BiggerPockets Real Estate Podcast - 310: A Straightforward, Repeatable Path to Early Retirement with Jennifer Bayless

Episode Date: December 27, 2018

Looking to find financial independence through real estate but don’t want to be responsible for a portfolio of 100 homes? Well, that’s exactly what today’s guest is doing! Jenny Bayless is a real estate investor in Colorado who is using long-distance investing principles to systematically build a portfolio of cash flowing properties using the BRRRR method! Jenny is absolutely crushing it by “making” deals in today’s tough market and shares what she looks for that other investors miss. Learn her system for targeting fixer-upper properties, how she estimates rehab costs, and the method her real estate agent uses to send her videos of potential properties so she doesn’t have to drive hours to see them. Jenny also shares how she uses hard money to buy “cash,” how she found a rockstar agent, and how she backed into an “accidental BRRRR” that led to future success! Today’s episode is equal parts inspirational and practical with TONS of actionable advice. If you want to retire early with real estate but don’t want the headache of managing 100 homes, don’t miss this show! In This Episode We Cover: Long-distance principles Jenny uses to invest near her market How Jenny uses the BRRRR strategy to systematically grow her portfolio Ways to chase financial freedom without a monstrous portfolio How she has an agent do her due diligence for her The strategy she uses to “make” deals in a today’s tough market Her opinion on how to use turnkey properties to get started investing Ways to start with fixer-upper properties to get great deals in a hot market How she uses hard money to buy “cash” deals How she estimates rehab costs before writing offers, Her “accidental” BRRRR story How she’s pursuing financial independence with only 10 homes! And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Webinar Biggerpockets’ Instagram Brandon’s Instagram BiggerPockets BRRRR Guide How BRRRR Increases Your ROI (And Why You Should Be Using It) BiggerPockets Calculators BiggerPockets Bookstore Quickbooks Online Cozy Property Manager Buildium Property Manager Appfolio Property Management Software Books Mentioned in this Show The Book on Estimating Rehab Costs by J. Scott The Book on Flipping Houses by J. Scott Long-Distance Real Estate Investing by David Greene Building Wealth One House at a Time by John Schaub The Book on Managing Rental Properties by Heather Turner and Brandon Turner Rich Dad’s Cashflow Quadrant by Robert Kiyosaki Tweetable Topics: “The worst that they can say is no.” (Tweet This!) “We all know what it’s like to have a job. We don’t all know what it’s like to run a business.” (Tweet This!) Connect with Jennifer Jennifer’s BiggerPockets Profile Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 310. Get a check for $30-something thousand dollars from that first house and apply it directly to that second house. And that's when the light bulb went off. We said, oh, my gosh, we're walking away with two houses for the amount of cash that we had originally put in one. They're both cash flowing. This is amazing.

We have to keep doing that. 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?

My name is Brandon Turner, host of the Bigger Pockets podcast here with my co-host, David the Man Green. It's been a while since I threw on the man. nickname you like that yeah but but don't you ever forget it i will not forget it no man how you been how you been you got to come out to hawai again sometime you got to hang out i think we're planning what like february march around yeah somewhere there we're going to get you out here again because and actually kevin who is our new producer of the podcast kevin is an awesome dude uh who's actually here on this call right now but his mic's muted so nobody's going to hear or see him but uh kevin you want to say

hi hey hey there he is all right so kevin is our new exactly exactly exactly there he is all right so kevin is our new executive producer. Is that what we call you? I don't know, you senior producer, executive, I don't know, whatever. You make this show good. The man. The man. Yeah. It sounds like we're keeping Kevin in a cage and we like let him poke his head out to say hi and then shoved him right back in there. Yeah, pretty much. Now everyone's always going to be one or like, know our secret that Kevin's here on the calls with us. Anyway, they are actually both going to come out here to Hawaii and hang out with me at some point do a little podcasting powwow. But with that said, I don't want to talk about us today. I want to talk about Jenny. So I guess today

is Jenny Bayless. She is awesome. She is a real estate investor who has a very straightforward, repeatable path. She has like 10 properties. This is super attainable for everybody listening to this show right now. And she talks about how she built that using the burr strategy as well, some turnkey stuff. Make sure you listen to the discussion on turnkey. She talks about how she did an accidental burr and how she used that to buy more properties. She says two cash flowing houses for the cash down of one.

Listen for that. You guys are going to be blown away by that strategy. It really illustrates the power of burr investing. And then, I mean, there's so much good stuff in this, but especially listen to the end, when she talks about Zorbing, you guys are going to love it. I can't wait to try Zorbing. Apparently, that's like a thing. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense.

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Then let us know that you did. Shoot us a message over on like Instagram or tag us in an Instagram post. You can take at David Green 24 or you can take at Bigger Pockets or at Beardy Brandon. Either one. And let us know that you did. We can give you a virtual high five that way. And last thing before we get to Jenny, let's hear from today's quick tip.

All right, short and simple. Today's quick tip is to invite you personally to this coming week's webinar, how to make 2019 your best real estate investing year ever. It's going to be super epic. It'll likely be the largest webinar we've ever done at BiggerPockets. Thousands of people are going to show up to this thing, and you should be included. We're going to talk about how to set the best goals,

how to make an action plan to achieve them. It's going to be awesome. Go to BiggerPockets.com slash webinar to sign up. Again, biggerpockets.com slash webinar. And if you're listening to this in the future, if you're a pro member, you can watch unlimited webinar replays. So, of course, go back and check that out, the replay of it. And, you know, every week we get a new webinar.

So again, biggerpockets.com slash webinar. And finally, it's time to get to today's show. So today's guest is Jenny Bayless. Jenny is a real estate investor who invests first out of state, now in state. She lives in Denver. And she doesn't use that excuse of, well, Denver's too expensive to not invest. and said she manages from a little bit of a distance, and she is just got a really great attitude and a great strategy that anybody here can adopt. So without further ado, let's get to the interview

with Jenny Bayless. Jenny, welcome to the Bigger Pockets podcast. It's awesome to have you here. Thank you so much for having me on. It's a great honor. Yeah, this should be a lot of fun. So I want to start. I love your story, by the way, from what I've read and what I've heard about you, I just love your story. I think people are going to love it too. So why don't we start at the very beginning. How did you get into real estate? Sure. So I feel like my story starts a lot like other people who get into real estate. Did the typical thing, went to college, got a degree, got a decent job afterwards, a couple years later bought a primary house. Then after that, we realized that we were just saving up money either in our savings account or our 401K. And I knew that there had to be a

better option out there. You know, 401K, we're not going to see that for 30, 40 years. Savings account, I get 0.001 interest, you know, percent interest on that. So we started looking at different investment vehicles, and that's when I came across real estate investing. And just the amount of benefits of that was just unbelievable as I was reading more and more about it. And going into it, I thought real estate investing was only for rich people. And it wasn't until I started understanding that this is something that an average person can attain. And that is when the light bulb clicked for us. That's awesome. And that's so true, right? I mean, I think most, people assume that real estate is something rich people do because it is something rich people

do. Like if you want to be rich, emulate what rich people do and rich people tend to invest in real estate. I would argue almost almost every rich person I know owns real estate somewhere. It might not be their primary thing in life, but almost every rich person I know owns real estate. So, but the great thing is it doesn't require. I've heard many accountants and bookkeepers say they got into real estate investing because they saw all of their wealthy clients owned real estate. Did that play a role at all with you, Jenny, with your decision to invest? No, not in the line of my work that I do, but just through accounting, like, the educational piece of it, it helps me to understand the baseline of real estate investing.

So I think that helped a lot, too. Actually, on that note, I mean, while we're on that topic, we'll start the show a little differently. Usually I ask about, you know, tell us about your very first deal. But before that, is there anything, I'm just curious, is there anything from an accountant's standpoint that like you feel that you are more of a rock star that you want or maybe where you understand better or that you feel like you've got a special power because you're an accountant. I mean, this answer might be no.

I don't know. But is there anything that you're just like, oh, yeah, I get this intrinsically. Everyone else seems to struggle with it because I'm an accountant. No, I don't think that any of the concepts that you need to be successful in real estate investing is something that you have to have some sort of business background on. Not going to lie, it definitely helped me jump through a lot of the beginning things. you know, I understand how to read a balance sheet and income statement. I understand the basic tax laws that relate to real estate investing.

So that helps, but it's nothing that someone can't do on their own or through the help of their accountant. Awesome. I love it. I love it. And yeah, again, I kind of ask that because a lot of people have the, what's that, the syndrome we call it? It's like, must be nice syndrome. I call it a nice. Oh, yeah, must be nice to be an accountant.

You can just jump into real estate. But I'm, you know, something else. Everyone's got that limiting belief of, well, must be nice, right? And like you said, there's nothing that you, there's nothing that your career said that you have to do that in order to succeed. Like, anybody can do it. Again, it's nice. It's helpful. Yeah.

Not required. Okay, cool. All right. So first deal. What was the very first property you ended up buying? So we actually ended up doing a complete 180 to our real estate strategy. So our very first property, we, first couple of properties, we invested in turnkey properties out of state in the state in the, the Midwest. And it wasn't until, well, I guess I should probably back up. I lived in a very

expensive market at the time that we started to decide that we were going to move forward with real estate investing and kind of fell into the mindset of, oh, I live in an expensive market, I'm not going to be able to buy anything local. I have to go out of state. And during that time, during that same year, 2016, we moved across the country to Denver for work. And a few months after that we purchased our first local investment property. And that local investment property was the catalyst to us completely re-evaluating our strategy and doing a 180 on that. Why is that?

So basically what happened was on our first property, we were able to do what I call an accidental burr. And through that process, a light bulb clicked and said, oh, my gosh, we're creating equity doing it this way. Whereas when we were investing out of state, everything was fine. There's nothing necessarily wrong with it, but we didn't have any equity other than what we put in. And it was that light bulb moment of after the Burr transaction completed is when we realized, while we're creating equity, we're able to turn this equity into more properties and we're able to scale quicker than we ever would have been able to just putting in our own cash.

Yeah, that makes a lot of sense. So, okay, so let's talk turnkey again for a little bit. This is a very common thing that people come to bigger pockets. They live in L.A. or, you know, Washington, D.C. Is that where you're from? I think I read that. Yeah, right outside D.C. Okay, so you were in D.C.

Yeah, prices are crazy there, right? Or you live in, yeah, you live in Hawaii or whatever, right? You live in an area where you're just not going to find cash flowing rental properties, right? Even people live in Denver telling me that you can't buy properties in Denver. We'll get to that in a minute. But, like, they say you can't invest if you're a Denver person. So anyway, the point being, you decided to go turnkey, which is, is what a lot of people do, right? Turnkey companies are, for those who don't know, they are,

they are companies who exist to find properties, fix them up usually, not always. They're always, like, every company is a little different, but usually will fix them up for you. Then they'll put a tenant in there and then they'll rent them out for you. They manage it and everything. Pretty much all you have to do is like turn the key. That's where the name comes from, right? So like, that's what you did, right? Do you think that was a good idea for your first couple of deals? I mean, a lot of people on the bigger pockets audience listening right now, I thinking, well, maybe I'll start with a turnkey. What's your overall impression of that?

So I'm thankful that we actually did it, believe it or not. And the reason for that is because we're able to learn the process of going through buying an investment property, getting the monthly income coming in, figuring out all that stuff, kind of like with training wheels is kind of how I equated it. You're not going to go very fast, but you're also probably not going to fall face down. You could. But, you know, by doing those turnkey properties, we underwent. understood the fundamentals of it.

And I think by doing that, we're able to translate that to when we started going off on our own and doing it that way. I think that's a really good analogy. I've said the same thing. Training wills will keep you from getting hurt, but they'll also prevent you from realizing your potential. And if you know that's what your struggle is, is you're like, man, I really want to ride a bike, but I just cannot get over the fact I might fall and skin my knee, then a turnkey

solution might be perfect for you. And you do one, maybe two, and you're like, okay, I got this. it's not as bad as I thought. You do your own thing. What you don't want is to get dependent on training wheels so that your idea of riding a bike is running around with training wheels all the time. And you never really learn the tricks that you want to go fast and get far. Exactly.

Okay. So I want to do a little bit more on the turnkey thing. So you're saying you don't regret doing it because it was like training wheels. You got started a little bit. And I agree entirely, right? So what are some of the downsides and what are some of the upsides of turnkey? So the downsides would be the lack of control that you have. You don't have the ability to create equity. You don't really have the ability to have any input on the management side of things, which for some, that might be a blessing. For us, we wanted to do things a little bit differently. You don't have control over the contractors that are being used. So all those can summarize to control essentially in various ways. Some of the benefits are, you are a little bit protected in the sense that the turnkey operator is going to want to make sure that their reputation is upheld.

So they're not going to sell you a bad product. And this is speaking generally, of course, there's always, you know, you always need to vet everything. But they're going to make sure that things are pretty decent so that you're kept happy. Yeah, that's awesome. So, okay, so it's kind of summarized a little bit. Again, this is partially my opinion, but based on what kind of what you're saying is the same thing. Like, turnkey can work. I mean, that's what I always believe.

The turnkey can work. There are some turnkey providers who have a great reputation and people love them. In fact, we've had sponsors of the Bigger Pockets podcast, and I have friends that own these companies, right? I think they're fantastic. Then there are other ones that you hear reviews in the Bigger Pocket forums and all over, like just shady people. So like, you just, you can't assume a turnkey company is going to be this golden ticket to wealth.

Yeah. But you also can't assume it's going to be bad, right? So the same way, if you're going to hire a property manager 10 feet away from you versus is a thousand miles away from you, you kind of still have to do your due diligence, still have to manage the manager. You still have to check your numbers. I would say never let anybody do your math. Don't let a turnkey company do your math.

Don't let your mom do your math. Don't let your spouse do your math, especially. You got to do your own math, right? So like, no, David's actually very good at math. But at the end of the day, you're responsible for your financial future. So don't assume somebody else is going to get you there. Do you agree? I completely agree.

All right. rant over. I get this question so much on like BiggerPockets webinars. Like by the way, speaking of webinars, if you are, if you're listening to this show right now, you have not attended one of our webinars. We do them every week. They're awesome. Go to BiggerPockets.

com slash webinar to sign up. But anyway, I talk about that a lot because people just want to, they live in expensive market. So all right. So you decided, let's transition back. You decided after a couple turnkey properties out of state. What city was that, by the way, that you bought the turnkeys in? Indianapolis and Chicago. Okay.

So you decided to change strategies. and buy local. Now you're in Denver. Are you buying in Denver? So we're buying an hour south of Denver in Colorado Springs. And so we decided to invest there because my husband was down there for his job and he called me up and he said, hey, have you, do you know anything about this market? I said, nope, not a thing. Everything started to, you know, pencil out on paper when I started to do some more due diligence on it, looking into the market and everything. And once things started to pencil out, I said, hey, I think we might be on to something. We live right in Denver, but we're only an hour away from the city that I think will

be a really great potential for rental properties. So we ended up just going down there pretty frequently, walking the neighborhoods, looking at properties, either properties that had already been rehabbed or properties that needed to be rehabbed to just get a general understanding of that city. I love that. I love that. So one thing that Josh Dorkin and I used to say all the time back when Josh was here on the podcast and now David Green and I have said it too. Like you can invest long distance. In fact, David Green here invests all over the country. He lives in, you know, the Bay Area of San Francisco. David even wrote a book on long distance investing. It can be done. But at the same time, long distance might mean an hour from you like you did, right?

We used to always say within a two hour drive of every single location in America, you can find properties that cash flow. Now, it might be a different quality that you were thinking. or different style. You were thinking, even here on Maui, I can find cash flowing properties. I have friends that do it. But it's like a matter of maybe you have to get in your car and drive an hour or two, right? And like, that sucks, but you know, what, you know, you make the sacrifice if you have to make the sacrifice. And then the same principles apply, whether you're buying an hour, two hours from your house or eight hours from your house. A nice thing if it's an hour like you, you can drive down if you had to to check out problems or whatever. So I love that.

So you found that market just by, you know, your husband saying, hey, what do you think of this market. Do you know anything about it, researching it and figuring out that it could work, right? Exactly. Yep. Okay. So what was the first property you bought there? What kind of property was it? So I like to refer to our first property affectionately as our accidental burr property. Okay. Yeah, that's that one. So we ended up buying it on the MLS. And we, it's a single family home, three bed, one bath, really old house. I think it was built right on the turn of the century. And we were able to get it for $126,000. And we went about it the traditional way, just kind of the way that I think most people think that's how you acquire properties. And that was by doing a

conventional loan, putting 20% down. And we funded the rehab for the property ourselves. So with the loan, it was about $25,000 for our down payment. And then we ended up doing $10,000 for our repair, which included paint, flooring, countertops, just cosmetic type stuff. Sure. And from there, we got a great tenant in there. And it was when I was evaluating for our second property locally, when I started noticing that all these houses in the same neighborhood that are the same level of repair as us, they're selling for $180,000 easily, like snapped up real quick.

So I said, you know, I talked to my husband about it. And I said, I think this is a potential. for the birthing that we keep hearing about, you know, we keep hearing about bird. We didn't really know how it worked. We understood conceptually how it worked, but we didn't know how to do it mechanically. And at that point, we were like, well, what do we have to lose? We already have a house. It's decent enough, you know, in terms of numbers. We have a lot of cash in it, looking back at it now. But at the time, we're like, oh, this is fine. And what do we have to lose? We'll learn something from it at a minimum. So we called up our lender, said we'd like to do a cash out refinance. We think

that this house is worth 180. Sure, let's get it appraised. Next thing you know, it was worth 180,000. And I said, okay, well, this is great. Now what do we do? So we finished the refinance. And interestingly enough, we're actually closing on our second local property that very same day. So the day that we're going to complete the refinance, we're going to complete the refinance, and interestingly enough, we're actually closing on our second local property, finance of that first property, the Burr, we were actually going to purchase the second local property that we planned to buy. And when we were at Title, we were able to get a check for $30-something,000 from that first house and apply it directly to that second house. And that's when the light bulb went off. We said, oh, my gosh, we're walking away with two houses for the amount of cash that we had

originally put in one. They're both cash flowing. This is amazing. We have. to keep doing that. Love that. I love that. Yeah, that's the birth strategy. Yep. So, Jenny, remind me, what did you pay for that first house that you, the accidental bur? $126,000 was the purchase price. And what did you put into the rehab? 10,000. And that it was worth 180, right? Yes. Okay. So would you agree with me that the best, I guess the most meaningful part of this whole process of buying it, fixing it up, renting it out, rehabbing it, refinancing it was when you bought it because that's when you made the majority of the money that was involved. At the time, we did not realize that, but looking back and reflecting on it, absolutely.

Okay, good. So that's the point I want to make is when you buy a deal below market value, you're making the majority of your money right up front when you buy it. And that's why people say you make your money when you buy. If you pay too much, you can't make up for it by over-rehabing it or trying to push the rents up more than what they should be. It always ends up backfiring. So by burying that house and getting your capital back out, and that's kind of cool that you immediately put it into the next one, like same day. If you're getting a good deal on that second house, you're now making a lot more money that minute you buy another one below market value, right? And that's what's so cool about Burr is that it allows you to buy more homes. And as long as

you're buying them at a really good price, your wealth starts to stack up crazy. And my guess is that's why you're doing it this way now instead of the turnkey model, because when you buy turnkey, you're not necessarily getting a lot of value in the house. You're not buying it below market value. So the curvature of building wealth is much slower because you got to wait for it to appreciate over time and wait for rents to go up as opposed to when you buy a really good deal. Right out the gates, you added a bunch of equity and you're making some pretty good cash flow and you're moving down the path. Would you say that's a fair summary of what you're doing? Absolutely. Okay.

And that's why Brandon and I always talk about Burr, right? Because you don't want to run out of money to where you can't keep buying homes, especially now Jenny and her husband are doing so good with buying properties. if they ran out of money, all this skill and talent that you have and the systems you've made would be useless because you don't have any way to keep buying houses. Yeah, that's why we love Burr. So for those who don't know by the way, Burr stands for buy rehab, rent, refinance, repeat. So you buy a property, you fix it up, you buy a fixer, you fix it up, then you rent it out. Now you got a nice house that's already fixed up, hopefully, which attracts better quality tenants, which hopefully won't have money repairs and maintenance and Kappex for years because you've already fixed it up.

it's renting at the highest market rate possible because it's a nice property in a nice area. So then the property is worth way much more money, way, way much more. Is that a thing? Way much more money. So then you go refinance it just like it was worth 180. So you refinance it, just like you did. So you can get all your money back out of it as much as possible. And now you can repeat it, buy, buy, rehab, rent, refinance, repeat.

It's a strategy, again, we talk a lot about it. It's actually been done for probably hundreds of years. I don't know, a while back we put the name Burr to it. And now David Green. actually writing a book on Burr investing that'll be out, I think spring or maybe it's summer of 2019, something like that. So if you're listening to the show in the future, look for that book. It's going to be awesome. I'm actually really excited for that book because I think Burr's probably the great, one of the greatest, if not the greatest strategy in a market like today is for building

wealth. Because you also now, if the market drops, let's say that 180 house drops down to 150. Oh man, that sucks if you paid 180 for it. But because you paid 126 for it, it's not as big of a deal, right? It builds in this cushion as well. Now, I want to know about Jenny, why did you, like, Here's what a lot of people are probably wondering, well, how am I supposed to find a $180,000 house for $126K on the MLS? Like, that sounds impossible, right? So, like, how did you get such a good deal? Was that just luck or what?

So I would attribute some of it to luck, but I would also attribute it to persistence. Once we made the decision that we were going to invest in Colorado Springs, I can't even tell you which number house that was that I put an offer on with my agent. And not to mention the fact that that particular house, when we were. walked in it had severe sloping. So there's clearly like a structural issue going on. The inspection as that unraveled, yeah, there was about $12,000 in structural engineering that need to be done. But we're able to negotiate that into the property. So I think that might have scared a lot of people off as well. So it's- That's a good point. Yeah. Yeah. People should listen to that again.

Remind that 30 seconds to listen again. You go into a property. And if there's a problem with it that scares everyone, right? Foundation, a bad smell. There's a few problems that just people hate, like mold, lead-based paint, those things that everyone runs away from. Like, why not, I mean, everyone's scared, right? So why not make an offer and then negotiate it as part of the deal, right? Exactly. One of my favorite quotes is the worst that they can say is no. So all you got to do is ask and see how it works out. Yeah, somebody asked me this. They commented on an article I just wrote on Burr on the blog and they said, well, yeah, that sounds great, but what seller is going to be letting the house go that's worth 180 for 126, right? That's always the objection that you get is,

well, yeah, but why would somebody sell it so cheap? But if it's got a problem, nobody else wants to fix and you're willing to fix it, that's what you look for as an investor. Like, there's some form of distress that you can solve. And in this case, it was the structure. And you actually went back and renegotiated and got them to lower the price, which is how you got this really good deal. That's what good investors do. They don't just go cruise on Zillow, find a pretty house and say, oh, man, it doesn't cash flow. I guess I can't buy. Exactly. And for, in this particular house, we were able to negotiate it so that the seller would pay for it at closing directly to the structural repair people. So that because we're doing a traditional conventional loan, so that didn't make us bring more money to the table because, you know, 20% of a $10,000 cheaper house isn't that extraordinary opposed to a dollar for dollar match to the contractor. Love it, love it. It just goes back to the thing that we say all the time. In today's market,

you don't find good deals. In today's market, you make good deals, right? You made that property a good deal. And you might have even done it accidentally. I don't know, I mean, it's kind of like, like, you said, an accidental burr. But you know what? Like, and the fact that you made a bunch of offers, you said, like, you weren't afraid to getting rejected. So many people are like, well, I just can't find a deal. I'm like, well, how many offers did you make? Well, I've made an offer yet. Well, okay, then. Like, that says a lot, right? So, I love that. All right, so let's move on. So what happened next? I mean, you bought that first property. You closed the second property the same day. How did you find that one? And then let's take a whole summary after that of your whole property.

Like, how do you find properties in general? Sure. So the second property, that was an MLS deal as well. We actually found it the day that we were going to get that first house appraised. We went there for the appraisal. Saw that house pop up, called our agent and said, hey, can we go check it out? Said absolutely, we went over and the rest is history for that. And the way that we find our other houses, So as of right now, we actually own 10 buy and hold properties in Colorado Springs. So we've found half of them via the MLS and the other half via off market type situations. Okay. So what, I mean, that's cool.

You can still find deals on the MLS, but what are you doing for off market stuff? So we admittedly don't have a good system for that. We've used wholesalers. I have done the method where I've reached out to people renting their house on hot pads and asked them if they wanted to sell it. And that one caught one. I got one off of a Zillow Make Me Move. I got one off of a Facebook post.

Okay, let's go back and hit both Zillow Make Me Move. I've never heard anybody. I've seen it on Zillow, but I've never heard anybody getting a deal that way. Can you explain that? Sure. So Zillow Make Me Move, typically it's like, oh, I want, you know, one billion dollars for this house. But we just happened to come across one that was extremely reasonably priced. It was for 165.

and it was a three-bed, one and a half bath. We turned it into a four-two, and now it's worth $2. So, yeah, we just kind of saw the potential in that and, you know, scooped it up, worked with the seller on that to get that property. All right, I got one more thing I want to pull out. This is just so many, like, gold nuggets in this. I just love this. So, again, goes back to today you don't find good deals, you make good deals.

So this is one thing I love about doing the numbers. Like, when I do the numbers on a real estate deal, like I use the bigger pockets, calculators, but however a person does their numbers, right? A lot of people will go, this is the purchase price. Sorry, they'll go, this is the asking price. We just said that a minute ago, right? They'll run the numbers. They say, oh, yeah, it doesn't cash flow.

Move on to the next deal. You're looking at this and you went, okay, wait, it doesn't, you know, like, what if I were to add another bedroom in this? And then what if I were to take that one and a half bath to a two bath? Now it's going to probably rent higher, be worth more money. Like, you find a way, like this is not a one dimensional thing. Real estate is not a one dimensional thing. Like when you start thinking creatively and three dimensional, I mean, yeah, I took a fourplex ones to a five unit.

I took a single family house. I had a weird garage made it a studio house that now rents for 600 bucks a month. Like, there's ways to get creative and make good deals out of what normally might not be, right? Exactly. And in a market like ours, you have to or else you're just going to be sitting on the sidelines. That's good. So I like that you live in Denver, but you're investing in Colorado Springs because you know that you have a shot there. and you're using creative strategies to make a deal out of something that wasn't there.

So now you're kind of stacking up all these strategies, Brandon and I talk about. And when you get the right combination together, boom, you got a deal. How are you looking at these properties that are an hour away? Are you driving out to every single property? Are you getting some help with that? So our agent is amazing. As soon as we first started working with him, he understood that we lived in Denver. And we also all collectively understood that in order to be most competitive on these market deals,

We need to be the first ones in, and we need to make a strong, clean offer. And so with that being said, you know, Mike and myself, we're working full time. A lot of times we'll call up our agent and say, hey, you know, this property just popped up. Is there any way that you can go over and video it and send it to us so that we can kind of take a look at it and make an offer? Absolutely, he goes over there, sends it to us in our email, gives us enough information that we get a good perception of the property that we can make an educated guest. and we've been able to be successful doing that quite a few times. That's fantastic. I love that.

So how do you find an agent like that? So we kind of stumbled across them. So back when we were doing our market research in terms of we're visiting properties that were renovated, properties that needed renovation, we went into a renovated property and my agent was showing it because he had flipped it or he had partnered on a flip or something like that. And we got to talking. We didn't have an agent at the time. told him what we were interested in doing and we all just sort of clicked and he really understood

what we want and you know we all work really well together and it's just kind of blossomed into kind of a never-ending situation. That's awesome. Okay so you're getting the videos, you're seeing the house, you're getting a feel for what it looks like. Now how are you going about getting your rehab bid? So we have contractors that we've worked with and you know admittedly the first property that we did, we're way off, extremely off on that. We didn't know what we were doing. But now that we've done lots of different types of repairs, whether it be an electrical panel or plumbing or flooring,

we have good estimates that we can go back and look at to be able to prorate out to our current property. And that's just by talking to contractors a lot. That's cool. That's cool. So, all right. So you said you, you know, you're getting better at this, obviously. When you're first starting out, the rehab thing is tough, right? Exactly.

What do you think is, is there anything you can, I guess, tell our audience that's listening that, they struggle with that. They struggle with estimating rehab costs. What do you tell them? Oh, man. I would say talk to people that have done this before, other investors, and ask them what they think it'll cost. I think that's the best way of doing it.

So speaking to experienced people, like I can tell you to replace a federal-Pacific electric panel is going to be $2,100. Like, I can tell you that. I can tell you that my flooring costs are $1.50 for labor and they're $3 for material. I can tell you all that stuff because I've done it. And that's really the only way that you're going to be able to get ballpark estimates. I mean, if you're close to a contractor, that's another option that you could, you know, take them out to lunch and ask them, how much would it be for, you know, a thousand square foot

house and if I want to do this. That's cool. I want to ask you something, because this comes up a lot. A lot of people have the question of how do I estimate rehab costs, right? Would you agree, Brandon, and you too, Jenny, that probably the best place to start would be learning the metric that the contractor uses to come up with the price. So you mentioned, I know that my flooring and my labor are going to be $3 for materials and $1.50 for labor to do flooring, right? I think just understanding that's the metric that a contractor uses to give you a price on flooring is a really good place to start. roofs are measured in squares.

It's a price per square, right? Cabinets are going to be measured by a certain metric. Countertops, paint is going to be priced per square foot. I think if you're stuck learning those things first, like what is a contractor look at when he's going to give, when then he's going to put a number to this metric is a really good way to get a firm understanding of what you should be looking for. Would you guys agree that's a good baseline for people to start with? Definitely. Yeah, definitely. I've had a couple quick things about that.

So first of all, as our audience probably knows, know, like, so we launched a book a few years ago. What is it? Five years ago now called the book on Estimating Rehab Cost by Jay Scott. The book is sold, I mean, tens of thousands of copies, probably even more than that at this point. This thing, I believe it comes out on January 3rd. We're actually relaunching that book with all new, like, updated information, things that we can, you know, basically because five, six years ago, things were very different today.

So we're relaunching that. It's an updated edition, new edition. So even if you got the last one, I'd encourage people to check out the new one, well. Again, comes out on January 3rd. Go to biggerpockets.com slash store to either pre-order it, which you can do right now, or you can just flat out order it if you're listening to it. Really, really good. But the second thing about that, because again, let me actually before I go back there, that book is all about that, right? It's understanding how contractors think and how they evaluate things. Once you do that, now you have, now you can speak their language.

How much you cause, how much is it per square foot? How much is it per linear foot? How much is it, you know, how many hours does that project take? Different things take different things. The second point I want to make is that a lot of people don't realize this, but Bigger Pockets actually has a rehab estimator calculator. And when we built it, it helps you go through all the various categories. It's based on the book, but it goes through all the categories. And then what's cool is you can add up all your different things based on the three

different most common types of way contractors bid things. There's time and material, right, which, hey, it's going to be this much for material and this much per hour or whatever. The time material. And then there's the cost per unit, right? So like, for example, per square foot, per linear foot. You can add it that way. Or there's just a flat fee.

Like, hey, the furnace is $8,000, period. Right? So those are like generally the three ways contractors estimate things. So you can actually choose while you're doing an analysis on the rehab calculator. So check it out if you've not played with it. It's just a really good way to get organized with your bids and with your estimates. Go to bigger pockets. dot com slash kelk c-alc or just click the word tools in the navigation bar and you can check it out

there so yeah i think everybody can use it five times for free but pro members get unlimited access to it so moving on if if we pick apart why jennie's doing so well what i'm noticing is that jennie you understand a lot of different aspects of real estate investing but you don't make it your job to do all of it so you understand how contractors value things but you're not the one out there swinging the hammer you understood how to pump up your arv like how an appraiser thinks but you're not actually running appraisals, right? You understand how to make the rents go up. Now, maybe you're managing your own properties,

but you wouldn't have to. If you wanted to have someone else do it, you would know how to pass it off to them and how to know if you're being taken advantage of because you get it. And that's a point that I want to make. You don't want to be the person who does everything in your business, but you do want to understand every person who's involved in it so that you can make sure you pick the right person

and that you're making good decisions. Exactly. That's how I would qualify it or strengths in this as well. And to be honest, I think to add on that, it's almost a benefit that we're an hour each way from our properties because it makes us really think, is this something that I need to drive down for or should I outsource it? And chances are outsourcing it tends to be the answer 99% of the time. I absolutely love that you said that. So this is something that I've said in the past. One of the, like I always said I wanted to drive by my properties.

And I wanted to be within, like short driving. Like, I mean, I wanted to buy in my town, right? For years, that's what I did. And I still think it wasn't a bad idea necessarily, but here's the downside of that is that every problem becomes I can take care of it, right? I can take care of it. I can take care of it. If there's a somebody gets locked out, I'll just drive into town and take care of it.

So by doing so, I wasn't treating my business like a business. I was just taking care of things as they hit me and it limited me on how much I could grow. And so by buying at a distance, whether it's an hour, two hours, 10 hours. And David, you, David Green is actually the guy that taught me this. Like, you're the one that convinced me this while we were sitting on the beach in Hawaii like three years ago or two years ago. Like, we had this conversation and it like blew my mind. Like, if I forcefully buy out of the area, I am forced to become a better real estate investor.

And that just was like, you know, mind blow. And so anyway, I love that you said that, Jenny. That's perfect. And Jenny's using these principles, even though her property is an hour away. She could go do all this stuff, right? But Jenny understands, no, I'd rather find the next deal or make. or make more money or budget or do something more important, I'm going to have to outsource it to somebody else. And now you're using business principles, not employment principles, right? And we all know

what it's like to have a job. We don't all know what it's like to run a business. So it's very easy to be like Brandon and slip into what's comfortable, which is, oh, something needs to be done. I'll go to do it. That's what I do at my job. But that's not how business owners think. Exactly. I like to joke that we have core three and a half. As we still do the management. That's good. So you've read my book because you're referring to Core 4. I like it. Thank you, Jenny. Way to go. Okay, so Jenny, tell us where are you headed next. Are you looking to buy 100 properties? Are you looking to buy them and pay them off and just retire early? Give us an idea of where you're headed and what you'd like your business to look like in the future. So I know that I just spoke a lot about how we've used creative financing

to acquire all these properties so quickly. But right now, we're going to kind of do a pause. and we realize that with the 10 properties that we have in such a strong market that we're in, that we can reasonably assume that we'll be able to retire and live very comfortably off of all those properties once they're paid off. So right now, we're actually going to be using themselves to pay themselves off and kind of do snowball method of that. But that's not to say if a deal comes across my desk or I stumble across something that I'm not going to jump on it, because I definitely will. But it's just not part of our master plan at this point in time.

That's cool. And I think that just shows also you don't have to have ambitions to have hundreds or thousands of units. Like if you have 10 good properties, this is actually like a John, I think John Schwab in his book. I can't remember what's called like building wealth one house at a time or something. I think he kind of makes this point. You could just buy 10 over the first 10 years by 10 properties and then spend the next 10 years

paint them off. At the end of that, you'll have 10 properties free and clear, probably making 10 to 15 grand a month in passive income. And great, you're retired. Absolutely. That's fantastic, right? So I love that. Just a different way of looking at life.

You don't need it. If you don't need millions a year, if you don't need millions a year, if you could live on a couple hundred grand a year and passive income, that sounds pretty great to me. And owning 10 properties, pretty clear. It sounds like a pretty low-stressed way to retire. So super cool. All right.

Well, Jenny, let's shift gears here. And we're going to look at one of your deals a little bit more closely. And that is in the deal deep dive. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Funrise flagship fund.

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I do. All righty. What question number one? I'll ask them. We'll just kind of go back and forth with me and David. But question number one, what kind of property is this? Tell us what is this deal? It's a single family home, three bed, one bath, one car garage. All right. And that's in Colorado Springs. Yep. All right. Okay. How much did you buy it for? So we purchased it for 114,500. Nice. How did you negotiate it? Was that what was listed? or what was it listed at and how did you get it for that? So it was listed for 140,000. Same thing as on the MLS and we just negotiated it needed some work. It was part of an estate sale and we offered, I think one of six something around there and they counted at 114. We took it. Okay. And how did you

fund that deal? So we actually purchased it using a hard money loan. So we are able to present to the hard money lender that the property's ARV was 160,000, and they gave us a 75% ARV loan for that. So we ended up getting a loan for 120,000. Awesome. I love that. All right, so what did you do with it then? So since it was 120,000 for the property, we were able to purchase the property for that 114,000. The loan covered the closing costs. and a little bit of repairs. So we ended up repairing pretty much the whole outside of the house. The gutters, windows, painted the exterior, new exterior doors.

That was what we ended up doing for that property. Okay. And then what was your outcome? So we ended up doing a burr, but we utilized a rate term refinance for this burr because the hard money lender had a three-month term on it. And we needed to be able to quickly convert that hard money loan into a traditional loan. And we ended up doing a rate term refinance. And the way that that worked was our conventional lender said, if we can get something that's 80 to 85% of the appraised value,

we can convert that $120,000 hard money loan into a conventional loan. And that's exactly what we did. It appraised for what we needed it to. And we just changed it out that way. We didn't do any sort of cash out method, but that was what we did. So is that because your hard money lender allowed that option? Yes. The three-month term was the max that they're going to allow. But they converted it to a normal amortized loan, right? Oh, so we went through a conventional lender.

I think it's Freddie Mac on that. Oh, so you refinance it out of the hard money? Yes. Okay, gotcha. Yeah. Perfect. Do you remember what it appraised for at the end then? 160.

Okay. You probably said that, and I just wasn't listening. All right. All right. So cool. So you got it out there. And then what lessons did you learn from this deal? So when we bought the house, it was tenanted.

And we learned how powerful, effective communication with the tenants was in the situation. Because after we explained to them what we needed to do, they understood that we needed to go in so that we could get the property to appraise for what we needed it to. And we needed them to be accommodating to our contractors to fix everything up. And then they benefited from it because we were able to. able to get them a fully repaired house. You know, it's still a little dated on the inside, but the outside and all the structural pieces of it is fantastic. And so they were really appreciative of that.

And in fact, one of the tenants, she had mentioned, she said, you know, before, this is just somewhere where I lived. It was a roof over my head. And she said, now it feels like home. It's not drabby anymore. It looks fantastic. She loves it. So it worked well for all of us.

Hey, what is rent on that property then? If you have 140, you know, purchase or, you know, value now or 160 value, what's rent? So we've kept the same tenants in there. So we are gradually increasing rent each year. When we bought it, oh my gosh, it was terrible. It was like 850 or something. And now we've gotten it up to 1,100. I think market value is 1,300.

So we'll get there eventually. Yeah. Yeah. That's one of the downsides of inheriting tenants, right? is you feel like a jerk. You can't just raise a rent six. I mean, you could, but like I never do. I don't raise it 600 bucks overnight or whatever because, you know, I don't want to kick them out.

But it is business. Some people will do that. But it is what it is. All right. Very cool. That is the end of the deal, deep dive. Let's head over to the next segment of the show where our actual listeners can jump, yeah, I guess like, I don't know, can't ask questions necessarily, but you can ask them in the forums.

And that is our fire wrap. It's time for the fire round. Time for the fire round. These questions come direct out of the bigger pockets forums, which of course, like I said, everyone can go and ask questions in the forums anytime day or night, and we may pick your question to ask our guest on the show. So, let's see.

Jenny, number one, this might be a little late for this one, but I think it's a good question anyway. I'm going to ask it anyway, even though this show actually airs after the holiday season. But do you do anything for your tenants for, like, holiday gifts. And I'll also add on there anything for holiday gifts or tenant renewals. Do you do anything like that? I don't. So for tenant renewals, we have a walk through and we fix up things that they may be asking for. If it's a small upgrade, we're willing to do that. In terms of gifts, we don't do that. I think that might be a slippery slip.

Okay. Yeah. I don't think that's a bad answer. I don't really do anything either. I actually have. So in the past, I used to send like we sent like $25 Starbucks gift cards to every tenant. And then one year we didn't do it. guess what? There was no difference, right? Like, yeah, I don't, I don't think people will stay any longer or shorter. Again, maybe it's a good idea to do it, but I have not seen an actual difference. But David, do you do anything like that? I have one property manager that asked every year and I say no and they are always like, well, all the other landlords do it. And my, my question is, what kind of an ROI am I going to get on this? And I just feel like you should ask that question for everything. Like you, when I was a cop, I don't know if I should say this,

but like if you gave an inmate a Snickers bar, you could get so much good information. Like your return on investment for that dollar 50, you could know anything that was happening in that jail, right? They'd tell you. That was a very good ROI. You buy a little kid an ice cream cone and their parents are going to love you for life, right? Those are things that I'd be more likely put my money to. I give a tenant a gift card and they're probably going to say something like,

oh, whoa, yeah, it's the least you could do considering what I'm paying for rent. It just doesn't really help you. So I'm not against doing it, but I'd rather put my time and energy and effort into something that I know is going to give me a better return than someone who's kind of pissed off. They got up here right in the first place. Okay. Next question. I currently own seven single family homes.

It seems like this is the point where most people start investing in multifamily, but I don't really want to do that. I like my job and I think I want to keep picking up single family homes. Is there anything wrong with a single family only route? Absolutely not. I say do what fits what you want to do. If single family homes, you understand them. you're able to get a good return on them as they keep going for it.

All right. Next question. How do you keep track of capital expenditures? Like, do you save up for them or do you budget for them? Do you keep money in reserves? How do you currently handle that? And I'm going to ask the same question to David, too. So we're actually undergoing a review of this.

We don't really know what we're doing in that sense. So I think that we're leading towards having some sort of a hybrid approach. As I mentioned before, like my husband and I, we have good day jobs. Our properties are cash-filling enough that if something were to happen, we'd be fine. We'd be able to cover it that month. But if everything happens all at once, I have some furnaces in my houses that are older than I am.

Like if all 10 of them break, yeah, we're probably going to be in a bit of an issue at that point. So we're thinking of having some sort of bank account set up with, you know, a sizable amount for situations like that. David, what do you do? As far as just planning for reserves, or as far as... I mean, knowing that things are going to break, you're going to have furnaces go out,

you're going to have roofs go out. Do you save up every single month for those? Do you have a big account that you keep stuff in? Or do you just be like, I'll deal with it when it happens? Well, it depends on your personal financial situation. So if you're someone who lives paycheck to paycheck and you don't have a lot of money left over,

you need to have a really healthy chunk of reserve set aside. If you're someone who's doing pretty well financially and you have extra money, and that's why you're putting it into real estate, you can get by with a much smaller amount of reserves because you know you're going to replenish that next month when, you know, you have money coming in. It's more than you need to live on. So what I like to do is, as I tell people, put as much away in reserves as you possibly can until it hurts and you're tick. Like, I can't buy this thing that I want because I have such a huge amount I put in reserves and let that motivate you to go make more money somewhere else.

Do a side hustle. Ask for a promotion at your job. Get out of the job you're in and get into one that has a higher upside. Like, get you out of your comfort zone because you made it harder on yourself, rather than just storing up money and reserves all the time that keeps you from investing in new stuff. All right. Good answer. All righty. Next question. David, you, you, you're up. Yeah. Okay. What are your go-to materials for your rehabs? What kind of flooring and countertops do you use and why? So I absolutely love laminate wood floorings and so do our tenants. And it avoids us from having to replace carpet every couple of years. It looks like real wood. It's more durable. We had, one tenant move out that had two giant dogs and not a single scratch occurred. So that's that's our flooring of choice. And then for countertops, laminate countertops that kind of looks like granite

design on it. That seems to be working well for us as well. All right. Good answer. Last question of the fire round. How do you keep track of things with the multiple properties? Like do you, what software do you use or what systems do you use to stay organized, keep your books together, all that? So in terms of the accounting for the properties, I use QuickBooks online, and that has been working really great for me. All right. Do you use anything else, any kind of management software? I mean, with 10, I don't know if you need it, but do you use anything like Cozy or, you know, buildium at folio?

So I use Cozy for tenant screening and rent collection. And then in terms of if there's a maintenance issue, I will just collect that information and pass it on to my contractors to go over and fix. And it's kind of old school that way, but it works. Very cool. With that, that is the end of our fire round. Now it's time to get to the last segment of the show. This is our Famous Four.

All right, let's get to the Famous Four. These are the same four questions we ask every guest every week. We're going to throw them at you. Number one, Jenny, what's your favorite real estate-related book? The book on managing rental properties. Woo-hoo! My wife will love to hear that. Thank you.

That's awesome. It was fantastic. I mean, it provided a tactical approach to real-life situations. Ooh. Wow. That's the only time anyone will ever say that about Brandon. Very, very cool. What is your favorite business book? Cash flow quadrant. I love that one. Love that book.

Okay, I have to ask you. We normally ask what your hobbies are, but I'd like for you to tell me about Zorbing. Oh, yeah. So Zorbing is, it was based in New Zealand, and you are in a giant, blown up, hamster wheel ball type of thing. They fill it with water and push you down a hill. Really? Yeah. It's like a thing. It is extremely fun. I highly recommend it. I was watching on the movie The Mag, right? About the shark, it's like the, you know, the big huge gigantic shark. Anyway, and the shark ate somebody that was inside one of those on the water. So I don't know if I would go in one of those. Anyway, that's actually super cool. All right. So I'm going to look that up now on YouTube after we're done with this.

Any other hobbies you do for fun? We just love traveling. We hit our sixth continent just a couple months ago, so we're hoping that we can knock out Antarctica in the next couple of years. Cool, cool. All right. What do you think separates successful? Don't mind the landscapers who always show up exactly what I'm in the podcast.

It's like they called my wife. They're like, hey, what time is we're doing this podcast? Because we're going to show up right then and do a belief below our side of the window. So anyway, what separates successful real estate investors from those who give up, fail, or never get started? So I knew that you guys were going to ask me this question. So I wanted to put a lot of thought into it. And I can boil it down to commitment. And commitment to me is putting action to a plan.

So I don't see commitment to real estate being any different than commitment to a relationship or commitment to doing an ultra marathon, for instance. You know, using that as an example, you're not just going to wake up running zero miles and the next day be able to run 100 miles. And the same thing applies. You're not going to be able to just read nutrition books and training books. You actually have to go out there and incorporate all of that in conjunction with physically doing it. And that's how you are successful in anything. I love that. I love that.

I say on the bigger podcast webinars all the time, there's a massive difference between desire and commitment. Right. Like some people say they're committed to something. They want to invest in real estate. They're committed, but they don't. They just desire it. Like I, I'm not committed to getting a six pack. If I was, I would have one, right? But no, I want a six pack. I'm not committed to it. I am committed to other things like, you know, in building my real estate business up and I'm committed to being a good husband and a good father. Like, those are actual commitments. And the reason why is because there's a plan of action behind them, right? Putting action to a plan. Like, that's exactly what you said, right? That's a difference between desire and commitment. So, perfect. I love that. I love that. All right. Final question. Go ahead, David. Jenny, where can people find out more about you? Feel free to message me on BiggerPockets. All right. And of course, we will link to that at the show notes at biggerpockets.com slash show 310. Jenny, thank you so much for being here today. This has been fantastic.

Of course, people can ask questions on the show notes. There's a whole question, answer area at the bottom in the comment section. They can ask questions. They can follow up with you there. Of course, again, BiggerPockets.com slash show 310. But this has been fantastic. I learned all about Zorbing and really like you're just super inspiring. So I just really appreciate you coming on here and just telling it like it is. Like it's very real and open.

So thank you. Well, thank you so much for having me. It's been a complete honor. Thank you very much, Jenny. I just want to add that I love that you're doing this and you're very honest and transparent and humble about what you're doing. Like these are the investors that I love talking to the most because you're not trying to be Grant Cardone.

You're not trying to own a billion dollars of real estate. But you're just systematically building the future that you want and moving your way towards financial dependence. So good for you. We need more Jenny's in the world. There you go. Thank you. This is David Green for Brandon 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 height, 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.

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