Afford Anything - Ask Paula - How Do I Buy a Foreclosure? - and Other Real Estate Questions

Episode Date: February 26, 2018

#118: Questions -- I get questions! Today, I’m tackling four queries about real estate investing that come from the audience. Here are the details: Sam says: I work full-time and I’m not handy, so I definitely need a property manager. I’ve found an amazing property management company, but they only serve a small, specific neighborhood. Should I buy a property in this neighborhood so that I can use this fantastic property management company? Terri asks: I’ve heard that if you’re above a certain income level, you’re unable to carry-over losses from your income property. My accountant says it doesn’t make sense to buy a rental property if you can’t carry-over losses. Is this true? Anonymous asks: I’d like to buy my first rental property when I’m in graduate school. I’ll live in one room and rent out the other. What should I consider? Noelle says: We’d like to sell our home, and use the proceeds to pay cash for a foreclosure in the South. How do we find a foreclosure or short sale? We cover these questions in today’s episode. Enjoy! _____ Resources Mentioned: Amazon - nolo every landlord's tax deduction guide https://www.nar.realtor/rofindrealtor.nsf/pages/fs_sfrspec?OpenDocument Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything. You just can't afford everything. Every decision that you make is a trade-off. And that is not just true for your money. That's true for your time, your energy, your focus, your attention. It's true for anything in your life that's a scarce or limited resource. There's always a trade-off. There's always an opportunity cost.

And given this set of facts, the questions become twofold. Number one, what is most important to you? And number two, how do you align your day-to-day behaviors and actions to reflect that which is most important to you to reflect your priorities. Answering and living the answer to these two questions is a lifelong practice. And that is what this podcast is here to explore and help facilitate. My name is Paula Pan. I am the host of the Afford Anything podcast.

Here's how we structure this show. Every other week, I have an interview with a guest. And on the weeks in between, I answer questions that come from you, the listeners. Among these questions, these episodes in which I answer audience questions, I've I divide them up into two different types. Half of them are questions generally about money, debt, retirement, savings, budgeting. And then the other half are questions specifically about real estate investing. So in other words, every fourth episode of this podcast is an episode in which I answer audience questions about real estate investing. Now, this happens to be that one in four show that covers this topic. So if real estate investing is not your job, If you're not interested in this topic, don't worry, 75% of our episodes are not about this. So I would invite you if you're not interested in real estate investing to bow out of this particular episode and check out any of the other episodes in our archives. If, however, you are interested in this topic, listen on because our first question comes from Sam.

Hi, Paula. My question is focused on property managers. I work full time and also very unhandy around the house. So a solid property management company is a key component in my strategy. My question is, are property managers a dime a dozen in that I can always find a good one if I go through enough of them? As right now, I know of one really good property management company that I know is wonderful. They are on the high side in that they charge an annual fee plus 10% per month rent, but they are phenomenal. The problem is that they cater to a small area. about five or six towns, which explains why they're so good. So should I buy property based on the area I know that that particular property management

company serves? As long as the ROI is pretty decent, I would assume maybe a loss of 1% or 2% for this particular sacrifice. Let me know. Thanks. Sam, this is a fascinating question. Should you buy a property in a particular neighborhood specifically so that you can use this fantastic property management company? The short answer is quite possibly. But let me walk

through the considerations. First, generally speaking, and I'm saying this for the sake of everybody listening, here's a framework that I want to establish. In the world of investing, risk is often commensurate with reward. And the analogy that I'll use to illustrate this is the stock and bond market, because that's something that I think many people are familiar with. Now, as probably everybody who's listening knows, a treasury bond has lower. risk and also lower expected returns historically than a large cap index fund. And so you cannot compare the rewards between an index fund, a stock index fund investment and equities investment versus a bond investment. They are inherently going to be different and you cannot make an apples to

apples comparison between the two. And there isn't one that's better or worse. You have to select whichever one you want based on your goals, your timeline, your risk profile, all of those other personal considerations. Now, the analogy that I just gave compared stocks versus bonds. So we're talking about two very different asset classes. But inside of an asset class, you'll see the same thing happening. Inside of the world of stocks, you'll see, broadly speaking, that small cap funds have a higher degree of risk, i.e. higher volatility, but also higher possible, higher possible. Rewards historically than large-cap funds. Similarly in the bond market, you'll see that treasury bonds have lower risk but also lower rewards than junk bonds. So broadly speaking, the point that I'm making that I think you all understand is that risk and reward go hand in hand and they exist on a spectrum in which higher risk often correlates with higher expected reward and lower risk often correlates with lower expected reward. The same is true in the world of rental properties. And this is particularly true when you're choosing a neighborhood for a

rental property. Now, neighborhoods are, broadly speaking, referred to as Class A, B, C, or D. Each of those letters illustrating a different risk profile. So a Class A neighborhood would be an example of a neighborhood that has highly qualified tenants who often have a strong income, good credit, stable employment. Many of the homes in Class A neighborhoods tend to be newer or recently renovated. Class A neighborhoods tend to have lower crime rates. There's often less tenant turnover. So those are all of the characteristics of a Class A neighborhood. Now, by contrast, a Class C or D neighborhood tends to have, broadly speaking, higher crime, greater turnover.

Oftentimes you'll receive applications from tenants who have bad credit or unstable employment. those are many of the qualities that you find in class C or Class D neighborhoods. And so when you are comparing returns on a rental property, you cannot compare the returns of a property in a class A neighborhood to the returns on a property in a class B or C or D neighborhood. Because it's not an apples to apples comparison. It's very similar to how a person would never compare the returns that they would make in an emerging market. index fund with the returns that they would make buying Treasury inflation protected securities. It's just not an apples to apples comparison. Sam, you mentioned that the neighborhood that the property management company services has a lower return about one to two percent lower than the

neighborhood that you were otherwise considering. My question to you, my questions to you, plural, are threefold. Number one, what is your target sweet spot with regard to risk and reward. Forget about the property management company for a moment. And in a vacuum, absent of all other considerations, where do you want to be within this risk reward continuum? What is your ideal preference? That's question number one. Question number two, with regard to the neighborhood that this particular property management company services, how close is the risk reward profile within this neighborhood to your ideal target sweet spot, the neighborhood that you identified in the previous question. So that's the second question. And then question number three, and this one is crucial,

you did mention that you would get a lower return in the neighborhood that the property management company services. Does this diminished return also reflect diminished risk? In other words, are you getting something for that tradeoff? Are you getting lower risk in exchange for that lower reward. If the answer to question number three is yes, and if your ideal target sweet spot is reasonably close to the risk profile of this particular neighborhood that the property management company serves, then in that case, I think it's perfectly reasonable to purchase a property in the neighborhood that the property management company serves. If this area, this area in question makes a fair adjustment if it has lower rewards for lower risk and that is pretty close to what you were going to get anyway, then I think it's not a bad idea.

Because fundamentally, your question is, should I choose a neighborhood that has a slightly more conservative investment profile than I otherwise would have chosen in exchange for having the ability to attract a stronger team? That is fundamentally the question that you're asking. And I won't tell you how to answer that, but I do think that a yes answer is a reasonable decision because attracting and retaining top-notch talent is what any good business owner does in any industry. Now, before you go ahead and buy a property in this area, there are four questions that I want you to ask the property management company. Number one, ask them if they would make an exception. even though they normally don't service the neighborhood that you were initially interested in, would they make an exception for you? Ask them.

If their answer is no, then question number two is, why not? What are their concerns? What are their fears? Is it purely a logistical thing? Or is it that they just don't want to deal with the level of risk that is in the neighborhood that you were considering? Why did they make the decision that they have? Question number three, have they ever considered expanding the scope of neighborhoods that they work in? and if so, what neighborhoods would they expand into next?

And then question number four is not really a question, it's a conversation. I want you to explain your thought process to them. Tell them just exactly what you've told me and let them know that you like them so much that you would choose to buy a house in a neighborhood that they serve specifically so that they can represent you. Then see if as you are going through the process of selecting and analyzing and purchasing this property, work closely with this company. Many property managers are also real estate agents and or work closely with agents. So see if they can either, if they have somebody in house who can represent you or if there's an agent that they work closely with who could

represent you. And if not, then even if you use a completely different outside agent who does not previously have any connection with them, still include them in the process. You loop them in when you go under contract for a property, but you're still within your buyer's right of rescission period, send them the listing and ask them if they would be willing to represent it and ask them what they think. So that's the conversation I'd encourage you to have with this property management company, but TLDR, the short answer is, I think purchasing a property in this neighborhood that they serve could be a totally reasonable decision, assuming that that lower reward also reflects lower risk. Thank you so much for asking that question.

Our next question comes from Terry. Hey, Paula, my name is Terry. I absolutely love your website and it's what encouraged me and inspired me to get started in real estate. I do have a question for you, though. I've been doing all my due diligence and researching the heck out of finding a property for my first investment property. But it recently came to my attention that if you're above a certain income level, I believe it's 150 that you are unable to carry over any losses that you might get with your income. property or with your rental property, that is, of course, unless you are an agent or you spend 750 hours a year on the property. So there's all these stipulations. I'm trying to figure out people are telling me, my tax accountant is telling me it doesn't make sense for you to buy a real estate property if you can't carry and use those losses. You can't use those losses. So I'm wondering what you think about it. And if you have any advice on that, if it's still worthwhile for me to invest in real estate. Thanks. Terry, so your question is about carry forward losses on rental

properties. Short answer, you can absolutely apply your suspended losses against passive income in future years. The only thing that your income prohibits is that you don't qualify for a special allowance. So that's a short answer. Now here is a more detailed answer, and we will start by establishing the background. And I'm going to establish, I'm going to kind of go into depth about the background for the sake of everybody who's listening. All right. So here's some background. Your income and losses on a tax return are divided into two categories. Number one is passive. So rental properties and other businesses in which the owner does not, quote, unquote, materially participate, the income that comes from that is considered passive income. And then non-passive income refers to income that comes from a business in which the taxpayer, quote unquote, materially participates. So salaries or 1099 freelancer income, all of that is considered non-passive income. It's actually. income. Now, the IRS regards rental property income as passive income. So when I say that rental

property income is passive income, that is not just my opinion. In the eyes of the IRS, its tax designation is passive income. And by law, losses from passive income cannot offset gains from active income. In other words, passive losses cannot offset non-passive income. What that means, means, I'll just rephrase this a third time in case there are people who are listening who are like, what? Okay, what that means is that if you have a rental property and you take a loss on that property in a particular year, you cannot deduct that loss from the money that you've made from a job or from the returns that you've made from a stock or from an index fund.

You can deduct your losses only against passive income that you've made. So what do you do if your losses exceed your gains? If your passive losses exceed your passive gains? Well, what you do is you do this thing that's called carrying them forward. And what that means is that any loss that you don't deduct gets carried to a future year. So passive losses that are not deductible right away turn into what's known as suspended passive losses. These are not lost. You can carry forward these losses indefinitely until you have indefinitely.

until you have enough rental income or other passive income that you can deduct them against. So I realize there are a whole bunch of people who are driving to work right now and it's probably 7.30 in the morning and you haven't had your coffee yet and I'm throwing all these big words at you. So what does this mean? Terry, back to your question. So if you are a long-term buy and hold investor, what's most likely going to happen is that you will carry forward your suspended passive losses for a future year, at which point those losses are going to offset your rental income. And as to the income phase out, Terry, that you're referring to, here's how those rules play out. So if you have a modified adjusted gross income of $100,000 or less, and you have more than a 10% ownership interest in the property and you meaningfully make management decisions, so in other words, if you're like legit owning and running this thing, then you can deduct up to $25,000 in rental losses per year.

Now, if you have a modified adjusted gross income that is between $100,000 to $150,000, then this $25,000 allowance gets slowly phased out. And if your modified adjusted gross income is higher than $150,000, then you don't get the $25,000 allowance. So what does that mean? What it means is that, quite simply, your losses can't exceed your gains. the losses from your passive income that exceed the gains from your passive income get suspended until you have the money to apply your passive losses against your gains. But you're not going to lose these losses. You can still carry forward disallowed passive losses to the next taxable year. The only thing that having a high income does is that you lose your ability to have a $25,000 allowance.

That's it. Now, if you want to learn more about this, NOLO has an excellent guide. It's called Every Landlord's Tax Deduction Guide. I'm going to link to it in the show notes, which is at Afford Anything.com slash episode 118. And that will give you very good, detailed, accurate information about tax laws as they apply to landlords. So again, you can connect with that at Affordanthing.com slash episode 118. Awesome. Well, thank you so much for asking that question, Terry. And again, check out the show notes. We'll come back to the show in just a second. But first, we'd like to welcome Betterment as a sponsor of the show.

Betterment is the largest independent online financial advisor. They provide personalized advice for your financial planning needs. Based on the information that you give them, they make tailored recommendations for how much to invest, how much risk to take on in your portfolio, and the type of investment account that you should have. They also have features like Betterment's socially responsible investing portfolio, which gives you the flexibility to reduce your investment in companies that don't meet certain social, environmental, and governance benchmarks. Betterment has low transparent advisory fees compared with traditional services. They charge a 0.25% annual fee with unlimited messaging access to their team of licensed financial experts. They also feature tax saving strategies to help increase your after-tax returns. and they use the strongest browser encryption available, storing all of their data on servers in a secure facility. Remember, investing involves risk.

Afford Anything listeners can get up to one year managed free. For more information, visit betterment.com slash Paula. That's betterment.com slash Paula. Freelancers and small business owners, I feel for you. Tax season is here. and there's a good chance that many of you are trying to dig your way out from underneath a pile of receipts and spreadsheets. Do yourself a huge favor and stop digging. Before you completely disappear under that abyss of paperwork, go and check out FreshBooks Cloud Accounting Software.

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That's freshbooks.com slash p-a-u-u-l-a. And when they ask, how did you hear about us? Put in, afford anything. Again, that's freshbooks.com slash Paula. And when they ask how you heard about them, mention afford anything. Our next question comes from Anonymous. Hi, Paula. I have a question for you. I'm planning to go to grad school in the next couple of years. And we're thinking of getting my first rental property while I'm in school. I would want to find a place. where I could rent out one room and have a roommate for the other. I know that's not a typical straight rental situation, but I would plan to rent it out once I move on from grad school, if I happen to move locations, something like that. So can you tell me if there's anything I should keep in mind when looking at properties, since it's not a straight investment and it's not a straight personal residence, including any tax considerations, things like that? I'm just wondering how to

sort of get started in that process. If I should be looking at agents who specialize in investment properties or more strictly residential, how I should go about doing that. Thanks. Heck yeah. I love this plan. Okay. So here are some considerations. Number one, when you are analyzing a property, run the math as though you are renting out both rooms. One of my favorite sayings, favorite sayings is how much of a nerd I am, is that math should always be identity agnostic. And what I mean by that is that it does not matter who is filling a particular role. The identity of a person should not change the equation. So if it helps, conceptualize that you have like split personality, right? There's you the owner and you the renter. And if it helps,

just imagine that you are your own tenant and you are paying rent to yourself. Now, you don't literally do this. Don't literally pay rent to yourself. But imagine the situation that way when you're the analysis, because when you're running a spreadsheet, that spreadsheet, the math, the numbers, must always be identity agnostic. And by the way, this is not only true for cases like yours in which you would live in one room and rent out the other. It's also true for, and I'm saying this for the sake of everybody listening, for hiring contractors, or hiring property managers. This is why I have such a problem with the people who say, who perform like hocus pocus spreadsheets where They're like, well, hey, if I do all the work myself and I value my own time at zero,

then look, my profits are a million. And that's just BS accounting, man. Like, you cannot value your own time at X and somebody else's time at Y and call that a fair comparison. A little rant there about the way that some people do their math. There's a fair bit of garbage in, garbage out in the way that some people approach spreadsheets when it comes to analyzing rental properties. So, but anyway, I'm off track. So that is tip number one.

Tip number two. So the impression that I get from listening to you is that you don't have a strong personal preference in terms of size, location, floor plan, layout, the quality of the upgrades, the natural light. I might be wrong, but I get the impression that you don't have very strong personal preferences in terms of like the type of place that you would want to live in. And that is fantastic because this will help you. And then the reason that I have that impression is because it sounds like you're only going to live there for a very short period of time. Not saying you don't have style, but I'm just saying because it's accommodation that is meant to be temporary. It sounds like you are pretty flexible about where you would live. And that is fantastic because that lack of strong personal preference will help you make a decision that is not based on your own personal desires,

but rather based on the analysis of an investor. And those are the shoes that you want to be in. And so I guess tip number two, I suppose what I'm really trying to say is that when you do start looking for a property, be very conscious, be very aware of keeping your personal biases, your personal preferences. Keep that out of it because this is not for you. This is not your home. And the moment that you start thinking about it as your home, red flag you've lost. Steve, can we get the sound of a siren here? Yeah, warning, warning.

Like, you do not ever want to think about this as your home. Even if you are going to live there, it's not yours. This is your investment, not your home. And the fact that you're going to live there reflects the fact that you're doing what you've got to do in order to get started. It does not reflect the fact that this is your home. Like, you have to disassociate yourself from that emotional connection to the property. So that is tip number two. Choose the property through the eyes of the.

an investor, not the eyes of a resident or a homeowner. Tip number three. Well, actually, this isn't really a tip. It's more of a common. The awesome part about your plan is that because you will be living there, you can take out a mortgage as a primary resident. And primary residence mortgages have some of the most generous terms. You don't have to put down a big down payment if you don't want to. You can get some of the best interest rates on the market. Like the type of mortgage that you can get when you're buying a primary residence is, broadly speaking, way better than what you could get if you're buying a second home or an investment property. So that is the really good news about what you're doing. I guess that's not a tip. That's just a congratulations. In terms of taxes, because you asked about taxes, the number one thing that I would say is hire an accountant because what your CPA is going to do is that he or she will treat a portion of the property as an investment and the other portion of the property as a person. residence. And so your property will be divided in its tax treatment. Like my first investment property, we bought a triplex, we rented out two of the units. And then in that third unit, we lived in one

of the bedrooms and then rented out the other two bedrooms. So we, we were a little bit unusual because not only did we buy a triplex and rent out two of the other units, but we also split our own unit with roommates. And that, again, was the, we did what we got to do. And order to get started. It wasn't our home, even though we lived there for five years. It was never our home. It was our investment. And this was what we had to do in order to make it happen. So anyway, when it came to tax time, our CPA had to slice and dice. He calculated the percentage of the property that we were using and the percentage of the property that we were renting. And then he processed our taxes accordingly. What I would recommend that you do in order to kind of streamline a lot of

the bookkeeping here, open a business bank account. Any expense that you have that's related to this property, pay through that business bank account, either through a business credit card or a business debit card that's linked to your business bank account. And also any income that you have from this property, put that income into the business account. So in other words, don't commingle your business spending with your personal spending. Like keep those two separate. Then link this business bank account to some type of accounting software. and then give your CPA access to your accounting software. Once your accountant has access to the software, it's up to them to deal with proportioning it out.

So all you have to do is have really clean, not commingled records, and that's it. And then it's your accountant's job to take those records and say, all right, well, of the money that you spent on this property, this percentage is what we will regard as part of your investment and this percentage is what we will not. So I guess TLDR, I guess what I'm saying is just don't pay for your housing expenses from the same account that you use to buy groceries or put gas in your car. Keep the rest of your personal expenses separate and have an account that is purely for the property that you buy. Thanks for asking that question. And congratulations on your plan. I think that's awesome.

We'll return to the show in just a moment. But first, are you interested in starting your own blog, but you're not sure exactly how to do it? Like, how exactly do you set everything up? Head over to our tutorial at afford anything.com slash start a blog. We have step-by-step instructions, including photos, everything that you need in order to figure out how to set up a domain, how to set up hosting. And in that, we recommend Blue Host as the host. They are affordable. They're easy to use.

And we show you exactly how to set everything up. We even have a YouTube video of ourselves setting up a blog on Bluehost in five minutes. So check it out, afford anything.com slash start a blog to get started with your own blog. Our final question for today comes from Noel. Hi, Paula. In a few years, my fiancé and I plan to move from High Price, California to one of the southern states. We haven't picked the city yet. We both own homes in California that are our personal residences.

we will have enough money after we sell our houses to buy a home in the south with cash. So we were thinking of renting an apartment in the new city month to month while we search for the perfect home. So my fiancé is very good at doing all his own home improvements and repairs. So he thought it would be a good idea to buy a foreclosure, short sale, or auction home. We hope this will be a way to be able to buy a bigger house at a very low price and fix it up ourselves. We have no idea how to buy a home like this. We bought our current homes in the conventional way. Do you know how we can go about buying a foreclosure short sale or auction home? Is there a service that's not a rip-off? Do local real estate agents do this for clients? Do you have any resources we can

look up or know of any pitfalls we need to look out for? Thanks for your help. Hey, hooray for buying a home in cash. Congratulations. That is amazing. And that will bring you so much closer to financial independence. So to answer your question, first of all, yes, there are agents that specialize in foreclosures and short sales. The National Association of Realtors has a designation called SFR, which is a certified short sale and foreclosure resource. We're going to put a link in the show notes to the specific page on the National Association of Realtor website, where you can look for agents who hold the SFR. designation in a particular specific geographic area. You can search by city, state, area, and look

for certified short sale and foreclosure resource specialists through that link. And again, that's in the show notes, afford anything.com slash episode 118. It's afford anything.com slash episode 118. Now, that is one possible way to do it. Now, here's another approach. And I kind of like this approach a little bit better? If you know what neighborhood do you want to invest in, look at foreclosures and short sales that are on the market. Now, when you are doing this, you're not necessarily looking, you're checking Zillow, Redfin, Trulia, any of those websites. You're not necessarily looking for the sake of buying any of these properties. So you can even look at properties that are under contract already or foreclosure or short sale properties that

have recently sold. But look at this particular area. Look at the foreclosures and short sales on the market and then ignore the property, look at the name of the listing agent who represents the property. Because in many neighborhoods, once you do this, you'll start seeing the same few names over and over and over. If you're searching the 3034 zip code, for example, and you're looking at keyword foreclosure and you're searching all properties, whether they're for sale, under contract, recently sold, you'll start seeing that the same few people represent represent the bulk of the foreclosures, real estate, all real estate, is inherently local. There is no such thing as a quote unquote national market or a state market or even a city

market. All real estate is local. And once you start noticing who the players are in this particular field, give them a call. Because even if they are only a listing agent, they will know which buyer's agent to hook you up with. And the reason that I like this approach is because it zeroes in on who the players are in that market. And whether or not they hold the right credentials, they're the people who are actually working that market. They're the people who actually have their boots on the ground representing the properties, knowing what's up, they got the connections. They're the people that you want to know. And again, even if that agent himself or herself can't represent you, they'll recommend somebody who can. And the person

that they recommend will be somebody who works with foreclosures or short sales in that neighborhood. But again, that entire approach, I guess the drawback to that approach, hinges on first identifying what neighborhood you want to be in. And that, if you're looking somewhere as broadly as somewhere in the South, that can actually be the biggest challenge. You might be, I don't know where you are within your search, but it might be the case that your challenge isn't finding a foreclosure per se, but rather just figuring out what zip code you want to be in or what neighborhood you want to be in. By the way, if you are interested in Atlanta, shoot us an email. Email my assistant, Aaron, Erin, E-R-I-N at Afford- Anything.com, and we can hook you up with

agents in Atlanta who would be super helpful for this. But at any rate, I mean, T-L-D-R, the most important thing that you would need to do before you figure out how to buy a foreclosure is figure out where to buy that foreclosure, what neighborhood do you want to be in, what area, what zip code do you want to be in? Now, with all that being said, there is a number. approach that you could take as well, and that is that you could chat with wholesalers. Now, wholesalers are people who find off-market properties, get those properties under contract, and then flip that contract to, typically to investors. Wholesalers normally do not work with owner occupants because the properties that they often

acquire are in need of some pretty extensive repair. But given the fact that that is specifically what you're looking for, it might not be a bad idea to meet the wholesalers that work in the particular neighborhood that you're looking in. So again, this strategy really all comes back to first knowing what neighborhood you want to invest in and then meeting the players in that neighborhood. You asked about pitfalls as well or red flags to look out for a couple things that I would say here. Number one, I would recommend having two people inspect the property. Once you get a property under contract, have two people check it out. One of those persons should be a licensed inspector and the other person should be a general contractor.

Have both of those, it'll be totally redundant. And if you're working with a real estate agent, they'll probably tell you it's unnecessary. And they're correct. It is not strictly speaking necessary. Most people don't do it. But as I see it, for the cost of a couple hundred bucks, you get two different opinions and two different perspectives, two different vantage points. You know, for a few hundred bucks, you might be able potentially to save yourself from a very expensive mistake. So I totally recommend get a general contractor to walk through it. You'll have to pay him or her hourly. There are very few people who will do this for free. And that's totally reasonable. I have no hesitation paying somebody 50 bucks an hour for two or

three hours to go walk through the property and tell me what they think and how much they think it's going to cost, give me their professional assessment of the place. I think that's money that's very well spent. So that is one thing that I would say. The other thing that I'll say is within your budget, budget to pay rent elsewhere while the work is being done. It's very tempting to want to live in the property as you are fixing it up. We did that with our triplex and I regret doing that with the triplex. To be perfectly honest, I think that was a huge mistake. And if I could go back in time, I would not have done that. So even though it will be more expensive, I would budget to at least give yourself the option to be able to rent some other place, some place that has electricity and running

water, refrigeration and a showerhead that works. After a while, you start wanting that. So yeah, give yourself the option to be able to pay rent somewhere else while you are fixing up this property. And of course, the final tip is that no matter how much you estimate, Always assume that the project will go over time and over budget. I think that's a truism in many industries and certainly in real estate, in rental property renovations and probably all real estate renovations. I think I mentioned on the last podcast, there's that famous quote for people who are traveling where it's like right before you take a trip, lay out all your clothes and all your money, then take half the clothes and twice the money. Yeah, it's true of traveling and it's true of renovations as well. Just assume it'll take more money than you think it will and more time than you think.

think it will. And be flexible and keep a good spirit. That is our show for today. Thank you so much for tuning in. I am posting on Instagram every single day with some sort of thought, observation, opinion. You can find me on Instagram at Paula Pant. That's at P-A-U-L-A-P-A-N-T. Oh, also, big news. I published a blog post. It's for the first time since November, I published a post, and it's actually, for those of you who are longtime listeners, if you remember episode 87 in which I discussed money myths, it was a discussion that came out of a presentation that I made at the World Domination Summit in Portland last year. Basically, I took the lessons that I covered in episode 87 and turned many of those lessons into YouTube videos, and then I embedded those YouTube videos into a blog post. So that is available at afford anything.com. Please head there and check it out.

And when you're there, subscribe for email updates for all the future blog posts that I do put out. They are at this point kind of few and what's the expression, few and far between? Is that the expression? Oh, and big news. So it looks like the store. You know, I've mentioned that we will be launching the Afford Anything store where we'll be selling shirts and hoodies and coffee mugs. It looks like we are very, very, very close to launching it. So long story short, and I will, at some point, I will put out a blog post kind of detailing how this all went down because I have never forayed into the world of manufacturing and delivering and shipping physical items.

And it's a totally different world than creating products that are digital only. Wow, it's like the world of tangible things. It's very strange. But anyway, long story short, back in October, November, we applied to be a merchant with Amazon and didn't hear from them, didn't hear from them. Then they sent us a note saying, hey, we need you to reapply. At which point I was like, all right, well, forget it. We're probably never going to get approval as an Amazon merchant. I'm not talking about selling products in Amazon. I'm talking specifically about the merch by Amazon program. Anyway, long story short, we gave up on them. I started looking, we looked into a bunch of other companies.

We had it narrowed down to two other companies that we would use for manufacturing. And then the merch by Amazon approval came through. So, we will be selling shirts, I think, both short sleeve and long, don't quote me on this, but I believe we will be selling both short and longsleeved t-shirts as well as hoodies directly through Amazon, which means that if you have Amazon Prime, you'd get free shipping, which is awesome, because that was a major drawback that we were encountering when it came to a lot of the other manufacturers. We'll still be using an alternate supplier for coffee mugs because the merch by Amazon program only provides shirts and hoodies. But anyway, long story short, the store will be up very, very, very soon. And once it is up, I will announce it on the blog, on social media.

Of course, in this podcast, but there might be a one or two week delay, given that this podcast comes out week. So yeah, that is happening. So that's really exciting. And 100% of the profits that we make from this all go to charity water. As of the time of this recording, we have already raised $1,426 for charity water. And the store's not even up yet. So I am floored by that because what that means is that we are well on our way to being able as a community, to sponsor a water project. And once we raise about $10,000, we as the Afford Anything community, will be able to build a specific, tangible project that brings clean, safe drinking water to hundreds of people. We will have photos and GPS coordinates of this water project that we as a community of sponsored. You know, somewhere in the world, there will be kids who otherwise would have been drinking water that would have made them sick, but who don't have to drink that water anymore because we as a community came together to sponsor that water project.

And so anyway, the store that we launch, 100% of the profits will all go towards that cause. And I'm very excited that that is on the horizon. Now, for those of you who are wondering when the course is coming out, I am wondering that too. Two years ago, I announced that I will be building a real estate investing course. I am still, believe it or not, I am still working on it. I am thinking, I think about it more than I can even describe. I think about it every single day. I do not have a date for when that will be coming out.

My hope, I really hope that it will be out sometime in the next couple of months. But the thing that I have learned is that building a course, building a genuinely good course, one that I think will, that I hope, will be the one stop shop resource for anybody who wants to become a rental property investor. Building something like that takes time. And, you know, and in hindsight, if I think about how much time it takes to write a book or to produce a movie, that's not something that people do in six months. Yeah, that's something that takes. years. And so in that context, I suppose it is not surprising that it has taken me two years to work on this course, to build this course, because it's very comprehensive. So thank you so much for being patient to everybody who's asked about it. And I hope that it will be out soon.

And hey, always late but worth a wait, right? So that is what I've got going on. Thank you again so much for tuning in. If you enjoyed this show, please head to iTunes or Stitcher or whatever podcast player that you use and please leave us a review. Those are very, very helpful. And while you're there, upvote any other reviews that you find helpful. My name is Paula Pant. This is the Afford Anything podcast. Thank you so much for tuning in. I'll catch you next week. Yeah, few and far between. That is the expression. I just looked it up. I just googled it. Oh, and by the way, I found this other website that just gives a list of idioms or expressions like at the drop of a hat or back to the drawing board or Elvis has left the building.