BiggerPockets Real Estate Podcast - 270: Turning Your Primary Residence Into 40 Units & Financial Independence with Amy Arata

Episode Date: March 15, 2018

Plenty of people can purchase a house to live in. But how can you leverage that single home into many more real estate deals—enough to achieve financial independence? On today’s episode of The BiggerPockets Podcast we sit down with Amy Arata,... Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 270. Every house I buy has a sad story. And I take that house and I make it into a nice home for a new family and something that improves the neighborhood. And the neighbors are always happy to see me come and fix up a house. 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. Your home for real estate investing online.

What's going on, everyone? This is the Bigger Pockets podcast. I'm your host today, Brandon Turner here with my guest co-host, Mr. David Green, author of, what's your book called, David? I'm just kidding. Long distance real estate investing. I know your book. That was funny, Brandon. Very funny.

Yeah. Anyway, how you doing, boy? Boy, how you doing, brother? Do you like that? I have really good, man. I think you're having a little too much fun in Hawaii. You're getting a little silly over there. I'm also losing my voice.

Do you hear that? It's like gone. I don't know. Yeah, is that from all the salt water you've been swallowing as you learn how to surf? It honestly might be learn. I don't need to learn. I'm an expert.

Okay, I do need to learn. I'm horrible. But no, I drink a lot of salt water. Maybe that's it. I'm not really sure. But yeah, you know what? It's, it's been nice. Hawaii is good for you, man.

You're looking good. You have a tan. You're feeling loose. You're already picking up on that island vibe. This is like a Brendan Turner 2.0. There you go. I like it. I like it.

And David's actually coming out to visit in just a couple of weeks right now. Actually, when the show airs, you will be actually back home again. But I'm totally looking forward to doing some hanging out and surfing and doing some Facebook live videos, which, of course, we actually do Facebook live videos a lot on the bigger pockets of Facebook page where we do live interviews and live chats and live Q&As with real estate investors around the country. It's really, really cool. David does them occasionally. I do them occasionally and others do them. So that's kind of, I guess a sort of quick tip today is make sure you guys are following us on Facebook for that.

Like that's some of the most valuable content. I think like site wide is the Facebook live stuff because it's just real like unfiltered Q&A live with experienced people. Like what better thing to do? So anyway, do it. So if you ever been listening to the podcast and you thought, oh, I wish I could ask them this question right now. That would be so good.

That's what Facebook Live is. You get access to these people that are experienced investors. and when they're talking about something in your learning, and you think, ooh, I wish I could ask them this question. You can, and they will answer it for you in front of a bunch of people. So I highly encourage everybody who's listening to this. If you like the Bigger Pockets podcast, if you want to learn more about investing, take advantage of the free information that's out there and jump on the Facebook lives.

There you go. Good. That was pretty much our quick tip today. Do you want to add another quick tip? Tip. Yes. So today's quick tip, formally, is going to be about buying houses and, not getting sucked into kind of the visuals of it or maybe the fun. A lot of people are watching

HGTV right now and thinking, oh, I'd love to go flip a house or buy a rental because I want to restore it to its former glory. And that's great. But what you need to be thinking about is what are the numbers going to be on this deal? As a real estate investor, we should be driven by the numbers, not by the look of a property. So today's guest talks about, they look at real estate like they're buying little people boxes. It's kind of a really cool way of looking at real estate. I think you guys are going to love it. They just want to buy a little box. that put a person in and collect rent from. They're not out there trying to buy the most expensive house

and kind of like buy this old Victorian home. I think she mentions buying a seven bedroom four bathroom house or maybe, Aaron and you brought that up. Yeah, that's a terrible idea to buy as a rental, right? That's four bathrooms that could go wrong. Even as a flip, it might be a terrible idea. Yep. So when you're buying real estate investing,

stay focused, stay on the numbers. Make sure you know your numbers. The numbers are not going to lie to you. And keep that in mind as you move forward. There you go. I love that tip. Love that quick tip. Nice job, David Green.

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Rent Ready helps ensure on-time rent with auto reminders, keeps communication professional, and lets you post listings to multiple sites. Check it out at RentReady.com slash Bigger Pockets. That's Rent, R-E-D-I-com slash Bigger Pockets. A lot of property managers think their job is answering tenant emails and coordinating repairs. That's not the job. The job of a property manager is protecting and growing your operating income and earning your trust while they do it. And that comes down to three numbers, occupancy, delinquency, and net promoter score. If those numbers slip, your income slips and your trust slips too.

And most PMs don't hold themselves to performance standards. They focus on activity, not outcomes. Mind is different. They obsess over the metrics that actually grow your cash flow. Go to mind.com slash show me to see how mine performs and get a month of management for free. Because if you're going to hire a property manager, hire one that manages your investment like an investment. Before we go any further, before we bring in Amy, introduce you to Amy, let me just ask you guys, if you have not left a rating or review on the show, can I implore you, beg you, high five you to do so? Just go to iTunes if you're listening to us on iTunes and leave us a rating and review for this podcast. Same thing if you're listening on a Google Play Store or on Stitcher.

Ratings and reviews are what helps us reach more people for the message of financial freedom, which is what real estate can give you. So please do so. It doesn't just help us. It helps out millions of people worldwide. So with that, let's get to today's show. So our guest today is Amy Arata. I'm hoping I'm saying her last name right.

She was a former molecular geneticist. She became a stay-at-home mom then and then got into real estate investing. Her and her husband, Mike, had been able to reach their financial independence goal. Like that, they actually achieve financial independence through rental properties, which is pretty awesome. And you guys are going to love her story, love her methodology, love what she does. I think she's fantastic. She's a lot of fun.

So without further ado, let's get to the interview. All right, Amy, welcome to the Bigger Pockets podcast. It's awesome to have you here today. Well, it's a pleasure to be here, Brandon. Thank you. Yeah, this should be a lot of fun today talking about your story. story. And you know, you and I met a few months back over in Bangor, Maine. Am I doing the accent? Well, I say Bangor. Yeah, let's, you, I want to hear a good Maine accent. Can you do, can you do a

really good Maine accent? Well, I went to pack the car the other day and it was all stove up. Nice. That's very good. All right. So, Amy and I met at a Bigger Pockets meet up, a gathering over in Bangor, Maine. And I really enjoyed our conversation. I learned a ton about you. But I have a horrible memory, so I don't remember any of it. So we're going to start over at the beginning. Who are you? What do you do? How did you get into this investing in real estate business?

Okay. Well, my name's Amy Arata, and I was born in Maine. I grew up in a mobile home park. We do not call them trailer parks. Remember that, Brandon. We do not call them trailer parks. I remember, but my mobile home park I just bought has a big old sign off front that says, trailer park.

Oh, no. And I'm like, oh, that's the first to go. So we are. That was like a square word growing up. I know. So my great grandfather was one of the first manufactured home dealers in the state of Maine, starting in the 1950s. And so I grew up in his mobile home park.

And my dad was an employee of his. Later on, my dad started his own dealership. But he always said he wishes that he owned a mobile home park, but he never purchased one. But that's why I brought him to meet you in Bangor. Brandon because I thought, oh, maybe my dad could contribute in some way to your research. We hit it off well. Yeah, he's a great guy. And so I had no interest in that business whatsoever.

I preferred working on the farm with my other grandfather, milking cows and driving the tractor. So I got involved in science. I was really interested in science. I ended up going to the University of California at Davis, which is kind of near you, David. I majored in, well, that was my, that was for graduate school. I was accepted into the PhD program for molecular genetics. And that's where I met my husband. And I decided after seeing the lifestyle of a molecular geneticist that I would not get a doctorate.

Instead, I got a master's degree. And I got married and started having a whole bunch of kids. I had three kids in three years. And my husband, yeah. So my husband and I arranged ahead of time. We planned ahead of time that we would live off one income and that I would focus on raising our children and perhaps go back into the laboratory later on. And we bought our first house in 1999. It was a fixer-upper in wine country over in Geyserville.

Perhaps David's been there. I don't know, Geyserville. Not at my house, but. I know the area of Geiserville. I definitely know about Davis, but it's a pretty small town, right? Davis or Geyserville? No, Geiserville. Yes, it is.

It's unincorporated. It's out in the county. And that's what I liked about it. Kind of being a country girl, I like that. So we bought our first house and we were working hard on it. And, you know, I'd be painting seven months pregnant up on the ladder painting. I learned a lot working on that house. And as the market improved, it tripled in value.

And it was 2006. And I was really homesick for Maine, even though I was living in one of the most beautiful areas of the country, wine country. I just really missed my family and I missed Maine and I wanted to move back to Maine. And at the same time, I was seeing that the market was pretty insane. In California, they had negative amortization loans they were giving out and just all this ridiculous stuff. And I said, you know, I think the market might level off at some point. I didn't think it would crash like it did, but I thought it would probably level off. And so I convinced my husband to sell her. house and moved to Maine. And he did take a big pay cut, about a $30,000 a year pay cut moving to Maine.

But we took all that profit from our primary home, tax free, because it was our primary home, and invested it in real estate in Maine. So, Amy, can you take us back? Did you decide you wanted to get in real estate investing and then go do it? Or did you kind of back into this because your house went up a lot in value and you had this equity and you thought, oh, now I should start investing it? How did the kind of the process start for how you guys got started in investing? Well, we saw the power of real estate in the fact that our house had tripled in value. I just never imagined that that could happen. You know, we were making more per year in equity growth than my husband was making at his job as an engineer.

So, and, you know, and my husband's parents had a few rentals in the Bay Area in San Mateo. And that allowed my father-in-law was able to retire at age 55 on the day that our first child was born. So that kind of, that demonstrated the power of real estate investing to change your life, really, to give you that financial freedom that you need to enjoy life a little more. You bring up an interesting point about how like, I don't know, like, finance, you can tell somebody about financial freedom, like what it is, right? But like the real thing that changed like my life and I think changed most real estate

investor life is when you see it in somebody else. You see somebody retire early. You see somebody like, you know, spending time with their kids when you're like on a commute to work, driving an hour and a half every day. You know, like those kind of things just make such a difference. This is why I love the podcast so much because you hear stories over and over and over like this about people who do awesome stuff. So I just think that's cool to see stories, which is why it's important to tell your story, you know. You never know who you're going to, you know, inspire on their journey. So yeah, tell your stories, people.

That's good stuff. Is that how you kind of basically made your. your initial venture into real estate investing and that went well and then you kind of expanded from there, Amy? Sort of. I mean, we never intended to flip it, but certainly we outgrewed. We out, outgrow this house. Yeah.

Outroated. I'm edgroomicated. You know, I speak like that. Good job. We outgrew the house and I was looking around the Bay Area. There was nothing that I could afford on my husband's salary. That was any better. But when we bought this house, it had.

It had two bathrooms. Each one was half finished. My parents came to see it from Maine and they thought I was insane to be paying that kind of money for a fixer upper. But all the difficult things had been done. The roof had already been done. The foundation. It's just that these people, I think, burned out. And so we came in and finished it off and made it a cute little wine country Victorian retreat for somebody. So it was pretty nice. I don't think, I don't know if I would do a live and flip necessarily. with kids because it is hard to live in a construction zone with children. You know what? One thing I found I do a lot of, I've done a lot of living flips. Almost every house I bought has been a rehab. But here's what I find that I do is I wait until like the very end to finish the house. It's a construction zone the whole time.

And then it's like, all right, well, we're ready to move. Let's put on the market. And like, that's when I fix it up the rest of the way. And then I'm like, I have a really nice house.

Like, why didn't I just fix it up at the beginning? And then I could have lived in the nice house. So yeah, I'm a bigger fan of, Now of like the living flip, fine, but I want to get that work done right away so I can enjoy the flip for a couple years maybe, enjoy the nice house. And then, you know, otherwise it's like, like you're going to spend the money anyway.

Why not just do it at the beginning? Right. And we were really nervous about the lead paint being an old house that we lived in. And I had the kids tested and they're fine. Okay. So we're just keeping an, they do at least so far. They're doing pretty well. So, you know, we should.

They tested negative. We should talk about that. I don't think we've ever talked about on the show. Like, lead-based paint is a thing. Like, it's an issue with houses, was it,

like, was it, was it, like, 178 and, um, yes. And like,

it's not like every house in 178, but almost every house in 1930 used it. Like, as you go older and older, older, it's a higher and higher percentages of houses that used it. And for anybody who's bought or sold a house, you know that there's like this form.

There's like a couple forms you have to sign that says, I either know or I don't know if there's lead based paint and I, you know, it's an issue because like, yeah, If kids eat paint chips, that blood-based pain, it can, like, mess them up. Right, right. I've heard, I have not tasted them, but I've heard that they're sweet.

Somebody told me, somebody who tested children in Massachusetts told me that lead paint chips are sweet and that kids are drawn to them once they taste them. They like them. Who knew? I'm very curious how that conversation started. That was his job, was testing children in Revere. Lead poisoning. Yeah.

Yeah. Yeah, so it was a problem. But my kids, I fed them a lot of junk food, so they were fine. They had a lot of sweets without eating the lead chips. Let me ask both you guys. Would you guys buy, like, is it okay to buy? Each of you are investors, right? Is it okay to buy if a house is older and it has lead-based paint?

What do you do if you're going to buy a house in 1950s and you find out there's lead-based paint? What do you do as an investor? We'll start with you. I buy them all the time. That's all I have. Okay. That's all for the most part.

And you just have to maintain it. It's not a problem. If the paint is actually still intact, it's not a problem. It's when it starts to peel and chip off that it's an issue. So I just maintain those windowsills, paint them between tenants. Keep it from becoming a problem. And cover it with vinyl. Cover everything with vinyl.

I do a lot of that. I tell everybody that there's probably not a problem that would keep me from buying a house. It's all just a number that you have to factor in. If you can take any problem in real estate and change it from a problem into a number, you can figure out at what price you can buy that house and still make sense. Like I try to take every problem that could come up and convert it into math because math is simple. We can all like deal with math, right? I don't see lead-based paint.

I tell my contractor, what's it going to cost to repaint over this or to make it safe? And then they give me a number and I know what to do with that number. So whether it's a new roof or a foundation or lead-based paint or a rodent problem, It could be a million things. What I care about is how much it's going to cost me to get rid of that problem. I like that. I like thinking about it. Change your mentality from problem to number.

Look at that. Yeah. That's a zinger. Problems got society, right? Numbers are like, that's a spreadsheet's problem. Once I turn into a number, I plug it on my spreadsheet. I don't have to worry about that anymore, right? It's my contractor's problem, my property manager's problem, whoever.

You got to find ways to remove the anxiety that comes from real estate investing or you'll just be paralyzed. And that's kind of the way that I found that works for me. I like that. So, yeah, what I found with lead-based. paint. It's not like, you know, drywall that was tainted and is going to give off fumes and kill everyone in the house, right? People often think that about lead base paint, but it's not. Like, as long as it's covered well and kids aren't eating the paint chips, you're fine. There's nothing

wrong with that. So my approach typically has been like if we're going to do a massive renovation, like, you know, large enough renovation to require it, then yes, we're going to, I'm going to have a contractor check into the lead base paint. But otherwise, I'm not going to worry about it. I don't, I don't test for it. And maybe this is right or wrong. I don't test for it if we're not going to be disturbing the existing paint because I'd rather almost not know if that makes sense because then I don't have to say that I know there's lead-based paint. So I just deliberately don't test unless I have to, which is a certain square footage and you're going to demo a bunch of stuff, then yeah, I'm going to go pressure wash outside of a house that's peel, paint is peeling.

Yeah, we'll test for that. Yeah. So, yeah. Just assume it's there and take proper precautions. Love that, love that. All right. Then you also mentioned that you sold the house in 2006 and you got the profit tax free. Can you explain why that is? like you made you you made a ton of money on that house. Why didn't you have to pay the government? I did. Yeah. I didn't have to pay the government at all. It was great. I even got a tax deduction for my moving expenses because we moved so far. So why is that? Like what why did you know pay in taxes? Because it was our primary home for two out of the previous five years. And as a couple married filing jointly, we were allowed up to $500,000 in capital gains tax free. There you go. So

there you go. So can you tell us, Amy, after this house, what was your next investment? And tell us kind of the thought process of, did you collaborate with your husband and say, hey, we did really good on this first house? Let's do another one. Or did you fall into it again? How did that go? So, yes, my husband and I agreed that we wanted to buy rental properties.

And so actually, so we did everything wrong. I mean, we moved to Maine. We paid cash for our house, an old farmhouse that I'm sitting in right now. some big money pit terrible investment but but we paid cash for it and then I started analyzing multifamily buildings and just I got a real estate agent I had him send me all the data the income and the expenses which was spotty at best I made a spreadsheet I compared everything from two units up to 21 units in the area and looked for the best return I thought that I had invented cap rates I didn't know that that was a thing.

You know, I called it yield or I called it something. I was looking at my old, my old spreadsheets from years ago. And then I realized, oh, you know, other people have done this before. Maybe I should buy a book or something. And so I did. And that helped a lot. I have the book. I brought it.

I guess that's for the final four, right? Yeah, if we're going to ask it anyway, you can save it. We'll tease people. Okay. I'll save. We'll tease people in the end. All right. We'll tease it to the end.

So what was that first deal then? What did it look like? What'd you buy it for? Where was it? The first rental. It was a five unit property in Auburn, Maine. It was in 2007. And we took out a, let's see, we cash out refinanced our primary home and used the money to pay cash for that five unit. So again, we did everything wrong. I mean, that's not what I would do now. But it worked. It worked back then. I want to talk about that because that's actually kind of a cool strategy, maybe. You did a cat, what does that mean to do a cash out refinance on your primary home to be able to, to buy that other property. What does that mean? It means like exactly what it sounds like. Well, for those people, we never heard the word cash out refinance. What does that mean? Well, we had a lot of equity in our primary home. And so we got a mortgage on it. And it was at a pretty good interest rate. And we used that to buy the five unit. Now, being a five unit property, we would have had to get a commercial loan. And a lot of the commercial lenders want you to have experience managing a property before they'll give you a loan.

And we didn't have any experience. So we got around that because the loan wasn't on the five unit. It was on our primary home. So we paid $148,000 for that. Okay. $140,000 in 2007 for a five unit. 2007, yeah, 2007, right? Yeah, that's right.

That's cool. It might. So the reason I ask is like, it is an interesting strategy. Like if somebody has a lot of equity in their primary residence, you know, they can go and get a loan or a second mortgage on their primary residence. And even if it's not paid off, they get a second. If it's paid off, they can get a first. Use that money to go buy a rental property. And like you said, then the money's on or the loan is on the house, not on the property you bought. So quick story about that. My in-laws did that. They had their house paid off free and clear.

They wanted to buy a house. So what they did is they ended up getting a line of credit on their personal residence. So not a loan, but a line of credit, which is kind of like a giant credit card, but super low interest rate. And you only pay when you use it, which is the beauty of it. Right. So they got this like $150,000 line of credit from the bank. And then they went shopping for a deal. Now they had that line of credits used. So when they found a deal, they were able to offer cash for it. So they didn't have to worry about bank financing, which they got an incredible deal accepted. They bought it for cash, fixed it up for cash. And basically had a no money down deal by that. By that. The other thing they've done before, I know they did later then they went and got the equity on that deal because now there's no loan on the second property. They got a line of credit on that one. And they went about another property that was in a flood zone. Now, normally flood zones require flood insurance, but because the loan was on the other property that wasn't in a flood zone, no flood insurance required. So anyway, just kind of fancy, cool little ways to put together a deal. But you said that you didn't think it was a good idea. That was a bad idea at the time. Why? Well, because it doesn't take advantage of the power of leverage. Okay, because you didn't

have a loan on that property. Right, right. So, Amy, have you, have you since taken a loan on that five unit? Oh, yes, I have. Absolutely. So you basically took, you took a loan on your primary residence, sort of as a bridge loan to buy the unit for cash, got a better deal on it, and then you refinanced it later. It was sort of using the Burr strategy, but getting a loan from yourself to purchase it, right? Yeah, pretty much. Yeah. That's kind of cool. You probably didn't know that going into it, but you figured it out as you went. Yeah. That's what most like cool strategies are. They're just like, I figured it out. I don't know. Yeah. And we were so nervous. We were so afraid of of messing this up. And by not having a mortgage, we didn't have a mortgage payment. So,

you know, that gave us a lot of room to screw up. Everything went well. I really like what you did. I think that for the listeners who are saying, I want to get into real estate, but I don't have any money, you may have equity or access to money that you're not thinking about, right? So essentially what you did was you tapped into equity in your home that was doing nothing for you at a really low interest rate because Helax have really low interest rates because they're secured by your primary residence. You went and bought an asset that made more money than it costs to get the loan to buy it. So you're cash flowing right away. I'm assuming you improve that asset by raising rents and improving your N-O-I. Then you refinanced it and we're able to pay off that primary residence

and you basically let your, sorry, the primary residence loan, you let your primary residence buy you a rental property without having to use any of your own money. And essentially, you were able to take advantage of all the tools that real estate amessing offers without having to to actually save up the $148,000 or whatever you paid for the house. That's something that a lot of people can copy and they can get started and they're not even realizing that they have access to do that today. Yeah. Yep. Yep. That's right. All right. Well, I have some questions about this deal. I have some question about those deals. Let me. This one. Yeah. Before you go on. So first of all, like you said you were, you were freaked out. You were scared. You were nervous, right? How did you overcome that fear? Because a lot of

people never do. I mean, I hear people from people all the time. They're afraid. So they never pull the trigger ever. But you pull the trigger and that's awesome. How? Well, you know, the numbers told the story. I had, I made pages and pages of spreadsheets and I compared every multi-unit on the market to each other. And this one, it just, the numbers proved that it was a winner, you know, and being five units, it was a little scary. A lot of people start with two units or three units, But those homes didn't cash flow. The numbers told the story there that those two units and three units would have been a waste of time or negative cash flow. And the five unit really made them.

Five unit, it was a crummy area, not enough parking, but it didn't have anything broken. You know, I wasn't going to have to buy it and put a ton of money into it all at once. So, you know, you have to have some confidence too. And we had seen relatives do well in real estate. Now, they were a little critical because they thought we should buy single family homes like they had done. But we weren't willing to wait for cash flow. We weren't going to wait 20, 30 years before we started making any money on it. So we did our own thing.

Two quick, interesting points here. First of all, math overcomes fear in a lot of cases, right? Math overcomes fear. The better you are analyzing deals, I tell newbies all the time. Just go and analyze like, if you're afraid, go analyze 100 real estate deals. Just go run the numbers on like 100 of them. Don't buy any. Just go run the numbers.

Do you think you'll be more or less? afraid at the end of a hundred deals that you've analyzed and determined the numbers. You'll be way more confident. So anyway, math overcomes fear. And the second thing is that certain niches and certain strategies work better in certain areas. So you can't just listen to somebody else saying, hey, single family houses are the best investment.

You should do that because that might not work in that area. And I love that you were like, you know, in San Mateo, California, it worked. But in Maine, Auburn, Maine, probably not. Yeah, I love that. So, like, yeah, find people local. Don't just listen to, you heard some guy on the podcast say that, you know, this worked or this work or this work like he doesn't know your market she doesn't know your market anyway those two little points right next next quick question quick question how did you convince

your spouse to do it you know well i'm married to an engineer so you take an engineer and you and a scientist together we both have you know the numbers tell the story and so it was pretty easy to convince him all right i like that again math overcomes fear it does then did you have a property manager did you manage that one yourself from the beginning We managed it ourselves and it was mostly me. I'm the one who did most of the managing. And, you know, in fact, one of the mistakes I made was I didn't even include property management as an expense in my pro forma, which is a pretty common mistake, I think,

especially in the, you know, five units around that number. Can you expand on that? Why is that a mistake? Well, you know, if I get hit by a bus, who's going to manage it, you know? That's my hit by a bus rule. So we have to have some numbers in there for somebody, somebody has to manage it because my kids aren't going to manage it, you know. Or, you know, if I got sick or something happened, I need to be able to have somebody manage it.

Also, I think banks look for that too. When you're going for a mortgage, they want you to account for management expense, even if you're planning to self-manage. Yep. I agree because you're not going to always want to manage. Well, I try to get out of it. I actually, yeah. Yeah.

It is another story. We'll get that later. We'll get there. Yeah, I found that like, so I made the same mistake you did in the beginning. I was like, oh, I can just manage myself. No problem. The problem is you like trap yourself into having to manage it in order to justify it being a good deal. So like if you stopped managing, like a lot of my early properties, if I stopped managing,

I will have negative cash flow, period. And so like, I can either choose to not manage and have negative cash flow or I keep managing and make some money off of it. And that I know more. Every deal, no matter. I'd rather pay myself a management fee. And then if I want to get out of it, I pay somebody else a management fee. Management fee goes on there.

Yeah, this is kind of a hot button topic, especially on bigger pockets. You hear a lot of people go back and forth between manage is better or don't manage is better. What I tell people is that if you're looking to buy a business or an investment, you need to underwrite for a property manager. It's very important. If you're looking to buy a job, then you don't need to worry about management, right? If I was to buy, you know, like a franchise, like a subway sandwich or something, If I underwrite the cost of hiring a manager to rent it for me, so I don't have to be there,

the business will be less profitable, but I own a business. I don't have a job. If I pay too much for it and I can't do that, well, I can still make money at it, but I have to be there every day and I basically bought myself a job. So I think that every investor just needs to ask themselves, what is it that I'm buying here? Am I buying a passive investment or am I buying a job to make more money? And that kind of answers that question of should I use a property manager or not? Because some people really like it. They just want something to do. They enjoy the aspect of talking to people. I mean, I don't understand how anyone could like that, but for some people, they love it, right? So that's why they love to manage it themselves. But if you're somebody who's

trying to, you know, do things other than manage a rental property, you absolutely have to underwrite for management every deal that you look at. Right. And I wouldn't say that I enjoy managing it, but I like the additional cash flow and I like the control over my investment because I have seen too many apartment buildings that are just, just trashed, you know, and they're under professional management, but the asset's value is just going down. So, yeah, finding good property managers is a big part of being a good real estate investor. It's definitely not easy. It's very difficult.

You buy your first house. You did really well on that. You converted that money into this five unit. You did really well on that. What would your next move after that? I bought another five unit and this time with a commercial mortgage. And how was that different than the weight you bought it the first time? You know, I had more closing costs and I had to go through.

a lengthy process to get the mortgage. But it wasn't all that different. Mortgages were still somewhat easy to get in 2008, not as difficult as it would be later in 2013, 2014. So, so yeah, so then I was up to 10 units and a flip. And, yeah. All right. So let's, if, if that, you know, you started out with these rental papers, can we fast forward to the, like today? And then we'll work backwards. I like to do that because then people get an idea of where are you at today. And then we can pick things in the journey since. So what have you got today? What's your life look like now? Do you have? How many rentals do you have? How much deals have you done? Sure. All right. So now I've done 28 deals total in the last 10 years. And you own 40 units. And we have one flip. We're under

contract to purchase right now. And, you know, I have a kid in college and I'm paying for it. And we, yeah, we could and we could live off of just the rental income. And that was our, ultimate goal to be able to live just off that rental income and be able to pay for college and give to charity and go on vacation once in a while, maybe not to Hawaii for a month. Three months. Three months. Three months. Oh, sorry. No, so in other words, you've achieved financial freedom through real estate. I mean, like, there's kind of like a couple levels of financial freedom. There's like, you know, I own a jet and I buy people type of financial freedom. And then there's like, I can pay my bills. And like, that's where I want. And like, that's where I want.

on everyone to get to. I can pay my bills. I can, if I stop working today, I think that's awesome. So congratulations on that, by the way. Thank you. Thank you. Yeah. That's, that's impressive, 40 units. Where are most of them located? In central Maine. Okay. So, so you moved out there not knowing anything about that market. How did you kind of plug yourself into the pipeline and figure out what's a good deal in Maine? How am I going to find good deals, that kind of stuff? Well, again, again, it's the math. You know, I, I analyze a lot of deals. And I got my real estate license. and that helps me to be able to look at all the data. I have better access to the data, sales data,

and income and expense data, such that it is. I mean, whatever they give you and the pro forma is not always going to be accurate. But now that I have my own properties, I have years of expense data that I go back to and I look at when I analyze a new property to purchase. That's awesome. Okay. So how are you finding your deals now?

Are you finding them off to MLS? because you're an agent? Yes, I am, mostly off the MLS. The flips, I usually buy at auction, but sometimes they're on the MLS. Okay, that's actually very interesting. What's your strategy for buying houses at auctions right now? You know, I just go in and I've analyzed it to death,

and I know what things cost, I know what the resale value is, and I don't overpay. I've been going to auction since I was a little kid. I went to livestock auctions with my grandfather. there. And I've seen how it's easy to get too excited and to want to win at any cost. Well, you don't actually win when you overpay. You actually lose. So you have to be disciplined. You have to go to a lot of auctions and walk away empty handed a lot. But that's just part of the part of the game. Yeah, that kind of that plays to Brandon's point about you need to analyze a lot of

deals and then you'll get comfortable knowing what a good deal is. You need to go to a lot of auctions and kind of see the way the process goes, see other people getting too excited and overpaying, see people giving into that feeling of, I've done this three times that I didn't get something. I have to get something. Right. And then overpaying, right? The more you do something, the more comfortable you get with it and your brain will start to pick out the patterns of success. You know, like you'll start to subconsciously recognize this is going to be where I can find a dealer. This is a good opportunity. Whereas when you're new, you don't know any of that. And that's where all the anxiety comes from. So I totally agree with you that repetition will create a familiarity

that will kind of overcome a lot of the anxiety the newbies have. Yes. And my first auction actually, well, most of my auctions I go to, I'm the only woman there a lot of times. And sometimes it's to my advantage. Sometimes, you know, they'll be gentlemen and not bid. I don't expect them to do that, but it's happened. That's funny. But my first auction, yeah, my first auction, this guy showed up and took me as, you know, I was bidding and I was very confident with my numbers. And he took me aside and he said, you know, how high are you planning to go? I'm not going to tell you. I'm not going to tell you. And he said, well, I just want to make sure you're not getting in over your head or whatever. I said, no, no, I'm very, I'm very confident in my numbers. And so I went ahead and I bought the house.

I was nervous. I mean, I was shaking. But I, you know, I went through with it because I had the numbers. I knew what my numbers were. And then when I went to close, I saw that same man working at the title company. And it was, it was kind of weird. He hadn't run the numbers at all. He just, and I was told later that he just,

he just, he found out about the auction that morning and showed up. That's funny. It just feels condescending, like, oh, look at the little lady here. Not,

you know, you know, look at a little lady. I was only in my 30s then. You know, I mean, like, it's like,

it's like, okay, okay, look at this little poor lady here. She doesn't know how to run her numbers. I'm a big scrapping man. I can help her. You know, like that's feels kind of, but you know, it's a, you know, play it up if you need to. If it helps you get a deal, I suppose. Yeah, exactly. Yeah. Have you, like, let's talk about the, that a little bit, the struggle. Like, have you found it be difficult being a woman investor?

Like there are, I think 80% of our audience is probably men. Right. What are some of the challenges that you've encountered or have you? Yeah. I'm frequently the only woman at the auction. getting contractors, sometimes it's hard to get them to speak to me as an intelligent individual. Sometimes they'll bid higher. And I've actually had contractors tell me who are being honest with me. They said, yes, we give higher bids to women. And that's just the way it is. So I have to deal with that.

And again, it goes back to knowing your numbers. You know, sometimes tenants, actually, I've had more problems from female tenants than male tenant. So when that happens, I send my husband, stand the husband. stand in the background and let him deal with them. I've only had a few, a few tenant, bad, bad situations with tenants where I felt fearful, but I know to get myself physically out of that situation and not trying, you know, I'm not going to,

I'm not going to win. In a handy hand-to-hand combat, I'm not going to win. So I get the heck out of there. Does that answer your best, kind of? I think so. When you're managing your own properties, that's definitely a concern that you're going to have because you're playing the role of property manager.

You're not just playing the role of investment. So there's like a kind of a, there's just an art to that that has to be learned and recognizing when you're in a bad situation is definitely an important point of that. Can you tell us, Amy, a little bit about how are you funding these deals now? So we know how you're finding them. You're looking on the MLS. You're buying them at auctions. You feel very comfortable with running your numbers and recognizing a deal. So how are you funding these deals so you can keep buying? Well, my, my bankers love me. I mean, I just conventional or commercial mortgages. And I have a line of, Well, for years, I had a line of credit on my primary home that was prime minus 1%.

So that was awesome. I used that for purchasing the flips mostly. But now that's matured. That loan's matured. I don't have it anymore. I'll have to get another HELOC. And I have had people over the years come and try and invest with me and they want a partner or something like that. So I haven't done that yet.

But I think when people find that you have some integrity and that you know what you're doing, they seek you out and they try and loan you money. So it's great. Right. So are you basically combining commercial mortgages with private money that people are letting you borrow? I haven't taken any private money yet, but I've been offered some. So now that, you know, you talk about future goals. That's something I'm looking at in the future. Okay. What about the rehab of these places when you buy them and they need to be fixed up? How are you funding that? Well, my very first one, I got a zero percent interest rate credit card for the $10,000 limit. So that was wonderful.

And I paid it all off before the 0% interest rate time period was up. Now I have lines of credit on a couple of my properties. And that's what I use. Yep. I do a very similar thing. My kids college fund. Right. Well, you're growing it for them, right?

That's right. Well, you're growing their college fund. Now maybe they can go to a nice college like UC Davis instead of a junior college. Good job, mom. So can you give us some advice for people that maybe they're not familiar with the process of getting a loan or how to build a relationship with the bank? You said your bankers love you. Can you tell us a little bit about how you built that relationship and what other people can do to kind of replicate that? I guess, you know, just go in there and talk to them and show them that you know what you're doing.

Show them that you're not afraid to work hard, that you run your numbers, that you've done your research and you have the data to back up what you want to do. Okay. So kind of demonstrating a mastery of how real estate investing work has helped for you with winning the confidence of these bankers that you're going to apply for loans for? Right. Okay. That's cool. Are you using more than one bank or is it just one? I have a couple of local banks that I use and I have a mortgage broker that I use for my four unit or less long term financing. Because four units, I can get a, I can get a 30 year fixed for buildings that are four units or smaller. So I've done that on a few of them. What's your preferred building? Do you like to go 40 units or less or do you like to go bigger?

If I can find it, I like to go bigger. I have a 12 unit that I really like the 12 unit. It's just so much easier to manage when you have 12 units under one roof. And it's in a nice location. So that makes a big difference. But again, with that, that's commercial mortgage. So I'm going to have to refinance it every five years or so. That is a really good point.

And for those that don't know the difference between a commercial mortgage and a residential mortgage, can you kind of explain the differences and maybe highlight some of the strengths and weaknesses of each? Sure. From what I found, anyway, with a commercial mortgage, you have a five-year, well, I was able to get a five-year fixed rate amortized over 25 years. And I had to put down 25%. For a conventional mortgage, you can get a fixed rate for 30 years. so your payments are much lower. And in this interest rate environment,

that's just a wonderful thing to have. Because historically, yeah, we're at historic lows right now. So if you can get that, you should do so. So if you can get a four unit, you basically you can lock in oftentimes a 30 year interest rate that's very, very low. Whereas if you're going to go five or more, you have to get a commercial loan.

And those typically last for five years. Sometimes you can find one for 10. Usually they adjust though somewhere during that period of time. So you're always having to look to refine. Have you used the same lenders for your refinances so far that you've been using for purchase? Let's see. No, I haven't had to refinance except for one. My second five unit, I had to refinance that. And I used the same local bank that I've used for a bunch of my other buildings. Okay.

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I love taking a house that's been destroyed that's had a lot of, you know, every house I buy has a sad story. And I take that house and I make it into a nice home for a new family and something that improves the neighborhood. And the neighbors are always happy to see me come and fix up a house because usually there's been a problem. Usually, you know, a lot of houses, the bedroom doors have been kicked in. You know, you know, there's been a lot of strife and a lot of pain in that house.

I don't buy foreclosures that are occupied. I don't want to kick anybody out of their home. So I come along after they've been empty for quite a while, usually. But I can see the evidence of, you know, all the problems that have gone on in those homes. You know, one that really stands out in my mind was a little pink bedroom with flowers all over it. The door had been kicked in, you know. So you know there's bad stuff going on. And so I, but it makes me feel good that I can go in and fix that place up and kind of make it a joyful place again,

improve the neighborhood too. That's super cool. I like that a lot. My last question before, well, maybe a second of the last question before we move on, What are you like you talk earlier about knowing the numbers. We talked a lot about knowing the numbers, which is something that we stress all the time at bigger pockets. So I have this thing called the LAPS funnel. It's just an what's the word like anagram?

Is that the word where it's like a anyway, lap stands for LAPS, which is you get leads that come in. So MLS or auctions or whatever. And then you analyze them to determine how much you can pay. And then you propose or you pursue. In other words, you go after the deal somehow, whether it's a formal offer or not. And then you get success on some of them, right? So some of them are going to say yes, but most will probably say no. Anyway, if you just keep working this funnel and clearly it's working for you.

My question is, how do you know it's a good deal? What do you define as yes? That is a good deal. I'm going to pursue it. My numbers say yes. Like, we can run numbers, but how do you know? Well, now that I'm older and pickier, it has to be in a good location. The numbers have to say yes, but it also has to be in a decent location with parking for the tenants.

Okay. Or if it's a flip, it can't have anything weird, like a messed up floor plan. that can't be fixed or too close to a busy road. I found that sometimes I can cure some of those problems, but if there's two or more of those problems, then I pass on it. What about the numbers in terms of, like, is there a minimum flip amount

and what's minimum cash flow you do a deal at? Oh, you want to know my numbers. Okay. Sure. Well, when I first started out doing flips, I was happy making a profit of 20,000. Now I look for 30. Okay.

And usually I end up, right around there, right around. I think my average is, you know, right around 30, sometimes more and sometimes less. I've had my $7,000 flip, like you talked about Brandon. We've, we've all had those. They're humbling. And sometimes we need that. And then as far as the multi-units, I look for a 10 cap. And I'm not getting that right now. I was getting it, but I'm not finding it so much anymore. And, you know, especially if it's in, it's in the bad neighborhood. Like, I made an offer on a 45 unit. And it's, it was in a sketchy neighborhood. So I said, well, if I'm going to work in this neighborhood, I want to be paid well for it. And it ended up selling to

somebody else for $1.1 million over what I asked, what I offered. So I think they overpaid. And I'm seeing that more and more. And so I'm not, I'm not going to compete with that. If I can't make money, I'm just not going to do it. Yep. And that's where the whole lapse funnel comes in so handy is that it takes the emotion out of it. It's fine. I'll just get the next one.

I'll just keep getting leads. I'll keep analyzing it. I'll keep making my offers and pursuing them. And then at the end of the day, if it works great, if not, move on to the next one. Yeah. The emotional. Yeah. I love old houses.

I love the architecture of Victorians, but they're terrible investments. You know, they require a lot of upkeep. And my husband and I like to joke about. buying people boxes. We just want a box to put people in, you know, a big square box. That's good. And, you know, that's clean and efficient. And, and, and that's what we're looking for. But there's no emotion there because they're, you know, sometimes we'll put shutters on them. Other than that, there's very bland. I love that. I love that. Because that's a point nobody ever talks about. I mean, a buddy of mine just said to me the other day, like he wanted to flip, he's got a house under

contract and he's going to go do it. And he's telling me, oh, it's just the most beautiful house. It's this old, you know, built in the late 1800s and there's like seven bedrooms and four bathrooms. And this thing, we're going to restore it to its former glory. And I'm like, this is a horrible idea. Like a horrible idea. Go find that simple little people box. Is that what you said people boxes? Like, I love that.

Like those have always been my best flips. Man, that's like, the Victorians are nice to live in. It's great. Yeah, for yourself. Yeah, great. You love an old house and you want to restore it. That's great. That's what I'm doing right now in my house.

but it's not an investment. Yep. Man, I love that. I love that. Very, very cool. All right. So where do you see now your future going? Like what do you,

now that you've achieved like that level one base financial freedom, you could pay your bills. Are you done? Or are you going to keep going? Well, you know, we're starting to look for more opportunities, maybe in areas that don't freeze, unlike Maine.

So we're kind of looking. Yeah, we run out of places to put the snow as you found, right? Yes. So that adds a lot of stress, the plowing and the possibility of pipes freezing. That adds a lot of stress, especially if you're trying to outsource things to property management. You really have to rely on them to make sure the heat's on and that the tenants are plowed out so that they can get to work in the morning. So we're kind of looking south, maybe to have maybe a mobile home park, 55 plus mobile home park maybe in Florida would be nice or a larger multifamily somewhere in the.

Somewhere in the south. I mean, I love Maine. Don't get me wrong. I love Maine. I love the people. I love everything about it. But it gets tough in the winter. So we got to diversify too a little bit.

All right. All right. Well, hey, let's shift gears here a little bit and head over to the world famous fire round. It's time for the fire round. All right, let's get to the fire round. These questions come direct out of the bigger pockets forums, which of course, all our listeners can go to and engage in for free 24. by going to biggerpockets.com forward slash forums.

Now, let's fire these questions right at you. Number one, Amy, I'm a 23-year-old single female and pregnant. I'm not, but this person is not a lot of income. Yeah, thank you. Not a lot of income, but also not a lot of debt. So here's my question. Where the heck do I start? I'm brand spanking new to the idea of real estate investing.

I'm reading, I'm listening to a podcast, I'm talking to people, but I'm having a hard time telling if a home is a deal or not in my area. Like I know where not to get a house, but, you know, other than that, I'm not really sure what my first step is or second or third step. Any advice? Okay. I think what I would do, at least in the state of Maine, because it's so easy, is get your real estate license.

If you get your real estate, you know, it's not that expensive. Get your real estate license. And then you have access to the MLS and all that data that it provides. And that will help you know whether it's a good deal or not. And if you're pregnant, you know, also don't worry too much about that other stuff. Focus on yourself and your baby. I mean, that's what it all comes down to. That's the most important thing in life.

Very good. All right, Amy, I am considering buying a small multifamily property. Can you give me some advice on how to calculate the expenses for a property like that? Okay. Well, you need to make your phone calls. You've got to call the gas company, call the electric company. you look, you know, call the town office and get the tax amount, call an insurance company and get an estimate of what insurance is going to cost.

You know, ask you the real estate agent for data. If they don't have data on that specific property, ask them if they have expense data on similar properties and compile it and figure out what, okay, what is the average for maintenance on a property like this? But, you know, a lot of the data you can get just by making phone calls, you know, how much is garbage going to cost? Things like that. It's not that hard.

Here's the problem with that, though. That requires some work. And I don't want to do any work. I just want to sit down and watch TV and get wealthy. That's what they said on TV. They sat on the late night infomercial. I could just sit on my couch and make a lot of money. So you need to rephrase that is.

All right. That's a great answer, by the way. I get on the phone and call people. It's like, I don't know how much the garbage bill is. Okay, go ask somebody, millennial. All right. Number three. I've been renting to the same tenant going on three years.

This is actually a really, really, really powerful. powerful questions. So everyone listen close because this happens to almost everybody. I've been renting the same tenant for three years. Exciting, yes. And everything's been fairly uneventful with them and they take care of the property. Great, right? However, about three months in, they were late with the rent. No big deal. I gave them a, you know, they gave a reasonable excuse. But then it became a habit. Now I've noticed they're on the same pay schedule as I am with my work. And they always have to make the rent payment later than the following paycheck, you know, the next paycheck.

So they're just not trained, right? So it seems like a lack of budgeting. But that's not a good excuse. And I know I needed a nip it in the bud. And I should have done it a long time ago, you know, three years in now, how do I fix this? Three years in, it's hard. Three years of bad training. And I saw that question on the forums, actually. But what I have done in the past is I've worked with my tenants.

So, okay, you're having a hard time saving up enough money to get to the first when you pay rent. So therefore, I'm going to have you pay me on your payday. So that way it's a win-win because if they're paying me weekly, I get an extra couple of weeks of rent. I think it comes out to an extra month of rent. Yeah. So I end up with more. It's more hassle. Yes.

I mean, I have more accounting to do, but I'm ending up with more money. And they're not always behind. So that's what I've done in the past. I let them pay me weekly. And that's worked really well. That's cool. That is a really good idea. I don't know that I've heard anyone talk about that yet.

Yeah, what if a landlord just did that? Like, what if that was a thing to make more money as a real estate investor is you offer your tenant the option of biweekly on their paycheck? It's the extra month. I mean, that's an extra 12% or what, an 8% increase in your revenue for your real estate business. Yeah. For having to do the extra accounting. And they're happy. Did Amy just invent rent hacking?

She just invented rent hacking. Hashtag rent hacking. Way to go, Amy. There you are right. I really like that. It's the same. principle that goes with when you make your payments if you make them buy a monthly instead of a monthly you get an extra payment in. Yeah. And the tenants think they think it's great. They're so

happy that I'm working with them instead of just kicking them out or I don't charge them a late fee that way. I mean in the state of Maine you can't charge a late fee until they're two weeks late. Oh, which is absurd. Yeah. It's terrible. Brandon, welcome to. Terrible. Welcome to Maine. I know. Now I'm now I'm a Maineer. All right. So I, uh, that's, that's good. One tip that's worked really well for me that I found is kind of a little lawyer. We'll call it a lawyer hack. The idea where because I've badly trained some tenants when I first got started and this is what worked really well. I simply had a very short conversation with my lawyer.

And I basically said, hey, lawyer, if I treat my tenants differently, like, and I treat one better than another, like in terms of the rules, can I get in trouble for that? And the lawyer said, well, of course you can. You could be in trouble for discrimination. Great. Thank you. Go to my tenant. Hey, tenant, listen, I talk to my lawyer and he says, that I have to make some changes of my business because of some loss, some legal reasons.

So going forward right now, my lawyer says I have to start charging a late fee on the sixth or on the first or on the 15th if you're in Maine, right? Like basically blame it on the lawyer and say there's legal, because it's true. There are legal reasons why you have to treat your tenants, you know, legally. And that's a really good way to like immediately retrain a tenant to say, you know, and it doesn't have to just late rent, anything. Like, hey, you know, I have to treat my tenants all the same. And, you know, we're friends, but or, you know, we have a good relationship.

But my lawyer's making me do it. There's a little lawyer hack for you. Let the lawyer be the bad guy. Let the lawyer be the bad guy. Nobody likes them anyway. Yeah, exactly. I love it. All right.

Number four. All right, Amy, this is also a really good one. We purchased our first duplex this past month, a large billing, the cash flows well, and a nice one to boot. Anyway, I'm curious to hear from you regarding this. How often do you check your property? And is it possible that you never hear from your tenants other than deposits into your account?

I'm curious how involved. that should be if the rent checks are coming in with no repairs, requests, or complaints. What are your thoughts on this? It cash flows and it's a two unit and there's no work. That sounds awesome. I'll buy it. Well, I've, you know, I've had that happen when I was, you know, when I first had the first 10 units and I'd forget about it. I'd be so busy with my kids and with everything going on.

I'd drive by to make sure they're still standing because they're right near where I live. but, you know, I'd go and check on them and the garbage would be full of maggots and there'd be trash everywhere and I, oh, how did this happen? Well, I hadn't checked on it in a couple of months. So, you know, you just got to make it a habit to go in there. Do the inspections. Go, you know, at least once a year, you got to get in there or you will have a bad surprise at some point. Yeah. Yeah. Sometimes it's funny because we never talk about that either, but sometimes like a rental unit, it will just be performing well. And so you just ignore it for years and years, right?

Mm-hmm. So anyway. Yeah. Yeah, I was in the town office once, and this guy was, another landlord was in there with pictures of his rental house. He was trying to get code enforcement to go in and shut it down because the person was a hoarder. And it was awful.

And he didn't realize how bad it had gotten until he had a leak in the bathroom, in the kitchen sink. And he couldn't get to the kitchen sink to fix it. And so he was, you know, co-enforcement said, no, this is a civil manner. Go to the police. I'm like, well, the police said to come to you. But, you know, but he should never have gotten into that situation in the first place if he had regular inspections.

There you go. So now I'm feeling guilty. I'm going to give out notices today that I'm doing inspections. Nice. I'm going to do the same thing. I'm feeling convicted here. Brandon, you mentioned, too, that like you're training your tenants with every decision that you make.

So if you train them that. hey, as long as you pay your rent, I'm not going to come look at what you're doing. They may start to feel like they can do whatever they want in that house, right? That's how you end up with the marijuana grow or some other things that can like, you know, one really bad tenant that destroys a house can wipe out five to 10 years of cash flow on something. So yeah, just because they're not, just because they are paying their rent doesn't mean that they get a license to not have any checkups. And if you've trained them to expect that there's going to be checkups,

and it's kind of sitting in their subconscious that they need to take care of the place because you're going to see it. I really like that. Yeah, I love that too. Very cool. All right, well, let's move on to the famous four. But before we get there, we're going to, let's hear what's going on over on the Bigger Pockets Money podcast this coming week. Thanks for asking, Brandon. Next week on the Bigger Pockets Money podcast, we interviewed your co-host this week, David Green. David's not a one-trick pony. He isn't just a real estate mastermind. He's a money genius too. Tune in Monday to hear his mindset tips and tricks that made him a millionaire by the age of 30.

Go to biggerpockets.com slash money show 12 or download on your favorite podcast app. Okay, Brandon, I'm going to let you get back to your famous four. All right, thanks, Mindy. And with that, let's get to today's famous four. All right, these are the same four questions. We ask every guest every single week. So, Amy, I'm sure you've heard them before. But let's get to them.

Number one, what is your favorite real estate investing book? Okay. I have a pile of them actually. Well, I said books. Oh, come on. All right. Give us them all. I love it.

All right. For apartment buildings, I have what every real estate investor needs to know about cash flow and 36 other key financial measures by Frank Gallinelli. And I believe you've had him on your show in the past. We have. And you need to have them again because the audio was terrible. I couldn't hear that. Yeah, that was back in like episode like, what, three, five, ten? The dark ages.

The dark ages of the Bigger Pockets podcast. Yeah. And then for flip, if you're going to flip houses, you need the book called Flip, put out by Keller Williams, Rick Villani and Clay Davis. Flip is really good. And another one that I found really useful, and that's going to be controversial. Okay. So you're ready for controversy? I'm ready.

It's called Aggressive Tax Avoidance for Real Estate Investors by John Reed. And you can buy it online through his website. it's kind of like getting advice from a really successful yet slightly grouchy uncle. I know it is. That's exactly how I describe it. John Reed is the man, but he is like a grumpy old like uncle. Yeah. Yes.

I love it. Very successful. You know, good advice. You know, I really don't do this. You're all stupid if you do this. It's the best books to read. He's got one on multifamilies.

It's just, it changed my life. It's like the best, one of the best books of not the best book I've read on managing larger multifamily properties. But it just was like, oh, I'll have to get that one. Yeah, it's so good. It's like, this is what you should do.

Do this. Like, I literally like, that's the book. I think I've told the story before. My library had it. And it was the only place I could get. I couldn't find it anywhere else. My library had it.

And then I found out that if I didn't return my library book, this is probably horribly unethical. But just like, when I was young and dumb, we'll say. Anyway, I found out if you didn't return it, it was only like a $20 fine.

So I just didn't return it. I paid the fine because it was like $100 on like eBay. And I ended up paying the fine because I wanted the book so much. So anyway, I broke my. Library hacking. Anyway, great suggestions. Great suggestions. Number two.

All right, Amy. What is your favorite business book? Okay. So I have searched far and wide for a business book that would benefit me. And I, you know, I don't think, I haven't found one. I mean, because a lot of business books are rah, rah, rah, go out, get it done, do it. But none of them give me the nuts and bolts. of how to hire an employee and legally, you know, how to make them my employee, how to do payroll,

how to fire them legally, manage them, things like that. So if anybody has any advice for any business books, that would be great because I haven't found one. I tried hiring somebody once. It was a disaster. I think I did everything legally. I really try, you know, with insurance and all the payroll deductions and all that stuff. Yeah, that sucks.

I like a book. I hate that stuff. Yeah. Yeah. I just stopped, I stopped hiring people like in house. Now I only work with independent contractors because I just can't. Yeah. I played the employee game for a while and I hated it.

Well, I really wanted the control of, okay, I need this painted. Show up and paint it. But like one time I found him with a, he was painting a room with a four inch roller. Like, why are you using a four? You know, I have to be here to tell you not to use a four inch roller. I mean, I just stuff like that. It's a tradeoff between hiring people and telling them what to do and like all the annoyances I go with that because then you're a boss and a manager and employees suck because they're getting

paid by the hour. So what do they care? You know, like that's the problem. They spend one hour on a smoke break, another hour in the bathroom break. And I'm not going to be a jerk and tell you got to stay out of the bathroom. Yeah, no bathrooms. No bathrooms. Right, no bathroom breaks.

It's like, you're in there for an hour. Yeah, I know that drives me nuts. But I find that when I hire people by the job, they get it done. And I'm very specific about like deadlines and bonuses or detractions when they don't get it done in time. It's shocking how well people get things done. So I've been moving towards that model a lot more. Yes. And I've been reading David's book.

And maybe I'll follow some of that advice. It's. Wait, what we want. David, David wrote a book? What book is that, David? That would probably be long distance trail of state investing, how to buy rehab and manage out of state rental property. Amy, what have you thought about that book? Well, I'm not all the way through it.

It's next to my bed right now. So I fall asleep reading it. I'm only reading it at night, that's why. No, it's a good book. It's a good book. I think I, I. There comes the bad stuff. Finding a management prop.

I think I would go about it the opposite way, not the opposite, but a different direction than you have, because you focus on finding the great broker and then the lender. and then the manager, I think I want to find a place, a great manager first. Because to me, they're in it long term with you. And they can make a break here. They can make a wonderful deal, a terrible deal, or vice versa. Yeah. I totally rely on my property managers as like a business advisor.

They're more than just a person that manages my properties, especially when you're buying in areas that you're not familiar with yourself. So just like a bad employee can just make you hate your life. A really good one can totally. like just take your investing to the next level when you find a really successful, smart, driven person that can like bring you deals and help you manage them better. It can just make you love real estate investing. So, you know, that's a skill that a lot of investors kind of need to learn.

It's not just about analyzing a deal. It's also about building a team around you of people to handle the stuff that you don't like and kind of assist you getting to the next level. And the stakes are high because if you get a bad one, you're going to hate the whole thing. And if you get a good one, you're really going to love it. Absolutely. Yeah. All right.

Well, thank you, Amy. Other than reading my book, what are some of the hobbies that you have? Lately, I've been volunteering a lot in my community. I'm on the local school board, the Maine Board of Education. I'm a Sunday school teacher. And I'm running for House, the House of Representatives in Maine. A politician? Get her off this show. Get her off this show. I know. But you know what, guys, you really, investors have to really pay attention to the laws. And there are a lot of bad laws out there. So I would urge landlords to get more involved in politics. I know in the state of Maine seven years ago, I went to the state house with a group of other landlords. And we got a bunch of laws changed.

There were some bad laws and we got them changed. Now, you would think that the huge property management companies would have a stake in this and that they would be the ones lobbying, but they weren't because they get paid regardless. You know, but the smaller landlords like us, you have to deal with this day to day and we're trying to make a living, we're really impacted by the laws more. So a bunch of us got together and we had some laws changed and it's been a lot easier. It makes our business easier. So, I mean, that's not the only reason I'm getting involved in politics, of course. But that's something to think about.

And I think landlords really do need to pay attention because there are people out there trying to eat your lunch. You know, they're trying to, there are some laws that are proposed that are just horrible. And we're so busy working and being productive that we don't even notice until it impacts our life. So true. Yeah. Really good point. Really good point. All right.

Well, let's go to the last question of the day. At least the last one for me. What do you believe sets apart successful real estate investors from those who give up, fail, or never get started? Okay. Well, I'm going to focus on those who fail because I know you talk. a lot about people, never get started. And I like to observe, I like to observe people. And so when I see people fail, I ask myself, well, why? Why did they fail? And I think there are, there are two reasons that I've seen. One reason is they either start, they start too small. Like, they'll start with a duplex,

and it'll cash flow $1,000 a year. And, you know, that doesn't change their life. But what does change their life is all that are all the hassles, you know, oh, I had to go show it or I have, I have to go clean this. And then that forces them to give up. I said, oh, this was terrible. Being a landlord was terrible. I didn't make any money. And it was a lot of work.

So they started too small. And then on the other end of the spectrum, I've seen people start too big. So, you know, they'll buy, I can think of a few guys in our area who purchased, you know, 100 units. Now, it wasn't a bad part of town, but they were in over their heads, you know, and they've, you know, one of them ended up in jail. And recently he died last week and he's only 53. Um, the part of it was the stress.

You know, he too many, you know, too many units, too fast, not enough infrastructure. And, um, he lost everything, including his life. This is sad. So, uh, bigger pockets to inspire you. So, so anyway, so that's what I've seen happen with, you know, several different people. They, they're too small or they're too big. You got to find the right. size for you, something that you can handle, but that will have enough cash flow to, to change your

life. Maybe it won't allow you to buy a jet, but it'll allow you to quit your job so you can go to all your kid's soccer games, you know? So that's, that's kind of, that's my answer. I like it. All right, Amy. Well, you have a fascinating story from scientists to real estate investor to politician. Where can people find out more about you? I guess they can look me up on Facebook. I don't have a web. I'm really not that techie. I'm old.

Should we play a game called Guess Your Age? I'm going to go with like 23. I like you. Okay, good. I'm going to go with 21. Because if you go over, you lose, right? That is the game. That would be weird because my oldest son is 18.

So that's kind of weird. Well, that's a new data entered into the formula. All right. So they can, they can, they can hit you up on Facebook. We'll link to that. Facebook, bigger pocket. Well, no, I don't know if they can find. I'll have to change my profile so people can find me on bigger pockets. Well, we'll link to it or something on the show notes. At Biggerpockets.com show 2.7B. Oh, anonymous is not bad when you're running for office. You know, you don't want people stocking you maybe. I don't know. We'll see. Yeah, people stock me. I've been stalked by tenants and crazy people around town. Awesome.

I just, yeah, you know, I had to make a decision at some point. say, am I going to let them run my business or am I going to run my business? And I chose to run my business and not be intimidated. And so far so good. That's an awesome way to end the show. So, Amy, this has been fantastic. Thank you so much for joining us today. Anyway, I love talking with you. So, you know, come back someday. Go get your next massive 55 plus mobile home park down in Florida. Let us know how it worked. I'll move into it. There you go. All right. Thank you so much. It's been fun. Thanks, Amy. Thanks a lot, guys.

All right, and that was our show with Amy Arata. Awesome stuff. I really like her a lot. I think she's got a good head on our shoulders and she's like crushing it in that little niche there, achieve financial freedom, just like everybody listening to the show really wants to get to. She did it and she did it just, I don't know, awesomely. Is that a good word?

Awesomely. That works. Yeah, you know, she did it. Anyway, what do you think? I think that Amy is a very inspiring story in the sense that she was just kind of a regular person that said, you know what? I did well on real estate. with my first house, I wonder where I can take this.

And she just followed that rabbit hole all the way to 40 units. I mean, if Amy can do this, then, you know, a lot of people can do this. And that's what I took away from it is I kind of have a new source of encouragement now that, man, there's like other everyday people that are out there and they're crushing it as well. And so what excuse do I have not to? There you go. I love that. I love that.

So anyway, I hope you guys enjoy the show. If you have any questions for Amy or you want to comment on the show, please do. Just head to biggerpockets.com slash show 270. that's biggerpockets.com forward slash show 270. Scroll on to the bottom, you can leave comments there. You can also, here's a little quick tip for everybody.

We are now transcribing all of our podcasts, all the new ones. And so if you would rather not listen to, you know, crazy me and David, and you want to read the results. You can do that as well on the show notes every single week.

So just head to the show notes. Again, it's always BiggerPockets.com slash show and then whatever the number is. Check it out there. And of course, leave a comment or a question for Amy.

in the comments section. So anyway, should we get out of here, David? Anything you want to leave folks with any final tips or advice or anything going on in your life? You know, I would just say that anytime you're getting discouraged with real estate investing, try to step back and take a 30-year view. That's what I do. I ask myself 30 years from now, will I be glad that I stuck with it and I bought these properties? Or will I be saying, man, I wish that I had played more video games and made more Cheetos. Because most problems that come up with real estate that can be frustrating are temporary problems, but the reward is going to be, you know, long term. So as long as you keep yourself in a long term frame of mind, you can put up with the problems and experience

reward later. Dude, I love that. I love that. Everybody go and rewind that the last 30 seconds. Listen to David saying it again. And then, uh, repeat. So let's get out of here, David. Thank you so much for being my guest co-host today. I had a lot of fun, you know, chatting with Amy with you and look forward to doing this again with you soon. See you soon. Bro. Aloha. Aloha. 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. 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. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calicoe 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. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.