BiggerPockets Real Estate Podcast - 234: Tenants, Evictions, & The Dark Side of No Money Down with Ryan Murdock

Episode Date: July 6, 2017

People often toss around the term “passive income” when it comes to owning rental properties. And, in truth, there are ways to make managing tenants passive. But for the majority of investors, being a landlord can be tough. On today’s show, we talk with Ryan Murdock, an investor and property manager from Maine about the lessons he’s learned building up his rental portfolio. Ryan also shares his story of going to the brink of financial ruin with a “no money” deal and how to avoid losing your shirt when doing creative financing. In This Episode We Cover: How Ryan started by reading a book The beauty of house hacking Why he started his own property management company  Tips for dealing with inherited tenants How to find good agents Thoughts on having an agency to “sponsor” you How to know when to quit your job The things he misjudged while buying houses How capital plays a huge role How to accurately estimate costs when fixing properties How many rental units he has Tips for finding properties through the BiggerPockets Marketplace What metrics he uses to decide on a property How he funded his deals What he would do differently if he started again The BRRRR strategy And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Marketplace BiggerPockets Keyword Alerts Books Mentioned in this Show Set for Life by Scott Trench Property Management For Dummies by Grisworld The book on investing with Low or No Money Down by Brandon Turner The E-Myth by Michael Gerber The ONE Thing by Gary Keller and Jay Papasan Tweetable Topics: “Don’t just quit and hope for the best.” (Tweet This!) “Creative investing is not about being broke. It’s just about putting together a deal without your own money.” (Tweet This!) “You either win or you learn.” (Tweet This!) Connect with Ryan Ryan’s BiggerPockets Profile Ryan’s Property Management Website Realty of Maine Learn more about your ad choices. Visit megaphone.fm/adchoices

Awesome. We had a great show today here with Ryan Murdoch. That was a good show. Wait. Wait. Wait. We got to stop this thing. You got to start with, welcome to the, or this is the Bigger Pockets podcast. Show. Whatever. Scott Trench, you ruined it. This is the Bigger Pockets podcast. Show 234. 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 investment, 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. Your home for real estate investing online. What's going on, everybody? This is Scott Trench, your guest host of the Bigger Pockets podcast here with my main host, Brandon Turner.

How's it going, Scott Trench? Welcome to the BP podcast again. It's great to be here. Things are going well for me. People seem to be enjoying the book that we released. couple months ago set for life. And I'm currently working to expand my real estate portfolio here. I'm under contract for a new fourplex here in Denver. Dude, you're on fire. This has been a hot spring slash summer for you. Yeah. Well done. I think it's just about summer. I think it's just about summer.

I think it was like today or yesterday or next week or this. I don't know. I don't pay attention to details like that in life. Well, it's definitely summer when the show is released. Yes. It is definitely summer when the show comes out because we're recording this, I think, a week early. So anyway, so you're buying new properties. That's awesome. Tell me about this fourplex. Yeah, I got a great deal off market. It was 355K here in Denver, which is a great deal for 4plex. Getting units for less than 100K is pretty rare these days. A little bit of a management issue.

So I'm really glad I got to pick Ryan's brain on the show today because there were some tips that I'm definitely going to be implementing with my own management. I think it'll take me a year or two to really nail down management given some of the tenants I met and some of the problems. There's actually a guy living in the crawl space. No way. Yeah. And again, this is all assuming that I get the property. We're under contract. And we just, we just had the seller accept our inspection objection. All right. Well, congratulations. That's awesome. And you, you probably want to get that guy out of the crawl space. So let me know how that goes. Oh, yeah. He's got. So now we have a weird cross-based locks. But there's actually an eviction going on to the property right now. So I'm hoping to get a vacant unit that is not trashed back when we close. But that's awesome. Yeah, new new stuff for me. Well, like you said, it was an awesome show then for you. And for anybody who ever wants to invest in rental properties, you guys are to love today's show. Ryan is a very experienced investor. He's been doing this for a while as both the property manager and a real estate agent and an investor owns a bunch of stuff. And he's very, very smart when it comes to dealing with tenants. And we pretty much just pick his brain for a good hour today. So yeah, stay tuned for that. Yeah, this guy's been through it all. He's had some issues and learned quite a bit. So definitely someone to kind of model after. Listen to his conversation. You have, make sure you pay attention to. when he's talking about the no money down stuff.

He's got a really, really good perspective that has not talked about enough when it comes to no money down, where he did one, and then it's like the dark side of no money down. So listen close to that. Absolutely. All right.

Well, before we get any further, why don't we go to today's quick... That was a multi-tip, quick tip. That was a multi-tip, yeah. What's your quick tip? Today's quick tip is, if you have a deal that you're looking to sell, we're looking at you listing agents or sellers,

post them into the marketplace. in Bigger Pockets. And actually, our guest today, Ryan, actually bought one of his properties. I think it was his most recent property from a deal that he found in the marketplace. And if you want to go a step further, you can even submit those deals that you, those listings that you have to our Deal of the Day segment, which runs on Facebook Live, where Dave will talk about them and show off your property. Yeah, pretty awesome.

Pretty awesome. So, yeah, BiggerPockets.com, such Marketplace, check it out. Here's why savvy real estate investors are obsessed with bonus depreciation. It lets you take that rental property or commercial building you own and depreciate most of the cost against your income. Legally, 100% IRS compliant. That's instant cash flow improvement. Cost segregation guys is the number one firm nationwide, specializing and identifying these faster depreciating assets in your property.

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Amazon gift card. That's bill.com slash bigger pockets. We've got all the house cleaning done. We can get to the show. So Ryan Murdoch is a real estate investor from the Bangor main area. The guy's been, like we said before, he's been through it all. He's had a lot of both ups and downs with real estate. And you guys are going to hear those stories today. He's been a lot of evictions, learn how to manage tenants well, learn how to invest creatively and both the ups and downs of that. So listen close to that. With out further ado,

let's bring him in. All right, Ryan, welcome to the show. Glad to have you here. Hey, thank you very much. It's an honor to be here, guys. I really appreciate you having me on. Yeah, yeah, this should be a lot of fun today. I guess you've listened to the show quite a bit, right? You've heard the episodes. You know what's coming? Yeah, I have. I only found bigger pockets about 10 months ago, and I wish I had found it 10 years ago or 15 years ago whenever it got started, but I have absolutely absorbed everything that I could possibly get out of bigger pockets. I've read thousands of forum posts. I've listened to every single podcast. So it's pretty surreal sitting here now being on one of these podcasts less than a year later. So I'm very excited. That's amazing about it binging. It's funny. And it's funny because when Mindy a couple

months ago told me that I was going to be on here, I think I was on like podcast 130. So I'm like, oh my God, I got to get up to speed. So I think one week I knocked out 30 of them in a row. And I was I was about ready to quit real estate at that point. I just had so much of it. But no, I got up speed and it's phenomenal. You guys do a great job. And I'm thrilled to be here. Well, thank you very much.

And you are a Bigger Pockets Pro member, correct? I am. That's awesome. Well, thank you for being a pro member. And, yeah, that's awesome. So I guess why don't we just start the beginning of your story and hear about how did you get into real estate investing? Like, what that look like? I bought my first duplex back in 2007.

And it was a house hack, Brandon. I lived in one unit and rented upstairs. I had just spent two years living in Asia. I was in electronics manufacturing in a previous life and kind of ran around the world, lived in a bunch of different places. And when I knew that ride was coming to an end, I decided I wanted to start investing in real estate. I didn't know anything about it, but sounded cool. So I remember when I was living in Hong Kong, I ordered property management for dummies and a bunch

of other books and had them shipped over there and just read everything I could, came back to the U.S. to Bangor, Maine, and bought this duplex to which my wife and I lived in and I inherited absolutely awful tenants upstairs. So I was immediately immersed in the world of nightmare tenants and, you know, how difficult they can be to handle and, you know, everything that it takes to get them out and how delicate of a process that is. But that didn't deter me. I bought another duplex a few months later and then, you know, just slowly added units over the next few years. That was 2007. Around the same time, maybe 2008, I think I was up to four or five rental units and decided that I was knowledgeable enough to open a property management company.

So I put up this crummy little website and just started advertising for property management. I had still no idea what I was doing, but figured, hey, I can make the go of it. My reasoning was if I had four units that I was self-managing, I said, well, I'm married to these things. I've got to be available at all times to deal with them. If I'm married before, I might as well be married to as many more as I can get my hands on and try to make a little money. So, yeah, so I built that business.

up to about 200 units over the, I think, next four or five years. I had my own portfolio of about 28 units and the rest were managed, but it was about 200 units total that I was overseeing. And also around that same time, 2008, I got my real estate license, my broker's license. Not so much that I wanted to be a real estate agent, although that's what ended up happening. You know, I was looking at $30,000, $40,000 foreclosures. And as you guys are aware, it's tough to motivate an agent on a Saturday afternoon. to drop everything and go show you this $30,000 house. So I just wanted to get my license so I could kind of do my own showings and, you know, stop having to climb through windows.

And, you know, I figure if ever the real estate thing doesn't pan out, I'd make a great cat burglar because I've been in and out, you know, every foreclosure before I called the agent to get them over there to help me out. Yeah, I can't say I've never done that. So, yeah, hey, the door was open. What are you going to do? You might as to walk in and take a picture around, right? So, yeah.

So let's, let's unpack everything you did. I mean, there's a ton of really good stuff here. Like, I know house hacking something Scott and I both have done. And we love it, right? And the first question that kind of stands out to me selfishly because I'm actually closing on a four unit coming up here is dealing with inherited tenants. That was your first property, right? Well, all of my units have been vacant. So do you have any tips for those of us that are buying properties with people in them already that maybe the tenants aren't so great or trying to get your lease?

Yeah, it really depends. And I think it's, you know, and I've inherited great tenants and I've inherited a bunch of bad ones. So it's kind of luck of the draw. You know, these guys, when I inherited them, they were current on their rent, you know, and that's about all the due diligence you can really do on and besides maybe walk through their unit. And the unit looked good. They were current on the rent.

So, hey, you know, these guys will be okay. But I think I was even a little more sensitive to it because I was living in that same building where, you know, and I can, I was a little uptight back then and just trying to, you know, do everything right and make sure everything, you know, they weren't violating, you know, any terms of their lease. And I'm looking out the window and they've got an unauthorized vehicle out there or, you know, they got friends sleeping over. They're not supposed to be.

So, you know, I was a little hypersensitive to it, but, you know, it did steadily deteriorate, and I did have to evict them in court and get them to move out. So, you know, in buildings I bought since then, you know, really all I'm looking for is that the rent is current and that the units look good, which is, you know, my same criteria back then, but it was just a little different because I was living right there. Yeah. Yeah, I've actually like half my evictions. I think I've done four or five evictions, I think four.

And two of them were inherited tenants that, you know, and one of them, we knew. Actually, I would say both of them, both of them we went in kind of knowing there was something wrong. Like there were, there were definite red flags going into it. Yep. Yeah. Yeah. One was a hoarder, a garbage hoarder and the other one, like wouldn't let us into the unit. So yeah. It was like. Yeah. And that's, you know, that's one of my pitches now when I, when I'm looking for buildings, I'll advertise that I buy buildings and I will inherit nightmare tenants because now I'm, you know, I've learned enough that I know how to deal with them. I know how quickly I can get them out. It's, you know, it's just, you know, normal course of business

now is evicting tenants if I have to. So if I can buy a building at a discount and take away somebody's problem tenants, whereas, you know, maybe with another buyer, they'd want those tenants out prior to closing. You know, I'll just take the whole thing if the price is right and just, you know, just know that I'm going to have two to three months of turmoil getting these guys out and probably a train wrecked unit to go in and turn over. But if the, you know, if the buy is right, then it works. You know, it's funny about that. So my wife and I just had this conversation yesterday, how when I first got into real estate, I mean, everything was such a big deal. I mean, in my first eviction was like, oh, like so dramatic, right? And like now, like, and so now when we're

talking to friends who have rentals or new people or or even like family members and they're like, oh, and then they did this and this. And I'm like, hey, it's just business. Like it doesn't even phase me hardly anymore. And like the fast you can get to that, the easier it is to get the emotion out of it. Like just remember like, this is all just what it is to be a real estate investor. There's. Yeah. And you hear some some of these stories from new landlords and they're like, oh, it was so awfully he did this and this. And, you know, we just. And I'm like, well, geez, I wish half my tenants were as good as that, you know. So it's not really that big of a deal once you're used to it.

That's funny. Yeah, and I'm definitely one of those people that's like, oh, I'd kind of worry about having to go through a first eviction. And I get the sense from some of the units in this property. Actually, in fact, one of them are going, one of the units is going through an eviction right now. And they're supposed to be vacated before closing. So that's kind of an interesting one. And I'm, yeah, this is very new for me. So it's great to hear this.

Yeah, it's so much easier. Like, that's what I feel like nobody told me. before was that like everything evictions or whatever i mean yeah they take some work but everything's easier than i expect it to be than like them my fear says it's going to be yeah no it's very state specific and i'm sure it's reasonably similar and you know the steps are very clearly defined and you've got to follow them to the letter but if you do the things in the order that you're supposed to the way you're supposed to it's pretty simple but i can absolutely understand why people are overwhelmed when they've got to do it i mean i've certainly gone to court early on

and been thrown right out of court because I forgot something seemingly simple, but the judge looked at and tossed it out. So, you know, but after you do dozens of them and, you know, as as a property manager, I've sat through hundreds of evictions, not necessarily for myself, but for, you know, other property owners or if we take over management of a problem building and you've got to go clean it out. You know, every one of those evictions that I have sat through for another property owner, you know, I'm keeping some of that knowledge for myself and it just makes me, you know, a better landlord for my own units and more expensive. dealing directly with my own tenants. Very cool. So I got a question about something else you said in that kind of intro segment there. You talked about getting your license that you could go view that $30,000 unit that an agent

doesn't want to bother to show you on Saturday. And I've heard this frustration for many investors where many agents who work with investors saying, hey, in Dendro, we have agents aren't even willing to entertain $150,000 units. They don't even want to help you look at those. So these folks are like, how can a new investor, get the support they need to analyze the dozens of deals that are on that oh so critical first purchase from the agents that maybe don't want to put in the time to help them. Yeah, it's really tough.

I mean, if you don't have an agent who's willing to help you out, and typically if the agent is as experienced as you wish that he was to help you, he's probably busier doing, or he or she's busier doing more profitable things and isn't going to want to help you, you know, if you're able to seek out even a non-agent, but just a mentor in your area, somebody that's been doing this longer than you have that can help you analyze deals, you know, even if it's not on MLS, there's enough other information out there on just public websites to, you know, to help you through it. If not, I mean, it's tough. You just got to, you know, you got to grind it out. And that's what I did. I would try. I did find some agents that were, you know, okay in helping me.

They weren't always available when I wanted them. But I would just try to minimize my impact to them. I would try to do as much of my own legwork. You know, if something popped up online, I would go drive out to the house myself first, look around and see if there was anything that, you that was a deal breaker for me before calling the agent immediately and saying I needed to get in there. So just trying to minimize the impact of the agent. So when I did call, yeah, I could maximize their value. Yeah, I like that a lot. Another thing that you could do, like, you know, let's say an agent doesn't want to do it for, like Scott, for example, for $150,000 property.

If you call the selling agent, you know, then they're thinking, oh, I get double the commission. All of a sudden that crappy deal that they didn't even want to list because they're not making much. Now they're making twice as much. It's a lot easier to get them to come show you a unit because they know they're going to get both halves. Yeah, and I'd even do that now as an agent. I would say, you know, if there was a smoking deal or, you know, negotiations were tight and it was a listed property, I would have no problem just saying, hey, you keep both sides of the deal as a listing agent and, you know, just represent me as a buyer. There you go.

There you go. I think that's just part of the deal. Successful agents don't want to work with newbies that are going to demand a lot of time for very low commissions. Yeah, I don't want to do it now. You know, I wouldn't jump off the couch on a Saturday afternoon and go run and show somebody something. I mean, I've met some, some younger investors, especially on bigger pockets. I've hooked up with some guys, some younger guys locally. And I love, you know, sitting down having a cup of coffee and, you know, fielding emails and calls and questions and helping out where I can.

But, you know, like anywhere else, when a great deal pops up on the market, it's gone not only in a matter of days, but in a matter of hours. And I can't guarantee that I'm going to want to drop what I'm doing and go help that buyer on that particular property. Yeah. So I get it. Yeah. Well, so let's go back to your story a little bit, you know, so you started the property management business. You started acquiring properties. I mean, what was your, let me first get like, where were you in job-wise here?

Did you, did you have a full-time job? Was property management your full-time gig? I mean, how did that transition from job? No, I was working a day job here outside of real estate just to pay the bills while I got up and running. And it was tough, you know, every break and every lunch break. I was out on the phone trying to, you know, call my agent or call a bank or, you know, I had no money. So I was grinding it out like anybody else that starts where I'm just trying to get financing. And, you know, I'm doing FHA or conventional loans of the 30-year,

30-year loans and the property's got to conform to, you know, all these standards. And I mean, it was, it was a real hassle. So I, when I became, when I got my real estate license, I was working a regular day job. And in this state and probably many others, you have to hang your license at an agency. So you have to have an agency that kind of sponsors you, you put your license there. And I found one. And I was just kind of going in after work and on days off and just hanging out in the office. And I asked the designated broker there one day. And this was 2008. This is right when, you know, everything was just falling apart. I said, I got to quit my job.

I can't stand it anymore. I said, I want to do real estate. It's, you know, I'm eating, breathing, sleeping real estate. Do you think it's okay if I quit my job and just, you know, be a broker full time and work here? And she said, absolutely not. Don't do that. She said, you know, build up your network of people, build up your clients, you know, get established as an agent before you quit your job. Well, next day I called her up and I said, hey, I quit my job.

So I got to make this. I got to make this. work. So, so yeah, I went to work full time there. And luckily at that agency, the administrative assistant had quit a couple days after I quit my job. So I never really had aspirations to be a secretary, but it was a steady paycheck and it kept me in the real estate office. So I was the administrative assistant there for the better part of the year. So I had a small paycheck and it kept me in the office and I had the flexibility to run out and do showing. So, you know, I made it work. I made it work. I love that. I love that. Yeah. That's awesome. You know,

that is a tough question of like, you know, when do you quit your job? I mean, Some people take the approach of save up the income, get the cash flow you need or the business, you know, run to the point you want and then quit. And other people do the burn your ships, you know, sort of analogies. Oh, yeah. No, it was a horrible decision. If anybody asked me that same question, I would say, don't ever do that. Don't ever do that.

I mean, that was just a bad decision. It turned out fine. But it was, you know, I would never advise anybody to just, you know, quit hope for the best. That's not a good, not a good strategy. Yeah. One of the things I think that people forget when they go to these, when they quit their job is, hey, you know, it's kind of hard to get a mortgage if you've never invested in real estate before and you don't have that job income first. So at the very least, don't quit your job and then apply for mortgages

and try to buy properties with that stuff. Yeah. And that was tough because I lost my W2 job at that point. I was an independent contractor. So now you're self-employed and it kind of starts that two-year clock of, you know, that the banks want to save for steady income. So it's usually a couple of years before you build up enough income in that business. So you might be four years before you get a mortgage when you quit. Yeah. Yeah. So I mean, just so frustrating to be out, you know, pounding the streets, trying to find these deals but not really having the ability to buy them and watching all these things go to cash buyers and you know you're you're just sitting on the sidelines frustrated and that's that's where I was but I continued to build up the property management business said I got that up to

about 200 or so units and I maintain that for I'm a better part of four or five years managing those units and I was pretty much a one-man band I mean I had a small network of independent handyman contractors and and you know licensed electricians and that kind of stuff but everything was going through my cell phone And it was, you know, all the maintenance calls, all the middle of the night, no heat calls, all the, you know, all the leasing, everything was going through me. And I just got to the point where I just, I couldn't keep up anymore. I mean, that's 200 units. That's a full plate. Yeah, for that long of time.

So I knew that something had to change. I knew that I either had to hire employees, which has its own headaches and stresses and all that kind of stuff, or I would have to scale back on some of that business. And I was financially strapped. So I didn't want to get rid of any good business because I really couldn't afford. to and I guess I purchased some some buildings that were not performing the way I wanted. And I guess we'll get into that a little later. But I didn't want to get rid of any of my management business because I needed the income. So I ended up contacting one of the bigger management companies in my town and just kind of,

I didn't know them real well, but I knew they were okay guys. And when I just sat down, kind of told them my story and ended up going to work for them. They had, I don't know, maybe a thousand or so units that they were managing. but I went to work for them as a W-2 employee. So it worked for me because they had all the stuff that I was lacking. They had the administrative assistance and the payroll handymen and the bigger network of independent contractors and all that kind of stuff. And it worked for them because I showed up self-funded.

I brought all my business with me, you know, which paid for my salary. So it was great. I was a W-2 employee again. So I was bankable. I could get loans. And, you know, I had the freedom now where I could disappear for a weekend and the place wouldn't burn down around me. So that was a big step.

that's cool. It's so fascinating because that's like the opposite path that most real estate investors kind of envision. They're like, oh, I want to quit my job and get into real estate. And you're like, I want to quit this full-time nightmare and go into a job that offers these benefits and perks. Yeah, but it worked because it was, you know, it complimented and it still does complement my own real estate investing because it's a property management company. So all of my own units are managed there and I'm still very involved. Obviously, I work there. But, you know, I don't have to deal with every detail of everything.

I'll pick some other projects within the company and work on those. Well, you know, somebody else who might be fielding my, my unit's maintenance call. So it's been a great match. I love that. You know, I do this, you know, webinar every, I don't know, eight weeks or 12 weeks or something like that. And it basically called how to quit your job through the power of real estate. And I talk about how, you know, what do you need to do to be able to quit your job? And one of the things I talk about in here is you don't have to necessarily build up a business good enough.

You can switch to a job that's in the industry. And then you get all the benefits of being in that, just like you did with the administrative assistant. That can be often, yeah, oftentimes way better than just quitting. And we go become an mortgage broker, work at a property management business, become a handyman for a landlord. Yeah, yeah. Absolutely. Anything that complements your business, even if it's a trade, like you said, become an electrician or, you know, even if you work at Lowe's or Home Depot, I don't think they probably have some sort of, you know, employee discount, anything that helps you on your path to building your portfolio. Awesome.

Yeah. Yeah. And it sounds to me like you found a lot of synergy with what the path that you chose. And that's why you've been able to be successful there. Changing pace a little bit. Can we talk about the units that maybe didn't perform so well that you mentioned earlier? Sure. Yeah. Yeah. Back, I don't know, it was probably three years after I got my start. I was, I had my property management company on my own. I was still a real estate agent, but I didn't have a W-2 income. So I was having a real hard time buying anything substantial because I just couldn't get adequate financing. And I stumbled into a deal. It was a 20-unit portfolio, 20-door portfolio spread across. I think it was three or four different buildings. And I was able to get into that for very little money down. The owner was willing to finance about 95% of it, give or take.

So I was pretty excited because it was a significant group of buildings. I mean, I think I had six or eight units at the time and I was going to be able to buy 20 more. And I was so hungry for a deal that when I found this, I thought I was still being pretty cautious. I mean, I analyzed the numbers. I had my spreadsheets and pro forma's and, you know, stayed up all night, you know, looking at these numbers from every which way I possibly could. And thought I was pretty conservative with all my vacancy and my repairs and my capbacks and all that kind of stuff. And went ahead and did it. And I bought these buildings.

And they're rough. They're off there. You know, C minus buildings pretty banged up. But I was okay with that. But, you know, what I failed to do and what I think a lot of new investors will fail to do is, yeah, you can run your calculations on how the buildings can and should perform. But where I got killed is I didn't have any. working capital. I didn't have any money. I needed these things to to hit the ground running. And where I got tripped up is I didn't anticipate the level of work it was going to take to get

these buildings to where they needed to be. And when I say work, I don't mean necessarily, you know, physical repairs, but the the tenants, I misjudged the caliber of the tenants. There were some that were not paying. I didn't dig deep enough into the receipts and the accounting piece of the buildings to see who was paying, who wasn't. even some of the tenants that were paying were just causing so many problems elsewhere that it took me the better part of two years to get the bad tenants out and get the units fixed up and get new tenants in. And, you know, most of those were through evictions. And even the units when I originally bought the buildings that were in reasonably decent shape,

as soon as I evicted those tenants, I mean, they were they were trashing these units on the way out. And they were, you know, just kicking through walls and, you know, ripping toilets out of the floor. And, I mean, just destroying them. So I was down the vacancy period, the lost rent, the two, three, $3,000, $5,000 unit turnover, which added up across, you know, 20 doors when you have no money. That's pretty tough. So I ended up, you know, my initial projection was I was going to have to put no money into these buildings.

And over two, almost three years, I put almost $100,000 of my own money into, you know, just repairs. I replaced all the heating systems, not because they were far, the fuel consumption was far off my original calculations. but I knew if I upgraded to new natural gas heating systems, my fuel bill would be lower. So I was just scrambling to try to cut costs. And I had to spend money to do it. So I really got into a bind financially. And it was absolutely hands down the most stressful period of my life was, you know, not being able to make my.

I've always made my payments on everything. I've always been up front with everybody. And I just, I couldn't make the payments and keep up with these buildings. So I ended up going back to the seller. and it was one of the most awkward, difficult conversations I had ever had, and I had to work out a deal with him to defer some payments and just have a period of interest-only payments. And I had kind of laid out a plan.

I said, look, I said, I've got the buildings performing now the way that they were supposed to be. And they were actually better than my initial projections. But I had dug myself such a hole getting them there. I said, look, they're doing well, but here's what I need over the next couple of years, you know, to dig out of this hole. I need to defer some payments. I need to do some interest-only stuff.

But at the end of that, I will make you whole. And the original financing terms, or it was a five-year note with a 20-year air more at a balloon at the end of the five years. So when I went to the bank after about year three, after I'd kind of clean these things up, I went to the bank. And, you know, I was up front with them. I told them everything. I told them all the gory details of what I, you know, just told you guys.

And they said, okay, it said it looks good, but we want to see two solid years of positive performance out of these buildings before we'll lend on. Oh, man. All right. So, so, yeah, I was able to hang on there for two. years and it was tense and you know the the seller was not happy I don't blame him I wouldn't have been happy but we were able to work through it and I actually was able to refinance those buildings and pay him off earlier than than the five-year

mark so great so it all worked out well but it was it was just horrendously stressful and I just you know I see these people diving into deals and they've done their you know 10% repair and 10% capax and you know that's all well and good but if on day one you've got to put fifty thousand dollars into either a significant capital repair or capital replacement or you know it's going to take you two years to get the buildings cleaned out and and repopulated with with good paying tenants you've got to account for that or have the ability to get money somewhere either because you just have it or you're able to borrow it somewhere else to be able to do that yeah so like i think that one of the the the primary

point that sticks out to me in this is that you mentioned that you didn't have a lot of working capital going into the deal and i think that could you could you expound explain like How that, would this investment have changed dramatically from a financial and stress perspective? If you'd had a hundred grand in liquidity to tackle these problems from day one and been able to kind of stretch out this timeline of when you need to have it. Oh, yeah. No, it would have been completely different. I mean, certainly it would have been stressful, but not nearly as bad if I had the ability to, you know, to just pour the money in or to, you know, bridge these periods of vacancy and, you know, deal with all these unit turnovers. And what happened is because I didn't have the money, you know, even the 10 or 12 percent repair budget that I had factored in. I didn't have the money.

I didn't have the money to do that. You know, somebody would call with a legitimate maintenance problem and, you know, my stomach would just tighten up because it was legitimate. I had to fix it, but I didn't have the money. You know, I didn't even like to drive by the buildings because I was afraid I was going to see some other broken thing on the outside of the building that that I would have to fix. You know, and that's a slippery slope because if you don't maintain your buildings, then they deteriorate. And that doesn't help you get any better tenant. So your tenant population gets worse and worse. And your vacancy rates goes up.

So it snowballs on itself. So yeah, if I had had the cash or the ability to, you know, to, I mean, I was able to find the cash, but I was putting it on, you know, higher interest loans and credit cards and, you know, all the stuff that you don't want to do where I was taking it from, you know, all the other income streams that I had were just going into, you know, trying to, trying to float this building. And it was extremely stressful. I think this is a huge point for low and no money down buyers.

It's like, hey, you don't need. You know, maybe you didn't, you know, to purchase the property with any of your own money, but you better have tens of thousands of dollars for a property is in bad shape, maybe even more if you're going to buy a property that has this kind of, that's in this kind of condition because that is money that you will need to bring to the table and have accessible in order to take care of problems. And, you know, you call them capital expenditures, but for a lot of people in your situation, they would have been called it disasters.

Yeah, it almost was. Yeah, no, it almost was. And I think you've kind of got to scale it to your own situation and what you have. for other income. You know, if this, if I had the same scenario with a single family home or a duplex, okay, I probably could have sucked it up and just paid for it out of, you know, my other streams of income. But with the size of this project, uh, in the magnitude of the issues, I couldn't, I couldn't float that with with other income streams. So I was, I was in a bad spot. Well, there's a couple things that stand out to me about this. I mean, first of all,

and this is something like, I think a lot of people get confused about when we talk about no money or low money down. I mean, I'm the guy, I wrote the book, right? I'm known low money down. And I make a point in that book that creative. investing is not about being broke. It's just about putting together a deal without your own money. Like, nobody should. If they can't, if you can't feed your family, if you can't, you know, support yourself if things go a little bit wrong, like you should not be doing a deal with no money down. Unless like the way I look at it is, you know, you could go get really creative with seller financing or with a lease option or combine a bunch of things. But what I tend to like better is find somebody

who's got money and then partner. Because at least then you have the financial backing if something goes wrong. If you're going to do no money down, I like the partner route because, yeah, then you at least have, I mean, you have money at that point because it's your partner might not like you, like you're using it, but, you know, it's there and you went into this together. So. Yeah, but at least it's a backstop, you know, and I had nothing. I was all in to even get these things, you know, initially. And, and had, there was nothing left to take when I needed it.

Yeah, that makes sense. Wow. Anyway, well, I'm glad you got out of that because that's, I mean, this is really a good lesson. Yeah, we don't, we don't talk about the stuff that often, like the kind of the downsides, like what, what can go wrong with real estate? And I think that's. It was very humbling, you know, and I see the guys and, you know, I respect them. If everybody, you know, hits every deal out of the park and everything's a success, great.

You know, I wish that on everybody. But it's humbling and, you know, very informative when you crash and burn. You learn a lot. And who was it a few podcasts ago said you either you either win or you learn? I mean, that's huge. I mean, that's exactly that. So, you know, if you can get knocked down and you get back up and you brush yourself off, man, it's made me a better investor moving forward because I've been a lot more conservative on my body. to the point where I probably passed up some things that would have been a good deal,

but I just have vowed that I will never get in that position that I was five, six years ago. I'll never let it happen again. Yeah. You know, I another thing that comes to mind then, it's like, you know, trying to get a good firm grasp on that what's going to cost to actually turn around a

property, especially if you're buying a fixer up. You know, we talk a lot about Burr investing here, buying fix her upper properties refinancing. Like how to get an accurate cost to really fix up a property? I mean, do you have any suggestions on how can a person do that?

Well, I think a burr or vacant building is actually easier because then you know exactly what you're working with. You have tenants in a building and the more tenants you have, the more of an issue it can be is they're a huge variable. You know, if you're inheriting these guys and they're on somebody else's lease and somebody else's rules and they're used to doing things a certain way and you step foot in the property and say, okay, this is the way it's going to be moving forward. And they change dramatically. Either they, you know, they don't want to adhere to your new rules or they stop paying. and when they stop paying, if they damage the unit on the way out, you know, that $5,000 turn when they trash the place in the way out wasn't in your initial projection. So, you know, it's almost easier in a sense, I think, to calculate the cost of a project when you buy a building that's completely vacant

because then you know, okay, I'm going to go in, I'm going to fix these units up. This is what it's going to cost. And I'm going to fill them with tenants that I have screened that are on my lease, that are on my rules. And, you know, I'm going to be able to more effectively to deal with them if they become a problem. Yeah. Awesome. So you move past this deal. You had a learning experience.

How many deals and doors do you have now? I am up to 45 doors now of my own. You know, and that's in addition to the company that I work for that manages, I think we're up to about 1,500 that we managed total. But 45 of those are mine. Oh, that's awesome. I mean, are those multifamily? I'm assuming there's a lot of multifamily in there.

How does that break down? Yeah, a little bit of everything. I think there's four, maybe three or four. four single family homes. I've got a couple duplexes, some three and four units. I just bought a 10 unit a few weeks ago, which is my biggest one. And yeah, so kind of a little bit of everything. Can we, can we dive into that 10 unit a little bit? I like the bigger deals. So how did you, how did you find that that 10 unit? Bigger pockets marketplace. Did you really? Oh, wow. Yeah, I really did. I really did. Yeah, that's one of my BP success stories. Before, I'll back up a little bit.

When I found bigger pockets last year, I had 28 doors. And so I bought 17 more since finding bigger pockets. And I will attribute most all of it to just motivation of listening to the podcast and learning little things and just helping me seek out deals in a more efficient and better fashion. So the 10 unit was one that I first saw on the Bigger Pockets Marketplace. It was a local guy who I had never heard of. I conversed with him a couple times on Bigger Pockets, which is where I found him. And it's strange. I live in a small town. You know, you pretty much know who everybody else is, especially in the investing circle.

But I had never heard of this guy. And, you know, once I had talked to him a little bit, I was familiar with some of his. properties and and he you know he's just starting to wind down a little bit he's a little bit older wants to start unloading some of these things so yeah it's a it's a 10 unit building it's in a rough area the building itself is good structurally you know new roof new heating system uh you know the the units are in good shape because of the area the tenant population is is rougher and i just told you my sob story about inheriting terrible tenants but yeah i'm older and wiser now you know and the the purchase price was was definitely uh worth the risk of inheriting these tenants and

I'm more geared up now and just better equipped to deal with troublesome tenants, you know, either to work them along and get them on the program or to get them out quickly. And I bought this building knowing that I'd be okay, even if I had to go through and clean house entirely and start over. Yeah, so it's going to be a good building. All right. That's awesome. So I'm curious of what kind of metrics you use to decide. Like what made you say that deal was going to make sense where other ones didn't? Like, do you look for cash flow per unit or a return on investment?

Like, what makes you decide? Yeah, I'm looking for cash flow, you know, and I don't have guys will run solely off cap rates and all this stuff. And, you know, I look at it, you know, which you probably should do. But I look at every deal individually. And, you know, a lot of it depends on my motivation on any given day, what other deals I have going on. If it's been three or four months since I bought anything, I'm going to be a little hungrier. I'm juggling a couple of deals and maybe I'll pass on something that I would have bought six months ago. But this 10 unit, it was $265,000 for 10 units.

And the gross rents are about $6 a month. You know, so I should, I think I'll clear probably 1,500 a month, or give or take after, after everything. I mean, after factoring in, you know, for reserves and repairs and, you know, heating, heating costs, which is a big deal up here. It's cold. You buy a lot of heating fuel. Do you pay all the heat then for the property or can you sub-meater that somehow to the tax? No, there's only one heating system. So you're on the hook for it as a landlord, but it's fine.

I mean, we factor it into the rent and I've got a high-efficiency heating system. So, you know, that building heats as well as everything else. So, yeah, conservatively, I should cash out about 1,500 a month. I'm hoping more for 2 to 2,500. My conservative number was 1,500 a month. Yeah, that's amazing. I love how you mentioned that it's kind of a given day, like any given day is how you kind of analyze the deals one by one.

I think that's such a huge thing that people forget when you hear a professional investor who analyzes each deal and is ready to go on each one of those. That's not how the majority of people that are scaling their portfolios operate, I think. I think they do exactly what you're talking about. Hey, my personal life, my personal financial position, the other things in my business have to be in position before I can offer on these properties. But going with that, how did you fund this 10 unit deal? I put 50,000 down cash out of my own pocket and the seller finance the balance, which was another component of this that I really liked. He was willing to finance it for 15 years at 5%.

So, I mean, it was just cash flows all day long at that. Jumped on it. That's awesome. I should have probably said this earlier, but I'll say it now is, you know, if you're listening to this podcast right now and you're not checking the Bigger Pockets marketplace, definitely, definitely do so. And there's a couple easy ways that you can do that. You can set up keyword alerts so that certain words pop up and somebody puts an ad in the marketplace for whatever. So I would recommend every single person listen to this. Go right now to go to biggerpockets.com slash alerts, A-L-E-R-T-S, and put in your town name and all the town names around you. I think, Scott, you can correct me from what free members can do a certain number of keyword. alerts and pro members can do unlimited, I think, or I'm not sure.

Yeah, I think, I think that we changed it so that free members can get unlimited. Oh, I'll double check that. Okay. Well, cool. Well, either way, yeah, go ahead. Yeah, that's how I found it. It was a keyword alert. Oh, perfect.

Yeah. Yeah, I love that. So, yeah, definitely go in there, set out some keyword alerts. And then when deals come up, jump in there. I mean, like, the fast you can jump. I think what it is, pro members can do text message alerts. Yes. Yeah, so, like, I have a text message.

So every time the word, like, I won't say it because everyone will spam me with ads. But, like, if a certain word comes up on my, on my phone, like on the marketplace, I get a text message. I can jump in and talk to them right away. So there you go. Right. All right. So you're funding this one with a conventional, like went to the bank, put down a down payment,

then you bought it. And then the, well, no, that's right. No, that's right. Seller finance. Sorry. Yeah. Seller finance. Sell or finance.

Yeah. The deals I had done earlier this year, every one of them I had purchased, yeah, every one of my purchase cash, renovated them with my own cash. And then went to the bank and refinanced them and got all my money out. This was the only one that. that I put cash into and left there. And I guess that's the other piece of me being conservative is just, you know, I'm okay with with that amount of money just sitting there.

I know people scream equities just dead laying there, whatever. But again, that's just me from previous experience, not wanting to be so stuck anywhere, anytime that, you know, I could unload this thing and, and sell it in a heartbeat or, you know, have some options if I need to get out of it or get into trouble. I love that. I mean, I actually got a couple properties right now free and clear because like, yeah, I'm not going to get in the highest return, but I actually hope in the next 10 years to pay off everything. And yeah, I'm not getting the highest return my investment. But who cares? Like life isn't about

getting the highest return on my investment. Yeah. You know, so like, yeah, I think that's cool. You know, and I'm 40 years old now. If I was 20, maybe I'd be a little more adventurous again, you know, but I mean, at 40 years old, you know, I'd like to start seeing stuff getting paid down and paid off, you know, a little sooner than I would of if I was younger, you know, so that's why I went that route. Very cool. Very cool. Well, I mean, so what's your plan going forward? And where are you headed with your business? Keep buying as many units as I possibly can. And hopefully by the time I'm bored or just burned out on doing this, I'm either making enough money that I can pay to have them manage full time and I'm completely hands off or just

sell them and cash out or maybe a combination of both. I certainly generate enough income from all these now that I could quit everything except for these properties and just self-manage my units. But I don't because I like the other stuff that I do. And it does complement my ability to buy properties. So, you know, I'll keep doing it until I don't like to do it anymore. That's very cool, very cool. Well, maybe like the last thing, can you kind of before we move on to the fire round,

can you know, talk real quick about, I guess people that are listening to the show right now that are where you were 10 years ago, let's say. You know, what can you tell them about building their portfolio, the mistakes you made, things that they should do, not do. I kind of just talk to our audience that way. Yeah, just don't overextend yourself. And, you know, I think people will get so hungry for a deal because of whatever reason, Either their market is tough to buy in or, you know, they have a hard time getting financing that when they finally find something that they can do, they feel like they need to do it. And I know that's a fine line between, you know, the analysis paralysis thing.

And, you know, you got to bite the bullet and just do it at some point. But, you know, don't jump on something that's going to blow up in your face, you know, especially if you don't have money. I mean, if I had, you know, if I had kids, if I had kids that were growing up, I would, you know, encourage them. Save as much money as you can, you know, put that bigger down payment down if you can. the reserves, you know, if you just come by the skin of your teeth, your risk is just so high. Yeah, that's true. That's really good advice. You know, and like you said, you know, everybody's got kind of a different place they're coming from, right? So if you're 20 years old, you might have a different plan than somebody who's 40 or 60. If you want to be more aggressive,

you get kids. I mean, yeah, like, it's important that people don't just listen to like what Scott Trench says or what I say or what Josh says or you say. Like, take that into consideration, but everything is going to be different for every single person. And so like, yeah. Yeah, I wouldn't want a 30 year mortgage right now at age 40. You know, a 15, 20 year mortgage if I can do it. And, you know, the other piece of it, if I can, is, you know, I had my buildings that I was kind of handcuffed financially with for so long that you tend to just kind of lose track of them. And I think part of finding bigger pockets and just getting into a podcast every day and just having this stuff front and center and being excited about it made me go back and revisit the buildings that I had, even those 20 units that I got in trouble with,

I was able to, I had enough equity at that point that, you know, I was able to pull a line of credit on those, which I used to then buy, you know, some more single family homes to renovate and do the birth strategy with. And, you know, start looking at your own portfolio. Even my own, even my own house, I kind of circled back and looked at my primary residence and said, you know, pulled up the mortgage. He says, why am I paying PMI on this? You know, when I bought my house, I was just thrilled that somebody would give me a loan to buy the house. I didn't care how or what or, you know, I got a loan. Let's buy the house. But now after all these years have gone by, I go back,

why am I paying, you know, $200 some of dollars a month in PMI? So I went back to the bank, was able to refinance the house. I got, you know, a shorter term note. I dropped the PMI and was able to pull a line of credit out of that. I mean, this stuff was sitting right under my own nose. I just didn't, you know, didn't have the motivation to go and reevaluate it. So I went, you know, through three or four of my other properties and said, yeah, wait a minute, I could be doing a lot better just with what I have here.

Let's circle back and refi and, you know, free up. free up some more cash. I love that. Well, on that note, I wanted to jump to the fire on, but I have one more question I just thought of. You talked about doing the birth strategy, which if you're not familiar with that, people listening, it's where you buy a property, like a fixer-upper, you fix it up, and then you rent it out. So instead of flipping it, you rent it, and then you refinance it with a new loan. So you mentioned doing that. How long are you having to wait between, you know, buying the property and then able to refinance? Are you seeing a requirement from the lender?

Yeah, no, I have finally got hooked up with a commercial lender. They do portfolio alone. So there is zero seasoning, which is, which has been huge for me. Yeah. So I've done them a couple different ways. And I've done, I think three burs since I, since I learned the term last year where I'll buy them cash, fix them up and then refinance them. Or I can go to the lender and they'll give me a loan on an as completed value. So they'll have it appraised and give me the purchase. They'll give me up to 80% of the as completed value. So, you know, let's say it appraises as complete for 100,000. They'll give me up to 80,000. If I only paid, you know, 50,000 for the building, then that gives me 30,000 to put into it for repairs. That's cool. What kind of terms are you getting on a, on a, on a part that,

from that portfolio lender? Fixed for for five years. Um, at a pretty good rate, whatever, four point something, maybe five percent now. Uh, and then variable at the, at the end of the five years, which is a little scary. Uh, I don't like variable anything, but, you know, I'm putting them on 15, 15 year terms, 20 year terms, maybe and throwing a little extra principle at it. So hopefully by the time the five years is up, you know, I'll be in pretty good, pretty good shape. but I'm not, you know, over leveraging the properties as they are now. I've got, I think, a couple that are at 80% and most of them are at like, you know, 60, 65%. So I'm trying to, trying to stay fairly conservative and not be over leveraged.

Okay. Yeah, that makes sense. Yeah, I know a couple of my portfolio lenders that have doing the BIR, yeah, we go into the same thing and to, you know, maybe fixed for five or I think one did seven and then variable. And it makes me a little nervous, but the difference between variable today and what it used to be is the variables that I'm doing have a cap at like 10 or 11 percent. that the highest you can ever get. Yep. And so like, so it's not the end of the world.

Yep. I look at worst case scenario, it's like an extra $200 a month. And I'm like, well, I'm still cash flowing at that. So I'm okay with that. Yeah.

Yeah. And the local lender I have, you know, I think it's very important that people build a relationship with a local lender, if at all possible. I am absolutely certain

that some of these deals that I've been able to do with the bank, I would not have been able to do if I didn't have that personal relationship with the loan officer. I mean, he's local.

He knows me. He knows what I'm, what I'm doing. He knows the area, you know, and since they're a portfolio lender, they've got a little more flexibility, you know, as opposed to, you know, some national lender or Bank of America, whatever, you know, whatever, one of the big guys that, you know, you don't get to sit down face to face to anybody. They don't know who you are. They're, you know, on the 27th floor, two time zones away, you know, it's just not the same. And even if you're just going to buy, you know, a single family home is your primary residence, but you think you're going to be investing later on, you know,

sacrifice the quarter point that you may get with one of the, one of the big guys. and just go and get alone with a local bank, just so they know who you are. I love that. I love that. They build a relationship with you. So when you do go back with something that maybe is a little more creative and, you know, you need their assistance on, they already know who you are. I mean, it's tough to ask for money, even from a bank, you know, the first time you meet

them, you know, if you walk in and, hey, how's it going and they know who you are and they've seen you come in for the past, you know, months or years, you're going to be much further head. So, you know, even if it's a slightly higher rate, you know, you're going to be a slightly higher rate, it's going to be worth in the long run to build that relationship. Love it. I love that. So many of my friends and these first-time investors are like so worried about are they getting the best rate and are they getting the lowest fees from their lender?

And I'm like, it's really the relationship that matters so much more. You can, you know, you can make this a smooth, easy, painless transition. So. Yeah. Yeah, absolutely. Fantastic tip. Well, this is awesome. Why don't we transition a little bit and head over to the world famous fire round.

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memories somewhere else. Your home might be worth more than you think. Find out how much at Airbnb.com slash host. These questions come direct out of the BiggerPockets forums, which of course you can jump into any time, day or night, 24-7, BiggerPockets.com slash forums. and I know like Ryan said earlier, he's over there hanging out and there's, you know, tens of thousands of people over there hanging out. It's amazing.

And it costs a lot of money. It's a total of free. So check it out. BiggerPockets.com. slash forum. So question number one, Ryan, do you always pull a permit even like if it's required, even on small stuff that seems ridiculous to have a permit for? Well, yes.

Of course I do. No, no, no. Yeah, the big stuff now, just because it is a small town. So I try to do everything by the board. if I can help it. And it depends on exactly which town I'm working in. Some are better than others. Pretty much if I think I can, you know, get away with the small stuff and no one's going

to care, then I won't pull a permit. But always for, you know, if I'm doing heavy electrical or heavy duty plumbing, just from a liability standpoint alone, if something goes wrong, I want to be able to say, yeah, I had a license guy do it. Here's my permit, which I think will help you a lot, you know, should something catastrophic happen and you get sued. At least you can, you know, say that you made a good effort to do it, right? Yeah, I like that.

Yeah. All right. So the second question here is, is it possible to get started with no money and having bad credit? And this person, a little background is they're making $12 an hour working 60 hours a week and they have credit in the 400. So can't can they get started and should they get started? Yeah. I mean, I guess anything is possible. You're not going to get a loan from a bank.

So if you can find, you know, seller financing or somebody to partner with, I know if I was going to partner with somebody with a 400 credit score, I really want to know why they have a 400 credit score. you know, I guess you could luck out and do okay, but I would probably focus on, you know, whatever they need to do to increase that credit score and just make themselves a little more presentable before they go asking anybody for money or, you know, any kind of creative terms. That's a great tip. Yeah, definitely. Yeah, I was wonder what if family has a bad credit score. It's not about the credit score.

It's about the reason behind the credit score. Oh, absolutely. Yeah. There are people with, you know, bad credit scores that have a very good story to go along with it. You can kind of see whether, you know, whatever it may be, a divorce or, you know, something. But, you know, and we see it a lot with tenant screening. You're looking at these credit reports. And if it's, you know, unpaid utility bills, you know, unpaid credit card, you know,

all those red flag type things, that that's, you know, that's inexcusable. So it looks like I just want a curveball that this person's family member, a parent actually, was a big factor in hurting their credit score. Okay. Interesting. So maybe there is a little bit of a story there, maybe. Yeah, who knows. Yeah.

I guess I'd have to hear the rest of it before I really, best judgment. Well, I'm curious Scott, because, you know, Scott just wrote the books set for life. and it's about young people getting started in real estate. I'm wondering, Scott, I'm going to deviate from fire around etiquette here and ask your opinion, Scott. What do you think? Well, I certainly am a big fan of correcting your personal financial position before doing anything that's a major risk with your money or especially other people's money.

You know, it's one thing to lose everything that I have. It's another thing to lose everything that you have if you're my investor. And so the answer is going to be your option there. I think that, you know, I want to see, hey, you're going to bring some skin in the game and you have a long history of operating your life responsibly, whether it's bad luck or bad management doesn't really matter. All right. I like it.

That's great. All right. It's number three here. Would you ever rent to somebody who has a prior eviction? If so, how long do you make them wait? No. Simple answer, no. That's one of my automatic disqualifiers.

If you've been evicted, end of story. I'm not renting to you. You know, when I first started, I used to say no evictions in the past five years. And then I later on amended that to, I think seven years. No eviction. Yeah. Nope. Not anymore.

are because out of the, a couple evictions I have done, like the two that were from people I put in, both of them had been evicted like 10 or 15 years ago. Like, it's, it's people don't change. Yeah, my reasoning for that too is, you know, an eviction doesn't happen overnight. Somebody doesn't just flip a switch and you're evicted. And oh, I didn't see it coming. No, it's such a long, drawn out process that, you know, even, you know, if somebody, if a landlord has started an eviction process against the tenant and, you know, if they have any kind of

morals or decency, they'll pack up and leave before the actual court day. If they hang on until you're standing in front of the judge and you have to get the judgment against them, no way. I don't want you as a tenant. I don't want you. Speaking of judgments, this is totally a random story. But so back here in the Bigger Pockets podcast back maybe two or three years ago, I talked about it on an episode.

Yeah, a couple years ago. Maybe people will remember. I had a contractor still $5,000. I gave a down payment for windows. He stole the money. Never. Okay. Yeah.

Yeah. Yeah. So I get a call two days ago from a title company. And we took him to, we took him to small claims court and then I gave to my attorney and he took the judgment and went and did something with it. I didn't really know what. And I get a call for a title company. This guy is trying to sell his house and the title company won't let him close until he pays me off. So I'm getting a, I've got a full check from supposedly today or maybe early next week.

Wow. Good for you. I know. I was a static. So. Yeah. Yeah. Yeah.

Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. lesson like it does like it does help to have you you know if you get stolen first of all don't give a $5,000 down payment to a guy you met on Craigslist less than one.

No. But you know, the system does work sometimes. So everyone every once in a while. Every once in a while. Yeah. It was a good day for me. Anyway, all right, number four. That's awesome.

The last question here is are applications fees worth it? And the question here I think that they're asking is should I pay the application fee or should my tenant who's applying the tenant applicant pay the application fee? And what's the tradeoff there? I think that is extremely dependent on your market. In my market, we don't do application fees at all. And I don't know any of our competitors that do. Because I think if you started charging them, people would just not apply.

What we try and do is we'll have a tenant fill out an application and we'll look at it and review it and ask questions. If we like what we see on the application and the tenant wants the unit, we'll actually have them put down the security deposit or first month's rent to hold the unit. And what we tell them is there's a couple ways to do it. What I used to do is say, I'm going to run a formal application process with you. I'm going to do the credit check and the criminal history check and all that good stuff. If for some reason it's denied, I will give me your security deposit back or your deposit back minus the $25 that it cost me to run the background check. I even did away with that now and I'm just refunding their money entirely if I denied them. If for some reason, they change their mind.

I've already got your money. I've turned other people away at this point. I've stopped advertising the unit, but if I deny them, I'll give them their money back. And, you know, we try to, you know, limit the number of applications that we actually run through that formal process. And that's why we asked for some monetary deposit from the tenants, to make sure that they're serious. I mean, if you were just, if you were running every single application you got, you know, through, you know, our channels and do the credit check, you'd just be racking up costs all over the place and it wouldn't make sense.

Yeah, I like that a lot. So let me ask you a question. This is not really a fire-round question, but I'm going to pretend that I asked it in the forums and now I'm asking you. what do you do when a tenant applies to your place and they pay the down payment, I mean the deposit, the security deposit, and then they back out for some, you know, some, I mean, it doesn't happen very often, but occasion does. Yeah. How tight are you on that? How tough is you and your company on that? Do you keep the whole 500 bucks or whatever? Yeah, it really depends on the situation. Our policy is we keep the money. Are there times and we have bent on that just to avoid the fight, you know, especially if we had somebody else lined up or, you know, maybe it wasn't a long period of time. Where it really becomes an issue is, you know, if we've held their money and we have stopped advertising and, you know, let's say three weeks have passed and, you know, we've turned other people away, we're going to keep your money because you put us out that far. But if it's, you know, it's a real short period of time and we think it's going to be, you know, a real easy one to rent to somebody else, you know, there's some flexibility there. Yeah.

I think that's cool. Yeah, I think it's only happened to me a couple times, but. Yeah, it's rare. It's rare. And we're very upfront when we take their money. We actually make them sign a document saying you're putting money down. You've got. I think we give them 24 hours to change their mind penalty free.

Beyond that, you're losing this money. That's great. That's great. If you change it. Awesome. Cool. I think that it's time for our. Famous Four.

All right. The Famous Four, these questions are the same four questions we ask every guest every week. Ryan, you've had several years to prepare for this or at least a year or whatever you've been around BP for. And you've heard this hundreds of times. What is your favorite real estate related book? I'm not much of a book reader. I used to be until I got a thing called the smartphone. Now all my downtime is spent reading short, stupid articles instead of books.

Except for Scott's articles. Those are the good ones. Yeah, except for those ones. You know, so I haven't read a lot of real estate books. I mean, early on, I think I mentioned property management for dummies and that's up like 10 years ago, which if I read now, I'd probably be horrified. It's outdated information. But I have read a few books since just listening to the podcast and getting recommendations.

So, you know, e-myth and the one thing, I got those. on the audio books. And, you know, but, but even so, I, I would much rather listen to a podcast and listen to conversations with, with you guys and whatever, whatever your guest is than to, I don't know, I just don't do well listening to somebody, you know, recite a book even, even on the audiobook, I tend to zone out and I end up going somewhere else mentally. You know, it's good information, but I think, you know, the actual stories from, you know, people that have lived it and done it and have actionable examples, either good or bad.

I mean, that to me is absolute gold. Yeah, I agree. I like it. I think that makes sense. Once you get past a certain point and have a certain amount of knowledge, you're really more interested in the specific nuances and ways people that you're working with that are doing the same sorts of things that you are. Yes. I think that that makes perfect sense to me.

Yes, extremely motivating. So we'll skip question two then and move right on to number three. What are your hobbies? What do you do for fun? Hobbies. I like to exercise. I try to go to the gym a couple times a week. You know, this time of year in Maine, it's absolutely beautiful.

So I've been trying to spend as much time outside as I can. I live on the lake, so we're trying to spend time on the water. Summer's about three months, and then it barrels right back into seven or eight months of cold, horrible winter. I'm a big Pat's fan, go-pats. Brandon, you a Seahawks fan? I am a Seahawks fan. All right, yeah, I think the Patriots played the Seahawks a couple years ago, I think, in a bigger game.

We're not going to, we're just going to talk about, yeah, question number four. Different coaching. All right. Number four. what do you believe sets apart successful real estate investors from those who give up, fail, or never get started? For me, it's persistence, absolutely persistence. And that has to compensate for your, what will likely be extreme inefficiency when you start. You will get kicked in the face.

You will fall over. You'll trip over your own two feet. You've got to keep getting back up and just keep grinding it out. I mean, you just got to keep at it. And, you know, the more you do it, the longer you do it, the more efficient that you'll get. But it's not easy. I mean, whoever coined the term passive income never had rental properties clearly because it's anything like passive. You just got to keep grinding it out.

Passive-ish. Passive. I usually use passive with like the quotation mark, you know, next to my head. Yeah, passive after a ton of work and a lot of gray hairs. Yes. I like semi-passive. Semi-passive. There you go.

All right. Last question here. Where can people find out more about you? Well, a couple of places. The management company that I work for is Maine real estate management, and you can find me there at least bangor.com. It's L-E-A-S-E, Bangor, B-A-N-G-O-R dot com. I'm a real estate broker with Realty of Maine. So Realty of Maine.com.

And probably the quickest easiest way is just on bigger pockets. Shoot me a message or tag me in a post, and I'll come crawling in. But yeah, happy to talk to anybody anytime. That's awesome. Well, thank you so much, Ryan. This has been fantastic. Lots of good information for people both getting started and people have been in the game for a while. So really appreciate it. Awesome, guys. It was a blast. Thank you so much.

Yeah, this is great. Thanks. Wow, that was awesome. Ryan has been through it all. He's started with a house hack back in 2007 or 2008 and has built that out to hundreds of units under management, quit his job and then retook another job with a bigger company for property management and now has dozens of units. Fantastic story, ups, downs, highs, lows. That was a great podcast. It was. I thought so too. And I like that perspective that we talk about because like about getting the job again, right? Because so many people look at, like you mentioned the show, people look at real estate as like, I can't wait to quit my job and get out. But, you know, some people get back in. In fact, I mean, right, I've done it. Right. So I was retired at 27. I was like, I'm never doing a bit of work ever again. I laid on the couch for like a few months and I was so bored out of my mind. I'm like, okay, now I got to write some articles or something. And that's how me being here at bigger pockets came about because like there's, I guess it's a different perspective than just. I'm going to go sit on the couch or on a beach my whole life. Yeah, there definitely seems to be a perspective where if, hey, if you have the drive and hustle to retire well before 60 from wage paying work, you know, you're probably too motivated to kind of sit there and relax in the beach for too long, you know, maybe maybe a couple months of the year.

But it is great to be able to do that on your own terms. And exactly, that's what it's all about, right? So like what Ryan said there was he doesn't have to necessarily work. He could go and just manage his properties, take care of it and have, you know, passive-ish income from his rentals. but he chooses to do it. Semi passive income. And, you know, he, I don't know, that's financial freedom, right? He can do that because he wants to do it.

Not because he has to. It's his choice. It's his freedom. And that's what I know all the listeners right now are aiming for. So good luck, guys. You can do it. I believe in you. Absolutely.

And real estate's proven time and again to be a really efficient way to do it. That it has. That it has. Well, Scott, how you doing, man? It's been a while since you've been a guest here, like a couple months, I think. Or a host here. might have been a month or two. So, but it's, it's good to be back.

You know, I'm feeling at home here. I get to rock my, uh, uh, arrested development t-shirt with the banana stand. The banana stand. Yeah, there's always money in the banana stand. You know. There is always money in the banana stand. Do not burn down the band-down. Do not burn down.

Uh, how many of you guys out there have seen the arrested development? Anybody raise your hand? Just kidding, I can't see you. But if you're a car right now. A good chunk of them, huh? Yeah. Yeah. Yeah.

Yeah. Oh, yeah. Oh, yeah. Uh, no. Yeah, it's one of my favorite shows of all time. Arrested development. Fantastic. So good job on the shirt. I wouldn't mind having a shirt like that. I'm very jealous. In fact, that might just come take yours. Awesome. Most $12 at Target.

All right. I'll work on that. All right. Well, let's get out of here, Scott Trench. Thank you for being an awesome guest host today. And I think Josh is going to be back next week. And make sure you guys, stick around for next week's show. The next two weeks, we've recorded them already. They're fantastic. Guys, all of them. So stick. Stay tuned for that. And let's get out of here. For the Vigure Pockets podcast, this is Scott Trench. 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, without all the hype, you're in the right place.

Be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online. It's time for it. It's time for. It's time. The Random Five. All right, and it's time for the Random Six now. I guess we're changing it from five to six. And we're going to throw a couple at you here. These are just completely random questions we like to throw here.

There's a random change there. I know. It was a very random change for the random five-ish six. If you could move anywhere in the world, you could not live in your area anymore. Where would you move? And why? I spent some time in Singapore a while back. I absolutely love that country.

It's clean. It's beautiful. It's kind of Asia light. I live in different parts of Asia. I love Singapore. And it's just a quick jump to anywhere else in Asia. So all things being equal, if I was financially stable, I would probably move to Singapore. All right.

All right. So Swiss on that question is, what fictional place would you most like to visit if you could? See, this is the one that fictional place. Yeah, I don't know, guys. I'm going to struggle with this bad. That's all right. You remember tomorrow you let us know. Yeah, I'll email you a great answer tomorrow.

We'll put it in the show notes. Yeah, okay. Scott, Trench, we're going to make you answer the question. question then. What fictional place would you most want to go? Oh, man. It's a tough question. I'll admit it. I'm a pretty big Harry Potter nerd, so I'd want to go to the wonderful magical land that JK Rowling created. Nice. So probably Hogwarts or something like that. I would go to Narnia. I'm a big C.S. Lewis, you know, lying the witch and the wardrobe fans. I'm going to Narnia.

All right. Send me a postcard. I will. All right. Next question. I like this one. If you didn't have to sleep, what would you do with your extra time? Probably analyze more deals. Nice. Yeah. It keeps me up enough as it is. So, yeah, if I didn't sleep at all, I could just look at deals online all night and just keep crunching numbers. All right.

This is a great question. If you could turn any activity into an Olympic sport and have a good shot at winning a medal, what activity would that be? Eviction. Inviction. I take the gold medal. Dance down. That's awesome. That's awesome.

All right. My last question. What movie can you watch over and over? and never get tired of it. The Departed. My absolute favorite movie of all time. Great movie. I've watched it.

And I don't typically watch movies more than once. I just, I don't like it. But The Departed, I've watched that 100 times and we'll watch it 100 more and it's still a great flick. Nice. Scott Trench, you answer that question too. I'm curious. Um, hmm. I can watch Shrek over and over and over again without getting tired of it.

There's so many great puns in that movie. That is an amazing movie. Family friendly. No, nothing. Yep. Yeah. There's a scene in Shrek where the guys running with the big huge head, running through the line, like to get into the city at the end.

Anyway, for some reason, I think that's one of the funniest moments of any history in mankind. Like, I laugh every time I see that hysterically. And he just walks through all the ropes. Yeah, yeah. I love that scene. It's amazing. Anyway. Never seen it.

I guess I'll have to go dig it up now. Yeah, check it out. All right. Scott, last question. Last question here. If you could have anyone narrate your life, who would you choose to be the narrator? narrate my life. You said these are going to be easy questions.

The other one's too easy. Was cheddar or Swiss was the other question? Yeah. Yeah, I probably have to say my wife. All right. Because she knows the story better than anyone. And yeah, it would be my wife. That's a good answer.

Good answer. All right. Well, thanks, Ryan. Absolutely, guys. Thanks so much. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday.

On the host and executive producer of the show, Dave Meyer, the show is produced by Ian K, copywriting is by Calico content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing.

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