fbpx
Rookie Reply: What EVERY Rookie Must Learn Before Investing in Real Estate

Rookie Reply: What EVERY Rookie Must Learn Before Investing in Real Estate

by | Jul 26, 2024 | Investing, News Feed

Not quite ready to invest in real estate? Maybe you’re still getting your finances in check or saving for a bigger down payment. In any case, don’t sit on your hands! While you wait, there are plenty of things you can do to become a more knowledgeable investor and prepare for your first deal!

Welcome back to another Rookie Reply! Today’s episode is jam-packed with essential tips for those who are just starting out. First, what market should you invest in? Ashley and Tony will show you how to identify up-and-coming neighborhoods before they explode! Most investors will also need to furnish a short-term rental or renovate a distressed property at some point in their journey. We’ll show you a hack that could help you save thousands of dollars when buying materials, furniture, and décor. At what point should you hire a bookkeeper? Can you manage your own books? Tune in for a few real estate accounting tips!

Looking to invest? Need answers? Ask your question on the BiggerPockets Forums!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Ashley:
Let’s get your questions answered on today’s rookie reply. My name is Ashley Care and I am here with Tony j Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Now, today we’re going back into the BiggerPockets forums to get your questions answered. And again guys, the forums are the absolute best place to go for you to get quick answers to all of your real estate investing questions. So today we’re going to hit questions like how to furnish a rental and get credit card points. How do you find up and coming neighborhoods for your real estate investing, what you need to know before you start investing and when should Ricky’s hire a bookkeeper?

Ashley:
So Tony, let’s go first into the starting out discussions. Do you see a question in there that would be a good

Tony:
One? I do. I got one from Tyler and Tyler says I’m in my first house hack in Austin Tech. I have two 12 month room leases and a midterm rental in an A DU. Now I get my midterm rental leads from Airbnb and do bookings through the Airbnb platform and then I use apartments.com to manage my long-term tenants and collect rent. Now the question is what do I need to keep in mind for starting off on the right foot for bookkeeping? Any recommendations on software or recommendations on content to watch slash read to learn the essentials As a beginner, any feedback would be appreciated. Thanks. Alright, so first Tyler, I want to say congratulations, man. I mean you got two room rentals going on and you got an adu. So I got to imagine you’re probably getting a juicy return on this property in Texas.

Ashley:
A low cost of living,

Tony:
Low cost of living, right? I mean, hopefully you’re doing pretty good on at least breaking even, maybe even getting paid to live where you live right now. So I’ll go with the back half of that question. First, recommendations on content to read slash watch. And I love Amanda Hahn and Mac McFarland’s books on real estate tax strategy and they have two volumes. Volume one is a little bit more beginner focused. Volume two is a little bit more advanced, but I like to start with those because it’s beyond bookkeeping, it’s just more so tax strategy. But I think those things are good to lay that foundation from just a knowledge perspective of the accounting side of being a real estate investor.

Ashley:
And as far as the software, I think there’s a lot of great options out there. You can use the long-term property management software for the medium-term rental, and you could actually use it for short-term rentals. I’ve used Buildium before for your short-term rental, and you just have to link the Airbnb deposits into the account to show that when it shows up it’s a rental income because they have the nice bookkeeping databases integrated with the property management software. One other thing too is you can use ssa, which is assets spelled backward. It’s still blows Tony’s, mind me use that. But Tony, you used to use SSA for your bookkeeping on your short term rentals and then now you use QuickBooks, which is also what I use too. What was your experience with

Tony:
Sessa was great. I think it’s built specifically for real estate investing. So there’s a lot of built-in functionality that supports our business model. And like Ashley said, it’s free and it’s super easy to use. QuickBooks is way more complex and I personally don’t manage anything inside of QuickBooks now, it’s mostly our bookkeeper who’s doing all of that. But I think ESSA is a great starting spot if you are the solopreneur, kind of running this by yourself because it gives you the foundation without being too complicated.

Ashley:
And essa I think is great for starting out. If you are doing the bookkeeping and you have no knowledge really of what to do or very vague, it simplifies it as to as an investor, here’s the chart of accounts. If you don’t even know what that means, then go assess it or something similar because QuickBooks has so many options and sessa is a lot more affordable too than QuickBooks. So there’s definitely different options out there for you. One thing that is a huge factor to me is how visually appealing it is for me to look at is sometimes how I choose a software or a database because I want to look at the software and it not be confusing and I want to be able to read it as fast as possible to get the information that I need and then move on to the next thing too. So that’s always one thing I take into consideration when choosing software too. But you can use rent ready. Rent ready has a great bookkeeping software integrated in it too. That would work for all your rentals.

Tony:
Just one last caveat for the short-term rental, midterm rental bookkeeping side of things, and this is actually feedback I got from my bookkeeper. You have to be careful when you’re using the bank deposits to build out your p and ls for your rentals or for your rentals or medium term rentals because those payouts do not include the actual gross booking value. The payout you’re getting is less any fees that Airbnb or VRBO have taken out. So if you really want an accurate number of the top line revenue for your properties, you can’t use the bank deposits. You actually have to use the data that’s inside of Airbnb to say, Hey, here was the top line revenue and you have to manually add in the fees that Airbnb took out and that’ll equal out to the actual deposits into your bank account. So that was one shift we had to make when we went from doing it ourselves inside Acessa to having a bookkeeper who was coaching us through these things. And it makes sense, right? Because if you’re almost short changing what the overall revenue is for your property, if you don’t do it the right way,

Ashley:
Hopefully finding the right software can be a good start for you as to what to do for bookkeeping. Reading the books on biggerpockets.com that Tony recommended, but also looking into hiring somebody to do your bookkeeping. It might not be as expensive as you think. Tony, what was the cost of your first bookkeeper? What is it at like $6 hour or something like that? It was

Tony:
Very inexpensive, somewhere between four to six bucks an hour. And she was great for that beginning phase of our business because all she really had to do was look at each transaction, apply with the right category, upload any receipts. So it was a very simple process. So we found her on I think Upwork and she had an accounting degree in the Philippines and she worked great. She actually still works with us today, but she just kind of supports our bookkeeper with some of the more administrative things, but super inexpensive way to get support there.

Ashley:
So actually in a few days we’re going to be releasing a little crash course on bookkeeping for rookie investors on the podcast. So make sure you guys stay tuned for that episode. We’re going to take a short break, but when we come back we’re going to learn how to find up and coming markets, how to furnish a rental and to get my favorite credit card reward points.

Tony:
Alright guys, so welcome back now Ashley, how about you? What questions from the BP forms are sticking out to you?

Ashley:
So right now I’m in the market trends and data discussions and here’s a good one. Okay, this one is asked by Claudia. How do you know if a neighborhood has the potential of going up in price? What should investors be looking for? Ooh, this is a good question. I recently bought a property that is supposedly in an area that is up and coming in an area of good appreciation where going to rent it out for the next three to five years and then hopefully sell it for a lot more money than I bought it for and put into it. So some of the things we kind of looked at was first we relied heavily on our real estate agent who sold a lot of homes in that area and helped people sell homes and buy them in that area. So going off of her knowledge of that area.

Ashley:
So first you have to have a good understanding of what that knowledge is that your real estate agent has that you’re working with. Because if they’ve never done a deal there or they have no experience in that market and they’re just guessing like, oh, I think this neighborhood will be great, things like that, make sure they actually have knowledge and where they’re getting their data from or their experience from where they’re suggesting this will be a good area of appreciation, but you always want to verify and you want to get into the numbers and the data. So in the real estate Rookie bootcamp, we actually do this for a whole week. We have a session that literally is just market analysis and this is where we’re diving into if this area has a good appreciation or not. So some of the things we’re looking at is growth.

Ashley:
Are there people moving into this area? And one thing to really remember when analyzing a market is defined down to the neighborhood, because if I looked at just the city of Buffalo, it’s going to be skewed numbers because there’s good parts, there’s bad parts, there’s parts that are depreciating, there’s parts depreciating. So you want to really define what your market is. And then there’s great websites where you can actually go and just pull all the information without having to go to all these city websites now. So one is Neighborhood Scout and the other one is Bright Investor. So you can go into these and you’ll be able to pull a lot of data about the neighborhoods. So once you pull the data, looking at the crime, what has the appreciation been in this neighborhood? What’s happening with the industries? What’s happening with retail? Is there more retail coming or retail closing?

Ashley:
Are more restaurants coming? Are restaurants closing along those lines? What’s going on in the neighborhood? Pick a couple neighborhoods comparable in that same city and see what they’re doing. So you have something to compare your data to because you could look at the data of a neighborhood and be like, I think this is good. I don’t know. What does it mean if the crime rate is seven, is that good? Is that bad? What does that mean? And you can compare to other neighborhoods. So maybe there is an area that you already know has already seen great appreciation, go back to the five years prior when it wasn’t such a wonderful and what happened in the next five years that they had the appreciation, growth. And then look at your neighborhood. Are those things happening in that neighborhood? And I think that’s a really great starting point as to figuring out is there going to be appreciation and growth by just comparing the data with other neighborhoods in that city that have seen that appreciation and that growth

Tony:
As you hit on so many good points. And I think one I really do love listening to on the market to get information about these different things, Dave Meyer, who’s the host of that podcast, does a phenomenal job of breaking down the different data points to look at real estate by the numbers. Another book that Dave Meyer and Jay Scott put together, it’s a thick book. There’s a lot of information there, but those are two of the smartest people I’ve ever met in the world of real estate investing. But BP actually just released a tool and it’s the market finder tool. So if you go to biggerpockets.com/find a market, okay, biggerpockets.com/find a market and BP has put together this incredibly useful tool where there’s a map of the United States with different cities and areas, and you can look at things like appreciation, affordability, the population growth, the rent to price ratio, and if they give these write-ups of these different cities in these different locations to help you identify which cities maybe match with what it is that you’re looking for.

Tony:
So if you want a high appreciation market, there is a tool that can kind of help you dig into that. So I always think going back to the data is the best way to know if a city’s going to increase in value. Now there’s also the maybe less hard facts that you can look at if you know that maybe a certain big employer is coming to town. Well typically when a big employer opens up, especially if it’s like a white collar place where there’s going to be a lot of high earning individuals coming into town, okay, well cool, that’s probably going to prop up the median household income in that area. So there’s both cold hard facts you can look at about the historical data, but there’s also that somewhat forward looking information you can use to make some assumptions or some bets on what property values might do in the future.

Ashley:
Yeah, one recommendation is checking out episode 429 where we actually go into how you can use AI to actually analyze your market and to find data

Tony:
Too. Alright, so guys, we love talking about real estate and we love answering questions just like this with our Ricky audience and we would absolutely love it and appreciate it if you could hit that follow button on your favorite podcast app or wherever it is you’re listening. The more folks we get following the podcast, more folks we can reach and we can reach people, good things tend happen.

Ashley:
So Tony, let’s go to your favorite section, the forums, and let’s go to the short-term rental discussions. Is there a good one you see there? You want to answer?

Tony:
Yeah, so I’m in the short-term rental discussions and there’s a question from Chad. So here’s what he’s saying. Any suggestions on which method is a better way to furnish a rental property? I’m debating whether to use a dedicated business account that is funded to ensure proper tax records versus using a personal credit card so I can accumulate points if I maintain proper records. I can’t see why the personal credit card is a bad option. Any opinions? So the first thing I’ll say is that you’re saying, should I use a dedicated business account or should I use a personal credit card? I think maybe a happy middle point, Chad, is just to use a business credit card. So if you already have this LLC established, go to Chase or American Express or wherever and get that business credit card and set that up so it is under your business account and you get those points as well.

Tony:
Now I can say we use both personal and business credit cards in our business, but the personal credit cards that we use, they’re only for business use. So we try not to mix expenses on those cards. So I love the Chase Sapphire card, but we’re able to spend a lot of money on that card through our business from all the different things that we do. So I keep that card even though it’s in my personal name, I use it for business expenses and we’re able to get a lot of points through that card. But then I also have the Chase Business Inc card, which I use for that business as well. So you can use a personal credit card, but the advice that I got is just make sure that if you’re going to use a personal card for business expenses only, run business expenses through it and don’t

Ashley:
See, I wonder if there’s some way that the corporate val could be pierced because it has your personal name on the credit card. And I don’t know the answer to that. I know that I’ve been given the same advice to never mix business purchases and personal purchases in a bank account or a credit card, but I’m about if you are using, even if you had a personal account and you were using that for your LLC, even if it didn’t have personal expenses, it was still in your individual name or for the credit card or how that would work. But I think there’s still great rewards for business credit cards too that you can honestly, I think the signup bonus right now for the Chase business card is actually higher than the Chase Sapphire personal card. And so you can still use those for still, and with the LLCs you can set up multiple cards, whereas in your personal name, it’s reported on your personal credit.

Ashley:
So as you add cards, they show up on your credit report and also Chase does a limit. You can only have five Chase cards in your name or something like that, but with the business ones you can go and open ’em up and they don’t show up on your credit at all that you have all of this debt because part of your credit report is that if you have a huge credit line, you want to see that your credit utilization is actually, I think it’s around 20%. You don’t want your credit utilization to be 30% because that affects your credit and actually decreases your credit. So I know we’re just talking about a little bit of points, a little bit of dip, but if you are actually trying to rebuild your credit, making these decisions of how it will affect your credit can actually make a difference trying to build your credit back up.

Ashley:
So that’s something else to look into too. Then we’re on the business side, the only credit card that if you get it in a business name, it will report on your personal credit, is Capital One. I don’t know if maybe they changed it, but at least three or four years ago that was the way that it was, it would still show up on your credit report. So that’s something else to look into too. And then also if you have different LLCs, you can set up a business card for each LLC and right now with the, I think Inc business is like 80,000 bonus points when you sign up each LLC now and now those points you can actually call Chase and they will combine those points for you. If you own multiple LLCs and have multiple cards, as long as it’s your name that’s attached to the businesses. So I could do a whole episode on kindergarten place and I’m not even an expert. I haven’t flew to Europe yet in first class with things, but one day I will get a reward that will fly me that way, not pay for it. So

Tony:
I think one thing that I see, and we don’t do this in our business because I’m too lazy from a bookkeeping perspective, but I know some people who will run all of their property related expenses against their business credit cards and then use their debit cards or their checking accounts to pay back those cards. And obviously the benefit of that is that these are things you’re going to be spending on anyway. So if you can get points for those, you’re going to rack up the points pretty quickly and we’ve got 30 properties in our portfolio, we’ve got the boutique hotel, we could probably run a lot of points, a lot of charges to the credit card. But the reason I don’t do that is because then someone’s got to go back and be able to say, okay, well this charge was for this property, so let me make a payment from this account on this card, and this charge was for this property, so lemme make a payment on this account from that card. And there’s just so much more admin work that goes into trying to separate those. But the way that we do it is we run all of our actual property transactions against the actual checking account and each checking account is set up separately for each property. So I never have to question was this charged for property A or property B? Because we know that that account is just for that property. So Ashley, what do you think? Am I crazy for not getting all those credit card points?

Ashley:
No, I agree because you would literally be printing out a statement every month and having to mark which one it was or someone in your business would have to go through. You would have to have a folder of here’s all of the charges on the credit card, and when you went and made that purchase, you would have to be marking every single one. This is for X property, this is for X, Y, Z. And that is so time consuming. So there are a lot of things too that I won’t put on a credit card, especially if an LLC doesn’t have a credit card that we really use, but if there is an LLC that has a designated credit card, then I will put the wifi on there, the utilities on there if I can, to be on autopay just to get those little extra points, even though it’s not that much, those little things.

Ashley:
But when we are trying to hit a bonus on a credit card to get the signup bonus, I will. Property taxes, sometimes you can pick property taxes online and they charge a fee, but if you look at it, I just paid property taxes yesterday for a couple properties, I paid ’em online and you could either pay with a credit card or pay a CH, there was a fee for both of them. And the fee to use a credit card was not that much more than the fee was to just have it automatically withdrawn. And at that point it was like, okay, I’m just going to use a credit card, I’ll get the points because it’s not that much big difference in a fee and I’ll get that much back in reward points by putting this, I think it was like $6,000 onto the credit card. But when I do that, I’m super diligent and I literally go and pay the credit card like that same right away so that I’m not having to go back and to actually figure out, okay, what was that expense for? Or whatever. Yeah, so I will do that sometimes.

Tony:
Yeah, more like work, right? But you get more points at the end of the day. So

Ashley:
Yeah, I’m taking the kids onto, we’re going on a cruise with another investor family, Kyle Wilson from Drunk Real Estate and Ashley Wilson who we may have seen around BiggerPockets before, and it’s all paid for with Points Big win. Okay, so we’re going to take a short break and when we come back we’re going to talk about what every rookie needs to know before they start investing. First word from our show sponsor.

Tony:
Alright, Ashley, so welcome back. Now I’m looking at the starting out discussions within the forum and one of our rookies says I’m still building my Sunny Day reserves and just starting my education on real estate investing. What books do you recommend? I start with for my education? I’ve never heard of my Sunny Day Reserves. I’ve heard of Rainy Day, but never Sunny Day. So I like the optimism here. So books to start out with.

Ashley:
Well, maybe it’s not for rainy day stuff, maybe it’s for Sunny Day, like it’s a sunny day, I’m going to hit the boat, and I need my Sunny Day money to

Tony:
Pay for gas for the politic that my Sunny day. So there’s so many good books out there. And then we could probably do an entire episode just on books that we’ve read that we’ve enjoyed. I do think just from a mindset perspective, rich Dad, poor Dad is probably required reading. I feel like that one gives you a lot of the foundational just ideas of what it means to be not only a real estate investor but an entrepreneur. I really do enjoy Cashflow Quadrant. I think that’s another really good book that kind of pushes your mindset thinking to the next level. There’s a few other books that aren’t necessarily real estate investing, but they’re really focused on building a business. I love the book Traction by Gino Wickman, that book itself. I think it can be a little tough to translate down to smaller businesses like ours, but again, I think the framework and the methodologies with things that translate pretty well, but Clockwork by Mike Mitz and a phenomenal book that’s really built for the small business solopreneurs, the people who are buying their first real estate deals. And again, none of what I’ve just mentioned are specific to real estate investing, but I think they do a really good job of laying that foundation of approaching your real estate, investing like a true entrepreneur and not someone who’s just putting down a couple 10,000, 30,000, however many thousands of dollars into a property.

Ashley:
Is anyone else listening upset that Tony didn’t mention any of our own books?

Tony:
I wanted to start with the foundational entrepreneurship books and then we’ll get into all the good BP stuff.

Ashley:
First of all, real Estate Rookie 90 Days to Your First Investment by Ashley Care. And then also if you want to partner with someone, you can find Real Estate partnerships by Tony and myself. So those are two highly recommended books that you could check out. But also one of the beginner books that I really love that I think had great foundations and wasn’t overwhelming with information, it was very cut to the point was Retire Early With Real Estate with Chad Carson. That’s also a BiggerPockets book too. You can find it on the BiggerPockets Bookstore, but that was one of my favorite ones. Then of course, all Brandon Turner’s books are great for getting started.

Tony:
Brandon’s got a lot of great books, David Green, so I’ve read his first, actually it was Long Distance Real Estate Investing and the Burr book, two great books, and obviously one of the most popular real estate books on the Amazon podcast. But guys, if you want to see all the BiggerPockets books that are available, there are lots and lots depending on where you’re at, head over to biggerpockets.com/bookstore and you guys can pick up or at least browse all of the different options that are out there for you.

Ashley:
Yeah, another one that I really love, if you’re going to rehab any kind of property or even just for maintenance on your rental, just having an understanding of what maintenance will cost on your rental is estimating Rehabs by j Scott. I think it’s a great foundational book to have an understanding of the workings of a property and the malfunctions it can have. That’s a great one too.

Tony:
I actually reread that book, or at least portions of it before we did our first big rehab on the short-term rental side. So I browsed through that one and I did the book on flipping houses that j Scott also wrote. And yeah, like I said, I think we mentioned earlier in this episode, but Jay Scott is one of the smartest people that I’ve met when it comes to real estate investing and a phenomenal author. So both of those books are great options.

Ashley:
So Tony, kind of along those lines of books to get started, what do you think is what the most important skill that somebody needs to have or to learn before they actually jump into real estate?

Tony:
It’s a great question, Ashley, and I don’t want to get too philosophical here, but I think it depends on the person because you have to identify where your natural skillset lies, what are you just naturally good at? And then you have to identify what will I actually enjoy doing within this business? Everything else outside of that tight circle delegate to someone else. So for example, say that you are really, really good at the numbers. You can project the income for a flip, for multifamily, for a wholesale deal, whatever it may be, but you are just really skilled in the Excel sheets and coming up with these different projections, but maybe you hate talking to people. So then maybe door knocking and trying to source your own deals isn’t the right path for each for acquisition. And you’ve got to really try and network with wholesalers or agents to help you find your properties right.

Tony:
Now, on the flip side, say that you love talking to people. Say that you could sell ice to an Eskimo, right? You’re just really gifted with the words and you love talking to people, then maybe you can focus all of your time on maybe raising private capital and getting deals directly from sellers. But maybe you suck at managing projects, right? Maybe you can’t hold a budget to save your life. Well now you’ve got to delegate that responsibility to someone else. So a lot of people say that finding good deals and being able to raise capital, which of the most important skills in real estate investing, but I truly do believe that you’ve got to lean into what you’re uniquely qualified and gifted at, and then find ways to support yourself with other folks who can fill in those gaps for you.

Ashley:
Yeah, I think that the thing I would add to that is problem solving and not giving up because I think there’s so many curve balls that are thrown at you in real estate investing. And they could be good, they could be bad, they could be not as bad as you think they are at the moment, but having the skillset to actually, not even the skillset really, but having the motivation to want to solve the problem and not to give up. Making a phone call can change the outcome of a problem. Doing some research, talking to someone, doing whatever you can to figure out what’s a good solution, even if that solution ends up not being the right thing, but you still have the courage to take action and to try to resolve it instead of just being, you know what? I’m giving up. I’m done.

Ashley:
I’m not going to do this anymore. And I think that if you keep trucking on that, it’s going to be worth it for you. But being able to problem solve, I think is a really, really great skill to have when it comes to real estate investing, because you’re not going to know everything day one, and there are going to be mistakes that are going to be made, but what are you going to do about those mistakes? How are you going to learn from those lessons that were created? And next time you’ll know how to solve that one problem. But that would be my biggest thing, is having the understanding. It’s not going to go 100% your way. There will be problems, there will be bumps in the road, but as long as you are determined and motivated, and that goes back to having your why, you should be able to overcome it in some way. And you know what? Maybe it’s not the best case scenario that you have wanted, and it actually is detrimental to you of what happened in that scenario. But you do everything to get yourself out of it. And even if you haven’t made yourself whole, you lost a ton of money, you’re making sure that your family’s still fed, all these things are happening because you’re pushing through. So determination, not giving up and also problem solving

Tony:
Couldn’t have said it better myself, Ashley. And they say that you don’t really fail at something until you give up. And I think so many people don’t give themself enough opportunities to fail in order to find that elusive success. So yeah, I think sticking with it, the persistence is an incredible skillset, and I love that you added that piece.

Ashley:
And I want to add that there are ways that are perceived as failure and giving up, but they are actually solving the problem. So if you’re in the middle of remodeling and you realize this was more than you got into making the decision to sell the property as is, that’s not, in a sense, it sounds like giving up, but you’re solving the problem, you’re getting yourself out of that property becomes before it comes worse for you. So I don’t want to make the statement that, oh, just you got to keep going on the property. You got to keep digging yourself in that hole. If the best solution is to sell that property, make yourself whole and then start over again. That’s problem solving, that’s not giving up, and that’s not failure at all.

Tony:
Well, what a great way to end the episode, Ashley, on such a motivational note. I’m going to start calling you Tony Robbins. Is that

Ashley:
The only time I’ve ever gave anything motivational,

Tony:
I guess? No, it was good. The most

Ashley:
Serious I’ve ever gotten. Usually Tony’s always a good one with the mindset, things like that. I was actually reading off a blog post you had written five

Tony:
Years ago. She had a chat, GPT prompts.

Ashley:
Well, thank you guys so much for joining us for today’s rookie reply episode. If you have questions, head into the Bicker Pockets forums, and you may even get a quicker response than ending up on this episode. But we do love having you guys submit your questions and getting to answer them for you. It helps tons of rookies learn and even helps us learn some things. So thank you so much for those that do submit your questions. If you haven’t already, check out the biggerpockets.com/bookstore. We gave a lot of great book recommendations for you to check out if you are looking for a new read. I’m Ashley. And he’s Tony. And we’ll see you guys on the next episode.

Tony:
This BiggerPockets podcast is produced by Daniel ti, edited by Exodus Media Copywriting by Calico Content.

Ashley:
I’m Ashley. He’s Tony, and you have been listening to Real Estate Rookie.

Tony:
And if you want your questions answered on the show, go to biggerpockets.com/reply.

Watch the Episode Here

https://youtube.com/watch?v=7LZzUja-b64123

Help Us Out!

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. Thanks! We really appreciate it!

In This Episode We Cover:

  • What EVERY rookie must learn before investing in real estate
  • How to save thousands of dollars when furnishing (or renovating) your rentals
  • When to hire a bookkeeper for your real estate business (and how to do it yourself!)
  • How to analyze a market and niche down on up-and-coming neighborhoods
  • Required reading for new investors (and the best skills to learn!)
  • And So Much More!

Links from the Show

Books Mentioned in the Show

Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected].

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

Rookie Reply: What EVERY Rookie Must Learn Before Investing in Real Estate

Transforming a Risky First Rental Into a Profitable Property by Doing THIS

by | Jul 22, 2024 | Investing, News Feed

If you’re holding out for the “perfect” deal, you’ll always be on the sidelines. Today’s guests weren’t afraid to take on a challenge with their first rental property, and it paid HUGE dividends. Not even an expensive market or extensive rehab could stop them from making money and reaching their investing goals!

Welcome back to the Real Estate Rookie podcast! Noreen and Derek Eddy are a real estate investing power couple who took a big risk with their first deal—a distressed, multifamily property that had recently been foreclosed on. To make matters worse, they were forced to turn their renovation project into a live-in flip once their contractor didn’t hold up his end of the bargain. Rather than straining their relationship, this DIY project brought them closer together, and today, the property’s revenue covers most of their mortgage!

In this episode, you’ll learn all about the low-money-down loan you can use to finance your property and renovation costs, as well as a lesser-known strategy you can use to find rare deals in a competitive market. Finally, Noreen and Derek will offer advice on dealing with tenants and how to get along while living under the same roof!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Ashley :
This is Real Estate rookie episode 436. Should you buy your multifamily as your first property, we’re going to find out. I’m Ashley Care. Welcome to the Real Estate Rookie podcast, where every week, three times a week where we bring you the inspiration, motivation, and stories you need to kickstart your investing journey. Today’s rookie investors are a husband and wife duo that purchased a two family home in a very expensive market, but they dove in headfirst, got their hands dirty and did the hard work for a bigger, brighter future. Today on the episode we’re going to discuss how they acquired the deal, what you should know about a 2 0 3 K loan, how to do a live and flip, and how to deal with tenants when you live under the same roof. So Noreen and Derek, welcome to the show. Thank

Noreen:
You. Thank you for having us. Hi, thank

Ashley :
You. So to kind of jump into it, Derek, I heard that before you met Noreen, you had already bought and sold your first property, but then you started renting again as a renter. What made that decision happen?

Noreen:
Yeah, good question. So I went in a single family home as a four two with my cousin, and it was during the time when Obama was giving out that $8,000, $10,000 tax credit. It’s for a first time home buyer. So we took advantage of that. It was a distressed property. We rented out two of the rooms to college students, so it was like 500 a room, and we were on the hook for 1181, and that doesn’t include taxes. So my uncle said, this is the cheapest you’re ever going to live. Well, surprise he was wrong, only by a little, but he was still wrong. So we did that. I think it had to stay for three years or four years. And the four year mark, I just decided, okay, let’s part ways while family relationship’s still good because that’s more important than a deal or that type of thing. And I started renting again and I moved in with my sister and we rented for a year. And as I was paying the rent, I’m like, this is a lot worse than owning and having the income. The opposite

Ashley :
In what was worse about it? Was it more just the mental aspect of I’m giving somebody else my money and I’m not getting equity? Or was it you’re submitting maintenance requests and things aren’t getting done? What was kind of the reasoning you decided you didn’t want to do that anymore?

Noreen:
Yeah, that’s a good question. I would say equity because every time you make your payment, you’re paying a thousand bucks, but you’re getting back 800 just to pull a number, 600 bucks. So when you’re paying rent, you’re not getting anything back that’s going all to the landlord. And now that we’re landlords, we see that side of it even more clearly. It’s kind of hidden when you’re renting that you’re paying like, oh, I’m getting something, a place to live. But you are missing out on that, on the equity

Ashley :
Building then. So had you met Noreen at this point when you decided you’re going to go and buy your first property or your next property, I should say Sue

Noreen:
You? I think so. Yeah. I invited you over. Yeah. Yeah. I had seen the house that they had and shortly after we met Derek wanted to sell out of it, and I was like, why? You are living for nothing here I am living in Astoria, which is a great neighborhood, but I’m paying rent in New York. Everyone I know would rather own something than rent something. So I was like, what are you doing? But it turned out that was in our favorite eventually because we were eventually able to get the loan that we got later. But for a while I was like, why would you sell out of this? But it made sense in the long run.

Ashley :
She’s like, this is why I am dating. You own a house.

Noreen:
Yeah, I know. I was like, why are you going backward? Yeah. But after we met, I think after we got married, I think we started talking again about investing and home ownership. We started our married life renting because we had to start somewhere. So we started renting and we very quickly said, let’s get out of this as fast as we can. Thankfully we had the finances to buy a house and we said, let’s buy a house. And then we started listening to, well, I should say Derek started listening to BiggerPockets before I did. Yeah. So we were renting an apartment in the city. It was like 1400 a month. One bedroom had two windows, which was nice. You could get across base. We had a corner, some of them you just don’t get that. And every day was 45 minutes on the subway into the city.
I was working in the city at the time, and we did that for a year, and the 45 minutes was a great time to listen to podcasts. So BiggerPockets, I listened to do Roller was another one that I listened to. There were a couple, I was kicking around just investing, what are people doing? And one day at lunch, I’m talking with Noreen on the phone and she’s like, what do you want to buy? And it was like pulling teeth for me. It’s hard for me to say what I really want. A lot of the times, for some reason, opposites attract because I’m really, really vocal about what I want. She’s like, what do you want? I said, what do you want? And I was like a multifamily. It just came out with that and it was the truth. And here we are.

Ashley :
So what were some of the things you did to prepare yourself for investing in multifamily? When you splurged that out and you decided, okay, we’re going for multifamily, what were some of the next step you did to actually be able to take action on a multifamily property?

Noreen:
Well, either way, you’re buying a house, so you need to take the action that you would if you’re going to buy a single family house or a condo or whatever you want to live in. So we got our ducks in a row financially and found a realtor and put aside our down payment in a nice account that we wouldn’t touch. And then the location. So one of the biggest things for us was we wanted to be able to go into New York City where Noreen’s work is. And so we said 10 miles, 10 minutes, 10 minute walk to a train station that has access to the city. And that really limited, that settled no to a lot of stuff, which makes it a lot easier to look when you’re not looking through thousands of listings, you’re only looking through hundreds or however many, a lot less.
It’s easier and then you can say yes more easily. And we also, we had looked around Queens in our neighborhood that we were living. We were living in Woodside. It’s a fine neighborhood. I had moved from a story to Woodside and we realized for our, we could get a studio co-op in Woodside, Queens or we could swing a multifamily house in New Jersey. So we were like, well, I said to myself, Noreen, you never thought you’d say this, but you’re going home to New Jersey from here. And my parents long ago moved out of the city and got a house in suburbia or whatever, and I was like, oh, bridge and tunnel. Here I go, but as long as I have a train, I said, as long as I have a train and a bus, I actually have a train and a bus. I said, then I could do it.
And we would hop in the car with your mom and she would drive us around to a couple properties and as we’re going, the value was kind of like, it’s going to be over 300,000. I was used to it, like 1 50, 200, but then just looking to, you’re going to get something that’s not really that great, not turnkey, you’re not moving in. Oh, this was not a turnkey situation at all. And these are 2016 numbers for anyone who’s listening and saying, oh, 300 grand in New York. Well that’s a deal. Now eight years ago, that’s a total steal right now. Tell me if you find one please. So the other thing we did is we looked at what are the taxes in the different towns that we’re looking? Because in New Jersey, our property tax numbers are quite high. I think they’re highest in the nation still 12 grand a year to 20 grand, 24 grand a year, especially in a multifamily, right?
Because it’s a bigger property, you get more. So we xed out all the towns for the highest taxes and we xed out all the towns that we wouldn’t feel comfortable in for safety reasons. And we xed out the towns that didn’t have a train in both directions at all times of day. And we ended up in three neighborhoods and we narrowed it down to where we wanted to go and we said, that’s it. And we’ll say no to everything else. It was like Lindhurst, Garfield, Lynnfield, a government subsidy for taxes here still is just trying to drum up industrial workers.

Ashley :
Yeah, what a great roadmap you guys just put together For somebody who’s looking to buy their first property but doesn’t know exactly what neighborhood they want to be in is to like, okay, you could say you want to be in Buffalo. Okay, there’s lots of neighborhoods just like in every single city, that’s not niche enough. You need to go in deeper and exactly. We did take a map and just X out as to like, okay, not here, not here, not here and putting that in. But also you guys did a really good job of defining your criteria of not only just the market, but you wanted a multifamily, you wanted it 10 minutes walking within a train station and how you said, instead of looking at thousands of deals, we were looking at a hundred. And when you limit the amount of deals you’re actually, or the amount of leads I should say you’re looking at coming in, you can spend a more quality time analyzing those deals because you’re not overwhelmed where there’s something that you guys discovered in your listing where maybe if you were inundated with a thousand leads, you would’ve missed it.
But what was that one thing that was listed incorrectly on the house that you ended up purchasing?

Noreen:
Oh yeah. So we were finding properties faster than our realtor was because we are our own client. He’s busy, he’s busy, he’s popular, he’s a nice guy. So we found our property listed as a single family on HUD’s HomeStore, and it’s actually a multifamily. So if you’re searching, don’t search your criteria too niche because you might be eliminating something by accident. That’s actually the thing for you. Often people will reverse bedrooms and bathrooms if you’re looking for a three, two, sometimes they’ll say it’s a two three or something like that. So just a little quick tip. Sometimes it’s just listed wrong

Ashley :
And that actually happens quite common. I’ve heard lots of stories as to something that’s listed as an office, but it super easily has maybe a closet on the other side of it. You just have to put the door to the other side or something like that, that there’s even not listed incorrectly, but opportunities within the home that you don’t see in the pictures unless you go and actually walk the property. So you found this on the HUD website. Can you explain what this is?

Noreen:
Okay, so the hud HomeStore Housing and Urban Development I think is what it stands for. I’m sure somebody on the internet will correct me if I’m wrong. So it’s a government website and it is very much a government website in that regard though. They did have a nice update recently and it is a listing, you can search listings on it. They have other programs that they have on their website, but you can search listings on it. And these are HUD owned government owned properties that are foreclosed upon. So they’re foreclosures of somebody who had a government loan and they didn’t pay it, and now it’s for sale. So a lot of these properties are distressed. A lot of them have been uninhabited for a year or two or five or 10, who knows? And they were unloved and not cared for because the people who didn’t have the money to pay their mortgage are also the same people who didn’t have the money to upkeep the property.
At least that’s what we saw in our property. Maybe not for all at HUD houses, but that’s what we saw for ours. The nice advantage if there’s an advantage on a HUD house is that they’re often open to owner occupants first. So on our property, that was a five day period. It can vary. I dunno what the rules are now. They changed them a lot, but for us it was five days. So it went up on the market on a Wednesday and the bids were due on a Monday and we saw it I think Thursday night we found it and we looked at it on Saturday and we had to get our bid in by Sunday night because on Monday it opened up to investors. And when we say investors, I mean like piranhas in our neighborhood because this, we’re in a multifamily universe. This is a multifamily neighborhood.
There are a lot of people around here who know how to fix a house and fix it quickly. If we see a house that’s like a little bit ignored around here, we’re like, oh, next week it’ll be two. And it really is. People are tearing down houses, building up students, contractors live here. So being owner occupants, we were able to bid before they all got here. We did a funny game game. Your dad’s like, we all sat around the dining room table and he’s like, everyone write down what your bid would be. And we folded it up and put ’em into a hat and then we pull them out just for the fun of it. Because if we didn’t win on Monday and no one ever knows what’s the magic number that HUD wants? If we didn’t win on the Monday, we might lose our chance. So we bid a little healthier than I think I would in retrospect. But the other thing is we were pushing up the end of our lease and we didn’t want to continue renting. And we said, look, the difference in 27 grand on our bid is like 30 bucks a month on our mortgage payment. And we were like, we can totally swing 30 extra dollars a month on a mortgage payment to get this house, get the house the object. The game was just get the house as soon as we could.

Ashley :
So whose number was it that you actually put the bid in? Who?

Noreen:
I forgot what it was. I don think my dad bid high. So he was out. We were like, we’re not paying over 300 for this house. We followed some guy online. It was okay. So the day the bid, we went home and when I tell you we read everything available on BiggerPockets on, I think this Invest four more has a great resource on HU Houses. We read our faces off about how to bid in this process. We knew nothing about it. So I said, look, reading’s free, let’s find out what we can. And we did, and I think it was my number that we settled on. 2 87 5 was where we settled. And then the 2 0 3 K,

Ashley :
Well, we’re going to take a short break first. Before we get into that, I really want to hear how you guys manage the renovation on this property once you close on it. But first let’s hear a word from our show sponsors. Okay, so welcome back. We’re here with Noreen and Derek talking about their multifamily purchase. So they just got it under contract, they got the winning bid and now they’re ready to get their 2 0 3 K loan. So Derek, do you want to explain what a 2 0 3 K loan is? Sure,

Noreen:
I can take a shot at it. Noreen knows more, but please

Ashley :
Then Noreen, you take this question.

Noreen:
It’s okay. I mean the basic concept is thank you, thank you. You can’t move into the house because the water heat isn’t available, so there’s no certificate of occupancy. You have to fix up the house enough so that you can move into it and it becomes livable. So that’s the premise of this. And then it allows you to take out your loan or your mortgage. It’s a construction loan on top of your mortgage is the short thing. So if you just bought a house and then said, oh, I need to take out a construction loan, you’d probably get some 15% rate or 20% or whatever construction loans go for now, which is probably astronomical. But your two or three K is the same rate as your mortgage. It just becomes part of your mortgage. So our rate at the time I think was 4%. I’m sorry, anyone listening? That’s not what rates are right now. So our mortgage and our construction loan altogether came to, I think 3 0 8 was the number. So we bid at 2 87 0.5 and then our 2 0 3 K cost to fix our house came to 3 0 8 and all of that was part of the mortgage.

Ashley :
What are some pros and cons of doing the 2 0 3 K loan through your experience of the process?

Noreen:
Wow, I just had a lot of emotions surged through my veins listening to that question.

Ashley :
Would you like to vent right now about the process?

Noreen:
I mean, I’m not going to mention any names about our contractor. So the pros, okay, so the pros are you can get a house that if you don’t have the cash to pay for an uninhabitable house, you can still get your house and you can mortgage it. So this is a house that ordinarily was uninsurable. This ensures that you can get the house and you can get insurance and all that good stuff. Big con is that there’s a lot of paperwork and it’s tear your hair out kind of paperwork and your contractor has to do a lot of it. Some contractors are very good, some contractors are not very good. We actually had a contractor who knew the paperwork, but then he knew his toolbox. So I don’t know which is better. We ended up basically fixing everything he touched in our house, but we got into our house in six weeks and for two or three K stuff, that’s actually pretty quick.
We had the laundry list of things we had to fix included both boilers, both hot water heaters, windows a roof, a portion of the roof. There was a staircase with a three foot drop to the side door that had no stair, I mean it was really truly an uninhabitable house and we could not turn on the water at all in the whole home buying process. So when they say like, oh, we need to test the water pressure, we’re like, can you do it? And they were like, Nope. So we’re like, all right, let’s just assume we have to fix all of the plumbing in the entire house. And that’s what we did eventually. We’ve pretty much done every inch of it.

Ashley :
And how did you guys go about estimating that rehab cost when you’re sitting at the table writing out your bids? Did you have an idea at that time what the rehab was going to cost and base your numbers off of

Noreen:
That? So the contractor did that. Okay. And I will say he was pretty accurate other than a leak or two that they didn’t foresee. He did do that. And they do make you do a 10% contingency, which is I think a really good idea no matter what kind of rental you’re doing is to add 10 or 20%, but 2 0 3 K makes you do 10 to your top number. So we ended up using that 10%. That’s what it’s for, right? For something unforeseen. So the con is definitely the paperwork, but the pro is that you get the house.

Ashley :
Six weeks is pretty good to do a full house rehab

Noreen:
Now, hold on now, hold on. Six weeks got us in the door like eating Chinese food on the floor next to the one working heater we did. This was not a Joanna Gaines renovation. Okay, let me curb expectations here. We were not screaming, clutching our pearls saying, oh my gosh, what a beautiful house. We were saying, oh wow, it’s nice and warm for the first time ever in this house. Well, plus even with the negatives of a contractor that wasn’t great with tools, he did hire subs that were great and we made, somehow we got his phone number plumber and he was star in fixing things that were beyond well, Noreen’s a carpenter, fifth generation carpenter. So he skills that maybe were less, he didn’t want to do them or it was electric. Getting those contractors that are good and you look at them and you say, you did good work. I’m happy to pay you and I want you to keep working on this or work on the next property. Yeah, we definitely got his, literally it was like whatever dating tactics people use to get someone’s number. We were all about that with our plumber. If he wanted a cup of coffee, I was like, Hey, do you want another cup of coffee? Yeah, we’re on it.

Ashley :
So you mentioned that Noreen’s dad was a carpenter and has contracting experience. What about you two? Did you have any knowledge of construction and going into a rehab and what to expect the

Noreen:
Process? I would say generally, no. I mean Noreen grew up with it. It would be a weekend and eight o’clock in the morning and the hammers are going. So she had more experience, let’s just say that way than I did. Obviously I’ve got the strength or whatever and quick to learn. So happy to help and learn as you go. We ended up doing drywall ourselves and doing some of the plaster and painting actually quite a bit of it later on our floor. You just put everything. Yeah. So you start to see it and you get exposed to it and you’re like, wow, this isn’t really that hard. This isn’t rocket science.

Ashley :
Did any point in time that put any strain on your relationship of like, okay, you’re going and moving into a renovation together, you’re having troubles with your contractor. At any point did this cause any strain and what’s your tips for any couple that’s going to be living in a renovation? Well,

Noreen:
You have a lot of stuff on making a makeshift kitchen. When you’re redoing your kitchen, you aren’t cooking in it. I think it brought us together more than it strained it. You can take an adventure and I truly think this is an adventure. This house, you can take it and say, oh my gosh, it’s going to be so stressful. I just wanted my nice house. Or you can say, look, we are newly married. Right? At the time we didn’t have kids and we said, this is going to be interesting. We’re going to have fun with this. We’re going to take it like an adventure. So when I tell you for the first week we lived here, I washed dishes in my bathtub and bathroom sink. I sure did because we had six sinks and only one of them worked or whatever. And you just say like, alright, this is temporary and I’m with my favorite person that I would ever do anything like this with. The only thing crazier I think we’ve done is have children.
And I wouldn’t have it any other way in terms of tips for other couples, I would say hold hands and do it together. Even if you don’t know what the heck you’re doing, find people who do say yes when they offer to help you. Go help other people and you’ll figure out how to do this and you’ll learn about how houses and on the days that are long and you’re literally covered in plaster. And I think there was one day Derek looked at me and he was covered. He was sanding, drywall, and he looked like a zombie. He looked like a zombie. And he came in and on the radio our wedding dance song managed to pop up. And I just looked at him and started crying. I was like, this is, here we go. It’s in the weirdest, craziest way. It’s kind of a dream come true right? Here we are. We’re doing life together. That’s what we said we would do. So any couple, find your common values, start there, draw on that and do life together even when it’s crazy

Ashley :
Messy and living in a rehab.

Noreen:
That’s it. That’s it. So

Ashley :
Let’s kind of wrap up that property as to how long did it actually take to finish the rehab? Did you refinance the property and what’s the final numbers on the deal? So

Noreen:
We renovated the second floor first. We’ve closed on the house in October of 2016. We had the second floor kitchen bath and the rest of the apartment done. We gutted the kitchen and bath and one bedroom and then fixed up the rest of it. And we had it rented out by June of 2017. At that point, we refinanced in September of that year to get out of our PMI. So we only put three and a half percent down. It was an FHA loan that was 10 grand, but we were paying over 200 bucks a month on PMI because of the low down payment. And the only way to get out of it was to refinance some situations. You can pay your way out of PMI In this situation, on that particular loan, we could not. So the only way out was to refinance and we said, heck yes, that’s what we’re going to do. So we did. And then in 2020 we refinanced again just because rates were so low and we took advantage of that. We were so early in the loan that Derek did all that math and it made good sense. Yeah.

Ashley :
Yours. So you got 4% on your first loan. What was the interest rate on your second loan to make us all scorer?

Noreen:
I think it was 3.65 on the second loan, and now we’re down to under three. We’re at 2.95 right now, so I’m so sorry. Anyone who’s shopping right now, but it was 2020, we refinanced in our shed on the pouring rate. It was a very 2020 thing to do.

Ashley :
And then just recap for us real quick, what was the purchase price, the total cost of the rehab, and then what is the property worth now?

Noreen:
So we purchased at 2 87, 500. Add on to that, the 2 0 3 K, that first loan was at 3 0 8. The purchase price total was technically 3 0 8. We spent probably between the second floor and we eventually did our first floor and some other things. The exterior, oh gosh, our mason made a lot of money. We eventually spent probably about 115 grand on the house from top to bottom and that does not include all the sweat hours and all of the friends that we had a lot of help, we had friends come and help us paint. My dad was here all the time. Yeah, Noreen’s like for my birthday, we’re doing a demo smashing party. I’m having a birthday smash, emphasis on smash, who wants to come? And people like my brother and sister-in-Law, shout out. They came and my dad was here and his buddy Frankie was here all the time helping us tape. And Derek’s cousins came down. We have friends help us paint so. So all of that does not included in that one 15, right. Our plumbers gone to Disney World quite a bit.

Ashley :
And what do you think the value of the property is now today?

Noreen:
So we can officially say we reappraised in 2020 at five 70. I would say it’s healthily above 600 by this point. A two bedroom house very close to here, just went for seven 20. And if you paid that for that house, please tell me who you are. That’s a lot. It’s a lot. It’s a lot. The market’s gone crazy here. Yeah, it doesn’t make any sense, but we’re not mad about it.

Ashley :
And what about your living costs now? So you’re still house hacking in the property?

Noreen:
Yes, we are.

Ashley :
Okay. So what is the other tenant paying in rent and what do you actually pay a month to live in the property?

Noreen:
There’s a little bit of a story there. So we started renting at 1800, which was 17, 1700, 1700 in 2017, which is awesome. And one of the mistakes we made was we kept renting at that rate. We were like, wow, this is great. Look how we’re living. And then when we decided let’s start upping it, it felt weird because it was the first tenant that was still living there. It was like, why are you changing this now? So there’s a little bit of difficulty with that. I was reading stuff and seeing things online and it’s like this is a business, it’s not a charity, so you kind of need to do that and it’s okay to get turnover because of it. So there was a little bit of a mind shift. We’re like, okay, so now we consistently do something, bump that rent up a little bit.
It seems like a lot of folks who are in this, they’re just like, should keep the tenants less turnover, less work and a couple less dollars. But now it’s up to 2100 a month. We originally charged ourselves rent as just a way of keeping our finances organized. We’d move money over to our rental account. We originally charged ourselves around a thousand or 1200 just to build up a fund, like a separate account for the house capital for capital expenses and maintenance. And we’ve had to use it. So we keep that money aside. But now we’ve been nice to ourselves now and we’re kind of enjoying the fruits of those labors. And now we charge ourselves 3 43, but really we only have to come up with 43 bucks. Yeah, it’s amazing. It’s kind of nice.

Ashley :
Well, we’re going to take another short break here and when we come back I want to talk about managing your tenant while living under the same roof. Okay. Welcome back everyone. Thank you so much for taking the time to check out our show sponsors. So Noreen and Derek, you’ve rented out your property now. What has the experience been like, house hacking with your tenants living now you guys in the first floor or the second floor? We’re

Noreen:
On the first

Ashley :
Floor. Okay, so your tenants living above you?

Noreen:
Yes, with our tenants living right upstairs. I will say for the most part it’s been a positive experience. Everyone has their horror stories and we have them too about tenants and just house hacking goes. But those days are very, very few compared to all the good ones. I’d say there’s maybe five days I can really say like, ah, I wanted to put my hair out. And all the other several hundred thousand are pretty good in our experience, in our experience. Now I will say tenant choice is everything. Tenant choice will likely make or break your experience. House hacking, if you’re thinking about house hacking to anyone listening, be prepared to have to wait for a good tenant because there’s no undue button. It doesn’t work like that with tenants, especially not in New Jersey where it’s a very tenant friendly state. Depending on your area, you might have a little more leeway than people on the east coast do.

Ashley :
So what are some of the things you guys actually put into your lease agreement to set that expectation of these are the way things go around here, but in a nice way?

Noreen:
So actually Bigger Park was a really good resource. There’s a really a nice post somewhere about making a battle ready lease or something. And we definitely drew on that. No waterbeds, I wouldn’t have thought of that, but who needs a waterbed in the second floor unit above your head? Just stuff like that. There’s things that I wouldn’t think of but somebody thinks is normal and that person might be a renter. We also have stuff about when it’s okay to contact us. And that was hard learned. Not hard earned, but hard learned because we had somebody banging on our door at two in the morning for something that really was not life-threatening.

Ashley :
So what is your actual rule for that? I’d love to hear. I

Noreen:
Think it’s 9:00 PM to 8:00 AM Unless your life is in danger, please just wait until the morning to call. It needs to be a real emergency. It needs to be a real life threaten emergency, not something that technically could wait until regular normal hours, but if you’re on fire, please let me know. I’ll help you out

Ashley :
Or call 9 1 1

Noreen:
Or yeah, do that. Right. The landlord is not like, I’m not your mom. You got to take care of yourself at some point.

Ashley :
And then what about having any kind of documentation instead of just your tenant constantly coming over and knocking on your door and saying, Hey, can you take care of this? Or Hey, here’s my rent. Do you have any kind of set standards as to this is the process you have to follow to submit a maintenance request or to pay your rent? Yeah,

Noreen:
One thing we learned with our first tenant, we had them come knocking on our door and give us the check and we found that that often came with a story or we’re a couple hundred short and the paycheck next paycheck is Wednesday. Is that okay? And when we start doing that, we realize that you’re legally start getting into some trouble because you allowed it before. Why aren’t you allowing it now? And how come you’re not extending it further or whatever the issues are. The landlord’s legal value is a book that we were referencing. Great book. So prompted us to switch over to Cozy, which is now apartments.com, to get payments. All the payments are online, we don’t have to be home to get them. We could be on vacation in Florida or elsewhere and we can see is this payment coming in or is it not?
And then you want to speak to it. And also I think taking online payments is a really nice buffer between you and the tenant for some reason. It just makes it less awkward when you’re dealing with money. Money’s emotional for a lot of people. Overdrafts it a little bit late, overdrafts it’s late. You can add it more easily. You can automatically set a late fee if you need to and say, well, I’m sorry, tomorrow it’s going to charge the late fee. Right? It’s the machine that’s going to charge it. I’m not. So while it is, we are the ones that set it up, but it helps us follow the lease and not get emotional about it. Especially when they’re people that you know, you see them when you check your mail and their kids’ names and

Ashley :
And I’m telling you face to face, this is a nice situation. It’s a way harder to not have some empathy.

Noreen:
And the other thing I do is I’m kind of the main contact because I don’t work full time. So I am the one that does the interfacing with the tenants and it’s either text or email. So it’s in writing, I can see when I can see what it said, I can reference it back. I can rough draft what I need to say and then edit it if I need to. I can run it by Derek before I send it. God forbid it ever comes to something legal or serious, there’s a whole paper trail. And that has been I think really good. And then somebody can’t say, oh, I told you five times about this. Well, if you really only told me once about this and I’m fixing it literally as we speak, then I’m fixing it. So back off,

Ashley :
I love the documentation of getting things in a text or an email. And if we do have tenants call, our VA will add an activity into their tenant portal page saying, so-and-so called at this time, this is what they said, or this is what the conversation was, makes a note if there needs to be follow up, whatever. But I also do the same thing for contractors too, is everything written. I had a roofer that asked, Hey, can you just call me because there was an issue with the building permit. And I said, no, please continue an email with everything and I would not get on the phone with them. I said, no, I prefer to have everything in writing, please. Let’s just continue the email communication. And I understand that it is easier sometimes to just get on the phone or whatever, but I do prefer having everything in documentation so that you can go back and reference it. Especially if it is something that is already an issue. You want to have everything in writing in case it goes to litigation or whatever. But there’s been countless times where I’ve been able to scroll back and screenshot and be like, actually, here it is. Here’s what you said.

Noreen:
I hadn’t thought of that for contractors. That’s a really good idea. So

Ashley :
Along with Cozy that you’re using, which is now apartments.com for your property management, are there any other tools or software that you’re using to manage your property right now?

Noreen:
Excel?

Ashley :
Yeah,

Noreen:
We’re basic. Look, we have one property, right? We’re not scaling. I know you have 10 or something properties, right? We don’t have that many. Right? So for now, for us, Excel makes sense to us and that’s how we manage our property budget and all that kind of stuff. But it’s pretty basic. And

Ashley :
Is that how you’re doing your bookkeeping too, is just tracking it in Excel with the budget? Yeah,

Noreen:
From my line of work, I’ve always had to track my expenses. I’m in the arts, I’m a model, so I’ve always had to keep my receipts and track when did I spend this and how much was it and what was it called, where does it classify? So I’ve just transferred that into real estate.

Ashley :
So with living next door to your tenant, do you have any crazy tenant stories that you’d like to share with us? And sometimes on this episode we do a horror story and not to scare people out of real estate and busing, but to entertain, but also so that if this situation happens to them that they know exactly how to handle it or at least what to expect. So it’s not as scary of this scenario if it does happen.

Noreen:
Yeah, we’re laying in bed one night at nine o’clock. Actually there are a few stories, hold on. It’s April of 2020. I am sick. I am sick. I’m very, very, very sick. I was super, super, super sick at the very beginning of Covid and I probably had covid, but I was so sick that I couldn’t do anything about it. Knock comes on the door and Noian wakes up first and she’s just recovering whatever. And I’m like, I’ve been reading stuff like Lou Brown Trust. You don’t have to, if someone knocks once we answer the door, then you’re answering the door, but you don’t have to answer the door. So I’m like, let’s not answer. It’s two o’clock in the morning. We don’t have to answer the, well. Also, there’s only one set of people that have access to our apartment door. Our house has a front door and then there are apartment doors behind it.
There’s only one person that this could be, you’ll never guess, but this was a really solid knock. I was like, I don’t think that’s our tenant’s knock. That’s a professional knock. This is a professional knock. And I thought to myself, maybe I should answer it. And then I thought, oh my gosh, Noreen, don’t do that. That’s so mean. You are totally sick right now and there’s a pandemic raging outside of your door that would be terrible if you’d answer this door. So I looked at my phone and sure enough it was our tenant and I said, I’m very sorry, whatever it is, I’m not answering the door. I don’t want to get you sick. And they said, it’s the police. The heat is out. You need to do something about it. And I thought to myself, well shoot, if my heat is out, I’d call a plumber, not the police.

Ashley :
So they lost heat. Did they have any contact with you at all that maybe you were sleeping and missed the text or whatever? Did they even try to communicate with you first?

Noreen:
I think they might’ve texted once or called once, but I didn’t hear it. I keep my phone off at night,

Ashley :
But they didn’t come down and knock at all apparently. And they called the police. Wow. I can’t believe that the police would actually respond.

Noreen:
That’s what I said. They have better things to do and bigger fish to fry at two o’clock in the morning during a pandemic.

Ashley :
I just can’t believe that. God, I hope none of my tenants are listening. I mean, our plumbers are great responders. They get there really fast.

Noreen:
That sounds something else. We put in our lease. If you have a maintenance request of any kind, please give us 24 hours before you start taking further action on and do it yourself. Just give us a second and let, maybe we need to go get a part.

Ashley :
Well, exactly too. And if they were the homeowner, they’re not going to be able to get anyone faster than you are most likely, unless you really are dragging your feet. But yeah, I think that’s one of the difficult things about being landlord is you do have to set that expectation of what is a reasonable time for this to be fixed. And I have learned that having a lot of communication with your tenant, if something is not being fixed, like communicating why, you know what? I’m so sorry. There was actually an emergency at another property. I’m going to do this for you. In the meantime, whether it’s take money off their rent or maybe their fridge broke, I’m going to drop off, have somebody drop off a cooler with ice or whatever. Having that communication and offering, a lot of times just taking some money off their rent is just, or giving them a little rent credit goes such a long wait and it’s worth it for them to not get super disgruntled too.

Noreen:
And it’s just how would you want to be treated? We actually had a fridge go upstairs and for our renter, we let her put her freezer stuff in our freezer downstairs, and then we said, here’s a $75 grocery store gift card to the local grocery store. In the grand scheme of things, that’s not that much money to keep someone happy, like you said. Yeah. And we like the concept, or at least I think we like the concept of have touches or interactions with them that aren’t only negative. So when you see them say hi, ask how the kids are doing when they first move in, we give ’em a gift basket of just some treats and things, and our tenants have given us gifts so that way it’s not like, oh, the water went or the lights aren’t out. And it’s always a negative, negative, negative. It’s like that’s not a relationship. Even though it’s a business, not a relationship, it’s still when you’re living with them, they’re still your neighbors,

Ashley :
But they’re still a client, they’re still your customer. That’s

Noreen:
It. That’s it. They pay their hard earned money to us every month. It’s like Derek said, putting something into that emotional piggy bank so that later you can draw out of it is always a good, it helps. Did

Ashley :
You guys ever consider not disclosing that you’re the owners of the property and just saying, pretending maybe you’re another tenant there, or maybe you’re just the manager of the property? Did you ever consider doing that?

Noreen:
I came across it. You read a lot of stuff online and people are like, how do you do this? Even with the lu round, like I was mentioning in trust, and it’s like you can kind of hide in the back. The general feeling, especially since we live in the house, is you can’t really hide. You feel like integrity. What are you hiding from Being a landlord is responsibility. That’s the word I would choose for landlording. So you kind of trying to shirk that responsibility. It’s like, well, maybe take a look at why is that interesting to you? What are you running from, what are you trying to hide from why you want to, is it that you don’t want somebody bothering you? Well, where’s the speed bump in that? Right? So let’s find a way through that. We don’t want people bothering us after nine o’clock. Our kids are sleeping now. Right? I personally like my sleep too. So find a way around it. Find a way through it. So

Ashley :
You set that expectation. Yeah. In your lease agreement.

Noreen:
Yeah. I don’t think I would do that. For me, honesty is the best policy and it’s, it’s easier in the long run to be honest about it.

Ashley :
Yeah, I was just curious about that because I think that a lot of people choose different ways how to handle that and what works best for them. But yeah, I think that’s a great point as to you can find ways to say that you are the owner of the property and still set those policies in place so you aren’t bothered. And if you are a decent human being and a good landlord, then there should be no reason that you don’t want them to know who you are. Well, Noreena, Derek, thank you so much for coming on to the Real Estate Rookie podcast. We really appreciated hearing your stories and your success with your multifamily property. What is next for you guys?

Noreen:
What is next? We don’t know. We don’t know. Well, I will say before we go, I do want to say we’ve been documenting our journey at our blog R two family, so R two family.com. If anybody wants to see the pictures of our renovations or what we have to say further about being landlords and how we live for cheap, that’s 2 cents right now. We are kicking around different ideas of possibly moving and we’re kind of waiting on God a little bit to just see where he’s going to lead us. We did that with this house and it paid huge dividends, so we’re not in a rush, but we are keeping our eyes open for what the next deal is, whether we sell this place or keep it and get, we got a couple of kids, we like to have a little bit more space. The city’s a little tight, so we’ll see what happens.

Ashley :
Keep it in, rent out your unit with your nice low interest rates.

Noreen:
Yeah, yeah, yeah. The idea of another mortgage right now is, but the nice thing about this situation now eight years later is that we have options and options. I didn’t think I would ever mean ever come across in terms of the amount of equity that we have in this house. I don’t think I ever considered that the rent would go up. Over time. I thought, okay, that will be our mortgage payment and our taxes will go up and we’ll just keep pace. And it’s not like that. Unfortunately, our taxes did go up, but So did the rent,

Ashley :
But your rent increased more rapidly than the property taxes said. Yeah,

Noreen:
Correct. And we did. In retrospect, looking back, we can say, wow, we really bought at the right time before the market got really hot. It was hot, but it got really, really hot in 2020, especially around here. And it continues to stay because New York is itself and people are moving out of the city as people always have. After nine 11 people moved out of the city back in the eighties, my parents moved out of the city. People always do, but the nice thing is that, like I said, we have options and I didn’t think we’d be looking at these options as early as we are.

Ashley :
And do you attribute a lot of that to house hacking on this multifamily deal?

Noreen:
Absolutely. Yep. Taking action. Yeah, taking action out of right away. When we’re looking, it’s like, how did we buy this place? Because how do you buy the next one? It’s a little bit of a mystery still to me. I’m like, when do you actually pick up the phone and say, okay, we’re serious and we’re looking. Now you can look and look and look and look and look and look. So we’ll see.

Ashley :
Congratulations on your success. And it’s really inspiring, I think for a lot of people to see that this can be done, especially in New Jersey market. And

Noreen:
I have to say this, you have to believe that it’s going to happen. You have to decide that this is what it is for you and that it is out there for you. We could have shopped forever and said, oh, well, I guess there’s not a two family house for us, or maybe this is never going to happen for house hacking. But for us, it did happen because we believed it would be. And when we saw this house, I knew in my bones it was ours. And when we put the bid in, I said, I don’t care what that number is, I know it’s going to be ours. And on Monday morning, I texted our realtor. I said, so. And he’s like, yeah, you won. I was like, I knew that. I knew that was going to happen. But you have to believe that it’s so with every ounce of your being,

Ashley :
You have to manifest it. That’s

Noreen:
It. Whatever people call it. Do that.

Ashley :
We’re going to link the information for Noreen and Derek so you guys can reach out to them and find out more information about them. I’m Ashley and thank you for listening to Real Estate Rookie. We’ll see you guys next time.

Derek:
This BiggerPockets podcast is produced by Daniel ti, edited by Exodus Media Copywriting by Calico Content.

Ashley :
I’m Ashley. He’s Tony, and you have been listening to Real Estate Rookie.

Derek:
And if you want to be a guest on a BiggerPockets show, apply at biggerpockets.com/guest.

Watch the Episode Here

https://youtube.com/watch?v=CR3PKbs1CPU123

Help Us Out!

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. Thanks! We really appreciate it!

In This Episode We Cover:

  • Whether you should buy a multifamily property as your FIRST investment
  • 203(k) loans explained, their pros and cons, and when to get one
  • How to cover your mortgage using the house hacking strategy
  • Finding rare deals outside of the multiple listings service (MLS)
  • How to become a landlord and what to include in your lease agreements
  • Why tenant placement is the KEY to a successful house hack
  • And So Much More!

Links from the Show

Connect with Noreen:

Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected].

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

Rookie Reply: Buying Your NEXT Rental & How to Save a Fortune on Renovations

Rookie Reply: Buying Your NEXT Rental & How to Save a Fortune on Renovations

by | Jul 19, 2024 | Investing, News Feed

Home renovation projects aren’t cheap, and it’s easy to let your budget spiral out of control if you’re not careful. Fortunately, we have several tips, tricks, and hacks that will help you save a fortune on your rehabs—from finding deals on materials to an investor hack that gives you money back every time you place an order!

Welcome back to another Rookie Reply! Are you investing out-of-state? We’ll show you how to find, vet, and manage contractors from miles away in today’s episode. Not sure if you’re ready to buy your next rental property? In this episode, we’ll break down a listener’s financials and help them (and you!) make the right choice. But that’s not all. Perhaps you’ve thought about renting by the room to help cover your mortgage but don’t know whether house hacking is for you. Make sure you listen to Ashley and Tony’s advice before diving in!

Looking to invest? Need answers? Ask your question on the BiggerPockets Forums!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Ashley :
This is Real Estate rookie episode 434. Let’s get your questions answered on today’s rookie reply. I’m Ashley Care and I’m here with Tony Jay Robinson,

Tony:
And welcome to the Real Estate Rookie Podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Now, today we’re diving back into the BiggerPockets forums to get your questions answered. Now guys, the forums is the absolute best place to get answers quickly to all of your real estate investing questions by tons of experts who know all the ins and outs of doing this the right way. So today we’re going to discuss whether or not you should Airbnb a room in your house, should you fix up a property with materials from Home Depot, whether or not you should rent out your primary move into a new home, and tips for managing contractors that are thousands of miles away. But first, our very first question.

Ashley :
Yeah, so Tony, I’m looking in the short-term rental and vacation rental discussions right now on the BiggerPockets forums. Is there one that you want to pick from?

Tony:
Yeah, so I got one here from Chelsea Colon and she says, my husband and I are planning to put one of the rooms in our house on Airbnb, either as a short-term or a medium term rental for traveling healthcare workers and such. We would like any tips, tricks, and don’ts for any of those that rent out rooms on an individual basis? It’s a great question, Chelsea. And I think the first thing I’ll say is that we’ve never actually rented out single rooms before. So when we rent out, we only do entire homes, but there is a level of demand for I think the room rental. Now, the first thing that I’d say, Chelsea, is people just sometimes assume that there’s demand for room rentals in their market, but that’s not always the case. So the first thing that I would do is look into the data and try and understand are people actually looking for short-term and medium term stays in your market?

Tony:
So on the short term side, you can go, I guess both the short term and the medium term side. You can go to sites like Air DNA and type in your city location, filter that data down to just rooms within a home. That way you’re not getting studios or other full rental units. Just filter it down to other rooms and other homes and then start to see what the going rate is for those kinds of properties or for those kind of listings. That way you have a sense of what you should expect from a revenue standpoint. You can also search websites like a furnish finder where people are listing their medium term rentals fully furnished and you can see what the going rate is there. But I’d say that’s probably the first step is just doing your analysis first so you have a good understanding of what the revenue potential is for the short term or the medium term because maybe you might make more doing it as a long-term rental and then just letting someone rent that room out on a 12 month plus basis. So I’d say doing that research is the first step.

Ashley :
Yeah, the thing that I like about doing the short-term rental especially and the midterm rental of the long-term is that you can pick and choose your windows of time that you actually want someone staying with you. So like Christmas morning, you’re waking up with your tenant in your house coming down the stairs or breakfast Christmas morning looking for the present under the tree. So that is the one thing I would love if I was house hacking and I had a room that I was renting out, if the numbers were pretty similar and you had your choice, I would pick short-term rental just to have that opportunity to be able to block out dates like, oh, my parents are going to come stay with us, or you want the house to yourself, so you’re going to be making a baby this month or whatever it may be, is having the ability to block off those dates.

Ashley :
So that’s why I like that. As far as the San Atonia, I have no experience actually renting out a room, but I have rented out an individual office in a commercial building. So it was a business that had a large building and to try to offset a little bit of the mortgage, we rented out a single office in the building. And some of the things I learned from that experience is you really need to lay out what they have access to, what’s available for them to use and any other shared expenses. So one thing that happened was they would come and use the big copier because it was faster. Well, that’s ink and paper that’s coming out of the other businesses pocket that they’re paying for. Is that something that was included? Not really, but we didn’t think of these things, so there was nothing in the lease about it.

Ashley :
So same with toilet paper, paper towels. What are the things that are going to be provided to this person when they’re living in their house? So maybe they have their own separate bathroom, which would be great, way better. And so their toilet paper, things like that, that’s on them. But in the kitchen, unless you have two kitchens, there’s going to be a lot of shared things like, oh, just taking a paper towel from here to use for whatever. So I think being very clear cut. And then I’ve seen in a lot of house hacks, we’ve had Craig curl up on the podcast, he’s written the book, the House Hacking Strategy of BiggerPockets. Everybody would get their own cover and that’s where they have their own food, things like that, even plates and things like that. If you use a plate, what is the timeframe that is allowed before you wash that plate and put it back?

Ashley :
Because if you go into the BiggerPockets forums, you can actually see people talking about this. It may seem like such a silly little thing, but not cleaning up after themselves and the person be like, oh, I’ll get it tomorrow. Why are you making such a big deal of it? So I think setting as many expectations as you can, just having a policy book as type A as that can sound. But here’s the policies for the place, and this is in both of our best interests to live civilly. And obviously that’s more for medium-term rental than a long-term rental. Short-term rental, you should be pretty much providing everything for them that they have. And maybe in the kitchen you’re saying, here’s where you have access in the kitchen. I don’t know if you want to give them full range of, here’s my organic, really expensive food that you have access to, but I think maybe you don’t even give them access to the kitchen where it’s literally a bedroom and maybe a bathroom that they have and then they don’t even have access to the kitchen or the living room. It’s just they have those two rooms only, which I’ve seen a lot on Airbnb.

Tony:
Basically what you’re saying, Ashley, you’ve got to set really clear expectations upfront to make sure that there’s less friction once that person is actually staying there. And I think that’s honestly one of the things I’ve found to really lead to success from short-term rental management, really just real estate management in general, whether it’s tenants or guests, is being able to set those clear expectations upfront about what are the rules of engagement for you staying at this property. I think that does reduce a lot of friction there. She talks about tips and tricks. We’ve covered a little bit of that, but in terms of the do’s and don’ts, again, this is me more so speaking from what I would do if I were stepping into this, but if I’m renting a property, I’m trying to go between the short term and the medium term, I’d want to understand the demand in that market.

Tony:
I’ll give you an example. There are some markets that are heavily seasonal. Maybe it’s like a beach market in Florida where labor day to Memorial Day, or sorry, the other way around Memorial Day to Labor Day, you’re jam packed. Everyone wants to be the beach during the summer, but that time in between September to late spring, it’s pretty dead because no one typically goes to the beach, but you get a lot of the snowbirds who come down and they want to stay for a month or two at a time. So I think understanding what those ebbs and flows are of your market and then switching between the short term and the medium term depending on what the demand calls for.

Ashley :
So we’re going to take a short break and when we come back we’re going to find out what you should do before you move out of your primary and turn it into a rental.

Tony:
Alright guys, so welcome back. Now, Ash, what about you? What questions from the form are sticking out to you?

Ashley :
Yeah, so I’m in the rehabbing and house flipping by the way, you guys. I am doing a talk at the BiggerPockets Conference with James Dard on this exact topic here. So if y’all see you guys in BP Con, maybe you’ll be in our Sunday session talking about rehabbing and house flipping. Okay, so this question here that I see in the forum’s discussion is from UL and he says, curious where everyone sources their material for flip servers. I mainly looked at Home Depot, those for flooring and larger items and got hardware like knobs, faucets from Amazon, Wayfair. But curious to hear where you get all your materials from. I also need to get a double vanity for my master bathroom. Any recommendations? So Tony, you’ve done a couple flips and I know you guys order a lot of your material. So what is your go-to for the short-term rental rehabs that you’re doing?

Tony:
Yeah, so there’s a couple places, right? So I’ll talk about the finishes first, the stuff that the guests and your tenants will actually see. But there’s a couple of websites. There’s one called Host, GPO, there’s another one called Minoan, and Minoan is M-I-N-O-A-N. And Minoan specifically, we use a ton because we can get furnishing items. We can also get things like flooring, tile, et cetera. They have relationships with Wayfair, with Creighton Barrel, with a Pottery Barn with a lot of the places that you might order some of these items from Tile bar. So what we’ll do, when we were doing the hotel renovation for example, we loaded up all of our flooring and our hardware and on our vanities and all of those things and we sent a quote out to Minoan and they were able to source and get different negotiated discounts on all those items. And then we went directly to some of those suppliers and we said, Hey, we’re looking to buy all of this material for you guys, what’s your best price? And we were able to negotiate between the two of them to figure out where can we get the best discount. So I like going direct to the supplier, but sometimes if you work with some of these third parties, because they get so much volume, they might be able to get bigger discounts than you being able to do that by yourself.

Ashley :
I’ve been obsessed with part Pottery Barn and West Elm Furniture lately, and I want to completely redo house and all their furniture. So I’m going to have to sign up just to quote, check it out, the discount on those stuff. Yeah,

Tony:
Honestly, one of the biggest things, and this is no one’s not sponsoring this episode, but one of the reasons that I really love them in addition to the discounts is that they also help with the logistics of ordering and delivery, which is super cool. So you place your order through Minoan, Manan then places all those orders with the individual suppliers and then you can track everything through Manino as well. So I’ll give you an example. We ordered, I think it was like bed frames through Manino and I think the actual supplier was like West Elm or something like that, but there was a delay in the delivery and Manone was one that brought it to our attention. They said, Hey look, just so you know, these bed frames got delayed, but here’s another option that we think will get delivered in time and then here’s a credit for the inconvenience of us having to replace this bed frame. So there’s a lot that comes along with working with a company like that as well.

Ashley :
And that is such a huge convenience of having everything in one dashboard instead of going through your emails looking for searching bedside, where did I get that from Amazon, where did I get that from?

Tony:
And if you need to replace something, you can just go back to Manoa and see all of your old orders and you can list each project by its own name and say you need to replace a vanity or you need to replace a bed frame, just go to that project and it shows everything that you ordered. So there’s a lot of efficiencies that come along with it.

Ashley :
So we order a lot of our furniture actually from Ashley Furniture because I really like to go in and actually see it and they set it up. I will never, ever in my entire life put together furniture anymore, ever. I’m done. So I love that they set up all the furniture and put it together, but we actually have this mattress in the a-frame and everybody raves about it and I was like, I’m like, I’m pretty sure I just got a middle of the road mattress. And so we actually went there the other day because we’re still about to set up another property and we, we had to go through their whole search history of all of our different orders from there and try and find it where if we would’ve used Minoan or something similar to that, we could have just looked it up on our own and actually probably price shopped it to get it even probably cheaper than buying it directly from Ashley Furniture too and just they have a great name too. Branding. Yeah,

Tony:
I was waiting. I was waiting for that part. Just love to go in and see your name on the big marquee when you walk in.

Ashley :
Oh, the kids just tease me every time we go there about it. Yeah. Oh, this is your store.

Tony:
Yeah. What about things Ashley? Like the flooring, some of the other materials even like the seal wax deals for the toilets and all these different things. Are you shopping around for those? Do you typically have a go-to place where you’re just purchasing those items and it’s kind of on a rinse and repeat?

Ashley :
Yeah, so primarily Lowe’s just because a Lowe’s is closer to our projects than Home Depot, so I don’t really have a preference between the two. We do have started doing this where when we’re doing a large turnover, we are sending in everything like going online, sitting at home, adding everything to cart and then emailing it to somebody at our local Lowe’s and then they actually go and bid it out for us and then bring us the discount. I think Home Depot calls it the bid room. I don’t even know what Lowe’s calls it, but I think something else. So we are getting a lot of materials from Lowe’s. The thing I can’t stand about some of these big department stores is the pickup, and I no longer involve myself in pickups, but it can be somebody waiting there because you scheduled your pickup for this time, but they still send someone measly back to the back of the store to gather all your stuff and then finally it comes up 30 minutes later, then you have to check through everything and then if there’s something missing.

Ashley :
So there are some specialty things that I’d like to get some other places just because it’s pretty comparable in price, but just because the customer service and the delivery of or picking up the material is so much more convenient. So there’s LL flooring, we get a lot of our flooring from there just because you go in, you pick it out, you pay, you drive around back and they immediately load it in and it’s just like that instead of having to wait around. So Ello Flooring is another one that we use too. And then there’s a couple tile places we’ll do too.

Tony:
Yeah, I think the biggest thing is just shopping around. We just interviewed Sean and Anne Wayne and they talked a lot about how they take really tight control over all of their supply ordering because they realize that’s where they can get some more margin in their project is by maybe going to a few different places to get quotes for flooring, maybe going to a few different places to get quotes on hardware, going to a few different places to get all these different material quotes and not just rinsing and repeating every single time because price has changed from vendor to vendor and who’s going to give you the best price at that time I think is super important. So I think the biggest thing you shop around, don’t overlook the big places like the Home Depot, the Lowe’s, but also don’t be afraid to go talk to some of those local smaller vendors that are just in your neck of the woods

Ashley :
And also going to, when you’re looking at the prices, comparing them getting some kind of cash back. So whether you sign up for all those or a Home Depot card too to save that extra 5%, or if you are getting a Chase business card and you’re actually putting it all on the Chase business card instead of writing a check for it or using a debit card or whatever, then you can kind of get some money back. That way too is finding the best card to actually use to pay for the materials too.

Tony:
Well guys, look, we love talking real estate. We love answering questions just like this with all of you and we would absolutely love it and appreciate it if you could hit that follow button on your podcast app or wherever it is you’re listening. The more folks we have following, the more folks we can reach and want to help some more folks with the Real Estate Rookie podcast. Alright, so Ash, I’m looking at the general investing discussions and I found a question from Kathleen. So Kathleen says, I live in the west town area of Chicago. I’ve recently been thinking about renting out my current primary home. It was built in 2019, the value’s about 550,000 bucks and I have a mortgage at 2.65%, which is great. The interest rate is 2.65% and I’m buying a new primary home that was built in 2020 value $700,000 and I’m thinking about putting 20% down in the same area.

Tony:
However, I have a few concerns. So she lists out some pros and cons here. The pros living conditions. So she’s going from 1400 square feet to 1700 square feet with some boutique features. Another pros at the rental market seems good in this area. And then the final pro she listed was that another property is being added to my existing real estate portfolio, which currently includes two other properties. Now the cons interest rate, she says for this new purchase, the $700,000 purchase, it’s a 7% interest rate. So obviously a little bit higher. The current home is too new to be rented out. Another con is that people often say not to buy property in Chicago due to high taxes and low appreciation. And in the last con is that there’s no necessity of moving since I have a decent primary home. She says any professional advice would be helpful. Really appreciate your time. So it seems like the premise of this question is should she move out of her current primary residence, 2.65%, moved in four years ago into another home, slightly bigger, but with a much higher interest rate and a higher purchase price. So I guess when you hear this question Ash, what comes to mind for you first?

Ashley :
Well, I was going to do the math real quick, but then you didn’t entertain everyone while I was trying to do it. So while I answer your question, I was trying to figure out what her mortgage payment was. So if she’s buying a property that’s 700,000, she puts 80% down and her interest rate is 7%, assuming it’s amortized over 30 years, what would her mortgage payment be without escrow? Then comparing that to what her mortgage rate was for her first property that she bought, even though we don’t know exactly what the value is, we know what the value is now, but not what she actually purchased it for to kind of figure that out because I think the best thing is to run the numbers. So on that property you’re living in now, if you were rented out, what could you rent it out for?

Ashley :
What would be that dollar amount and then the new property? What would be your mortgage payment on that new property and what is the difference that you will be increasing your living expenses by, if any? Maybe your living expenses would actually decrease if the rental income is more than what your mortgage payment is on that first property and there’s actually room for it to cover some of your mortgage on the second property. So I think that’s a piece of the puzzle we’re missing is to what are the numbers on that property of it being a rental? So will it cashflow, will it break even and you’re going to bank on appreciation of that property, but then you also said Chicago has low appreciation in that area, so maybe there won’t be that, but if you are going to decide to go this route, I think the first thing to really look at is what is an exit strategy If it doesn’t work out as a rental, so you want to move into this new property, you move in and then you realize that it’s not renting out. Maybe you rented it for a year, you can’t find another tenant, it’s a strain on you to pay this mortgage also then could you sell the property no problem and be done with it.

Tony:
Yeah, all really good points Ashley, and I think maybe even taking it one step back, Kathleen, I think the one question that we really need to answer to is what’s more important to you right now? Is it upgrading your primary residence and gaining that extra 300 square feet with some of those boutique features that you mentioned? Or is it adding another property to your real estate portfolio? Because if the goal is that you really just want a new home, okay, then cool. Even if maybe from an investment perspective, it doesn’t make a ton of sense if that’s just truly what you want for your personal life to make that decision. But if the goal is just to have another rental property, then you have to ask yourself the question, does it make more sense to take that 20% and instead of popping into a $700,000 property in Chicago, does it make more sense to take that 20% and put it in another property in some other city where you can get the cashflow that you’re looking for? So I think that’s another missing piece as well, is what is the actual motivation for even considering this and then depending on which one is more important to you, that can kind of help point you in the right direction as well.

Ashley :
Yeah, I think that’s great advice right there. Definitely a way to start to think of it. What is your why for considering this option and then run the numbers on the deal. Okay, so in our next question, we are going to discuss tips for managing a renovation that is miles away from you, but first let’s hear a word from our show sponsors. Okay, so Tony, what is the next question you want to pull out of the BiggerPockets forums?

Tony:
So I am in the bird discussions and there’s a question from Nam and she asks, Hey everyone, can you share their experience managing general contractors remotely? Any tips you could share would be greatly appreciated. So Nam, I love this question and it’s so funny. I was actually digging around on my BiggerPockets account last week and I logged in to check something, but I just ended up going through all of my old posts and I found one of the first things that I posted in the forums. It’s literally there. If you search my name, you’ll probably find inside the forums, but it was me talking about the very first birth that I ever did, and this is back in 2018 I think, or 2019, but go find it. You hear me talk about it. But I bring that up because the very first real estate deal that I did, it was a long distance burr.

Tony:
So I was in California, the property was in Shreveport, Louisiana. So if you’ve been around the show for a while, you’ve heard me talk about Shreveport a lot, but that very first deal I did was actually a really solid deal. It was a great burr. Now I had some fear nam around very first property. Does it make sense for me to do this remotely? But here are the kind of guard rails that I was able to put in place to give me the confidence to manage that rehab remotely. The first thing that I did was I really tried to focus on finding a contractor that was known, liked and trusted within that community, and I did that a few ways. First, I asked my lender who was a local credit union in that city, I said, Hey, do you have any contractors that you recommend I go talk to?

Tony:
They gave me a short list of people. I asked my agent in that market who worked with investors quite a bit, she had a name for someone and lo and behold, there were a couple of names that showed up on both of their lists. So I was like, okay, cool. This is a good place for me to start. I think I also posted inside the BiggerPockets forum and I think I got a recommendation from there as well. So just leaning into the network that I was building within that market of folks who have maybe already been vetted by the folks who I was working with. Once I found that person, I asked two of them. I think I got two different quotes for that first one to both give me bids on that property and once I had those bids, I was able to have some conversations with them and then figure out who did I maybe enjoy working with more, who did I like a little bit, a little bit more, and I chose the person that they ended up working with. Now once we actually closed on the property, these are the steps I kind of took to somewhat hold that person accountable. First, I think it was every Friday once a week I would FaceTime the general contractor and they would walk me through the property to show me the updates. So that was one kind of layer of confidence that I was given.

Ashley :
Is that something you clarified ahead of time? You set that expectation when you hired the contractor or was this something it was like, okay, as a project one, I shouldn’t need to do that.

Tony:
I don’t remember how we kind of fell into that cadence, but I’m sure I said like, Hey, I’m not going to be able to walk the property. So we got to find something out. And I think that was the solution that we landed on, which just kind of FaceTiming the property, but honestly that it gives you a little bit of an update, but it’s hard to really get a good sense just by doing the FaceTime walkthrough. It gives you an idea. But the other two things I did is what really gave ’em the confidence. The second thing Ash that we kind of put in place was the bank where I got the HAR money loan from. Again, it was that local credit union. Before they would release money to the contractor for work completed, they would actually send an inspector of their own to the property to validate that everything was done.

Tony:
So that was major for me as a first time investor because I had someone who not only knew that market but had worked with this contractor before and they were able to take his scope of work, compare it to what he was invoicing for and make sure that those things were done. The third thing I did was before we actually finished the entire rehab project, the property manager that I hired, I had them go walk the property to do a final walkthrough. So they’re putting in their tape saying, Hey, we need to fix this, we need to fix this, we need to fix this. So I was FaceTiming with the contractor throughout the bank, was sending an inspector at the different milestones to make sure that those were done. And before we officially wrapped the project, my PM went through and added all of their notes. So those were the three layers that I put into place. Now I know I just rambled a lot, but this was my experience the first time that I was doing it. So yeah,

Ashley :
I think as far as doing an out of state rehab, I’ve only done two of them and I had a partner that lived there was the boots on the ground and a project manager. So I can’t speak to the same experience, but we’ve had a lot of guests on the show and I’ve talked to a lot of people and what I have learned, and so I’m actually doing a flip now that is over hour from my house, which I always end up having to go there when it’s during rush hour, so it takes me an hour and a half. But we settled on a contractor that we’ve used before. So if there is something or some way that maybe you already have a property in this market and you have a simple rehab, just a small project, maybe a couple things in a bathroom or maybe flooring, replace, whatever it may be, you can start out with something small to see how the process goes on that small project before you go and you buy a completely gutted house that needs a full renovation and you’re giving one GC full control of this thing, never having worked together and never having experienced yourself overseeing a general contractor.

Ashley :
So I think if you can kind of date the contractor first. So we do a contractor usually with an apartment remodel before we’re giving them a whole house that we’re working on, whether that’s going to be a cabin that we’re renovating for short-term rental or for a house that we’re flipping. But we start off just kind of dating them with giving them a little task or a little job to see how that process goes before handing over a house.

Tony:
I love that approach, right of dating before you jump into it. And I think when you have that opportunity, it’s great, but maybe for Nam, if she doesn’t have that property yet, Ash, I guess what questions would you ask to say or to maybe give you that confidence if you can’t give them a small job to start with?

Ashley :
Yeah, I think setting the expectations ahead of time. How much is this going to cost? What is my budget? First of all, they should be able to give you an amount that is going to cost. If you’re getting a lot of, well, I don’t really like to put a definite number because things could change, blah, blah, blah, I wouldn’t go with that contractor. I want to concrete number. Understanding that once you rip the walls open, there could be things that are added on and there could be change orders, but a contractor should be able to put together a concrete cost for you of what it’s going to cost, what their estimate is. The next thing is a timeline. They should be able to provide you with the timeline. While we are on this podcast, I got a notification that my flip right now is delayed because we’re waiting for the inspector to come and inspect the electric so we’re at their mercy until they come and inspect it when it’s convenient for them.

Ashley :
So I’m not punishing my contractor because we’re delayed a couple of days waiting for the inspector to come, but there should be a timeline in place where if there are no outside circumstances, your contractor can say, this is the timeline, this is the project due date. So just those two things your contractor should easily be able to provide for you, and it’s a red flag if they’re already wishy-washy won’t commit to any of that. So that would be the first thing. The second thing is have someone as the boots on the ground or some sort of checks and balances, whether that’s the agent you bought the house from, Hey, can I pay you 20 bucks a week? Or whatever it may be to go and just stop by the house, take a video for me and send it to me. Is there anything that you see that stands out?

Ashley :
I mean even if it’s a 50 bucks, a hundred bucks, whatever that cost is going to be, that could be less expensive than having a contractor do something completely wrong. And even though your agent probably doesn’t know everything about construction, if you could find somebody else that actually has construction knowledge even better, but your agent goes through hundreds of homes and can even my agent who doesn’t know anything about a construction, she is very, very curious and will consistently point out some that doesn’t look right. I don’t know what’s wrong or if it is right, but let’s question that and let’s second guess that. So having somebody that can go through and do that too. And then just during the interview process, what’s the gut feeling? How do you feel about the person? Are they communicating well with you? Are they actually listening to you or are they constantly pushing things onto you like, oh, you got to sign the contract now, we got to get started right now or else you’re not going to get me, and stuff like that. So I always take that into consideration as to how they actually handle the onboarding process of you as a new client too.

Tony:
Yeah, I think vetting them upfront is probably one of the most important things. If you’re doing this remotely and you touched on a lot of important things, but that communication piece is probably one of the biggest ones because if you have a GC locally that maybe isn’t the best with communication, but they do a really good job of everything else, you can kind of offset that by just going to the property yourself. But if you’re doing this thousands of miles away, you don’t have that luxury. So you really need to vet someone on not only their ability but their ability to do the job, but their ability to communicate effectively as well.

Ashley :
Yeah. So you hear a lot of people talk about don’t give money to contractors upfront, right? There is a red flag. If they ask for money upfront, they’ll just run with it. But Tony, what about the other side of it? So you are a contractor, you get this phone call from an investor lives out of state, you can’t meet them, they want you to do this rehab. Are you as a contractor, would you consider asking for money upfront? Since you have no relationship with this person, you don’t have any references of this person, no referrals. They literally found you on Google, they live out of state, can’t meet you. All these things. Would you want to ask for money upfront, just like on a business aspect, not because you’re a sketchy guy, you’re going to run with the money, but because you’re afraid you’re going to do some of the work and not get paid for it. Do you think that is contractors way go into the BiggerPockets forums and tell me, is this something that you would do? Not because you’re scamming them, but because you don’t know this person or anything about them and you would ask for money upfront?

Tony:
Yeah, it’s an interesting take ash or you’re definitely stirring the pot with that question. I think, I guess putting on a contractor’s hat, I feel like there’s probably less risk for the contractor to start a job without money being paid than there is for the investor to start a job and not get paid. Because I feel like if you’re looking at it from a contractor’s perspective, you literally know where this person’s property is. You can look up where this person lives, depending on the property records, you can maybe put a mechanic’s lien against their house. There are more avenues for recourse. If you’re the contractor who has a signed agreement that’s doing the work, then I think that there is for the homeowner that’s working with the contractor. So I feel like a lot of it does come down to just in the same way that the investor should be vetting the contractor to see what kind of vibe am I getting? The contractor should be doing the same thing for that client as well to make sure that they want to enjoy or that they both will enjoy working with each other.

Ashley :
You know what? Contractors are going to start asking for proof of fund style before they build out a scope of

Tony:
Work. There you go. That’s one thing they can do, right? Prove to me that you got it.

Ashley :
I mean, one thing you could do too is have your attorney hold the funds in escrow and say to the contractor, like, here it is an escrow. Here’s the draw schedule that we put together in their contract. You submit it to my attorney or you submit it to me and I give permission to my attorney. If we have a dispute, it’s held in the escrow account for the dispute to be settled. So I don’t know what an attorney would charge to handle that, but I think it would be a lot. But I feel

Tony:
Like it wouldn’t be too much. Right.

Ashley :
Do too. Yeah. Unless there was a dispute, then that’s where they’ll get the legal fees.

Ashley :
Well, thank you guys so much for joining us on this episode of realestate Rookie. If you have a question that you would like to ask us or you need an immediate answer, you can go head over to biggerpockets.com/forums. Leave your question there, and don’t forget to give back and answer some questions too. Maybe you can even connect with someone that’s also in your market and make some new real estate friends. We just did a session last night for the Real Estate Rookie bootcamp with BiggerPockets, and what we had everybody do is go into the BiggerPockets forums, go to their profile, and you can set keyword alerts. So if you, for Buffalo, I have the keyword alert for Buffalo set up. So every time that someone mentions Buffalo, I get an alert once in a while. It’s like Buffalo, Wyoming, or it’s actually about the animal of buffalo, but usually it’s about Buffalo, New York. But you can also set other things like more specific like flipping in buffalo or boutique motels, whatever that may be, and you’ll get a notification whenever there is a keyword. So go everybody set one up for whatever market you’re investing in, so you get an alert every time someone posts in the forums about that market you’re interested in investing in or currently are investing in. Okay. Well, thank you so much for joining us. I’m Ashley. And he’s Tony. And we’ll see you guys on the next episode.

Tony:
This BiggerPockets podcast is produced by Daniel ti, edited by Exodus Media Copywriting by Calico content.

Ashley :
I’m Ashley. He’s Tony, and you have been listening to Real Estate Rookie.

Tony:
And if you want your questions answered on the show, go to biggerpockets.com/reply.

Watch the Episode Here

https://youtube.com/watch?v=b06X_pZuD7M123

Help Us Out!

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. Thanks! We really appreciate it!

In This Episode We Cover:

  • The BEST places to find materials for your home renovation projects
  • How to save money on material orders with THIS investor hack
  • When to buy your NEXT property (and why you always need an exit strategy!)
  • How to find, vet, and manage contractors when investing out-of-state
  • What you MUST know before using the rent-by-the-room investing strategy
  • And So Much More!

Links from the Show

Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected].

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

Rookie Reply: Buying Your NEXT Rental & How to Save a Fortune on Renovations

The Million-Dollar Real Estate Business YOU Can Start Today with Just $150

by | Jul 17, 2024 | Investing, News Feed

Starting a real estate business is one of the best ways to achieve financial freedom, replace your W2 income, and leave your nine-to-five. Why? Because you don’t need a ton of money OR a rental property to get started. Today’s guest built a million-dollar business with just $150, and in this episode, she provides the blueprint for you to do the same!

Brittany Hailey and her husband were living in an expensive market and working low-paying jobs when they were introduced to short-term rentals. They eagerly bought a house and turned their mother-in-law suite into an Airbnb, and right off the bat, this tiny rental skyrocketed to the top of the listings and covered 100% of their monthly mortgage payment. With proof of concept, Brittany decided to launch her own management side hustle with just $150. Little did she know that this fledgling business would soon allow her to quit her W2 job and bring in over $1,000,000 in annual revenue!

Ready to launch your own profitable real estate business from scratch, just like Brittany did? Tune in as she shows you how to start a vacation rental management company with little to no money and scale it into a wealth-building machine. Along the way, you’ll learn which services to offer, how to compete with national brands, and how to keep homeowners and guests happy!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Tony:
This is Real Estate. Rookie Show 433. What’s up guys? My name is Tony j Robinson and welcome to the Real Estate Rookie Podcast, where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Now guys, our guest today took action to start her own real estate business with only $150. Yes, you heard that right? 1 5 0. And she decided to go all in on a vacation rental management business, which she actually started by accident. So today we’re going to learn how to scale a successful vacation rental management company. What kind of services should you offer, how you can actually stand out from your competition, and just an overall blueprint of how to get started. So Brittany Haley, welcome to the Real Estate Wiki podcast.

Brittany:
Hey, Tony,

Tony:
Super excited to have you here.

Brittany:
Thank you. I’m really excited to be

Tony:
Here. Now you’ve got a really interesting backstory, but I guess maybe where we can start is how did you discover Vacation Rental Management?

Brittany:
Yeah, well, it was really by happen chance, and like you said by accident, how I came upon it. So my husband and I moved back to Denver after living abroad for about a year and a half, and we decided that Denver just wasn’t going to cut it anymore after a year and a half. Denver went from zero to Hero when after we had left. So we randomly came across the Aspen Valley while looking for a wedding venue and the scenery and the people, everything just captured our hearts in this area. So we moved to Carbondale and it’s a little town of about 6,500 people and it’s 30 minutes outside of Aspen. So we knew we really had to get creative to make things work here. And the best way to describe this valley is the billionaires are pushing the millionaires down valley. So the market is just really flooded and has become really expensive.
He got a job working for a tech startup and I started working for a wellness company and we both made 50,000 a year, which was not going to cut it here. So to be considered low income in this valley, it’s making anything under 110,000 a year as a couple. So that kind of just gives you a perspective of the lovely money that runs through here. So we met a really great couple when we were staying out here, kind of planning our move. We stayed in their Airbnb and it was a mother-in-Law suite of their home. So still connected to the house, but at a separate entrance and completely locked off. And they kept telling us they wanted to sell the house and they wanted to go travel. We were like, we just did that. We would like a home. We would not like to live out of a backpack for a while. And so we asked them what their mother-in-Law Suite made on Airbnb and they gave us the numbers and we were just super shocked at what a tiny 400 square foot mother-in-Law Suite could do. It could almost pay for our whole mortgage. So we went through the process of getting a loan and Wells Fargo was basically like, well, you are at the very top of your debt to income, so go for it, but you guys are complete idiots.
So in nicer words, that was basically what they said. We bought it with our hard earned, we’d been saving up, we were able to do 5% down and bought our first house. And before we even moved in, we got that Mother-in-Law Suite listed on Airbnb, totally decked out, and we needed the money immediately to make this work. And I did everything for this rental. I baked fresh bread for every guest, Susie Homemaker right here. I gave them eggs from our chickens. I cleaned the house at lunchtime at my nine to five job. I would come home, clean the house, rush back to work, and pretty soon it was the highest rated home in the Carbondale area, and it was rented 98% of the year.

Tony:
I bet. I mean fresh baked bread and fresh eggs from the chicken. I’ve seed a lot of Airbnbs and I’ve never had the combination of both. I’ve seen one or the other, but never both of them in the same place. So you guys run with this thing and it seems to do incredibly well. I guess the question is, are you able to, because the initial goal was like, Hey, can we at least cover a portion of our mortgage? Were you able to accomplish that?

Brittany:
We did. So we grew it and were able to outdo the numbers that our friends were doing and slowly through pricing strategies and just getting to know the Airbnb market a little bit more, and the fact that this area has grown exponentially since 2016. So yeah, we were able to cover the mortgage pretty soon, just a hundred percent

Tony:
With that one Mother-in-Law Suite. Yeah,

Brittany:
With a 400 square foot mother-in-Law Suite. That wasn’t that great. Just the setting was beautiful.

Tony:
Yeah. And what’s the square footage of your entire house?

Brittany:
I think the about 2,500. So we lived upstairs, so it was like the noise transfer was kind of odd sometimes. My husband and I had a couple whisper fights. We’re like, don’t disturb the guest.

Tony:
But I asked that question because we’re talking about 400 square feet out of 2,500, so less than 20% of your home is covering the entire mortgage, which is insane. So you guys crush it with this first mother-in-Law Suite. At what point do you decide to take this kind of side hustle and turn it into a full fledged business?

Brittany:
So my husband kept telling me, Hey, you’re unnaturally good at this and you should try to do this for other people. And I just was not in the mindset. I didn’t have that big picture in mind, and I was like, those people are my competition. Why would I help anyone else? It was all about the nine to five and then just covering our mortgage. That was my goal. So we started a family in August of 2018, and I planned to take my three months of paid and unpaid maternity leave and then go back to work. That was just my goal. I loved my job, I said, and two days after giving birth to my first son, a friend of a friend texted me and said, Hey, do you want to manage my place? And he owned a large beautiful estate like five minutes away from me that had multiple units on it, and he was thinking about renting out his little casita on the property, and he just lived all the way across the US and he’s like, I can’t do it myself. I see from my friend that you’re doing a really good job. Do you want to take a shot at this? And I’m like, let me be able to walk again after giving birth, and sure, that sounds great. And my husband’s like, you can’t pass this up. We’ve got to start thinking bigger. So we got home from the hospital and threw together a basic,

Tony:
Oh, you were still at the hospital when you were texting him about this? I

Brittany:
Was still at the hospital, yeah. I’m like, oh my God, I signed this. My husband was able to come up with this really basic rental contract that we had him sign. I didn’t know contracts very well or anything, and he did. And so he threw this together, the guy signed, and right before I finished setting up the house, I have my son strapped to me and I’m trying to fold towels and do all this stuff. I come down with this, I start feeling very odd, and it turns out I had an infection and I like so many new mothers do, I completely tried to ignore it. I’m like, it’ll go away. Well, then I almost went into sepsis, and so I was rushed to the er and I spent three days in the ICU with my new baby and all in the middle of trying to set this rental up and become a new mom.
So my husband kind of stepped in and was like, look, I’ll fold the towels and put all this stuff out. Just get better. And so finally I got home from the ICU and I listed the house and it became so popular. It was just, once again, not even a full kitchen. It was a connected, hence Mother-in-Law Suite or a DU, but it had beautiful views and the people just came flooding in. And so I spent my maternity leave snuggling with my baby and then doing my rental as well as this guy’s rental and basically trying to figure this out because it’s not very intuitive. And as you know, there’s a lot of ins and outs of the business.

Tony:
Yeah, there’s definitely lots to juggle and kudos to you for doing this almost immediately postpartum. I can only imagine how challenging that must have been, but so you have your rental that’s up and running, do an incredibly well, you take on this other French rental, that one crushed it from day one. So is it at that point where you’re like, Hey, I want to do this full time, or I guess what gets you to the point where you’re like, Hey, I’m going to go all in on this business. It’s

Brittany:
Like to say, I basically built this business when my kid would take a three hour nap, I would just sit on my computer being Googling how to start a business and dealing with other people’s money and taxes and account set up and guest management. That’s where it became really tough. I had it for myself. That was fine. It was when I was dealing with other people’s money where it started to get more complicated. So then my maternity leave came to an end and I went back to work. And childcare in this valley is so difficult. We were on a waiting list for a year. We had nothing, so I couldn’t find childcare, and I joined up with a friend and did a nanny share, but it was only four days a week that we had care. So I guess my nine to five really didn’t like that because I came back, was like, I can only come back four days a week because I don’t have childcare.
And they cut my benefits by 20% for that one day. So medical, dental, everything was cut, DTO 20% done. And then I went from a management role to clocking in and out for $25 an hour. And so I’ll break it down for you if they thought I was a bad employee to start, I became a horrible employee moving forward. I was like, what is this? So my mind space completely shifted after, and the nine to five just made zero sense to me anymore. And I spent the next three months after that happened, focusing solely on my side hustle and just clocking in and clocking out. And then I stood up on a random Thursday and I just had enough. And I walked into my boss’s office and I said, I believe in myself more than you ever will. And I quit. And I just didn’t understand why I’d worked my butt off to make the same amount and never really see a significant raise when I built something that made me the exact same amount of money without the need for childcare at the time with a quarter of the effort and with just those two additional units, I was bringing in more money than what I made at work, minus the childcare is paying for.

Tony:
That’s like a scene out of a movie. And kudos to you for having that courage, you said, I literally stood up on a Thursday and walked into my boss’s office and said, I quit. And I think that’s the dream for every person who’s building some kind of business on the side. It’s an amazing story. So I want to give Ricks and Ricks, you’re going to hear an actual blueprint on how to build out this business for yourself. So maybe you can have that Thursday afternoon where you walk into your boss’s office and quit. But first we’re going to take a break and hear a word from today’s show sponsors. Alright, so we are back here with Brittany Haley and Brittany just kind of broke down how she got started and kind of how she got to the point of being able to walk away from her job. But now what does this business look like today? You started with 150 bucks, which is insane. What have you built it into today and what kind of services do you offer now?

Brittany:
Yeah, so I love to tell people how I started a million dollar rental business with $150. Well, my baby mapped, so now my services today are very different than what I started with. So we have 40 homes anywhere from Glenwood, mostly up to Aspen, and I started with two or three rentals. We now offer full service design and full service vacation rental management. And then just everything I offer is very different from the setup to the actual execution of what we go through with guests to our accounting system on the backend. So it went from zero to hero really quickly.

Tony:
So Brittany, how can a rookie start their own vacation rental management business today?

Brittany:
So the great thing about this business is that you need such little overhead to start. So to lay it out, I listened to every BiggerPockets podcast. I was the biggest fan every day. That was my session. But I made so little money and lived in such an expensive area that I couldn’t figure out how to get out of that nine to five hole and into the investor’s seat. And I finally realized that I could leverage other people’s real estate to do it. And then when that fell into my doorstep, I was like, oh, I could do this. So yeah, we’ve grown pretty much all word of mouth and whenever anyone asks me how I grew so fast, I always would say I just do good work for people. And when you do good work, the word that spreads and the beauty of the Airbnb and VRBO model is that they are your marketing machine.
So you list a house and you get great reviews, they promote you and they pump you up on their algorithm. So when people want to find someone to manage their property in my area, they type in the location and then our homes come up at the top with our logo. So they’re really the marketing powerhouse for rookies. So how does a rookie start their own vacation rental management business? I like to say don’t be shy. And I am the most shy person on this planet, so when I want something, I’m going to find a way to get it. So I would go and talk to everyone. So if I heard someone talking about real estate at a party or at a coffee shop or on the street, I’d just go right up to ’em and be like, oh, what are you talking about? This is what I’m getting into. This is what I’d like to do. I would call developers and be like, Hey, what are you doing? Can I get in on it? I work for free. And so when people know you’re interested, they start bringing you into their projects. And then I just became an expert in the market on the side. So the more rentals I got, the better I was at pricing them and knowing all that stuff.

Tony:
I guess one follow up question though though, Brittany, you said that you were reaching out to developers and other folks who were professionals in the real estate industry, but what were you actually saying to them when you were reaching out? How were you integrating yourself into their network of people? What were you offering to them to be of value?

Brittany:
Yeah, I mean, a lot of these developers have large homes themselves or just know everyone. So I’m like, Hey, I’m in the vacation rental space. I’m really interested in just everything in real estate. And it didn’t even have to be related to vacation rental management. It was just getting in with these people and then all of a sudden that person has a rich friend that has an A DU that they were thinking about renting out or has a second home or has a third home. So really it’s just when the word starts spreading of what you’re interested in getting into, somebody always knows somebody else that knows somebody else, and that’s when the calls started coming in.

Tony:
Interesting. And where are you meeting with these folks? Is there a local meetup? Are you just knocking on doors? What steps are you taking to actually find those people to connect with?

Brittany:
It was neighbors. My neighbor knew a bunch of very wealthy second homeowners. She would go and introduce me around. It was people I’d meet through my job, people that I just met on the street. It was anyone that I heard talking about real estate. I was up in their face.

Tony:
Maybe try and lay this out for the rookies that are listening, but say you were starting over today and I said, Brittany, you don’t have any of the contacts you currently have. You have all the knowledge, but none of the contacts. How would you go get your first five vacation rental management clients?

Brittany:
So I think that the more that you put it out there, the more you’ll find that people are calling. So can you set up your own house on Airbnb and rent it out occasionally? Can you go camping on the weekend? Can you go to your parents’ house? Can you just get a basic logo and put your own house on Airbnb or VB because they’re going to be the marketing powerhouse and pump you up. So there’s your first client, maybe you can be your own first client. And then from there, create an easy Wix website. I created a super cheap Wix website for like $20 a month. Really beautiful imagery. You can get stock imagery, make it look like you’re more than you really are. And like I said, you can be your own first client.
So after you get your first few rentals, and I like to say that first rental can be your own because the better your rental is on Airbnb or V rbo, people are going to search for it. They’re going to see your logo and then they’re going to search on Google and find your Wix website and say, oh, this girl does this, great. I’m going to give her a call. And that’s what started happening. I just had one rental and I had two, and then I had people renting out and then there was three, then there was four. It just snowballs from there. So you really just need one to get started and then the other people will start coming.

Tony:
And a caveat to add to that though, Brittany, is that you need one, but you’ve also got to knock it out the park with that one. And I think that’s what you did. Your first two, you said immediate became two of the most popular listings within your specific market. And obviously that’s a good marketing tool to have is hey, my listings are the top 1% of the ones that are at least in the size range, right?

Brittany:
Yeah. And that’s what I always say, just ace one thing. So if it’s guest communications do really well at that, even if it’s your own space that you’re listing, you’ve got your logo on there so other people are seeing it. And then if you’ve got all five star reviews, that’s all you really need, then other people are going to start calling you because they think it’s a company representing this home. And then that company that leads you to your website,

Tony:
You said something important there. You said just start with the guest management piece and you talked about what your business looks like today where you’re offering full service design and install and all these other things. But I guess what services should a rookie offer when they’re first launching that management business?

Brittany:
Focus on one thing and it’s guest management because the reviews are going to be what catapult your business. So if you just focus on guest management and you get really, really good at it, then you can start adding in little things here and there. We are consistently growing. I mean, just this year we’ve probably grown more this year than I ever have five or six years ago, and I’m not in the beginning or I’m not even in the beginning stages anymore, but you just need guest management to really get a leg up because that’s what’s going to get your first, second, third, fourth rental. And like I said, the Airbnb and VRBO, they are your marketing powerhouse. So if somebody sees you, they see 25 star reviews, that’s going to be the place they book, and that is going to be what gets you to the top of the algorithm.

Tony:
So guest management, so maybe break that down for folks who aren’t super familiar, how does that differ from full service management?

Brittany:
Yeah, so really it’s just your communications that you have with your guests. So when they check into a house, make sure it’s super clean, make sure it has, I don’t know, a small bouquet of flowers or a little gift basket with a personalized note. If you’re in the area and you’re working on doing this, there’s a ton of small personal things that you can do so that when a person checks in, they say, wow, this is a great fruit of first impression, or this is a great home that I’ve on a real gem. And that’s what I did with my fresh baked bread and eggs. People just, they loved those little touches and it was, like I said, it wasn’t that great or spectacular or luxury of a place, but I made the personal touches and communicated with my guests flawlessly, and that’s what earned those five star reviews.

Tony:
Now, one of the other pieces, so it sounds like, and maybe let me get some clarity here. So when you say guest management, you’re truly just doing the interaction between the guest and the listing, but say if there’s backend issues around, I don’t know, managing the cleaners or there’s a maintenance thing that needs to be handled, you’re saying initially maybe don’t worry about those pieces to let the owner take care of that part?

Brittany:
It depends on what your agreement is with the owner. And I think this is where we get into the difference with CIA rental management, and I have never been co-host, only been a vacation rental manager, and really guest management, I view that as the full check-in checkout process of a guest. So if something happens during the guest stay, it is your job to make sure that that thing is fixed and it’s fixed quickly. So I view that as a whole bundled experience.

Tony:
And we were talking about this with our producers before we started recording, but there is kind of a difference between a property manager in the short-term rental industry and a co-host. Vacation rental management has been around way before Airbnb and VRBO as long as vacation rentals have been around. But the term co-host is more of an Airbnb phrase where Airbnb kind of coined this phrase where if you want someone to help you with the guest communication side of things and maybe some other smaller tasks around running your listing that would technically be a co-host. But now you’ve seen those phrases just blend together. Those terms blend together where people call themselves, but they still do everything. Or people call themselves a management company, but they only do the first 10%. I think that’s evolves business model where they call themselves a vacation rental management company, but I think they only do the front end of the guest communication. Is that correct? Have you heard the same?

Brittany:
That’s correct. And that’s really where I’ve seen the process fail. And I’ve always said, I do not believe that the National Vacation Rental Companies work as a business model because I am the heart of this company. I know everything about this valley, I know everything about this market. I really think you need that person running the operations. And that’s where I think that national companies, they just don’t have that. And yeah, evolve is, I view that as there’s too many hands in the pot, so it’s like they can do their areas so well, but then the cleaning team fails because the homeowner had to get the cleaning team and they didn’t schedule it, and it’s like, just have one person do it.

Tony:
So you bring up an interesting point, right about the big national vacation brands, and there’s a few of them out there. A V and VA CASA are probably the two biggest ones, but there’s also Avant Stay is another big one. And there’s another one I just heard of recently that Porto, which I think is VC back. So there’s a few of these big ones popping up. So I guess how can you as maybe the small, more local vacation rental management company compete with some of these bigger brands that have the marketing budget to do all of these things? It might be more difficult for the person with 150 bucks to start,

Brittany:
Tony. It’s very easy to compete with them because they don’t have the heart and the staff and the boots on the ground and they don’t have that drive and that knowledge of the local market. So those companies are here and the homeowners that have hired them all leave to come to me. So right now we have about 50% new homes that get set up that have never rented before, but 50% of the people that come to me are all from those big national companies because they have a poor experience.

Tony:
I was listening to a podcast, I can’t remember which one it was, I was trying to look it up, I think it was Vacasa, but they said that Churn has been a big issue for them. So churn is like what percentage of their customers are they losing on a year over year basis? And I think a big reason is that they, they’ve lost touch with the owners and they’re so focused on maybe the growth and the scale that they’re not providing the level of service that people were hoping for when they signed up for that. So it’s almost like we always joke, it’s like if you’re a contractor and you just pick up your phone, you’re already in the top 1% of contractors that are out there because no one else picks up their phone. Very similar thing on the vacation rental management side where it’s like if you can just give your owners a good experience, well now you’re already in the top 10% of that because a lot of these big brands aren’t doing it anymore.

Brittany:
I completely agree. I mean, the reviews that the large national companies have in this area are so poor, and it’s all what you’re saying, bad communication came in and there’s a lot of miscommunications and the place wasn’t clean or it just felt very generic. So I think that goes back to what we offer, and I call my company Boutique Mountain Homes because we offer, we don’t just take on anyone. We offer a very boutique experience. And I think you have to know your market and know the people that are coming in and visiting, and that’s what people want. So they don’t just want one of 50 really rundown condos that are skiing, ski out. I don’t really want that. I want the really well-designed unique place that maybe is ski and ski out, maybe it’s not, but it’s offering a boutique experience in one way or another. That’s where you set yourself up as different in the market.

Tony:
You talked a little bit about the additional services that you offer now. I guess how can someone maybe create multiple streams of income, aside from just the property management fee? What are some other additional ways that you generate revenue within your business?

Brittany:
So after you’ve mastered the skill of guest communication and have a few listings under your belt, it’s really how I felt was it was time to scale. And so we really try to, going back to the property management thing, we really try to separate what we do from what a property manager would do. Part of this is because property management’s a really tough job, and I never felt I could handle both. So however, you inevitably become a property manager in this vacation rental role. So whether your contract says it or not, you build in an hourly charge for your clients to recoup this time. And so for instance, let’s put it this way, I have homes that never have anything go wrong with them. They’re like these magical unicorns where I’m like, how does this home never have any problems? And then I have these beautiful homes.
I mean, it could be a huge estate and something is always going wrong with ’em. I don’t know why or what, but if you don’t have that hourly property management charge built into your contract with the homeowners, that’s where you’re going to lose a lot of time and time is money. So if you are renting both of these properties, the one that’s the unicorn and the one that has nothing or has everything go wrong with it, and you’re making the same amount of money, which place are you spending more time on? The one that always goes wrong. So build in these additional streams of revenue. Every time you have to call a contractor, we charge a fee. So there’s a leak under the sink. I call a contractor. That’s one small charge. If the leak turns into a large flood and we have to physically go to the property and see what’s going on, need a plumber clean up, that’s $50 an hour. So these, that additional stream of revenue with these property management jobs that you’re inevitably going to do can really help you recoup some money from all the time you’re spending on ’em.

Tony:
So you have your flat property management fee, and then in addition to your fee, if you have to call out a contractor, there’s a project management fee almost that you’re tacking on top of that. Am I understanding that correctly?

Brittany:
Yeah, that’s correct. So we have a flat commission where it’s like your gross bookings, we’re charging X percentage and it’s all based on your market. And then, yeah, if we have to do anything property management wise at a house, that’s when we’re charging that extra fee. And that has helped us recoup so much time that we’re spending at these properties.

Tony:
Interesting. Do you get any pushback from owners on that additional fee ever?

Brittany:
Oh, yeah. All the time. But I think that that’s also the setting up of expectations, and we have diagrams because nobody reads anything. I send this diagram out to every person every single week, here’s a reminder of the contract you sign, this is what we do. This is what’s extra money. And I explain it to them as we have houses where we never have to go to, we never fix anything. The homeowner has it all, and that’s great. They can do that. We report things to them and don’t charge anything. But if they say you go out and hire the person and do that, that’s opening you up to a lot of liability too, so you better be charging for it.

Tony:
Interesting. I don’t think I’ve met another PM in the vacation rental space that’s set up their fee structure that way, but I do like it because it kind of balances out some of the ownership that the owner takes over some of these issues and just making sure that things get resolved. Because I guess if they have to choose between truly fixing an issue or just like a bandaid fix, if they know that you’re going to be the person who’s always doing the bandaid fix, then maybe they’re not super incentivized to actually fix the root cause. But if they know that they’ll get billed every time you have to fix it, then maybe they’re like, Hey, let’s just get it taken care of from the beginning. Right. So

Brittany:
Let’s just get it taken care of. Yeah, yeah. I mean, we’ve had entire heating systems go out and you have to have spend hours there delivering heaters and this, that’s just more than, that’s like your house. That’s not really us getting a guest in. I always say it as there’s a lot of full service vacation rental property management companies, and they charge 50% whether your house has things to go wrong or not. So I’m charging half of that, and if something goes wrong, we’ll charge you accordingly.

Tony:
Now I want to get into a few more of the fees and other income stream you’ve built around this business, and I also want to know what your team looks like. I know you said you’re up to 40 listings now, so I would assume that maybe it’s more than just you today. So we’ll get into all of that after a quick word from today’s show sponsors. So we are back with Brittany, and she just broke down a fee structure as a short-term rental manager that I haven’t heard before. So I guess, what are some other additional income streams you’ve been able to set up with inside of your vacation rental management business?

Brittany:
So one of them is in-house design services. And this is key because I mean, we’ve had people that come with us that come to us and I walk into the house and there’s a couple ratan chairs and a futon and a bunk bed, and they’re like, go lift it. I’m like, oh my God, God no. So the person I’ve hired for this doubles as what I call a property success manager. So she’s doing property management esque tasks, and then she does full scale design services as well. So I don’t have a designer that that’s all they do. I’m using employees multiple talents so that they can kind of flex between each job based on the season and what they need to do. So she’s full service design. So we have a client come in that has a completely empty house, and they say, I live in Florida or New York, I can’t do this. She puts together a mood board for them, and once that’s approved, she goes out, puts together a budget, we get a check for that budget, and she goes and designs a whole house start to finish with a renter in mind. And that’s kind of how we sell it as you can pay twice as much for a normal Aspen designer, but they’re also not coming at it from a rental perspective. So everything’s very rental friendly and guest friendly, and it has all the amenities we already recommend.

Tony:
Now, do you also do the install of that furniture as part of that design fee, or is it just the actual hey, picking the furniture? Yeah. Okay. Because that’s a big thing as well, because a lot of designers will do the virtual design, but it is becoming, I think a more in demand service to do the install as well, because the owners maybe don’t want to pay for or coordinate someone building all the bed frames and tell ’em where to put everything

Brittany:
And have different fees for those too. When my employee, Heather is picking out furniture and doing design work, she’s charging X amount, and then when she’s actively on scene with a handyman or somebody else, she’s charging that fee. So also know what to charge, but it’s a great additional source of revenue we found.

Tony:
Interesting. So are there any other revenue streams that you’ve added into your vacation rental management business?

Brittany:
It, so credit card processing is really tough to get around, and Airbnb does it as that 3% charge that they put onto hosts, and then the, what was it, 12 to 15% that they give pass on to the guest when they book. That’s a way for them to recoup their charges for processing fees, dealing with chargebacks, dealing with all the nitty gritty in their staff. So we said we need to charge that as well for processing and for website management. And we’ve also made that as a slush fund for legal issues that could inevitably come up. So every time somebody books and we process their credit card, we charge a flat fee, a flat percentage of that booking that helps us deal with things like chargebacks, deal with the credit card processing fees that are frankly really high now, and it just helps us create that additional stream of revenue. So we have that. And then also on the Airbnb side, we charge an Airbnb processing fee as well, because as you know, sometimes Airbnb is not going to side with you, and we always have to take the hit if they don’t agree with the additional cleaning or this and that. So it helps us deal with those kinds of excessive charges as

Tony:
Well. So Brittany, is that a fee that you only charge on direct people who book direct, or have you found out a way to do that through the OTAs as well?

Brittany:
We do it through anything VRBO or any of the subsidiaries because we’re running the credit card. So once you become a property manager on VRBO, you’re running the credit card and that opens you up for chargebacks basically. So we do it for anything that we’re running the credit card for as well as a smaller amount for Airbnb.

Tony:
Well, you’ve really found a way to optimize all the different revenue opportunities within this business. I love hearing that. I guess, what does your team look like today? Because curious, right? You said you’re at 40 listings, I, I’m assuming maybe it’s more than you right now. So what does that team look like today?

Brittany:
Yeah, so my husband actually just joined the company about eight months ago. He was high up in the digital marketing tech space, just not really loving his life, but he is really good at spreadsheets, bless him, and he really good at kind of the financial management thing. He managed big budgets for large outdoor brands for so long, and one day he was like, I’m so unhappy, and I said, I could really use you. So he jumped ship and it was one of those, I believe in myself more, and he came on and he does all the financial management now, and it’s so great because I was missing some really big things. Then we have a property success manager. She is in charge of the success of all of our properties as well as the design services. We have a customer experience team lead, so she’s kind of the manager of then our client or our customer experience advocates. So we have three customer experience advocates and our team lead, and then our property success manager, our CFO and me. And then we outsource all of our cleaning as well as our bookkeeping currently. That might change. But yeah, so we outsource some things and then we have a very dedicated, hardworking team that works directly for the company.

Tony:
As a Ricky who’s looking to build this business out, who do you think that first hire should be? Or maybe what tasks should they be completing?

Brittany:
So I truly believe you should know your strengths and weaknesses. So what was really bogging me down was the guest communications. So my first hire was somebody to take on the communications. It’s really like I said, what will free your time up and what do you enjoy doing? I did not enjoy after a while dealing with guests, and I knew I had to get that off my plate. So what can free up your time to scale? And for me, that was guest management. And then after that, it was the financial side of things. That’s not my strength. So getting someone to handle the freed up my time greatly. So it’s all about freeing up you, the business owner’s time to really scale the business and focus on what’s going to get you to that next property.

Tony:
It reminds me, Brittany, of a book that I read recently, and it’s kind of blown up in the entrepreneurship circle, but it’s a buy Back Your time by Dan Martel. Have you read that book? I

Brittany:
Haven’t read it, but I will now,

Tony:
Very similar concept to what you just said, where when you’re looking to hire someone, it shouldn’t necessarily be for at least as a small business owner, it shouldn’t necessarily be for a specific title, but it’s how do you start buying back your time and letting these people do the things that aren’t the highest and best use of your time and aligns perfectly with what you just said. And we try to replicate that in our business as well. So I guess one last question that I have for you, Bri, before I let you go, and this has been an amazing conversation. I hope that we’ve inspired a lot of folks to kind of go down this path as well. But the tricky part of being in property management, and this is true for short-term, long-term, midterm, whatever you want, is that you are sum up between a rock and a hard place because you have to keep your guests happy, but then you also have to keep your owners happy. How do you strike that balance, Brittany, between keeping your homeowners happy and keeping your guests happy? So

Brittany:
I think that what’s important to know, and I learned this unfortunately later in the game, is who is your client? Your client is the homeowner. Your client is never the guest. So it’s an art, like you said, being stuck between a rock and a hard place of you want a good review, but also if you don’t have a house, you can’t host anyone. So the positive relationship with that homeowner is absolutely key. So knowing that the homeowner is your number one client and number one priority and delivering their wishes is what you should do. At the same time, knowing how to get a bad review removed and knowing the OTAs inside and out is key. So we view Airbnb as almost like an art. Working with Airbnb is an art. We know everything about that platform and we know how to get a review removed. We know how to bait a guest so that we can get the, and I know Sarah is an expert on this,
What to say, to get someone to insinuate that they want money to have their stay better. You really have to know these things. So knowing your platforms, knowing how to work in them, and then treating your client as a friend and being honest, that’s always what I say, is if you want to build a good successful business, just be honest, because that’s how my business has grown too, is the other people out there in this space in my market are very, very dishonest, and I just operate an honest business, and if I make a mistake, I apologize and pay for it. And that has made me grow tenfold.

Tony:
So Brittany, I think here’s the big question that everyone’s probably wondering, right? So you started this business with $150 insane. What kind of revenue do you project this business will do maybe in the next 12 months?

Brittany:
In the next 12 months, we’re hoping for one to 2 million in revenue.

Tony:
That is insane. And you say that with a straight face, but that is a major accomplishment and something you should be incredibly proud of to go from unhappy at your day job to within just a few short years building a multiple seven figure business with a $150 initial investment. So kudos to you because as someone who’s also in this space, I understand how taxing it can be at times to try and grind it out and grow something like this, but you figured it out. So I guess last question for you, Brittany, before I let you go. For someone who wants to follow in your footsteps, go from one 50 to 1 million. What are some blind spots someone should know before just jumping into this business?

Brittany:
I think a huge blind spot is knowing your strengths and weaknesses. Like I said, I know nothing about bookkeeping and I thought I could keep my own books, and within a month I had ruined everything. So getting key people in to help you is absolutely key. I couldn’t read my p and l, so I was missing huge holes in my business. So just leveraging people that no bookkeeping or read up on it. I was making, just last year for instance, I didn’t realize that my credit card processing company was secretly upping my charges and I wasn’t accounting for it, so I didn’t know how to read my p and l, and we were 20,000 in the hole for credit card processing fees. That was not fun. And then just know the space in terms of the products coming on the space. I think that there’s not one product that really encompasses everything to manage your short-term rental.
So I’m talking about the property management software side of things. It’s very piecemeal in this space. And Tony, maybe you feel this way as well with the PMS system that you use. Just really interviewing different software providers and getting into the weeds of what are they going to provide me? Are they going to charge me commissions on my bookings? A lot of ’em do, and that will cut into your revenue. That was the $150 that I invested in the business was to my property management system that freed up my time so much and allowed me to expand and splatter my listings across multiple OTAs rather than just Airbnb. And I did that with 150 bucks, and that made my life so much easier. So really getting to know the different softwares in the space is key as well, and can be a huge blind spot if you choose the wrong one.

Tony:
Well, Brittany, I very much enjoyed our conversation today. And again, congratulations to you for building this successful business and embedding on yourself. And I truly hope that the folks who are listening to this can have that Thursday afternoon where they can walk into their boss’s office and say, you know what? I’m over this. I’m out of here. I feel like I can do better about myself, my, yeah. Well, Brittany, I appreciate you coming on. For all of our rookies that are listening, we’ll put Brittany’s contact information in the show notes for today’s episode. So if you’re listening on the Apple Podcast player, check there. If you’re on YouTube, check the description. And guys, look, wherever you’re listening, please do subscribe. Follow. When we get more engagement on these platforms, it allows more folks to reach the show. And that’s our goal here at the Real Estate Rookie Podcast is helping more people just like Brittany, because we want more success stories. We want more people who listened. We can then bring back on the show to say, Hey, here’s what the Rookie podcast helped me with. Well, Brittany, thank you again for coming on. We really appreciate you taking the time today.

Brittany:
Thank you, Tony. It was a pleasure.

Tony:
All right, guys. That is it for today’s episode, and we’ll see you guys back on the next real estate rookie episode. This BiggerPockets podcast is produced by Daniel Zarate, edited by Exodus Media Copywriting by Calico content.

Ashley:
I’m Ashley. He’s Tony, and you have been listening to Real Estate Rookie.

Tony:
And if you want to be a guest on a BiggerPockets show, apply biggerpockets.com/guest.

Watch the Episode Here

https://youtube.com/watch?v=b06X_pZuD7M

Help Us Out!

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. Thanks! We really appreciate it!

In This Episode We Cover:

  • How Brittany started a real estate business with $150 (and grew it to over $1,000,000!)
  • Covering your entire mortgage payment by converting extra space into rentals
  • How to create multiple streams of income within your real estate business
  • The FIRST hire you should make when building your real estate team
  • The advantages small businesses have over national vacation rental brands
  • How to keep homeowners and guests happy when managing a short-term rental
  • And So Much More!

Links from the Show

Connect with Brittany:

Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected].

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

Rookie Reply: Buying Your NEXT Rental & How to Save a Fortune on Renovations

From Losing Her Health, Home, & Marriage to Chasing Financial Freedom (5 Doors!)

by | Jul 15, 2024 | Investing, News Feed

Anyone can buy rentals, whether you have some money to deploy or very little to your name. With seemingly everything working against her, today’s guest managed to buy not one, not two, but THREE properties to support her and her daughter on their journey to financial freedom!

Welcome back to the Real Estate Rookie podcast! Bella and River are a mother-daughter investing duo who, just a few years ago, were facing dire circumstances. In a short amount of time, Bella lost her eyesight, foreclosed on her home, and went through a divorce—leaving her with low income and no immediate way to increase it. But when a family member introduced her to real estate investing and brought her a deal, she jumped at the opportunity. Today, this duo has a small portfolio of three rental properties and five doors!

In this episode, you’ll hear about the unique strategies Bella and River are using to choose their markets, vet contractors, screen tenants, complete home renovations, and manage their portfolio. Stick around until the end to hear how they plan to take down their next property, a short-term rental in Indiana, and achieve financial freedom within the next five years!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Ashley:
This is Real Estate rookie episode 432. I’m Ashley Care and I’m here with Tony j Robinson.

Tony:
Welcome to the Real Estate Rookie podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And today’s show, we are speaking with two very special guests. We have Bella and her 12-year-old daughter River, and they’re a mother and daughter investing duo who work together to buy, renovate, and manage properties. Now Bella and River are building their portfolio so it can support them and they’re working towards being financially free in the next five years. So Bella River, welcome to the Real Estate Rookie podcast.

Bella :
Thank you. Thank you, thank you. We are so excited to be here.

Ashley:
Hi River. Hi Bella. Thank you so much for joining us. We want to get started with what actually caused you to want to start investing in real estate. A

Bella :
Few years ago I got sick and continue to get sick and I found myself unable to walk, unable to move my arms, and then slowly I lost my eyesight. So I lost my ability to work, to do anything to support my daughter and myself. It was just really hard. I couldn’t make ends meet anymore and my doctors are self-pay. I would constantly be canceling my appointments or moving ’em out to the next month just trying to make amends meet. And I was just trying to think of what can I do to bring in more income to help us survive and not even survive to thrive after all that’s happened to us.

Ashley:
Yeah, what an incredible story that you have to kind of go through this journey with your health and still have the motivation to find something to support yourself instead of just giving up. So what were you doing before you started or before you had your health issues? What was the industry that you were working in before that?

Bella :
I was working in it and I’ve always had an entrepreneurial spirit, heart. I also had my own, I had three online businesses, so I had a regular W2 income coming in and I also had my side incomes coming in and at the time I was also married, so we had that income coming in too. And that’s another thing that happened too where I lost his income. We divorced, I couldn’t afford the bills by myself. I had an eight month old baby and my house was foreclosed on as well. It was just basically all of this was going on at the same time. Losing my health, losing my marriage, my house. It was just a lot. It was just, I say my life was just on fire.

Tony:
Yeah, Bella, it breaks my heart to hear those things. I know how difficult life can be at times, but I guess what kind of conversations were you having with yourself during that moment or during those moments? Because you have pretty significant health challenges that you’re facing A new baby, you said eight months old, a divorce, those were a lot of things that even if they just happened by themselves would be difficult, but to experience all of those at once would even be more. So I guess what kind of conversations were you having with yourself to stay positive, to stay motivated, to believe that there was something better on the other side of all of that?

Bella :
I think my why was my daughter and I just knew she was my responsibility. I needed to provide a better life for her and to be able to afford the things like art classes or going to dance or just a trip to Disney. I couldn’t do those things. And it was just the uncertainty of not being able to provide for her was my motivation. And I started getting my financial house in order. I listened to a lot of Dave Ramsey and what stuck with me was he would say your income is your biggest wealth building tool. And that’s where I would get stuck. I’m like, well, that’s where I lack. I can’t go pick up overtime hours. I can’t go pick up another job. I can’t go jump in a car, an Instacart or Uber. What do I do to bring in more money so we’re not struggling every month? And that’s where I accidentally got into real estate.

Ashley:
Can you explain that to us as to how you accidentally came across from it? We get a lot of people on as guests and they are searching, how do I become financially free? How do I get rich quick? What was actually the method of how you accidentally got into real estate?

Bella :
Real estate is familiar to me because my family, they’re all realtors, but I really never paid attention to it. And my sister was just speaking to me one day talking about her listings and what was going on and I just quickly asked myself. I was like, should I buy property? Maybe this is my answer. And it was just such a strong yes. And I called my sister up, I said, Hey, I want to buy that property you were talking about. And she told me, she goes, well, seller just accepted an offer from someone else. We’re waiting for the buyer to sign the paperwork. And I was like, okay, well just keep me updated on that. And she called me back a few days later and she’s like, buyer went MIA, never got back to us, never signed, can’t get ahold of them. Do you still want the property? And I was like, yes.

Ashley:
So that’s definitely an exciting feeling. And I think right there is one lesson, like never move on from a property without putting in some kind of little word out there that you are still interested in the property because properties can fall through all the time. And you took that, you just made that one extra statement of saying, just follow up with me. I am interested in it. Where some people, they just go at a property and say, oh, it’s already under contract. I’m not even going to bother the real estate agent, or I’m not even going to tell anybody. Keep me in mind for a backup because there’s always chance that if the deal falls through instead of having to re-list the property, it’s so much easier for the seller, their agent to go out to the people who are already interested. That right there is already a great tip in itself. Before we dive into the first deal, I think it’s only appropriate that we speak with your investor duo, your daughter, river. So river, what is your favorite part of helping your mom invest?

River :
My favorite part is when we have to rent a property or the tenants move out, I like to message people back. And what I do on the Rent Ready app, I help screen the tenants.

Ashley:
So first of all, congratulations on being 12 years old and being an investor and entrepreneur already. So it seems like property management software has been very helpful to you in getting your real estate investing journey done. Yes. Yes. That’s awesome. So Bella, can you explain to us what it feels like to have your daughter be able to help you? I understand it has to be extremely challenging to not have your eyesight and your ability to walk.

Bella :
I am so proud of her, so, so proud of her and the experience she was gaining, just doing real estate and helping me, looking at contracts, helping me screen tenants. And now we’re actually, we homeschool and I’m teaching her how to bookkeep. So she has her own binder with each of the rental rentals and she records every month incoming, outgoing, and I have her do the math, okay, what was our profit? What was our net? These are valuable skills that she’s gaining now that she’ll be able to use in the real world.

Ashley:
I 100% agree. I took in accounting class when I was a senior in high school. It was just for a couple months, but it was the most impactful class I think I took of my whole high school career. And it was an elective class because a lot of high schools don’t, at least public high schools don’t offer so many classes that actually teach you life skills, like learning how to do bookkeeping, manage your finances and things like that. So that’s great you guys are doing that.

Bella :
Absolutely. I agree completely as well. She also handles our budget. We homeschool and for fifth grade I had her take Dave Ramsey’s financial piece with me, so she has her financial house in order as well. So she handles the budgets for our personal household and for the business accounts and she tracks it on her iPad and we have monthly budget meetings. So it’s really cool and I just want to get her that habit because those are skills that she’ll need when she’s an adult.

Tony:
Bella, what a cool experience for you as a mother and daughter to go on that journey together and river. I’m sure you’re building some skills that are going to serve you well as you find yourself in adulthood as well. But I guess just even going back to just as a real estate investor, I guess, how does not having your eyesight or the mobility impact you as a real estate investor?

Bella :
It definitely puts you in a more vulnerable position. None of my tenants know I’m blind. I think maybe one or two people on my teams know that I’m blind, but everybody else does not. And it’s just more for protection. You don’t want them to know, oh, I send them to go fix a hole on the wall or paint and they’re like, oh, she’s blind, she’s not going to know any differently and let me just pick up the paycheck. And so I just keep it on. I just don’t say anything about it and I just go move on. And as I get renovations done or anything done, I just say, sure, just send me a picture and a video and then I’ll send payment over. And that’s where my mini me steps in and she makes sure, looks at the video, looks at the picture and says, okay, mommy. And she’ll send money over.

Ashley:
That’s a really incredible process that you guys have put together to actually complete that task because I can imagine it is very difficult to have to rely on other people. And this is where a lot of new investors get caught up where they feel like they need to be involved in every aspect. And here you are without the ability to be involved in walking through the property and things like that, and you have set up a system that works for you for your business and not giving any excuses as to why you can’t be a real estate investor. I think you’re disproving a lot of people who have those doubts and disbeliefs today that they can’t do and can’t get started. So we’re going to take a short ad break here, but when we come back, we’d love to get a rundown of your portfolio and talk about your first deal. Okay. You guys, we are back from our short break with Bella and her daughter river. So Bella, can you give us a breakdown of what your portfolio looks like today? Yes.

Bella :
Right now we’re still in our rookie stage, but we do have five doors. We have two properties in central Florida and we have a triplex in the Ohio market.

Ashley:
So which one of those did you get first? What was kind of the order of those properties?

Bella :
The first property we bought was here in central Florida, and as I was buying that first property, the seller came back and said, Hey, these tenants are going to be moving out. Do you want the second property? I said, sure. And we bought both together. And what’s interesting, I didn’t know until probably last year how great of a deal unicorn was because it was a seller financing. And it didn’t hit me until listening to podcasts and listening to books that traditionally it would’ve been 20% down for each of them. So I would’ve had to come to the table with about $50,000. And this seller was owner financing and he did 0% down for both properties for me. So I was able to get into both properties for 8,000 each. He just asked that we pay all closing costs on each side, which was about $8,000 each. Wow,

Tony:
That’s fantastic. So Bella, let’s maybe break down that first deal. What steps did you even take to go through that process to find that deal to negotiate the seller financing? Kind of break that deal down for us.

Bella :
I didn’t have to negotiate seller financing. This was a old landlord. He still wanted that monthly check without the maintenance. So he put all his properties for sale with seller financing. And I honestly at that time I knew nothing about real estate and I thought, oh, okay, that’s just how it is everywhere else. But now I know better. And that deal, actually that first deal, it was 90 K and it was actually what they call an alligator property because I was negative about $300 a month and I was going to chicken out and not buy it because I was so scared. I was like, oh my gosh, what if we put ourselves in more financial debt? What happens if I can’t make this work? And I use a technique called muscle testing, and it’s just a way to kind of use your body as biofeedback, kind of like your own lie detector machine.

Ashley:
Almost like trusting your gut in a

Bella :
Sense. Yeah, in a sense you actually use your body to get physical notifications, kind of. Some people use sway. I use, I can only use my fingers, so I use my fingers. So I asked the question several times, they kept saying, yes, you need to buy this. And I say, are you sure? Is this a great financial investment for us? And I kept getting, yes. So then I brought in the big guns. I brought in my 9-year-old at the time. I said, okay, babe, do your thing. I showed her a picture of the property, I said, do your thing and you tell me what you get to. And then she looked at me and she goes, mommy, we need to buy this. So we bought it and then we bought the second one too. So we did a dual closing because as we were in the middle of buying the first property, the second property came up. So I did the same thing and we got a yes. And I said, okay, we’ll take both of ’em. And that’s what happened, that first deal.

Tony:
So Bella, you said that you were somewhat hesitant because the cashflow wasn’t the greatest on those first two properties. So I guess what do you think it was that made you find the belief to move forward with it even though the cashflow wasn’t there?

Bella :
Honestly, it was my muscle testing that I’ve been using it for several years. It’s never steered me wrong. And I just went with it and I’m so glad I did because this was in the middle of 2021. I was negative for about nine months, so that was an extra 3000. So my all in on that property was about 11,000 and middle 2022, the market went hot, especially in central Florida. Each of those properties I paid 90 k for, they jumped up over $110,000 in equity in less than a year of me owning them. And the rents went up over $800 month than when I started with, and they’ve been beautifully cash flowing.

Ashley:
Wow. So that was three years ago. Yeah, $800 from three years ago. Wow. That’s awesome.

Tony:
Ashley, have you ever seen a rent increase that big before?

Ashley:
Not in three years going up 800 unless doing a nice rehab on the property, but not just from markets or on snow. So what freedom has real estate been able to provide you after losing your income? What happened with your ex-husband, your vision and ability to walk, all of these horrible things happened and since then you started your real estate journey. How has that actually made a difference in your financial future?

Bella :
It has allowed me to breathe.
Yes, it has given me relief. There are so many nights I would be in tears trying to figure out how do I support myself and my daughter? And as kids get older, they want to do more things, they want more toys and I want to do dance, I want to do this, and I just couldn’t afford it. And I remember thinking, I was like, how do I make this work? And receiving those monthly rent checks has made such a big difference. I don’t have to worry about, oh, I have a doctor’s appointment, I can’t pay for it. I need to move it. I need to reschedule. I can afford my doctor’s appointments, I can afford her extracurriculars. She’s very much into art right now. She takes several art classes a week, I homeschool. So that was another expense, their curriculum, her books, and I don’t have to worry about it. And I still have money that I can put in the savings and I can just breathe. That’s the best word. It is just a relief.

Ashley:
As soon as you said that, I could feel your relief as you said that that was the biggest thing for you is being able to breathe. And just congratulations on taking that initiative. River. I have a question for you kind of on this aspect, but what is your favorite part about helping your mom? What’s the actual favorite task that you do in the business?

River :
Well, I love messaging people. I like bookkeeping as well. She bought me glitter pen, so when I bookkeep it’s sparkly.

Ashley:
Oh, that’s so cool. What a good idea.

Tony:
We got to do that for my bookkeeper as well. Get her glitter pen. So my p and l is like a little prettier

Bella :
And she color codes it too.

Tony:
So Bella, one question that comes to mind for me, because even for a lot of rookies that are listening, they have fear of buying properties that they’re not able to physically walk themselves. We call it buying property sight unseen. But for you, literally every property that you have, you have to have some process in place. So I guess how do you protect yourself from being taken advantage of when you’re initially walking a property and then even once you have the property from the contractors, the property managers to tenants? And you touched on it a little bit, but I think it’s worthwhile. Maybe dive into that topic a little bit deeper.

Bella :
Yes, my mainstay is muscle testing. With muscle testing, I can pull and gather information quickly, speed on my thoughts. So we’re building a team in Indiana right now. Literally my daughter will pull up Google and we’ll Google contractors handyman and we’ll just muscle test, okay, who’s the most trustworthy here? Who’s the most reliable, who should work with? And I’ll give them a call. And as I’m hearing their voice, I’m checking them. I’m like, is this person a good person? Is this person trustworthy? Is this person going to lie, cheat or scam me? And as I’m doing that, they’re speaking to me, I’m asking questions. My daughter’s on the other side doing the same thing. So as we hang up the call, we kind of ping pong each other. I say, okay babe, what did you get? Yes or no? And then we move on. And that’s how I build my teams.
I do the same thing with my tenants and I love it because I was able to help two single moms that just came out of bad relationships that happened to me too. And they didn’t have the credit score to get into somewhere. And I was able to get them into my properties because I could muscle test them and I could see that they truly were good people, they were trustworthy, they’re just coming out of a bad situation. But that’s not something you can on paper, they just wouldn’t qualify. But I can go that extra step and I can just pull that information. And I do that with all of real estate. I find it works really well with contractors, realtors, everything. And I can actually muscle test the property as well. I can check the foundation, I can see if there’s mold in the property. I can do all sorts of things with muscle testing. It’s such a great tool to have and it’s great because everybody can actually do it. It’s just knowing how to do it.

Tony:
Now, one thing that I believe is important, and this is just in business in general is the saying of trust but verify. And I guess what is your process? Because you’re doing this initial muscle test when you’re having these conversations, but I say that you get an inspection report back and maybe you’re considering purchasing a property. What are you doing to try and verify the information that’s in those inspection reports given that you can’t go to the property yourself?

Bella :
We recently bought property in Ohio and I also helped a family member buy up there as well. Once we get the inspection report, I already have my team there and I just call a second person, like a handyman and I’ll send it to them. And usually I’ll say, can you just look this over and can you just look at the property as well for me? And usually they’ll do it. Some of them will just do it without a fee because I say you’ll be first in line if I need anything done on the property. Or then I had another one was like, sure, I can do it for 50 bucks and that $50 is worth everything. And I have I guess second eyes on there to check it for me and we go off of that.

Tony:
So I just want to recap kind of the process that you just laid out, Bella, because I think it’s something that all of our rookies can replicate, especially when they’re buying remotely or maybe in place that they can’t go visit themselves. But you said the first thing you did is you interviewed a bunch of potential team members in that market and you kind of used your own instincts to who you trusted and who you didn’t. Once you have those team members in place that you trust, you find a property that you like, the first thing you do is you get an inspection done. So there’s one certified professional who’s walking that property giving you their opinion of what needs to be done and what maybe you can ignore for now because it’s not that big of a deal. And then the second layer to that is you then pass that same inspection report off to another contractor, handyman, whoever, maybe have them go walk the property to identify if there’s anything else that might be missing. So now you have two sets of eyes that have walked that property with their years and years of experience to tell you what should be fixed or what maybe can be passed down the road. Am I tracking that process correctly?

Bella :
Yes, absolutely.

Tony:
And I think that is the key to giving yourself confidence as a new investor is you really don’t add a lot of value as a first time investor walking the property yourself. Because if you’ve never purchased a rental property, if you’ve never managed a rehab before, if you’ve never done any of those things, what value are you really going to add above and beyond the contractor, the inspector? And the answer is probably not a lot, it’s just an emotional thing. So Bella, I love that you’ve been able to break it down in a systematic way to give you that confidence to submit those offers to buy those properties without having to go to the property yourself.

Ashley:
So I’m going to take a short break here, but when we come back, I’m going to dive into why you decided to actually pivot and change your markets and manage a renovation from afar. So we’ll be right back. Welcome back Bella and River. So you guys started out in Florida and then you made the switch to Ohio. So what went into making that decision?

Bella :
I was listening to BiggerPockets and I heard a lot of people just talking about other markets and I’m like, why are they all talking about the same states and similar markets? So I had my daughter pull up and I was like, oh my goodness, these prices are definitely not Florida prices. And my light bulb went on and I was like, right now Florida’s way too expensive for me. And I was like, I can do the same thing somewhere else. If everyone else is doing it, I can do it as well. And that’s what we did.

Ashley:
So what are some of the things that you considered when you were looking at it, you at the prices, was there anything else in the market that you were like, this is exactly where in Ohio we need to invest in? Were you looking at job growth industries, anything like that on top of the price point?

Bella :
No, honestly, I don’t have the ability to Google and Google data or anything like that. And I tried getting my daughter to try and do it, but she’d just get bored. She wanted to go play. So I have a very small window when she would do it for me, what I was doing was as I was listening to people talk about where they’re investing, I just kind of made mental notes of the markets. And what I did was I was like, okay, these are the states people are talking about what state should I invest in? And I got from all the markets, Ohio and Indiana popped up for me. So what I did is I had my daughter just pull up listings. I just told her Google multifamily for sale in Ohio. And from there, I don’t know if it was Zillow or Redfin that she popped into, I said, okay, let’s just muscle test it.
And that’s exactly kind of, you do kind when you’re trying to scrub data and you put in filters, I can do the same thing. I said, okay, we’re looking for a multifamily house that will be a great financial investment for us and under a hundred thousand dollars. And we just kind of muscle tested and it brought us to one property. And I said, okay, cool. We called the realtor, we went and saw it the next day and it was listed for 90 K. It was a duplex. And when we got there, she was on video time with my daughter. She goes, oh, this is not a duplex. It’s really a triplex. And it had two long-term tenants and the bottom was already turnkey. I said, okay, we want it. And we bought it.

Ashley:
So when you talked to the real estate agent, was that the agent that you just saw on the listing who was actually selling the property and you just contacted her directly? And how did you start to build out your team in Ohio?

Bella :
I did the same way I Googled and I just called them beforehand. I had already known I wanted to buy in that area, so I just Googled agents and muscle tested ’em, and we got our agent and she was ready to go the next day and we went and saw it and it just fit all our boxes. I wanted to make sure, for me, I wanted to cashflow at least a thousand dollars a month. That was my buy box, that was my goal. And we got it for 80 5K, we put down 26,000, and my mortgage is $550 and it’s bringing in 2300 right now. So it made our buy box

Tony:
That is a killer deal. What year did you buy that one?

Bella :
We just bought it five months ago.

Tony:
Wow. And so what’s your interest rate on that?

Bella :
It at a 7.92%.

Tony:
Wow. And that’s crazy. And you’re so cash on that much. That is a crazy good deal. I got to have you find some deals for me, Bella, because that one’s like you knocked it out the park. So it sounds like what you’re saying, Bella, is that in terms of helping you identify that next market, you relied on your network, and I say network loosely because it’s maybe not investors that you knew personally, but just other investors that you’re hearing having these conversations and that’s what led you into this new market. And we talk about this in the podcast a lot as well, but I personally believe that a lot of times the best way to find a new market is to talk to someone who’s already investing in that market, right? Like Ash, you did pretty much all of your investing in your own backyard, but your first flip that you did out of New York City or out of Western New York, out of Buffalo, where was it at

Ashley:
Seattle? Pretty much as far away from Buffalo as you could get. But I partnered with somebody who only did flips in Seattle. So it wasn’t really me having to learn the market, it was me just finding that one team member, that person to partner with who had all the experience, had the network, had the knowledge to go into that market. So just having one key person that can connect you to anyone in a market definitely helps make it an opportunity.

Tony:
So it sounds like 86,000 bucks, you’re renting it out for, I think you said 23. Was this property turnkey bill or was there any work you had to do to this triplex?

Bella :
Yeah, it was turnkey. We did update the bathroom on the second floor and we did that long distance. My 12-year-old turned interior designer and I introduced her to Pinterest and I said, just look to see what’s the trend and let’s mimic it. And we did. She loaded the Lowe’s card up with all the things and we called Lowe’s up in Ohio, contractor went, got the material, and within a week we had a new bathroom. It was gorgeous. Yes.

Ashley:
Yeah. Oh, that must have been fun river, to be able to pick out all the design for that. It was very fun. I’m

Bella :
Very proud of myself.

Ashley:
Yeah, I’m proud of you too.

Bella :
And then she went on to renovate four more bathrooms for me down here. Oh

Ashley:
My gosh. Wow. Cool. River, you didn’t tell us that too in the beginning that you’re also the interior designer for the business. That’s awesome. So with those rehabs with finding the contractor, was that the same thing? Did you Google contractors or did your real estate agent actually connect you with a contractor to use?

Bella :
I googled them.

Ashley:
I feel like that’s such a hard part of going into a market is first you can find an agent, but finding a reliable contractor that you can trust is usually more difficult.

Tony:
And I just one follow to that, Bella. I agree with Ashley. That is a big challenge for folks finding that right person. So what specific questions Bella, are you asking as you’re interviewing these different contractors? That’s where a lot of new rookies get stuck is that they don’t know what exactly they should be asking to be able to differentiate the good from the bad. So what questions do you recommend rookies ask as they’re looking to interview these potential team members?

Bella :
I like to ask about experience and if they work more with investors or more residential. I try to find contractors and handyman that deal more with investors because I do find there’s sometimes they’re reluctant to when they say you’re out of state and they’re like, oh, another out of state investors coming to town. So I try and tend to stay with people that just mainly work with investors in their area and also how quickly they communicate. If I call ’em, do they call back? If I text ’em, do they call back? That’s very important for me. The communication piece as well.

Ashley:
We recently had one of my contractors on the show as a guest, and he’s very specifically built out his business as an investor friendly contractor. And during the episode we talked about the differences in a contractor who does home remodels for people for their primary residences compared to an investor friendly contractor because it is two completely different realms where an investor just wants to get done what it needs to, it doesn’t care about that it’s going to be the highest and best quality of all the products that are out there. Where as if it’s your primary home, you’re going to care more about that. It’s a high-end finish for the product and an investor wants to make money and he can give tips as to what’s the best way to actually go about that without actually compromising quality. But it’s not going to be the high-end finish that a homeowner would want in their product. So having a contractor that can kind of guide you as to even knowing the market as to no rentals in this area have quartz countertops, you would be great with just doing laminate or things like that that can help you guide along the market, I feel is so useful. So Bella, what is your process for once the rehab is going on, what is your expectation for these contractors as to how they report to you while the job is being completed?

Bella :
I usually just send a text and just ask them

Ashley:
For an update.

Bella :
For an update, yes. And they usually, without me really asking, they usually every contract I’ve worked about with five contractors now they willingly or they just like to send me pictures and videos as they go through progress. And then once it’s done, they’ll send me a video of everything done and pictures and then that’s when I’ll send payment over.

Tony:
And I love that you’ve really tried to systematize everything and it’s like every time we ask a question like, Hey, here’s what I do first, here’s what I do second, here’s what I do third. And you’ve really had to think through what the right process is for you to make sure that you’re finding the right people, that you’re finding the right deal. So we have a lot of people who listen to the podcast the same exact way that you were before they read the books, they watch the videos, but they never take action because they’re making excuses for themselves about why now isn’t the right time, why they can’t do it because of X, y, Z reason. What is your advice to those folks who are sitting on the sideline making excuses or waiting for the perfect time to get started?

Bella :
I say jump right in. As long as your financial house is in order, you have an emergency fund, you’re good financially. I say jump in. It’s a wild ride. But it’s fun, but it’s so rewarding. It has changed our lives.

Ashley:
Before we kind of close out here, I want to ask River, we touched on your interior design experience. Could you maybe give us some tips as to what is in right now for a bathroom renovation?

River :
So I like choosing a lot of light gray stuff because it’s not white and it’s not black, it’s more in between. So it’s kind of like a perfect color. So I mainly like to pick stuff like gray and white and a lot of the bathrooms that I renovated have the gray wood tile look.

Ashley:
Oh yeah, I love that Look, the graywood tile. Well thanks.

Tony:
Yeah, I love the design tips. I’ll take those for our next property as well. So I guess last question for you both, and Bella, maybe we’ll start with you, but I guess what is next for the two of you? I know you talked about the goal of financial freedom, but yeah, I guess what is next in the roadmap for the two of you?

Bella :
Sure. We just finished finding our team in Indiana In the next few months I plan to pull some equity and we are going to purchase our first short-term rental. So we’re excited about that. We’ve been looking, we have some properties earmarked. We know the location. And just today actually, I finished reading Sarah Weaver’s 30 Day Stay, and once my leases in Florida end, I will be converting them to midterm rentals. We’re in a great spot in between Daytona Beach and Orlando. I think we do really well for midterm, so we’re excited about that. Entering the short term midterm rental market.

Ashley:
Bella, you mentioned that you were going to pull some equity. Could you explain what that means for maybe somebody listening that isn’t sure what that process actually is?

Bella :
Yes, pulling equity is HELOC and it’s a home equity line of credit, and I have over a hundred thousand dollars in my property sitting on each one. I’m going to get out a HELOC and use that money to purchase more properties with it.

Ashley:
And that is a great use of the equity in your property. For sure. Well, Bella and River, thank you so much for taking the time today to explain your journey and to give everyone this amazing sense of inspiration and motivation to get their first deal or their next deal. So we’re going to link information about Bella and River in our show notes so you guys can reach out to them or find out some more information about them. Thank you so much for listening and we hope you enjoyed this episode of Real Estate Rookie. Don’t forget to join us on Facebook, and if you love this episode, make sure to give us a follow on your favorite podcast platform. I’m Ashley. And he’s Tony. And we’ll see you guys next time on Real Estate Rookie.

Tony:
This BiggerPockets podcast is produced by Daniel ti, edited by Exodus Media Copywriting by Calico content.

Ashley:
I’m Ashley. He’s Tony, and you have been listening to Real Estate Rookie.

Tony:
And if you want to be a guest on a BiggerPockets show, apply biggerpockets.com/guest.

Watch the Episode Here

https://youtube.com/watch?v=CR3PKbs1CPU

Help Us Out!

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. Thanks! We really appreciate it!

In This Episode We Cover:

  • How THIS investing duo built a small real estate portfolio from scratch
  • Putting no money down on an investment property with seller financing
  • Creative strategies for vetting contractors and screening tenants
  • What to do when a rental property isn’t projected to cash flow
  • How to assemble and manage a team when investing out-of-state
  • How Bella and River are on track to reach financial freedom in FIVE years
  • And So Much More!

Links from the Show

Connect with Bella

Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected].

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.