\n
Ashley:
This is Real Estate Rookie Episode 266.<\/p>\n
Tony:
Most people, when they\u2019re going into a house hack, their goal isn\u2019t necessarily to make $500 a month in cash flow. Their goal is to subsidize their cost of living. So if you can cover the majority or sometimes all of your mortgage by renting out these additional units, then you are probably doing a pretty good job, because now you\u2019re able to save that money you would typically be spending on your rent or your mortgage, say whatever, it\u2019s 2,000 bucks a month, and now you can put that aside to start saving towards your next property. So for a lot of people, when they\u2019re house hacking, not necessarily the cash flow, per say, that they\u2019re looking for. It\u2019s how much of my mortgage can I offset by renting out these units?<\/p>\n
Ashley:
My name is Ashley Kehr, and I am here with my co-host, Tony Robinson.<\/p>\n
Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And I want to start today\u2019s episode by shouting out a really cool review that came in. This person loves us, a five-star review on Apple Podcasts. They go by the username TTWray, and the title of this review says, \u201cRookie Vitamins.\u201d And TT goes on to say, \u201cThis podcast has given me the confidence to make moves. I was sitting on my mother\u2019s home for about a year before committing to gutting and renovating it. But listening to Ashley and Tony every morning was like taking my morning vitamins. My real estate immune system got stronger, and I completed the renovation project, found a tenant, and now, it\u2019s cash-flowing. I listen every morning as a part of my morning routine. I love how they break concepts down into nuggets that are actionable. No other podcast compares! Great job guys!\u201d
That\u2019s one of the coolest reviews I\u2019ve read in a while.<\/p>\n
Ashley:
Yeah, it is.<\/p>\n
Tony:
So, TTWray, we appreciate you. And for all of our rookies that are listening, if you have left us a review, we appreciate you. If you have not yet, please take the two to three minutes out of your day to leave us an honest rating and review. More reviews we get, more folks we can help, and helping folks is what we like to do. So, Ash, what\u2019s up? How you doing?<\/p>\n
Ashley:
Well, you know what? I feel like I haven\u2019t done this in a while since we recorded, but I feel like I really need to tell you guys more about my book that I just published.<\/p>\n
Tony:
Yeah. [inaudible 00:02:20].<\/p>\n
Ashley:
I feel like I haven\u2019t talked at all, but here it is, right here, sitting here, the Real Estate Rookie: 90 Days to Your First Investment. There\u2019s lots of mentions of Tony in here. But yeah, so if you guys haven\u2019t checked it out, I would appreciate it if you look into it and see if it\u2019s a good fit for you.<\/p>\n
Tony:
How\u2019s it feel, Ash, to be a published author? What\u2019s that feeling?<\/p>\n
Ashley:
Well, I sent my mom like 20 bucks, and she got the package in the mail and was telling me, \u201cOh, I\u2019m so excited. Somebody sent me something, and then I just, ugh, just saw it was your\u2026 It was just books.\u201d [inaudible 00:02:51]. I\u2019m like, \u201cThanks a lot, Mom. Thanks.\u201d But, yeah, so it launched on January 10th, and did a nice little dinner out to celebrate. And so now, I got to get a list together to publishing of all my friends to send copies to, and yeah. But it\u2019s been pretty cool. Everyone should be getting their books now that did the pre-order pretty soon, and it\u2019ll be exciting to hear what people think about it.<\/p>\n
Tony:
Yeah, I love it. Well, I\u2019m super happy for you. I know you put a lot of time and effort and energy into that book. And it\u2019s so cool, because we already see what the Rookie Podcast is doing for folks. So the fact that you get to replicate that with this book, it\u2019s so cool. So, I\u2019m excited to see where it goes for you.<\/p>\n
Ashley:
And Tony and I are working on a little secret something too, so you guys stay tuned for that too, because Tony may be an author soon too.<\/p>\n
Tony:
Fingers crossed. We\u2019ll see.<\/p>\n
Ashley:
So, Tony, any exciting stories to tell us or any boring banter before we get into today\u2019s episode?<\/p>\n
Tony:
Let\u2019s see. What\u2019s the most boring thing I can think about that we can talk about today?<\/p>\n
Ashley:
What did you eat this morning for\u2026?<\/p>\n
Tony:
You know, that\u2019s [inaudible 00:04:05]-<\/p>\n
Ashley:
You have the save meal every single day.<\/p>\n
Tony:
Actually, so I\u2019m gearing up my training for another competition. So I was initially planning to do a show at the end of April, but I think I might push it back to May probably, just to give myself a little bit more time. But I actually didn\u2019t have breakfast this morning. I woke up, and I was doing stuff on the computer. Before I knew it, we had to jump in to start recording. So I had a protein shake for breakfast this morning. That was about it. But most days, my breakfast is 10 egg whites, two regular eggs, and then a little bit of oatmeal.<\/p>\n
Ashley:
So, I don\u2019t know what made me think of this, but like something that\u2019s boring, I guess, in a sense. So, we\u2019ve been implementing these Monday afternoon meetings. We were doing Tuesday mornings, but Tuesdays are when you and I record, and it\u2019s just like, I have another call I do every Tuesday morning. So it was just like, too many calls in that day to actually sit down and focus on a meeting. So we moved them to Monday afternoons. And so we have an agenda built out. And so, it\u2019s just me and my one business partner, Daryl. And, basically, we go through what each person did last week, what were our wins, what do we want to accomplish going forward, what are the things we need to prioritize, and then, what are the things we want to talk about next week? And then we just take the agenda, roll it over to each week.
And even if this is something you do with your spouse, your significant other, or your business partner, if you guys aren\u2019t implementing this, I highly recommend it. It doesn\u2019t take that much time. But with ours, we also have a section for travel, because we do a lot of travel together. So, last week, on our travels, we\u2019re going to Tony\u2019s short-term rental summit. And the one night, we\u2019re actually going to Disney Springs for dinner, okay.
So we\u2019re going through our agenda, everything, and one of the things was, pick the restaurant to book reservations for Disney Springs. 20 minutes later, we are in YouTube videos of the best and worst places to eat at Disney Springs. And it was just like, \u201cHow is this happening right now?\u201d We could just fly through everything. Then we get sucked into watching YouTube videos on where we\u2019re going to eat dinner one night. But it just goes to show that leaving those little things in, that adding things like that into your agenda that excite you or motivate you, because then it\u2019s like, \u201cOkay, we got to get all this work done now so that we can go and enjoy ourselves and not actually have to be like\u2026\u201d We want to use a lot of time for, obviously, enjoying your conference and things like that and not having to be like all these other things we got to do in the back of our mind.<\/p>\n
Tony:
Yeah. And it\u2019s an interesting point, because one of the things I\u2019m really trying to focus on in this new year is less time doing and more time deciding and delegating. I feel like my time is best spent in my business at this point, not\u2026 If there is a meeting, almost no action item should be assigned to Tony. There is enough people that I work with now where I should be able to delegate that task to someone else. And really, the only thing I\u2019m doing is deciding, I\u2019m making a decision saying, \u201cOkay, yes, this thing. Okay, not that thing. Yes, this thing,\u201d and then handing it off to someone else, because there were moments where I was like, \u201cWhy am I doing this still?\u201d
For example, we were on vacation earlier this year, or late last year, and we had a YouTube video coming out for the Real Estate Robinsons channel, and I was like, \u201cOh crap, we don\u2019t have a thumbnail.\u201d I was still doing the thumbnails. So I\u2019m on vacation making a thumbnail. I\u2019m like, \u201cWhy am I doing this? Why am I doing this?\u201d And as soon as I got back, I found a graphic designer on Upwork. Now he does all of our thumbnails, and he does it way better than I ever could. Anyway, just as I\u2019m thinking about next year, and for a lot of our rookies that are listening as well, as your business starts to scale, think about what are the things you should no longer be doing, and then delegate those off to someone else.<\/p>\n
Ashley:
And also, making sure that it\u2019s just the high-level decisions too, and that\u2019s something I had heard Ryan Pineda talk about when I interviewed him in, I think it was Austin, Texas, maybe, at a conference there is he talked about how\u2026 Don\u2019t even ask him the question. He\u2019s high-level decisions only. There\u2019s other decision-makers in place, and he only has to really think about those high levels that will actually make a huge impact on his business, where anything mediocre, there\u2019s somebody else that\u2019s making that decision too. So, he\u2019s not overwhelmed with things, because he has everything\u2019s set into place and his whole org chart set out as to like, \u201cThese are the things that actually need to come to me, and don\u2019t bother me with anything else,\u201d which I think is pretty interesting and, obviously, a great system to have set up. The hard part is actually getting yourself set up so that you are in that position.<\/p>\n
Tony:
Yeah, and finding the right people and all those good things. So that\u2019s always a challenge. And obviously, for our rookies, most of you are at the beginning phase of your investing journey, so don\u2019t feel like you need to set this up on day one. But it is an important concept for you to understand so that as your business starts to scale, you know that the right decision is to start plugging people into these different roles so you can focus on the bigger picture tasks.
Like Ash, for me and you, the majority of our time should be spent in front of the microphone recording this podcast, in front of our computers writing our books, and doing other things that are super important.
All right, so today\u2019s first question comes from Nadeem Chaudhry, and Nadeem\u2019s question is, \u201cHi all. Learning more about doing property analysis and wondering, if I\u2019m planning on a house hack on a multi-unit with an FHA loan, should you only worry if it\u2019s cash-flowing once you hit 20% and get rid of your PMI in a high cost of living area? Otherwise, it seems as if no properties will be able to satisfy traditional rules around what a property should cash flow or make over the first year.\u201d And just to clarify, I think when Nadeem says once you hit 20%, what she\u2019s talking about is the loan balance in comparison to the property\u2019s value, once you\u2019re at 80% or less on your loan balance and your PMI goes away.
So, a couple things to break down here, Nadeem. I think the first question you have to ask yourself is what is your goal with this house hack? Most people, when they\u2019re going into a house hack, their goal isn\u2019t necessarily to make $500 a month in cash flow. Their goal is to subsidize their cost of living. So if you can cover the majority or sometimes all of your mortgage by renting out these additional units, then you are probably doing a pretty good job, because now you\u2019re able to save that money you would typically be spending on your rent through your mortgage. Say whatever, it\u2019s 2,000 bucks a month, and now you can put that aside to start saving towards your next property. So for a lot of people when they\u2019re house hacking, it\u2019s not necessarily the cash flow per se that they\u2019re looking for. It\u2019s how much of my mortgage can I offset by renting out these units? What are your thoughts on that, Ash?<\/p>\n
Ashley:
Yeah, so, Nadeem, what you should do is remove yourself from the property and put somebody else in the unit or the room that you\u2019re going to house hack in and see, okay, what would you be able to charge for rent on that? Does the property cash flow after you receive now that additional rent from the property? So I think using that as kind of a basis in looking at it that way, it will make you realize more as to like, okay, this is not a cash-flowing property. It\u2019s more of like, yes, you are actually making money off of this, because you\u2019re building equity, and you\u2019re not having to pay any living expenses.
So, look at if for some reason, you had to move out of the property, would it still cash flow if you put somebody into your unit, or at least broke even on the property? But I love to cash flow, so if you can make it cash flow if you were to move out of the property, yes, great, but also, take into consideration if you were to go and rent a comparable unit, what would you pay and rent to live in that property too? And then kind of say, \u201cOkay, that\u2019s $1,500 I\u2019m actually saving a month.\u201d So definitely look into that. And then if you can live there and make money off of it and cash flow too, awesome, even way better, yeah, especially when you get down to that getting rid of your PMI, that definitely helps.
My sister, when she bought her house hack, she was paying, I think it was $45 a month to live there on that property, which, for her unit, probably had rented for like eight 850, $900 a month, and she was living there for $45 a month. So we consider that a huge win, even though she\u2019s not getting any cash flow off of that property, which I think she is now, because she\u2019s raised rent for the lower unit, and she\u2019s maybe making $100 off of it or something, not paying anything now, but that was still a huge win to only pay $45 a month to live in that property.<\/p>\n
Tony:
And Nadeem mentions that they\u2019re in a high cost of living area. And I think it\u2019s even more difficult to find deals that just create a ton of cash flow as a house hack in those kinds of areas as well. The only other thing you might want to consider, Nadeem, is, if you\u2019ve got a multi-unit property, maybe instead of renting each unit out, can you rent out each room, right?
Say that you\u2019ve got, I don\u2019t know, like a triplex, and you\u2019re going to live in one unit, and you\u2019ve got two other units. Instead of renting out that entire unit, maybe it\u2019s a 2\/2 and another 2\/2. Now you\u2019ve got four rooms you can rent out, and what does that look like? And there\u2019s ton of guests that have come on the podcast that have talked about the rent by the room strategy, but typically, you can maximize or increase your revenue per each unit if you rent out the rooms as opposed to renting out each unit. And we even had a guest, and I wish I could remember which guest this was, we had a guest that was doing that, but they also rented out the rooms in their own unit. Do you remember this, Ash?<\/p>\n
Ashley:
Yeah. Yeah.<\/p>\n
Tony:
He was sleeping on the couch in the living room just so he could rent out the other rooms in the unit. So there\u2019s so many ways to maximize the revenue on a house hack.<\/p>\n
Ashley:
Yeah, and you can incorporate different strategies too. So if you get a four-unit, if you\u2019re in an area that demands it, turning one of those units into a short-term rental, then having the other two long-term rentals, or even doing one as a medium-term rental and renting it out for 30-plus days to traveling nurses or whatever, sometimes that can actually maximize your cash flow too, instead of just doing a long-term rental.<\/p>\n
Tony:
Yeah, that\u2019s a great part of having those multiple units, like you said, is you can throw a bunch of different strategies into each unit. So if you\u2019re in one, say it\u2019s a two-bed, you live in one bedroom, rent out the other bedroom, you\u2019ve got one you\u2019re doing as a medium-term rental, another one you\u2019re doing as a long-term or a short-term rental, and now you\u2019ve got income coming in a bunch of different ways. So that\u2019s cool.<\/p>\n
Ashley:
Yeah, Craig Curelop, who wrote the book, The House Hacking Strategy, you can find it in the BiggerPockets Bookstore, he would buy properties. He lived in Denver, Colorado, and he would rent by the room. He would have one of the rooms, rent out the other ones, and then, in the basement, he would make a basement unit, furnish it, and have the basement as the short-term rental. And that\u2019s what he did with several of his house hacks. And then, after he had lived there for a year, he would go and purchase another one and do the same thing, and he built up his rental portfolio that way.<\/p>\n
Tony:
I think it might\u2019ve been Craig who said it was his first house hack where he was sleeping on the couch.<\/p>\n
Ashley:
Yeah, you know what, that definitely sounds like something he would do [inaudible 00:15:24].<\/p>\n
Tony:
All right. Anything else on this house, or should we roll to the next question?<\/p>\n
Ashley:
Yeah, let\u2019s go to the next one.<\/p>\n
Tony:
All right. So question number two comes from Jason Lamb. Jason says, \u201cJust curious, what issues have you all run into with unpermitted renovations? Obviously, you should always do things the right way, but I\u2019m just trying to understand what kind of issues come up and when. For example, do buyers normally look for permits, or is it just their lenders, et cetera?\u201d So have you ever had any issues, Ashley, with unpermitted renovations? And, if so, how did you handle those?<\/p>\n
Ashley:
No, but we did just have on Episode 265, so this past Wednesday, you guys should go back and listen, we had Devana and Reid on, and they talked about a property they purchased that they knew had an unpermitted addition to the back of it, and they knew it was not permitted, but they didn\u2019t need it permitted, they thought. So they went and pulled permits to do some electrical work, plumbing work, and other renovations through the property. And when they did that, the inspector came and said, \u201cWell actually, this is not permitted,\u201d so you have to take it down. And they had to rip off the back of the house where this addition was, and they said it was just an eyesore as to how it was set up, and they actually had to build back onto that same space, that same pad, build a new addition back onto the property. So that was definitely something they did not expect and made them go way over budget, I guess, on the property.<\/p>\n
Tony:
I feel like it definitely varies by the city or county that you\u2019re operating in. Some cities and counties are going to be more strict about those things. Others will be less strict. I think Devana and Reid\u2019s situation is probably the absolute worst situation that could happen. We had a rehab that we did recently where we missed a permit in the bathroom, but we\u2019d already completed the entire bathroom. And we were nervous they were going to come through and make us demo the entire bathroom, do it all over again. But the folks in the city were super understanding, and they said, \u201cHey, we\u2019re just going to test a couple of things, that it looks good.\u201d
But we have a separate property where we purchased this property and it already had one of those big swim-up spas, so it\u2019s much bigger than a hot tub, but definitely not as big as a pool, like 15-feet long or something like that. And it came with the property. But when we went to go pull the permit for the short-term rental, they did the inspection and said, \u201cHey, a permit was never pooled to do the electrical for the spa. So now, before we can issue your permit, you guys have to go back and get this electrical thing sorted out.\u201d
So, depending on what you\u2019re looking to use the property for, depending on what the inspection process looks like for that city, depending on if the county or city needs to get back into that property to do an inspection for something else, there\u2019s a lot of different variables that could happen. So I would say there are some risks that come along with buying units that include properties that are not permitted correctly.<\/p>\n
Ashley:
And when I did my flip with James Dainard in Seattle, Washington, it was really the first time I dealt with heavy permits and an understanding of them. I mean, where I live, it\u2019s just you go and talk to the code enforcement officer, and you get your building permit. You\u2019re on your way. So, with him, what he actually does too is when he\u2019s purchasing a property, he pulls the permits on the city\u2019s website. And, for me, none of these little towns have permits online that you can actually go and look them up. You have to actually physically go there and ask for them. But he pulls the permits on the property.
But also, he\u2019ll keep note of who the contractors were that did the work on those properties. So if he is going and doing a rehab and be like, \u201cOkay, this was the last person to do electrical work. Maybe since they know the property, they\u2019ll be able to do the work more efficient, and maybe even I\u2019ll get it cheaper because they already know so much that\u2019s going on. They don\u2019t have to take the time to figure out the electrical of that property or things like that.
So I thought that was just a great little flip tip, as he called [inaudible 00:19:30]. When you pull the permits, look at who the actual contractor was on the property that you are using too. Or if the work is really bad at it, that\u2019s why you\u2019re rehabbing it, because the plumbing is all messed up, you know not to use that contractor.<\/p>\n
Tony:
Who not to call, yeah, who not to call. Yeah, I mean, James is obviously like an encyclopedia of all things rehab and flipping, so anything he does, we should all try and emulate. Last thing I\u2019ll say is that we actually bought a property that\u2019s listed right now as one of our turnkey short-term rentals. And the property itself on paper was a three-bedroom, but when you walked in, the previous owner had knocked down the walls between all the bedrooms and just had one massive bedroom. I guess it was a single lady living by herself, and she\u2019s like, \u201cI don\u2019t need three bedrooms. I just want one massive master suite.\u201d So we were able to essentially just put those three bedrooms back in place, because she had knocked down the walls unpermitted, so we were able to just, without having a really repermitting thing, just put it back to the original floor plan. So there\u2019s some nuances there for sure. All right, anything else on that one, Ashley?<\/p>\n
Ashley:
No. Let\u2019s go on to our next one. I feel like this is really going to hit home for you, and you\u2019re going to have some mixed personal experience answering the question.<\/p>\n
Tony:
Yeah. But hopefully you can give us some more insight, because we were so lost when this happens. But anyway, next question comes from Juan Alvarez, and Juan says, \u201cOne of our vacant units has frozen water lines due to the bad weather in DFW in Texas. Do you recommend I turn the supply valve off so it doesn\u2019t flood the home if it breaks the pipe or starts to thaw the pipes out? What do you suggest I do?\u201d
So we had our first experience with frozen pipes this past Christmas. We actually had to cancel a few reservations, because pipes weren\u2019t working, and water was frozen, and water\u2019s a kind of important thing to have at a short-term rental. So the pipes weren\u2019t working. People can\u2019t stay. And we actually posted on Instagram about the issue, and we had so many people talk about different things that they do to help prevent lines from freezing in the first place and some other remediation things they do to help solve those issues.
So, yeah, thawing the lines is one thing. And we had our crew out there kind of thawing the lines. One limitation to thawing the lines out is that they can only thaw the lines they have access to. So if the lines are frozen underground, maybe where your main water supply line is, you can\u2019t thaw that out, because you can\u2019t get to that line. And that was the issue we were having in our property. We could thaw the lines that were in the house and visible, but the stuff that was underground, we had no way of getting to it.
So one of the tips that we got was that when it gets cold, you should always leave a slow drip going at your property, because that little flow of water will help prevent the lines from thawing out. Another thing that was told to us is that you should almost never put your\u2026 even though it looks really nice, if you\u2019re in a place that\u2019s prone to freezing pipes, never put your kitchen sink in front of a window, because, for whatever reason, because there\u2019s less insulation, those pipes tend to freeze pretty quickly as well. So there\u2019s a lot of little things we learned around how to prevent this from happening. But Ashley, you live in Buffalo, New York, which had probably one of the worst freezes on record not too long ago. So you probably have some more insight on this end than I do.<\/p>\n
Ashley:
Yeah, this is something I\u2019m always very proactive about, is freezing pipes, especially if we\u2019re rehabbing a property, or, if we have a property under contract and I know that it\u2019s a vacant, going into the winter, I make sure, we call it, \u201cIs the property winterized?\u201d Okay? So you\u2019ll see this a lot with foreclosure property.<\/p>\n
Tony:
I just want to say, winterizing is not a thing in California. If someone said, \u201cDid you\u2026?\u201d What does that even mean? In winter, we\u2019re like, we\u2019re in shorts and stuff. So if you\u2019re like me, where you live in a state that isn\u2019t prone to getting froze, listen to what Ashley\u2019s about to say, because you\u2019re going to save yourself a world in trouble if you do that. So, anyway.<\/p>\n
Ashley:
Yeah. So this is common with people who have seasonal properties, so maybe you have a lake house, or you have a cabin where maybe there\u2019s not even any heat in the property because it\u2019s a lake house, and you\u2019re just there in the summer, and you don\u2019t have heat through it. Or the biggest part of it\u2019s maybe you do have heat, but your pipes aren\u2019t insulated. So maybe there\u2019s just a crawl space under the house. So what people do is they winterize the house, where you actually go and drain all the water lines and you turn the water off to the property.
So if you go to a property that is owned by the bank, maybe it was foreclosed on, there\u2019s usually a maintenance company that\u2019s taking care of the property, and they\u2019ll have tape over the toilet. They\u2019ll have tape over the faucet. Like, \u201cThis property\u2019s winterized. Don\u2019t flush the toilet. Don\u2019t turn on any of the valves. There\u2019s no water to the property.\u201d So winterizing a property is like if you\u2019re going under contract in a cold area and the property is vacant, make sure that the seller has winterized the property and that there is no water throughing.
So, basically, why you don\u2019t want your pipes to freeze is because, let\u2019s go back to basic science, when water turns to ice, it expands. Think of like water in a water bottle, when it freezes. So what it does is it can cause your pipes to crack because of all of that pressure from the ice. So then, when the water melts, the ice melts back into water, it shoots out of wherever those cracks were. So that\u2019s where the issues come in. The actual freezing causes the cracks, and then the water shoots out of it.
So me, as anal as I am, I have one rehab right now where when the deep freeze was coming, I was like, \u201cWe don\u2019t have any water going through this. I just want to make sure. I\u2019m pretty sure. I\u2019m looking at it. We don\u2019t have water to the property yet.\u201d Everyone, \u201cYes, yes. It\u2019s fine. It\u2019s good, blah, blah, blah.\u201d There was about three inches of the main water line coming into the property that was into the property. Somehow, someone had switched off the breaker, so the furnace shut off in the property. Well, just in those little three inches sticking out of the ground where we have a spigot on there right now, because the water lines aren\u2019t hooked up, completely cracked the pipe. Water was shooting out all over. So, luckily, that same day, somebody was there and saw this happening. We were able to plug it up, fix it that night and take care of it. But also, the furnace got ice buildup in it, because the furnace froze. And so we actually had to have the plumber come out and dethaw the furnace and to get it going again.
So, as much as I would like to say I\u2019m very experienced and knowledgeable about pipes freezing, it still happened to me, because I listened to my contractors, and I didn\u2019t actually go to the property, because I would\u2019ve seen that little pipe sticking up, and I would\u2019ve known. But yeah. So, I think the biggest piece of\u2026 Have your property winterized if you\u2019re not going to be living there, the rehab\u2019s going to be going on and you want to make sure that doesn\u2019t happen, the pipes don\u2019t freeze. Winterize it if you\u2019re doing the rehab, or you can actually go and make sure there\u2019s constantly water dripping through the pipes too.<\/p>\n
Tony:
Ash, who do you go to? So winterize the property, is that something that plumbers typically handle for you? Is there someone else? If you want to winterize, who are you calling?<\/p>\n
Ashley:
Yeah, the plumber can definitely do that, but it\u2019s something that you can just YouTube real quickly and do it yourself. A lot of the people that own lake houses around here, they set up a day that they go, and if it\u2019s not seasonal where their pipes are exposed, then they\u2019ll just usually go and do it themselves, and that\u2019s part of their yearly routine. And in the spring, they\u2019ll come and turn the water back on and check everything, yeah.<\/p>\n
Tony:
Have you ever had one of your main water lines break?<\/p>\n
Ashley:
I don\u2019t think so. I\u2019ve had the main sewer line get cracks in it and stuff, but never the main water line.<\/p>\n
Tony:
I\u2019ve never had any main major plumbing issues either. Just really quick, on the main sewer line, that actually happened to my aunt. She bought a house, and it wasn\u2019t an investment. It was like their primary residence, and the main sewer line that connected into the city sewer cracked, and they made her replace it, even though the crack was coming from the city. And she had to dig up all of the sidewalk and do all these other crazy things, and it turned into this big ordeal. So, anyway.<\/p>\n
Ashley:
Yeah, we had to do that in front of a duplex too, is like, get a mini-excavator there, dig it all up, and, yeah, it was a pain.<\/p>\n
Tony:
Yeah, the only reason I bring that up is if one of those main lines that tie into any kind of public utility end up breaking, it\u2019s super expensive to get those repaired.<\/p>\n
Ashley:
Do the sewer scope inspection. That\u2019s another thing I learned from James Dainard, is always do the sewer scope. Maybe if you decide to skip the home inspection when you\u2019re buying it, but do that sewer line scope.<\/p>\n
Tony:
Well, lots of frozen pipes. And actually, if you guys go to the BiggerPockets Instagram, my wife Sara made that Reel that I was talking about, but BiggerPockets was a collaborator. So it\u2019s on there. And there were literally, I think at this point, over 100 comments of people dropping tips on how they prevent their lines from freezing. So maybe the producers can find that and add it in the show notes. But there\u2019s a lot of really good information on that post.
All right, so next question here comes from Kyle Campbell. And Kyle says, \u201cMy wife and I own two duplexes. We\u2019re ready to make an offer on a third. However, this third property is a FSBO, which means four sale by owner, and this would be a first for us. What steps do you go through when buying FSBO? We\u2019ve read a lot and listened to thousands of podcasts, but still looking for any and all advice. Thanks.\u201d
So Ash, I know you\u2019ve bought FSBO. I have as well. But from your perspective, what are some of the differences that a rookie should look out for regarding FSBO?<\/p>\n
Ashley:
Yeah, so the first thing is, you\u2019re most likely not using an agent. Oftentimes, you still can. You could go to them and say, \u201cI\u2019m going to pay the agent directly, and I want to use an agent to facilitate that deal,\u201d whether it\u2019s to do the paperwork or to help you negotiate or anything like that. So the biggest thing for me, the difference is, you\u2019re not going to have a real estate agent fill out the real estate contract for you. So that\u2019s either\u2026 I use an attorney for that. But you also have to use an attorney in New York State, where I will tell my attorney what the terms are, and then she\u2019ll plug it into her real estate contract, and then I take it to the seller.
One thing you can do is a letter of intent. If you just Google that, there\u2019s tons of samples out there. If you\u2019re in the Rookie Bootcamp, it\u2019s included in there. You get a copy of it. And it just basically gives the initial terms of your offer without going through a full-blown contract and then just says like, \u201cThis contract is based on attorney approval. These terms are based on that.\u201d So it kind of gives you some leeway. But I usually write one of those up myself without even having to talk with my attorney. Then that\u2019s where I negotiate with the seller. And then, once we agree on terms and we have a signed letter of intent, that\u2019s where I pass those terms off to my real estate attorney, where she draws up a contract as to what those terms are. Then I have the seller sign that.
One thing with doing dealing directly with the seller is I think you have a huge advantage with negotiating. That\u2019s not always the case, but getting face-to-face with the seller and really figuring out why they\u2019re selling. And also, if you\u2019re going to be doing some kind of creative financing, like pitching to them the benefits of seller financing, things like that, it is so much easier to sell the creative financing option to the seller than having it go from you to your real estate agent to their real estate agent, then back to them, like playing telephone. So that\u2019s why I love for sale by owner, is because you get to deal directly with the seller for negotiating.<\/p>\n
Tony:
Yeah, that\u2019s a fantastic breakdown, Ashley. And we\u2019ve purchased a few directly from the owners as well. And our process, it\u2019s fairly similar. We still do use title and escrow to facilitate the transaction. So even if you\u2019re going FSBO, still make sure that there\u2019s some third party in there to make sure that all of the paperwork with the county gets filed correctly. You\u2019re still getting things like title insurance to make sure that there\u2019s no issues with the title, and that party, escrow or title company\u2019s there to manage all the funds to make sure people get paid out appropriately. But outside of that, it\u2019s honestly pretty much the same process. And, to your point, Ashley, it\u2019s honestly a little bit easier, because there\u2019s less back and forth between you and your agent, their agent, that seller. So I think the ease of the transaction is definitely there.
But if it is your first time doing it, Kyle, I would just try and find an\u2026 I don\u2019t know what state you\u2019re in, but for me, I always go to my escrow company first, and I say, \u201cHey, I\u2019m looking to buy this property. I\u2019m looking to sell this property.\u201d And then my escrow company\u2019s the one that draws up all the documents and makes sure that everyone\u2019s DocuSigned on everything. So the escrow company almost works as the transaction coordinator when I\u2019m doing FSBO here in California. So, if you\u2019re in a state that uses escrow companies in addition to title, I would just try and find a really good escrow officer, let them know that you\u2019re a new investor and you plan to do more deals with them. But if you build that relationship, they can really help facilitate any FSBO deal that you do moving forward.
All right. Well, let\u2019s move on to the next question here. This one comes from Daniel Budihardjo. Hopefully I said your last name right, Daniel. So Daniel\u2019s question is, \u201cHello Rooks. What do you think about installing electronic keypad door locks? It sounds awesome for multi properties, as you can maintain a master code for the landlord and reset codes for your tenants. If your house has multi exterior doors, say front and back, do you install one at each door? The best seller on Amazon is only 40 bucks. It\u2019s a great price, but not sure it has everything that we need. Thanks in advance.\u201d
I love the idea of electronic keypads on properties, both for, I think\u2026 Obviously, we don\u2019t really have any long-term anymore, but if I did, I would probably do that. It is just, I think, a nice feature to include, because as a tenant, having that kind of smart home functionality is a really cool way to make your property stand out from other ones. Like for example, when I bought my home, it didn\u2019t come with any smart home technology. We had to go back, and we added our keyless entry pad, added all of our smart light switches and stuff. But I bought earlier in the phase.
Now the new home, the newer versions of my home, they\u2019re selling with all that stuff built in. So even for new construction, it\u2019s something that builders are starting to add, because they recognize that it is, I think, something that people want in their homes. If you\u2019re doing a short-term rental, 1,000,000,000% you should have smart keypads. Nothing is more annoying to me as an Airbnb guest than having to fumble with physical keys and open up a lockbox, then having to go back and put the key back into the lockbox. So if you can do electric keypads for your doors, I think it\u2019s definitely the way to go. Just, last thing, like which one you should purchase, we use the Schlage Encode, or Schlage Encode.<\/p>\n
Ashley:
Tony, stop telling people. They\u2019re so hard to [inaudible 00:35:14].<\/p>\n
Tony:
That was my point. They\u2019re so incredibly difficult to find these days, it\u2019s almost like there\u2019s a black market for these. But that\u2019s the one that we like the most. There\u2019s some other cool ones out there as well, like Remote by August Lock. They have one. Every smart company has some kind of electric keypad, so there\u2019s a lot of good options out there.<\/p>\n
Ashley:
Yeah, I\u2019ve used a Yale one before. I don\u2019t know specifically what it was, but we switched to the Encode one because of Sara\u2019s recommendation. I really like them. But, yeah, they\u2019re definitely difficult to get ahold of. So we use them just for our short-term rentals. The issue that I run into with long-term rentals is especially at the small multi-family. In the apartment complex, it would be fine, because there\u2019s a general Wi-Fi in the building. But when you have your duplex\u2026 So the tenant usually gets the Wi-Fi in their name, so you would have to request access to have the lock connected to the Wi-Fi if you\u2019re going to be changing the code or doing things like that.
So, for me, I think the advantage of doing it for long-term is like if a maintenance guy is coming in and they\u2019re not going to be home, you can set a code so that it\u2019s just active during the hour they\u2019re going to be there, whatever, and they don\u2019t have to have a key, anything like that, and maintenance can be done when the tenant\u2019s not home.
The second thing is when they move out of the property, they\u2019re most likely canceling their Wi-Fi. So to go ahead and change the code, you won\u2019t be able to just do it so easily from your app, because it\u2019s not connected to the Wi-Fi because they disconnected the Wi-Fi. So you would have to manually go onto the keypad and\u2026 There\u2019s some way you can do it through the keypad without having to be connected to Wi-Fi. But just the convenience of having the app on your phone and being able to create new codes, change new codes, you can\u2019t do that without the Wi-Fi enabled. So that\u2019s where I\u2019ve run into is it actually that big of an advantage? Because turning over an apartment, not having to install a new lock in there, that, yeah, having to send someone out that takes time to do that and just be able to remote do that would be awesome. But I haven\u2019t figured out that piece of it yet as to how to do that.<\/p>\n
Tony:
Yeah, you\u2019re right. That definitely is a limitation. You can use the app even if Wi-Fi isn\u2019t set up, but you do have to be within range of the lock. So you wouldn\u2019t be able to do it from sitting at your house to the property. But if someone was near the door, they could still go in. And I don\u2019t know what kind of\u2026 I don\u2019t know if it\u2019s Bluetooth or some other kind of local connection, but you are, so even if there is no Wi-Fi, able to set the app up and have the lock communicate.<\/p>\n
Ashley:
And you can still change the code and everything and lock [inaudible 00:38:07], yeah.<\/p>\n
Tony:
Still add codes and stuff like that, yeah.<\/p>\n
Ashley:
Okay. That\u2019s cool. Well, I mean, that\u2019s better still than having to go in and change the lock. Okay.<\/p>\n
Tony:
Yeah.<\/p>\n
Ashley:
So, I\u2019m also going to continue to hijack Daniel\u2019s question here, because I had a situation that came up. This actually happened Friday night, 9:30 at night, get a call from the property management company that a dog is barking in the unit that we actually use as a short-term rental. So they don\u2019t have the contact information for who is the current guest in there. So what happened was, somebody, we think it was one of the neighbors, because one of the other units ended up calling the police because of the dog barking. But we looked in the app, and it showed that the lock was actually disabled because somebody tried the wrong code too many times, and it said the lock is disabled.
So, when the tenant actually got home, or the resident, the guests of the Airbnb, when they went to put in their code, it wasn\u2019t working. So we had to go to the property, and we somehow ended up resetting it through the app, like having the phone there and doing it through the app, and we were able to get into the unit. But have you ever had that happen before, where it\u2019s saying that the lock is disabled and you\u2019re not able to get into the unit, and is there a timeframe on that or\u2026? What should I have done better next time to prevent that?<\/p>\n
Tony:
Yeah, usually, it is like a time duration that is disabled, but I\u2019ve never seen it where it\u2019s just like permanently disabled, you have to go in and reset the lock. But what we do have, we still have physical keys at every short-term rentals. That way, if, for whatever reason, the keypad isn\u2019t working, the guests can just go to the lockbox and grab a physical key from there and then use that until we\u2019re able to troubleshoot it on our end. So that\u2019s typically our process.<\/p>\n
Ashley:
That\u2019s it. That\u2019s a great idea to have that key extra there. Okay.<\/p>\n
Tony:
And we put that in our digital guidebook that says, \u201cHey, if, for whatever reason, you can\u2019t access with the keypad\u2026\u201d And we have a video where we walk\u2026 \u201cHere\u2019s the lockbox. Here\u2019s how you open it, grab the key, and stick it in there.\u201d So, usually, folks are pretty good about reading directions most of the time.<\/p>\n
Ashley:
It has a key, though, the Encode lockbox?<\/p>\n
Tony:
It does, yeah. So it comes with a key, and then, we usually just take that key, and we put it in there. If we wanted to get really elaborate, we should probably make duplicates of that key. Because right now, there\u2019s only one key and it\u2019s at-<\/p>\n
Ashley:
That one, yeah, yeah.<\/p>\n
Tony:
Yeah. But yeah, it does come with a key.<\/p>\n
Ashley:
Obviously, you can tell I\u2019m not in charge of installing those in the property, so I don\u2019t even know that.<\/p>\n
Tony:
There was another one called August Lock\u2026 or RemoteLock by August, and that one was a little bit different, because it\u2019s like an attachment that goes on top of your existing lock. So you would just use your original keypad, and you just add this on there, and it unlocks it for you. But that one, the battery life was kind of not the greatest, and the integrations weren\u2019t quite there, but yeah. Anyway, the Schlage comes with a key.<\/p>\n
Ashley:
We actually started using RemoteLock. The person that\u2019s been kind of managing our short-term rentals, she recommended it, and we set that up as to\u2026 Which, the customer service, I have to say, has not been that great with RemoteLock. But once we got it up and going, it\u2019s been beneficial, yeah. I actually had to use my social media power to message them and say like, \u201cWhat is going on?\u201d<\/p>\n
Tony:
What\u2019s up? Yeah.<\/p>\n
Ashley:
Yeah. And the person who runs their social media responded to me right away, got somebody to email the person that was sending it up for me, and that person was great. But oh my gosh, it was a headache to actually set up that process. But now that it\u2019s operating, everything is going good with that.
And I had one more question. For the batteries on that, do you have some kind of quarterly maintenance schedule where you\u2019re going in and having the handyman replace the batteries? Or is it just when you get an alert the battery is low, you\u2019re adding as a maintenance task? How are you handling that?<\/p>\n
Tony:
Yeah, that\u2019s a great question. It\u2019s the latter. So whenever the alert comes through in the app that the batteries are running low, our VAs create a maintenance task, usually for the cleaner, because we just keep extra batteries at the property. And then when the cleaners\u2026 yeah, the next time, they\u2019ll just make sure they swap the batteries out for the unit.<\/p>\n
Ashley:
Well, thanks for letting me ask a lot of questions. [inaudible 00:42:24] that will be good.<\/p>\n
Tony:
We got one last question. I think we can hit this one pretty quickly. This one comes from Sara Lucas. And Sara\u2019s question is, \u201cAside from the owner, who in this case, has no idea, how do you find out who is the lender for a property?\u201d So I\u2019m going to share the one way that I know how to look this up. There are probably other ways to do this as well, but if you use a website like PropStream, PropStream usually keeps track of any mortgages that are recorded against a property, and you can see the name of the company that is holding that note. So literally, you type in any address, and it\u2019ll show that information as well. And then similarly, you can go to your county and say, \u201cHey, what deed of trust or mortgage security document or promissory note do you guys have filed against a specific property?\u201d And hopefully, somewhere in those documents, you can figure out who the lender is for that home.<\/p>\n
Ashley:
Yeah, you should\u2026 If the city of Buffalo has it, I\u2019m sure most cities have it, but you can actually go online to the city records for the county, and you\u2019ll be able to just search for it. If you know that person\u2019s name, search for their name, and you\u2019ll be able to come up as to what the mortgage is that they have in their name.<\/p>\n
Tony:
Cool. Well, that was an easy one.<\/p>\n
Ashley:
Yeah, yeah. All great questions, we really appreciate it when you guys throw your questions at us, mentally stimulates us. And also, some of the times, there\u2019s questions where we\u2019re not sure, so we actually take the time and go and research it, and we learn some things too. And obviously, I learned a ton about locks in this episode, just from Tony. So, thank you Daniel for asking that question, because I had some burning questions I needed to figure out too. So, thank you guys. And you can leave us a voicemail at 1-888-5-ROOKIE, or you can send us a DM @wealthfromrentals or @tonyjrobinson. Thank you guys so much for joining us. I\u2019m Ashley @wealthfromrentals, and he\u2019s Tony @tonyjrobinson, and we will be back on Wednesday with a guest.<\/p>\n
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