Ashley:
This is Real Estate Rookie Episode 198.

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

Tony:
And welcome to the Real Estate Rookie Podcast where every week, twice a week, we bring you the inspiration, information, and answers to your questions to help you kickstart your real estate investing journey. And today we’ve got a really cool question coming in from the Real Estate Rookie Facebook group, and if you guys are not in the Real estate Rookie Facebook group, make sure you join. It is honestly one of the most active, the most engaged Facebook groups that I’ve seen for real estate investing.

Tony:
Today’s question comes from Montes Receivus, so Montes, hopefully I said your last name the right way, but Monte’s question is, “So my friend just encountered this situation I’ve never heard of before. My buddy placed an offer substantially above asking price, and the seller, before accepting the offer, asked my friend if he would be willing to pay the difference if the appraisal came in lower than the offer price. Very ballsy question. Has anyone encountered the situation before, and what would be the best response, if any?” So Ash, what are your thoughts on this?

Ashley:
Yeah, so an appraisal, it’s so tricky, and Tony, I’ve heard you mention this before about how it’s more of an art than a science, and I think that’s such a great advice because you can’t say for sure exactly what a property is going to appraise for even if you look at the comps or you look at what income it is bringing in. So this buddy, what they’re saying could happen, it definitely could happen where there could be a difference in the appraisal. So a couple things I do are do as much research as you can ahead of time as to try your best to estimate what the actual appraisal is going to be. So one thing I do is pull up the comps. I use Prop Stream. You can go to your county GIS mapping system and look at properties. You can also just go to a MLS listing website like Realtor or Zillow and pull up the comps from there. And then go ahead and look at what are some differences between those comps, too. Maybe one property has a garage, one doesn’t, kind of take those into your measurements there.

Ashley:
Then when you meet the appraiser, bring all the information you have. So if there was a new roof put on, there was upgrades done to the property, bring that with you. Maybe if you own property down the road, or you know somebody who does, and they had an appraisal done, and it works in your favor, bring a copy of that appraisal. So it goes both ways. Some appraisers will take as much information as you can give them and say, “Oh wow, thank you. This is going to make my job so much easier.” Some will be like, “Nope. No thanks. I don’t want to even look at it.” But might as well be prepared if it’s somebody that’s going to take the information that you want. As far as the appraisal coming back lower than you want it to, I don’t personally have any experience, and that’s why I’m going to turn it over to Tony. So my little tips were just to help you get prepared for the appraisal, and now Tony’s going to actually help you with what happens when the appraisal does not come back how you want it.

Tony:
Yeah. And Ashley, all fantastic points. I appreciate you sharing that with the listeners, and Montes, to kind of go back to your initial question as well, it actually isn’t that crazy for a seller to ask that of a buyer. So it is common that if there’s kind of this bidding war situation going on, that the purchase price exceeds what the property will appraise for, and there’s a name for that. It’s called the appraisal gap. And we saw a lot of this happening over the last 12 months as the market went bonkers, and there was multiple offers, multiple bidding, people bidding on the same property. You saw a lot where the properties were getting placed under contract for a price that was potentially significantly higher than what the property would appraise for. So in a market like this, Montes, it is common. It’s not that crazy the seller to ask that from the seller.

Tony:
And a lot of buyers, when they’re submitting offers in a competitive market, they’ll even include in their initial offer what appraisal gap they feel that they’d be willing to, they’d be willing to go up to, but say that you feel that the appraisal just came in low, right? Not necessarily that you went way over what it was valued at. If you feel that it came in low, you can challenge an appraisal. Okay? We have you successfully challenged a few appraisals, and what we were able to point out was some discrepancies in the report that the appraiser put together. So for example, one that we just did, the appraiser had the square footage off by, I think, almost 200 square feet, right? And that makes a difference in what the value of the property is. The comps that the appraiser chose, we found other more similar properties, better comps, and the same mile radius that the appraiser used that he just overlooked for whatever reason.

Tony:
So find holes in the appraiser’s report that you can point to say, “Hey, here’s an inconsistency here. Or here’s an inconsistency here. Or here’s a better appraisal comp here, or here is some information that was incorrect.” And if you can push back, sometimes the appraiser will admit and make those changes, other times I’ve had it to where you can actually get a second appraisal ordered, and then if all else fails, maybe it’s just about finding a different lender, right? If the lender isn’t willing to jump through those hoops to help you fight that appraisal, you can always go out, find a different lender, they’ll be able to reorder another appraiser. They’ll be able to order another appraisal from another appraiser which will help you hopefully get a better opinion of the value of the property. So that’s what we’ve done in the past to help us get around some of these appraisal gaps that we’ve seen. But all else fails, you might, Montes, your friend might just have to come out of pocket to actually cover the difference between the purchase price and the appraisal price.

Ashley:
Yeah. And I think the thing to take away from this episode is to at least try to dispute that appraisal if that does happen, where there is that gap, the difference. Do what you can to try to get a new appraisal or have the appraiser re-look at his configuration and what he computed as the appraised value.

Ashley:
Well, thank you guys so much for joining us for this episode of Real Estate Rookie. You guys can send us a DM on Instagram or leave a message in the Real Estate Rookie Facebook group. And if you guys are enjoying the show, please leave us a five star review on your favorite podcast platform.

Ashley:
I’m Ashley at Wealth from Rentals and he’s Tony at Tony J. Robinson. Thank you guys so much for listening.

Mindy Jensen:
Welcome to the Bigger Pockets Money podcast, show number 316, Finance Friday edition, where Carl and I recap our big June spending. I have started to notice inflation at the grocery store. I don’t really notice inflation for clothing and shoes because I shop at the thrift store mainly. And I don’t really notice inflation for a lot of other things. I just don’t buy a lot of things.

Mindy Jensen:
But for food, I’m starting to notice that at the grocery store and I’d like to think I have a pretty good handle on our food budget and on food prices in general. And it seems like they are going up and up. And that can be scary if you’re paycheck to paycheck. Hello, hello. Hello. My name is Mindy Jensen and joining me today is my co-host, Carl. You might know him from 1500days.com or the Mile High Five podcast, but I’ve known him as Mr. Mindy Jensen for the last 20 plus years.

Carl Jensen:
This is the first time I’ve ever heard you refer to me as Mr. Mindy Jensen.

Mindy Jensen:
Oh, I say that all the time.

Carl Jensen:
Really? Oh, I’m okay with it. I mean, you bring home most of the bacon so you can call me whatever you want.

Mindy Jensen:
Oh good.

Carl Jensen:
Just no bad words, at least not in front of the kids.

Mindy Jensen:
Oh, I would never.

Carl Jensen:
Okay. Thanks.

Mindy Jensen:
In front of the kids. Carl and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you are starting.

Carl Jensen:
Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate or start your own business, we’ll help you reach your financial goals and get money out of the way. So you can launch yourself towards your dreams. Wow.

Mindy Jensen:
Wow. That was smooth as silk.

Carl Jensen:
Yeah.

Mindy Jensen:
Usually Scott reads those words and he has been doing it for 300 episodes. So he has that memorized now, but that’s okay. You did a great job. Thank you, sweetheart. So Carl and I are here to talk about our June spending, which was the most expensive month that we have ever had. We spent, let’s open up our spending tracker, which you can follow along with every single month, every single day, if you’re really all that interested, at biggerpockets.com/mindysbudget. And I say Mindy’s budget, because I work at Bigger Pockets and you don’t. So we spent a whopping $11,995.70 this month, all in one month, which is a lot for us.

Carl Jensen:
Yeah. That hurts a little bit. But let’s flip over and say where most of that spending came from. Let’s see, we go …

Mindy Jensen:
It’s right here.

Carl Jensen:
Oh, okay.

Mindy Jensen:
Mindy highlighted it for you.

Carl Jensen:
Oh geez. Yeah. I can’t do anything.

Mindy Jensen:
Are you new?

Carl Jensen:
I need glasses. Yeah. I pretty much am new.

Mindy Jensen:
Get your classes then.

Carl Jensen:
$8,437.15 cents were travel expenses, which is quite shocking. And we had a slippery slope situation where our child decided to go on this school trip to Germany. We said, “Fine, if you want to go on this, we’ll pay for half. You have to cover the other half.” And then I started thinking, I’ve never been there. I’d really love to go to Germany. So let’s go over there and meet her, which is fine. We can shop for flights and get all that stuff and try to find budget accommodations and do all that stuff ahead of time.

Carl Jensen:
But it turns out, this tour company who will go unnamed, but they’re a big tour company, doesn’t book the tickets until like weeks before the actual trip. Keep in mind, this is an international flight and they booked it less than a month before the trip. So we were forced to book our stuff a month before the trip. So I think we paid a premium. Most of that 8,000.

Mindy Jensen:
You think we paid a premium? Let me confirm that for you.

Carl Jensen:
Yeah. I don’t know. I don’t frequently price flights to Frankfurt. It sounds like a tongue twister. Say flights to Frankfurt 10 times fast. What’s another German F-word? [foreign language], that’s a Volkswagen thing. Yeah. Yeah. So anyway, the flights were like, for the three of us. And then we had to buy another one for the daughter because of this other debacle with the store company. So we had to buy three round ship flights and a single flight home back from her. And that was weird, it was cheaper to buy her a round trip flight to go from Frankfurt to Denver and then back to Frankfurt and then to just ditch the second half than it was to buy one flight. So yeah, we ended up buying three and a half flights and I think that was close to $6,000, right?

Mindy Jensen:
That was over $6,000.

Carl Jensen:
Painful.

Mindy Jensen:
And what makes it so painful is that we couldn’t even fly or we couldn’t even shop for airlines. They didn’t tell us if they were going to fly Luftansa or if they were going to fly United or American or any number of other airlines. We couldn’t even start accumulating flight points. They just said, we will get to you when we get to you basically. So we weren’t able to really accumulate any points anywhere that would have worked out. I suppose we could have, going back now, we probably could have gotten those Chase Ultimate Rewards points and done a one-to-one transfer. That actually might have been a really good choice.

Mindy Jensen:
If anybody knows about the Chase Ultimate Rewards points, would that have been good? Because we did end up flying Lufthansa, which is a lovely airline. Everything worked out really, really well with the airline once we were there. We flew during some pretty awful domestic flight cancellation weekends. So we’re really thankful that we didn’t have any of those. We did go direct Denver to Frankfurt, without any sort of layovers or stops at all, which was my favorite way to travel. All in all, we had a good time.

Carl Jensen:
Wait, is it Frankfurt or Frankfurt, how I’ve been saying it?

Mindy Jensen:
Well, I’m American, so I say Frankfurt, because that’s how we roll.

Carl Jensen:
You’re mostly German though.

Mindy Jensen:
I’ve actually only been in Germany like 10 whole days, which occurred in June 2020.

Carl Jensen:
Okay.

Mindy Jensen:
It’s the first time I’ve ever set foot in the motherland.

Carl Jensen:
I do know, we have multiple German listeners and they will correct you because I think I’m right.

Mindy Jensen:
Okay. Well, if you want to correct me, you can send it to Carl, [email protected]

Carl Jensen:
Okay. So something we have never talked about, I’m going to ask you this right now, do you regret the trip?

Mindy Jensen:
I do not regret the trip. I wish we had more time to plan. And I say that like, we didn’t have a year and a half to plan the stupid trip. I wish I would have planned it a little bit better and maybe got a bunch of airline miles on Luftansa and United and American. And I mean, you can always use them someplace else or maybe you can’t, maybe we’ll just go back there. I wish we would’ve done it a little differently, but I’m glad that we went. It was a lot of fun.

Carl Jensen:
Yeah. I regret nothing. It was such a good trip … We saw-

Mindy Jensen:
Oh, thanks for setting me up like that, and then you, “I regret nothing.”

Carl Jensen:
No, no. I think there’s a lesson in here. We’ll tell you real quick what we did and why I don’t think we should regret it. We went to Berlin, that was four days. Then we rented a car. We drove as fast as our little Skoda could go. If you want to haul butt down the autobahn, a Skoda is not a good choice. We had that thing [inaudible] at like, what, 160 or 180 kilometers an hour, I think 110 miles per hour, which is not fast on the fast parts of the Autobahn.

Mindy Jensen:
No.

Carl Jensen:
So we took that thing to Munich after that for another like three nights. And then we came back, we stopped in Rothenburg on the way back and that’s it. I wish we would’ve had more time at both places, but especially in Munich. So back to my original question, I asked if you regretted spending that kind of money and you said no, and I don’t say no-

Mindy Jensen:
Oh, you didn’t ask if I regretted spending that money, you asked if I had any regrets.

Carl Jensen:
Okay. I guess that was my question then. Let’s go back to it then. Do you regret?

Mindy Jensen:
And that makes sense, this is a money podcast.

Carl Jensen:
It’s kind of the same thing. Do you regret the trip because we spent that much money on it or do you regret the money part of it?

Mindy Jensen:
I don’t regret the money. I wish we would’ve been able to save some money. I mean, how many times do we sit here and talk, both of us collectively, on our blog, on our podcasts, on our respective podcasts, we talk about money and saving money and saving money where you can. And we didn’t really have that opportunity. Although I think we could have saved more money if we would’ve tried a little bit harder.

Carl Jensen:
Yeah.

Mindy Jensen:
There’s a lot of information out there about how to earn miles and points and sitting down here talking to you about this was the first time it popped into my head, those Chase Ultimate Rewards, which are really fabulous rewards points. And we have the ability to get new Chase cards fairly frequently. I don’t think we’ve opened up a new one in the last 24 months. They have this five out of 24 rule. You could only open up five Chase credit cards in the last 24 months, I think. I’m pretty sure that’s still the same rule, but I don’t know, maybe it’s not. If you know for sure that, that’s changed, feel free to send us a note or comment in the Facebook group at facebook.com/groups/bpmoney. Would love to hear the updated.

Mindy Jensen:
If you have any tips for travel, saving money for travel, last minute tips when you have a specific deadline, a specific location that you’re going, a specific date like we had, if you have any off the wall tips, that’d be great too. But no, I don’t regret our trip and spending that much money. I mean $8,437 in one category that is not car is a lot, but let’s talk about what exactly that 8437 is.

Mindy Jensen:
That is the airfare, the hotels that weren’t booked on miles, which we do have boatloads of. That was all of our food, all of the restaurants, all of everything that would normally go into different categories. We put that all in travel. And the reason we did that and we did it consciously is because we would not have had those expenses at that level, if we had been at home. So groceries are more expensive because we’re not going to a real grocery store.

Mindy Jensen:
We’re going to a tiny little grocery store because we don’t speak the language, which is another, that’s a regret. We should have learned some German. We don’t speak the language and we don’t know where these other grocery stores are, so we just go to the little convenience stores and convenience stores always have higher prices. We went to restaurants, we went to, what’s the big brew house, brow house?

Carl Jensen:
Hofbrauhaus.

Mindy Jensen:
Hofbrauhaus, thank you. I always forget that. We went to the Hofbrauhaus and we got a great big beer. Well, did you post that picture of me holding two giant beers? I looked like such a lush.

Carl Jensen:
I did.

Mindy Jensen:
Yeah. Thank you. That’s great. You’re awesome.

Carl Jensen:
They’re light beers.

Mindy Jensen:
We drank a lot of beer in Germany. It was delicious. And I didn’t categorize that into different spending categories because we wouldn’t have been going out so much. We wouldn’t have been spending that much money if we had been at home. So we lumped it all into travel. And again, the reason we have so many different categories in our spending tracker is because if we had to, we could cut out travel altogether. Let’s say the stock market takes a big dump, like a 25% dip. Theoretically, of course, that would never happen the first quarter, the first half of 2022. Is it down 25% or just 22%?

Carl Jensen:
I think it’s like 22.

Mindy Jensen:
Yeah.

Carl Jensen:
It’s definitely a bear market.

Mindy Jensen:
Yeah.

Carl Jensen:
Over 20%.

Mindy Jensen:
Don’t get crazy. Don’t say 25. It’s only 22 and we’re recording this on July 4. I don’t know what the market’s going to do by the time this releases on July 7. However, the market has taken a big dump and there are a lot of categories we could cut out and get back into our normal spending threshold. So let’s look at some of, we did some math before we started this. Oops, let’s scroll down.

Mindy Jensen:
So we are in, this is the end of June that we are sharing numbers for. And the total spending that we have done thus far in 2022 is $46,484.79. Now, when we first extrapolated our FI number, what did we say that was going to be?

Carl Jensen:
40,000.

Mindy Jensen:
$40,000 for the whole year. And here is us going $6,000 over in six months, so that’s a lot. We looked at some of our expense lines and the biggest one that we could very easily cut out is travel. We have spent $17,000 in travel this year, and this is the first year after a pandemic, so we want to get out and see things. And yes, I’m not saying the pandemic is over. The pandemic is still going on, but we have been able to travel more this year than we have in the last two years. That’s a very easy cut, but that’s $17,000.

Mindy Jensen:
So without the travel expense, we’ve spent $29,424. Okay, well, we planned on 40,000, so that’s still at six months, we should be at $20,000, but we planned on $40,000 with no mortgage payments. How much have we paid in mortgage? Well, lucky you should ask that question. I anticipated that and I did the math and we have done $7,938 in mortgage payments. So without travel and without mortgage payments, the amount that we have spent this year in six months is $21,486.71.

Mindy Jensen:
So now we’re only $1,400 or actually you round that up to 1500, that number comes up all the time. It’s crazy how frequently the number 1500 pops up in our lives. We are $1,500 over our anticipated spending over the course of six months, which feels pretty good because we haven’t had to tighten our belts. We go out to dinner frequently. We go out to tap rooms with friends. We spend way too much on groceries and we live a pretty good life, without feeling like we are restricting ourselves. I mean, that’s what I think, what do you think?

Carl Jensen:
Yeah. I think that’s-

Mindy Jensen:
[inaudible] plant words in your mind.

Carl Jensen:
Yeah. I think that’s absolutely true. And this is something I say, I think every time I record. Every time we record, I say this. Sorry, I sound like a broken record, but we’re frugal for the things we don’t care about so we can spend on the stuff we do care about. The travels important to us. When we went to Munich and Berlin, we stayed close to the city center so we never had to get into a car. We walked everywhere or took bicycles and we paid a little bit extra for that convenience, but it was well worth it, because I don’t like to get in a car if I don’t have to. So it was great, but we’re pretty frugal. I’m about to order 20 tons of rocks to put in our yard and I’m going to move all of those myself, because I think it’s great exercise.

Mindy Jensen:
You heard it here. I don’t have to move any of those rocks. He’s going to move them all himself. I love that.

Carl Jensen:
Well, did I say me?

Mindy Jensen:
Yes.

Carl Jensen:
We, we, we.

Mindy Jensen:
No, no, no. They’re not going to cut that out. They said, you said you were going to do that all by yourself.

Carl Jensen:
There’s no I in rock.

Mindy Jensen:
There’s no I in team.

Carl Jensen:
I guess there’s no we in rock either, but yeah. But I don’t mind because I get a bunch of exercise from it. What are some other things we take care of our own lawn. I know some people absolutely hate mowing their lawn, but I really hate blowing their line button. I don’t mind it so much. I could put on my noise canceling headphones and catch up on the Bigger Pockets Money podcast.

Mindy Jensen:
Yeah. What is this episode? 316. So what do you have? 313 episodes to go.

Carl Jensen:
Yeah, I think so. I’ve listened to a couple. It’s pretty good. I like it. It’s too close. Yeah. What else? We do our own car maintenance. I don’t really like that, that much, but it’s faster to change the oil than it is to go to one of those places and sometimes, they screw it up. I cut my own hair, which looks so, so great.

Mindy Jensen:
Yeah.

Carl Jensen:
So I’ve paid like zero for haircuts for the past 10 years, at least. Right.

Mindy Jensen:
So, oh, it’s been longer than that. We’ve been cutting your hair. I, we, that’s a team effort.

Carl Jensen:
Yeah. So if you think of that, 100 times 20 bucks, that’s $2,000.

Mindy Jensen:
100 times 20, what are you 100 times 20 for?

Carl Jensen:
100 haircuts times 20 bucks with a tip and all that. At least 100 haircuts probably. No, a lot more.

Mindy Jensen:
Over what time period?

Carl Jensen:
Like one haircut a month for 10 years. That’s actually 120 haircuts.

Mindy Jensen:
You’ve been cutting your hair for like 20 years.

Carl Jensen:
Okay. So bump that up. That’s all our airfare. My haircuts bought us our airfare or most of it to Germany. But yeah, I think there’s something in that. I think you need to, at least our models to carefully consider where we spend so we can not spend on the things that we … I just totally messed it up. So we can spend on the things we really care about, but then save money on things that we don’t care so much about.

Mindy Jensen:
Well, let’s look at the things that we don’t care so much about. Oh, I don’t really want to because we haven’t really done this line at all. We need to work on that a little bit more.

Carl Jensen:
No, we have done. Here’s one entry right there. We’re looking at charitable-

Mindy Jensen:
And one over here, charitable contributions needs to be increased significantly.

Carl Jensen:
Yeah. We do, do some. I think we gave some money to Ukraine. We forgot to put that on there. Yeah. And we’ll certainly do more. I think our goal in life is probably to give in much bigger amounts. This is a whole other conversation, but I always think right now it’s the most spendy part of our lives. We have two children, but in like 10 years, they’ll be out of the house, I hope. They’ll be out of school, I hope. And then we can live super cheap and then we can give more of our money away.

Carl Jensen:
Now I still feel, we’ve done well, but still a little bit of shakiness and unease due to financial insecurity. So we’ll give and we’ll give big, but it’s probably a little bit further down the road. I’m not going to wait till I die, like Warren Buffet though. It’d be cool to see your money in action while you live, but we’ve gotten way off topic.

Mindy Jensen:
We have, but that’s something that we need to start discussing. We don’t need to discuss that right now and hash that out as people listen to us awkwardly discuss this. We’re going to stop that. But we will discuss this after the lights go down. Let’s look at our spending. If you look at our June spending, we only hit four red categories. And one of them was utilities by a dollar, which doesn’t even count. One of them was school. I don’t remember what I bought for $27, but it was a school expense that I had allocated zero to because it’s June and I didn’t think we’d actually be spending any money on school. So I think I just need to have $100 in the budget for school for every month. And then sometimes we hit it and sometimes we don’t.

Mindy Jensen:
Gifts, what gifts did we buy this past? We bought a lot of gifts in June. I can’t remember why, but we went $173 over the gift giving budget. And oh goodness, last month we went, we really need to up our gift giving budget because we have really gone over.

Carl Jensen:
In May, we had a family member graduate from school and we took the family out to dinner. So I put that in the gift category. That’s where that came from.

Mindy Jensen:
That’s right and I didn’t think of that when I was making my budget. That’s a learning opportunity and a research opportunity for everybody who is listening, who wants to make their own budget. Think ahead. I don’t know if you know this, but my projected is just a guess for a while. Because we haven’t been tracking our spending for so long, I don’t really have a good guess, a good gauge as to where my money is, where my money will be going this month. So I am now guessing based on, or estimating, let’s call it an estimation and not a guess.

Mindy Jensen:
I’m estimating based on the previous month. And that’s right, May was expensive. June was expensive. I think that maybe for gift giving, we need to bump that up to about $150 a month and see what happens, except for Christmas, which will be more.

Carl Jensen:
Yeah, it’s it feels good to be generous. I don’t mind spending money in that category at all. I think one of the gifts was we sent something to J. Money, Budgets Are Sexy. Congratulations, J. on buying it back.

Mindy Jensen:
Oh yeah. Budgets Are Sexy is now re-owned by J. Money.

Carl Jensen:
Yeah.

Mindy Jensen:
What else do we have? That’s right, I did send that. Our household budget, I think $200 a month in random household expenses is going to be our sweet spot. It feels like we have finally figured that out. Although I’m looking back, $1000, $2,000, we bought a couch. What did we buy in May? I don’t even remember. That’s kind of sad. What did I buy? I don’t even remember. And yet, I blew my budget way out of the water by $1000. Now I have to go back and research that.

Mindy Jensen:
We didn’t have any entertainment last month, but we were in Germany, so that was all entertainment. And again, that went into the travel expenses. So a lot of these numbers, the category numbers in June are artificially low because we were in Germany for 10 days. What else do we have? Healthcare is going to be ongoing until we figure that out. We are going to have that about $400 and I’m happy to come in a little bit lower. But overall, we had pegged it at 13,600 and we came in at 12,000-ish, just under 12,000. So we’re $1,600 below budget this month and it feels good to have a green month instead of a red month.

Carl Jensen:
Yeah.

Mindy Jensen:
Next month, I have us pegged at 9,200. I think I’m going to bump that up to 9,500.

Carl Jensen:
And it looks like a lot of this is coming from travel. We have one more big trip plan. We’re just going crazy. We’re going to be on an Oregon for some time.

Mindy Jensen:
We?

Carl Jensen:
Yeah, we.

Mindy Jensen:
We? I’m going to be here in Colorado.

Carl Jensen:
Yeah. After this, well, you’re coming out to California for a little bit.

Mindy Jensen:
Yes. Yes.

Carl Jensen:
So there is that, but then after that, we’re going to calm down. We’re not going anywhere for Thanksgiving. We’ll probably stay here for the rest of the holidays. We’re going to travel out to you for the Bigger BP Con. Is that what you all call it?

Mindy Jensen:
San Diego, BP Con, October 2 through 4. You can find more information about the Bigger Pockets Conference at biggerpockets.com/events.

Carl Jensen:
So I think we should talk about what goals we have for the second half of the year. What have we learned the first half?

Mindy Jensen:
We have learned that we don’t know how to make a budget.

Carl Jensen:
Yeah, but I think, for me at least, I think the keeping track is more important than the budget. The keeping track and especially the reflection part, like what we do now, this is probably our money date. I know certain couples do money dates where they’ll meet on a weekly or maybe monthly basis to review their numbers. And that’s exactly what we’re doing here. We’re just doing it in front of everyone. I don’t actually like budgets because that puts constrictions on your spending. You should spend thoughtfully, but that’s where what we’re doing comes in. We can review and consider if all our spending was thoughtful spending.

Mindy Jensen:
Ooh, I’m going to disagree with you and say, I like a budget because I open up this spending tracker frequently. I have this open on my computer all the time. So you can follow along at biggerpockets.com/mindysbudget. I am speaking specifically of the second tab, the 2022 budget. I keep this opened every day and I will look at it. I’ll just check in to see how we’re doing. And I will see that in the month of July, I have already spent $40 on groceries. Okay, that’s no big deal. I have $709 left or I will see that I have already spent, oh that’s fitness, $250 of our $300 fitness budget was on a bicycle for our daughter. We’ve spent a lot of money on our travel budget.

Mindy Jensen:
We have two trips to take and we only have $1,200 left on that budget. I’d like to be a little more conscious about our spending on food when we are on those trips. So instead of going out to dinner every single night, maybe we go out to dinner every other night and we make sure we have breakfast and lunch in the Airbnb or hotel, wherever we’re staying.

Carl Jensen:
Yeah, I agree. Can I go to a Taco Time when I go on my road trip?

Mindy Jensen:
Okay. What’s Taco Time?

Carl Jensen:
It’s a taco restaurant. They’ve got a deep fried taco or a deep fried burrito. I think we call those chimichangas but they call it something else. I’m not going to have that one.

Mindy Jensen:
[inaudible] heart attack.

Carl Jensen:
I value my cardiovascular system, so I don’t abuse it too much.

Mindy Jensen:
What else do we have? Oh, parties. Well, that party number’s going to go way up because we’re having a 4th of July party today and I didn’t put that expense in yet.

Carl Jensen:
Yeah. Going to be crazy.

Mindy Jensen:
So I like to keep track of this. We’ve already spent almost half of our clothing and shoe budget this month. So I want to make sure that we keep that under the 250 mark, which means that maybe I don’t go to the thrift store with the girls whenever they ask.

Carl Jensen:
Yeah.

Mindy Jensen:
Even though it’s the thrift store, we’re still going. In fact, I think I didn’t put the Kohl’s charge from yesterday in there, which means that there’s more money that we’ve already spent. So it’s very helpful for me to see this. When I don’t see this, I don’t think about it. When I see this, I think about it and I think to myself, oh, maybe I don’t need to charge that item. Maybe I don’t need another pair of shoes. Maybe I can wait another month for a new pair of workout pants.

Mindy Jensen:
I would like to know what about these monthly money budget dates are helpful to you and what you would like to hear from us in the next recap, because we’ve just been doing what we want to talk about, but we want to make sure that you’re hearing what you want to hear. Do you have any questions about our budget or how we come up with any of the things that we’re doing or any other questions that you would like to know about making a budget, making a spreadsheet?

Carl Jensen:
Yeah, I agree. I think it’d be super fun to answer a reader question or two.

Mindy Jensen:
Yeah. Any questions you have about our finances? You think we’re missing a category? I think we’re pretty good on categories, although we don’t have the umbrella insurance category in here. That’s going to add another $100 a month, $75 a month.

Carl Jensen:
Wait, how much is it?

Mindy Jensen:
It was like, was that $900 a year?

Carl Jensen:
No, I don’t think it was that much. I thought it was pretty small. We should go back.

Mindy Jensen:
I should look that up.

Carl Jensen:
Yeah. It wasn’t that.

Mindy Jensen:
Was it $900 for all of it?

Carl Jensen:
Yeah. For all of it.

Mindy Jensen:
For all of it, yeah, so, that’s okay.

Carl Jensen:
Yeah. We have a cheap old cars. Our auto insurance is like 800 a year or something like that. Right?

Mindy Jensen:
No. Auto insurance is like $300 a year. Homeowner’s insurance is $600 a year.

Carl Jensen:
That’s it? Wow.

Mindy Jensen:
Well, and the umbrella’s in there somewhere. I can’t remember what it was.

Carl Jensen:
Okay. Wow. Yay to crappy cars.

Mindy Jensen:
Or maybe homeowners is 900. I don’t know. I should look this up. Maybe it was $600 every six months before and now it’s 900 for the year.

Carl Jensen:
Okay. Anyway, shout out to the Mazda people. That thing will not die.

Mindy Jensen:
Yeah. Mazda five.

Carl Jensen:
Yeah, it’s a Mazda five, which is like, it’s a mini minivan or as Mindy likes it call it, the Mindy van.

Mindy Jensen:
It’s the Mindy van. Yes. If your name is Mindy and you drive a minivan, you should change the name to a Mindy van.

Carl Jensen:
It’s pretty awesome.

Mindy Jensen:
It is great. Is there anything else you want to talk about?

Carl Jensen:
I don’t think so. For the second half of the year, I would just like to keep watching things. It’s become a little bit, I don’t say scary, but yeah, this is the first time since I quit by job, since we started our journey. We started talking about financial independence, October 2012 and we had a little bit of a correction when COVID happened, but that one was very short. The feds jumped right into prop things up. V shaped recovery, hit the bottom, bounced back up like a rubber ball.

Carl Jensen:
This one has already gone on longer. And I think it will go on for a little bit longer as well. We might be in for some more, I don’t even want to say pain. I hope it’s not painful for y’all. But do you have any thoughts on that? Does that change the way we think about things? I’ve been noticing inflation too. I always notice gas prices. Everyone notices that, but I went to the store to buy some other stuff and the diet Mountain Dew was way more, so I’ve cut way back.

Mindy Jensen:
You should cut way back because it’s Mountain Dew.

Carl Jensen:
I know, it sucks. It is the diet, but it’s still bad for you.

Mindy Jensen:
I have started to notice inflation at the grocery store. I don’t really notice inflation for clothing and shoes because I shop at the thrift store mainly. And I don’t really notice inflation for a lot of other things. I just don’t buy a lot of things. But for food, I’m starting to notice that at the grocery store and I’d like to think I have a pretty good handle on our food budget and on food prices in general. And it seems like they are going up and up. And that can be scary if you’re paycheck to paycheck.

Mindy Jensen:
Having a meatless Monday, meatless Tuesday, meatless Wednesday to try and combat that, so you’re not spending so much money on the big expensive things. Go to budgetbYtes.com, B-U-D-G-E-T-B-Y-T-E-S and get all sorts of really inexpensive meals there, inexpensive recipes. We had Beth on the podcast just a few months ago or just a few weeks ago. And she had some really great tips. Cheese and nuts are really expensive sources of protein, but eggs are an inexpensive source of protein.

Carl Jensen:
We could buy our own chicken.

Mindy Jensen:
You could buy our own chickens and eat the eggs. And then when the chickens don’t make any more eggs, then you eat the chicken.

Carl Jensen:
Whoa. I don’t want to be involved in that part.

Mindy Jensen:
I don’t want to either. Plus our HOA doesn’t allow us to have chickens.

Carl Jensen:
Yeah. The kids would probably need the chicken. It would become a family pet. And then yeah, the chicken-

Mindy Jensen:
Can you imagine the hassle they would give us if … So, yeah. I’m starting to notice it, but I keep hearing that things are going to change. So we’ll see.

Carl Jensen:
Yeah. Yeah.

Mindy Jensen:
I’m not really concerned. And I really hope that this doesn’t come back to bite me in the butt. I have a job. We have saved. We hit our FI number and then you didn’t want to quit, so you worked another couple of years, we doubled our FI number and it has continued to grow even after you left your job. And according to the 4% rule, we have far more than we need. The 4% rule failed for 4% of the time, which is interesting. And that’s not why it’s called the 4% rule. But the 4% at the time that it failed was when the person, the retiree retired into a period of extreme inflation.

Mindy Jensen:
So if you were planning on retiring now, if you did retire and all of a sudden we are hitting inflation, keep track of your spending. Use my spending tracker copy and paste and change my numbers to whatever you want and keep track of your funds. You’re not going to go from perfectly fine to absolutely destitute overnight. You should have some warning, but you will have the warning if you’re paying attention.

Carl Jensen:
Yeah. And right now is the best time ever to be looking for a job too, super low unemployment.

Mindy Jensen:
Are you going to go get a job?

Carl Jensen:
I don’t think so. Is Bigger Pockets hiring?

Mindy Jensen:
Yes. Bigger Pockets is hiring. Go to biggerpockets.com/careers and you can see all the current job openings that we have.

Carl Jensen:
Are they paying me for my keynote at BP Con? I think they’re going to call it the Carl note, instead of keynote.

Mindy Jensen:
No, you’re not speaking at BP Con. Sorry.

Carl Jensen:
It’s okay.

Mindy Jensen:
Speaker submissions are closed.

Carl Jensen:
Ah, okay. I’ll try next year.

Mindy Jensen:
Okay. Good luck. Okay. Do you have anything else you want to talk about?

Carl Jensen:
That’s all.

Mindy Jensen:
Okay. Should we get out of here?

Carl Jensen:
Let’s go.

Mindy Jensen:
From episode 316 of the Bigger Pockets Money podcast, he is Carl Jensen and I am Mindy Jensen, saying, see you later, alligator, right back to the basics.

Carl Jensen:
Thank you.

Don Fandetti, Wells Fargo, joins ‘The Exchange’ to discuss Wells upgrading Rocket Companies to overweight and the impact on mortgage lending from Fed tightening.

Dave:
Hey, everyone. This is Dave coming at you with another bonus episode. Just a few weeks ago, we released our first bonus episode and it got such great feedback, we decided to do it again. In this episode, I got together with Henry, Jamil, Kathy, and James to talk about whether or not you should still be considering investing in real estate even with today’s crazy market. We were actually just intending to make this as a YouTube video, but it was so good we had so much fun and there was so much value created, we decided to throw it up on the podcast feed so you could all hear it here. That said, if you haven’t already subscribed to our YouTube channel, you should definitely check it out because we are putting out a lot of content really regularly that doesn’t make it here to the podcast channel. We can’t get everything out on a podcast, so there’s a lot more content there on YouTube, and it’s a great opportunity for you to learn more from me and the rest of the crew.
But for now, please enjoy this bonus episode and as always, we’d love to hear what you think. This is On the Market, a BiggerPockets podcast presented by Fundrise. Hey, what’s going on, everyone? This is Dave Meyer and I am here today to talk about a super important topic, whether or not 2022 is a good time to invest in real estate. Believe me, I know there is so much conflicting and confusing economic information, so I brought my friends from the On the Market podcast. We got Henry Washington, Jamil Damji, and James Dainard joining me today to talk about what they are doing to invest in real estate and how you can jump into this market. Yes, you can do it even in this crazy market. In addition to all the insights, the panelists are about to share with you, we also have a ton of Easter eggs and free giveaways because we just felt like it honestly, and we have some amazing things to give away to you.
You can go to biggerpockets.com/datadrop and download all of the rent data that I have amassed for the top markets in 2022. In the episode, we giveaway Jamil’s Tricks to Underwriting. I built a house hacking calculator that you’re getting for free. All of the links are below. You can download them all 100% for free, commitment-free on biggerpockets.com, so absolutely go do that. There’s no reason not to. With that, let’s jump into our question of the day, whether or not you should invest in 2022. What’s going on, everyone? This is Dave Meyer, your host for today’s panel conversation about whether or not right now in this crazy hectic market we see in 2022, if it is still a good time to invest and to have this conversation. I have brought my friends from the On the Market podcast.
We have Jamil Damji, master flipper, and wholesale coming to you from Phoenix, Arizona. Then we have Henry Washington, buy-and-hold and short-term rental investor from Northwest Arkansas, and James Dainard, the certified deal junkie from Seattle, Washington. Thank you all so much for being here. Before we get your takes on whether or not you are investing right now, and whether you think the rest of our audience should be investing right now, I want to just give a summary of what’s going on. We are recording this in pretty much the middle of 2022, and since the beginning of the year, the housing market has changed pretty fundamentally, at least in my mind.
When we started the beginning of this year, we had interest rates that were about 3.1%, which is close to the lowest it’s ever been. Now, as of this recording, it’s above 6%, so they’ve nearly doubled. At the same time, we are seeing that housing prices are still going up. They’re up about 15% year-over-year as of May, which is not as high as it was last year, but is still ridiculous by historical standards. Inflation is running hot at about 8.4%. Inventory is still extremely low, but starting to tick up, and of course, many are calling for a recession. So I think it’s reasonable that a lot of people are wondering is now a good time to invest in real estate? Just quickly, yes or no. Jamil, is this a good time to invest in real estate, and why do you think so?

Jamil:
Absolutely. I think it’s a great time, because you can actually get out there and get some deals. So if you stick to the fundamentals of understanding your numbers, sellers are having conversations they were not having months ago. They are ready to deal. They are ready to take haircuts on their numbers. You can get out there and snag up some amazing opportunities, get at it.

Dave:
I love that, because that is super contradictory to what we hear a lot in the overall narrative about investing right now, but it sounds like you’re finding good deals. We’ll jump into that in a little bit, but Henry, what do you think? Yes or no, good time to invest?

Henry:
Yes, absolutely. Real estate’s cyclical. It’s either going to be hard to find deals and easy to get money, or hard to get money and easy to find deals. That’s how the market works, so jump in either one of those scenarios. There’s always going to be a challenge, no matter what the market’s doing. It’s about figuring out how to overcome that challenge and the best way that fits your financial situation.

Dave:
I love that. All right, James, are you going to be a contrarian here, or you also think it’s a good time to invest?

James:
Yeah, it’s always a good time to invest. Scared money doesn’t make money.

Henry:
Amen, brother.

James:
At any time you need to be ready, or at least for me, I’m always buying. It’s just about adjusting my numbers and changing things, but I am always a buyer in any type of market. It’s just a matter of what kind of deals are coming in my way. Like Jamil said, they are coming. We are seeing them rapidly coming our way.

Dave:
All right. Let’s jump into that idea that there are more deals. Jamil, you mentioned that sellers are now having conversations that they weren’t just a few months ago. Can you tell us a little more about that?

Jamil:
Absolutely. In Phoenix, Arizona, for instance, in the last say six months, if I was trying to buy something at even 70% of ARV, I was having a really difficult time. I’d been adjusting my numbers up and up and the fix-and-flip rehabbers had been doing the same thing over here as well. We were buying speculatively. It was starting to get pretty scary, to be honest with you and we were looking at our projects and we’d done great on them, but we thought, “Man, when we bought this deal, we really were underwater. The day we closed.” Now we’re back to the fundamentals. I’ve been having conversations with real estate agents who are representing sellers right now, who haven’t been able to move their property. I’m getting discounts of 150,000 or more from what their original asking price was just because they didn’t time the market right, so these conversations are happening. They’re happening every single day. My team is cleaning up.

Dave:
That’s really encouraging to hear. I want to just reiterate for everyone listening and watching this that Jamil is not saying he’s going on the MLS and just buying something that is at list price. He’s able to negotiate with sellers because the dynamics of the market have shifted. Six months ago, a year ago, it was probably the strongest sellers market ever, probably. I think sellers are starting to see that the scales are tipping a little bit more in buyer’s favor. In these transitionary periods, it can be an opportunity to buy. James, I know that’s something you always talk about is looking for opportunities in these transitionary periods. You are a buy-and-hold investor. I know Jamil, we might have convinced him to do his first buy-and-hold the other day, but-

Jamil:
Closing July 11th.

Dave:
… are you seeing the same kind of dynamics in the buy-and-hold market as well as in the flipping and wholesaling market?

James:
Yeah. We’re seeing things across the board. It’s kind of amazing, because everyone keeps talking about, “Hey, rates are so high, you can’t make anything pencil,” and that is just not true. We looked at four deals on market on Monday that all cash flow above 10% cash-on-cash returns at 30% discounts and really good BRRR opportunities. We’re definitely seeing that things are balancing out now to where you can look at a property and go, “Okay, does the math work or not?” Then you get the time to evaluate it correctly, and then you can write your opera accordingly. But the market is definitely balancing out and it is making for great opportunities, and that’s why we’re just changing numbers around. We have lots of people reaching out to us on a daily basis right now like, “Hey, what will you pay?” We’re giving them the numbers. They might not be happy with them, but people are definitely starting to play ball.

Dave:
That’s really interesting. I hadn’t even thought about the fact that lower competition in the market right now means that you have more time to underwrite your deals and you can actually sit and think about something probably for the first time in two straight years. Everything was going in four or five days before, so now you can actually have some time.

James:
Yeah. Before you start throwing out hundreds of thousands of dollars, you actually can think about it for a second. The last 12 months was like, “Okay, cool. I’ll buy it. Here’s a half million dollars.” It’s like, what is going on?

Dave:
It is. It is a benefit to investors to be able to have some time to think about this. Now, I’m sure there are people watching this thinking, “These are three successful investors with sophisticated marketing apparatus, great deal flow, and they’re biased,” because you all like real estate investing. That’s your business. Henry, what do you say to that? Do you think there is some validity to the fact that we are all biased, and how do you respond to something like that?

Henry:
I think the bias comes from the success and not just success, but life- changing success that we’ve seen and how this vehicle has not only provided us a return on our investment, but provided us the ability to be good stewards of other people. We spent the first half-hour before we started recording talking about something really kind, James was able to do with some money that he made. So the bias comes from us understanding how powerful of a tool this is to change people’s, not just their lives, but their family tree.
It’s a generational wealth building tool, so I say that if we are biased, that should excite you, because we are biased because it’s such an amazing vehicle. You look at the stock market and you think about you’re building wealth, you’re generating some income. It’s more just like thinking about individually, what that can do real estate gives you that and the ability to be a blessing beyond just yo because of the abundance it can provide. So if we sound biased, we probably are, but that should be super exciting to you, because we just want you to be able to experience some of the amazing things that this tool provides.

Dave:
A lot of people ask me and they say you’re biased or people feel that there’s fear. Basically, they’re thinking that there is going to be a market correction seems to be the idea that people in the real estate space are either deliberately or are blindly ignoring the fact that there is going to be a market correction. The only true answer is, no one really knows what’s going to happen. I certainly have my opinion. I think I know you all have your opinions about what’s going to happen, but there is a genuine fear that people don’t want to buy at the top of the market. I think even people who want to invest in real estate and are bought into the idea long term of investing in real estate say, “Why would I buy right now? Interest rates are high and the market could correct.” So Jamil, I’m curious, how do you handle that fear and how do counsel other real estate investors to managing that?

Jamil:
Well, that fear always exists. I’ve been hearing people tell me that the market was at its peak so many times on the ride up. Look, I can absolutely say that we’ve hit a threshold. We’ve hit a threshold of affordability. We’ve hit a threshold of interest rates. We’re in an interesting spot. At the same time, I believe that when you’re looking at real estate and you’re looking at it over time, we’ve gone up. We always go up, and even though you get these little blips where values can decrease, you got to look at the use case. Like, what are you doing with the property?
My friend, Pace Morby, has a saying, and I love it. It rhymes. He says, “The equity comes, equity goes, but the cash will always flow.” So if you’re looking at a deal and if you’re looking at it from a short-term perspective and you might lose a little bit of money in equity, well, are you still making money in cash flow? You’re really only losing anything if you sell at this time. So I’m about to make a purchase for $12.5 million on a multi-family building. I was talking to James before we started the show today, and does it make me nervous? Absolutely, guys. It, for sure, makes me nervous, but I have a plan and I know the fundamentals of what I’m doing. I love the location of the property.
There’s an absolute opportunity for me to increase rents. I’m going to depreciate a lot of my income, so I’m going to save money on taxes. This makes financial sense. I’m using the fundamentals of real estate to increase my wealth. In a hot market, in a not-so-hot market, I’m still making money. One more thing, yesterday, I was able to trade a $25,000 assignment fee. In this crazy market where all this fear is everybody’s talking about, “Oh my God, this and that,” well, what about the $25,000 that I made yesterday? Is that biased or is that actual money?” That’s money, so if you understand how to do this and how to make proper moves, and if you’ve got the liquidity partners, you’ve got the buyers ready, you’ve got sellers ready to have conversations with you, you can always make money.

Dave:
That’s great advice. Obviously, it really just depends on the strategy, and there’s so many different ways you have to operate differently in each type of market. You said something, Jamil, that you use Pace’s rhyme. You said that the cash will always flow. James, you often hear, and there are fears of recession. I saw something recently where Bloomberg said that the risk of recession is about 75% right now. In my experience, I haven’t seen rent go down, even in recessions. I haven’t lived through as many as other investors have, but you can look at the data for this and see that it hasn’t. Are you afraid that rent is going to go down if there is a recession? If so, how do you mitigate that possibility in your own investing?

James:
I think it depends on the market that you’re in. Some markets are definitely really elevated. People living in secondary home areas that moved out for pandemic reasons, I do think those rents are going to come down. Those are pretty juiced up right now. How we do it is, we focus on where the money is and the jobs are, and we’ve always had good success. Even back in 2008, when the market crashed, I didn’t see a lot of rent drop. They actually stayed very stable. The big difference was it took 60 to 90 days to fill rather than a week or two, and it was just a longer time to fill up your units, but we didn’t see a lot of rent drop. Things that we’re looking at is, like right now, we just wrote an offer on a 90-unit building up in Everett, Washington, but it’s downtown. It’s next to the jobs. It’s still very affordable.
Our average rent or unit per rent or, it’s a 1.75, a foot that we’re performing and out, and so we’re staying where the affordability are. Then, we’re also looking at staying away from different types. I wouldn’t go buy luxury apartment buildings right now, because I don’t want to go chase those really, really high rents. When those rents went from 3,000 to 4,000 in Washington, that’s a huge jump and that can come back pretty aggressively. But the affordable stuff, if you’re around that median home price and you are staying in that median price range, that stuff doesn’t really flex much.
Then, the other thing that we do is we make sure we get good tenants in and we don’t slum board. Everything gets renovated to a high caliber because our quality of tenant that’s coming in is good. They appreciate living in a good spot, so they’ll actually rent quicker and they don’t mind paying more money for a good unit. So everything that we look at right now, we have full stabilization numbers in. We have big budgets, and that deal has to work with all of this in there, or we won’t buy it because we want it turnkey. We want low maintenance. Then also, with inflation going up, we also don’t want this building to bleed us out for two to four years. So by stabilizing these correctly, you get better tenants, rent don’t fall, less money out of your pocket.

Dave:
Love the idea of just producing a great product that attracts a great tenant or a great customer. It’s a surefire way to continue to generate the same kind of income that you are expecting or that you underwrite your deal with. Just for reference, James is right. Just to provide some data here, back in 2008, housing prices dropped nearly 20% nationally and rents, they stayed pretty flat. Of course, it depends market to market, but just on a national basis that is pretty dramatic, because if people do stop buying as many homes, maybe they need to rent. Just for some further context, right now, vacancy, as James is saying, it could start to go up in a recession. It is at its near all time low.
Vacancy is extremely low for the same reasons, or one of the same reasons we’ve seen housing prices go up so much is because there’s just not enough homes. Some of what, basically, what I’ve heard all three of you talking about so far is that we need to adapt. You can’t just go out and buy anything in this kind of market. You have to be smart. That’s always true. I guess maybe the last two years you could have just shot from the hip and done okay, but we’re getting back to the area where we need to be smart and considerate. Henry, what’s one strategy or one niche within the whole realm of real estate investing that you think makes sense in this type of economic climate?

Henry:
Oh man, absolutely. I’m always going to be a big proponent of house hacking, because when you’re looking at a tough economic climate, one of the things you want to be able to do is create more income, or reduce expenses and then be able to invest the difference, some sort of hedge against the economic factors that are pushing against you right now. So when you look at something like house hacking, it is fairly low ceiling to get into it. You can find a deal that works from a house hacking perspective, pretty much on the market and almost any market because you are also going to factor in that you are going to be eliminating a mortgage or reducing it substantially by creating income from that property that you’re living in. It’s also low barrier to entry as far as cost to get into the property, because you can utilize a convention or an FHA owner-occupied loan and get in with 5% down, sometimes even three-and-a-half percent down if you can qualify for an FHA; sometimes even less, if you can qualify for a VA loan.
There’s no down payment, or there’s assistance programs like NACA, Neighborhood Assistance Corporations of America, where you can get into it without having to pay a down payment and they will pay your closing costs. So there’s all these types of programs that you can leverage to get into a multi-family asset or even if it is a single-family home and you rent out rooms, there’s multiple options, and that’s what I like about it is, you can take the place that you live, use it to create income and decrease expenses, which gives you this surplus, if you will, of money that you didn’t have before, which now you can use to either make your ends meet if you’re in that position, or set it aside so that you can invest in something that potentially you’re not living in, but it’s one of the easiest ways to do all of the things, which I think you need to do when economic constraints are tight, which is, save money and figure out a way to make more money.

Dave:
That’s awesome. I think house hacking is just such a no brainer for people, especially if you’re just trying to get started. Rent is so expensive right now, you’re probably not saving that much money renting. Even if you’re fearful of the market, you can probably reduce the amount you’re spending. We actually mentioned this on the On the Market podcast in a recent episode, but I did create a tool. It is a calculator where you don’t just look at whether you buy or own, there’s plenty of things out there in the media where you can do a buyer or a rent calculator, but this is a buy, rent or house hack calculator that can show you if and how much money you can actually save. We will put a link to that in the description below. You can download that completely for free on BiggerPockets. Jamil, what about you? What would your one niche or strategy advice be for people who are looking to jump into real estate investing right now?

Jamil:
Well, I think if you’ve got fear of holding a property and worrying about the equity potentially disappearing, really understanding the fundamentals of wholesaler. I don’t just say that because I’m a wholesaler, I’m saying that because if you are fearful, then trading is the way to go. I was fearful coming out of the last recession because I got burnt in 2008. I lost millions of dollars. This is my second go around, so I learned what not to do last time, and that was collect a ton of leverage and get overextended. I’m not in that position, but I can tell you this, that I traded property on the way down. I traded property at the bottom and I traded property all the way up, and I made money being able to do that. I sustained my life because I was able to understand how to wholesale contracts.
So I’m telling anybody who’s out there right now, if you’ve got fear, if you think, “Hey, I don’t want to buy a property and hold it right now, because I’m worried I might lose 10 or 20% in equity if a correction happens,” understand the fundamentals of wholesale, get yourself involved. You can wholesale a transaction. You can wholesale a house with an earnest deposit and just understanding the values and understanding the fundamentals of what a property is worth. Guys like myself, Henry, James, we’ll buy those deals from you, so you can actually make tons of money understanding how to wholesale properly. I think right now, especially if you have any fear, that’s the way to go.

Dave:
That’s great advice, because it’s relatively low-risk compared to a lot of other real estate investing strategies. Jamil, you previously on our podcast gave away some underwriting advice and a spreadsheet that we were giving away on BiggerPockets. Now that I just talked about giving away my calculator, would it be okay if we linked to that in the show notes as well to that people can go download?

Jamil:
Absolutely. Absolutely. They’re called the Appraisal Rules, guys, and you can follow them to understand how to really hone in on how much a property is worth and what its potential is.

Dave:
Awesome. Well, thank you. You can download that for free, again, in the description below. We’ll have the link there. All right, James, what about you? What strategy would you bank on here in 2022?

James:
All of them, because [inaudible 00:24:16] at the end of the day, a deal’s a deal. It can be a great wholesale deal. It can be a great flip deal. It can be a great buy-and-hold and not all those are the same, but the biggest thing that I have had to do in the last 90 days is really establish my buy box. I see a lot of people, the people with fear are the ones that go, “I don’t know what’s going to happen and I don’t know what I want to do.” So the first thing you want to do is narrow down what you want to do. So for each sector that we work in for wholesaling, we have a buy box like, “Are we going to keep that deal or sell it?” We know what deals we’re keeping, what deals we’re going to wholesale off.
We know if we’re looking at a buy-and-hold, whether it’s a two to four unit or 20, 40, 50 units or above, we’d have our buy box and our process set in play. If it hits this return and we can get this kind of debt, we will buy the deal. Then with fix-and-flip, it’s the same thing, because fix-and- flip, I keep hearing that it’s very risky. It is. It’s always been very risky. It’s been very lucky the last 12 to 24 months. If you flipped a house and you made a lot of money in the last 24 months, half of it was luck. I’ve flipped a lot of homes, and I know that I got lucky the last 24, but you can flip in any kind of market. 2008, we were crushing the market flipping and that market was dropping, like you said, 20% in a year and we still made margins.
So you just have to buy your right plan behind your buy box. We don’t go and buy a house, design the whole thing before we have architect plans back. We want to know where our window schedule is. We want to know how it’s laid out. What’s the actual theme of the house. If we went and designed that down the road, we’re going to have a disaster. So you don’t want to just go buy without really putting together that core fundamental, which is, “This is what we’re doing. This is what I’m trying to accomplish, shrink my numbers down. If I still want to flip, I’m just going with bigger margins now. I want 20 to 25% returns and I want to have 10 to 20% on my construction budgets, and then I’m padded all the way through.” The more people walk away from flipping, the harder I’m looking at it because that’s my biggest opportunity area.

Dave:
This isn’t theoretical, you’re actually doing this. You’re finding these deals right now.

James:
Oh, yeah. The margins we’ve seen have been at least 2X what we’ve been seeing the last 12 months. I got a call yesterday from a seller that we actually gave an offer to nine months ago, a builder beat us out. They beat us out by 50 grand, but they had a very long close and they were supposed to close actually today. The builder just walked away from their earnest money, $40,000, and they’re out that deal. These people have already packed their house up and moved, and they just got notified two days before. So they call us panicked and they say, “Hey, can you buy this?” Then, for us, we’re not going, “Hey, well, how do we get this just for nothing?”
We’re going, “Okay, well, we have to reevaluate this property. Here’s our new margin.” We educated them on what’s going on in the market and they know, but then we educated a little bit more about the impact of rates and the math behind it. Now, they just took an offer, we gave them an offer 150 grand less than we gave them nine months ago. It’s in a great neighborhood, and they’re going to take it because it’s very logical at that point. So for us, by not getting that deal nine months ago, I just made $150,000 more in value. So as things get scarier margins increase. The last 12 to 24 months were not normal.

Dave:
Is the same true for you, Henry? Are you seeing pretty good deal flow? Can you share with our audience, I’m assuming you’re getting pretty good deal flow, but assuming that you are, where are you finding those deals?

Henry:
Yeah. Yeah. Real quick, to piggyback on what James and Jamil both said, the best insulation for risk is to buy great deals. I know that that sounds generic, but in essence, what that means is, you have to figure out how to go find people who have motivation to sell and equity. We’re buying situations. You heard James just explain a situation that caused him to get a good deal. We’re not buying houses, we’re buying situations. So if you can get good at finding those situations, and they need James, they don’t have another option, and so when you create those win-win scenarios by providing people who need to sell with a solution, then you can get good deals.
The better margins you have, the better deal you buy, the more you insulate yourself from problems. So if the market shifts, James can either reduce his asking price and still make a profit. He can potentially put a tenant in there and keep it as a rental. When you have the margins of buying a good deal, then you can have multiple exit strategies and multiple exit strategies is what helps you reduce the risk. If he goes over on his renovation budget, he’s got cushion. It eats up some profit, but if you’re making 80 grand instead of 92 grand because you went over 12K, you’ve given yourself some cushion.
So being able to figure out how to find and purchase good deals or put them under contract, in Jamil’s case, is how you’re going to be able to insulate yourself from the things that most people are scared of when it comes to real estate investing. For me, Dave, we’re absolutely still finding good deals. I am getting more leads coming to me now than before when I was having to go out and push for leads. So now people are trying to come find me, because again, it doesn’t matter what the market is doing, if the market’s high or the market’s low, it doesn’t dictate if a person’s going to be in a tough situation. People get in tough situations, no matter what the market’s doing.
In fact, there’s more tough situations when economic conditions are the way they are now, it creates more difficult situations where people are going to struggle to sell. It also thins the pool. It thins the pool of investors and buyers to the ones that are the most serious and the most prepared. So if you are consistently trying to align yourself with the people who are moving and shaking in the industry with the people who are getting deals done, then you won’t have a problem making money in those environments because whereas, a year or so ago, maybe even six months ago, if you put a house under contract, there was a million hands going up to buy that deal.
There’s less hands going up to buy that deal now, and so the people like Jamil and James and myself who are connected with the people who are ready to jump and do those deals are the ones who are going to make the money. So right now, there’s more deal flow coming. Access to money is what’s getting a little more difficult, traditional money that is. So it’s always going to be a two-pronged approach. You’re going to have to figure out how to solve your deal flow problem and solve your money flow problem so that you can buy those deals. So if you can solve both of those problems, I think you’ll be able to make money in any market, but man, we’re getting great deal flow right now, Dave. Mostly I do direct mail and cold calling, but as of, I would say, the past two weeks, people have been calling me.

Dave:
That’s amazing. For people out there who want to get started, maybe they are listening to this, hopefully they’re inspired by all of you and your wise advice. Jamil, what advice do you think, what would you give people in the next 30 days? If they just want to start and take action and jump in on these opportunities you’re describing, what is one or two steps that they can take right now to move towards that first deal?

Jamil:
Well, direct mail can take some time and cold calling can obviously take some resources and time, but there is nothing that costs less money than going to the MLS. Guys, listen to this. You can go to the MLS right now and look at anything that’s been on the market 30, 60, 90 days. Believe me, realtors right now are more sensitive to this situation than sellers are. You can pick up the phone, you can have a conversation with a realtor right now and ask them, “I see this property isn’t selling, and the world has changed. Is your seller ready to have a real conversation about where this property’s going to trade at?”
Use that listing agent as your buyer’s agent and incentivize them with a double commission and go offer on that property at a number that’s going to make sense for somebody. Come to me and I’ll be your buyer. I’ll tell you what to lock it up at and make a profit. That’s the first step. You can get a deal done right now in a matter of weeks by having that one hack. Go right directly to the MLS, go get some agents, build some rapport with them, have them represent you as well so they’re double incentivized to work with you. Bring me the opportunity and go make a check.

Dave:
All right. That is great advice. I do think, James, you told me the other day that you’re getting a lot of on market deals right now, but do you have any other tips, anything, not just deal flow, anything that you think could help someone achieve that first deal in the next couple of weeks here?

James:
Yeah. Just the first step is to find what you think is a good deal. That is the most important thing. If I don’t know what a good deal is, I can’t go out and go find it at that point. But yes, we are getting a ton of properties on the MLS. Honestly, the deals are really good because it is the market is telling them what the activity is. When someone lists a property on the market and they get zero showings in the first week, they are concerned, especially after what they saw from 90 days ago. So the market really tells them where it’s at, but where we’ve been getting most of our deal flow is, is we’re defining what it is, and we’re looking on the MLS. We’re using call rooms now to get mass coverage.
There’s a company call Magic we just used because we want to be able to hit more people, because as there’s more fear out there and people are wanting to make that next decision, I want to touch more people. So we’re able to hit five times as many more people. We ramp that up, so we’re doubling down on all of our marketing efforts, because as people stop contacting, I’m going to increase my contacts. Then the other thing is, like Jamil said, is talk to real estate brokers. Real estate brokers are the best avenues out there. They’re talking to tons of people.
They have tons of clients that have been thinking about selling for 12 months and now their clients are having FOMO and they’re going, “I missed it,” and they’re rushing to get to the market and they want to rack in whatever equity they still have in that property. So reach out to all your brokers and let people know what you’re looking for. Don’t just say, “I’m out buying deals,” tell them what kind of deals you’re looking for, what returns you want to be at, set the tone and then start talking to everybody and expanding your marketing network, and you will get more opportunities.

Dave:
It just seems like what’s holding so many people back is just the fear without any actual action. The things that you’re talking about, just going and actually calling someone, going and running numbers on a deal, even if you know that’s a bad deal, just teaching yourself the skill to be able to run the deal, know what a good deal looks like, these are the actions that you can take for free. It doesn’t cost anything. There is zero risk in doing research and learning whether you can actually find a deal, and I think a lot of people think, “Oh,” they come up with these ideas or these scenarios in their head, “There’s no good deals,” or, “It’s too risky,” but you don’t actually know that until you go out there and actually do something and actually look at a deal, talk to a broker.
For everyone watching this right now, there are so many free resources we have on BiggerPockets. If you want to find a investor-friendly agent, you can do that for free. If you want to download the stuff I was talking about, you could do that for free. You want to learn how to analyze deals, you could do that for free all on BiggerPockets. If you want to start taking action on real estate, if you agree like James, Henry, Jamil that this is a good time to invest in real estate, definitely head over to biggerpockets.com. It is entirely free. There’s a community of more than 2.5 million real estate investors who have found success in real estate through the same thing that these guys are talking about, and you can do it absolutely too, so go check that out.
James, Jamil, Henry, thank you all so much for being here. This is a super important conversation. If everyone watching this likes this kind of conversation about what’s new, what’s happening in the world of real estate investing, you should check out our podcast, we have one. It’s called On the Market, there will be a link below. We have our own YouTube channel. You can see all of their beautiful faces regularly there making some great content for all of you, and so hopefully check that out. Go take some action. Thank you all for being here. We’ll see you all again real soon. On the Market is created by me, Dave Meyer and Kailyn Bennett, produced by Kailyn Bennett. Editing by Joel Esparza and Onyx Media, copywriting by Nate [inaudible 00:37:36] 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.

Andrew Bresee never wanted to work for someone else. “I don’t want to build somebody else’s dream,” he says. “I want to build mine.” And that was his motivation for putting in the work it would take to become financially free just two years after buying his first investment property. 

In an episode of the BiggerPockets Rookie Podcast, Bresee explains the obstacles that could have easily led him to give up on his dream and how you can cultivate perseverance even when your luck seems to run dry. He lets us in on the lessons he learned while developing his investment strategy and even provides the “cure” for analysis paralysis, giving real estate rookies hope that financial freedom is in no way out of reach. “Whether it’s two years, five years, 10 years, it will be much quicker than you think,” he says. 

Starting Small

As a 15 or 16-year-old teen, Bresee was checked out. “All the Ritalin in the world couldn’t get me to focus at school,” he says. But when someone gave him a copy of Rich Dad, Poor Dad, it sparked an instant passion for real estate investing. “I knew from then on I wanted to be a real estate investor, and I didn’t want to work for somebody else for the rest of my life.”

Of course, saving the money he needed to realize his dream would require working several jobs and a lot of sweat equity. Even before Bresee and his wife were ready to purchase their first property with the income they saved, they got some experience rehabbing his parents’ basement, laying the groundwork for the hard work to come. 

“My parents were super generous with us, let us move into the basement, and we took six years off and on, building a full apartment in the basement. So we put in every Sunday for eight hours and then whenever we could during the week we built a full bathroom, a full kitchen, put in a laundry room, put a bedroom, we put a window below grade.” So when they viewed a property with four units that needed love, Bresee had the confidence to move forward. 

Putting in the Time and Rolling with the Punches

Bresee and his wife used all their savings to buy two duplexes, one with an FHA loan and one with a conventional loan. When the transaction was complete, they had only $2,000 left in the bank. But Bresee had the ingenuity to recognize the right strategy that would get all four units in rentable condition. “And [the] first thing we did was say, ‘Okay, which of these four units is in [the] best shape that we can get on the market?’”

Over six months, they moved from one unit to the next, making the most urgent improvements first. “It was just all hands on deck every moment we could possibly put in before work, after work, whatever we could do.”

They made it work by putting in the time and rolling with the punches. For example, when they couldn’t permit one of the one-bedrooms for a short-term rental, they used the monthly or medium-term rental strategy. “I turn over the unit every two, three, or four months and I still get almost as much as I would get as a short-term rental,” says Bresee. And this strategy has lifestyle benefits for the couple as well. Longer-term tenants tend to be more respectful of the landlord next door. 

Bresee says he’s clear in the Airbnb description and title that the unit is ideal for extended stays to encourage bookings for the unit. With all repairs and expenses covered, including his personal internet access, he says, “We’re on pace to make about $1,200 a month.” 

There’s a Time to Hustle and a Time to Delegate

Putting the labor into the first four units left Bresee with a faulty mindset. “I thought I could do more or better than others. So we bought another duplex, and I ended up, when I quit my job, rehabbing that for an entire year.” He was stuck in the mindset that he needed to protect his cash, preventing him from seeing the opportunity cost of finishing the work himself. “And so I should have farmed things out sooner.”

Now, Bresee has put his tools in storage (literally) and resolved to get help from contractors who can finish the work quicker. This allows him to earn more money by getting units ready for rent sooner. Still, there’s a time to hustle, he admits. “If you don’t have a W-2, if you don’t have a ton of extra money,” sometimes putting in the work with your own hands is the only way to get started. 

“We put $40,000 into those four units together [over] six months, and we worked our tails off. That was a good use of my time [back then] because my ability to get another deal was contingent on me getting those units up and going, spending the least amount of money possible because I didn’t have any money left. But later on, it was the exact opposite. I was still in the frame of mind that I was going to do what I did before, and I was not treating it like a business when it should have been.”

That’s where a flexible mindset is important. Evaluate your strategy based on your current financial situation rather than trying to pinch every penny in repair and remodeling costs. “Don’t bite off more than you can chew, but also don’t be stuck like I was in a mindset that held me back.” 

Bresee says if you know what you’re doing and feel confident in the outcome, you can even take the risk of buying your materials with a 0% introductory APR credit card. “And then all you need is cash to pay your contractor,” he says. 

Accelerating Your Success

Bresee says he has the cure for analysis paralysis or overthinking a problem to the point of avoiding action. We’ve already seen that his success was partly due to the extra time he put into work—but he says how and when you make time for your goals is also essential. 

“If every day you just got up 30 minutes earlier, instead of giving your time to a boss,” if you gave “the best moments and brain power of your day” to accomplishing your goals, you’d accelerate your success. “I got financial freedom long before I thought I would. And I believe it’s that consistent daily action. 30 minutes is plenty to make tons of progress.” 

On the other hand, if you don’t make a concerted effort, you’re probably not going to have the life you want. “It’s a snowball, but if you don’t start it now, you’ll wake up at [50 years old] building someone else’s dream.” 

Whatever your motivation for financial freedom, keep it at the forefront of your mind and allow yourself the time to take steps towards your goals. It may require you to sacrifice screen time for the first 30 minutes of each day. In fact, it will probably require a lot of sacrifice throughout the process. But if Bresee’s story is any indication, you can realize your dreams faster than you think. So pour everything you’ve got into the next few years of your life. We dare you to try it and see what happens. 

Running a successful rental property business seems like managing a never-ending list of “to-dos.” First, landlords and rental property owners must deal with collecting monthly rent, screening prospective tenants, and trying to keep tenants happy. Then there are unexpected events to take care of like emergency repairs, tenant disputes, or the lengthy process of evicting a tenant for lease violations. 

Real estate software can streamline many day-to-day chores of being a landlord. Automating tasks like rent collection, tenant screening, maintenance requests, vacancy listing, and accounting can free up much of your valuable time. The result is you have extra time to dedicate to the core of your business. 

For many landlords, switching to digital tools to run a rental business may seem like a huge learning curve. And some may have concerns about security, data processing, or using mobile apps for rent collection or property management.

This article looks at seven ways your rental business could profit from using real estate software solutions. 

Why Use Real Estate Software for a Rental Business?

Real estate software simplifies many recurring tasks you must care for as a successful landlord. But beyond this, there are other incredible benefits. Property management software allows you to access your data securely from any device. In a way, it’s like taking your office with you wherever you are. 

Another compelling reason to switch to digital real estate solutions is collaboration. For example, suppose your rental business has a small team. In that case, everyone can access the specific information they require. This removes the need to send emails and reminders. 

However, software for real estate companies also makes it easier to connect with tenants, listing agencies, and property managers. Just think how much easier it would be to send bulk messages to tenants about upcoming maintenance—or automatically listing a vacant apartment when the lease is soon to expire. 

Seven Ways Real Estate Software Can Make Your Rental Business More Profitable

Property management is a multi-faceted job that requires mastering several skills. So, the more you can use software to automate tasks, the more time you have to run a profitable business. Here are seven tasks you can assign to real estate software. 

1. Processing online tenant applications

Property management software saves you time because the entire application process is online. All documents in the rental process can be stored digitally and signed electronically. This means no more mailing applications, meeting with tenants in person, or manually processing forms. 

One of the benefits of online rental applications is that they remove the risk of human error. For example, information from the rental application automatically populates into the lease agreement. In addition, electronic forms ensure that tenants don’t accidentally leave required fields blank or use scribbled handwriting that is illegible.

2. Tenant screening services

Screening tenants is a crucial landlord task because it’s the only way you can find excellent tenants. However, if you have ever screened a prospective tenant manually, you know how time-consuming the process can be. 

The function to screen tenants can be part of the digital rental application. First, the potential tenant approves the required background checks like their rental history, credit report, and criminal history. You then receive the report in no time at all. And based on this, you can accept or deny their online application.

3. Accepting and tracking maintenance requests

Real estate software helps you keep on top of maintenance requests. Keeping rental units in good order and promptly processing service requests is vital for keeping tenants happy. 

How can a property management tool keep you organized? First, the tenant contacts you via the app, and you can send the request to the appropriate contractors. Then through the app, you can stay in contact with the contractor and tenant about timelines. The beauty of this system is that everything is in one place.

Landlord software applications also save valuable time because you or the contractor don’t have to assess the issue in person. Instead, the tenant can take a photo or video of the damage and send it through the app.

4. Advertising vacancies

Delays in filling vacancies can eat into your profits. However, if you use a suitable property management app, you can automatically list vacancies on several rental listing sites at once. Because all the information is stored in the software, there is no need to continually compose new listings whenever you look for a new tenant.

5. Online rent collection

Rent collection apps help simplify the rental process because they make it easy for tenants to pay rent online. Landlords who get tenants to switch to online rental payments find that they have fewer late payments. 

Here are several reasons why a rental payment service can help you collect rent on time:

• Tenants can set up recurring monthly online payments
• Tenants can make debit card or credit card payments
• Some payment apps report on-time rental payments to the major credit bureaus
• Landlords can send reminders before rent is due

Rent collection apps also give landlords payment controls during an eviction process. For example, you can block a partial payment from a tenant facing eviction. This option prevents the bad tenant from derailing the entire process, ultimately costing you time, resources, and money.

6. Integrated accounting software for landlords

Rental property management software helps you manage all aspects of running a rental business, including keeping financial records in check. For example, accounting software for landlords automatically includes rent payments, mortgage payments, contractor bills, and debts. The handy accounting features immediately give you easy access to your financial data.

There is also a space-saving benefit to using real estate software. Cloud-based software means you don’t have to physically store hundreds—sometimes thousands—of files in an office. This protects the files from getting stolen, lost, or damaged.

7. Data analysis

Data analytics is a way that real estate software can make your business more profitable. Analytics gives you insights into the real estate sector that you could never get if you relied on keeping paper files and processing rent checks. This could give you tremendous leverage to beat the competition. 

Some ways that landlords and rental property owners can benefit from analytics include the following:

• Automated valuation tools
• Revenue optimization
• Property prices indices
• Cluster analysis to identify rental performance in specific areas
• Maintenance management and cost analysis
• Expense tracking

Conclusion

Real estate management software is invaluable for any successful landlord or real estate investor. The good news is that many rental management software solutions are free for landlords and tenants. 

Giving you options to automate laborious tasks saves valuable time and resources. In addition, tenants find the rental experience more enjoyable when they can use an app to make online rent payments, send service requests, and build credit history.

Find financial freedom through rentals

If you’re considering using rental properties to build wealth, this book is a must-read. With nearly 400 pages of in-depth advice for building wealth through rental properties, The Book on Rental Property Investing imparts the practical and exciting strategies that investors use to build cash flow and wealth.

Ashley:
This is Real Estate Rookie, Episode 197.

Brec:
If I lived in a high rise in the nicest part of Atlanta spending I think it was $4,400 a month on rent, and still continued to rent out my place and get that positive cash flow, and how it happened to work out is I would have more money at the end of the day. If I was living the bougie life and still renting at my property. So just this one rental property has given me the freedom to live and not worrying about furnishing something while I’m working a full-time job, and just the freedom its given me has been so liberating and empowering.

Ashley:
My name is Ashley Kehr, and I am here with my Co-Host Tony Robinson.

Tony:
And welcome to the Real Estate Rookie podcast where every week, twice a week, we bring you the inspiration, information and education you need to kickstart your real estate investing journey. And I am so happy to be back sitting in front of the microphone with my wonderful Co-Host Ashley, what is going on in your neck of the woods Ash? How are things these days?

Ashley:
Well, I have to say major FOMO after watching yours and Sarah’s Instagram stories at the short-term rental conference in Nashville. How was it? It looked like a great time and that you got to meet and network with a ton of people.

Tony:
It was so cool. We weren’t speaking at that conference. We just wanted to go as attendees. There’s a lot of real estate conferences, but there’s not very many short-term rental conferences. So really cool getting to meet people that we had connected with online and meeting them in person, and it was actually also CMA Fest this week in Nashville.

Tony:
So there was just probably even more live music everywhere than there usually is. So overall, it was just really cool, love connecting with people. And just as a really big thank you, there were so many people that came up to me during that conference that shared that they were inspired by my story and they took action. Actually, I had three separate people that came up to me and said, “Tony, after hearing your story, I started buying short-term rentals and I’ve quit my job.” I had three separate people who told me that. So hearing those stories guys, you have no idea how much gratitude I have towards all of you. So I really do appreciate it.

Ashley:
I know. Doesn’t that just, it gives you that warm and fuzzy feeling that us totally talking nonstop is hopefully actually helping people.

Tony:
Right, right, right, but it was great. I love conferences. I know we’ve talked about the power of networking and stuff like that, but guys, if you haven’t gone to your first short-term rental conference, make sure you go. Obviously BPCON coming up in San Diego. If you guys haven’t gotten your tickets yet, make sure you do that, but that is one of the biggest, the best, real estate conferences out there so we would love to see all your smiling faces there for sure.

Ashley:
Yeah, I think one thing BP does is they do a great job of bringing in the speakers and the content, but also the parties, and it’s not just the parties, but that’s a great way to relax, let loose and connect and meet with people. I think they do a great job of doing that too. So it makes it a lot easier especially if you’re going to a conference alone, you don’t really know anyone. They make it really easy so that you can meet some people and become lifelong real estate friends.

Tony:
Yeah, some of the best conversations at these conferences happen after hours at the bar and you’re chatting with people when everyone’s kind of loosened up a little bit. So yeah, I met a lot of great people. So we hope to see you guys in San Diego at the bars after the conference history.

Ashley:
Yeah. I had a life changing conversation in a pizza restaurant or a pizza parlor on Bourbon Street in New Orleans at 2:00 a.m. at the last BP Conference. So yeah, I definitely agree with that. So on today’s episode, we have Brec Bassinger who is a superhero. Guys, we are so pumped to have our first superhero on the show. She is from CW’s Stargirl and a new real estate ambassador. She purchased her first short-term rental a year ago, and she comes on the show to tell us how she did it, breaks down the numbers and tells you guys, I think gives great advice as to how important running the numbers.

Tony:
Yeah, Brec and I connected on Instagram and we just formed a relationship that way, and I wanted to bring her on because I think, and she shares a lot of her story and how she got started. And I think people hear the word actress or actor, and they immediately think multi-millionaire rolling in the dough. And she shares how she was essentially house hacking a small room in Atlanta when she got started, and that’s what kick-started everything for her.

Tony:
So just lots of good information, and I think one of the things she talks about that hopefully you guys get some value from is how with her irregular income of being an actor she was able to still get qualified for a loan. I know a lot of rookies in our audience don’t have typical W-2 job. So that loan approval process is something she might struggle with. So make sure you guys pay attention for that part of the episode because I think there’s some golden nuggets in there for sure.

Ashley:
Yeah, I really enjoy too that she’s still house hacking too. So she talks about that a little bit too is not only before she even started investing, but she’s still house hacking too in her primary residence. Brec, welcome to the Real Estate Rookie podcast. Thank you so much for joining us today. Can you tell us a little bit about yourself and how you got started in real estate?

Brec:
Hi, I’m Brec. Thank you Ashley for the introduction. Most people know me as an actress. I grew up doing a Nickelodeon show for a few years called Bella and the Bulldogs. Super fun. Now, most recently I play Stargirl on DC’s Stargirl so I get to be a superhero. In real estate, that’s my other passion. I love acting so much, I feel like it really stimulates me creatively, but growing up, I was a mathlete, I was a numbers girl.

Brec:
I was what would be considered a nerd in school, and for me, real estate simulates that side of me. So it’s been really fun to start getting into that. And I feel like stimulating both sides of my brain. How I got into it is during the pandemic, my boyfriend and I, we went on a little trip to Big Bear in California, and it was like an off month. It wasn’t ski season, it wasn’t necessarily summer lake season and we show up and it’s a cute little tiny A-frame home, probably no more than 400 square feet, and we’re sitting there that evening and I start thinking about how much I’m paying for it.

Brec:
And I was just like, “Wait, if I’m spending $500 a night for this little thing, holy crap. They’re making $15,000 a month.” And I just started doing the numbers. And I was like, “Oh wait, I’ve got to do this. I have to get into this.” So within 30 days of that trip, I had moved down to Atlanta to film the second season of Stargirl, made an offer on a condo, found, researched what ROI meant in all the little real estate terms, and within six months, I had my first short-term rental up and going.

Tony:
So can we pause on that because that’s like most people Brec I think don’t take action that fast. We’ve interviewed a lot of people on the show and even in my old podcast, your first real estate investment, I just focused on that first deal. So I know a lot about people’s first deals and most people on average take between 12 to 18 months to get that first deal. But you said 30 days later, you’re already submitting offers and you had that first deal within six months. That’s insane.

Tony:
And I’m appreciative of you sharing that because I want to get into your psyche a little bit. So most people have a little bit of fear or a lot of fear around getting started. Were you fearful? And if you were, how did you get past that?

Brec:
At the time, I didn’t know what to be scared of. So I called it like naive bliss. I just looked at the numbers and was like, “This makes a lot of sense. I want to do this.” And also, I feel like I’m so fortunate in my job that I get to travel a lot for work. So I get to study all these different markets and I have always been into real estate.

Brec:
So every place I go, I check the Zillow all the time, really studying the market. So going into Atlanta back for season two. I did feel confident with that market. So I did have that kind of education and history behind me, but as for buying a property, I knew absolutely nothing. And I just threw myself in and it’s been interesting because now, I’m wrapped from season three of Stargirl so I have time.

Brec:
So I’m really wanting to expand, but now, I do struggle with that fear because I know how many people are in it and what a competitive market it is and things that can go wrong. But I am trying to get back to that naive bliss of just throwing myself into it because it was successful. So why wouldn’t it be successful again?

Tony:
Brec, can we talk a little bit about how you educated yourself? Because I think that’s an important component of this. What kind of steps did you take to make yourself feel confident enough to go out and start submitting offers and eventually closing that first deal?

Brec:
So once again, numbers girl. For me, it’s all about the numbers. So I looked up online what the formula would be, of how do I make a positive cash flow and what the goal percent should be. And that’s just what I did. I got AirDNA, didn’t even know what it was, but just tried to figure out how I could get occupancy rates and daily rates and obviously, stumbled across AirDNA, and I just started plugging numbers in and saw what I needed to pay, and then I was so lucky.

Brec:
I literally just Googled short-term property management Atlanta, called the first lady. Absolutely wonderful woman. Still worked to her to this day. I tell everyone about her. She’s so fantastic. But once again, it wasn’t like, I didn’t know anything. So to me, of course she’s going to be great, and I’m so lucky that she has been great. So I do think a lot of it was just right place, right time. But then also education-wise, just really running the numbers because I trust that aspect of it the most. And so just practicing that until I felt confident with it. So then when I went to Atlanta, I was able to plug in those numbers and figure out if it was going to be a good deal.

Ashley:
So Brec, you said this was your second season that you were in Atlanta that you purchased this property?

Brec:
Yes.

Ashley:
Okay. So what did you do the first season? Did you rent a property there?

Brec:
So I was 19 at the time moving to Atlanta a place I had never been. I hadn’t been on a show in a couple years, also, a really cool thing about real estate. It’s like a consistent income, consistent passive income, we’re acting. It’s like, “Great. I made money this year.” Two years later, haven’t made any money the past two years. So going into first season, I didn’t have the finances to buy or really, the finances to live in a city like that.

Brec:
There’s a lot of corporate housing in Atlanta, furnished which looking back now is a great place to be for something I’m wanting to get into. But at the time, it was really freaking expensive. It’s anywhere from 5,000 to $7,000 a month, and I just couldn’t afford that. So first season, I lived in a not great part of Atlanta with one of my castmates. She was my roommate.

Brec:
A tiny little two-bedroom apartment. I think we were both paying $700 a month. We furnished it ourselves. So while we were working our full-time jobs, we were still focused on furnishing a place we were going to be in for literally six months. Fortunately, with season two, I had some more finances built up from that first season. So that’s when I was able to buy that rental property.

Ashley:
So you purchased this property to live in for season two, and then after that, it became the short term rental. Do you think it was an advantage that you got to live in it for a little bit first and be like, “Okay, you know what? This would be great to add.” Or, “These are the things that I need for the property.”

Brec:
Yeah, absolutely, because at that point it was very livable. The kitchen was I love cooking, so it was ready for a chef to come in and cook whatever he wanted. I plan on doing that again. So say if Stargirl God willing gets picked up for a fourth season, I fully plan on doing that exact same thing, using that six months to furnish it and then renting it out.

Tony:
So Brec, I’m glad you shared your experience about getting started because I think there’s this misconception about people who are in the entertainment industry or who are in sports that as soon as they get started, there’s just this big windfall of cash, and they’re rolling in the dough and flying private jets.

Tony:
We had Terry Harris, he was on episode 153 and he was a professional basketball player. And I think anytime people hear professional athlete, there’s this idea of what kind of lifestyle they’re living. And he was very open and candid and said that he was only making $35,000 a year as a professional athlete in the minor leagues for the NBA. And so I just want our listeners to understand that just because we have professional athletes or people that are in the entertainment industry, it doesn’t mean that their financial position is all that much more different than a lot of you that are listening today.

Tony:
So I appreciate you sharing that Brec because I think it helps set the table for the listeners. So Brec, obviously you started off in season one sharing your space and doing all this stuff. How was it progressed? What was that progression like for you?

Brec:
I think I mentioned, but something I really love about real estate investing is that passive income. And because of that third season was, it’s just so funny looking at the three years how much I’ve grown and gotten to grow. And I do give a lot of it to that second season decision of getting that rental property because after I moved away second season and started renting it out, it was really successful. I was getting positive cash flow every month.

Brec:
And to me, how I came back home to Texas and I bought a house here and basically what I was making off that property was covering my mortgage here at home. So I was like, “I’m getting this house for free.” That’s just how my brain works. But then going back to third season, everyone’s like, “Oh, you’re going to let, you’re going to live in the property you bought.” And that was my original plan was like, “Well, I might as well live there while I’m there and then rent it out while I’m not.”

Brec:
Then I sat down and I ran the numbers and I ran how much I would have in my bank account, the end if I paid the mortgage each month and just lived there versus if I lived in a high rise in the nicest part of Atlanta spending I think it was $4,400 a month on rent and still continued to rent out my place and get that positive cash flow. And how it happened to work out is I would have more money at the end of the day if I was living the bougie life and still renting out my property. So just this one rental property has given me the freedom to live and not worrying about furnishing something while I’m working a full-time job. And just the freedom its given me has been so like liberating and empowering.

Ashley:
Brec, you have mentioned this several times throughout the episode and we’re not even that far in, but run the numbers, and I think that is-

Brec:
I’m so annoying about it.

Ashley:
No, I think that is so powerful because Tony and I often get asked, and I’m sure you’re going to get the ask this now too is someone will come to you with two different scenarios and maybe somebody listening is like, “Should I do this or should I do this?” And the answer is to run the numbers just like you did. You looked at the numbers and ran them for each scenario and figured out, “Okay, at the end of the day, I’m going to have more money doing this scenario.” And that’s such a great way to make a decision when it comes to investing and what your investing strategies should be. So keep saying that. We need it to really hit home with everybody.

Brec:
Run the numbers.

Tony:
Yeah. Ash, let me ask something on top of that. I literally just came back from a short term rental conference last night and there was a guy in the crowd and he stood up and he asked a question to all the speakers and he was like, “Hey guys, I’m new, but I found this amazing property. I’ve ran the numbers. My returns are going to be super solid.” And he was like, “But I’m not sure if I should move forward with it.”

Tony:
And everyone on stage was like, “Well, why not?” They were like, “If the numbers work, why wouldn’t you move forward with it?” And he was like, “I don’t know.” He was like, “I just don’t know if there’s things that I don’t know.” And he was just slacking himself out. But for me, and it sounds like for both of you as well, it’s like I try and remove all the motion out of my decision making when it comes to running my real estate business because I think emotion is what gets us caught up in making bad decisions, but if you can sit back and look at the numbers because the numbers don’t lie, the numbers do not lie.

Tony:
I think if the numbers make sense and that’s your sign to move forward and Ash, I know you and your spreadsheets, you like to get down and make everything happen, right? So I’m just glad that we’re talking about the number’s perspective for our rookie listeners.

Ashley:
Yeah Brec, I want to ask you, so you had said you were a mathlete, you’re been into math and you’re knowledgeable about it, but what about somebody who isn’t? Maybe there’s somebody out there listening right now that is not good with math. What would be your advice to them as to how they can get better at running the numbers or maybe different tools or resources that you’ve used to get better at analyzing?

Brec:
Well, for me, like I said, when I got started, I knew absolutely nothing even when I had made an offer on the property, still I was just, very little, but I feel like there’s books out there that explain what those numbers are that we’re talking about and how to use them and how to work with them. So just educating yourself by reading, listening to podcasts like these, and then also there’s online calculators. So I’ve definitely used those to speed things up, and if you do that enough, I feel I can watch it, look at it happen, then maybe you can learn to do it yourself, but save time, use the calculator.

Tony:
Yeah. So speaking of calculators, we obviously have to plug the BP calc. So if you guys don’t know, BiggerPockets, you can use it free up to five times. It’s a property analysis calculator. I use that as I started my career as a real estate investor. Ashley’s used it in her real estate investing career. And to me as a newbie, it’s one of the best tools you can use. So you guys get five free uses of that. So go over to biggerpockets.com, there’s a whole calculator section, you guys can check it out there.

Brec:
I didn’t even know that. And look, see?

Tony:
There you go. There you go. And some people like to build it themselves. I’ve met other people that build out their own calculators and do it that way, but if you’re not that analytical person, or you don’t have that skill set, there are so many tools out there that can help you. Brec, I wanted talk a little bit about how you’re you’re financing these deals, because obviously you don’t have like traditional W-2 income. And I think some of the people in our audience have that same situation. So what was the process like for you in order to actually get qualified for a loan to purchase that first property?

Brec:
It was really, really stressful because of my unique finances and how the money comes in. It was really hard for me to get the loan. Now I do traditional financing my first property because I lived in it. Some, it was a second home mortgage, but then moving forward, there’ll all be investment loans. It was just a good learning experience for me because in my head, if I showed them that I could pay for the property in cash, that I would get it.

Brec:
And my lender literally told me, she’s like, “You could pay for this property five times over again in cash. But if you don’t show a steady income, we will not give you a loan.” And that was such an eye-opening experience like, “Oh, okay.” So for me, I’ve just been after that experience these past two years, I’ve been very mindful of how to better lay out my money for it to look prettier for a lender and look more steady even though to be realistic, my income’s no more steady than it was, and then also having this one rental property and showing that on my history, I’m hoping will help me in the future as well.

Tony:
Yeah. Ash, I just want to ask your perspective, how do you balance because obviously, one of the big benefits of investing in real estate are the tax advantages. And you’re able to reduce your taxable income, but you can swing the pendulum maybe too far where if you’re showing this really small silver of income, it gets difficult to qualify for the loan. So Ash, I’m just curious, you’ve purchased a lot of properties. What has your strategy been for trying to balance those two things?

Ashley:
Well, I think my situation’s a little different than Brec because I worked at W-2 as I built my rental portfolio. So I had that W-2 for a long time to support a steady income and then build my rental portfolio, but I haven’t had … I still have a W-2 where I pay get paid $22 a week just to do a couple odds and end. So that is no difference at all to my income. So I technically still have a W-2.

Tony:
That’s $22. We could go real far, right?

Brec:
That’s it.

Tony:
Yeah.

Ashley:
So, but this will be my first, this will be about two years now because it was February 2020 when I stopped my W-2. So it’s been about two years now where I have my full tax returns, but I honestly haven’t gone gotten residential, traditional, conventional mortgage in that timeframe at all. I do more commercial where they’re more interested in the property itself and what the numbers look like and that I’m an experienced investor and that I have a history of being an investor than they are more concerned about seeing an actual W-2 income. So if you are someone who’s in Brec’s position, or even mine, you go to the commercial side of lending and it’ll be easier to get financing than if you’re going to the residential side.

Tony:
Yeah, and I’m so glad you brought that up because obviously, a lot of folks that are listening, they have this goal of leaving their day job. But to your point Ash, there is tremendous value especially if you have a healthy W-2 income to hold onto that for a while. So Kell Delaney, he was a guest on the podcast and I was actually just hanging out with him at the short-term rental conference over the weekend.

Tony:
And he’s up to like, I don’t know, six or seven short term rentals. I’m sure making pretty healthy cash and I asked him like, “Why are you still at your job?” And he was like, “Honestly, it’s because we’ve been able to bank roll so many of these loans because of his day job.” So he was like, “I just want to max that out when I get to that point, then I’ll leave.” So if you’re in a position or you’re in a job that you can tolerate maybe for a little bit longer, using that steady income is going to really, really help unlock some future lending options for you.

Tony:
Just one other thing that you mentioned Ashley that I also want to highlight is that there are other lending options outside of the traditional like, “Hey, how much money do you make?What’s your debt to income ratio?” For us in the short term rental space, you’re starting to see more of these DSCR loans or debt service coverage ratio loans where they’re saying, “I’m not looking at Tony as a lender. I don’t care about Tony’s debt to income. I don’t care about what his tax returns say. What I’m looking at is how much income would this short term rental produce and what is the required debt coverage on that property?” And if the property’s projected to do more income, then what the debt service is, then banks are willing to lend out on that. So guys, there’s so, so many other options in the marketplace for lending.

Brec:
I do have a question for you Tony.

Tony:
Yeah.

Brec:
With that, will they take in consideration short term rental rates or will they only do that long term monthly income? Because I’ve run into that before.

Tony:
Some lenders will do both. Yeah, so just to clarify Brec’s question. So when lenders are looking at projecting the income on a property, some lenders will only look at what that property will rent for as a long term rental. So if you had a tenant in there for 12 months who signed a lease, other lenders will look at your projected short-term rental income.

Tony:
So there are some lenders that specialize in short-term rentals that will do their own analysis to say, “Hey, here’s what we think this property will do as a short-term rental.” Now, here’s a little hack and I actually just learned this from my friend TJ Tijani. So if you guys don’t know TJ, he’s a short-term rental operator based out of Houston. But TJ said what he does is he will sign … He has two entities. So he has one entity that purchases the property and holds the mortgage, and then he has his short-term rental property management company which signs the lease to his entity that owns the property.

Tony:
So entity B is leasing from entity A and he just signs a long term lease between those two entities. And now, he can go to a bank and show like, “Hey, I’ve got a long term lease in place, help me refinance this debt.” So there are so many different ways to do that.

Brec:
That is so smart. Yeah.

Tony:
So smart, right? Blew my mind when I heard that the other day. So there are lots of options here.

Brec:
It seems simple, but it’s like, “Why didn’t I think of that? That’s amazing.”

Tony:
Yeah.

Ashley:
Okay. So Brec, you purchased that first property and then you went and purchased your primary now in Texas. Do you have that rented out when you are in Atlanta or are you just keeping that strictly your primary?

Brec:
Well, I am gone for quite a bit of time. So my brother actually lives with me and he pays rent. I was like, “I don’t care who you are. I’ll take your money.”

Ashley:
So you’re house hacking too, you didn’t even tell us that.

Brec:
No, I know. Yes. I actually did use that term the other day. And I was like, “I hope I use that correctly.” I don’t even know, but yes, I’m house hacking my own home with my brother. Woo-hoo, but it’s actually been, it’s worked out so great. Yeah.

Ashley:
So is there one of these properties that you wanted to go into the numbers with us and break it down?

Brec:
Yeah, absolutely. I’d love that.

Ashley:
So we know it’s in Atlanta.

Brec:
Yes.

Ashley:
In Atlanta. What was the purchase price?

Brec:
273,000.

Ashley:
Okay. And how did you pay for it?

Brec:
Conventional second home mortgage loan.

Ashley:
Okay. And you’re doing it as a short term rental. On average. What is your daily rate would you say?

Brec:
Obviously, it depends on the month. I’d say if average would be around $175.

Ashley:
And then how did you find the deal? Was it on MLS or a different source?

Brec:
I did go through a traditional real estate agent, but actually, it was through my property manager who already managed a property in this condo. So when she saw one was available, she sent it to me. So I give so many props to her because it’s extremely hard to find a condo that will allow short term renting.

Ashley:
Okay, that’s really cool. I didn’t realize when you had told us you Googled and found your property manager, that you did that during your initial research before you even purchased a property. So yeah, you want to start there is to talking with her and how you actually got her to send you the deal. We talk about networking and getting people on your team, but you hadn’t even worked with her yet, and here she is sending you the insider information on this property for sale.

Brec:
Yeah, looking at it from her perspective, I feel like that’s very smart of her because she has this potential new client. Why not send them a very lucrative looking property so you can manage it? So to me, it makes sense.

Tony:
Brec, can you tell me was that initial conversation like when you contacted that property manager? Because I’m sure they get all kinds of people reaching out to them. What did you say to build that relationship?

Brec:
So I called her and at that point, I didn’t know what you paid a property manager to manage your short-term rental. I really didn’t know much, but she was just so open and honest. And one of the first things she said, she’s like, it’s one woman. And right now, I think she’s managing 37 properties. And she was like, “I can send you any one of my current clients, and you can hear it from them.” Basically how amazing she was.

Brec:
And then I started asking the questions. At this point, I hadn’t checked AirDNA. I didn’t know what it was, and so I asked her, “Well, what’s your average occupancy rate among your properties?” And she was like, “80%.” And I’m like, “Oh.” And then I plugged in the numbers. I was like, “Oh, wait. That’s really good.” And then she’s like, “My average ratings are 4.9 star.” I’m like, “Wait, I think that’s also really good.” And she’s like, “And 90% of my properties are super host.”

Brec:
I’m like, “Wait, that’s also really good.” So she actually was one of my main sources of education I feel like and really explaining to me the tips of it. And once again, my naive bliss, maybe she just believed it because I went in with such confidence like, “Yep. I have 30 days to find a property. I have 50 days to close because I’m moving down here in 45 days. So let’s go.” And I just said it was such confidence I guess she believed me.

Tony:
I only asked that question because I know a lot of rookie investors, they have this imposter syndrome. I get people that ask this question like, “How do I get an agent to take me seriously? Or how do I get a wholesaler to take me seriously or property manager to take me seriously?” And on the flip side, I’ve also met agents and property managers who say that. Yeah, they’re always trying to filter out the people that are tire kickers versus those that are serious potential customers. So yeah, I do think it was maybe your level of detail in your line of questioning and maybe the confidence that you had when you reached out to her that communicated how serious you were?

Brec:
Yeah, in all careers, I’ve always had this attitude of not like I want to do it, I’m going to do it. Even when I was an actress or even when I was young … Even when I was an actress, when I was young, probably five years old, people would come up to me and they would ask, “Oh, what do you want to be when you’re older?” Kid you not, my answer would be, “I don’t want to be anything. I’m going to be an actor.”

Brec:
Obviously, I was a very sassy child. And I think just going into that, or going into this, I had that attitude as well. I was like, “Well, why not me? I’m going to do it. This sounds like a good opportunity. Sure. Yes.” And looking back, I think that was extremely helpful. And it’s something I feel like knowledge sometimes can create fear, at least from my experience. So it’s good for me to say these things out loud and remind myself and rationalize my fears to get back to that point because I think that’s a good attitude to have.

Ashley:
So did you have this same attitude when you found your lender for the deal? The confidence going in is, “I’m buying a house, give me the money.” And how did you find your lender?

Brec:
It was someone my dad had used for years. And so I was like, “Great. Family recommendation.” My parents just bought a home and sold their home and this person was not involved because they were not great, but not everyone can be great like my property management. I can’t always get that lucky. It was so extremely hard. I feel like every single day I would … Well, first of all, they wouldn’t call me back.

Brec:
But at this point, I really did. I was moving down there two days before I was supposed to close. And so it’s not like I could not go through with this and then try to find a new property. My time restraints were very slim. And so I would just tell her, she’s like, “Well, I don’t think it’s going to work. At 2020, you’ve made no money this year.” And I was like, “Well, figure it out. What do you need from me? Do I need to get a letter of intent from my employer?”

Brec:
Just tell me what you need and I will get it to you. I worked with someone who was also really great, but I still, that is the one thing I feel like I haven’t found is a good lender who almost understands my finances because I get they’re very, very unique, but I do need to find that. That’s something I still am in search for.

Ashley:
So how did you solve that problem? Obviously that’s amazing that you were persistent and you got the deal done. So how did that happen? What did you end up? Did you supply the solution or did they eventually come back to you with things that you could do?

Brec:
Oh, no. I called our show runner and I was like, “Can you send me a letter saying that I’m going to be working for the next year?” And he is like, “Okay.” And then I called my account. I’m like, “Can you send a letter that I’ve been making money consistently since I was 15?” And he was like, “Okay.” So I just kept getting stuff because I’m like, “No, this …” At this point, this was my only option. I was running out of time.

Brec:
So I was going to make it work even if at that point, even if I had to go to a family member and be like, “You go in on this with me. Let’s co-own it, and then I’ll pay you back.” I was so set on getting this property.

Ashley:
I think that’s a great lesson right there is that persistence and also being determined. You could have easily have just, “Wow. They said no to me.” “Oh, I guess I’m not getting the property.” And given up right there, but look at just giving that little bit of extra effort. And I think that being told no turns people down and then that fear of rejection again and again, and that can really stumble people from getting started in real estate investing because there are going to be these obstacles, there are going to be these roadblocks.

Ashley:
And as soon as you can get over one, each obstacle and each dilemma and each problem gets easier as you go on because you don’t care if people say no because just like Brec here, you’re going to be persistent, determined, and you’re going to find a way to make it work. So I think that’s a really important lesson for everyone to think about. If someone tells you no, especially when you are so close to the finish line of getting this deal done, ask them what can you do to make it work, or like Brec, just go out and find your own solution and get as much data and information and overwhelm them with that.

Tony:
Ash let me add on to that because this is just more of a mindset thing, not even necessarily related to real estate, but I read this quote, I don’t even know, it was a long time ago, but it said a smooth sea never made for a skillful sailor. And that always stuck with me because it’s like I think in life, we have the tendency of trying to avoid adversity and obviously, no one wants bad things to happen to them, but I think a healthy level of adversity in your life is a good thing.

Tony:
You have to go through these things that are difficult, things that you can’t find the solution to initially, or things that are challenging because it does build that muscle for you. And it always makes me go back to Nick Cooley’s episode. I can’t remember what episode he was, but if you guys look up Nick Cooley, he talks about his ice cream sandwich story. And Nick and I literally almost cried together on this podcast because we both shared these moments where we went through this extreme adversity, but we both felt like better men and better people because of those moments.

Tony:
So for all of you guys that are listening, all of you rookies that are listening, I think accept and anticipate some adversity as you go through this real estate investing journey, but also understand that it’s going to make you a better real estate investor, it’s going to make you a better person once you get through the other side. And there, now I’m off my soapbox now, so.

Brec:
I love it.

Tony:
Brec, back to-

Brec:
No, I love it. That saying is going to stick with me as well. That’s really beautiful.

Tony:
Yeah. Yeah, Nick Cooley was episode 109. So if you guys go back to that episode, you guys can hear his story. Brec, before we move off of this deal, you said that it was a second home loan. So can you maybe give some details? How was that different from a regular loan? What was the down payment? What was the interest rate?

Brec:
Yeah, I believe correct me if I’m wrong for a second home. It has to be minimum 10% down. I’m sure it could be lender to lender as well. I had to put 20% down because once again, they didn’t trust that I could do this. Also looking, I was 20 years old at the time and I’ve run into my age being a big thing. Even I’ve met with a few.

Brec:
I’ve gone into new builds and there will be the representer there and they just speak down to me. I’ll go with my mom and they immediately go and talk to my mom and not me and my mom, she knows it. It gets me riled up. She goes, “Oh no, no, she’s actually the one interested.” And they just turn around. Anyway, I don’t know. I got lost. I got lost on my soapbox of me being young and looking 15.

Tony:
No, I love that. I love that. But no, I get your point. It is most 10% down, second home or I’m sorry, most second home loans are 10% down, but yeah, it’s obviously going to vary from borrower to borrower and lender to lender in terms of what that person’s unique situation is. But you bought this you said during … What was the year you bought this in?

Brec:
Okay. It was the end of 2020.

Tony:
Okay. So interest rates were still pretty low. Do you remember what you-

Brec:
3.125. It’s what I got on both my home mortgages and now they’re going up. And I was like, “I thought this was the norm. I thought they were always 3%.” No.

Tony:
Yeah. And honestly, we picked up a lot of our portfolio during that time of really, really low interest rates as well. Our best interest rate on one of our short term rentals is 2.625%.

Brec:
Oh, shut up, that’s amazing. That’s stupid good.

Tony:
That’s like almost free money. So it’s like yeah, we were scooping them up last year. So Brec, I want to run out this deal. Are you able to share some numbers? You’ve had it a little while now, do you know what the property’s gross and approximately what that net looks like?

Brec:
Yes, I wrote it down so I would be prepared. So my down payment plus furniture all in was 60,000 almost exactly. So last year, I didn’t rent it out every month. So I took the average of what it rented out per month, and I made approximately 22,000 in positive cash flow. And then with the equity, I built it, it would’ve been about 45% return on my 60,000.

Tony:
You’re saying it real casually, but that’s pretty impressive especially given the fact that you didn’t even rent it out the entire year.

Brec:
No, I know.

Tony:
That’s amazing. And sorry, give us some context. You said it it’s in Atlanta, but are we in downtown Atlanta in the suburb somewhere?

Brec:
I’m in Atlanta proper. So there’s Midtown which is where you want to be. I’m right north of that, but I’m still actually considered a Midtown location. So it’s a wonderful location. I actually got so lucky. I feel like I bought in at the right time because mine’s a two bedroom. A one bedroom sold two months ago I want to say for 375,000.

Ashley:
Wow.

Brec:
Mind you, I bought a two bedroom just a year prior for 273,000. So I’m also there’s been this thing in my head where like, “Now, it’s probably worth north of $400,000.” So take that $120,000 worth of equity. Plus the $75,000 that I’ve made, that’s almost $200,000 that I’ve made off of $60,000 in two years. So in reality, I’m looking at a 300% return which because I’m like, “I got to keep doing this.”

Tony:
And there’s the tax benefits, right? We talked about that earlier, but now you’re also going to be able to use that to in a smart way like offset some of your other income as well. So that’s why we love real estate.

Brec:
It’s so great. It’s so fun. I love it.

Ashley:
So Brec, are your plans for the next deal? Are you going to buy again in Atlanta or are you going to look into a different market?

Brec:
So I’m living in Texas now and I use my travel, my work always as an excuse to study the market that I’m in whether it’s a three day vacation in Destin, I’m on Zillow, I’m on Airbnb. I’m studying what’s going on because I just think it’s really fun. So I have really been setting the market I’m currently living in which is like the Dallas-Fort Worth area. And right now, I’m narrowed down to two things and whatever better opportunity comes up first, that will be my next deal.

Brec:
So either a lake lakefront property in the Dallas-Fort Worth area, so more of a vacation destination type thing or back in Atlanta because I have my team set up there. That’s so wonderful, and there’s two very particular areas in Atlanta that I’m looking, but still sticking with the short term rentals.

Tony:
Can I ask one last question before we move off of this deal Brec. So I know you have the property manager in place right now. A, what drove your decision to hire that property manager versus trying to figure it out on your own and then B, as you continue to scale, is your plan still to use third party property management?

Brec:
So when I’m in Atlanta filming, I work on average a 14 and a half hour day, and that’s not fully working. I’ve worked 80 hour weeks before. So realistically, when I’m working, I don’t have the time and mental capacity to also be managing a property. Right now though, I’m on hiatus.

Brec:
So in the area that I’m in, I’ve done some research looking for that property manager because it is important for me to have them set in stone before making an offer on a place because it can all happen so quickly. And then you have this property, but you either don’t have a team to help you rent it out or you’re just not set up to do that. So I’ve done quite a bit of research, reached out to different companies.

Brec:
I reached out to five different property management companies in my area. One followed up, only one response and then didn’t respond after that. And I’m like, “These are not the type of people I want managing my property when it’s supposed to be a 24 hour service to those tenants.” So actually, there’s been a lot of conversation between me and two of my friends to start my own property management company. My dad and brother also both do real estate investing.

Brec:
So right there, I have some secured Airbnb properties. So I was like, “Okay, you already have about, you could have easily five properties in just a couple of months.” But once again, it’s a bit nerve wracking to do that. It’s something I know absolutely nothing about on how to do that, but so I’m currently working on learning how to do that because that is one of my next goals.

Ashley:
It’s exciting building something, isn’t it? That’s what I [inaudible 00:42:39].

Brec:
It is. I told my dad because he’s very … And he also knows, it’s very kind of him, but he knows how much my time is worth at this point. Just like how many things I have my fingers in and how successful a lot of it has been. And he told me he’s like, “Could this property management company make you a million dollars?” And I was like, “Absolutely.” He’s like, “Okay, fine. Do. I don’t care.” I’m like, “Great.”

Ashley:
Brec, we’ll have to have you back on in a year to talk about starting a short term rental property management company.

Brec:
Please. And I’m going to annoy you guys whenever I have questions or need help. This has been so fulfilling and exciting to me because at this point, I haven’t really had anyone to talk about this stuff too. It’s just in my head and I’ll talk to my boyfriend about it and half the time I’m going, “I’m sorry if I’m annoying you.” He’s like, “No, just keep talking. It’s fine.” So I’m totally going to take advantage of this new relationship and friendship. So thank you guys.

Ashley:
Yeah, good.

Tony:
Of course.

Ashley:
Okay. So we have a rookie exam Brec. So hopefully you still have all of your math knowledge because this is definitely a hard exam.

Brec:
Oh no.

Ashley:
Okay. So these are a couple questions that we ask every guest onto the show, and the first one is what is one actionable thing rookies should do after listening to this episode?

Brec:
Just because we’ve been talking about it so much, go do your best. Find a property online and run the numbers on it. If you have to look up a formula, if you have to go use a calculator, I don’t care. Just go run the numbers on it. Get a good little practice in, it’s fun.

Ashley:
That is a perfect answer.

Brec:
Does that work?

Ashley:
Yeah, we can’t hit home enough. Run the numbers. Practice, practice, practice.

Tony:
All right Brec, so question number two. What is one tool software app or system that you use in your business?

Brec:
AirDNA.

Tony:
I love that. For folks that aren’t familiar with AirDNA , can you explain what it is and how you use it?

Brec:
Yeah. So you pay, once again, correct me if I’m wrong, I feel like you all are the professionals, but you pay $20 for X amount of properties in whatever location you want. And it shows you, you can click on each property that’s listed on Airbnb and it shows you the average occupancy and the average nightly rate. So you can use all of those to get an idea of what your property would do.

Ashley:
Okay. And the last question is where do you plan on being in five years?

Brec:
In five years? 28. I’m kidding.

Ashley:
We’ve never had that answer before actually, surprisingly.

Brec:
I’m quite a literal person. I’m going to manifest it. I’m going to say owning my own property management company and at least 10 short-term rentals in my portfolio.

Tony:
All right Brec. Well, you passed the exam so great job, but I want to take it to our next segment which is the rookie request line. So every episode we give our listeners a chance to ask questions. So for those of you that are listening, if you want your question featured on the show, give us a call at 888-5-rookie, and there’s a chance we might use your show or I’m sorry, there’s a chance we might use your question on the show. So Brec, are you ready for today’s question?

Brec:
Yes.

Zoe Gatlin:
My name is Zoe Gatlin. I’m just outside of Austin, Texas, and my fiance and I are trying to get into our first real estate deal. We have a good lump sum of money saved up, but we’re both self-employed so we don’t have the money to show for it. I recently got a W-2 job to proof of income, but I have no credit. I don’t have bad credit, I just never built my credit. My fiance does have credit. Is there any way we can use his credit and my income source to get into our first deal or what’s the best way to start building my credit? The quickest amount? Thanks guys. Love your podcast.

Brec:
Yeah, I feel like you spoke on this a little bit earlier Tony, but more that investment lender situation where they focus more on the numbers and less about you as an individual. To me, that seems like a good fit.

Tony:
Yeah, and even your experience Brec about just finding the lender and like maybe there’s some additional documentation you need to provide or there’s other ways to prove income even outside of the W-2. So yeah, like Brec said, we talked a little bit about that earlier, but hopefully that points you in the right direction. Anything to add onto that piece Ash?

Ashley:
No, I don’t think so. I think you guys covered it is finding ways to work with the lender. One thing that I have realized has helped build a good relationship with the lender. So they want to work with you is that when they do ask for things, be super, super timely in getting that information back to them because, or else, they’re just waiting around and the quicker and the more responsive you can be and keep those lines of communication open with your lender, they’re going to be way more appreciative when you can get things back to them in a timely manner than them sitting around and waiting for you for days or weeks or months, even to get information back from you. And so they don’t have to nag you for it to keep your file moving.

Tony:
And we talked about this in the past before too, but it’s like don’t always walk into a bank or to your lender and say, “Hey, I want a loan, this investment loan.” Walk into your lender’s office and say, “Hey, I’m looking to buy an investment property. Here’s how much cash I have. Here’s what my credit situation looks like. What is the best lending option for me?”

Tony:
And then put the onus on them to figure out how to get you the right loan for your specific situation, but I think all too often, we hear these different loan products and we get tied up in using the product and the product doesn’t matter. We’re not real estate investors because of the loan products. What’s most important is getting the deal done. So give them your situation and put the onus on the lender, on the bank, on whoever you’re working with to find the right solution for you.

Ashley:
And a lot of these smaller local banks too, they have a lot more flexibility than bigger banks because they actually have a board of directors that goes and approves every loan or every option that goes through that bank. And some of the loans they’ll keep in house or they’re not tied to federal and government loans like Fannie Mae and Freddie Mac. So definitely check your small local banks and ask them what options do you have for what I want to do.

Tony:
Last thing before we move on. I’ve shared the story before, but my very first, the first three deals that I did in Louisiana, they were all zero money out of pocket. The bank financed the purchase price and the rehab. And it was because I walked into them and said, “Hey, I’m looking at buying and rehabbing some properties in your area. What kind of loan product do you have?”

Tony:
And they were like, “Here you go. We’ll cover everything if you find a good enough deal.” And I wouldn’t have been able to find that if I was just going in and saying, “Hey, I want a 20% down loan to buy a property.” So always going with your intentions and let them guide the conversation.

Ashley:
Before we close out the show. I want to give a shout out to this week’s rookie rockstar. So this is Jay Mennel, closed on a cabin that he’s going to turn into a short term rental. This is his first short-term rental and fifth property overall. So congratulations Jay. And he says that he’s hoping to follow in the footsteps of Tony Robinson. So even more exciting, but congratulations.

Tony:
We’re a size 14 man. So those are some big footsteps [inaudible 00:50:09]. I’m kidding.

Ashley:
So if you want to be featured as our week’s rookie rockstar, please post in the Real Estate Rookie Facebook group what you have going on, what is your weekly win. Even maybe a lesson learned. We love to share those too because we think it’s always important to not only share the wins, but to share things that you may have learned across your investing journey or you can send a DM to me and Tony @wealthfromrentals or @tonyjrobinson. Well Brec, thank you so much for joining us. Can you let everyone know where they can reach out to you and find some more information about you?

Brec:
Yeah. Thank you. I am on Instagram @brecbassinger, my name and I’ll go ahead and link this, Stargirl season three coming up this Fall.

Ashley:
Well, thank you so much for joining us. We loved hearing about your first property, your short term rental, and also your house hack. Make sure you guys check out Stargirl too coming out with the third season. So thank you very much for joining us. I’m Ashley at Wealth from Rentals and he’s Tony at Tony J. Robinson, and we will be back on Saturday with a rookie reply.