\n<\/p>\n
Buying eight rental units in under one year<\/strong>\u2014how is that even possible? By the time you\u2019re done with this episode, you\u2019ll know how to fund any rental property purchase<\/strong>, no matter how much money or experience you have. And if Tim Yu<\/strong> can build a rental property portfolio<\/strong><\/a> AND do multiple house flips<\/strong> in less than twelve months when he had close to nothing in his bank account<\/strong> this time last year, you can, too.<\/p>\n Tim is a true Real Estate Rookie<\/em>. He spent over a year listening to every episode of the show on his way to and from work. After getting fed up with analysis paralysis, Tim threw in a lowball offer on a potential <\/strong>BRRRR<\/strong> (buy, rehab, rent, refinance, repeat)<\/a> property. His offer was accepted! The problem? He had NO money to buy it.<\/strong> Fast forward a year; Tim has done ten deals, owns eight rental units, and is getting closer to leaving his W2 job.<\/strong><\/p>\n In this episode, Tim reviews EVERY (and we mean EVERY) type of rental property financing. From hard money loans<\/strong><\/a> to credit cards<\/strong>, selling off retirement accounts<\/strong>, and partnerships<\/strong>. Whether you\u2019ve got the funds or not, Tim will walk through EXACTLY how to get your first (or next) rental property<\/strong>!<\/p>\n Ashley: Tony: Ashley: Tony: Ashley: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tim: Tony: Ashley: Tim: Tony: Tim: Ashley: Tim: Tony: Tim: Tony: Tim: Ashley: Tim: Tony: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tony: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tony: Tim: Tony: Tim: Ashley: Tim: Ashley: Tim: Tony: Tim: Ashley: Tim: Tony: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tony: Ashley: Tim: Ashley: Tim: Ashley: Tim: Tony: Tim: Ashley: Tim: Tony: Tim: Tony: Tim: Tony: Tim: Ashley: Tony: Ashley: Tim: Tony: Tim: Tony: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tim: Ashley: Tim: Tony: Tim: Tony: Tim: Ashley: Tony: Ashley: Tim: Tony: Tim: Tony: Tim: Tony: Tim: Tony: Tim: Tony: Tim: Ashley: Tim: Ashley: Tim: Tony: Tim: Tony: Tim: Tony: Tim: Tony: Ashley: Tony: Ashley: Tony: Ashley: Speaker 4: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Email <\/em>[email\u00a0protected]<\/span><\/em><\/a>.<\/em><\/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 335. My name is Ashley Kehr and I am here with my co-host, Tony J. Robinson.<\/p>\n
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. Today, we\u2019ve got someone who\u2019s like a born, bred, raised in the bask of all things BiggerPockets. We got Tim Yu on the podcast and he\u2019s been a faithful listener for quite some time. He said he listened to the podcast every day for almost two years, but really use everything he learned in the podcast to really kickstart his investing journey. The guy closed on 10 deals in a year. A little less than a year actually. And you\u2019ll get to hear exactly how he made that happen.<\/p>\n
Yeah, I love how we go through every single deal. So listen to him talk about all the ways he was able to finance these deals. Not one was funded the same exact way, so he is going to break down each deal he did and how he was able to get financing for them or get a very creative\u2026 One deal, he only paid $2,000 out of pocket and didn\u2019t have to go and get a bank loan. So he explains how he was able to do that.<\/p>\n
He even got paid to buy a property. He went to the closing table and got a check back. So you\u2019ll get to hear how he made that happen. But overall, Tim is just, I think, a shining example of what happens when you\u2019re a big part of the BiggerPockets community. He was active on the Real Estate Rookie Facebook group and the YouTube channel on the actual podcast itself and the forums. And it\u2019s like when you do those kinds of things, good things typically happen.
So if you\u2019re part of the rookie community and you haven\u2019t yet, we would love if you could leave us an honest rating and review. We\u2019re at 1,595 ratings as of this recording. So hopefully by the time it airs, we\u2019re at like 1,700. We should be there at least. But take a few minutes, let someone know what you think about the show because honestly, the more reviews we get, the more folks we\u2019re able to reach. And hopefully that leads to more stories like Tim\u2019s. So take a few minutes, leave that review for us.<\/p>\n
And if you have a story like Tim\u2019s or you just completed your first deal, we would love to hear about it. Please apply to be a guest on our podcast by going to biggerpockets.com\/guests. And I will tell you that if you don\u2019t think that your story is good enough, it probably is good enough and we\u2019d love to have you on. I\u2019ll also tell you a little secret that when our producers go through the application, they love, love extra detail. So really take your time and give us all of the nitty-gritty about how you got into real estate investing and we would love to have you on if you would take the time to share it with the rookie community and inspire others. Welcome to the show. Thank you so much for coming on with us today. Can you tell us a little bit about yourself?<\/p>\n
Yeah. Hey, I appreciate you guys bringing me on the show. I\u2019m Tim. I\u2019m 30 years old. I\u2019m actually a full-time Army officer stationed at Fort Knox and I live in Louisville, Kentucky. I started investing back in November 2022, and I kind of dabbled in a lot of different things throughout the last year. At first, I wanted to do long-term rentals through BRRRRs, and then I ended up having a love and passion for fix and flips. And then I went into the creative space and that\u2019s where I\u2019m right now.<\/p>\n
Awesome. So before we go any further, just give us an overall picture of what your portfolio looks like today.<\/p>\n
Yes. So I have two duplexes. I have three single families in Louisville, Kentucky. I have two partnerships in Oklahoma. They are two single families as well. And then we also have a fix and flip partnership in Atlanta, Georgia. I\u2019m currently working on a fix and flip right now in Louisville, Kentucky, which we just started renovations and then we\u2019re closing on a property in a couple of weeks, which is a seller finance deal.<\/p>\n
So you had said 2022, so this was all within a year.<\/p>\n
Yeah. So November will be my one-year anniversary.<\/p>\n
Wow, awesome.<\/p>\n
\u2026 of real estate investing.<\/p>\n
That is amazing.<\/p>\n
Yeah. It\u2019s very cool.<\/p>\n
So it\u2019s been so fun.<\/p>\n
I just want to ask something because\u2026 Let me ask this question first. Before you got that first deal in November 2020, how much time would you say you spent educating yourself, getting yourself mentally to a point where you were like, \u201cOkay, I\u2019m ready.\u201d<\/p>\n
So there was a lot of things that I did. I was always an investor of some sort. I had that mindset with stocks. So I did the 401(k), I did the Roth IRA type thing. My brother-in-law is actually a big investor with stocks and stuff, so he would teach me, \u201cHey, if you make $50 mowing a lawn, put half of that away in a 401(k) and then you can keep that half to spend it.\u201d He told me that when I was 11 years old. As soon as I started working a full-time job, I always decided to put money away into my investment accounts, which we\u2019ll go into that probably later of how I used it to invest in real estate.
But prior to that, I live in Louisville, Kentucky. So if anyone is in the military, especially the army, you know that all the duty stations are terrible locations. I was single at the time, so I wanted to live in a city, so I had to commute to work every day. So I drove 50 minutes each way every day for two years and I got started on real estate by listening to you guys. So I listened to the Rookie Podcast every single day for almost two hours a day for a year and a half. And I\u2019m sitting-<\/p>\n
So you\u2019re sick of us by now.<\/p>\n
I still listen to you guys. It\u2019s absolutely incredible because I sat in my car one day and I realized I was listening to you guys for a year and a half and I never did anything about it. I always wanted to say, \u201cHey, I wanted to buy a house now, but maybe I\u2019ll just do it later.\u201d I ran into a real estate agent by chance when I was trying to get out of my rental lease. So I was asking the lady, \u201cHey, when do I need to tell you I\u2019m moving out?\u201d And she\u2019s like, \u201cWhy are you moving?\u201d \u201cWell, I want to go buy a house.\u201d A real estate agent literally walked around the corner and was like, \u201cHey, I\u2019m an agent. Do you want to work with me?\u201d<\/p>\n
No way.<\/p>\n
And I still work with her to this day. She\u2019s incredible. And I was like, \u201cLet\u2019s do it. Let\u2019s go get a property.\u201d<\/p>\n
That\u2019s a lesson learned for all of our agents that are listening to the podcast. Just lurk around corners and just wait until you hear someone say that, \u201cI want to sell my house.\u201d But Tim, so you have this year and a half journey of educating yourself, which is what I\u2019ve found is the typical time range for people that really take action is somewhere between a year to two\u2026 Six months, a year and a half is a good timeframe typically, but you close on that first deal and then you just go on a rampage where you\u2019ve got 10, 11 deals done in a year. I know we\u2019ll get into the specifics, but just at a high level, was it your intention going into it to move this quickly from the beginning? Did the motivation or the momentum just build after one deal? What was it that allows you to move so quickly?<\/p>\n
This was definitely not the plan. I wanted to do one property every couple of years because I am a veteran, so I wanted to use my VA loan. So I wanted to do house hacks. That was the big strategy that I wanted to start off with, which, \u201cLet\u2019s house hack a deal or let\u2019s renovate a property in BRRRR and just slowly grow from there.\u201d I think they call it the real estate bug. I bought one house and I was like, \u201cOh my gosh, this is so fun.\u201d I think the most fun I have now is going to the closing table. So I think it\u2019s just been a rush. It\u2019s been so much fun and the people you meet in real estate world is incredible. So I think it just snowballed from there.<\/p>\n
So let\u2019s talk about being able to fund all these deals in a year. Where is all of this funding coming from? Let\u2019s start out with the first deal and then maybe walk through how you were able to fund the other ones.<\/p>\n
Okay. So the first deal originally was going to be a BRRRR. So it was around Thanksgiving time. I was walking in the park with my girlfriend at the time who is now my fiance.<\/p>\n
Congratulations.<\/p>\n
Thank you, man. I appreciate it. And she was actually yelling at me saying, \u201cHey, get off your phone. We\u2019re outside. Enjoy the weather.\u201d I\u2019m creeping on Zillow the whole time. It was on the MLS and a house was $100,000 and it actually dropped to $50,000 overnight. So we went to go see it. There was definitely something wrong, but there was a squatter in the property that the seller had to get rid of and he was out of state. So I offered $40,000 cash to purchase the property. They accepted the contract the next day and I realized I didn\u2019t have that money in my checking account.
So I asked my agent, \u201cHey, what do I do?\u201d She\u2019s like, \u201cLook at hard money loans.\u201d I had no idea what they were, so I went on YouTube and became a YouTube warrior and was just watching videos on hard money loans. I ended up linking up with a hard moneylender at one of my local real estate meetups and he was like, \u201cHey, if this is your first deal, I\u2019ll fund you.\u201d Because I actually had some issues getting some hard moneylenders to approve me just because of my lack of experience and they weren\u2019t exactly confident on the property, but he actually took a chance, so he loaned me 90% of the deal and I had to find the rest to close.
So I begged my parents, I was like, \u201cHey, loan me some money. This is going to work out.\u201d And they actually said no. So they\u2019re very old school. We don\u2019t have a financial background. They had all their money in a checking account and for the last 20 years, so they didn\u2019t really feel comfortable with this type of investment. So what I did was, I was like, \u201cWell, if you don\u2019t lend me the money, I\u2019m going to sell my 401(k) off and I\u2019m going to fund this deal myself.\u201d
That\u2019s what I decided. It\u2019s like we talked about earlier, my whole foundation was stocks and invest for 30, 40 years and retire off that money. I\u2019m sitting in my room contemplating, liquidating the account.<\/p>\n
Pushing that button.<\/p>\n
Oh my gosh. They had to call me and say, \u201cAre you sure you want to do this?\u201d I literally was like, \u201cI need another day to think about it.\u201d But at the end of the day, I think I took a chance and took a gamble. And I think a lot of investors and entrepreneurs have to take that leap one day. I said, \u201cI think I\u2019m going to make more money doing this than sitting in my retirement account.\u201d And that\u2019s pretty much how I decided to press the button and sell it all.<\/p>\n
So first I just have to acknowledge this, you threatened your parents to give you the money or you\u2019re going to liquidate your 401(k). Did they say, \u201cGo ahead, I don\u2019t care, that\u2019s on you\u201d?<\/p>\n
They basically told me like, \u201cHey, you\u2019re an adult. If you really believe in this, you doing that shows that you\u2019re serious.\u201d<\/p>\n
Yeah.<\/p>\n
Don\u2019t support me.<\/p>\n
Which I think is a wonderful response. Yeah.<\/p>\n
They support me in what I do.<\/p>\n
Exactly.<\/p>\n
Do they agree on everything? A hundred percent, no.<\/p>\n
It\u2019s the support that is important that they weren\u2019t saying, \u201cDon\u2019t do it at all. You\u2019re making a super stupid decision.\u201d It\u2019s that, \u201cIf you\u2019re really passionate about this, you want to do that, then make that investment.\u201d<\/p>\n
Sorry, before we move on, I just want to ask one question because you mentioned this, Tim, about the hard moneylender, and you said that because you didn\u2019t have any experience that a lot of hard moneylenders weren\u2019t necessarily excited to work with you, which is true. A lot of hard moneylenders tend to favor working with folks that have a bit more experience. But you said you found this hard moneylender at a real estate meetup. Were you just going around shaking hands saying, \u201cHey, someone give me some money.\u201d Or how did you broach that conversation? And if I\u2019m a new investor in a similar situation, what should I be doing to find that hard moneylender?<\/p>\n
So I watched a video a long time ago on YouTube. It was one of the big investors out there and he said, \u201cHey, if you go to a meetup, don\u2019t just go to a meetup to just network.\u201d He said, \u201cHave an intention and have a plan.\u201d So I went to that meetup looking for a lender of some sort. I wasn\u2019t sure if it was going to be a private person where it was a friend and one to just lend on the deal or if it was going to be an entity, like a hard moneylender or something like that.
So I asked everybody, \u201cHey, do you know any lenders? Do you know any hard moneylenders?\u201d And that\u2019s how I got connected with a couple of them. Throughout the week, I called every single one of them and they were like, \u201cWe have a minimum amount of money that we want to loan out.\u201d And my deal was under that threshold. So a lot of those hard moneylenders wanted at least a hundred thousand dollars loaned out and I was asking for 70.
So they were like, \u201cWell, it doesn\u2019t meet my requirement and also, you don\u2019t have a lot of experience, so we don\u2019t really want to lend on this.\u201d And luckily this one guy said, \u201cHey, I\u2019ve been in your shoes before and as long as you can show that you have some sort of money in the back.\u201d So I leveraged the 401(k). I said, \u201cI have this money in a piggy bank and I\u2019m willing to let it all go if this deal goes south.\u201d And he was like, \u201cLet\u2019s do it. Let\u2019s close.\u201d<\/p>\n
So with that first one, was it more just the experience part or was there something actually with the deal they didn\u2019t feel good with?<\/p>\n
A lot of it was the experience and the amount of money I\u2019m asking to borrow. So because it was under a hundred thousand, they\u2019re like, \u201cIt\u2019s not worth it for us to take the chance.\u201d And also they asked me how many properties have we done? I was like, \u201cThis is my first, zero.\u201d And it wasn\u2019t in the best neighborhood either.<\/p>\n
Okay. That\u2019s what I was wondering, just because sometimes the hard moneylender will actually do their own analysis of the deal and curious as to if they said, \u201cWe don\u2019t like the numbers on this property at all.\u201d<\/p>\n
Actually, the guy who agreed to do the deal actually sent out his own appraiser and then it ended up appraising for 118. So we were all in on the deal for 70, and it appraised for 118, so then he was like a hundred percent good to go on it after that.<\/p>\n
Okay. So let\u2019s just go into how you funded some of the other properties real quick, and then maybe we can go into one of those deals and work through the exact numbers on it. But I think what a lot of people want to know, \u201cWhich I want to know is how were you able to get these 10 properties within the year?\u201d So what were some of the ways that you scraped up money? So your first deal liquidated your 401(k), and then you had your money guy, but what are some of the other ways you\u2019ve had to fund the deals?<\/p>\n
So after we purchased the first property and we were renovating it, or I had the real estate bug, so I was looking for another deal. Since I liquidated the 401(k), I had about $30,000 left just sitting in the pot. So we found a duplex on the MLS that needed a little bit of work. So I went full traditional. I did the 20% down on that property and I did the light renovations myself, and then that\u2019s just a long-term rental. And then as we moved forward, I was out of money, so I used pretty much all my money on that down payment.
So then I started looking to use my VA loan. So the next property was the duplex. That\u2019s the house I\u2019m in now. We got the 0% down with the VA loan. And then we also had sellers concessions where the seller actually paid for the down payment. So I actually got paid a couple hundred dollars to close on that. So I live in one unit, and then the other unit in the duplex is actually a midterm rental for nurses because Louisville has a crazy nursing market out here.
There\u2019s like five or six hospitals around here. Now, I\u2019m completely out of options. I have no money, no VA loan. And I was like, \u201cLet me try wholesaling.\u201d<\/p>\n
Real quick, Tim, before you go forward, for anyone that doesn\u2019t know what a VA loan is, let\u2019s just break that down as to no down payment. So you didn\u2019t need any money for that. Did you qualify to have no closing costs or did you have to pay closing costs on it?<\/p>\n
Yeah. So you have to pay closing costs with the VA loan, but you can negotiate what the seller to have sellers concessions, which you can use that money to either buy points down on the loan or you can go towards the closing cost, which is what I did. And the really great benefit about the VA loan compared to the FHA is you don\u2019t pay the PMI, so you don\u2019t pay the mortgage insurance, which saves you a lot of cashflow. So that\u2019s what the VA loan is awesome. And also you can use it for any residential property. So one to four plexes, you can use the VA loan on it. So it\u2019s a great tool to house hack.<\/p>\n
That was a great explanation. I think there is one circumstance where you can avoid paying closing costs, and I think that\u2019s if you have a certain eligibility of disability.<\/p>\n
Yep. So if you have-<\/p>\n
Yeah, I don\u2019t Remember what the limit is though.<\/p>\n
So that\u2019s a crazy program. Obviously, I\u2019m still in, so I don\u2019t have that disability. But yeah, if you have the disability on you, you also\u2026 The more you use your VA loan, so the first time you use it, you don\u2019t have to pay this crazy fee, but that fee is waived every time once you have your disability. So it gets even better for you.<\/p>\n
We also did an episode recently number 329 where we did a really deep dive into doing VA loans if anyone wants to learn more about that.<\/p>\n
Just one quick comment too, Tim, you mentioned that you got paid to close on that duplex. Can you just explain what that means for people because you glossed over that, but I mean, it\u2019s a cool concept.<\/p>\n
So in Kentucky there\u2019s a certain maximum percentage of sellers concessions. So I think I got about nine to $10,000 of sellers concessions and my closing costs were almost about that range. So since I moved all that money to my closing costs, I actually was in the net positive. So when you show up to the closing table, it\u2019s crazy that they cut a check to you. I was really surprised, but it was enough sellers concessions to pay off everything, which is great.<\/p>\n
So tell us what happens from there, man. So you get to get this duplex. Move us to how you funded the rest of these ones after the VA loan is gone.<\/p>\n
I didn\u2019t have any more money, so I was kind of like, \u201cMan, I still want to buy stuff. I still got a crazy addiction to trying to buy houses.\u201d So I started trying to wholesale and that really didn\u2019t go well. I tried working for somebody and that\u2019s how I started with the partnership stuff. I wanted to work for somebody and gain some knowledge and mentorship by serving as a cold caller. I realized that I really didn\u2019t want to do that. So I started seeing creative finance options, the seller finance. The subject-to deals and all that stuff. And then I started getting really into that and that\u2019s what kind of landed me on my next deal in Louisville was a single family.
It was a subject to deal and that\u2019s when I took over the person\u2019s mortgage payments. She was actually a full-time nurse and didn\u2019t want to manage her property anymore, and it was zoned for Airbnb. So when we talked to her, she wanted to listen on the market, but it had no equity in the deal. So if she sold a house, she would actually have to lose money to do so. What we tried to do was\u2026 I actually pitched arbitrage. I didn\u2019t know how to do that. She didn\u2019t want to do that. She wanted to sell it outright.<\/p>\n
Explain what arbitrage is real quick.<\/p>\n
So it\u2019s when someone leases a property from somebody and furnishes it and lists on Airbnb and the person who furnished it manages the property and you don\u2019t own the property at all. So the seller or the person who owns the house still owns it, they\u2019re just leasing it out to you and you\u2019re doing all the legwork on it. So that\u2019s how you can generate that short-term rental revenue without actually owning the property. And I hope that was a good enough explanation.<\/p>\n
Yeah, that was great.<\/p>\n
But yes, she didn\u2019t want to do that. She wanted to sell it outright. So I literally talked to her on the phone for two, three hours about subject-to and if it was legal or not. We actually convinced her to do it and then I ended up buying it subject-to, and then I actually turned that into a midterm as well.<\/p>\n
All right. So let\u2019s break down what subject-to is for folks that aren\u2019t familiar with that phrase as well, Tim.<\/p>\n
Okay. Purchasing a home subject-to is when you take over an existing mortgage. So her mortgage was 3.96% interest rate, and I think at the time when I was shopping around, interest rates were around 6%. So I got a really good mortgage rate. So the PITI was super low. And I guess the way I explained this is if you\u2019re buying a bag of groceries at a grocery store and you have the bag of groceries and you swipe your credit card, who owns the groceries? You do. You\u2019re holding the bag of groceries. If you give it to your aunt down the road and you give her the bag of groceries, who owns the bag of groceries? Your aunt.
How do you prove who owns the groceries? It\u2019s the receipt to the grocery bag. So we treat the receipt of the groceries as the deeded to the property. So they give us the receipt or the deeded to the property, and then we just take over their credit card payments or their mortgage payments and you\u2019re now the owner of the house.<\/p>\n
That\u2019s a really cool explanation. Yeah, go to analogy.<\/p>\n
Thanks.<\/p>\n
Yeah. That\u2019s like better [inaudible 00:22:10]<\/p>\n
I mean, we heard that story from Pace, so it\u2019s burned in my brain. But I think that\u2019s a great story to explain sub-to. So I paid her $2,000 on top, so we took over the property, we took over the mortgage and we gave her $2,000 on top and the incentive was she was going to lose $7,000 in the deal. So instead of losing seven, she gained 2000. Now she doesn\u2019t have to worry about the mortgage and we took over the property.<\/p>\n
So let me ask you this. This is something I\u2019ve always wondered, especially when Pace talks about sub-to and I see a lot of agents who specifically go towards vacation rentals, short-term rentals saying buy houses at sub-to. Are a lot of these people selling? So if they have that really great interest rate, they probably bought it within the last three years and it seems like some of them are selling because it\u2019s not profitable for them. Why would somebody else want to come in\u2026 So they\u2019ll have the same expenses from them and take over those payments and then renting it out.
What is the thing that I\u2019m missing in this gap? Is it poor management? Is they\u2019re not taking advantage of pricing? What am I missing in that scenario is if someone\u2019s not making money on this house, they want to sell it, why would I come in, take over their payments in?<\/p>\n
I think people try to get into the short-term rental business and especially if they\u2019re out of market. So if they\u2019re out of state, I think it\u2019s to our advantage as creative finance investors because they think it\u2019s going to be super profitable until they realize they got to deal with the constant turnover managing the cleaners. And then also if they\u2019re out of state, they probably have a property manager and they\u2019re paying a lot of money to manage these short-term rentals.
For us or for me in this market, if I take over someone\u2019s mortgage and I keep all the PITI the same, I\u2019m probably going to save a lot of money on managing the property myself in the market. And also, you save that 15, 20% and I think that\u2019s huge. And then also since I\u2019m boots on ground, I can go see the property and make sure that the cleaners are doing their job and doing all that other small stuff that actually gets people dinged up on their reviews or it just eats into their cashflow. But I think from my experience, I think it\u2019s because of that, they have all the expenses.<\/p>\n
You have that advantage that self-managing or saving that management fee, and then also you\u2019re able to have a better product because you\u2019re the boots on the ground overseeing it and you have that quality control I guess.<\/p>\n
Yeah. And I don\u2019t do any short-term. That short-term rental, that probably would\u2019ve done well as a short term. I just turned into a midterm because I have the midterm in the other unit right here. So I have some experience with that. I think I like the slower turnover because I do at least three month contracts with my midterm nurses versus, \u201cOh, there\u2019s a weekends there and I can manage it myself with that.\u201d But if it\u2019s a short-term rental, I probably would\u2019ve to hire somebody because I\u2019d have to keep going and turning over the property and stuff.<\/p>\n
Yeah. I\u2019ve always wondered about that because it seems like it\u2019s becoming very common that people are doing sub-to to vacation rentals. Tony, what are your thoughts on that? Have you guys bought anything sub-to?<\/p>\n
Yeah. We haven\u2019t purchased anything sub-to, but in terms of why would I buy a property, I think a lot of what Tim said is true. It\u2019s like, I guess first taking a step back, there\u2019s probably a couple of different motivations as to why someone would want to sell their short-term rental. It could be because they have a property manager in place and that property manager just isn\u2019t performing well and they don\u2019t have the time desirability to manage it themselves. They\u2019re like, \u201cHey, I could make more by selling this than continuing to pay this property manager 25 or 30%.\u201d
The other motivations that they have been managing it themselves, but maybe they\u2019re burned out. Maybe they underestimated how much work goes into managing a short-term rental. They haven\u2019t really set up the tools and systems and automations and software to do it the right way. So they\u2019re like, I just don\u2019t want to do this anymore. And in both of those situations, like Tim said, I think there\u2019s an opportunity for you to come in as a new host and improve the performance of the property.
Let\u2019s say that first motivation where maybe they had a property manager that was charging them 25%. If I come in and I\u2019m it myself, I\u2019m immediately adding 25% to the bottom line, even if everything else stays the same. And that could be a big difference in profitability. I might have to pay my VAs a few bucks an hour, but it\u2019s significantly cheaper than 25%. Or maybe they weren\u2019t doing things like using dynamic pricing tools. Maybe they have really old listing photos.
Maybe they hadn\u2019t changed the linen since the \u201980s. Who knows what it is? But you come in, do a little bit of a refresh, and I do think there\u2019s an opportunity there for folks.<\/p>\n
Okay. So, Tim, sub-to, what\u2019s your next financing you did? We\u2019ve got the VA loan, sub-to, liquidating a 401(k).<\/p>\n
Yeah. So now we go into the partnerships in Oklahoma and Atlanta. So I actually met these partners through a mentorship that I joined down the road and I met those partners through there. For the partnership stuff, it\u2019s a really scary game too because you\u2019re not only marrying the deal, you\u2019re also marrying that partner.
So the ones in Oklahoma, I actually met somebody out there that does GC work himself, so he does all the renovations and manages those type of projects. And those two deals were actually sub-to deals as well. I funded the deals by raising capital. So I brought the money to the table and to the deals, and then he managed the project and found the tenant buyers. So how we got rid of those deals as long-term rentals were we actually lease optioned those two houses out to end buyers. And that\u2019s how we fund the deals.<\/p>\n
Can you explain what that process is doing a lease option?<\/p>\n
So explain the lease option process?<\/p>\n
Yeah.<\/p>\n
So a lease option process, I guess the easiest way for me to explain it is that you rent it out to somebody with the option to purchase the home later. So I guess the slang term is rent to own or something like that, but it\u2019s a two -part deal where you lease the property to somebody and they rent it and then they have the option to buy it from now to however long you set the terms.
So for those two properties, we set a five-year term. So it\u2019s a fixed purchase price for that amount of time for that buyer to qualify for a loan and then purchase it outright with a lender.<\/p>\n
And Tim, you\u2019ve got so many tools in your tool belt here, man. So I guess what\u2019s been your process for like\u2026 I guess let me frame the question this way. There\u2019s a lot of people who read on certain topics or YouTube university, podcasts, whatever it is. But like you said, it took you 18 months to kind of feel confident to do that first deal and you went from that deal to the duplex, which was somewhat similar, but then you really took off into the creative finance space.
Was it that you were surrounding yourself with the right kind of people? Because you mentioned going to the meetups. You mentioned that the mentorship program, you mentioned all these other things you\u2019ve been meeting people. Was it your network that gave you that confidence to try out these different strategies or was it something else?<\/p>\n
A hundred percent. So I know a lot of people talk about Robert Kiyosaki\u2019s book, Rich Dad, Poor Dad. And it gets them started in investing and it\u2019s an amazing book, but the book that I really love that I live by all the time is Who Not How by Dan Sullivan. That book really changed my mindset with business owning and entrepreneurship because it really talks about instead of you spending hours, months and years learning a strategy like lease option to finding the person in your community or in your mentorship program that has been doing those type of deals. And to find those people to help you, the who\u2019s in your world to help you catapult your career or catapult your journey and the way that you get those people to help you is try to figure out what value you provide.
Because I know there\u2019s a lot of people that say, \u201cHey, go network with people, go network.\u201d It\u2019s absolutely true, but I feel like a lot of people just ask people for help and they don\u2019t really know how to ask for help. So for me, I like talking to people. I like building relationships and I think that\u2019s where I figured out like, \u201cHey, that\u2019s how I\u2019m going to bring value to the team. Let me go talk to investors and bring some money to deals because I don\u2019t have the money myself and I\u2019m not generating the leads myself.\u201d
So to find someone that has a lot of leads but doesn\u2019t have the funding to get those deals done, that\u2019s when I kind of figured, \u201cHey, this is where I\u2019m going to sandwich myself in between these deals.\u201d<\/p>\n
So do you think a big part of this, if somebody is just starting out, is finding that money partner, finding how to finance a deal first by making those connections? Or is it finding the deal first, then going out and searching for those connections?<\/p>\n
I think if you find a really good deal, and you guys may have different experiences, but if you find a really good deal and the numbers make sense and it\u2019s going to make money for you or a partner, I think the money will come once you find the deal. Because even me as a normal guy looking at properties and stuff, if the deal makes absolutely sense and I can fund it somehow or bring the money, we\u2019re both going to win.
So I think a lot of people are afraid. I was too. I was like, \u201cI don\u2019t have the money to do all this stuff.\u201d But once I started realizing once you bring a good deal to the table, the money is going to come from somewhere if you reach out to enough people.<\/p>\n
Yeah. Tim, I\u2019m so glad you said that because I couldn\u2019t agree with you more. I think finding a good deal makes everything else exponentially easier. And I heard this story over the weekend. It was this marketing guy, but he was talking about how sales is easier when you\u2019re better at marketing and he gave the example of two different cars that you were trying to sell for $400,000 and he said, say imagine the first car is like an old beat up VW bus with blown out tires and the air conditioner doesn\u2019t work and hasn\u2019t been touched since 1970 and you\u2019re trying to sell that for $40,000.
And then the second car is Rolls-Royce which retails for $300,000 and you\u2019re trying to sell that for 40,000. You could be the world\u2019s worst salesperson and still sell the Rolls-Royce for $40,000 because it\u2019s an amazing deal. And you would have to be a hell of a salesman to get someone to buy the VW bus for you.
A lot of that comes down to raising capital as well. It\u2019s like if I\u2019ve got a really, really good deal, it doesn\u2019t matter how big my network is because someone is going to find that deal. I could go into a random Facebook group and say, \u201cI\u2019ve got a really good deal and you\u2019re going to have people breaking down your door.\u201d So for a lot of our rookies that are listening, I think if the capital is a constraint for you, then try and focus your energies on how do I find a really good deal and then let everything else flow from there.<\/p>\n
Absolutely.<\/p>\n
All right. We\u2019ve been talking a little bit of funding. Did we get through all the deals yet? I think you\u2019ve got a couple more left in there. We haven\u2019t touched on them all. Let\u2019s quick rapid fire the last few deals and how you funded those.<\/p>\n
Okay. So the fix and flip in Atlanta, I actually\u2026 It\u2019s kind of crazy. The Atlanta flip, I used a credit card, so I used a business credit card that had a promotion on it. It was like 0% interest. So I funded that deal on Atlanta. We sell it and we listed this month.<\/p>\n
Wait. Hold on for a second. Did you use that to purchase the property or to fund the rehab?<\/p>\n
To fund the rehab.<\/p>\n
Okay. I was going to say how [inaudible 00:34:29] with a credit card.<\/p>\n
I\u2019ve never seen anyone buy a property with a credit card.<\/p>\n
I\u2019ve seen people do a cash advance and pull out the cash off the credit card.<\/p>\n
So I used the credit card. I paid the 2% whatever to transfer the money into the checking account, and then I wired it to the Atlanta title company and then he\u2019s renovating the property and then we\u2019re going to list it actually in a couple weeks.<\/p>\n
Wow. Was that a business credit card or a personal card?<\/p>\n
Business one.<\/p>\n
Gotcha. Which one was that?<\/p>\n
It was a Wells Fargo card. So it had 0% interest for I think nine months. So it\u2019s coming due soon. We\u2019ve got to sell this house.<\/p>\n
Well, I used a Wells Fargo one too for a funder rehab. We actually did it for all the materials.<\/p>\n
Oh, nice.<\/p>\n
So we didn\u2019t do a cash advance or anything, but we did it for all the materials. And they had a promotion too that if for the, I don\u2019t know, first nine months, if you made your minimum payment every month that they would extend it to 12 months. I think-<\/p>\n
That\u2019s nice.<\/p>\n
\u2026 we paid it off already, but it did extend in case we have another project that comes up we need it for.<\/p>\n
Yeah. I mean they\u2019re a really good tool. They\u2019re so underrated.<\/p>\n
Definitely. I mean, you could fund a pretty good rehab doing your materials and then you just have to worry about coming up with the cash to pay your contractor unless your contractor takes credit card. I just actually did a dumpster removal where they cleaned out a property and took the dumpster and everything like that and they emailed me the bill and they\u2019re like, \u201cAll right. Pay by credit card.\u201d I\u2019m like, \u201cYep, racking up those credit card points.\u201d<\/p>\n
Excellent. Awesome. And then the next deal, the one that I\u2019m renovating now is a hard money loan. It\u2019s just a normal fix and flip. We did a cash offer and then used the private moneylender to cover the rest of the costs and holding costs. We just started reno this week. And then the house that we close on in a couple weeks, it\u2019s a seller finance deal, so we\u2019re going to do light reno. Little down payment and we\u2019re going to use a private moneylender on that deal as well.<\/p>\n
Okay, awesome. So a wide variety of different ways to finance properties. I do want to go back to. Okay, so you\u2019ve been able to purchase all these properties with this different funding, but now I\u2019m curious about the rehab portion of it. Did you have any kind of construction experience at all?<\/p>\n
No, absolutely not. I looked for general contractors on the Facebook pages and networking events and that led to my first deals struggles because of my lack of experience and lack of network and having those systems in place. So are we going to talk about that more in depth? That kind of led into my first deal with the contractors and the lack of experience. I think the contractor knew that that was my first project and I lacked experience. I picked the cheapest one because I figured let me use the cheapest contractor to make the most spread on the deal, and it ended up costing me a lot more money because we had to hire a new contractor later on to fix a lot of the stuff that he originally did.
Also, since he knew that I was really inexperienced, we didn\u2019t do a contract and it was the last third of the project and he actually asked me to pay him in advance because he had to pay his workers. I said, \u201cYeah, you\u2019ve done a really great job for me the last month or two. Yeah, absolutely, I\u2019m going to pay you.\u201d
So I gave him the last third and then he literally stopped showing up to work. I know a lot of people have issues with their first GC and all that stuff, and it\u2019s definitely true. He disappeared on me, so I had to paint the house myself and put all the light fixtures up myself to get this listed. And the project took really long because I had to do it myself towards the end. I remember I was supposed to BRRRR this house and I ended up listing it on the MLS to just get rid of it because I was just bleeding, holding costs and all this stuff.
As soon as that house was listed, there was a drug bust right across the street. So it was a lot of madness. I wanted to just stop real estate investing after that and it ended up selling. So we made a little bit of money off it. So I think that\u2019s why I felt okay, but it was probably the most expensive learning experience that I\u2019ve had. And I think that\u2019s what\u2019s helped me with the further projects because now I actually GC my own projects here in Louisville where I hire my own contractors, floors, windows and all that.
I think my military background helped me with that because I like managing stuff like that. So it\u2019s a lot of fun to me. And I feel like I can sleep better at night.<\/p>\n
Tim, I guess the logical next question is you must\u2019ve picked up that drug bust house on a pretty good deal. Right?<\/p>\n
I try to buy it. I try to buy it. I couldn\u2019t get ahold the seller, but I tried.<\/p>\n
I wonder why.<\/p>\n
I really tried. It was all boarded up and stuff too, so I was like, \u201cOh, let me try to find the seller.\u201d But no, I couldn\u2019t get ahold of them.<\/p>\n
I was at a real estate meetup once and this wholesaler came up to me and-<\/p>\n
A drug bust happened?<\/p>\n
No. The wholesaler came up to me and I think he was a newer wholesaler. I didn\u2019t know him. And he\u2019s like, \u201cOh, people told me I should talk to you that you invest in this area.\u201d It was one of the rural towns that\u2019s actually close to where I went to high school and he is like, \u201cHere, I have this house here. Here\u2019s the address and stuff.\u201d He was like, \u201cOkay. I\u2019ll look at it. I\u2019ll email you.\u201d And so I pull it up, I\u2019m like, \u201cWhy does that house look familiar?\u201d
I searched the address, just Googled the address and it was a meth lab, the people that owned it. And I remember my mom calling me and telling me that there was this meth lab, this drug bust going on in this house or whatever and this was probably like five, eight years ago maybe. So I said to the wholesaler, I said, \u201cWell, has there been any remediation done?\u201d And he\u2019s like, \u201cWhat are you talking about?\u201d I\u2019m like, \u201cThis house is a meth lab and it\u2019s a [inaudible 00:40:32] the cops busted up.\u201d
He had no idea or whatever. And it was just, you literally Google the address and information like that came up. So just you\u2019re trying to wholesale houses or you\u2019re buying houses. Just take the time to put the address of the property in and google it and see if there\u2019s any news articles on that property. But actually I see that finally somebody ended up buying it and they\u2019re slowly doing stuff to it.
Okay. Well, any last words of advice for somebody that\u2019s doing a rehab or project managing? So you said your military background has definitely helped you with that. What are some of the things that you have implemented that make you a strong project manager?<\/p>\n
So I like to set deadlines now. I think organizing the project in thirds or quarters and having that contract laid out, I think that\u2019s really important is to not do those handshake deals with your contractors and to have that contract that\u2019s organizing, \u201cHey, I\u2019ll pay you in thirds or I\u2019ll pay you in halves after you finish this set list of items.\u201d It\u2019s actually really nice too because if you\u2019re using a hard moneylender, a lot of those hard moneylenders will pay you for your renovations after they go see it. They inspect it or you take pictures of it.
So actually it helps us too out when you break down those payments in those organized manners because once they finish that project, then you can call the hard moneylender. They\u2019ll inspect those items and then they\u2019ll cut you the check and you can pay your contractors. And with that contract, it really keeps your workers in check as well. And also, I like to add a little bonus too. So if I have a 45-day project, I\u2019m like, \u201cHey, if you finish it in 40 days or 38 days,\u201d whatever it is, I like to give them a little money on top so they have a little bit of incentive. But also not too fast. So they rushed the deal and the project kind of gets messed up.<\/p>\n
Well. Tim, it seems like you\u2019ve learned a lot since that first deal and sometimes things going south can be the best teacher and you tend to learn a lot when things go wrong, sometimes even more than when things just go perfectly great. So I\u2019m glad to hear that you\u2019re able to take some of those lessons. The next question I have for you though is about how you\u2019re actually structuring these different partnerships and obviously Ash and I wrote the book on partnerships for BiggerPockets. Head over to biggerpockets.com\/partnerships. But Tim would love to hear just your experience on how you\u2019ve structured these different partnerships across the different deals.<\/p>\n
I actually had a partnership with somebody that didn\u2019t work out, so it is not always sunshine or rainbows. But a lot of it is you find what you\u2019re missing in your tool bag. So for me was the lead generation and finding someone in those areas out of the market or out of your local real estate market to help you. So for me, obviously, I\u2019m not boots on ground. I don\u2019t know how to generate those leads in those random cities like Oklahoma or Atlanta. I met some of these guys through the mentorship. And you always have to do your homework on your partners because once you work together, you\u2019re stuck together until a good or bad outcome happens.
A lot of it is to see, instead of just analyzing the deal, you got to analyze your partner. So you got to see what their credibility is, how many deals they\u2019ve done. So I usually try to find them on social media first to see if they\u2019re actually posting content on Instagram, Facebook, or YouTube and to see what type of projects they\u2019ve had. Also since I\u2019ve met those guys in a mentorship, I actually asked a couple of guys and girls in my mentorship if they worked with them.A lot of other students had some really positive reviews about these guys, and so I felt like I can trust them.<\/p>\n
Got it. I love that you\u2019re doing a little bit of homework on people beforehand. I think you mentioned this earlier, but sometimes getting\u2026 I mean, not sometimes, every time in a lot of ways getting into a real estate partnership is like a marriage. So you really want to make sure that you\u2019re \u201cgetting into bed with\u201d. But Tim, love your story so far, brother. I want to leverage all the experience you\u2019ve gained this past year and let you answer a question from someone in the rookie audience.
So we\u2019re going to head over to our rookie request line. So for all of our rookies that are listening, if you\u2019d like to potentially get your question answered on the show, head over to biggerpockets.com\/reply and we just might use your question for the show. So today\u2019s question comes from someone by the name of Ja Mac and Ja\u2019s question is, \u201cIn your opinion, what are the top three things that increase rental value? I\u2019m gathering ideas for a home that we bought and planned to rent out.\u201d So Tim, in your opinion, how would you answer this question for Ja?<\/p>\n
To increase rental? Are they talking about the rental income, how much you can charge?<\/p>\n
I guess let\u2019s look at both, right? Both rental value and the after repair value.<\/p>\n
For the after repair value, you can always\u2026 If you have some extra space, maybe add another bedroom or a lot of the projects that I do is we have huge closets in the master bedroom and it doesn\u2019t have a bathroom. So we usually add a bathroom in there because it adds a ton of value. Renovating a kitchen. I think one of the projects I did actually in my midterm, the kitchen looked like it was a picture from the 1950s. Has it been renovated? It had the weird turn knob ovens.
So we modernized that, ripped out all the cabinets and gave it a facelift, stainless steel appliances on and all that. But anything that you can add some value to your property will definitely boost your ARV. And obviously if you make things nicer, you can definitely raise the rents of those properties. If you are trying to make it even more profitable, if it\u2019s in a really nice neighborhood or a good market for a midterm or short term, you can always add value like that by changing the amount of income you\u2019re getting. So there\u2019s the couple of tips that I can think of right now to boost the value and also to boost your rental income.<\/p>\n
Yeah. I love that answer, Tim. I think a big part for me is looking at your comps as well. So what other properties have sold in that area and what information can you get from those properties that have sold? We recently had Serena Norris on episode 330 and she came in and just gave a masterful breakdown of managing rehabs. So part of that conversation was how heavily she relies on comps to come up with her scope of work. So Ja, if you\u2019re thinking about rehabbing a property, I\u2019d say look at some of those other properties in your area, understand what they\u2019re offering to folks and see what you can do to match.
All right. Let\u2019s go to our next segment here, which is the Rookie Exam. Tim, these are going to be the three most important questions you\u2019ll ever be asked in your life and you\u2019re doing it in front of the rookie audience. Are you ready for the exam?<\/p>\n
I\u2019m ready.<\/p>\n
All right, man. So question number one. What is one actionable thing that a rookie should do after listening to your episode?<\/p>\n
If you\u2019re trying to get started in real estate, and I think you should find a real estate investor focused agent, it\u2019s no cost out of your pocket to use a real estate agent. I think if you find an investor friendly agent that\u2019s focused on investments and own their own projects, they can help you comp, like what Tony was talking about earlier, comp properties, find out what the values are and tell you what a deal is or what not a deal is. Also, when you buy a house on the MLS with an agent, you\u2019re not paying the commission. So it\u2019s free of charge for you and I think it\u2019s a good way to get started and also build your network as well.<\/p>\n
Yeah. I think that\u2019s great advice. And BiggerPockets has the agent finder tool too. If you go to biggerpockets.com\/agentfinder, you can see the selection of investor friendly agents to really help you out. Okay. Next question is, what is one tool software app or system in your business that you use?<\/p>\n
So I actually use your guys\u2019 program for my property management. I use RentRedi. Because since I\u2019m a pro member, I get it for free and I\u2019ve been using it for the last year and it\u2019s super easy. This is not an ad, but it\u2019s super awesome. I mean it made my life a lot easier because I was super worried about being a property manager and it\u2019s super nice to get your requests for repairs on there. Also, it literally goes directly to your bank account. A lot of your tenants will really like it too. They don\u2019t have to cut a check to you, they can just wire the money to you. So that\u2019s my number one software that I use.<\/p>\n
And they don\u2019t have to call you to put in the maintenance request. They can just put it in through the app.<\/p>\n
Put it in, super easy. But for real estate stuff, I use REIPro. My REIPro, so I use that as my system to pull up addresses, to pull up information about the properties. Now, that costs a little bit of money, but if you are trying to wholesale or trying to find some good deals off the market, that\u2019s a system that I use.<\/p>\n
That\u2019s interesting. I\u2019ve never actually heard of REIPro before. Have you heard of that one, Ash?<\/p>\n
So it\u2019s kind of PropStream.<\/p>\n
Interesting. There\u2019s so many other options that are popping up. And Velo is one that has a relationship with BiggerPockets. Privy is one that I just recently found that actually seems pretty, pretty cool. Lots of options out there. But last question for you here, Tim. Where do you plan on being five years from now. If you keep the same pace, you\u2019re going to be at like a thousand doors in five years, but what\u2019s your personal goal where to see yourself being in five years?<\/p>\n
For me personally, in the next couple of years since I\u2019ve been shifting towards the fix and flips and shorter stuff, I\u2019m really trying to supplement my W2 income so I can comfortably leave work and start focusing on the business full-time. I started off with the long-term rentals, trying to generate a hundred, $200 a cashflow a month. But that would take me a long time to eventually feel comfortable to leave my W2. So I think in five years from now is to focus on real estate full time and start building long-term wealth with long-term rentals and still using the flip income to survive.
But I think in the long run is I would like to start getting into multi-families larger than the normal residential stuff. I think it\u2019s a great opportunity out there. There\u2019s a lot of cool things to get into and it\u2019s something new, something that I\u2019m not familiar with. So I really like learning, so I think that\u2019s what I want to get into down the road.<\/p>\n
Awesome, brother. We\u2019re excited to see you make that a reality, Tim.<\/p>\n
I hope so.<\/p>\n
So before we wrap things up, I want to give a shout-out to you. This week\u2019s rookie rockstar, this week\u2019s rockstar is Marielle Lily Walter. And Marielle says, \u201cIt\u2019s almost unbelievable how much life can change in just one year when you decide to get out of analysis, paralysis, fear and doubt, and go for something greater. One year ago I decided to plunge headfirst into real estate and go hard towards my goals of financial freedom. At that time, I had done just a few real estate deals. Now, I\u2019m about to celebrate my one-year anniversary of taking the real estate plunge and decided to look back over the year.\u201d
So she says in just one year, she\u2019s done 12 real estate deals, including seven flips, two apartment building investments, three rental properties, and four new deals under contract. And she finishes off by saying, \u201cYour dreams are on the other side of your fear.\u201d So Marielle, congratulations giving you a run for your money, Tim, with 12 deals in one year. But super excited to see that success happening too, man.<\/p>\n
Tony, when I first read that before you said it out loud, I thought it said, \u201cYour dreams are on the other side of your feet.\u201d And it was because there was like a little smear on my computer screen. I was like, \u201cHuh, I never heard that one before. You got to move your feet to take action to reach your dreams.\u201d<\/p>\n
Move your feet to make it happen.<\/p>\n
Well, Tim, thank you so much for joining us on the show today. Can you let everyone know where they can reach out to you and find out more information about you?<\/p>\n
Yeah, thanks for having me on the show. It\u2019s been so much fun. You can find me on Instagram. It\u2019s @itstimyu. So we keep it super simple with my name and you can find me on there. And thanks so much guys.<\/p>\n
Thank you so much for listening to this week\u2019s Rookie Podcast. I\u2019m Ashley @wealthfromrentals, and he\u2019s Tony @tonyjrobinson. And we will be back on Saturday with a rookie reply.<\/p>\n
(singing)<\/p>\n