\n<\/p>\n
The older you get, the more you realize\u00a0how much life costs.<\/strong>\u00a0As a kid, it\u2019s easy to take for granted the free rent and free meals, but what if you could get back to that? What if you could live mortgage or rent-free as an adult? What if you could have your\u00a0meals paid for on someone else\u2019s dime<\/strong>? In today\u2019s episode, our guest,\u00a0Nate Weintraub<\/strong>, shares how he\u00a0lives for \u201cfree\u201d with his three properties that total sixty-five units.<\/strong><\/p>\n With a real estate investor as a father,\u00a0Nate has always been around rental property investing<\/strong>. He\u00a0<\/strong>never saw himself getting into real estate until he worked his first W-2. After seeing the realities of a nine-to-five, Nate\u00a0decided to buy a property after college<\/strong>\u00a0and pursue real estate. In March of 2020, he put a house under contract in Rochester, New York.<\/strong>\u00a0Since then, he has\u00a0purchased a sixty-three-unit storage facility in Alabama and is currently house hacking in Florida.<\/strong><\/p>\n As Nate works toward\u00a0financial freedom<\/a>, he has\u00a0made steps toward reducing his cost of living\u00a0<\/strong>while still living a life he loves. In addition to being an investor, he does what he loves as a\u00a0self-employed <\/strong>copywriter<\/strong><\/a>\u2014BiggerPockets\u2019 copywriter in fact.<\/strong>\u00a0At only twenty-four, Nate\u00a0lives rent-free in his house hack, his rental property covers most of his food, and his real estate investment trusts pay for his car.<\/strong><\/p>\n Ashley: Nate: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Nate: Tony: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Tony: Nate: Ashley: Nate: Tony: Nate: Tony: Ashley: Nate: Tony: Nate: Tony: Nate: Tony: Nate: Tony: Nate: Tony: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Tony: Nate: Ashley: Nate: Tony: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Tony: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Tony: Nate: Tony: Nate: Tony: Nate: Ashley: Nate: Tony: Nate: Tony: Ashley: Tony: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Tony: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Tony: Nate: Tony: Nate: Ashley: Nate: Ashley: Nate: Ashley: Tony: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Ashley: Nate: Ashley: Tony: Nate: Tony: Nate: Tony: Nate: Tony: Nate: Tony: Nate: Ashley: Nate: Ashley: Tony: Ashley: Nate: Tony: Nate: Ashley: Nate: Ashley: Nate: Tony: Ashley: Tony: Nate: Ashley: Nate: Ashley: Nate: Ashley: Band: \u00a0<\/p>\n<\/div>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our\u00a0<\/i>sponsor page<\/a><\/i>!<\/i><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is Real Estate Rookie, episode 213.<\/p>\n
I don\u2019t count on any of the income that comes from the rental or the storage facility as true income. I don\u2019t touch it. It\u2019s just for reinvesting for right now, but in my mind I can allocate that stuff. So basically, I\u2019m living for free right now in the house hack. The rental property covers most of my food every month. And I invested in a bunch of real estate trusts, which you can invest in the stock market and that pays for my car. So we\u2019re slowly ticking the things off, with each property that comes up it becomes how can I live my life for free? And if you keep your expenses down to a pretty low amount, it\u2019s very easy to do that with a small amount of properties.<\/p>\n
My name is Ashley Kehr, and I\u2019m here with my co-host Tony Robinson.<\/p>\n
And welcome to the Real Estate Rookie Podcast, where every week twice a week, we bring you the stories, inspiration, and information you need to kickstart your real estate investing journey. And if you guys have not yet done this, we would really, really appreciate an honest reading and review for the podcast on Apple, Spotify, or wherever it is you consume this content. And before we get started I just want to highlight a recent review that came in, this one\u2019s from Iscriminator. And Iscriminator said, \u201cEvery episode is unique. I\u2019m glad you guys do what you do. I\u2019m addicted. I discovered you guys three weeks ago and I\u2019ve been binge listening and catching up. Hopefully, soon I can share my success story with you.\u201d So guys we appreciate all the honest ratings and reviews, it helps us reach more like-minded investors just like yourselves. So Ashley Kehr, let\u2019s get into some boring banter. Tell me what\u2019s going on. What\u2019s new in your world today?<\/p>\n
While we were actually recording this podcast, I was having an inspection done by a home inspector on a lake house that I have under contract. And this is the first time that I\u2019ve actually hired a home inspector in probably five years I think. So really exciting to have a bit more peace of mind of what\u2019s going on in property than just buying such a dilapidated property, where I already know there\u2019s so many big issues that it would be a thousand page report from the home inspector, so why even bother hiring them. So excited to see how it turns out. My business partner went there and met the home inspector and there was no big red flag, so we\u2019ll just get the final report and hopefully be moving forward.<\/p>\n
That\u2019s awesome. The reason you haven\u2019t gone much is because you knew you were going to have to gut the whole place anyway.<\/p>\n
On other properties. Where this property it\u2019s turnkey, we really shouldn\u2019t have to do anything to it. But we just wanted to get just an inspection report on it, just because we\u2019re buying it at a turnkey price.<\/p>\n
And want to make sure it\u2019s solid. For all the inspection reports that we\u2019ve done, I don\u2019t think I\u2019ve ever been there in person when the inspection was actually taking place. Usually, I\u2019ll just get it afterwards and I\u2019ll call if I have any questions. You said Darrell was there at the property today walking with the inspector?<\/p>\n
Yeah. And actually the seller was there too, because he let them in. But when I first started out and I had inspections done on every property, I would go and I would just follow the inspector on just because I wanted to learn.<\/p>\n
Learn. Right.<\/p>\n
Darrell brought back this binder of stuff that I\u2019m like, \u201cWait, where\u2019s the inspection report?\u201d He\u2019s like, \u201cOh no, they send it later.\u201d Where five years ago when I was having it done he would hand write it as he was going along, and he got it at the end of the inspection and would go over it with you. And so when I stopped using an inspector, I would go through the property using his inspection checklist and-<\/p>\n
Template.<\/p>\n
\u2026 his sheets. Yes, template and go through the properties myself and look at everything. And obviously I couldn\u2019t do everything like check the electrical outlets, things like that, but it really helped me get familiar with what actually a home inspector does.<\/p>\n
There you go. What a great tip to start today\u2019s episode.<\/p>\n
So Tony, what about you? What\u2019s going on?<\/p>\n
Yeah. So much is going on. We\u2019re still working on our big BRRRR deal, so we got until the end of August to get that one closed, so making steady progress there. We\u2019ve got a few flips that we\u2019re working on. We\u2019ve got a new short term rental that just went live two days ago, another one we literally just published today. So just lots of things happening, so we\u2019re excited for the next couple of months here.<\/p>\n
Yeah. Well, that\u2019s awesome. And I think we are both very excited about the guest that we have on today.<\/p>\n
Yes.<\/p>\n
So we have Nate on who is actually the copywriter for our podcast. We\u2019ve never really gotten to put a face to his name that we see all over the podcast stuff, so this is awesome to really be able to meet him too along with hearing how he got started in real estate.<\/p>\n
There\u2019s this misconception maybe about all the folks at BiggerPockets that everyone\u2019s just this massive successful real estate investor, but it\u2019s not the case a lot of people are just getting started. And Nate\u2019s at three properties right now, two of those are single family type residences, but one is a self-storage unit. So we spent a pretty good amount of the episode talking about how he graduated up to self-storage, how he educated himself on analyzing and the process that he\u2019s gone through to manage that property as well. So overall, just a lot of really good nuggets from Nate about breaking into the world of real estate investing.<\/p>\n
So if you read the description of this podcast and you did not think it was great, blame Nate.<\/p>\n
Nate, welcome to the Real Estate Rookie Podcast, we\u2019re super excited to have you. And before we get into your story, I just want to let everyone know that Nate you are actually a very, very, very important part of this Real Estate Rookie Podcast. Literally, every piece of copy that anyone has ever read about the Real Estate Rookie show came from Nate\u2019s fantastic artistic marketing. I don\u2019t know I\u2019m running out of adjectives. I\u2019m trying to be like you man, but you\u2019re the copywriter for everything Real Estate Rookie. So super excited to have you on the show, man, but tell folks a little bit about yourself.<\/p>\n
Thank you so much, it\u2019s been fun working with BP. And I\u2019ve gotten to see every single time Tony\u2019s worn a black shirt, it\u2019s every episode, it\u2019s just black shirts. There\u2019s never a gray, there\u2019s nothing, so he keeps that vibe going the whole time. So I\u2019m the copywriter for the BiggerPockets Podcast. I started about a year and a half ago, we were probably in the high 300s on the regular show. You guys were much, much earlier than that, but I basically look at and watch every podcast that comes out from the BiggerPockets Podcast network. We write all the titles, the descriptions, so if you don\u2019t like any of them, you can email what\u2019s your email Tony?
[email\u00a0protected]<\/a>, that\u2019s the email you can email. But it was slightly before I started working with BiggePockets, I had just started getting into real estate investing. So obviously, digesting this on a daily basis, a multiple daily basis has helped out a lot. And it\u2019s just been great to listen to Ashley and Tony give insight to other investors that are new like me.<\/p>\n
Yeah. I think there\u2019s this idea that everyone that works at BiggerPockets is already a real estate investor, but it\u2019s not the case. There\u2019s quite a few people who haven\u2019t started yet, or at the very beginning phase of their journey. And obviously, Ashley and I get to chat with a lot of folks at BiggerPockets, and it\u2019s always so cool to see people start from zero and build themselves up. And Nate, you\u2019ve got an interesting story as a real estate investor as well. Just give us the background. You were already thinking about real estate investing before you came on at BP, but take us through where that journey has led you so far.<\/p>\n
Sure. So from the very, very start, I grew up with a real estate investor as a father. My dad had been investing in rental properties before I was born, so that has been ingrained in me for a long time. The problem was growing up with someone who is heavily into single family and small multi-family rentals, you can see the headaches that come with it. So every single day it was not unusual for my dad and I to be talking and then he\u2019s like, \u201cHold on.\u201d And then he\u2019d pick up the phone and it\u2019s his handyman and a strong Southern accent, and I still have no idea what that guy was saying. Talking about a plumbing issue, a lighting issue, painting, something like that because he was running this small portfolio with his partner. And there was just a lot of things to take care of all the time.
So the 5:00 AM phone calls, the toilet calls, all that stuff that everybody dreads that\u2019s scared of. It wasn\u2019t a thing that I had to really like, \u201cOh, is that a possibility when I buy a rental?\u201d I saw that growing up the entire time. The downside of that was because I saw that so much, it didn\u2019t really seem like an option for me because I saw my dad stressing so much over it. And obviously, it had huge benefits for the lifestyle we were able to live. I never had to worry about any mortgage being paid or food or anything like that, because he was investing from a pretty young age. But I didn\u2019t know that was exactly what I wanted to do because I seemed to only see the downsides of it. I didn\u2019t see the nice life I lived around me.
I just saw, \u201cHe\u2019s always on the phone. He\u2019s always talking to these guys. He seems stressed a lot, there\u2019s eviction, stuff like that happening.\u201d So I remember when I was 16, he tells me he\u2019s like, \u201cNate, when I don\u2019t want to do this anymore, I\u2019m going to give you all these rentals.\u201d And I was like, \u201cPlease don\u2019t do that. I don\u2019t want that.\u201d Which I know for everybody listening is like, \u201cAre you kidding, that\u2019s the opportunity of a lifetime.\u201d But I think when you\u2019re growing up, you just see the hassle a lot.
So it wasn\u2019t until I started working at an internship close to the time I was leaving college when I was like, \u201cOh, this is how people actually work W-2s in the real world. I understand why he was doing this the whole time.\u201d Because I had always had small businesses that I relied on for money from age 16, up to early 20s. So when I saw what the other reality was, which I know you both know very well, it clicked to me that, \u201cOkay, there is a reason for all this stress.\u201d It\u2019s a worthwhile pursuit to do that.<\/p>\n
That stress is better than working a 9:00 to 5:00 job.<\/p>\n
Yes. And that\u2019s the thing is you always have to think about that, you\u2019re going to suffer either way in life. And so are you going to suffer doing what you like and having control of your life, or are you going to suffer at the helm of somebody else and that\u2019s your choice. So he chose the right thing in my opinion, but as I\u2019ll tell later in the story I went a different way because I didn\u2019t want to have the full throttle amount that he was handling.<\/p>\n
We had this guest on once that was talking about how when he got his first rental, he got his first call from the tenant and they had a maintenance request, and he was just panicking and full blown anxiety and just like, \u201cOh my God, this is the worst thing ever,\u201d and blah, blah, blah. And then he hung up with the tenant, he called somebody to go take care of the plumbing issue. And then he was like took a breath and was like, \u201cWait, that was just five minutes of my life and this lady is paying me a $1000 a month,\u201d or whatever it was.
\u201cI just made a $1000 for five minute phone call. That\u2019s the only issue I had that whole month, it was that five minute and I panicked for no reason.\u201d And I think that\u2019s a great example, there\u2019s going to be headaches, there\u2019s going to be things you don\u2019t want to do, but it\u2019s so minimal and minuscule compared to other opportunities such as 9:00 to 5:00 jobs to make money in life.<\/p>\n
Exactly.<\/p>\n
So tell us a little bit more about what you did before you started in real estate, and what made you decide to actually buy that first property.<\/p>\n
So during that internship, when I was looking around at everybody and I was like, \u201cWhat are you guys doing?\u201d And everyone\u2019s just the same thing it\u2019s like, \u201cOh, on the weekend I go out, I come home, I sleep and that\u2019s it.\u201d And I would talk to people about their finances because I\u2019m generally interested. Now you can do that when you\u2019re a younger person at an internship because people will just be like, \u201cOh, he\u2019s young, he\u2019s stupid. He doesn\u2019t know that\u2019s pushing the boundary.\u201d Use that, do that when you\u2019re young because people won\u2019t mind. But I was talking to people like, oh, financial stuff, \u201cHow are you investing? Are you doing your Roth? Do you have any rental properties, stuff like that?\u201d And the amount of people I talked to who were doing nothing really scared me, and I was just watching it week in and week out.
So I kind of clicked where I was like, \u201cI think I should try and buy a rental property after college.\u201d So at the internship I started going on Zillow and it was just looking at markets, looking at how much the prices of every house was in different places that weren\u2019t crazy unaffordable, like my home state of California. So after I got a W-2 after I left college and then a year after that this was during about a year and a half after, so this was March of 2020. So the best time to buy real estate ever, nobody said it was a stupid decision at that time, everybody said, \u201cGreat. Buy during the pandemic.\u201d I put a house under contract in Rochester, New York, Ashley, which I know that you\u2019re probably well aware of.<\/p>\n
Yeah. It\u2019s like an hour from me.<\/p>\n
Yeah. This is a very heavy cash flow market, and I think when you\u2019re young you care about that a lot more and you\u2019re just like, \u201cOh, I got to get cash flow so I can retire early,\u201d stuff like that. So I put a full cash offer in on a $40,000 house in Rochester, New York. And I had it under contract March of 2020, we didn\u2019t close until June of 2020, it took that long, and that was the first investment I made.<\/p>\n
But before we keep moving Nate, can you just give us a brief overview of what your portfolio looks like today?<\/p>\n
Yeah. So I have the house hack I\u2019m currently living in Florida. I still have that Rochester property and we also bought a self-storage facility, a 63 unit self-storage facility, me and two partners last month. So it\u2019s just three properties, but I guess I can say 65 doors, which makes me sound really impressive. Can I say that at a meetup?<\/p>\n
I would say don\u2019t say just three properties because that\u2019s still impressive. I think there\u2019s people already drooling right now, \u201cHe has a self-storage facility. I want one of those.\u201d<\/p>\n
That was me for a year, I was like, \u201cHow are you people doing this?\u201d But with that first property it was really entirely cash flow. It was not a good market, I\u2019m sure I can talk to Ashley about this later. It\u2019s not a very good market. It was a C neighborhood. It was a C house. It wasn\u2019t super taken care of. The saving grace, which was the reason I probably still invest in real estate now is that I had really good inherited tenants, really good people who the entire time during COVID, when they couldn\u2019t have paid me, tried their hardest they could to pay me the whole time. And it was the same thing Ashley that you were saying before where as soon as I closed on the property, I remember I was going to sleep that night after everything was done.
And I was like, \u201cOh my God, they\u2019re going to call me and something\u2019s going to happen. I\u2019m going to have to call someone else.\u201d And that happened and you just get over it. But that was the first property and I think buying in a C neighborhood, a C property with still very good tenants, but not the best house, not the best area, the cash flow was fine. But buying that residential real estate and realizing that I was like even if I\u2019m picking up the phone three or four times a month, and it\u2019s maybe taking me one to two hours of work to do this rental property stuff. The scale of doing that isn\u2019t that fast with just buying a single property at a time, and that led me into maybe we should try something a bit bigger.<\/p>\n
And I definitely want to get into the self-storage piece Nate because I think people are always intrigued by the idea of going bigger. But before we do, so you\u2019ve got a property in Rochester, where\u2019s the self source facility at, what state?<\/p>\n
The self source facility is in Alabama and I\u2019m in Florida.<\/p>\n
Alabama. Okay. So you got one in Rochester, one in Alabama, this other one in Florida. So walk us through your process for choosing a new market to go into. What is your analysis and due diligence looks like? And at what point do you say, \u201cOkay, this is a good market let me sink my teeth in. Let me start submitting offers.\u201d<\/p>\n
When you bought the Rochester one, was that when you were living in California, that\u2019s literally the farthest point across the country to choose.<\/p>\n
I don\u2019t know what it was, but I\u2019ve never been to New York. I tried to go to upstate New York one time to look at the house during COVID and they were like, \u201cGet out. You\u2019re from California.\u201d I was like, \u201cOkay.\u201d So I couldn\u2019t do that. I don\u2019t know why I chose the farthest part-<\/p>\n
Wait. So Nate, you still haven\u2019t seen the property in person-<\/p>\n
I still haven\u2019t seen the property in person, and I\u2019m probably going to sell it soon so I can move it into more self-storage. But no, I never saw it, I don\u2019t know why I picked that far away. But when I was doing it, I wasn\u2019t very educated on choosing a market in the first place. It was literally just does it cash flow? Is my house going to get damaged by some really bad thing? And if it basically was there\u2019s two to 300 plus dollars of cash flow and I feel like my tenants can safely live there, that was kind of it. That\u2019s not the way you should do rental property analysis at all, but it\u2019s worked out until now, it was very basic. I was a complete beginner.<\/p>\n
But Nate there\u2019s several thousand miles in between California and Rochester and there\u2019s thousands of other potential cities in between those two location, so what was it about Rochester that made you even begin to look there?<\/p>\n
They don\u2019t have an increasing population, but they have a pretty large population, it\u2019s 200,000 plus, their houses are relatively cheap. I bought the first house 40k in cash and I\u2019m a very financially anxious person probably as it is. So for me buying something in cash took away that fear of a mortgage collector\u2019s going to come after me. I just wanted to do the first one in cash just as a complete learning experience. Because I didn\u2019t want to mess with any leverage when I really didn\u2019t have any idea of what I was doing. So that was a market that hit, the population was relatively big, I knew there was a lot of renters. The cash flow was giving me two to 300 plus bucks a month, that\u2019s true cash flow after everything. Their Section 8 laws are also really good. So that was another thing because I was buying in a C class neighborhood, I knew that I could probably get Section 8 renters there.
The thing is the house I bought it for $40,000, it could be rented on Section 8 for 1480 right now. So what is that like a three point something percent, it\u2019s insane. But I just knew that there were options that I could take if something really went bad, because there is a pretty strong Section 8 market in Rochester and they seem to be able to give out the money quite freely. I had a few points where I felt like I had some defense going into the deal that I felt comfortable with that. Why I didn\u2019t do anywhere in the Midwest it was just I looked at so many markets and nothing was matching that I can buy this in cash, making cash flow metrics. As soon as I got there I was like, \u201cLet\u2019s just do something,\u201d because I was tired of waiting.<\/p>\n
So Nate something else you mentioned that I want to dive into is the fact that you still haven\u2019t seen this property. So for a lot of new investors there\u2019s a high level of fear and anxiety around buying property sight unseen, but you were able to do this nonetheless during a pandemic. So walk us through what your process was for completing your due diligence on this property that you were never able to see in person.<\/p>\n
So the first thing I would tell people is if you\u2019re going to buy a residential property, probably see it in person, unless you have a really good team. I had obviously we did a full inspection and everything and we had about three months of closing, so there was time to do it multiple times. I had an investor friendly agent who I found probably through BiggerPockets that I got to go into the house and do the full Zoom videos with me, so I could see everything. Also when you\u2019re buying a rental property in Rochester they make you go through a certain I forgot what it\u2019s called, but you have to get a certain rental qualification.
Someone has to go into it from the city and make sure that it\u2019s livable, so that passed. I looked at it with my real estate agent and I got an inspector to look at it. I also had a few months after I bought it, now this was after the fact. I had a handyman that my father knew in a neighboring state drive up there and do a full deep dive into everything that had to be done there. But it was basically inspector, the city and my agent who were all able to lay eyes on it before I wanted to dip out of the deal if I wanted to.<\/p>\n
Nate, I\u2019m so glad you mentioned that because that is exactly the same advice that I give to new investors as well. It\u2019s like Nate, you had never purchased a rental property before, so how much value do you believe you would\u2019ve added on top of the city inspector, your agent and a professional property inspector?<\/p>\n
Oh zero. I\u2019m a first time homeowner right now house hacking. I was impressed that I installed a sink in the bathroom. I don\u2019t know anything about construction. If you show me an electrical box and you\u2019re like, \u201cHow many volts?\u201d I\u2019ll be like, \u201cI can\u2019t even read this. I don\u2019t know.\u201d So if you\u2019re someone who\u2019s new that\u2019s getting it and you know that there\u2019s people, who have experience that you can trust that can do the things that you can\u2019t do. I could say you could feel pretty confident buying an out-of-state property that you\u2019ve never seen, because it\u2019s like what you said what are you going to provide that they can\u2019t?
If you\u2019re coming from a background like mine where it\u2019s like, \u201cI know the numbers, but mechanically I know zero,\u201d there\u2019s not much I can add to that besides do I feel safe in this neighborhood physically, and for some people that might be worth it to go see it. But I asked my agent, \u201cWhat do you think about this? How do you feel? Is it okay as a rental?\u201d And he got back to me on all those questions, and we were talking every day about this stuff. So I had someone I could trust that I could ask.<\/p>\n
Nate I do think there\u2019s a ton of value in obviously being able to see the property in person, but not so much for anything other than emotional. I think for a lot of new investors there\u2019s just a sense of emotional, I don\u2019t know, you just feel better as a new investors if you can see the property in person. But usually if you\u2019re a new investor, that\u2019s never purchased a property before, you\u2019re just going to walk around, take a look, \u201cOh, this looks good.\u201d You\u2019re not going to have a really technical or critical analysis of what needs to be done to that property.
But you can get an inspection report and see that, \u201cHey, this panel is an old panel that might need to be upgraded,\u201d and you can take that and get a quote. Or you can see that, \u201cHey, there was some leaking in the roof here in this bathroom that looks like maybe it was a bad patch.\u201d You can take that and say, \u201cOkay. What\u2019s the quote to get that corrected?\u201d You can take all the information that\u2019s in an inspection report, shop that around to other qualified professionals, and then you\u2019ll get an idea of whether or not that property\u2019s still a good deal. So that\u2019s always my advice for new investors is to have a property inspector agent, if you can get a contractor to walk through it, let the professionals be the ones to give you their opinion on the value of that property.<\/p>\n
Yeah. For the house hack I\u2019m living in right now I came here. I came from California for me to look at all the properties because I\u2019m living in this property. I\u2019m also going to be living with other people in this property, that\u2019s emotional value to me that I need to feel safe in my own neighborhood. If it\u2019s your own house you\u2019re living in, you\u2019re like, \u201cOh, there\u2019s a fountain out there. I love that fountain. I don\u2019t know why, I just like it.\u201d But that\u2019s something that it\u2019s not the same with a rental property as it would be when you\u2019re living in there, so I completely agree.<\/p>\n
There are those differences. And especially even with doing the due diligence, there may be things that you\u2019d be able to live with if it\u2019s your own house or versus if it\u2019s a rental, it can go either way. But Nate, I want to know are you managing this from afar or did you hire a property management company?<\/p>\n
I learned from my father that 90% of property management companies are not great. And most people told me they\u2019re in the Rochester area, I talked to so many agents and every single one said, \u201cNone of the property managers are good.\u201d I tried to reach out to someone they didn\u2019t even get back to me, that was like, \u201cOh, that\u2019s the sign.\u201d So I\u2019ve been self managing it for two years now. I have a very good relationship with my tenants. They\u2019ve done right by me so many times and as soon as they need anything fixed, they call me and I call whoever needs to come out and take care of the house.
It\u2019s worked out fine for me, I haven\u2019t gotten a call from them in a month and a half. If it\u2019s a busy month I\u2019ll get maybe three calls and it\u2019s just stuff you have to deal with. But not even the money saving part of it, I felt like it was important for me as a first time investor to manage the property myself, even if it was out of state. Because I feel like I know so much more about not only my tenants, but the house through just talking to them through any issue that comes up.<\/p>\n
Are you using any software or anything to make them pay their rent online, or they submit their maintenance request online or anything like that?<\/p>\n
I wish because I work for BiggerPockets I hear this enough. No, but I don\u2019t though. It\u2019s just because I had that one rental, I think if it was beyond that I would. But it\u2019s so easy for me to manage everything internally, that I don\u2019t have anything. I tried Stessa for a bit, that was fine, but I don\u2019t know why I\u2019m such a spreadsheet freak that I like my own stuff much better.<\/p>\n
So you\u2019re a lady in the streets, but a freak in the spreadsheets.<\/p>\n
Yes, I am a lady. I think if it\u2019s just one property and you\u2019re really trying to get nitty gritty, it\u2019s fine. But I think anything past that where you have multiple tenants, it makes no sense to not use all the free property management software that\u2019s out there.<\/p>\n
So Nate, I want to talk a little bit about your move as well. Now you were in California, you\u2019re SoCal like me and you packed up a move to Florida, and I just want to know what prompted that move, was it a cost saving thing? Was it because you wanted to invest there? What was the motivation and what have been some of the benefits of making that move?<\/p>\n
I lived in San Diego, so for me being by the ocean is very, very important. Now there\u2019s no waves here because I\u2019m on the Gulf side, but there still is the ocean in a relatively short distance, so that was nice for me, but the biggest thing was probably affordability. Tony and I lived in California or he lives in California, I lived in California. I think the average home price in San Diego is about $800,000 right now. And even if you can afford that it\u2019s hard to make that sense. I have friends who are house hacking in San Diego and even with the subsidies from renting out another room as a medium term rental, something like that, they still have to pay three to $4,000 a month just towards PI, CI stuff like that. So for me it was a lot of cost savings.
It\u2019s not only that, you can buy a house here for 400,000, my house is 428,000 and I should be able to subsidize the rent by about 75%. And on top of that, I also now don\u2019t pay any state income tax. So even though I\u2019m not living for free on paper, I am living for free because I\u2019m saving enough from state taxes that covers the rest of what I would be paying on my mortgage. So for me it was like, \u201cI can be close to the beach, this area\u2019s growing a lot.\u201d I\u2019m in Sarasota, so it\u2019s close to Tampa, so it\u2019s growing a ton. It\u2019s a very nice place to live. The school systems are great. You\u2019re close by the beach and I get to essentially live for free. I don\u2019t really know why I wouldn\u2019t do that, especially when I don\u2019t have so much physical attachment over to San Diego that I couldn\u2019t.<\/p>\n
Do you have any other tips or tricks? It seems like you\u2019ve gotten a great plan in place to live for free, but do you have any advice for our rookie listeners of some creative strategies that they can do to reduce their living expenses?<\/p>\n
I mean you can rent hack if you\u2019re renting a place and it allows you to sublet it to other people, you can rent out another room that you\u2019re not using. I know people that have rented out their garages as storage. You can get a couple hundred dollars a month for that. If you\u2019re thinking about making a move for house hacking, definitely visit the area first, but look for the places that seem like there\u2019s a lot of businesses going into them. Tampa\u2019s a big part of that and that equals job growth, which usually equals more pay, so then everything is probably just going to increase in price.
Also Sarasota\u2019s a place with very, very low inventory and you have to basically whack down jungles to build here, so there is some barrier to entry for new homes. So if you\u2019re looking for some place that is going to appreciate that you are going to be able to subsidize your costs, just look at where the population is moving towards. Look at your total cost with state tax savings, if you\u2019re going from one state to another state and go on roomies.com or roommates.com and look at what a room could rent for. And then just use the BiggerPockets calculators to go calculate out how much money you would save.<\/p>\n
So Nate, I know you\u2019ve got the house hack going on, which is fantastic, and we recently had Craig Curelop on an episode where he gave all the ins and out outs of house hacking. So if you guys haven\u2019t listened to that episode, go back and listen to that one. But Nate I know something else that a lot of folks use, as they\u2019re building their portfolio they\u2019ll say, \u201cHey, this rental is to cover whatever my credit card debt or this rental is to cover my student loan payments.\u201d Are you using any of those strategies as you build your portfolio?<\/p>\n
Yes. 100%. I don\u2019t count on any of the income that comes from the rental or the storage facility as true income. I don\u2019t touch I. It\u2019s just for reinvesting for right now, but in my mind I can allocate that stuff. So basically, I\u2019m living for free right now in the house hack. The rental property covers most of my food every month. And I invested in a bunch of real estate trusts, which you can invest in the stock market and that pays for my car. So we\u2019re slowly ticking the things off, health insurance is going to be a tough one because I\u2019m self employed. With each property that comes up it becomes how can I live my life for free? And if you keep your expenses down to a pretty low amount, it\u2019s very easy to do that with a small amount of properties.<\/p>\n
So Nate earlier you said that you\u2019re getting about $200 per month cash flow was it on that Rochester house?<\/p>\n
It\u2019s probably 300.<\/p>\n
300. So you said that covers most of your monthly food costs.<\/p>\n
Yes.<\/p>\n
How much are you spending on a meal?<\/p>\n
I bet the producer Eric told you guys about this. I watched The Money Show because I\u2019m also the copywriter for that. And I\u2019ve always been a pretty frugal person and it\u2019s made sense to me my whole life that the less I spend, the closer I am to financial freedom. So my girlfriend and I consistently will eat out for probably $25 or less. And if it\u2019s over that we look at each other and we\u2019re like, \u201cWhat are we doing? This is insane.\u201d We just buy a bunch of vegetables and beans and stuff like that and eat that stuff all the time.<\/p>\n
The Dave Ramsey, beans and rice.<\/p>\n
Exactly. Oh my God, I get those Taco Bell, just bean and rice, no cheese. Just bean and rice burritos those are a $1.50 and I\u2019ll just eat four of those at a time. There\u2019s ways to do this people.<\/p>\n
So Nate, I want to talk a little bit about the self-storage piece because I know that\u2019s an asset class that I\u2019m super excited about. And I think honestly after we do short term rentals, self-storage would be the next asset class we move into. So I\u2019m just curious, so you have this new one that you just got on your contract, 63. What do you call them in self-storage? They measure by the square footage, however many square feet typically. But anyway, so you have these two residential properties and you leveled up pretty quickly into this massive self-storage portfolio. Talk us through, A, why you made that decision to kind of level up, and then, B, how did you even start educating yourself on what is a good purchase in the self-storage asset class?<\/p>\n
Learning about this whole different asset class it\u2019s just weird if you\u2019re a residential investor. Because for a long time you don\u2019t think you can buy these things, you think that\u2019s for really rich people. Only they can buy self-storage facilities, only they can buy hotels and motels and camp sites and all this stuff that you guys are doing now. It takes a big mindset shift for you to realize that there\u2019s not really a barrier in entry to any of this. There\u2019s just, can you do it? And if you think you can do it, you probably can. So what was happening was I have someone who I used to work for, she was my manager at my old job and we were always talking about real estate at work. So she ended up buying a duplex in Cleveland around the same time I was buying the single family house from Rochester.
About a year later, she texts me and she\u2019s like, \u201cCan I pay you money to help real estate coach me?\u201d I\u2019m like, \u201cI don\u2019t think I can accept money. I have one unit, that doesn\u2019t really seem like an acceptable amount to do coaching.\u201d But I was like, \u201cDo you really want to buy more real estate?\u201d She said, \u201cYeah.\u201d I said, \u201cWhy don\u2019t we just go at it together and then just pull our money and do it together?\u201d Because I trusted her, I worked with her for so long. So originally, we were thinking apartment complexes, but then we got on the whole topic of the toilets and the trash and everything else like that. And that over time it blended into, \u201cOkay. So what should we do?\u201d And we were thinking, \u201cWhat can we do that\u2019s not residential?\u201d And then we had two options, mobile home parks and self-storage.
They both kind of operate the same, because both of them you\u2019re literally just paying for a spot somewhere, that\u2019s how it works. For mobile home parks, most of the time the mobile home owners will pay for all their own maintenance. Is self-storage, I have a concrete box. And it\u2019s like in those movies where the angel scene because someone realizes something, that\u2019s how I felt when I realized that somebody would pay money to put their stuff in a box. I didn\u2019t realize this before, but it was so amazing when I realized it, so we shifted gears towards that. And then we hunted around for a deal for about a year before we finally got one. But the way that you would get educated on that is you read books, you read books by AJ Osborne. You read books like what is it Crushing It in Commercial Real Estate, is that by? Why am I forgetting his name?<\/p>\n
Brian Murray.<\/p>\n
Brian Murray. And there\u2019s sites. There\u2019s tons of people talking about it on BiggerPockets, there\u2019s sites like Storagerebel, stuff like that. It\u2019s very easy to get self-storage information. And anytime I had a question, \u201cDoes it need to be climate controlled. What unit breakup do you guys have on your facilities?\u201d I could just ask it in a forum and someone would answer it, and that was pretty much how we got educated on it. I don\u2019t know if I answered the full question, maybe I went on a tangent.<\/p>\n
Well, Nate, can we use this as your deal dive here?<\/p>\n
Yes, we can do the rookie deal review. Let\u2019s go.<\/p>\n
See, he even knows the name of it better than I do.<\/p>\n
Yeah. I\u2019m ready for this.<\/p>\n
Okay. So I\u2019m going to rapid fire you some questions and then you can go into the story of it.<\/p>\n
I\u2019m completely unprepared.<\/p>\n
Okay. So you had mentioned this deal was in Alabama?<\/p>\n
Yes.<\/p>\n
And how did you find the deal?<\/p>\n
So when I was looking for off market self-storage deals, I would be calling everybody throughout Florida, Alabama, Sun Belt area. And I found a deal that didn\u2019t work for me, so I called a wholesaler whose list I was on and I said, \u201cJust take this information. I don\u2019t even want anything for it. Can you just keep sending me more deals?\u201d And he was like, \u201cSure.\u201d So luckily enough four months later, he\u2019s like, \u201cI\u2019m on the email list and there\u2019s a deal that\u2019s coming up in Alabama.\u201d I saw him start to drop the price over time and nobody was bidding at it, so I thought it was overpriced. We ran the numbers. We realized it would work at some level or some price, it wasn\u2019t the price that he was asking for. So I got it through a wholesaler. Can I explain what a wholesaler is for people who don\u2019t know what wholesalers are?<\/p>\n
Yes, that\u2019d be great.<\/p>\n
Okay. So a wholesaler is basically someone they\u2019ll either send letters to or call properties that aren\u2019t for sale on the market. And they\u2019ll ask owners who might want to sell the property, \u201cWould you sell the property to me?\u201d If the owner of the property says, \u201cYes.\u201d They\u2019ll lock it up in a contract and then the wholesaler legally because there\u2019s a stipulation in that contract that says, \u201cEven if I don\u2019t buy this, I can hand it off to another person who can buy it at the same price, same everything in the contract.\u201d And they usually charge a fee for this, so our wholesaler did charge a fee. But that\u2019s how a wholesaler works, they\u2019re basically just the matchmaker between an off market property and you a person who doesn\u2019t want to do all that work and they collect a fee at the end, so we got it through a wholesaler<\/p>\n
Nate really quick, before you move off the wholesaler piece, how did you find this wholesaler in this new market you\u2019ve never been in? What advice would you have for someone looking to find a wholesaler?<\/p>\n
If you want to find wholesalers, if you\u2019re looking at residential houses or anything, the easiest thing to do is look up on Google cash for houses, insert the city you\u2019re looking for and there will be tons of websites that come up. You can email any of the people on those websites, and they\u2019ll put you on a buyer\u2019s list where they\u2019ll send you deals. They like to blast a lot, Facebook groups, I\u2019m part of a bunch of self-storage Facebook groups. People always say, \u201cIf you need deals sign up for my email list,\u201d I know there\u2019s people who will probably say it on BiggerPockets. You might even be able to look up wholesaler, my city and you can find a website and you can sign up for people\u2019s buyers list on that website.<\/p>\n
That\u2019s so funny, I\u2019ve never thought of doing it that way.<\/p>\n
Oh yeah.<\/p>\n
I just Googled cash buyer or cash for houses Pigeon Forge and there was six, seven websites that popped up saying, \u201cWe\u2019ll buy your house in Pigeon Forge.\u201d That\u2019s a great tip, man.<\/p>\n
Quick tip. There you go.<\/p>\n
Wrong podcast. Back to the rapid fire. What was the purchase price on this property?<\/p>\n
So he wanted 400,000 for it, it didn\u2019t make any sense at 400,000, it made sense around 360, but not 400. So I went to the wholesaler and I was like, \u201cDude, you\u2019ve been emailing this out maybe four or five times, nobody wants it at this price. What if you just let the contract go, void it with the seller, give me the seller\u2019s contact information, and then I\u2019ll just pay you the same wholesaler price if I lock down a deal with him.\u201d And for him that\u2019s a zero risk way of doing it. We signed kind of a JV agreement with each other that if I got the deal, he would get paid his wholesaler fee. So there wasn\u2019t any way of me going around him, so he says, \u201cLet me wait for one other buyer to see if he wants it.\u201d The other buyer didn\u2019t want it.
He comes back to me and he goes, \u201cOkay, I\u2019ve just voided the contract with the seller. Here\u2019s his information.\u201d So remember the wholesaler was asking 400. I called the buyer and within about five minutes the buyer says to me on the phone, \u201cI\u2019ll take three 50 for it.\u201d And I go, \u201cOkay.\u201d So that\u2019s how we got to that price and that was a price that worked well with me, it was also a very, very nice owner. He\u2019s helped us the entire time moving over to our management, sending us everything we need, going to the facility cleaning out units that he had stuff in.
He\u2019s like, \u201cI\u2019ll mow the lawn for you the whole summer.\u201d That\u2019s fine. I\u2019m like, \u201cOkay.\u201d I think people get hung up a lot of times where this is the price and it\u2019s never that this is the price, there\u2019s ways to get around that. But we ended up at 350 and the wholesale fee was 14,500 and that\u2019s on a 2% interest only loan for two years. So hopefully, by the time we refi we can just give him that\u2026 Yes Tony, pretty crazy, right?<\/p>\n
2%.<\/p>\n
Oh no, sorry 5%. Two year at 5%. That\u2019s still pretty good though.<\/p>\n
Oh, gotcha. Gotcha.<\/p>\n
Yeah. Still.<\/p>\n
Okay. But still really impressive. Still really impressive. Wait, so if I can keep going, how did you guys finance this thing? Was is it a cash offer? Did you guys bring some debt? What did this look like?<\/p>\n
It was just a 20% down commercial loan from the local credit union who the seller was actually a commercial underwriter there. So he was like, \u201cHey, if you buy this and use our bank, I will give you a 4% interest rate for 15 years, 25 years amortized.\u201d And I was like, \u201cYeah. Let\u2019s do that.\u201d So that was the thing, that closed on the first of this month. Interest rates were not 4% at the first of this month. I don\u2019t know how they\u2019re doing this, I don\u2019t want to ask, I\u2019m just getting the loan.
Let me explain that again for the rookies who don\u2019t know what I was saying. It is a 4% interest rate, the loan will last 15 years, but the length of the loan is over 25 years. So at the end of that 15 year period we will in theory owe the next 10 years worth of loan payments at once. But we\u2019re probably going to refinance out sooner than that or sell it before that even happens. So for us, it\u2019s more a long term, low mortgage, low interest rate loan.<\/p>\n
And instead of having it amortized over 15 years, the length of the actual loan spreading it out to the 25 years makes your payment a lot smaller, and hence gives you more cash flow the longer you can amortize-<\/p>\n
Exactly.<\/p>\n
\u2026 out to, which is awesome. Your strategy with this is obviously self-storage, but how are you managing it? You had mentioned that the owner helped you switch over to your own type of management. What are the differences there compared to what he was doing?<\/p>\n
So before he was like everything\u2019s on a piece of paper, that\u2019s how he sent me everything. Every customer info phone number, address, contract is a written down piece of paper. I love the gentleman, he\u2019s so kind. I would not do what he was doing, because it seems like such a headache. And my partners had to take the time to transfer 45, 50 tenants worth of all information contracts and everything onto spreadsheets and then into an online system that\u2019s called ESS, it\u2019s Easy Storage Solutions.
And that\u2019s kind of a property management software for storage that allows people to put in their credit cards and have recurring billing, purchase insurance, stuff like that. But it was basically a Nate is on the weekend, Nate turns on a Netflix show, Nate tries to understand what this man scribbled on a piece of paper and put it into a spreadsheet, but we got it. We got all the customer info in after a month, it\u2019s amazing, I\u2019m so happy about that.<\/p>\n
That is really cool, so what is your exit strategy on this? You said maybe you\u2019ll sell it or refinance before 15 years, but what are some of your immediate goals that you have for it?<\/p>\n
Part of the reason we liked the storage facility, it was so heavily under rented or not under rented, the rents were way below market. It was about at 75% occupancy when we bought it, so pretty close to full, but for something that might have been $85 a month unit, the old owner was charging $40. And every single self-storage facility in the area was charging 85, $90. And this one had no online presence, nobody knew it existed unless you drove by it.
So our long term thing is basically we\u2019re going to try and increase the rents over time, by either, A, getting new customers at the full price it should be, and slowly through a multiple tiered way that we\u2019re doing it increase the rents of the current occupants. That should take us probably about a year or two, because I don\u2019t want to do things too quickly and get people to just dip all at once. But when that\u2019s done, when we get everything to market rent, start selling self-storage insurance, which if you don\u2019t know this, if you offer self-storage insurance you get a kickback from the company, a pretty significant amount that increases your profit.
Once we get it all rented out like 90% plus, we\u2019ve calculated the facility should be worth at a minimum with a pretty high cap rate $500,000. So then there would be 150k profit made over about a year or two. And then we could either choose to should we refinance and buy a same size facility or should we sell the whole thing and 1031 into a bigger facility, and just repeat until we\u2019re bajillion, trillion, fafillionaires.<\/p>\n
So Nate, gosh, so many questions rolling through my head right now. So first I know you said that you\u2019re using the Easy Storage Solutions software, but are you personally managing this thing or is Bubba still playing some kind of role in the day to day management for you guys?<\/p>\n
So we\u2019re managing all that, we\u2019re managing that ourself. I have two other partners, so one of them handles the customer service. I kind of manage getting everything into ESS, my other partner then just takes it from there. So we have everything in there, it\u2019s super streamlined, you can text people, email everyone through that system. We\u2019re handling all the management, the old owner isn\u2019t handling anything besides just helping us continually get it rolling, because he lives in the area, but we\u2019re self managing that whole thing.<\/p>\n
Have you been there to that property?<\/p>\n
Oh no. She asked me this question. No I have not. I will be going in\u2026 I think we\u2019re going to try and go in September. But the thing is which is cool is because it\u2019s about an hour outside Huntsville, and I have a good friend who invested in Huntsville and had a great property inspector, so I got that guy too. And he looked around the facility, sent us a lot of pictures, we asked him his opinion of stuff and it\u2019s been pretty good so far. And every single time we\u2019ve had a new customer come in and say, \u201cYou guys have any open units?\u201d And we say, \u201cYeah.\u201d And they go, \u201cOkay.\u201d And they accept the full price that we ask them for. So we know we\u2019re not completely off base for the area, but no, I haven\u2019t visited. Why did you ask me that Ashley? Now I seem like a rookie.<\/p>\n
No, I think that\u2019s so cool that you\u2019re able to get all this stuff done and you don\u2019t even have to go to the property or look at it.<\/p>\n
Have partners.<\/p>\n
I think that\u2019s awesome.<\/p>\n
Have partners that do things that you don\u2019t want to do. Doing this alone, I guess it\u2019s cool because you get all of the clout if you\u2019re like, \u201cOh, I own a 63 unit self-storage, I get all the profit.\u201d But dude, it sucks if you\u2019re doing all this on your own, it\u2019s less fun, it\u2019s so much pain. Everybody\u2019s asking you for something all the time. When you spread the risk it\u2019s just way better.<\/p>\n
I have to 100% agree with you today while I\u2019m recording podcasts, which I love to do. My business partner Darrell was out at the lake house where we\u2019re buying and getting with the inspector getting this section done. And for me that is not something I enjoy standing there waiting for the inspector to be done, small talking a little bit with the seller, that\u2019s things he loves to do. So you\u2019re exactly right, it makes it way more fun doing it with somebody else. And especially when they enjoy the things that you don\u2019t want to do.<\/p>\n
I hate calling people. I think it\u2019s the worst thing ever. I just don\u2019t like talking to people, even though I\u2019m a very social person. So I have a partner who has no problem with it, I\u2019m like, \u201cWhat do you mean?\u201d He\u2019s like, \u201cI\u2019ll just pick up the phone from people.\u201d And that\u2019s the weirdest thing to me, but I\u2019m so blessed. Thank you Alex, I love you, that he\u2019s taking care of this for the business because there are things you\u2019re good at. I think I\u2019m good at the learning about real estate side and there\u2019s some things my partners are good at, like calling customers who won\u2019t pick up the phone and calling them five days straight, stuff like that, so I\u2019m very thankful for them.<\/p>\n
So Nate, I want to talk a little bit more about the analyzing piece. So you talked about how you guys stumbled into this one and a little bit of the educational piece. You\u2019ve talked about maybe 1031-ing wanting this property into something larger. So it makes me wonder, what is your buy box for these self-storage facilities? What kind of boxes do you need to check to say, \u201cOkay. This is a good investment for us our team.\u201d<\/p>\n
So off of the first one, we didn\u2019t really want to borrow anybody else\u2019s money. We wanted to make sure that we could do it all on our own. So we had a half a million dollar was the max price. We wanted it in an area that had at least a population of around 6,000 people, and there\u2019s ways you can figure this out. How many storage facilities per a certain area does the area need to fulfill the demand? So that was another thing we checked out. I think this town is 9,000 people that we invested in and there\u2019s four storage facilities. And if you can count up all the units under demand of what people need.<\/p>\n
Can you dive into that a little bit more Nate? What is an adequate number of supply given 9,000 residents in a city?<\/p>\n
So I\u2019m not AJ Osborne, so please don\u2019t quote me on this. But the way that it works is about\u2026 I think the recent numbers show that 10.5% of US households use self-storage, and there\u2019s about two to three people per household. You can look that up in the county website, how many people per household on average is there in the city? So if you think there\u2019s about a 10.5% need for how many households, you can divide it and say, \u201cOkay, how many storage units are there available?\u201d And if it\u2019s under what the demand shows you can start up a storage facility in there. If it\u2019s way over and there are some cities like small towns that have\u2026 I\u2019ve seen towns with, \u201cIt\u2019s a 300 person town, I have a 400 unit storage facility.\u201d I\u2019m like, \u201cI don\u2019t know if that\u2019s going to work.\u201d
So that\u2019s some way to look at it is because it\u2019s like this is a business. It\u2019s more of a business than rental properties I think, even though obviously rental properties is a business. But it\u2019s a real business, you\u2019re on Yelp, people are looking you up on Google reviews. You need to make sure there\u2019s actual demand there. And another great way to look at this is because ours wasn\u2019t online, nobody knew it existed. We looked at all the other facilities within a 10 mile radius, every single one was booked minus a parking spot here, a one unit there. That shows you already that if everything\u2019s filled to the brim in the area, there\u2019s probably a good chance that other people want to get in. Especially, if you can call other places and they say, \u201cOh, we already have a 10 person waiting list, so you have to get on it.\u201d 10 people, those are my 10 customers. Let\u2019s go. There\u2019s a few ways to figure that out.<\/p>\n
And Nate real quick, he mentioned AJ Osborne, who is the self-storage king. If you guys haven\u2019t heard of him and you are really loving this episode with Nate talking about self-storage. So you can listen to AJ Osborne on the BiggerPockets Real Estate Podcast, episode 286. If you really, really want to dig into the mind of a self-storage genius and check that out.<\/p>\n
Aren\u2019t you friends with him?<\/p>\n
Yeah. Yeah. He is an awesome guy too. I plug him every single day. Not only as a great real estate investor, but just a really awesome person in general.<\/p>\n
All right. Don\u2019t show him this episode in case I\u2019m wrong.<\/p>\n
You know what\u2019s funny I was thinking as you were saying that, I was like you could probably give him the exact town and he\u2019d like, \u201cYeah, that\u2019s about-\u201d He\u2019d be able to throw off some statistics, just a random town in Alabama.<\/p>\n
Cool. Well, can we talk a little bit more about the marketing aspect. So I know you said that this place had no online presence whatsoever. So what has been the plan for you all to beef up the online marketing for the self-storage facility?<\/p>\n
So the good thing about this is I come from an SEO background, and now a kind of SEO combo copy writing background. My partner also comes from an SEO background where she worked at multi-billion dollar companies and knows everything about organic search. So basically, the way that we\u2019re doing this now is obviously you get your Google page set up. You have to submit all the information about your self-storage facility to the billions of listing sites out there, so you\u2019re on every single one of them. And we\u2019ve just been doing that, we\u2019ve been hitting all those listing services.
We\u2019re going to start trying to get in reviews because you\u2019re in short term rentals, you know this, it\u2019s the biggest thing if you\u2019re trying to make your business just grow out of nowhere. So we\u2019re getting set up with Google Business, all the listing services, Yelp, SquareFoot, everything else like that. And then we\u2019re going to start a referral program with the current customers, we\u2019ll look at X percent off of rent in two months if they refer someone over and that person also gets X percent off. I think in these small towns referrals is way bigger than for us in big cities, so we\u2019re going to push on all those angles. My SEO partner could go more into this than I can because she\u2019s doing all of it.<\/p>\n
How are you going to track those referrals? Is that something you\u2019re manually going to have to track or is that built into the software?<\/p>\n
We can set that up with different UTM URLs and stuff like that, where we can set up different URLs that people come in from. So on Google Analytics or other analytics softwares like that, you can see which site someone came from or which code they used or which ad campaign they came from as well. Again, it\u2019s a business, less of a rental property, so if you know your stuff it\u2019s kind of helpful, which thank God she does.<\/p>\n
So to wrap up the deal here what is your cash flow going to end up being here?<\/p>\n
I think if we do it right, we should be cash flowing somewhere between two and a half to $4,000 a month off of it, and that\u2019s after the mortgage payment. So it\u2019s pretty good for three partners as a split, especially if it\u2019s 3k, it\u2019s like a $1000 each, but it\u2019s more important that we get the cash flow up so we can refi. Because this is a commercial loan they\u2019re looking at income, we need to just show as much income as we can to get the value of the property up.<\/p>\n
And what do you think that value is going to be after you increase the rent to where you want them for everyone? What do you think that value will be on them?<\/p>\n
Hopefully, low estimate around 500k, it could be anywhere from five to 600, if things go really well. But we always set up these parameters in our calculations where we have a worst case, okay and best case scenario. And I always look the worst case scenario, I\u2019m like, \u201cThat\u2019s the one.\u201d So if I can at least hit that I\u2019m doing all right.<\/p>\n
Increasing a property value by 150k in a short period of time, that\u2019s awesome, that\u2019s great. That\u2019s 50k in net worth for you and each of your partners.<\/p>\n
And it\u2019s cool because the partners I\u2019m working with no one\u2019s really concerned about taking profits or spending any of this right now. All of us are just thinking, \u201cOkay, we\u2019re going to use this for the next one and then do that for the next one.\u201d And then in about five to 10 years when we\u2019re all like, I\u2019m tired of working with you, \u201cI\u2019m done with this,\u201d then we can be good.<\/p>\n
Just sell it all cash out, take your money and run.<\/p>\n
Put it in REITs and then just go to sleep for a while.<\/p>\n
Yeah.<\/p>\n
Well Nate, congratulations, man. It sounds like you got a pretty killer deal there and we\u2019re excited to see how it turns out. And again, just before we move off of this, I think that\u2019s obviously the big power of commercial real estate is that you do have the ability to manipulate the value of that property in a way that you can\u2019t really with single family residential properties. Because your commercial properties are based off of your NOI, your net operating income, and then the prevailing cap rates, where other big properties are selling for and you divide those things, whereas your single friendly residences are all based off of appraisals. So if you can buy this property, increase the NOI by increasing the income, decreasing the expenses or some combination of both, you\u2019ve just immediately increased the value of that property as well. So really, really love the approach there, man, and we\u2019re excited to see where you take that one.<\/p>\n
I\u2019m going to try guys. I\u2019ll do it just for you two.<\/p>\n
All right. So I want to take us now to our rookie request line. So for those of you that are listening, if you want to get your question featured on the show. You can give us a call at 885-ROOKIE and if the question is a good one, maybe we\u2019ll use it for the show. So today\u2019s question Nate it\u2019s actually about partnerships, which you just talked about. So are you ready for today\u2019s question?<\/p>\n
I think so.<\/p>\n
All right. So today\u2019s question is from Davidson D. And Davidson says, \u201cHaving multiple properties with the same partner, should it be one big LLC or multiple single member LLCs owned by a parent LLC that is then split 50\/50? Thanks so much for your time.\u201d So what are your thoughts on that Nate?<\/p>\n
It\u2019s multiple rental properties.<\/p>\n
That\u2019s what it sounds like having multiple properties with the same partner, how have you guys structured your legal setup with you and your partners?<\/p>\n
The way that we want to do it long term thinking is each property has its own LLC. We want to limit the way that people can go after us. I\u2019ve listened to a lot of the what is it asset protection on this show and the other shows. I can\u2019t say because I\u2019m not a lawyer, but we\u2019re going to set up each property in its own LLC. And then eventually when it\u2019s probably worth over a million dollars worth of things, we\u2019re going to try and put it in a trust as an umbrella for all those LLCs, and then one day do the, \u201cThat\u2019s in Bermuda, you can\u2019t touch me,\u201d type trust.
So I think that pretty much is our plan going forward. It\u2019s so cheap to file LLCs that if you feel like there\u2019s even a smidge of protection extra that you\u2019re getting, it probably makes sense to pay the 100 to $200 to just set up for each property. And then I think you may know this better than I do, is it easier on an accounting end because then you each have each entity instead of just this whole scrambled seven properties and one LLC, and all these expenses for different houses type thing.<\/p>\n
For me in California, it\u2019s actually, I think it\u2019s 800 bucks to open up a new LLC, and then the tax returns is only 1200 bucks a year. So it can get pricey, especially on smaller family residences if you\u2019re trying to spring up an LLC for each one. But to your point I think everyone\u2019s going to have a different risk profile. And if you\u2019re you\u2019re really concerned about potential litigation or protecting your assets, then obviously it might be worth that extra expense. But I think our approach moving forward is that we\u2019ll have a collection of properties that fall under one LLC. So maybe five in this one, five in the next one and so on and so forth, and then eventually we\u2019d like to put a trust in place as well.<\/p>\n
And then it probably also matters on how expensive the properties are, you\u2019d probably not want three $3 million properties in the same LLC. But if you have five 50k properties, that\u2019s probably fine, don\u2019t quote me on that. I\u2019m not the lawyer.<\/p>\n
I want something that Tony said to be a reminder to everyone, how he said it costs $1,200 for an LLC tax return in California and to do his return. So I think a lot of people forget to actually add that into their numbers when they are doing a rental property. If you don\u2019t do your own tax return and you are hiring an accountant out, if you get an LLC that\u2019s a separate tax return you have to pay for, I think mine runs 250 to $300 per year, per tax return. But if I were to go and put an LLC on every single property, that\u2019s $500 plus that $300 for the tax return. And if you are just buying a small single family rental cash flowing, maybe a 100 bucks a month, you have a mortgage on it everything, there goes your cash flow it\u2019s gone, if you don\u2019t remember to add in that accounting cost.
But for my partnerships, each partner I have an LLC with them and we put our properties and I think Nate\u2019s point is very valid. I\u2019m buying $50,000 properties, we\u2019re throwing a bunch of them into an LLC and then it just depends on the equity split. So with one partner we actually have two LLCs, one, we are 50\/50 each and the other one we are 60\/40 each. And it just depended on the money that each we\u2019re putting in and the workload that we were each taking on, that determine that we are changing some of the properties to that 60\/40 split too. So I think there can be a lot of costs associated with having multiple LLCs. I actually like having more properties under an LLC, because if you are using bookkeeping software like QuickBooks, they charge you per an entity.
So if you have an entity for each property, you\u2019re going to have to pay 50 bucks per month per each property that you have, where if you have the LLC with five properties in it, you\u2019re just paying for that one QuickBooks file. So I think there\u2019s definitely an advantage. And as far as asset protection liability, if you have mortgages on these properties and there\u2019s not a ton of equity, there\u2019s not $3 million of equity in the property, you don\u2019t have a ton to protect anyways, if you only have $50,000 in equity in your portfolio.
I think that kind of plays into factor too, because no big time attorney hotshot is going to go after your LLC, if it only has $10,000 in equity. Nate, we\u2019re going to go to our rookie exam and this one is special for you, we actually have four questions for you today. So the first one is the most important, which podcast is your favorite to copyright for of the BiggerPockets platform?<\/p>\n
It\u2019s not a hard decision. It\u2019s the new podcast On the Market, which you guys should check out. More people over there because it\u2019s a really good podcast and Dave Meyer does a very good job talking about up to date information. No, Rookie\u2019s a really good podcast. Every single time it\u2019s good because you see people who are in the same situation as you. And it\u2019s just good because sometimes you\u2019re learning the same lessons over and over again, but with just a different flavor, so you\u2019re like, \u201cCool. I won\u2019t do that thing that that person did.\u201d So I love the Rookie Podcast, but go check out On the Market, it\u2019s a great podcast.<\/p>\n
On the Market is such a good answer because I love it too, my friend James Daynard who\u2019s one of the hosts on it and I\u2019ve been listening to every episode, it\u2019s really great. Especially, now with a lot going on in the market to stay informed.<\/p>\n
And in the economy.<\/p>\n
Yeah. Okay. So the next question, what is one actual thing rookies should do after listening to this episode?<\/p>\n
Just talk about real estate more. I met my partner through work because I just talked about it a lot. I\u2019ve had people offer me money because I\u2019ve talked about it a lot. She\u2019s had multiple people offer her, they\u2019re like, \u201cOh, you did a self-storage deal. You don\u2019t want money for the next one?\u201d It\u2019s weird just post on Instagram, even if you\u2019re not that comfortable with it, post once in a while, talk to people at work, talk to family members, just talk to everybody. Because most likely someone might not even be thinking of it, but it might be able to change their life in a way that they can do something that they love, so just talk to people.<\/p>\n
Yeah. That\u2019s fantastic advice Nate, love that, man. Ashley and I have preached the same exact thing many, many times in this podcast, so love that. All right. Question number two what\u2019s one tool, software, app or system that you use in your business?<\/p>\n
Easy Storage Solutions, it\u2019s pretty intuitive. I like it. I know there\u2019s two big ones for storage, storEDGE, it\u2019s something called storEDGE. And it\u2019s called Easy Storage Solutions, those are I think the main two that people use. But if you\u2019re trying to get into self-storage, watch some videos on that because when you get a self-storage facility, it\u2019ll be way easier, but it just makes running everything really easy.<\/p>\n
And Nate, the last question, where do you plan on being in five years?<\/p>\n
Probably with more storage units, hopefully doing less. My goal is to do nothing, not in a lay around all day thing, but really just taking your brain away from things that, I don\u2019t know, just putting your brain to the best use possible. And I feel like if you invest in real estate and you like investing in real estate and solving these fun financial problems that are fun for you. Buying more real estate probably will give you more energy than taking away from it even though it\u2019s work. So hopefully with more units, hopefully doing less, maybe with a gator farm in Florida, who knows. We\u2019ll see.<\/p>\n
I can\u2019t wait to come visit that.<\/p>\n
Yeah. Please.<\/p>\n
Yeah. I\u2019m excited too, man. All right. Before we close this out, I just want to highlight this week\u2019s rookie rockstars. So again, if you would like your story featured on the show, get active in the Real Estate Rookie Facebook group, which honestly one of the most active, the most engaged Facebook groups out there. Get active in the Real Estate Rookie forum on BiggerPockets, there\u2019s a wealth of knowledge.
Almost any question you can think of asking has probably been answered somewhere at some point on the BiggerPockets forums, but today\u2019s rookie rockstar is Andrew White. And Andrew says, \u201cStarted last week on our most ambitious project yet. This will be our fifth property in our fourth Airbnb, it\u2019s a 1930s historic build in San Antonio, Texas. The plan is to Air-BRRR-nb this property and it\u2019s a doozy.\u201d Almost 4,000 square foot main house with five beds and four baths, as well as a two bed, one bath casita, so seven bedrooms in total, but they purchased it for 265,000.
They\u2019re planning a whopping $210,000 for the rehab, and the ARV is projected at 70 or I\u2019m sorry, $700,000. And then they did a cash out refi leaving about 10 grand into the property. Right now the monthly revenue is about 11 grand a month and they\u2019re cash flowing about 5,100 bucks a month, which gives him a crazy cash on cash return of 660%, which is-<\/p>\n
Wow. That\u2019s awesome.<\/p>\n
Pretty solid.<\/p>\n
Get Andrew on the show. Why am I here? Drew\u2019s killing it.<\/p>\n
Well, Nate, thank you so much for joining us, really enjoyed hearing about your Rochester property and the self-storage. Can you tell everyone where they can reach out to you and find out some more information about you?<\/p>\n
Sure. If you have any organic content SEO copywriting needs, you can go to calicocontent.com, that\u2019s calico like the pirate or the cat, calicocontent.com. Or you can email me at [email\u00a0protected]<\/a> You can also find me on Instagram at natelikesmoney, that\u2019s actually my handle.<\/p>\n
That\u2019s a good one. I like that.<\/p>\n
Yeah. So that\u2019s basically it.<\/p>\n
Well, thank you everyone for joining us this week. If you love the podcast, please leave us a five star review on your favorite podcast platform and check out our YouTube channel and make sure you are subscribed at the Real Estate Rookie. My name is Ashley Kehr at WealthFromRentals and he\u2019s Tony Robinson @TonyJRobinson on Instagram. And we\u2019ll be back on Saturday with a rookie reply.<\/p>\n
(singing).<\/p>\n