, David. That’s kind of a mental or a mindset deal deep dive almost. It’s like the mindset version of it.

David:
And Ryan, you gave awesome answers. It’s almost like you’ve been training for this.

Ryan:
Nobody even prepped me for that. That was kind of like random.

David:
Well, thanks, Ryan. This has been an excellent show. We covered how to get started with the advice that you have. It doesn’t have to be perfect. So your uncle gave you some advice for how to get you going in real estate. You built a portfolio that eventually Grant Cardone told you was crap, but it doesn’t matter because that crap got you to a point where you could even be called crap and you could put it into something better. We talked about the right way to reach out to somebody and we gave a framework for everybody that’s trying to get an opportunity. I hate the spaghetti against the wall method. Just send a bunch of DMs and hope that something sticks.
Actually come with something feasible that you’re proposing, and be humble, like you said, just “I’ll work for free. Let me prove my way.” But if you get in the right environment, that will get you to the top. You’re now running Cardone Capital. If that’s not a great example for everyone to follow, I don’t know what is. We talked about underwriting deals quickly, right? Not getting too caught up in the mess. That does not mean that you’re going to buy a property based off of a 43-second underwriting system, but it does mean that you’re going to get your foot in the door and that you can move with the power players. Those brokers are trying to figure out who’s legit and who’s kicking tires. And you kind of put yourself as a front runner in that situation and then take some time to analyze the deals.
And we talked about buying properties, thinking about the future, not just right now. What do you expect rents to do in that area? What do you expect jobs to do in that area? Is there going to be more supply coming in or is supply somewhat constricted? When we had Grant on the show the first time, he actually talked about how he likes to buy in liberal areas because they are less likely to issue new building permits, and it’s a way of eliminating competition. It’s a different way of thinking that your typical investor that just runs it through a calculator and says yay or nay. Is it taking into consideration? Rob, anything you want to add there?

Rob:
No, no. You covered every single thing. And just going back to your thing about people reaching out at everything. You mentioned getting your foot in the door. There was this old adage back in the day or this old kind of urban legend of this guy that really wanted to work at a very prestigious ad agency. And so what he did is he sent a shoe to the creative director with a note that said, I just wanted to get my foot in the door. So I just wanted to know would that work on you, David? Do you think that would be a way to get through your DMs if everyone just sent you a shoe?

David:
No, that’s the opposite of what I was just saying, people, come with a plan. Don’t try to be cute. “I’m so clever. I sent David a shoe.” And I get the shoe and I’m like, “Well, now what do I do with you?” It always sounds good when you hear the story and it just turns into a Cinderella tale. But no, that isn’t. Unless inside the shoe you have a business plan and you tell me what your skills are and say, “Give me a shot. I’ll do this thing for you,” and then you can see how it looks. All right. Well, thank you, Ryan. Man, this has been fantastic. I really enjoyed getting to know you and thank you for sharing things. Where can people find out more about you?

Ryan:
Very easy. Social media, Ryan Tesko. YouTube, Instagram, cardonecapital.com. I mean, I’m very out there. I’m very open. I typically give people my cell number, but I’ll leave it via social media and also the website.

David:
And Tseko is spelled T-S-E-K-O. So that’s RYAN T-S-E-K-O. Go give Ryan a follow. Rob, how about you? Where can people follow you?

Rob:
Oh, you can find me over on Instagram or Threads or YouTube at Robuilt, R-O-B-U-I-L-T. I teach people how to do real estate, Airbnb, short-term rentals, investing, life, liberty, the pursuit of happiness, and everything in between. What about you, David?

David:
Find me at DavidGreene24 all over social media including Threads and Instagram and everything else. Or at DavidGreene24 on YouTube. My website’s davidgreene24.com so thank you for saying that. My social media used to be pretty boring, I will admit, but it’s been stepped up quite a bit, so.

Rob:
It’s fired now, my friend. You have done it.

David:
Absolute fired. If my social media had a glow up, it would be Ryan going from a pilot to Grant Cardone’s pilot, and now running Cardone Capital. So just like you don’t want to miss out Ryan’s story, you don’t want to miss out on my social media. How was that, Ryan?

Rob:
So basically David’s social media is the Ryan Tseko of social media.

David:
That’s what I’m saying. Yes, thank you for clarifying that. This is David Greene for Rob, the Fire Hydrant, Abasolo, signing off.

Kenneth Zener, KeyBanc Capital markets analyst, ‘Closing Bell Overtime’ to talk KB Homes earnings and the real estate market.

Ashley:
This is Real Estate Rookie episode 323.

Matt:
My system now is I have my contractor come in on every job and just walk through everything we want to do and then just bid a price. And then we set that price and then his, that’s kind of like his incentive because it’s like, okay, if this job is going to cost us 20, if I’m going to pay you 20 grand and you get it done in three weeks and you just made 20 grand in three weeks, if I’m going to pay you 20 grand, but you’re going to take eight weeks and you made 20 grand in eight weeks.

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

Tony:
And welcome to the Real Estate Rookie podcast, where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And today we’re back with another guest, we got Matt Ramirez on the podcast. And Ashley’s going to talk a little bit more about Matt as an individual and why his story is so unique. But Matt’s going to share a couple of really important things for you. He’s going to share the worst way to pay a contractor. He’s going to share how a panic attack at work pretty much changed his whole life trajectory. And he’s going to talk about how to find off market deals. Lots of great content coming your way.

Ashley:
One thing that we learn about Matt in this episode, he’s going to tell us how he lost 80% of his income during COVID. Then he has these life events that happen and almost forces him to become a real estate investor to survive. He also ends up having to move cross country to live with his father-in-law and how that actually might’ve been a good thing for his real estate investing. Matt, welcome to the show. Thank you so much for joining us today. I want to have a little fun before we actually get into the full episode and play a game. Are you up for it?

Matt:
Always up for a game.

Ashley:
Okay. So we’re going to play two truths and a lie. I am going to read these and I want our audience to guess which is actually the lie. So if you’re listening right now, pay attention. And don’t reveal what are the truths before we’ve let Tony guess. Let Tony be our guesser. Okay?

Matt:
Perfect.

Ashley:
Okay, so here are the three things. Made six figures as an entrepreneur operator of a corporate focused fitness company for 10 years. Second one is trained sea animals and performed on stage weekly with a walrus named Gus for five years. And the third is you were a part-time stuntman on 50 different TV shows and movies. So Tony, what do you think is the lie?

Tony:
I feel like the most outrageous one is usually the truth. So I’m going to say the lie was a part-time stunt man on 50 TV shows and movies.

Ashley:
Okay.

Tony:
So you really were friends with the walrus named Gus is what I’m getting at here. Ash, what about you?

Ashley:
I’m going to say, I’m going to say the corporate focused fitness company for 10 years. I’ll say that. I’ll say the two more outrageous ones are correct. And I’ll say the fitness company for 10 years is a lie.

Matt:
So I wish I had experience working with walrus, but yeah, that one is a lie.

Ashley:
We should have known our producer’s imagination was that good.

Matt:
Yeah. So I did own a corporate fitness company for about 10 years, and I have been a stuntman since 2015, so almost getting into the 10-year mark.

Tony:
So Matt, I’m super curious, man. We’ve had over 300 guests on the Rookie podcast, and I think you might be the first professional stuntman that we’ve interviewed. How does one even get into that line of work? Is there a stuntman school? Do you have to get a certification? Just give me the quick 30 second background on how you became a stuntman.

Matt:
Yeah, so there is no school. I mean, there are schools that you could go to, but there are no requirements as far as becoming a stunt performer. Essentially it’s the same as becoming an actor. I mean, you just got to be in LA mostly, you could be in Atlanta now and a couple other places, but you just have to be in the scene and then you just have to kind of network with the right people and just find auditions and different things. And it’s really just a networking game. I mean, obviously you have to have the skillset and put in the reps to get there, but at the end of the day, it comes down to being in the right place, right time and going from there.

Tony:
Ashley, you face planted off the wake boat last weekend, I feel like you might have a future in-

Ashley:
And I took it like a champ.

Matt:
There you go.

Tony:
Took it like a champ. So Matt, I mean, I guess I’m super curious, man, how does one go from being a stuntman to then being a gym owner to then being a real estate investor? What was the kind of progression there for you?

Matt:
So as far as that goes, it was really the pandemic. So in 2020, business was doing pretty good. We were probably doing 12 to 15 grand a month with the corporate wellness. And then I was doing stunt work a little bit on the side as well. And then pandemic really just flipped our lives upside down. We had just had a baby and my wife and I were living in Santa Barbara at the time, and quickly within probably three months, lost 80% of my income just because all my contracts were with companies and everyone went to work from home. So I had no money coming in from that, and then the film industry shut down, so I had no money coming in from that. I did have a couple clients that I was seeing just via Zoom, so that kind of saved me a little bit. But that was kind of the start of it.

Matt:
And then I actually did have a backup plan already in place, not because of pandemic, but I wanted to step out of the corporate wellness realm, and I was trying to become a firefighter for LA Fire Department. And I had a couple friends that are already on the department, they’re like, “Oh yeah, you’re a shoo in. You already got a company, you’re well set up for that. You’re pretty fit, not as fit as Tony Robinson, but you’re up there.” And then I was going along in that process, and then I got to the last interview, and from that point it was going to be one interview and then go to the fire academy. So we had about three to six months before really anything started. So my wife and I decided to just take kind of a road trip and go to Tennessee just because we knew we had some downtime and I was just working remotely anyways.

Matt:
And on the way out there, I got a call, or I guess it was probably an email, and they’re like, “Oh, unfortunately you haven’t been chosen for the last interview. You’ve been cut from the process.” And it’s kind of one of those moments, just stomach dropped. And I was like, “Ah, but what do you mean? I just lost all my income. This is my next play. Where do I go from here?” And yeah, that was kind of the start for searching for something new. And during that process is when I came across originally the BiggerPockets, the OG podcast, and I started listening to it, but really listening to those episodes, I was like, “Oh man, this guy’s a neurosurgeon. I’m not smart enough to get into real estate, or this person’s got 100 houses. How am I ever going to get to that point?”

Matt:
And then luckily, I came across your guys’ podcast and there’s just people that I felt were relatable and I was like, “Wait a minute. I feel like I’m in the same walk of life as them. I can figure this out.” And that was kind of the beginning of my real estate journey.

Ashley:
So once you started doing all this research, was your wife on board as to you’re going to completely change what you’re doing and kind of start into this new business?

Matt:
Yeah. I mean, she was on board from the sense of at the time, really, I was like, well, I lost my business. Firefighting didn’t work out, at least at the moment. And then stunts was still shut down, so I was like, “I don’t know what else I’m going to do.” So she was on board just because she’s like, “Well, we got to do something to make money, so why not try something new?”

Tony:
So just one thing I want to just pause on really quickly, Matt, because you’re talking about this very, very calmly now, but I would assume in that moment there was maybe a level of stress that you were dealing with. Your business comes to do a fraction of what it was doing before, you’re side hustle, the whole industry gets shut down, and then this other kind of steady, stable job as a firefighter, you end up not being able to take that opportunity as well. So just in that moment, what was going through your mind? Where you were in survival mode? Were you going great? How does one kind of deal with that kind of setback?

Matt:
Yeah, I mean, to be honest, when we got to Tennessee, I was looking at jobs every single day and what can I do to make money? And at one point I just hit the panic button and I was like, “All right, I’m just going to get a sales job.” And it ended up being cold calling. And actually I guess to take a step back, first I was like, “All right, I can flip a house, I can figure it out.” My father-in-law who lives in Tennessee, who we were living with at the time in his guest house, used to be a contractor. And I was like, “I know I can use him to help me, I’ll find a house and I can renovate it with him and we’ll get the ball going.” But I went to get, because I didn’t know about hard money or anything like that, so I went to get pre-approved and the lender was like, “No, you were making good money, but you’re not now.”

Matt:
And I was like, “Well, but I have the stunt income and it’s starting to ramp back up.” And I don’t know, different lenders might’ve said different things, but he was like, “No, because we pretty much look at that like it’s a business. So since you had to decline last year, you need two more years of an incline in the stunt, in that world in order for us to lend to you.” So then I was like, “Oh, all right.” So then I hit the panic button there, went and got a 9:00 to 5:00, and ended up working there and just hating every day of it, just cold calling. And I was like, “This is not me. I’m not meant to be sitting in an office doing a job like this.” But fortunately through that job we were able to buy our first property, which when I got it under contract, my intention was to flip it.

Matt:
And then my wife just dropped the bomb and was like, “Well, we’re actually pregnant and having another baby, so we need to get out of my father’s house and live in this house ourselves.” So I was like, “Well, all right, here we go.” So we ended up, instead of, that one still need to be renovated, but instead of flipping that one, we just moved into it. And then I was probably about three weeks into the job and I had, I don’t know if you’d call it a panic attack or what happened, but just passed out essentially at my desk and my wife took me to urgent care and everything checked out luckily, but I ended up putting in my two weeks. I’m pretty sure I bought that house or closed on that house without even having his job. So I don’t know if there’s such a thing, but I think I might’ve job hacked myself into the house.

Ashley:
That’s what I wanted to ask is how long did you have to have your pay stubs for to get that financing lined up? Because they’re saying for a business you need two years of income for your business, but then for a job, I mean, it doesn’t seem like you worked there for two years and is it four weeks of paychecks you need or how was that for you?

Matt:
And it might be different in different areas, but I learned that from this show, and I don’t know if it was you, Ashley or you, Tony that said this, but one of you was talking about how somebody kind of did this and just got their first pay stub and then was able to go do it. So that’s literally what I did, yeah.

Ashley:
It was probably maybe my sister, because she didn’t even have her pay stub yet. She just had her offer letter that she was starting in a month or something like that, yeah.

Tony:
Same thing happened to me on my first deal. I had gotten a new job and they approved me based on that offer letter as well. So it is a common thing that some lenders will do.

Ashley:
But isn’t that crazy, that comparison of like, okay, you’re an entrepreneur, you need two years of your tax return to show income?

Tony:
Oh, you’re unemployed.

Ashley:
That’s way better.

Matt:
That was the crazy part about it too, because with the stunts, I mean, I wasn’t killing the stunt world, but I think in 2019 or 2020 even maybe, my tax return said I made like 80 K, and then this job, it was entry level. So I was starting out at 50 or 55 K, and I was like, “Wait, I made more than this last year, but you won’t approve me because it was a decline from the year before, but now you’re approving me based off this lower number.” And that was just one of those things that I was like, “All right,” just threw my hands up. I was like, “Whatever you say.”

Ashley:
How long did you actually work at the job for then?

Matt:
Honestly, I think it was right at a month I had that panic attack or whatever, took two, three days off, and then I went in, put in my two weeks. But they were like, “Well, we have sensitive information, so if you’re quitting, this is your last day.” And I was like, “All right.”

Ashley:
Like that’s a bad thing.

Matt:
Yeah, I was like, “Ah, if I must.”

Tony:
But Matt, can I ask what was the plan? Because your other sources of income, it’s still kind of been impacted. This was supposed to be the kind of thing that kind of got you over the hump, at least for a little while. You bought this house with the intention of flipping it, but it sounds like now this became your primary residence. What was the plan in that moment to I guess survive and put food on the table and kind of keep the income flowing in?

Matt:
Yeah. So fortunately at this time, so now we’re early 2021, so the film industry had opened back up and I was doing stunt work again, and just because of proximity, living in Tennessee, the cost of living was so much more affordable than California, I was at a point where I was able to make enough just based off of the stunt work. And it was tight, and it definitely wasn’t at all where I wanted to be financially, but I just knew, okay, I’m making enough that we can get by and then I’ll figure out what to do from here. And I was still interested in real estate, but that was still actually before I even did my first real flip.

Ashley:
So let’s talk about the first flip, because the first property you actually moved into and made it your primary, correct?

Matt:
Yes.

Ashley:
Okay. So then you’re going on and you’re buying the next property. How long after that first initial purchase did you find your actual first investment property?

Matt:
So it was probably about three to six months, somewhere in that window because I definitely had a lot of just analysis paralysis and just really scared to take the leap of faith. And then finally, it was actually one of my cousins that kind of pointed this out to me, and he’s like, “Well, you’ve already done a flip.” And I was like, “No, I haven’t.” And he was like, “Well,” he’s like, “You have this house that you live in, you renovated and added value.” And I was like, “Yeah, but I haven’t sold it.” And he’s like, “Well go out,” and I forgot what it’s called, but essentially when you have a realtor come and tell you what they think your house is worth, so he’s like, “Go out and have a realtor come over and just tell you how much they think the house is worth.”

Matt:
And we bought the house for 225, and then the realtor was like, “Yeah, you could probably sell it today for 280.” So he was like, “Well, there you go. You’ve already proven that you can make money doing this.”

Ashley:
Add value.

Matt:
Yeah, add value. So then I was like, “All right.” So then luckily at this point, I’m a year into listening to BiggerPockets, so I know about hard money, I know about wholesalers. Granted I didn’t have any in my pocket, but I just started doing my homework and connected with a wholesaler and then ended up using hard money to get myself into my first flip.

Ashley:
I think a really big common question is how do you get hard money as a rookie investor, especially with having no experience? And even though you did your primary residence, there wasn’t that actual appraisal or that sold comp to kind of show what you had done there. How did you find a hard moneylender that would lend to you?

Matt:
So for me, I found one that would lend to any rookie or really anyone, and they just had higher rates and higher points upfront. And then once you were vetted, I think once you had done four deals with them, then you got a veteran package or your rates got low. But in the beginning, yeah, I mean, because of that risk they’re taking on you, they just charge more upfront and you’re just paying for it in that sense.

Ashley:
But you factored into your numbers so that it all works out, so you’re still making a profit on it.

Matt:
And that was the thing too. At the time I didn’t really, because I didn’t have much income coming in, I had a little bit from the stunt world, I was like, “Well, if I make 10, 15 K, that’s a lot more money than I’m making not doing anything else.” So the margins were pretty tight on that first one. And honestly, the market, I won’t say necessarily saved me because I definitely, even if I was wrong, I would’ve made 10, 15,000. But because the market was so good in 2021, I made a lot more than I thought I was going to make.

Tony:
Matt, if I can ask, I think a lot of new investors feel like they have to kind of have all the answers before they get started. We actually just record another podcast episode earlier today, and that same guest kind of touched on that same idea about you have to push past that fear of not knowing kind of the finish line and just knowing the next step. But for you with this rehab, I mean, you came from a totally different world fitness, entertainment industry. How did you even educate yourself on, hey, what are the steps of rehabbing a home? Were you doing YouTube University? Was there some other resource you had? How did you even know what to do?

Matt:
Yeah, so that’s where I was super fortunate and blessed in the sense that my father-in-law, who lives out in Chattanooga, was a retired contractor. And I kind of brought him out of retirement and was like, “Hey, help your grandkids and your family by helping me and teaching me what you know.” And so he came alongside me on the first two flips I did, and just kind of taught me some basic drywalling and painting stuff. And I by no means picked it up quickly or am good at it, but I learned what I needed to learn to get through those first couple deals.

Tony:
So Matt, were you DIYing, it sounds like on a lot of those, or were you bringing in subs or how did you kind of manage the workload?

Matt:
Yeah, so the first two flips I did, it was 100% DIY. It was just me and my father-in-law, and we did everything from painting, installation, some basic plumbing. I mean, they were a little bit more cosmetic flips, the first two at least, but definitely it was all us.

Ashley:
And then have you progressed to using contractors? Actually, we haven’t even touched on how many flips you’ve done yet. Do you want to just give us that little breakdown first as to how many you’ve actually completed since that first one?

Matt:
I think I just sold one, closed on one yesterday that I sold, I think that was number 10. And then I’m working, I have two going on right now.

Ashley:
And what timeframe is this in? This is a little over a year?

Matt:
Yeah, about a year and a half.

Ashley:
Yeah, that’s awesome.

Tony:
Congratulations.

Ashley:
I think that’s something we really need to go into detail on here is how were you able to scale and take on that many flips at once? Because here you are, your first investment property, it’s you and your father-in-law in there doing the DIY. So how were you able to scale your business so you’re able to do that many flips within a year and a half?

Matt:
Yeah, so it was really, I mean, like you said, just go back to the question, scaling, I had no clue how to do it at first, and I still can’t say I really know how to do it. But the third one I took on was when I really, I tried to, because my father-in-law was kind of a little burnt out and the house that I purchased was a little further out, so he didn’t want to drive out there every day. So I was like, “No problem. I’ll hire a contractor, I’ll just kind of go out on my own.” And that one was by far the biggest learning lesson, that’s the only one to this day that I actually lost money on, just because there are so many lessons for me to learn along the way.

Matt:
And it was through that one that I kind of developed most of the relationships I have now. My contractor that I have now, I found through that job, but he was the third contractor I hired for that one house, which is how I ended up losing so much money is just because I kept hiring people and firing them and just kind of jumping from one to the next. But it was definitely a process to get to the point I’m at now.

Tony:
I just want to give a quick shout out, episode 311 with a guest by the name of Shaun Kelly. He breaks down how he DIYed, I think all of his rehabs, least the first several as well, similar to you, Matt. But if you guys are looking for kind of a masterclass breakdown on how to DIY your own rehab, episode 311 with Shaun Kelly would be a great resource. So Matt, just going back to you, so you said that you had to hire and fire a lot of people with that first one you kind of did on your own. I think that’s the fear for a lot of rookies who are thinking about flipping properties is that they’re going to get scammed by a contractor, they’re going to get bad work, that someone’s going to run off with their money. What were your steps for sourcing these different folks you were working with, the different subcontractors and contractors, and I guess what were some of the lessons you learned that you’ve applied to your future deals?

Matt:
Yeah. So as far as sourcing, really, and I still rely pretty heavily on this, I just went, there’s a local Facebook page here in Chattanooga where you can just ask for what you’re looking for as far as businesses go. And I mean, it’s not specific to real estate, but I just said I was looking for, I think originally I might’ve said I was looking for a contractor, but anyways, said I was looking for a contractor and I just hired this guy because I interviewed, I think, three of them, and I made the mistake of just hiring the one that I jived with best. I was like, “Oh, he’s young, he’s an entrepreneur. Yeah, you got the job.” And I didn’t realize at the time that he actually didn’t really have much construction knowledge, because a thing that I didn’t know in Tennessee at the time, but you can essentially get your contractor’s license in Tennessee without any work experience. It’s just a test that you have to pass and anyone can more or less hack the test.

Matt:
So he had a crew, but he himself had never really done construction. And his crew was, I won’t say they were awful, but they were learning, and I was not in a position where I could afford to pay someone to learn. So I ended up letting him go and then you would’ve thought I would’ve learned from the first time, but I went the exact same route, went on the Facebook group, hired another guy that then was charging me by hour, which was another mistake I learned, never hire a contractor, at least in my opinion, and paying by hour because he was just dragging his feet. And I think three weeks went by and they had put up some trim and that’s about it. And I was like, “What do you guys do all day?”

Matt:
They’re like, “Oh, well, we got to fix this and fix that.” And just blaming it on the other contractors, which some of that was probably true, but I think most of it was just them dragging their feet. And then through that process, the first crew that I hired, at one point one of their cousins came in and just was essentially showing them how to do drywall. And that was kind of one of the first red flags. I was like, “Wait, you guys don’t know how to do drywall?” Anyways, I got that cousin’s number just randomly, and he reached out to me a month later and was like, “Hey, if you ever have any other work.” I was like, “Ah, yeah, I need you yesterday.” He came in and just saved me towards the end. And that was flip number three, and we’re on 12 now, and I’m still with that same one.

Tony:
I just got to add really quick, what a nerve wracking thing to walk into as an investor to see the guy that you hired to hang your drywall, getting coached by someone else on how to hang drywall. It’s like the ultimate red flag. The only thing that might be worse is them, I don’t know, having a YouTube video up like hanging drywall 101 or something.

Matt:
Yeah, that was pretty much the extent of it though. I mean, yeah, those two go hand in hand.

Ashley:
Well, Matt, Tony and I have definitely had similar experiences where we’ve had to fire contractors during the middle of projects and go with someone else. What was the final decision of it is going to be more cost-effective in my mind to fire them than to just continue the project? Because for me, it was like I let it go on for a while because I just thought it’s going to be, we’re have to stall the project, we’re going to have to wait and find new contractors. We don’t know when they’ll start. Do we take the risk and fire these ones or is it worth the wait to find new contractors? So what kind of went through your mind during that process of I need to fire them now?

Matt:
Yeah. So with that first crew, it was really, I felt like I didn’t have a choice because it was just very obvious, after first week and a half, two weeks, they don’t know what they’re doing. So it was just like, I can’t afford to let this run to the very end and then find out, oh, I actually have to redo everything. So it was kind of just cutting my losses there and just letting them go. With the second crew, that, I just lucked out timing wise, I was scared of letting them go and not having someone else to come in. And that’s when my contractor I have now reached out to me and was like, “Hey, if you ever need any work done, here’s my number. I’m available, dah, dah, dah.” And I was like, “Yeah.” So I essentially the next day went to the existing contractor and just let him go. And then that guy started a couple days later. So I mean, if it wasn’t for him reaching out to me, honestly, I probably would’ve let it drag on for another couple weeks and who knows where that would’ve gone.

Ashley:
Yeah, Tony and I definitely struggled with that for a little bit on two of our projects, of having to make that switch to a different contractor.

Tony:
But you mentioned, Matt, about the paying by the hour. Just before we move on, I want to get your insights on that. What is the downside to paying by the hour and what is the better alternative?

Matt:
So I would say the downside to paying by the hour is just I feel like it just gives the contractor, whoever you’re paying, I guess, by the hour, just the opportunity to just kind of drag their feet and a job that might take them two hours, they’re going to do in four hours because you’re paying them by the hour so they have no incentive to work faster and work harder. So I would say that’s the biggest downside is just there’s more incentive for them to work slower than there is faster.

Matt:
And then as far as the alternative, my system now is even though I’m going to hire him no matter what, just we have a good thing going, I have my contractor come in on every job and just walk through everything we want to do and then just bid a price and then we set that price and then that’s kind of like his incentive because it’s like, okay, if this job is going to cost us 20, if I’m going to pay you 20 grand and you get it done in three weeks and you just made 20 grand in three weeks, if I’m going to pay you 20 grand, but you’re going to take eight weeks and you made 20 grand in eight weeks. So he’s got that incentive to just work a lot harder and work a lot faster.

Matt:
And I mean, I’ll show up to my jobs on Saturdays at 6:00 PM and they’re there just working. I mean, him and his crew, I’m just so blessed to have them because they’re just workhorses and they get it done. And I mean, if I had that last guy who was I was paying by the hour, I would probably be paying him twice as much as my current crew.

Tony:
Yeah. The right crew makes all the difference when you’re, honestly even taking a step back, the right team as a real estate investor is probably one of the most important things to get right, because if you can surround yourself with the right boots on the ground, with the right contractor, with right property manager, with the right whoever, it makes your job as the investor, which is really trying to find the deals and maximize the profitability, makes that job easier. But I guess on that note, finding the deals, Matt, what steps have you taken to find out of these, I guess 11 or 12 properties you’ve done or in the progress of completing, how are you finding these deals? Are they all MLS? Are you going direct to seller? Are you using a wholesaler? What methods have you used?

Matt:
So I’ve kind of used them all. I think out of the 12, I bought three on market, and then the other nine have been off market. I would say I had a good wholesaler that I was working with pretty consistently, and I probably bought six deals with them. And it was just like, I literally got to the point where I was like, “Am I doing something wrong? This seems like it’s almost too easy right now.” I had this person feeding me deals, I got a good crew, everything’s lining up. And then I didn’t hear from them for a while and I reached out to them and they just kind of ghosted me. And then finally one of their employees reached out to me and was like, “Oh, I’m so sorry. They let me go and they just shut down shop.” I don’t know what happened. But anyways, that was the beginning of this year, and at that point I was like, “Uh-oh, what do I do now?”

Tony:
Well, let me ask that question. I mean, how’d you find that first wholesaler? Because I think for a new flipper, the deal flow is oftentimes one of the biggest constraints, it’s like, how do I find these good off-market deals? So what steps did you take, Matt, to find that first wholesaler and then once that one kind of shut down shop, what steps did you take to find that next wholesaler?

Matt:
So that first one I found through our local real estate REA or meetup group or whatnot. I think I was on their Facebook group and somebody, another wholesaler was posting something, and then I just started scrubbing through the Facebook group and looking for all the wholesalers and just either emailed or called all of them just to get on their list. And then this one just seemed to be the most consistent as far as just putting out deals. And then I guess as far as the second part goes, just luckily from being in this area and doing the real estate for the last year and a half, I kind of knew even if I wasn’t working with them, I kind of knew of and about a few their wholesalers. So I just immediately started reaching out to them and was like, “Hey, I’m looking for deals if you have anything.” And then now the last couple deals have been through various different wholesalers. I haven’t really found one that feeds me my deals like the original one was.

Ashley:
Tony, I’m curious how you are sourcing deals right now.

Tony:
Yeah. So honestly, we haven’t been buying as much on the single family side right now. We’re looking more into the commercial space. So my team and I are really just trying to network with commercial brokers at the moment to find most of our deals. So we just got a purchase agreement, or at least an LOI that we agreed to over the weekend, for a hotel in Utah. And on that deal, it was just us networking with a broker that I met last summer that ended up having another deal in that same city. So that’s kind of been our approach on the commercial side, but on the single family space, a lot of our deals honestly have just kind of come from relationships. So we have relationships with realtors that send us off market deals, whether it’s a pocket listing or maybe a wholesale deal that they found. We do know some wholesalers in the markets where we flip. And really, yeah, it’s been a lot of relationships for us. What about you, Ash?

Ashley:
Yeah, relationship based is such a big, big way to get properties, but really a lot of it is referrals as far as word of mouth. So somebody saying like, “Oh, my aunt is selling a property.” Darryl was working on a property the other day and somebody stopped and was like, “I want to rent this because I am going to sell my house.” So right away when Darryl tells you this, I’m like, “You call him back right now and tell him we want to come and see his house and we could buy his house and he can rent this apartment. It’s a win-win.” But also we have a property under contract that’s on the MLSs. And then the other property that’s under contract right now was a word of mouth, one of my dad’s best friends, his mom’s house that we’re buying. So that’s really been the biggest deal source for us right now.

Tony:
Ash, have you cold called before? Have you done just straight cold calling owners?

Ashley:
I have before a couple times, but I actually had Nate Robbins here who is actually going to be a guest on our episode because of my experience with him. So he came to visit me and we’re just driving to get a chai tea and he sees this house with letters in the window, which usually can signal that somebody is not living there, or maybe they are, but there’s a third party company taking care of the property, doing the lawn maintenance or the bank has foreclosed on it or there’s a violation, whatever it is. So he found the owners and he cold called them and he didn’t get any response, but it was so nerve wracking for me because I do not like cold calling.

Ashley:
And then he actually found somebody who’s related to the person that owns the property and he’s like, “They live five minutes from you, I’m going to drive over there and go talk to them.” And that even more was like, “I’m not going to go, you guys just go, I’ll stay here.” And he was like, “The lady was so nice. You can’t be afraid of those things.” And so that’s why I have Darryl, he does all the direct mail, the cold calling, he’ll door knock, no problem. But for me, that’s out of my comfort zone and I’d rather have my partner do that.

Tony:
Someone else do it, yeah. And that’s always leaning into where your strengths are as a real estate investor, and each of us has to kind of know where we naturally thrive. Matt, just one other follow-up question for you on the wholesaler piece. So you said that you reached out to all these different wholesalers. What kind of information were you giving them about you as a buyer and how were you able to tell between who the good wholesalers were versus the not so good? Because I’ve shared my email address on Instagram before and said, “Hey, send me deals if you’re in this market.” And a lot of times I get just things that aren’t good deals. So how do you kind of suss out between the good and the bad, and then what information are you giving them about yourself?

Matt:
Yeah, so as far as information, I mean, I think I’m just essentially kind of telling them where I’m buying. For me personally, I’m mostly focused on flipping single family homes right now, so I kind of just share that, and then just the general area. And then I honestly haven’t figured out how to tell just by talking to them, the good and bad ones. That really just comes down to once I get on their radar and they start sending me deals, it’s like I’ll just start looking at the deals and use PropStream and comp them out. And with that I can kind of just tell like, okay, this guy just sent me five properties in a row that are all junk and you can’t really flip any of these. I would be in negative on all of them. Versus this guy, maybe he just sent me two in the last month, but both of them seem pretty profitable. So just kind of going down that path.

Ashley:
Matt, if you had to give three pieces of advice to somebody who’s starting out flipping a house, what are the three things they should focus on to maximize the value of that property?

Matt:
To maximize value? I would say the biggest things are kind of curb appeal because obviously when you come up to the house, that’s the first thing you’re going to see, and then even going just back, before you even get to the house, looking at Redfin or Zillow or whatever you use, the first photo you see is that the exterior of the house. So making sure that looks nice because I feel like a lot of people focus on the inside so much that they kind of forget about the outside and it’s like, oh, I just kept the old mailbox that’s fallen over and that’s right in the center of the frame of my photo. So that’s a big thing, and you don’t have to do anything fancy, but just some landscaping and just maybe a new mailbox and obviously fresh paint, whatnot.

Matt:
And then I’ll go from there to the kitchen because I feel like for a lot of people, that’s kind of the first area they walk into, even if it’s not, I mean, obviously usually it’s not the first room you walk into, but a lot of people kind of just walk straight through the living room or whatever, don’t really pay too much attention to that and just go to the kitchen. So if you can create that wow factor in the kitchen, which is one of the things that we go for. And then the third thing, which I think I actually stole this from AJ Osborne, is that his name? He’s like a-

Ashley:
Self storage guy?

Matt:
Oh no, not AJ. Who’s the one that’s …

Tony:
James Dainard?

Matt:
Yeah, one of them. And he was talking about just value add in the bathroom and just doing tile floors versus LVP. Just because he’s like, at the end of the day, it’s going to cost you pretty much the same price, maybe 50 bucks more or something. So just things like that, it’s like we always tile all the bathroom floors and put in tile in the background. Just little things where you can add a lot of value without adding a lot of price out of your pocket. So yeah, I guess just starting with outside the house, then moving to the kitchen and then the bathrooms, those are the biggest three areas, I feel like if you can control those three areas, then the rest you can kind of play with and you’ll definitely win or hopefully win.

Tony:
So Matt, one of the questions I always have for our friends and the guests that flip homes is the systems they’re using to make this whole operation run efficiently. So I’m going to hit you with some rapid fire questions and just let me know what system software, yeah, whatever, we can do that now, just what kind of systems are you using to manage that? So first, when it comes to budgeting, how do you keep track of the money coming in and out for your flips and kind of comparing that to your original budget versus what you actually spent?

Matt:
Yeah, so essentially I have two spreadsheets that I use and it’s, I mean, very basic Google spreadsheets. I don’t pay for software as far as that goes. But I have one of my initial budget that I create and then once I go live with a project, I have another, and then I just kind of plug and play all those numbers and then I’m able to compare of what I originally thought I was, to where I’m actually at. So that’s, I don’t know, it’s pretty basic to be honest, and I just enter everything myself. I don’t have anyone doing the accounting for me, but kind of helps me keep on track.

Tony:
And then in terms of scheduling, are your contractor, is your GC the one that’s kind scheduling all the subs at this point, or are you manually scheduling the subs yourself? And if so, do you have a tool for making sure that your countertop guy is going in before your guy doing the back splash?

Matt:
I don’t, and that’s something that I’m still kind of learning the process on. So I am the one that hires out all the subs and kind of sets the schedule for everyone. I kind of know just from trial and error of who needs to go in when, and I’ve made that mistake before of my hardwood floors one time I had done before we painted just because I didn’t know and I didn’t really think about it and he was like, “What are you doing?” But yeah, I don’t have a system for it, it’s just kind of in my head. And to be honest, that’s one of my goals for this year, is just to get better at systems and processes as far as that stuff goes.

Ashley:
Well, Matt, I want to take us to our rookie request line, and this is where a rookie investor sends in a question for a guest to answer on our show. And if you would like to leave us a question, you can go to biggerpockets.com/reply. Today’s question is from Tyson Masingo.

Ashley:
“Okay, I am having trouble with finding a market, as well as trying to determine what types of deals I will do in different situations. My plan is to find a very low cost area to invest in since I have very little money to get started, I want to flip a couple properties to build up capital and then begin to BRRRR as much as I can, continuing to flip some deals at the same time. Here are what my problems are. One, what metric should I use to find a market? If you can break it down step-by-step that would be amazing. Number two, how do you decide if a deal would be better suited to flip verse BRRRR? I intend to do both to continually build capital as well as cashflow, but I need to figure out how to decide which strategy I’ll use for each specific deal.” So Matt, the first question is how to find a market. So how did you decide on the market that you’re investing in?

Matt:
So I mean, I kind of just decide on the market that I was in because me personally, especially the approach that I was first taking is I was completely hands-on. So I wanted to work within a market that was 30 minutes to an hour of my house so I could realistically drive there every day and be the one swinging the hammer and hanging the drywall and doing the work. So I would say if that’s possible, I feel like that’s the easiest place to start, is just start in your own backyard, obviously, depending on where you are. I was in Santa Barbara prior to this and I wasn’t going to … I don’t see a way that I could have started with multimillion dollar homes, flipping those.

Matt:
So yeah, you kind of just have to hopefully start with where you are, but then if that doesn’t work, then I would say the next thing is just kind of looking around and starting with maybe where you have connections, because that’s going to be the next biggest thing, is who do you know in those areas that can help you out and be the boots on the ground for you.

Ashley:
Yeah, that’s great, as to where you have an opportunity or an advantage, maybe that’s knowing someone or maybe you grew up there and you know the streets, something to give you that little bit of edge and make you feel a little bit more confident. Okay, so the second part of this question was how do I decide if a deal would be better as a BRRRR property, to rehab it and rent it out or to flip the property?

Matt:
So I think that’s just up to each individual and their finances and what they have going on, because I mean, I guess if you have the money and you do a perfect BRRRR, then yeah, you can kind of just keep going with it. But I actually just finished my first BURRRR about, I don’t know, well, I’m actually waiting for the money to come through today, but just finished the project about a month or two ago and got some renters in it. And I mean, I’m not leaving a ton of money in, but I’m going to have to leave in, I found out, about 30 grand into it. And luckily because of the flips and I have that income coming in, I’m okay with not having that money and it’s not going to hurt me per se to not be able to recycle that money right away.

Matt:
But I think it really comes down to that, if you were to do the numbers and it turns out like, hey, I need that 30 K in order to keep the ball moving, then flip it because then you can take that 30 K, buy another house, and then once you build up a nest egg, then you can go back to the BRRRR method. But I think it’s just deal by deal and just what kind of resources you have under your belt.

Ashley:
And I think another thing to point out too, Matt, is you did a great job of becoming experienced and knowledgeable at flipping a house first before you went in and did this BRRRR. You focused on that one strategy before trying to navigate two or three different strategies at once. And that would be my advice to Tyson, is to pick one market and pick one strategy to start and kind of get a feel for that one strategy and become knowledgeable and confident in it, and then kind of branch off and do something. Because you’re going to have a lot more deals to vet, to analyze if you’re trying to go after more than one strategy. And you’re also going to be building systems and processes for two different types of strategies also, which is just going to weigh you down and you won’t be able to grow and scale as fast too.

Matt:
Yeah, I will say my third flip that I did, I actually went into it thinking it was going to be a BRRRR and something that I stole from one of those episodes was doing the rent by the room. So I took a four bedroom house, turned into a seven bedroom, four bath, and I was like, “Oh, this is going to be great. I’m going to just make so much money.” And just spent way too much money, went way over budget, realized I couldn’t BRRRR it and then had to flip it. And then it turns out that not that many people want a seven bedroom, four bath house that’s just only 2,200 square feet or something like that.

Tony:
Lessons learned though, and that’s the part of being an investor is each deal kind of teaches you something new, brother. So I’m happy to hear that you learned something at least. Cool, man. So last thing we’ll finish out with is our rookie exam. So Matt, these are the three most important questions you’ll ever be asked in your entire life. So are you ready for question number one?

Matt:
I’ll try.

Tony:
All right, man. What’s one actionable thing people should do after listening to your episode?

Matt:
I think just reaching out, if you’re interested in whether it’s flipping or any aspect of real estate, finding one person that you can reach out to. I think that was a game changer for me. I would listen to an episode and if it was somebody I jived with, I would literally just DM them on Instagram or just find a way to reach out, even if it’s just going to a local meetup. But I would say just starting by just networking and putting yourself out there.

Ashley:
The second question, what is one tool, software or app that you use in your business?

Matt:
PropStream is definitely probably the most important one that I use, because I probably comp out two, three houses a day and I’m constantly looking at things. And if it wasn’t for PropStream, I’m sure there’s other software, but I don’t know how people comp outside of that.

Tony:
All right. And then in question number three, where do you plan on being in five years, Matt?

Matt:
So five-year plan would be essentially to be financially free from the aspect of just having enough rentals and passive income that I can … I mean, I truly do love flipping and I don’t see myself stop doing it anytime soon, but I would just like to have that comfort level of knowing like, oh, if I want to take this year off and go travel in Europe with my family, I can do that, and I’m in a place where I can dictate what my life looks like on a day-to-day basis.

Tony:
Love that, man. Yeah, we’re excited to see you hit that five-year goal. Before we wrap things up today, I just want to give a quick shout out to this week’s Rookie Rockstar is Michael Mills. And Michael says, “Finally sold our first flip, eight months of work and then under contract to sell for four months. I was beginning to think it would never happen.” Michael, kudos to you for getting that first flip done, and we’re excited to see where your next one takes you.

Ashley:
Matt, can you let everyone know where they can reach out to you and find out some more information about you?

Matt:
Yeah, so I think the easiest way probably is Instagram. It’s very fancy, it’s Matts, M-A-T-T-S, double underscore because I was late to the game, adventure. And if you really just are bored and want something entertaining, you can just Google Matt Ramirez stunts and watch my stunt reel.

Ashley:
Well, thank you so much for joining us today and taking the time to educate our listeners on your real estate investing journey. I’m Ashley at Wealth From Rentals, and he’s Tony @tonyjrobinson on Instagram, and we will be back on Saturday with a Rookie Reply.

Ashley:
(singing)

Kyle:
I think I would encourage people to ask themselves if they’re a “late starter,” why are you transitioning to real estate? If you’re someone who is like a go-getter, go for it. And especially if you have kids watching you do this awesome transition into something new and exciting when you’re 50 or 55, what a great example to show them of how you can make a transition and learn a new skill.

Kim:
It’s never too late. It really isn’t. I mean, there’s expiration on a milk carton, right? But that’s not us. I think we get better, we get wiser, we have more fun in life. We enjoy things more because we’re not so uptight. I like this stage in life. I really enjoy that I started later.

David:
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast here today with Henry Washington co-hosting the show with me. There are many people out there that think that they are too old or it’s too late to start investing in real estate. Well, today, Henry and I are going to do our best to debunk that myth. Today’s show is going to be a late starter’s guide to real estate investing. It’s all about the belief that it’s never too late, whether in your forties or your sixties.
There may be some mental hurdles you have. And this conversation should hopefully help you clear some of those blocks and start taking the action that you need to start building wealth to prepare yourself for retirement now, rather than waiting even longer. And today’s episode is going to be a little different because we have not only one, but two interviews with different guests. The first part of the show, we’re going to speak with Kyle Mast. He’s a certified financial planner and a regular contributor to BiggerPockets money. Kyle is going to fill us in on how people that are starting late may have some advantages when it comes to investing in real estate.

Henry:
And in the second half of the show, we interview Kim Bosler, who started investing at 56. She’ll tell us how she was able to build such a strong portfolio that set her and her husband up for retirement and allowed her to purchase her dream home in Utah. And before we get into the show, we want to add a caveat. In this episode, we’re going to make some assumptions. We’re going to assume that you’re already ready to start investing, which means that you’ve got somewhat of a financial basis. So we’re going to assume that you don’t have any crazy amounts of debt, heavy credit card debt. We’re also going to assume that you have your finances under control and you have a budget. We will also assume that you have some savings and an emergency fund and that you may already have some investments outside of real estate.

David:
And lastly, that you have a cash position, which means you have assets in the bank in a 401(k) or even equity in your primary residence, anything that will help you start investing today.

Henry:
And for those of you who may not be in this financial place just yet, we recommend that you listen to our sister podcast, the BiggerPockets Money show, because Scott and Mindy on that show will guide you through that journey. They will help you get your financial books in order. And once you’re there, you can come back, listen to this episode and get started in real estate. So grab your pens and paper, take some notes. This is going to be a good one.

David:
Kyle Mast, welcome to the BiggerPockets Podcast. Happy to have you on today.

Kyle:
Thanks, David. It’s really good to be here. I appreciate it.

David:
For those who haven’t heard you on BiggerPockets Money, can you tell us a little bit about yourself?

Kyle:
Yeah. I’m sure some people have listened over there, but I am a farm boy from Oregon. Grew up on a Christmas tree farm. Became a CFP soon out of college. Spun off a little bit from the firm that I was working at, started my own firm. 10 years later, which would’ve been last year, sold that firm. And in the meantime, invested in real estate throughout that time. And I guess you can put the FIRE label on last year. That was the final stroke. But yeah, I have twin boys that are two years old and a boy who’s six and a wife, and we enjoy spending lots of time together, fishing, outside all that jazz.

David:
And FIRE stands for financially independent, retire early. Correct?

Kyle:
That is correct. Yes. Sorry, we have to explain that acronym for sure. Yeah.

David:
It’s the new flex instead of a BMW. You hit the fire designation.

Kyle:
Yeah, it’s funny. You still keep working even though I hit that, but it’s more fun, I guess.

Henry:
You don’t just stop doing stuff when you hit FIRE?

Kyle:
I tried, yeah, but my twins wouldn’t let me.

David:
Basically means you don’t have to tuck in your shirt or wear a tie. That’s the real flex, right?

Kyle:
For sure. For sure.

David:
Well, today, we’re going to be talking about how a late starter can get into real estate investing. What advantages a late starter has versus someone in their twenties. So let me ask you, Kyle, for someone who’s a late starter, do they have an advantage over someone who’s younger?

Kyle:
Yeah, definitely. I think a lot of times, people who are a late starter… And maybe we’ll put some parameters around that. It could be anywhere from 40 into your sixties, I would say. You can start anywhere in there. And sadly, I’m getting close to that 40 mark, so I would be a late starter here coming up. But I think there’s a lot of advantages that someone might have. A few of those would probably be, you’re very established in your career. You might have some savings, some nest egg, some 401(k), some IRA, some Roth IRA, potentially a decent amount of equity in your own home. Some of these things that someone who’s starting out right out of high school, right out of college is just not going to have.
Those are some of the basic things and we can get into a few more as we go here, but that’s setting up the stage for someone that we’re maybe assuming has got their financial foundation under them, but they’re just now looking at real estate.

Henry:
I actually used a 401(k) to get started investing in real estate. And it wasn’t something I knew about prior to. I just stumbled on learning that that was a thing. And so if you’re looking at 401(k)’s, the average 401(k) amounts around 76,000 for people who are typically between 35 and 44. And then it goes up to 142,000 for folks between 45 and 54. And then it really jumps to 207,000 for people between the ages of 54 and 66. So how can someone leverage their 401(k) if they want to start investing?

Kyle:
Yeah, that’s a good question. I’m going to shoot it right back at you, Henry. How did you use yours? And we’ll go off of that. What did you do?

Henry:
Yeah. I took out a 401(k) loan and they allowed us to… Well, let me caveat this correctly before I get myself into some big trouble, Kyle. We, my wife and I, took out a 401(k) loan on her 401(k) because I wasn’t financially savvy enough at the time to have one. And so she allowed us to tap into her 401(k) for our first deal. So we did a 401(k) loan. I think we could have borrowed around 60 grand or something like that, but we only took like 20, and just enough for the down payment for a deal, bought a rental property, and then used the rents to pay off the 401(k) loan.

Kyle:
Love it. Yeah, that’s probably the most beneficial route that people would go. There’s a few other ways you could go about it. A couple of things to keep there. And I should throw a caveat out there too. I am a CFP, but I’m not your CFP or anyone listening to the shows’ CFP. These are just some ideas. But the 401(k), every plan is a little bit different on what you can withdraw and how you can withdraw and how you have to pay it back. And one thing to keep in mind too is that if you leave that employer, be really cognizant of what you have to do with that 401(k) loan if you leave. Usually it’s a quick payback about a 12-month timeframe or less. So just keep that in mind.
There’s a couple other things that you can do too. One, the thing that I’ve done a couple of times for short term needs in the real estate arena. There’s something that’s called a rollover. When you move a 401(k) to an IRA, or a 401(k) to another 401(k) at another employer, or even to a Roth IRA as a conversion rollover, all that to say you’re moving it from one retirement account to the next. Usually, it’s a direct rollover where it goes straight from the custodian like Fidelity to Schwab. But there’s something else that’s called an indirect rollover, that you can actually take the funds in possession yourself for a certain amount of time, and then you have to get them into that account or they become taxable and penalized depending on what age you are.
So in that case, it’s actually a 60 day timeframe and you can do it once every 12 months. So I’ve done this for short-term projects, a fix and flip type of scenario. But you need to have a way lined up to be pretty sure to be able to pay that money back in that 60 day timeframe. But that’s a little hack that someone could get themselves in trouble or use it potentially down the road. But you can only do that every 12 months. But I’ve switched between me and my wife being able to do that a couple of times every 12 months for different things. Haven’t done it for a few years now. But there’s different ways you can go about things with the retirement accounts.
And one other thing I should say is that, that loan that you took out, there are ways to put real estate inside, say, a self-directed IRA and that if that’s the only way you can get started, that’s a great way to get started. But in general, it’s best to keep retirement accounts and real estate investing separate. That’s a big generalization. But the reason I usually make that generalization is that you’re losing tax benefits from both accounts if you muddle them together. They both have their specific tax benefits, and real estate has so many specific tax benefits that if you put it into a retirement account, you lose some of those. If it’s the only way you can get started, that’s great, that’s fine. But something to keep in mind when you are thinking about going that route.

David:
So for someone who’s a little older that isn’t thrilled about the idea of house hacking, maybe they’re not willing to compromise on comfort, they’re used to the place they’ve been living, it’s kind of like their life is set up, a lot of them may have boat storage at that point or a workshop and they’re not willing to move from one house to another. How can someone still leverage their primary home to get them started in real estate investing?

Kyle:
Yeah. I think the late starter, you guys have covered this on the show before, one of the biggest things is going to be your home equity and your primary residence. If you’re doing a good job of saving and you’re paying down and say you’re 10 years into a loan on your primary residence and maybe it’s your second or third house that you’ve rolled equity into over the years, a home equity line of credit is a really good way to at least prepare for real estate investing. I would say that’s one of the first places that I would go and one of the easiest places that I would go.
And sometimes, people worry about taking out a home equity line of credit and they think, “I don’t want to have this big loan that I have to pay extra interest on and it’s risky to have more debt on my house.” Well, you’re not adding risk until you draw on that line of credit. It’s a line of credit. And that’s sometimes people maybe get that confused, but it’s just a great another plan B, C, or D in your arsenal of another financial well that you can go to if something bad happens or if you want to invest. What you do down the road to create a permanent financing for your real estate might look differently than the HELOC, the home equity line of credit in the short term.
But that’s a great route. Go to your local credit union. If you’ve got a lot of equity, go put a HELOC on your house right away as big as you can, just so you have it. You don’t have to use it. They usually cost $75 to a $100 a year for their maintenance fee. And that’s it. A couple of things to keep in mind. They usually have a variable interest rate on the stuff that you draw out of it. But again, if you’re not using it initially, just have it there ready to go. When that house across the road from you goes up for sale and it’s the lady that passed away and it’s a smoking deal, you know it’s worth a lot more that you can pounce on it with a cash offer and then turn it into something. Just have that dry powder in that HELOC. It’s a great way to be ready.

Henry:
Yeah. I was going to follow up there. I think you touched on a little bit of what I was going to say is that there is a lot of fear around HELOCs. And I think you did a great job of explaining like, what we’re saying is, you can go get access to the money now. And yes, there may be a variable interest rate, but you don’t pay for any of it until you use it. And yes, some can have variable rates. I’ve had fixed rates on my HELOCs at times. And so you can get access. And it’s just a way of… It’s like having a credit card almost, right? You’re not paying anything for having the credit card, but if you need the money, it’s there.

Kyle:
Yeah, definitely. Some of them have a conversion feature that you take it out and you can convert it to a fixed loan at some point. That’s something to keep in mind when you’re signing the initial HELOC. They usually have-

Henry:
I did that.

Kyle:
… certain different… Yeah. So that might’ve been what you did. There’s different features that come. And every bank is different. That’s a very unique product to different ones. So it’s definitely something to throw in there in the mix of things if you’re getting ready to go.

Henry:
I often see that there’s two camps when it comes to HELOCs, right? Because people are right, they’re like, “Oh, don’t take on extra debt in your personal home. That’s a crazy idea.” And some people love it as a means to get started. So what are some of the risks in the current market environment you see as to using a HELOC to get started?

Kyle:
That’s a good question. I don’t know in the current market if the risks are a whole lot different than they would be in just about any market. The one that jumps out to me right away, and David, you’d be on this too with a mortgage company, is just rates being higher and it being harder to permanent financing on something. If you use that HELOC for something and you’re not able to find good permanent financing to put on that investment afterwards, you now have variable rate debt on your primary residence where if you lose your job and you’re not able to make payments on your primary mortgage or your HELOC or both, that gets you into the foreclosure territory.
And I just went down a rabbit hole of fear right there. So I’m going to back up just a little bit because even if you… So maybe take myself as an example. So last year, I sold my firm. My income went from a good income to zero on paper. From a financing standpoint, I have a HELOC on my house that I use for different purposes for investing on and off, pull out of it, pay it down. The HELOC stays there. The bank doesn’t come and say, “Hey, you’re not working, your income changed, we’re calling your HELOC, we’re calling your first mortgage on your property.” That doesn’t happen. It’s if you don’t have the resources or the reserves somewhere else to continue to make those payments if something in life changes.
So just like with any debt, with any obligation, have reserves. If you’re getting to the real estate investing, have reserves. This is something that is very important. And that ties back into these accounts that you have at the late start that you don’t have when you’re younger, is that these accounts… And again, David, being in the mortgage business, you know that these accounts can be used as reserves for qualifying for certain loans for properties, and they can be accessed if you get into trouble. Like a 401(k) or an IRA, if you need to pull some money out of that to help push a property through a bad period of time, you can do it. It’s going to hurt a little bit.
Say you pull 50,000 out, that’s going to get added to your income for the year, so you’ll pay tax on it. You’re also going to pay another 10% penalty on top of that if you’re under age 59 and a half. But if you’re a late starter and you’re over 59 and a half, you don’t get that 10% penalty. So there’s a few things to keep in mind there, but you having these big accounts that you’ve built up at a job or a few jobs over the years is definitely an advantage over someone just starting out.

David:
So what about if somebody wants to add a little bit more income to their primary residence? We’ve talked about HELOCs, we’ve talked about 401(k)s. What’s your thought on if they build or convert a part of their house into an ADU to add a little bit more rental income? Good idea or bad idea?

Kyle:
I love it if they’re going to love it. I think it depends on how passionate you are on this whole real estate journey. Are you going down the road as just like a little diversifier or are you’d making a big switch to it being your main retirement income? Because at this point, people are thinking… As a late starter, you’re thinking about retirement income. This is not like, “I’m 20 and I’m thinking of this is what I’m going to do for the next 30, 40 years because I enjoy it, or I want to be financially independent.”
When you’re 45, 50 to 60, now you’re thinking, “I’m getting older. I might not be able to do the job that I’m doing now forever. I need to have some income.” So all that to say, ADU on your property, short-term rental, these are great things, especially if you’re a hospitality minded person. And if you have a little business acumen, you got to run it like a business. You can’t Joanna Gaines your [inaudible 00:16:01] and have some people come stay there and you charge them $95 a night and book it a 100 nights out of the year and you’re negative 200% every year.
So you got to run it like a business. You got to run it with a hospitality mindset, especially in the short-term rental industry. That is what drives the reviews, which drives your occupancy, which drives your rates, which drives your profitability on it. So I think it’s great. We have several short-term rentals and I love it. I worked at a resort when I was in college and the hospitality piece is just fun. But you also get some weirdos too. So you got to be ready for that too. And if it’s on your property, that brings another level to things. Do you want somebody on your property? Are you okay with that, with people coming into your property? The proximity can make a difference there too. But it is a good way to get some extra income faster as opposed to straight up house hacking.

David:
So here’s what we’ve learned so far. Late starters are more likely to have a stronger cash position, a possible 401(k) that they can tap into or other form of retirement account, a primary residence that hopefully has some equity built up, and a little more life experience. I imagine they’re a little more savvier when it comes to picking the right contractor, making the right decision. Their algorithm is more developed because they’ve seen more things go on in life. Anything that I missed there, Kyle, that you would add to this that advantages to a late starter?

Kyle:
I don’t think so. I think you hit the one right at the end there that we haven’t touched on yet, is that they have life experience. And I think I would encourage people to ask themselves if they’re a “late starter,” why are you transitioning to real estate? Why haven’t you done it in the past, actually might be a better question. Is it because you didn’t know about it? Well, that’s great. Now you’re finding out about it. You’re maybe excited about it. What’s your personality like? Are you someone who takes action, and if you get under this real estate umbrella, you’re going to drive forward and do it? Or is it because people have told you about it? You’ve meant to, you’ve meant to, and you haven’t done it.
We all have friends who have thought about it, and thought about it, and it’s five years later, and it’s 10 years later, it’s 15 years later. And man, if they would’ve bought 10 years ago, things would’ve been different. So you need to really self-assess what personality you are. Because if that’s your personality, you’ve got some work to do before you dive into something new at this point in your career. If you’re someone who is like a go-getter, go for it. I mean, this could be a cool exciting point in your life.
And especially, if you have kids watching you do this awesome transition into something new and exciting when you’re 50 or 55, what a great example to show them of how you can make a transition and learn a new skill. And a 10 year timeframe, for just about anything, you can crush it. 10 years is a decent timeframe to just nail any new endeavor if you really put your mind to it.

Henry:
And for anybody who’s sitting back cringing at the idea of hearing us talk about leveraging these investment vehicles they’ve worked so hard to build up in order to buy real estate, we’re not saying go buy anything. We’re saying, you’re going to go buy the right thing. Right? You’re going to use that wisdom to understand that we’re going to buy things where we have a lot of opportunity cost, where there’s a lot of equity built up. The better deal you buy, the less risk you’re taking on. And so it’s really all about being savvy about what you’re choosing to buy and not just buying real estate for real estate’s sake.

David:
That’s true. And I’ll put one last cherry on top of what you said there, Kyle. The worst time that I’ve ever seen that anyone could have bought real estate in was 2005. In recent history, I don’t think you could have had a worst perfect storm of all of the fundamentals being wrong, real estate values going up for all the wrong reasons, and then a nasty crash in 2010. But if you bought in 2005 and you waited 10 years, by 2015, not only were you not underwater, you had made ridiculously good money. That’s how quickly it turned around.
So as you’re thinking about these scary decisions, stop thinking about the immediate, what’s right in front of my face? What if the market crashes tomorrow? And start thinking about what’s it going to look like 10 years from now? Because 10 years becomes 20, becomes 30, becomes retirement. And the worst thing you could have done would be to do nothing at all. Thanks for being here, Kyle. Appreciate you, man. If everybody would like to hear more of Kyle, check him out on the BiggerPockets Money Podcast. Or Kyle, where can people contact you directly?

Kyle:
Yeah. You can just check out my website kylemast.com, or I’m on Twitter @whoiskylemast?

Henry:
So far, we’ve already spoken to Kyle Mast about advantages a late starter may have when investing in real estate. We talked about 401(k)s and HELOCs and as well as adding value to your property. And so now we’re going to talk to Kim Bosler about her journey as a late starter. Kim Bosler, welcome to the show.

Kim:
Hi. I’m so thrilled to be here. Thanks so much, Henry.

Henry:
Give us a little background, Kim. At what age did you get started investing in real estate?

Kim:
I was 56. And I have six children and 20 grandchildren. So I put everything into being a mom. I absolutely loved being a mom and raising kids. And as they started to leave and no one was in California, I thought, “Wow, I’m going to be having to take a lot of plane flights.” So one day, I was on a plane and I ran into a really dear friend whose husband had just passed six months prior. And I was consoling with her and she said, “You know, but one of the greatest gifts that Gordon ever gave to me was five homes.” And I said, “What do you mean?” And she said, “Well, he bought five homes, and now that’s my play money. And so I’m able to go visit my grandkids whenever I want to.” And I was like, “Ding, ding, ding. That’s exactly what I want to do.”
So we had fiddled with real estate early on in our years when we were first married. And we didn’t know what we were doing. So we bought a little old home that took a lot of maintenance. And we didn’t have property managers. And every weekend, Bruce was fixing a dishwasher. And also, we were in the red from day one, so we hated real estate and we were never going to do it again, especially my husband. He said, “No, this is not for us.” And so I was always thinking, but to me, it seems like the closest thing to printing money. If you buy a home and someone else is living in it and they’re paying off your mortgage, how is that not like printing money? Really.
I mean, I kept thinking about it like, “There’s got to be a way because I know that there’s people that are successful in it.” Especially single family, it seemed like. So I was at the gym one day. And this is after all my kids had left. I think my son was a senior, but all five were married. And I was jogging along on the treadmill next to a dear friend that had invested quite a bit. He had several properties. And I said, “How did you do it Rusty?” And we were talking and he said, “Well, I think you should just hook up with… My wife loves RealWealth Network with Kathy Fettke.”
So I didn’t have a pen or paper, and I’m thinking the whole time as he’s talking, “RealWealth Network, Kathy Fettke.” So I go home and I looked at the podcast and I started going to events and I just loved it. I thought, “There’s so much information on here for beginners. This is fantastic. Maybe I can do this and I can get some homes and have some play money and great retirement.” We don’t have a pension. We have a 401(k). But you never know how long you’re going to live, right? I mean, how do we know? So I went home and I put on my vision board six homes, because my friend had five. So I thought, “Well, I better have six.” I don’t know why.
And I really laughed out loud. I thought, “There’s no way Bruce was going to go for this.” And I finally took him to an event. And it was a great event. It was North Texas. And the presenter was saying about these homes. And we looked at them and the math just made sense. You don’t have to really be a rocket scientist. They were $120,000 and they rented for 1200, and that was at the time. So Bruce looked at me and he said, “Well, I think we should buy six. And I was like, “You’re kidding.” I was just so excited. I said, “Okay.” And he said, “But you’re going to have to take it out of the HELOC because this is going to be your thing and I want you to prove that you can pay this back out of the rents.” So I said, “Okay. Deal done.”
And they were new construction, so there wasn’t a lot of maintenance. And I know a lot of people in the audience are thinking, “Oh, that was the day. Okay. 120. You can’t do that anymore.” But I hope that everyone knows that there’s always a way, there’s still deals out there. And we can get to that later. It’s never too late to invest in real estate. It isn’t. So that was the start. And then from there, we went to 1031 exchanges after a while. Your home builds up in equity. And then you can do a 1031 exchange. You don’t pay any capital gains and it goes straight into a bigger property.
So this week, I am not kidding, I am so excited, I found my dream home. And I was able to sell five properties. And I also bought a duplex with it in Texas, and was able to buy my dream home. It’s beautiful. Beautiful views, right near my mom family. I’m just absolutely thrilled. Now, you can’t take 1031 money and put it towards a personal home. Correct? So we will rent it out for two years or as long as we want, and then eventually move in, and then it becomes our personal property. So I’m just over the moon, to be honest. Absolutely thrilled.

David:
Now, when you first started investing in real estate, Kim, did you have any fears or hurdles that you had to get over? And what did you do to get over those?

Kim:
Well, there’s always fear in everything you do that’s big and exciting and you’re learning. And so I think part of it was just hanging out with people that were experienced and did it. I think it’s really important to get a great team that you can trust. That’s the most important thing. You’ve got to get a great lender, you’ve got to get a great property manager, turnkey provider, unless you want to find them on your own. And a lot of people do. But when you’re really busy with other jobs, maybe a good turnkey provider, maybe a build to rent, or somebody like Lori Woodworth in Texas who just works her buns off at Hello Texas to just find these properties that actually builders will lend you. She finds builders that will lend at 4.75. She finds properties that are assumable loans. Things like that, that are still available today.
So you just have to find a trusting accountant. I got a bookkeeper right away too because I didn’t want to do all of that. So I think it’s important to get a very trustworthy team because, guess what? Every single person that you meet in real estate is absolutely amazing. And then you start to work with them and you start to realize that some can be sharks, amazing sharks, but they are not honest. And so I’m a trusting person. I believe everybody. And I have been burned a few times because I’ve believed people. So that’s why getting in a network like RealWealth Network, who they’ve already vetted all these people, is really valuable. And I just adore Kathy Fettke. So that’s another thing.

Henry:
One of the biggest hurdles that new investors face is, they’re not really sure where to invest. And so talk to us a little bit about how you picture market when you got started.

Kim:
Well, when I was looking, of course it was Leah Slaughter that was presenting these properties, and she was telling all about North Texas. And it made sense because of the jobs that are flooding in. I just know, I live in California and it seems like half the businesses are going to North Texas. And the new freeways that they’re putting in. And so you want to look for real job growth. You don’t want to go out in Timbuctoo where if we have a financial crisis in the nation, it is going to be harder to get those places rented.
An interesting thing that I’ve noticed is, as things tighten up, the squeeze and the interest rates get higher, you’re also getting more renters because more people can’t seem to afford homes in the beginning. So it’s always good to have, I think, real estate. It just is.
But that’s one of the things I look for is mainly job growth. I mean, where would you like to live? I like the Sunshine State. So I like to invest in Florida too. That’s just a fantastic place. I was fortunate to do some 1031s into Florida before the pandemic and all of those homes doubled in value and they’re just continuing to go up. There’s build-to-rent and rent-for-retirement, and they do things like they actually build for investors to rent, and they’re all new construction. So there’s just a lot of great places.

David:
So with these investments that you bought, what was your strategy? Were these buy and hold? Were they BRRRR properties? Were they short-term rentals? What were you doing with them?

Kim:
You know what? That’s such a great question because all of those are such great possibilities. Some people feel very uncomfortable with leverage, and I was one of those. We were solid inlets. Just buy 10 homes and pay them off and be good. But at the time, I’m really glad that we did leverage because we were able to buy twice the properties or more. And all of those properties just, it was good timing too, but they all just really went up a lot in value. And I love Florida. So that was a good move to do the 1031s.
And so, I think you just have to look at the market and the strategy and do what you feel best about. My friend that I was on the plane with, she had five to just buy and hold. He had those almost paid off. Some people are extremely against that because they think you should leverage as far out as possible and buy as many properties as possible. So it’s all your comfort zone, it’s all what you feel best about. And really, there is probably no right or wrong. It really depends on you and what you’re comfortable with.

Henry:
Okay. So just to clarify, it sounds like you were buying and then renting them out for a period of time, and then you would sell them in 1031. Is that correct?

Kim:
Right. We held them for about five years, and then we switched a few of them out right before the pandemic, which was a good timing. And then we took those properties, some of those that have gone up so much in equity, and were able to buy this dream home. I mean, honestly, I’m so happy about it. Every day I am like, “I can’t believe this happened and that I was able to it.” Because also now, we’re able to keep our primary home, the one I’m living in now. We didn’t have to sell that one to move.
And this home, we’re trying to decide, should we just have two homes or should we maybe rent this one out? This one will rent for $4,000 a month because we live next to Travis Air Force Base, and the military is constantly looking for housing. And so a lot of our friends… Not a lot. A few have moved out of their home into a trailer park. And they’ve fixed it up and it’s cute, but then they get this extra income on the side on their primary home which is really valuable to them. It’s equal or greater than their social security check. So anyway, it’s nice to be able to have that option.

David:
So when it comes to management, did you self-manage these or did you end up hiring a property manager to take care of them?

Kim:
Oh, heck no. I would never self-manage, or that would be really full-time. I’m a real estate professional now, which I did want to mention is great. If your partner is working and you can become a real estate professional because you can put 17 hours or more a week, which is things like bookkeeping, it’s looking at properties, it’s podcasts, it’s travel, it’s a lot of things that can equal that 17 hours. So it’s really easy to do 17 hours a week. It’s very easy. So you want to be a real estate professional without having to self-manage. And I only self-manage one, and it’s because I have perfect tenants.

Henry:
So give us an example now. How big is your portfolio today?

Kim:
Well, I started out just wanting 10 properties. And so now, it’s probably just double that. It’s because we sold some. And for my comfort level, that’s good. I think, there’s some people that have 400 properties, not very many probably, but I do know some. And to me, that would be overwhelming. So it’s just your own comfort level. And I think those will be pretty sufficient. What you should do is just decide how much do you want to live on. How much do you want to live on when both of you aren’t working anymore?
And then you just look at your rentals and say, “Is that going to be enough?” And then you can stop there. You can keep going. It depends on how much you love it. I mean, some people just get really addicted to it and they’re always trying to find deals and BRRRRs and all kinds of things. My brother, for example. He would never buy a new construction home. He likes to buy these total fixer uppers and do it himself. So it’s whatever you like. That’s what’s so great about real estate. What do you like to do? What do you want to do?

David:
Yeah. There’s a lot of creativity they can work into it. And the people who have the blueprint lenses that they put on, these blueprint glasses, like, “What’s the blueprint, Henry? Tell me exactly what you buy. Or Kim, what did you buy? What did it look like? Was it three bedrooms or four? I have to know. Was it three or four?” That miss out on all of the different ways that you can structure this to work based on your personality, your skillset, where you want to go, what you want your retirement to look like. So on that note, how many years did it take you to build a portfolio that you feel you could retire on? And what were your target properties that worked for you, Kim?

Kim:
Well, it just depends on your properties too. But I would say 10 years. And then, like I said, you just take what you think it will take you to live on. We have 401(k)s and things like that. And I would say, do a mixture. Some people are a 100% real estate or a 100% stock market, but I would really advise to do both, just in case. I like having hard assets in case the stock market crashes. And when the stock market is climbing, then I want to have stock too. So I would just say, have a balance. And then you never know about anything really. You just do your best and hope that you can live your life in gratitude and joy for right now, because that’s all we have is really right now. But you want to still prepare for the future.

David:
But it sounds like you wanted simple, right? You didn’t want a big fixer upper like your brother. You didn’t want to run a construction zone. You wanted something that was sort of plug and play like Monopoly. I want that little greenhouse and I want to stick it on the board and I want to start collecting rent. So you picked a market that you believed was going to grow over time, would have a solid tenant base. Maybe it’s not incredibly sexy. You’re not going to scale to 500 units using the BRRRR method, but the simplicity of it was attractive to you.

Kim:
Absolutely. That’s what I wanted. And I found that 3/2s are excellent. For me, it worked out really well. One or two car garages. Preferably, people like two. But I always would say, “Well, what would I want to live in? And what neighborhood would I like living in?” Because sometimes, people will try to sell you a home that is really nice online, but when you go to Google Maps, or actually I would fly there, and I would say, “I wouldn’t want to live on this street. This is the only good house on this street.” And so you have to work with people that you trust. So important.

Henry:
Well, I think that that’s a great piece of advice. What other advice would you give someone who feels like they’re getting started a little late, but are interested in doing this?

Kim:
Well, I have a little saying, and Michael Jordan said, “Some people want it to happen, some people wish it to happen, and some people make it happen.” And some of those people… We all know about Ray Kroc, right? McDonald’s. And Ronald Reagan, he was 54 when he switched from acting to being governor of California. Martha Stewart didn’t start till she was 50. I mean, really, you hear about these big names that start later, but it’s never too late. It really isn’t. I mean, there’s expiration on a milk carton, right? But that’s not us. I think we get better, we get wiser. We have more fun in life. We enjoy things more, because not so uptight. We’re just enjoying our kids and grandkids. And we’re just… I don’t know. I like this stage in life. I really enjoy that I started later.
I actually don’t think I could have done this with kids because I was so into all the things they were doing. If anyone called me about a property, it would be a week till I got back to them. And now that I’m home and I am an empty nester, it’s really nice. And another thing about it is we wouldn’t have been able to buy six properties, even on a HELOC, if we were just newly married. So there are some advantages to being older. You’ve got better credit. Hopefully, you have more savings. You’ve got more wisdom. And you’re enjoying life. And so it’s just icing on the cake.

Henry:
Wonderful. Well, there you have it, folks. You heard it right here. Kim is letting you know it’s never too late to get started. I really, really appreciate you taking the time and sharing this experience with us. And I am super happy for you that you’ve now been able to purchase your dream home. That sounds like you are loving that. So thank you so much for sharing the story. If people want to learn more about you or get in contact with you, is there a way they can do that?

Kim:
Well, I’m on Facebook. And it’s Kim Woolf, that’s my maiden name, W-O-O-L-F, Bosler, B-O-S-L-E-R. And you can DM me and I would be happy to get back to you and guide you to some people that I trust personally and I’ve worked with, and just encourage you if there’s something you need, because I do think it’s an amazing way to have passive income. I really do. Or I wouldn’t be here.

Henry:
David, how can people get in contact with you?

David:
Well, I sure hope they do because I’m lonely and I need more people to be my friend, if I’m being frank here. They could do that by visiting davidgreene24.com and checking out my chat option and seeing the stuff that I have going on. Or they can DM me on their favorite social media. I’m @davidgreene24 everywhere. Henry, where can people get ahold of you if they just want to see how your big brain works?

Henry:
The best place to reach me is on Instagram. I’m @thehenrywashington on Instagram. Or you can go to my website, www.henrywashington.com.

David:
Alrighty. Well, thank you, Kim. What a cool and inspiring story that you shared. And thank you for relaying it in such a positive way that there is hope out there for people even if they feel like it’s too late to get started or they’ve passed up some opportunities in their past, that does not mean that they cannot do this now. In fact, it’s probably more important than ever that they do. Thanks for being here today. We hope we see you again.

Kim:
Thank you, David and Henry.

Henry:
Thank you.

David:
This is David Greene for Henry big brain Washington. Signing off.