BiggerPockets Real Estate Podcast - 2: Starting Out with Karen Rittenhouse – Subject To, Direct Mail, and Investing from a Woman’s Perspective

Episode Date: January 24, 2013

Today we’ve got another great new BiggerPockets Podcast interview to bring to you, packed full of actionable tidbits and great conversation. Each week, we will be bringing you incredible real estate investing tips, training, and interviews with actual investors who are in the field, and who are making it happen. You can listen to the show online (below), download it later, listen on your smartphone, or via iTunes — all for free. On today’s show we talked with Karen Rittenhouse from KarensPerspective.com – an active real estate investor, author, trainer, and all-around great gal. Karen’s started investing in 2005 and has acquired well over 150 properties during her investing career. On this podcast, she shares with us exactly how she did it, and how you can use the same strategies to begin (or improve) your investing career. Read the transcript for Episode 2 with Karen Rittenhouse here. In This Week’s Podcast, We’ll Explore Why rentals are just like little oil wells – and how to get started owning them. How Karen bought over 150 properties, most without ever getting a mortgage. Dealing with sexism in the real estate field. Using the “subject-to” strategy to invest with no (or low) money down. How Karen made $9200 when purchasing her first project – with no money down. The two most important steps to avoid making mistakes. Karen’s technique to find motivated sellers and how to get deals from non-motivated sellers. Why Karen is changing her strategy to adapt for the future… should you? The most important first step for new investors. Karen’s fear when beginning – and the phone call that made her think she was going to jail. Links from the Show: Karen’s Profile on BiggerPockets www.KarensPerspective.com Karen’s Favorite Direct Mail Company: PostcardMania Books Mentioned in the Podcast “Essential Handbook for Buying a Home” by Karen “Essential Handbook for Selling a Home” by Karen “Essential Handbook for Landlords” by Karen “The E-Myth” by Michael E. Gerber “Secrets of the Millionaire Mind” by T. Harv Eker Tweetable Topics: “I don’t mind there’s a 1% in this country – I just want to get there” Click to Tweet! “Real estate investing works no matter where we are or what we’re doing. The checks still come in.” Click to Tweet “Rental properties are like “little oil wells” – no matter where I am – they keep pumping.” Click to Tweet “When talking with motivated sellers – don’t go in to close a deal. Go in to solve problems.” Click to Tweet “Without a good plan – it’s easy to quickly jump to the next shiny object.” Click to Tweet “You’re not going to get rich quick. It takes time – but the rewards you’ll reap long term are huge.” Click to Tweet “You never forget your first… (real estate deal!)” Click to Tweet “When it comes to marketing – everything works – just do something.” Click to Tweet “You’ve got to think bigger than a 40 hour work employee” Click to Tweet “We’re in the business of helping people – and we get paid for it. It doesn’t get better than that.” Click to Tweet “There’s never been a better time to be in real estate” Click to Tweet Karen Rittenhouse, along with her husband Jim have 11 employees, a real estate investing business, a full service real estate agency, a property management company, a coaching and training business, a lending company, and Karen has written 3 books on real estate. Connect on Twitter: @KSPerspective KarensPerspective.com Karen’s Profile on BiggerPockets Learn more about your ad choices. Visit megaphone.fm/adchoices

What's going on, everybody? This is Josh Dorkin, and you're listening to the Bigger Pockets podcast show number two. With me is my co-host, Brandon Turner. What's going on, Brandon? Not much, Josh. I'm glad to be here. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. for real estate investing online. So today we're going to talk to Karen Rittenhouse from Karen's Perspective.com. Karen's a real estate investor located in Greensboro, North Carolina,

and she's actually bought and sold more than 150 single family homes over the last eight years. Karen started her real estate career with an original goal to own five rental properties. She's actually far surpassed that goal. And today with her husband, Jim, she's got 11 employees. a real estate investing business, a full-service real estate agency, a property management company, and so much more. She's the author of three books, the essential handbook for buying a home, the essential handbook for selling a home, the essential handbook for landlords. She might even be writing the essential handbook for writing essential handbooks. You can check out those books.

We'll share links to those and her website in our show notes at biggerpockets.com slash show two. decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought-after industrial facilities,

thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns, and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise flagship fund before investing.

and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. We all joke that rentals are passive, but if you're spending nights matching receipts or guessing what a property earned last month, that's not passive at all. Baselaine fixes that part of landlording, the financial chaos. Their banking and AI bookkeeping system automatically tags every transaction, updates cash flow insights in real time, and builds the reports you need for tax season. You can even automate transfers and move money around without paying wire fees.

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increase the likelihood of claims. And traditional insurance companies aren't always built to handle these claims. quickly or smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on landlords, whether it's a single-family rental, a burr-builders risk policy, or midterm holiday guests. You get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in minutes at biggerpockets.com slash landlord insurance. Steadily, landlord insurance designed for the modern investor. And Karen, it's great to have you on the show. Thanks so much. I'm so glad you guys

had me today. So Karen, you started with this goal of owning five rental properties. Where did that come from? Well, my husband and I met and married later in life. My kids were grown and leaving the house. And so my focus became retirement. Jim and I both made really good money and lived very well, but we just didn't have anything save for retirement. And I wanted to quit working. I'd been working since I was 15. And we had very small 401Ks. So what I did was I started reading and researching about the wealthy.

I don't mind there's a 1% in this country. I just wanted to be there. How do they get there? How do they get generational wealth? And I kept running into real estate over and over. So I knew I could buy houses. I'd bought two in my life. one long time ago with my first husband.

One was a single mom, so I knew I could do that. And I talked to Jim, I said, I think if we have five rental properties for retirement, that will be set because by the time we retire, they'll be paid for, they'll be generating a thousand to two thousand a month income. So that's an extra five to ten thousand a month passive that's just going to come in. And he agreed. So it was great. We started as a hobby on Sundays, driving around looking at,

neighborhood, talking to first sale by owners, talking to real estate agents. Now, at this time, it was probably, you know, 10, 12 years ago, 15 years ago, and the market was very good. So our goal was to pay 5, 10% below retail, get it to cash flow about 200 a month so that it would cover our costs, cover hot water heater damage, painting a carpet when tenants moved out, not for income. This was strictly long-term hold for wealth for retirement. So it took us about five years to get those three rental, well, sorry, it took us about three years to get those five rental properties. And at that time, we were done with my original goal.

Now, what happened next was Jim and I were both in straight commission sales for our income. So we never took vacation, because if we didn't work, we didn't eat. and we certainly didn't take off at the same time. So finally, after about five years or so, he and I took a week vacation to Seattle. Nice. Yeah, it's beautiful. Good place. So we came home.

Of course, our commission's in the toilet. We hadn't sold anything, so we had nothing. But our rent checks were in the mail. At that time, I had this aha moment. I said, what if we're focusing on the wrong end of our income? This real estate stuff works no matter where we are, no matter what we're doing. We can be on vacation. We can be on the sofa.

We could be in the hospital. And at that time, I started calling rental properties oil wells. And I said, these little oil wells just pump. It doesn't matter where we are or what we're doing. Maybe we should do this more. That's great. That's great. I've never heard it stated like that.

Had you, Brandon? No, that's awesome. Oil wells. Yeah, we're going to have a whole new thing on bigger pockets. We're going to talk about oil wells, and nobody will know what we're talking about except the people who listen to this podcast. That's right. It'll be our secret.

Nice. Well, that's great. There was that aha moment where you just came out and were like, holy cow, we can actually start making a living with rental property. Everything changed. Yeah. And we didn't know. We thought maybe. But I said five is good. What if we had 10? What if we had 15? How many can you have? I didn't even know. Is there a law? Is there a certain number? And you can't have more than that. So we started at that time looking for a guru. We wanted to know more. We needed training. We knew we didn't know anything. And we found somebody who was training in Atlanta, which was perfect for us. That was a five-hour drive. So we took two days a weekend. We went down to Atlanta for a two-day event. And we were already psyched about real estate. We were already primed. And, of course, it was two days of selling. Jim and I together had $20,000.

Everything this guru was selling, his whole package, all of his books, all of his forms, contracts, everything was $20,000. We took it as a sign. Yeah. So we bought everything he was selling and headed home. And we were so psyched. Now, at that time, we each had a good enough income that either one of us could pay all the bills. So what we decided was one of us should quit and quit our W-2 job, try this real estate thing full-time and see if it worked. Now, I didn't know what worked meant.

I just thought maybe I can give to retirement sooner. Maybe I can have a better retirement. I don't know. But I wanted to quit, jump into it full-time and see where it would lead. And so that's exactly what happened. I quit my job and jumped into it January 2005 full time. Wow. Wow, wow, wow, wow.

Well, so the first thing that comes to my mind from there, I definitely want to talk to this transition from that five deals to wherever you are today. 150 is what I think I've got written down, but I'm assuming there might be more. I want to talk about you. You are a person of the female persuasion. And there are not a ton of female real estate investors out there. And I'm really, really curious to hear about the challenges, you know, what you experience, kind of from a female perspective.

I don't know if you can actually do that. But I think it's just fascinating because I don't understand why there are not more women in this industry. There's tons of women who are agents and brokers, but not a ton of investors. So can we talk about that a little bit? Maybe nobody was desperate enough. I don't know because I was really desperate to secure retirement and to not be a burden on my children. I'd been a single mom for a long time. So my big focus was how to not be a burden, how to have my retirement set, how to pass on to my kids and grandkids.

So I just jumped in with blinders on and was determined. And it was interesting because for the first two and a half years, I did it by myself. At the end of two and a half, well, my husband would help when he got home from work, but I did it about 18 hours a day, seven days a week for two and a half years. In that time period, I bought 25 houses. And then I was done. I said to my husband, we have enough. I thought five was good.

25's plenty. He said, no, no, no, no. You've got a good thing going. And at that time, he quit his W-2 job to join me. Well, starting out when we were first working together, of course, it annoyed the heck out of me, but contractors would come, attorneys, anybody, and they'd want to talk to my husband. So it was interesting because there were a number of people who came for interviews because they wanted to work with us. Even people that I had met, spoken with, and set up an appointment with would come in and say, I'm here to see Jim. None of those people got hired.

Yeah. Yeah. And I think, really, in this day and age, you still have that mentality of my need to talk to the man. So that was interesting. Yeah. Wow. Wow. Wow.

But Jim had a very different perspective on finances that I did. We coach and train, as I think you might have mentioned. And what we find constantly with couples, the man's typically the leader. The woman is a support. But we females have a real hard time wrapping our head around the term good debt. we don't want debt. We don't want debt for our children. We know what the talk means to budget for groceries or whatever else is going on in our life.

And why is it okay to borrow money from people to buy an asset that you can't begin to pay for and to have this hanging over you? So Jim and I argued for probably two and a half years about the term good debt. I said that's an oxymoron. Makes no sense. Gotcha. My wife and I talk a lot about that as well right now. I mean, like, because she's very much more.

We should pay off everything as quickly as possible, get everything down. And I'm like, oh, but look at the interest rates. And, you know, I start pulling out the numbers and the math. That's right. Yeah, we have that debate at least once a week. We talk about that same issue. Jim had all these calculators and spreadsheets that would show me. Yes, we can sell that property today and make $15,000.

If we hold it, look, Karen, in 10 years, it's going to be. be worth, you know, $350,000 to us. Why would we sell today? And I would say, so I can buy groceries. Yeah, yeah, definitely. Well, so let's get into this female thing a little bit more if you don't mind. You know, obviously, I like you, had I been a female hiring, would have also told them to take a walk if they had asked for my husband at that time. But so how do we overcome that? Because, I mean, I don't know that we can just kind of wheel it away this bias. But how do we, you know, I think a lot of women potentially shy away from stepping in from the industry because I think they assume it's a man's world. Yeah.

Do you have any, I guess, advice as somebody who's thrived as a woman in this quote unquote man's industry, which I disagree with completely. but do you have any advice for women who might be thinking about it but say, oh, you know, I'm a little worried. I don't want to be dealing with these male contractors, you know, chauvinist, this, that, and the other. What helpful tidbits do you think you have for them? Well, it was interesting starting out because, of course, as I mentioned, Jim and I could each pay all the bills. So we had to decide who would quit and start this business. Jim wanted to. He was all ready to jump.

I didn't want to. Again, I think it was a security issue. I was mid-40s, did not want to be stupid again. But what I determined was if Jim quit and learned this business, he'd be really good at it. He was capable. I'd come home at the end of the working day, exhausted. He'd want to tell me about it. And I'd say, I'm exhausted.

I don't want to know. And I'd turn on the TV. If I quit and learn this business, I'd be forced to learn everything. Jim would come home at the end of the day, say, tell me everything you've done, and we'd both learn the business. So it's most uncomfortable. I was way outside my comfort zone. I was terrified, but I made myself do it because I knew that I needed to know it and I wanted to know it. Because, again, I wanted to know for myself and for my children to make sure that I could do this business. Now, once I got into it, I think it was a great thing that it was me as a female doing it. I think most people are comfortable saying the woman tends to make the decision about buying and selling.

You better make the kitchen and the master bedroom good because it's what the woman looks at. Well, as a woman in the business, especially someone who had been a single mom, I had a real heart and passion for women. So as an investor, I never went in aggressively to talk. I never went in to close a deal when I talked to sellers. I always went in to solve a problem. I always went in saying, what is it you need and how can I help you? And that's how I learned the business, because people would tell me, this is what I'm looking for, this is my pain point, this is my issue.

And I'd say, let me see if I can figure out a way to fix that for you. And then I'd get back to them because, of course, I didn't know anything anyway, so I had to figure it all out. And I just would go back and I'd say, I may not be your best. solution, but I am a solution, here's what I can do. And if it doesn't work for you, I just want to keep helping you, feel free to call me, ask me questions. And I think it was kind of a mothering response that people liked and were comfortable with. Yeah, that makes a lot of sense. I was going to just say, it's funny because most of the people that I talk to who I believe

to be successful in investing, look at it from that same approach. How? How can I solve your problem? It's not, I'm trying to shove it down your throat. It's I want to help solve your problem. And if you do that, it's amazing how doors open. And even if you can't close a deal right now, you know, I think things start to come back to you once you begin to do that. They do.

Yep. People would come back, call back. Yeah, sometimes much later. And that's how I learned the business because I heard gurus and I read books and they would say it's this way and I didn't necessarily find it to be that way. I found people at the time eight years ago, I would say half or less than half were desperate sellers that I bought from. But they always had an issue. They didn't want people walking through their house. They didn't want a first sale sign in the yard. They wanted to know they could move when their new house was ready to move into. They needed to

move quickly because they'd been transferred. So many different reasons that I would go, okay, I can do that. And they were willing to walk away from equity for that just because I made a solution. It didn't have to be a desperate sale or a need. You know, I think that's a really good, you know, transition to how exactly you started buying these properties. You know, you talk about dealing with sellers, possibly motivated sellers who had a problem. Could you, you know, expand on that a little bit on when you first started, how did you, I guess what was your business model? How did you pick these properties up? When we first started and we're working with some agents and for sale by owners and things,

we could get mortgages. Of course, we'd both had good incomes and we had good credit scores. And at that time, mortgage companies would allow you to have eight loans in your name. Jim and I have separate last names that worked out really well. I got eight loans in my name. Then he got eight loans in his name. We've done that as well. Okay. Then, of course, we were stuck. We still had good credit scores, but boy, our debt to income ratio is funny.

So then we had to be creative. We were forced. So at that point, we did almost exclusively for probably four years. We bought subject to the existing financing. And what exactly, just for those who don't know, what is subject to? That means you go in and you take over the financing that. it's already on the home. A lot of people will say, well, a seller's not going to let you take over a property and keep the mortgage in their name. But it is very legal. It's on the HUD. We would

explain to people when we went in why we could pay more if we didn't have to get our own financing and if we did take over their existing financing. And it was never a problem. We bought a whole a lot of properties that way. Now, I've heard that there are issues, you know, with lenders could foreclose, you know, on a subject two. Have you had that happen at all, or is that just a we have not. We have had one lender out of, I don't know, well over a hundred properties. It was actually a credit union that contacted us and went in payment. And we were able to talk to them and discuss with them. And they ended up saying, oh, fine, okay, no problem. What we have found is the banks do know what's going on because they do see the deed change. They do

see a change in insurance policies. And we've gotten more than one letter from lenders saying, we've seen all these changes. We're not sure what's going on, but please continue to send the payments to this address. And my belief is they do indeed know what's going on, but they're very grateful to have a loan that's performing. So no, we've never had one called. In the beginning, it was a tremendous fear, especially for me, I guess. I think for both of us, you know, oh my gosh, what happens if one does? Because we would hate to do that to the seller. Obviously, it was going to hurt the seller more than us.

We did let them know if this would ever happen, you will get the house back. We've already paid it down more. We've already repaired it. You'll have an opportunity to come in and rescue your loan. But our priority was always to make their payments first. We didn't want that to happen. It never did. So it sounds like you've done over 100.

sub two deals. What would somebody who is interested in potentially doing these deals, how would they go about getting started? What's, you know, what advice would you have for that person? Well, I guess first go online, read about it, get all the information you can find a, an attorney who's comfortable with you doing that and will handle the paperwork for you doing that. We have three in the beginning. That was one of my big dilemmas was learning how to do it and also getting an attorney who understood it and was comfortable because we do all of our closings with attorneys, of course. We want all of our sellers to be comfortable. In our subject to documentation, we have two places where the seller signs saying, I understand you are not ultimately responsible to make my payments.

And then our attorneys have their own paperwork that they have the seller signs saying, now you know these buyers are not ultimately responsible to make your mortgage payment. So it's all about disclosure, disclosure, disclosure, and paperwork. We make sure all of our paperwork is done and approved by attorneys who are willing to defend it in a court of law. Tell me about approaching somebody. Approaching a seller. Yeah, approaching a seller. What is that conversation like?

How does that actually come about? What's your approach? Well, I go in, first of all, and I've done a lot of them over the phone. I used to just do a lot of them over the phone because I didn't have the time to run around until I knew that it was going to work. And so I would explain to them. I eventually had a form that I would start with the seller's asking price, and then I could deduct prices from there. I could deduct our costs, our closing costs, repair costs, things, so that we would go. get to the bottom of this form, and at the bottom, it came up with the number that I was offering.

I always want to be able to show the sellers how I came up with my offer price, so they knew I wasn't just making up a number, and they weren't confused. And then I would say, this is what I can pay if I can take over your existing financing. Let me explain what that means. Let me explain why. and then would proceed with if I go out and get my own financing, of course, it's going to cost me more and I can pay less. So I would show them that taking over their loan, they would get the best deal. If I had to get financing, they were going to get less. And if they wanted cash, they were going to get even less. So a lot of people like knowing that they're getting a better price.

That's the first comfort area. Okay. Yeah, that makes sense. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund.

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have the results to prove it. Go to mine.co slash show me to see how mine performs and get your first month free, which is much cheaper than learning the hard way. I'm curious. I'm kind of going backwards a little bit here, but how do you advertise for them? I mean, how do you find motivated sellers? Our favorite way is direct mail marketing. Okay. And again, the reason I started with that was efficiency. I was busy. I was trying to learn this business. I couldn't also learn. neighborhoods, and I certainly couldn't learn large areas. So starting out, I picked three neighborhoods, my own first, then two other in the price point I was looking for, and the condition and the age I was looking for. And I direct mail marketed to just those three neighborhoods. And basically,

we buy your house. We can buy houses. If you know anyone who's selling a house, please have them contact us. That way, it's not personal. It's not an affront to the person who gets the postcard. and that way when they called us, I knew that it was a house I was interested in because it was a neighborhood I was interested in. And also, when they get that and they call us, they know I'm not an end user. They know I'm a company,

so they know I'm not going to offer retail. Okay, Karen, so let's talk about how you're going about doing your mailings. Presumably you're using some kind of company to get the list for the neighborhoods, the three neighborhoods that you're focusing on. I'm assuming you're not walking up every street and writing down addresses. So presumably you're using somebody to do that. Who is that?

And is the process a difficult one to get that information? How does that work? Right. No, it's not a difficult. Starting out, we did some starts and stumbles. We ended up using postcard mania. They're out of California. They ended up being one of our favorite resources.

And what we did there was, We just narrowed down neighborhoods. So we narrowed down by area. We narrowed down to price point. We wanted owner occupied only because we were buying from owners. Now we also will do non-owner or occupies. But we had three bedroom or more, two bath or more, 10 years old or newer. So over the years, we've used different specifics, but we just wanted to mail a

these three neighborhoods and homes that met our criteria. Gotcha. So you use postcard mania and they put the list together for you and they actually send the postcards out as well? They did. When we first started, we had 5,800 homes that we mailed to. We made sure they were hit every six weeks in the beginning and we did that for four years. Then we backed it up to where we hit them every two, three months. We hit them a lot less often because it's pretty set.

We're known in the neighborhoods. They see our signs go up and down. They come to our open houses. So we've really become known in the eight years. Oh, wow. Yeah, absolutely. So what makes presumably there's some metrics that you use in measuring the success of your direct mail marketing campaign. What are those numbers?

Maybe you can share some percentages with us in terms of leads that you. get or anything like that? Gee, I don't know. I know beginning, when we first started, we said, you know, you have to talk to 100 to get 10 to make five offers to buy one kind of thing. Now we probably talk to 20 to buy one as far as how many mailings we did to buy a house. Yeah, Jim knows that. Well, maybe we should have had Jim on the show.

The numbers questions. are always about numbers. Oh, boy, oh boy. Well, I mean, this is fascinating. This is fascinating. Something just jumped back in my mind here, and it was on the number of properties. You know, you said you've got, you know, X number of properties. The number doesn't really matter.

But some people might be sitting and listening and saying, you know, when is enough enough? Is there a point where, you know, you're getting closer to retirement and you're, you you just don't want to keep adding. So, you know, I guess is there a number for you, a specific number of properties, a number of income, an amount of time that you're spending, managing the business? What's that level? Where's that line? Yeah, and for everybody, it's different.

We see constantly with our coaching students. Someone to buy two, three properties a year. Someone to buy at least three a month. For me, it went from five to then. Jim had said, well, when you have 25, well, we'll. stop. So, of course, I jumped up and down when I got 25, and he said, no, no, no, because if we stop, what else will we do? Then we started hiring employees. We have two different office building sites. So suddenly we had to buy more and more to cover overhead. We have enough. We do have

enough properties. We bought 68 properties last year. We have out-of-state investors. We partner with students. We do a lot of different ways. We do some flips. We do not nearly as many flips as holds. But from now on our thing, this year going forward, we've changed our strategy to where we don't want to hold. We only want to sell and because we want to pay off the however many number we're going to keep and be done. Our goal is totally done in itself sustaining in three to five years from now. That's great. Is your plan then to take the equity from the ones you're selling and pay the mortgages off on the others or just pay them down? or you're not going to buy anymore.

So, I mean, is that your strategy? Right. We want to get these mortgages paid off. Yeah. Yeah. No, that's great. Well, you know, that leads me to think about exit strategies a little bit. And maybe we can kind of approach that.

I always like to tell people when you get started, you want to start with the end in mind. You want to know on a specific deal how you're going to get out. But that leads me to think about, you know, the lifespan. of somebody's real estate portfolio. And I don't know if you've got any thoughts on that, but maybe some perspective into how somebody can plan for, I guess, getting rid of their portfolio. What happens?

How do they go about doing that? Exactly. And we say the same thing. We start with the end in mind and then back up into smaller steps, how to get there. And it keeps you focused and keeps you on track. For us, we want this to be generational. I want our children to get it.

You know, when they inherit, they get it at a stepped up basis. So there's no tax involvement. We have everything set up through trust. We have nothing in our own name. Everything automatically just flows and passes on to the next heirs. We also have business partner. We have business entities and structures. So that eventually we will be simply passive holders of the companies that we have going.

We probably year five or six went from studying. real estate, we felt we had a good handle, to studying business entities and wealth management. And we're a part of national groups and national mastermind groups now on owning, operating, structuring businesses, getting to where it functions without you so that you can either sell it or just hold it passively. And that's what we're doing now. You know, what I really like about your story, Karen, is, you know, in every real estate investors' life, there's these stages that they go through. You know, your beginning stage, yeah, you start with the acquisition and you're, you know, passionate, you're trying to get

everything you can. And then you kind of transition to the holding period. And then you eventually get to the, what do you do with all that. And so it's great, yeah, it's great to see in the last what you said, eight years. Like, you can see the, yeah, you can see the entire, the entire system there. Entire spectrum. Yeah, yeah. It's really cool to see that in like one, because, you know, sometimes you see that spread out over 20 or 30 years, but you know, you can see in eight years then how, you know, how quickly you can build wealth and pretty serious wealth in real estate just through, I guess, being careful and having a plan and just following that plan through. Absolutely. We always say start with a plan, a business plan, which we purchased a big business plan, and we spent two months working on it back at the beginning. And a business plan, just like your business, just like you, grows and evolves and morphs over.

time. So, you know, my first goal, five properties. Jim's next goal, 25, had no idea I'd have offices and employees. It was never part of the plan. But it just got here. And now, like I said, we study business and we study wealth and it's all evolved. And it's been so exciting. But you have to constantly learn and be adaptable for sure. Yeah, I always look at, I always talk about a plan as kind of like a roadmap where you know you wouldn't drive from new york to california just getting in your car and driving heading south you know like you just wouldn't do that you would you want some kind of GPS or map to get you there and uh i definitely think the business plan is such a is such a key part for new investors that it doesn't have to be fancy doesn't have to be complicated it just

needs to be um a plan so you can fill in the blanks and just follow that plan and make sure it works you know figure out the math and and i love um you know a little plug here but i love the bigger Pockets forums because of that. You know, I love, I did it when I started. I posted, hey, does this sound like a good idea? You know, this is my plan for the next five years. And, you know, guys would say, no, it's a terrible idea or no, that's a great idea. I mean, just today I responded to somebody else who had an idea about buying cheap, cheap

houses in Detroit and then selling them with seller financing. And he asked, hey, what do you guys think of my plan? And, I mean, there's this massive discussion going on there about his plan. And I love that because it's a lot. like a roadmap. It gets you there the quickest and most efficient route and it keeps you kind of focused. Yeah, it keeps you on track. Focus is so important. We've watched a number of investors who started where we did who get discouraged because it's not get rich quick. I don't tell anybody to look for the home run. We never looked for the big numbers. We were very excited

the few and far between times when they happen. We just looked for getting on base and keep moving around. A lot of people want more and get discouraged. So then they get distracted by the next bright, shiny thing. We've had investors who suddenly they're selling juice products or they're selling, you know, internet service or whatever. And you think, oh, my gosh, what are you doing? And they get distracted. They get off course because they didn't really have a good plan. And real estate falls by the way. Well, that's that allure of the get rich quick. I think there's just, I think too many people don't understand that this is a business. It should be run like a business.

I think a lot of people think they could just jump in and do it and jump back out. And you get a lot of those people attracted to this industry who are those, you know, I want to get rich quick. I think I'm going to make millions because I saw some dude on television talking about it, some ladies next to him in a hot tub or whatever. It's like, come on, this is, you know, seriously, if you stop and think about it for just about five minutes, you'll realize you're not going to get rich quick. It doesn't happen. And be patient because it doesn't matter what you do every day when you get up.

Even if you're going to a 40-hour week W-2 job, it takes time and you're going to be busy doing something. You might as well be busy doing this because the rewards you will reap long-term are huge. Absolutely. Absolutely. Let's talk about mistakes. you know, surely in the years that you've been doing this, you've made one or two, which ones really stand out most for you and why? Wow. You know? She hasn't made any mistakes, folks.

I tell you what, we have always been uber cautious and uber slow. We haven't bought like employees offices, whatever, until we had the money coming in to do it. Jim didn't quit his job until we had the money coming in to do it. We have always worked with attorneys. We have never created our own contracts. We just really try to dot our eyes and cross our T's. And we have been lucky or I can't think of any really big mistakes. We were talking the other day.

We have not made money on two deals that we've done in all the years and all the properties. So we're cautious. We're cautious. We've done a lot, but I can't stress strongly enough about making sure that you do everything through an attorney and having good documentation. I've seen investor contracts, especially rental agreements, where they very much protect the investor, not so much the tenant. And you never want to get into court with a lopsided contract. You never want to stand before a judge with something you've done on your own. So I think one of the biggest best things we do is work with a tenant. attorneys and get things done well and right going in. Set your foundation, get your foundation good and secure, and then you can rock and roll. That's terrific advice. You're making me feel guilty now.

I'm going to go and call my attorney later today and go get some stuff figured out. But no, that's an excellent advice. I mean, like you said, just be cautious. I think a lot of real estate investors just jump in and they want to just start doing things and making things happen. And I think, you know, being careful, being cautious and doing the right thing at all times. I think, I think, you know, I think it's a recipe for success. Following successful leaders, yeah. But I think there's a, you know, there's a fine line, right? The fine line is there's that caution,

and then there's the actually taking action and taking that first step. And I think it goes back to what you guys both were talking about on that business plan. If you've got the plan, the roadmap, it helps you overcome the fear that comes with being overly cautious oftentimes. The analysis, paralysis. Right. get started and do something. And yeah, you can figure it out as you go for sure because you can't begin to know everything starting out and going in.

But little by little, this year, next year you're going to know more than you do this year. And every year and every deal, you learn more and you get better. Well, what was your favorite deal? Probably one of my first, just because you never forget your first. But I was thinking back to... to the beginning and being new. And I had set up my little home office in a spare bedroom and I had printed out a stack of questionnaires

in case somebody called because I wanted to try to remember things to ask them. And I was terrified. I just knew I was going to go to federal prison. I didn't know why. But this is a really big deal, real estate. You're dealing with mortgage companies, all kinds of lenders, you're dealing with attorneys,

insurance companies, people, homes, hundreds of thousands. I was scared to death. Just starting. I hadn't done a deal. I was scared to death. So no kidding. I had put out some little advertisements and newspapers. I had magnets on my cars because that was cheap. I had done just a little bit to get started. My phone rings. The very first week, my caller ID says, U.S. government, Baltimore, Maryland. I paralyzed. I thought, should I answer it? Shouldn't I answer it? Oh, my God, it's the government. I'm going to prison. I don't know what I did. And all those things, you know how they go through your head real fast.

And I thought, just answer because if you're going to prison, you have nothing to lose. So I answered the phone and this woman on the other end says, do you buy houses? And I think, oh, my God, I'm going to prison. The government knows what I'm doing. I just started. So again, should I answer? Should I answer? Should I do?

And I went, yes. And she said, I have a condo I've been trying to sell for about a year. And I thought, oh my God, this one's in Baltimore, Maryland. How does she know what I do? So long story short, she had bought a condo in my neighborhood in North Carolina for her son while he was in college. He'd since graduated, moved to a house, had been on the market with a realtor for about a year. And she said, my son saw the phone number on somebody's car at the grocery store, my car. So we're talking.

I said, I don't know if I can help you. let me see what I can do. I looked up her property, evaluated, called her back, said, you've got it at full retail. I think if you listed it for this, you could probably sell it. She said, thank you, honey, so much. You've helped me more than my agent had. I really appreciate, but can you buy it? Well, of course, I didn't want to buy it. I was scared to death. I didn't want to buy anything. So I offered her 65 cents on the dollar, not really knowing what I was doing, thinking I had the right price. And she said, honey, I've owned this for six years, and you're offering me less than I still owe.

And I said, yeah, I know I might not be the best offer. If you have more questions going forward, feel free to call me. Because, again, I didn't want to buy anything. I was scared. That night she called. She said, honey, if we do this deal with you, how do we do it? So I explained the paperwork. I was talking about taking over her existing financing.

I said, and you'd have to write me a check for $9,200. She goes, yeah, that's what I thought. So the next day she called me and she said, we want you to buy her property. Wow. Now, how can that not be my favorite deal, right? So a few days later, I meet her son at the condo. They'd had it on the market. It had fresh paint, fresh carpet, all the appliances, including washer and dryer, a two-story stone fireplace.

It was amazing. We own it to this day. And they wrote me a check for $9,200, which I turned around and spent on marketing. Wow, wow. How long was it on the market before she called you? 10 months, I believe. Okay. And my first week.

Wow, that's an awesome story. That is really cool. That was a good way to start. It was a sign from God. This is what we were supposed to do. That's great. That's great. Hey, you talked about having a number on your car.

You have one of those magnets? I did. Because it was cheap. So my husband bought a seat just set. It was $50 for a set. And I was horrified. I said to him, the only reason I can ride around with that tacky magnet on my car is because when I'm driving, I can't see it. So fortunately, it got stolen off our car three different times, and so I quit using it.

But it worked. Oh, my gosh, those things work. Everything works. Every single thing you do works. Some better than others. Everything works. Do anything. Do everything.

Hey, where did you get the car magnet signed from? Do you remember? I do it. It was a local company. It was just like a couple miles from us, a sign company that made them for $50 for a pair, and we even had the little one for the back bumper. Wow. That's great.

That's really great. Well, this is, you know, this has been fantastic. I'm looking at the clock here and I think we're kind of running out. So we're going to kind of come to some of these questions really quickly. And, you know, you're fascinating. This has just been really, really interesting. And, you know, maybe I do say it to everybody, but we definitely have to get you back. And we got to dig into some other stuff because this is incredible.

So let's get to a couple quick questions here at the end. you made a reference to baseball earlier on. You must be a baseball fan. What's your team? No, I'm not. What? I like them all. In case I ever want to run for mayor.

All right, she doesn't like baseball, but ladies and gentlemen, Karen Rittenhouse is a tried and true guitar hero expert. Oh my gosh. I absolutely wear myself out with guitar hero. Great. What's your favorite song? Oh, Lord. I don't know.

I'm terrible. I don't know. I don't care any of them. I just see the colors coming at me so fast, trying to keep my fingers moving as fast as the songs are coming. All right. What is your favorite real estate book? That's not one that you've written.

That's great. You know what? Again, starting out, we just read anything at Barnes and Nobles and Borders. But my favorite books are always the motivational think bigger, think outside the box books rather than specific how to do real estate like Michael Gerber, the E-Myth, T. Harb E. Eckers, Secrets of the Millionaire Mine. You've got to think bigger than a 40-hour week employee and a W-2 employee. And those books really help take you outside your own limitations. Those are my books.

Okay. That's great. Yeah, that's awesome. So the one question I like to ask everybody is, so you've been in this industry for eight years. now. And you know, you've probably, I know you do some coaching, some training, and you've probably seen a lot of people come and go. You know, some people come and make a lot of money and they are very successful. Some people just disappear. So what is it, in your opinion, that sets apart those top performers, the ones that actually make it, and those that just jump in and then jump out

again? Focus. Yeah. Just making a commitment, sticking with it. You got to pick something and stick with it. Don't get distracted by the bright and shiny objects. You can make this business. work. That's great. The guru product of the week. Stay away, right? That's right. All right. Well, one last question, which is where can people find more information about you? Presumably you are obviously, not presumably, obviously, you're on bigger pockets. Are you also on Facebook, Twitter, Gplus, LinkedIn? Where do you like to connect? Right. Mostly through my blog, Karen's Perspective.com. On Facebook, I think, as Karen, Karen's perspective, Twitter at KS perspective.

Okay, great. And we'll add that in the show notes for everybody to check out. That's going to be at biggerpockets.com slash show 2. And Karen, it's been fantastic. Really, truly, truly great show. We've enjoyed having you. And we'll see you back on Bigger Pockets. I really thank you, Josh and Brandon, both for giving me this opportunity to share.

I hope you can tell I absolutely love what we do. We're in the business of helping people. We help buyers. We help sellers. We help tenants. Every single day of my work in life, I'm helping people, and I get paid for it. I think it doesn't get any better than real estate investing. And like I continually say, there's never been a better time to be in real estate.

That's great. That's great. Agreed. Agreed. Thank you so much. Yeah. Thank you, Karen. Thank you.

And that was our interview with Karen Rittenhouse from Karen's Perspective. We really hope you enjoyed the show, guys. Just a quick announcement. We're up to 16 5-star reviews in iTunes right now, and I just want to say thank you to everybody who hopped on to the iTunes player and left us a review. It's really awesome. Every single five-star review, well, these things are going to allow us to get more and

more exposure so we can continue to bring you guys amazing guests who are willing to share their real-life experience and knowledge with us. So if you haven't left us an honest review yet, please take two minutes and do so. Also remember, you can access all details from this episode, including summary, links to various resources discussed, and a whole heck of a lot of other great stuff at biggerpockets.com slash show to. Again, biggerpockets.com slash show two. Thanks again. This is Josh, signing off. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing,

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