BiggerPockets Real Estate Podcast - 90: My First Real Estate Investment – A Newbie Podcast With Matt, Romeo and KC

Episode Date: October 2, 2014

Don’t miss this special feature, as we come to you live from FinCon 2014 for Podcast 90! In a BiggerPockets Podcast first, we sit down and chat live with financial conference attendees Matt Giovanisci from New Jersey, Romeo Jeremiah from Detroit and KC Beavers from Rochester, NY, three real estate investor newbies with fascinating stories and great tips for beginning investors and veterans alike! Hear from “accidental landlords” — a growing breed of property owners — firsthand, and let yourself be regaled by tales proving that first time investors CAN achieve success from the get go. A unique and high energy recording, this is one episode you’ll definitely want to tune in for! In This Show We Cover: Getting stuck with a property during the economic downtown The decision to rent by default, ie. the “Accidental Landlord” situation The art of staging a space to rent it out fast What exactly a “Streamline Refinance” entails The pros and cons of renting from afar Why finding a (trusted) property manager can be crucial The simple way to fix a garbage disposal you may not know A great first-time house flip success story How to start out with a 24-unit apartment building The concept of “Forced Appreciation” Wealth creation vs. wealth preservation The importance of thoroughly vetting tenants The ins and outs of using Real Estate to diversify your portfolio How to get a loan on a commercial property And so much more! Books Mentioned in the Show The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich by Timothy Ferriss The Millionaire Real Estate Investor by Gary Keller The E-Myth : Why Most Small Businesses Don’t Work and What to Do About It by Michael E. Gerber Tweetable Topics “You can never learn enough about this [industry].” (Tweet This!) “Just take action, just go for it…but make sure it was a risk worth taking.” (Tweet This!) “There’s not going to be a single path for someone to take.” (Tweet This!) Connect with Matt Matt’s Website Connect with Romeo Romeo’s Website Romeo’s BiggerPockets Profile Connect with KC KC’s Website KC’s BiggerPockets Profile Learn more about your ad choices. Visit megaphone.fm/adchoices

Live from New Orleans, this is the Bigger Pockets podcast. Show 90. 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, everybody? This is Josh Dorkin. to the Bigger Pockets podcast here with my co-host, Mr. Brandon Turner.

What's up, Brandon? What up? What up? How you doing, Josh Dorkin? I'm good. I'm good, man. This is a new format for us this week. Yeah, this show is kind of cool, a little bit different.

I think people are going to like it. I do, too. I do, too. I do, too. Yeah, so quick heads up, everybody. This show is a live show. We've got three guests coming to you, and you'll get to meet them all shortly. but Brandon and I were at a conference in New Orleans called FinCon, the Financial Blogger Conference,

and we did a live on-air podcast at the show, and what you're going to hear today is that podcast. So, you know, definitely check it out. There's some good stuff in there, and we hope you like it. So listen up. Managing properties can feel like a full-on circus. You're juggling vendors, tracking payments, chasing approvals across multiple properties, and maybe a few HOAs, all while trying to keep tenants happy and owners confident. One delay can throw everything off, and suddenly your day is all clean up, no progress.

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Fundrise.com slash flagship. This is a paid advertisement. Here's the thing about traveling. If you buy food at the airport, a burrito, salad, bag of peanuts, you start wondering if you should have opened a savings account for snacks. So wouldn't it be great if you could actually earn money while you're traveling? Well, you can. Airbnb has something called the co-host network.

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And you guys sit back and enjoy this interview with three newbie real estate investors. This is the Bigger Pockets podcast. Coming to you live from the country financial stage here at FinCon, 2014. Woo-hoo. I am very excited to be here with my family. Fabulous, fabulous co-host. The man, the myth, the Sasquatch, Mr. Brandon Turner.

What's going on, Brandon? Who, hey, how are you all doing today? He is pretty tall, so I... Woo! Cause him the Sasquatch. That was actually my nickname in high school was a Sasquatch. Like, that's what we actually... All my friends called me, so I don't know.

I wasn't hairy, though, but I was tall. You're just nasty. I'm a little hairy now. Yes, you are. Was it the satchquatch? Like the? You had the? No, it was just sasquatch.

Oh, just, okay. Yeah. Yeah, I didn't need the the before it. All right off. That's fast-coach. Anyway, hey, everyone's probably wondering, listening to this right now, what the heck is this? This is really different from usual. Josh, you want to explain?

Yes, so we are here at FinCon. FinCon is the financial blogger conference. Lots of amazing financial bloggers that are applauding us right now. Yes. Yes. These guys are the elite, the best of the best, the financial gurus. Now, these are amazing, amazing writers and folks in the financial community. And so we're here at a conference of financial bloggers and we're really excited.

And three of these guys have done real estate investments and are all semi-active in investing. So we're here to, yeah, no, you can't say that. And so we're all here to talk about real estate. So anyway, we've got Brandon. We got me. We've got, to my right, we've got Matt from New Jersey. We've got Romeo from Detroit. If anybody's a listener of our podcast, you guys,

you know that Romeo is about to get it. Okay, because Detroit, yeah, yeah, trouble. And then we got Casey right next to Romeo there, and Casey is up in the Rochester, upstate New York area. Yes. And all these guys are out there investing in real estate. So today's show is going to be a little different, but why don't we get to it, man? Actually, do we have a quick tip?

All right, our quick tip for today is actually very, very simple. It's simply check out the show notes, which you can get at, and I'm going to have to dub this in later. You can get at BiggerPockets.com slash show whatever show number it is. So definitely check out the show notes today because I wouldn't have links to all these guys' websites and all their good stuff, so we want to check them out. So we're going to have a good time. And this is a newbie podcast. I mean, these guys, some of them have been doing this a little bit of time, but this is our third newbie podcast. These guys are not, haven't been doing it for 20 years.

They don't have 100, 200, 300 properties. They're all just getting started. So, yeah. So we're going to actually talk to all of them today, interview them one at a time, and explore how they got started and how they got their first investment. Nice, nice. All right. So let's get this thing going. To my right, we've got Mr. Matt from Jersey.

Of course, you guys know I'm a New Yorker, so Jersey is our toilet pole. That's fair enough. That is fair enough. So let's see how this thing goes, man. Matt, how did you get going? You decided one day I'm going to be a real estate investor and you bought a condo, correct? Yeah, I decided one day that I wanted to own a condo

and then I became a real estate investor by default because of the 2008 crash. Nice. How so? All right, so I bought on October 8th. I closed on October 8th of 2008. Oh. Yeah.

It was like the roller coaster like going over the edge. Like, I think it was, like, literally I closed on Black Monday. Nice. Yeah. So, uh... That couldn't have felt too good. Yeah, so I basically bought at the peak. Okay.

And it was a brand new condo. So they, like, I watched it be built. And this was for you to live in. This was for me to live in, which I did for five years. Okay. And then, uh, I wanted to start my own business. And I decided to leave. I could not sell it.

Okay. So I decided to rent it out. And I've been renting it for two years now. So you bought a condo to live in. The market hits the skids. You're stuck with this thing for five years just living in it, and now you decide to rent it out. So what are you thinking?

Like what goes through your mind? Oh, my God. How do I find a tenant? What's happening? Yeah. So actually the easiest part was finding a tenant. Oh, really? Yeah.

So I have a friend who's a real estate agent, and he's a freelance real estate agent. I guess what are they called? Like a resale? Unemployed. Unemployed guy. Someone who did not go to college. That's terrible.

to say, right? Ouch. Yeah, we would never say such a thing. I didn't go to college, so if that means anything. Okay. I'm self-deprecating. So, yeah, he went out and found me a tenant within two weeks, and it was pretty easy because my house was, my mom's an interior decorator, so my house was very nice.

Nice. Very nice. Women were very comfortable staying over. You still live with your mom, right? I don't. But, no, no, but she seriously did help me. decorated. So I think that brought, like, the staging of the house or the condo, like, really helped me to get a tenant. So you're saying you staged it to get it rented.

Yeah, well, I didn't take it out. I've never heard that. Well, I was still living in it. So all the furniture, I just kept it clean for two weeks. Okay. And I had a person in there every day. And I worked from home, so I just would draw, you know, when someone who was coming over, I would just park my car down the block and just sit there and creepily watch them. And what did you pay, like, what do you pay, what do you pay a real estate agent to rent it out? Do you remember what that cost? The first month's rent. Okay. Okay. Okay, okay. Okay, cool.

And then did you manage yourself then going forward? Yeah, I've been managing everything. Yes. Okay. Now it's a new, it's only a five, the place is only five years old. Yeah. So there's only been a few issues with what's happened to it, you know. Maintenance wise.

Maintenance wise. Yeah, like the garbage disposal went. And when I say went, you just have to push a little red button on the bottom and put, yeah, that took two seconds. Uh-huh. And you know what's funny is I didn't realize that for the first, I'm not even kidding. For the first five years of landlording, every time that happened, I were, placed the garbage disposal.

I didn't know there was a stupid little red button on the bottom that you just press. To reset. Yeah, I probably spent $1,000 on garbage disposal and probably like 20 hours worth just replacing garbage disposal. So, you know, and I'm not a handy guy either, so I just

Google everything. So I go on Google, there's a little Allen key that like, he put glass in it. So I just unshifted it, there was like, you know, and it was like, turned it on. It's fine. Nice. And like a couple of things, you know, as far as maintenance, there's just a couple of things that I was able to do. It started

smelling really bad in the pantry closet. Was that because you were living there? No, they was completely... I'm just asking. I'm a bachelor. I had no food. I had the ketchup bottle and the mustard bottle in the refrigerator. Nice. Nice. Like, quintessential, you see that on movies.

That was really my life. You know what? One of the things that you pointed out, you said Google. Google is a real estate mogul's dream. There's a lot of stuff. It's not necessarily. Google but YouTube. It can save you a lot of time and a lot of money. Like I broke so many tools not going to Google or YouTube to try to figure things out.

And then you take two minutes and boom, all you need is a $5 tool to fix something. Exactly. Yep, exactly. Agreed. So I want to jump in here. So you're telling us all this stuff that's kind of boring. So let's get to the real stuff that matters. We want to know.

How much are you renting this place out? First of all, what did you pay for the condo? 180,000. Paid $180,000. and how much were you able to rent it out for? $1.50 a month. So less than the 1% rule that everyone talks about, which basically means the monthly rent is 1%.

The 1% rule says that it should be greater than 1% of whatever the purchase price is. So 180 would rent for $1,800 a month, right? So you're getting less than that. Oh, really? That's all right. That's all right. So because it's brand new, you don't have a lot of maintenance stuff, right? I don't know.

So the most important question is, do you get cash flow from this or does it cost you money to own it every month? It costs me $125 to own it. Okay. Because I pay the association. Okay. Now, ladies and gentlemen, everybody listening, this is why I continue to harp on not buying condos, not buying anything in an HOA. Association fees can destroy an investment.

Association fees, not only are these the regular fees that we're talking about, but the cool thing about condo associations is this. They like to come up with things that are called special assessments. The great thing about a special assessment is they can come up with one at any time, for any reason, for any price. So, hey, all of a sudden, you know what, we're not going to just have you paying $300 a month in HOA, but here's a $5,000 special assessment because we want to rebuild the roof on your building. Yeah, and that happens, especially like clearing out snow. Oh, yeah.

That's fun. Yeah. So condo investing is kind of dangerous in that you have, you have. a lot less control over those costs. Other costs are more predictable. Capital expenses and things like that are semi-predictable if you put the money in up front. But those kinds of fees can kind of be scary.

I'm curious also. So today, do you think it's worth more than you paid for it? Are you underwater? I'm underwater by the last time I checked, $8,000. Okay. So here's what I like about you, right? So a lot of people have a choice. And I'm not, you know, ragging on people who choose one way versus

And we're not busting his chops. We are, but, you know, I mean, we're not trying to pick on him about it. I can absolutely take it. Yeah, yeah, yeah. So, but I, what I like about you is that you could have just put your hands up in the air and said, I quit. I walk away. Yeah, I walk away. Screw this. Yeah, screw this, right? But you didn't, right? Like, you, you're going to take $125 loss, sure. But I like to think that over time, that price will go up, hopefully. I'm not saying you should go out and buy a property. Do not buy on appreciation. Yeah, but the fact that you are making good on it and learning a heck of a lot in the process is awesome. Can I share a story real quick on what I did recently in March?

Really, really quick. Okay, that was great. The next guess. I think I just did one breath. I'm like, all right, tell the story. So anyway, I was subsidizing like $250 per month.

So I've dropped it to $125 just for the HOA. And I refinanced in March, but I had already paid five years into it, and I did a streamline refinance, dropped my interest rate from 5.8 to 4.4.4. 5% and did not extend the term of my mortgage. Hey, really quick, can you explain what a streamlined refinance is?

From my understanding, a streamlined refinance is a way for them to come and refinance your home without, you know, there's no closing cost fees. They don't come out and assess your home. They are, do what do they, what do they call that? Appraisal. Appraisal, that's it, yeah. So it was very, all just paperwork. It was all kind of done over a fax machine.

Oh, nice. Yeah. And that's what I found. I mean, that's what I assumed it was. So I'm going to ask the question. The question is, you're bleeding money, not terribly, but you're bleeding money. Yeah. This property you've been holding on to, why are you still holding it?

Why not just unload it, you know, take your licks and move on to the next one? Because I think it can make money. It's a new property. And I think there is potential to make passive income from it at some point. But could you then not sell it? No. I mean, do you have any cash in the property left? No.

Okay. I'm underwater by $8. You're still upside out. Yes. So you're going to just hold on and wait it out. At least until, yeah, my mom wants me to. My mom is, he does live with his mom. I'm telling you, I love my mom, and he certainly loves his.

So my mom was my real estate agent when I bought the house. She worked for the company. Okay. And it's a nice property. She worked for a nice builder. No longer works for the builder. But, yeah. So she wants me to sell it and walk away from it.

And she also wanted me to refinance at 30 years. Yeah. And I said, no, that's going to cost me an extra. what, $13,000 a year for the total price of the mortgage. And I saved $8,000 by doing the streamline refinance and only doing it for 25 years. Because that just took advantage of the lower interest rate. That's all I want it. Yeah. I mean, yeah, you got a great low interest rate now. And I like to think, yeah, like you will probably come out ahead because real estate is a very, very forgiving asset class, right? Like, you can kind of screw up and you're paying a lot of money,

but over the long run, I mean, you're paying off the mortgage as well. And over the long run, I think you will do well from it. Now, and you learn to hold a whole. whole lot in this process that your next property will be a whole lot better if you buy another one. And, you know, the reason, I mean, you and I just met, I mean, we all met here, what, three days ago. And the reason that we wanted to have you on this show is because your story is the story of like millions, right, millions of Americans out there. Right. And I love the fact that you, you used real estate investing to turn your story from like a tragedy into something that's going to be a positive thing someday. Yeah. And so there's not always just, you know, I don't know,

I think just a positive outlook that you did and that was awesome. Thank you. And the other thing that's interesting about you is you're an accidental landlord. I mean, that's what we call it, right? So you're a guy who lived in a place and you turned it upside down and you're like, all right, well, how do I salvage this? I don't want to go and destroy my credit. I don't want to do all these things. I'm going to go and rent out the house and bring in some cash flow and basically do what I can to salvage it. Now, it's scary. You know, there's a lot of accidental landlords out there. and the problem that I see is most of them are unprepared for what's to come. Exactly.

And that's, I mean, that's why we do the show. That's why we do what we do is because we want to help people like you to try and take your situation. And can we take this and make it successful? You know, whether it's, hey, listen, I just got a job. I'm in the military. I bought a house. I got to move somewhere. Well, why would I sell it?

Maybe I can make some extra money or whatever it is. So it's pretty cool. So I know that I want to wish you a lot of luck. Thank you. I know it's, you know, I give you grief. Your mom's great. I haven't met her yet, but I'm sure she's awesome because you are too. And we really do appreciate the story.

Do you have any tips that you would give to somebody else who was in a similar situation to you? Learn to do it yourself. Google's a great tool, like you said, Romeo. And I think just, yeah, going in and YouTube has a lot to offer. I was able to watch a YouTube. YouTube video install a garage door opener. Oh, nice. I still can't do that.

I didn't actually go through with it, but the video was very interesting, and it walked all the way through it. Nice. Right, nice. You can teach me then. Yeah, I'll just, I'll send you the link, yeah. So I just think you should do it yourself. I don't think you should hire a company.

Now, I don't know if anyone has a special interest in this area, but the middlemen sort of, you know, there's companies that will handle the maintenance. You pay them a certain fee. Property manager. Yeah, I used to work for, thank you. for telling me the word property manager. Yeah. So that thing, yeah.

I would say, like, if you have one property, two properties even, try to do it yourself. But once you start moving up, I mean, I think obviously you would need something like that because there's a lot to handle. Nice. Nice. Awesome. Awesome.

We're going to come back and do our famous four for everybody at the end of the show. Cool. Hang around everyone, listen to the end. And before we go on to Romeo, I'm real excited. We got Chris Guthrie in the crowd. Everybody give Chris Guthrie a round of applause. Chris Guthrie, boost WP. Yeah.

He's a good buddy of us. All right. All right. We're going to talk to Romeo next. Romeo is from the Great City. Are you from Detroit? You live there now or what do you buy there? I was born and raised in Detroit.

I'm sorry. Right. Don't worry. All right, what's the great city? Yes. Are you living there still? You get real estate for like $1,000. Yeah.

You know that right. Is that a good idea? Definitely not. Yeah. But if you want to get started in real estate, $1,000, there you go. So I should go and buy a property for $1,000, because it's cheap. Are you trying to get me broke? I'm just trying to get you to experience.

Right. So $1,000. There you go. Absolutely. Yeah, that's a bad idea, people. Not that, like, if anybody here works for Detroit, for the city of Detroit, please do not shoot me. They wouldn't be at the Financial Blogger Conference.

Yeah, they would not be here. All right. So tell us about yourself. How did you get into a real estate? What did you get into? I really, I really believe in real estate, right? So just like Matt, I started in 2007, I purchased my, first property. And so right in 2009 is when I had to leave the area where I purchased the

property. And of course in 2009, it wasn't a great time to sell your property. I tried, but at the time that I tried to sell the property, I was underwater by at least $30,000. So I said, okay, well, what am I about to do? And I decided I wanted to rent the property out. Were you, because you're in the military, right? Yeah, I am. Were you serving at the time? I was. So were you overseas or the local? No, I was in Kings Bay, Georgia. Okay, so you were at least at a distance from your hometown. And when you decided to get into this, you didn't actually do a property in Detroit.

You did it in Charlotte, right? No, when I really got into real estate, so my first property that I purchased was my primary residence in Kings Bay, Georgia. Okay. Right, and then after King Bay, Georgia. So that was the accidental landlord. That was the accidental landlord, right? Another one. And then I got into something else, right?

So after the Kings Bay, Georgia for two years, I kicked myself. And then I say, you know what? I have to redeem myself. So I purchased this property, and I was $30,000 underwater. But I really believe in real estate as an asset class. So I start looking into what am I going to do next? Unfortunately, the next place I moved, I wanted to purchase a property there. But instead of purchasing the property there, I rent it.

Okay. All right? So I rent it, took the time to learn more about real estate before I can get into it again. And then eventually I moved from the next place. So I moved from Kings Bay, Georgia, and I went to Connecticut, New London area. And then from the New London area, I went to Charlotte. Nice. All right.

So in Charlotte, I was debate. Where's Waldo? Say what? I said, where's Waldo? Where are you at next? Exactly. So, oh, well, right now I'm not in Charlotte. I think it was like Carmen San Diego.

I was thinking the wrong, you know, childhood thing. But, yeah. So in Charlotte, that's when I decided that I had to, I had to, decide whether I wanted to rent or whether I wanted to purchase the property again. And of course, Charlotte is a booming area if no one knows about that. So I decided I was going to purchase a primary residence again in Charlotte. And I said, worst case scenario, I know all about this 1% rule. Worst case scenario.

If I can't sell it this time, at least I would be able to rent it and not be under water. So I want to ask really quick, again, on the accident of the landlord thing. I mean, so for you, what was that experience like? I mean, that's, you know, hey, I got this house. I'm going to decide to rent it. What goes through your mind? What, you know, is there fear? Is there excitement?

Talk about that. Your feelings. Your lady's here. She wants to hear you talking about your feelings. You really want me to talk about my feeling? Well, I do. I do. I was sad and I was sad and really.

Okay. No, the reality of it is it was easy to rent my property where I'm at. All right? So many accidental real estate landlords and military areas, they don't do too bad, relatively speaking, and I'm saying they will be able to find a renter. However, they don't necessarily find a renter that's going to pay their full mortgage, but they'll find a renter nonetheless. To subsidize the least partial.

So that's kind of what I did. So I said I just went the property manager route. I did go with a property manager that only charged 8% of the rent that was brought in. So it wasn't too bad. I started off and I was about $250 underwater. And, of course, like Matt said, later on, I did a heart refinance. And that got me to the point where I was only $50 underwater. Okay.

So at this point, do you have one or two at this point? That's just your first, right? At which point? Like right now? Yeah. Well, at that point in Charlotte. At that point, that was my... No, that was in Kings Bay.

Oh, okay, that's right. That was in King's Bay. Okay. Exactly. And then you moved to Charlotte. Do you buy one in Charlotte as well? I did. And I bought one in Charlotte.

I can't keep a... You live there. You rented the other one out. Yes, I did. It was a property manager. Okay. And what was that like? I mean, those two aren't near each other, right?

I mean, those are... Nope, it's not. So what's that like owning a rental property far away from where you're at? Because I've never done that. Right. So, again, so that's when I actually recommend a property manager. So if you are in the same area of their home, then it's great because you can go and check on it as long as you give your tenant's heads up. You can go there and you check.

You can do projects yourself when things occur. But I had to rely on my property manager. So my attitude was as long as my rent was getting paid and I was seeing my rent and my checking account, then I'm good. Yeah. Was that a good idea? Actually, it turned out not to be a good idea. Okay. All right.

So let's talk about this. that because that's, you know, one of the things that I like to rent and rave about. And a lot of people think, hey, I'm going to get a property manager. And, you know, as long as I get the rent paid, we're good to go. So really quickly talk about what else do you need besides just the ring getting paid? I mean, because other stuff can happen, right? Yeah, that's true. I think one of the things that you can do to leverage the fact that you have a property manager is actually have someone maybe a friend if you can't get to the area I have a friend that you trust go and check on a property through your property manager and at least twice a year go check on your property to make sure your property manager is doing their job yeah yeah and the key this is Brandon's wife calling by the way live on the air come on pick up you should answer it she is Brandon's property manager she is my property manager so that might be a maintenance request hold on put her on speaker for phone.

Hello? Put her on speaker phone. Hey, guess what I'm doing right now? On speaker phone. Honey, I'm home. Yeah. But we can't hear her. Yeah, you can't hear Heather.

So I will call you back later. All right. So while he's doing this, on the property management thing, guys, a lot of problems can happen if you're not taking the time and energy to manage the manager. And you're not taking the time and energy to really fully vet and interview these guys. And I think that's where a lot of, I know that's where I messed up on several occasions. You know, you want to be sure, you want to be careful, you want to know that they have good references from other investors that, you know, they're doing their jobs. And absolutely

what Romeo is awesome, you know, finding some way to check on them, even the good ones, to make sure that they're doing everything that you want to. Absolutely. So I want to turn it really quick and go to the flip. Yeah, you did a flip, right? I did. All right, let's hear about that. All right. So the flip. have happened pretty quickly. So I already had the rental property in Kings Bay, Georgia. I had the primary residence that I was living in in Charlotte. And I'm one of those guys to get bored. I'm bored and I'm like, hey, you know what? I want something to do. And I went outside one day, talked to one of my neighbors and we were just looking at the subdivision I was living in

and we were just discussing about how many different properties were available. So this was actually this year, 2014. Okay. All right. And so I learned, he actually has some real estate books for me. And I read through those books really quickly. And I went through the MLS and I said, you know what? I'm going to find me a property and I'm just going to flip it because I never did it before.

Nice. And of course. I said I needed to redeem myself for the $30,000 of underwater that I was in in Kings Bay. So what I did is I went on the MLS, found a property, right, through auction.com. Oh, nice. All right? So I don't know if you guys dealt with auction.com or not. I have not yet.

What they do is they list a bunch of foreclosures in your area. I found one that I thought that was interesting to me. The listed price was $86,000. Okay. And so I'm like, okay, well, what? do I have to lose. So I drove downtown Charlotte to the courthouse, and I was expecting that there was going to be a lot of people there looking for properties or looking for the same property that I was looking at. And so, come to find out, there was no one there bidding on this property. So you were bidding

against yourself? I was bidding against myself. Nice. So their rules is that you have to bid $50 more than their listing bid price. Okay. So that's what I did. And you got it. So, Yeah, 10 days, wedding, waiting period. And after 10 days, I got the property for $86,000. That's awesome. That's awesome. So you got this $86,000 property. Right.

Never flipped the house before. Never. What, I mean, what are you thinking? You haven't seen, you haven't been inside the property. I haven't. I wasn't enough. On an auction property, you don't get to see the inside. You don't get to walk in this thing.

That's the excitement of it, right? Yeah. You never know. It's like Christmas. It might be a newborn baby there. Who knows? Or something else. Dead bodies.

So what did you do? I mean, you walked in the house. Did you fix it up yourself? Or what did it look like, I should ask first? You know what? So when I went in, it wasn't too bad. So what I was expecting for $86,000 was a three-bear room, two-bath home. But when I actually went in there and walked through,

turned out it was a five-bear room, two-and-a-half bath home. Nice. Yeah, so I'm like, it is Christmas. Exactly. So like jackpot. Yeah, right? And so I realized that. I realized that after the initial walk-through, it was just cosmetic.

So the carpet was messed up, needed some paint, and then it was trash, so we needed to trash out. Okay. So my thought process was actually to call around, get some contractors, do some bids or things like that. But I ended up finding someone that does a turnkey rental, turnkey rentals and contracting and things like that, and they helped me out greatly. So it was ideal investing in Charlotte.

And so they told me that they can just do everything and all I had to say is go. Really? Exactly. Really? So they did all the work, all the contractors, they handled everything. Everything. What did that? I mean, do they just bid a big price or how did you pay for that?

No, actually, it only charged me $1,500 to manage it. $1,500 to manage it. Is it like a flat annual fee or what was it? No, that was just a one time, $1,500 to manage to flip. Okay, okay, okay. That's cool. Okay, so they managed, so they managed this. the entire rehab for you for $1,500.

That's awesome. That's right. I want to find that company. Yeah, that's not bad. What's up? And then the rehab cost turned out to be about $14,000. Okay, so you bought it for 86, and you got about $14,000 into it, plus the fees and closing cost, right? Yes.

Do you know what you have total ended at the end? He's got the computer. Yeah, I got the computer. Let's do it. So, total in and... It's loading, loading. No. That would be a PC.

I got it. There we go. So total in the end, I know what happened is I end up listing the home for 152-9. Okay. And I ended up selling it for 146. Wow. So the acquisition cost for was 104,000. What about your whole, how long did it take to do the whole flip?

Oh, so I purchased, I closed on the house 13 May. Okay. That's when I first purchased it, the rehab. began on the 17th of May. The rehab was completed on the 5th of June. So it was about 10 days. Wow. That's quick.

Right. And so we listed the house on 30 May. So five days before the rehab was actually the final walkthrough happened. And we contracted on the house on the 9th of June. Wow. So it was listed for four days. That's amazing. That's amazing.

And you're like, for everybody listening who's unfamiliar, flips typically don't go that fast. Like, I mean, really, you need to plan for these things. It sounds like everything probably went right, Romeo. But, you know, in many, and I'd say probably most cases, they don't. Well, actually, it was a cash offer. So I think that's what made the difference. Right?

So typically when you do a flip, you're doing a flip so that someone can move in it as a primary resident. But even dealing with ideal reality. the guys that manage my flip, they have a whole host of investors that they deal with. And so they went ahead and put it out into their network and someone came in and offered cash for it. That's awesome. So you said you had 104 into it. You sold it for 146. He made, what's that, $30 something?

I made about $34,000. So that was right. And I put my own money in it, right? Of course, to acquire a flip about $39. But still, profit was about $34,000. Man, that's awesome. Congratulations. If you do one of those a month, at $30,000, somebody do the math, that's not a bad year.

Yeah. So, before we move on, do you have any good tips? I mean, like, for other people looking to get into their first flip, I mean, what do you recommend people do that? Maybe you did or you didn't do right? I guess I recommend people research it, right? So you can never learn enough about this. And, of course, bigger pockets have a great forum for that. They have great...

We did not pay him for that. No, you didn't, right? And you also have that great guide, right? I say, what is it, the ultimate guide of flipping books? The book on flipping houses. Exactly, yeah, right? So make sure you go through that and then just take action, just go for it. But before you do that, of course, make sure you have enough capital so that if something goes wrong,

hey, it was a risk worth taking. Yeah. And reserves. I mean, you know, there's a lot of people who think, hey, I want to go flip a house and I got nothing in my pocket. What do I do? You know what? I'm going to do it anyway. That's right.

So what happens? Done that like 20 times. You may get lucky. You never know. Yeah, well, it happens, but you can run out of cash. You run out of cash and it's very scary. Yeah. Problems.

Problems. Right on, man. Well, very interesting stuff. Thank you for sharing that with us. Hey, no problem. If you own a large or complex rental property, congrats. And I'm also sorry. One day you're building a portfolio.

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Oh, yeah. That's why I want to hit them. So this is Casey from the Rochester area, right? Yeah, Rochester area. All right, well, tell us about yourself. How'd you get into this? And what did you do? All right.

Well, yeah, I did well with some internet commerce businesses. So I had money. Oh, can you hear that? All right. So I did well with some internet commerce businesses, and I had some money. I reached a point where I saw, I needed to diversify and, you know, kind of rounded out a little bit. So I started looking at real estate. I actually, I followed bigger pockets, of course.

I mean, as we all do. I did pay him, by the way, for that place. Yes. And, you know, went in the forums a lot. And I was looking at lots of real estate, lots of properties. But I kind of wanted to jump into the higher, I didn't want to be managing a lot of single units and stuff like that. So I was looking at like 24 units. I looked at a few that were up towards 50 units, nothing really higher than that, but I kept looking through the whole upstate New York area.

And upstate New York is, in terms of like price-wise, I mean, we're not quite Detroit, but it's, it's Rust Beltish, yeah? Yeah, it's interesting. It's definitely a cheaper market. Yeah, okay. Cheaper than Detroit? Yeah, well, not cheaper than Detroit. You can't get that for $1,000 in Rochester. Seriously. Well, so I looked for probably four years before I actually made my first purchase.

and it was kind of a, there were several that honestly slipped through my fingers that I should have grabbed looking back at it. And actually the very first place I looked at, I should have gotten. It was an amazing deal. But I just, I was too new and I had no idea what I was looking at yet.

And I think that's wise, right? I mean, like, you may have missed a good deal, but given the alternative, if it wasn't a good deal, you wouldn't have necessarily known it and you would have bought a bad deal, and that's as bad all around, right? Exactly. It's better to buy no deal than a bad deal, right? Yeah, I would have been sick, I think, because I just didn't know anything.

Yeah. So I eventually bought my first was a 24 unit. Okay. It was $1.4 million. Wow. And it has, it's good. It's, I don't know, I'm not the amazing, I don't know, there's guys out there who do real estate deals all the time. And they find the amazing deals.

This was more of a, you know, I was able to identify that they were, you know, they were inflating the price a little bit by not listing management fees and all that stuff. And, you know, I was able to look at it. were saying originally, oh, this is a 14 cap. And, you know, this is amazing. And I was able to, you know, after all the, all the stuff I'd look through, I just kind of knew, I'm like, all right, you're not including management. You're not including, you know, snow plowing. You're not including anything, you know, you're all, you're doing everything yourself and saying that you have a 14 cap with a full-time job, basically. And you know, this is a problem with, I mean, like, on the, on the webinar that I do every week for Bigger Pockets, I always talk about this is one of the

biggest mistakes people make in mind is they don't, I mean, and you didn't make it, right? Yeah. But the mistake is they believe the pro forma, which is the document, the sales document, right? They're like, oh, I'm going to believe exactly with the broker. And I'm not saying that brokers lie, but brokers are big, fat liars. And so trust but verify. Yeah, trust but verify, right? So I just want to commend you for that. Good job. Yeah. Well, I've been looking for four years. And of course, you know, following the forums and reading books and stuff like that. So you just, you know. So eventually, I got to a point and I talked to him. I talked them down. I think they're originally asking, like, I think 1.6 or something like that. So,

I didn't talk them down tremendously. So I got it for $1.4 million. And it's been one where it's, I mean, it's not like a cash cow. It's like in an A neighborhood, you know, great neighborhood. So it's one that I'm not going to get a big return on. But, you know, it covers its expenses and it's a nice, it's paying down its mortgage. So let me ask you a couple of questions. First of all, so four years is not an insignificant number.

A lot of people got to year one, year two, year three. They're out of this business. So to have the fortitude. to kind of stick it out. My question is, were you screening deals over those four years? I was. I was just kind of afraid to pull the trigger. I was screening. Well, I was afraid at first. I mean, honestly, the first year was more fear trying to figure it out. Okay.

But also, when you're looking at deals that are more, like, I think my minimum I was looking at was like a 20 unit up to a 50 unit. And there's not a million of those deals out there. So, you know, I was looking at every year, maybe eight deals a year kind of thing. thing. I mean, it's not like I'm looking, but there's not any more than that. That's pretty much it. Where were you looking? I mean, was this MLS? Was this LoopNet? Loopnet, I started getting in touch with a lot of, with some realtors and stuff like that. I started floating my name out there to people. This property actually was listed with a, with a realtor. Okay. And they didn't ever, ever listed on LoopNet.

Yeah. And I think he actually floated it to me because he knew I was looking. And he was, he eventually got it over to me. Nice. All right. So you buy this property. Yeah. Was it fully rented? What was the occupancy?

It's 100% rented. It's always been, I mean, it's in a great neighborhood. I honestly could probably raise rent. So it was fully rented when you purchased it? Yes. Okay, so one of the cool things about commercial properties, for those people who don't know, is something called forced depreciation. So you could actually increase the value of a property, unlike a residential company,

zero to one to four units that's that's going to be appraised based upon comps. A commercial property is going to be valued based upon occupancy based on total rent collected, not actual occupancy, but what you're bringing in. So the nice thing about a commercial property, if you could purchase a 24 unit that's got 13 units rented, you're going to pay a heck of a lot less than for a 24 unit that's got all 24 rented. Yeah. But that said, so now you've got this 24 unit. You've got rents coming in. Yeah. Did you put any money into the, to the upfront maintenance of the property?

Any cap-ex to improve it? I did a little bit. Well, and actually I should correct that where it was 23 units when I first got it. But they had a maintenance shed that had full water hookup and everything, and so I turned it into a 24. Okay. And that was really the only improvement I did. It was a pretty pristine, you know, managed by a guy who was doing it all himself. He'd been, he'd owned it for 30 years and he was just retiring. Nice.

Do you manage your, you don't manage it yourself, right? No, I don't. You don't hire a property manager. Yep, they do all of it. How has that been for you? It's been great. It's been great. It's a husband-wife couple.

And she kind of does all the rent and stuff. He takes care of the upkeep of everything around there. I mean, he plows it, mows it. They live in one of the units? They actually live in one of the units, yeah. Oh, that's cool. So it's not like a management company. It's like a resident manager that lives in a group.

That's cool. Are you giving them free rent? Yeah, they get free rent and $500 a month or something like that, and they take care of it all for me. That's awesome. I've had really struggled. I've had four resident managers and I've had problems with everyone. So you have any advice for me, don't hire the drunk. Don't hire the drunk.

That's good. Well, and they'd actually been there when I first got it. So they'd been there forever. And it was, I mean, they're a great. The husband's actually a cop. So I was happy for that. That might help. That's cool.

Yeah. That's very cool. Keeping crime down is a good idea. That's awesome. No, that's not the only problem. I mean, you bought even more after that, right? Yeah, so about a year and a half, close to two years later, I bought a 32 unit. Wow.

And that one was a better deal. It was another, probably a B-plus neighborhood, you know, not quite A, but good working-class neighborhood. No, this is the one you got a smoking good deal on, right? No, no. This is a. It's not. No, no, I had, so I bought a house for a smoking good deal. You hear about that. All right. Okay. But, yeah, the 32 unit was one where it was, I mean, it was, the rent was a little bit less. It was, it was still in a great area. But I got that one for $1.32 million. Okay. And, and it was, it's been a pretty good one. That one doesn't have like a resident property, but I actually have a friend nearby who, him and his wife manage it all for me.

Oh, that's great. I don't do anything with that. I don't do anything. that. Well, that's very cool. That's very cool. I mean, I think that's awesome. Yeah. So, you know, your company was doing well. Did you pay cash for these or did you finance them? I financed them. You financed both of them. Okay. And I think 25% down on the first one. And I think I had to go in higher on the second one because they were looking at my numbers and saying I'm leveraging a little bit more. So I think they end up going like 30, 35% down on the second one. So what's it like getting a loan on a commercial property? Getting a loan on a residential property is It couldn't be difficult, but getting a loan on a commercial property is a whole other ballgame, right?

Yeah. I don't know if it's that much harder or not. I guess it definitely, there was more stuff involved than, I guess, a regular house mortgage. But it was, it really wasn't that bad for me. I did, I think I went to like five different companies trying to get a good rate. Okay. And it worked that well. I was in an interesting bracket too where as far as commercial loans go, because if I had to gone a little bit higher, I could have. have gotten some amazing government type stuff. And I just barely fell short of that. But it was still good. Cool. Cool. That's awesome. I love to hear that story.

I mean, because, you know, I want to get into larger and larger units. So it's cool to hear you. And I love that you started that way. Again, that's why I wanted you on because I think people think you have to start with a, you know, a condo or a single family house or something. But you don't have to. I mean, if you can afford it, if you have the money, if you've been successful in other areas, there's nothing wrong with doing that. And I look at you, though, and you've done so many deals. I mean, how many deals have you done, Brian?

I don't know. I mean, you're hundreds almost. When you can't count anymore. Not hundreds. Like, you're like the deal, man. Like, I honestly, like, I look at it. If I really wanted to make a lot of money in real estate, it's like, you've got to start with the deals.

You got to start small and work your way up. And that's how, I mean, that's how people get humongous. Yep. Whereas my strategy is more of just rounding out my portfolio. Well, yes. It's not wealth creation. It's wealth preservation, right? Exactly.

And I think that's perfectly fine. I mean, if you can build wealth, I mean, honestly, you're probably going to build more wealth in a business that you own that you run, then you would in real estate. Unless you're flipping houses, and that's a business in itself or wholesaling or something. So, I mean, when you have the money, I think real estate is an amazing wealth preservation as well as it is in accumulating wealth. And the nice thing here is, I mean, first off, all these stories are different, obviously, but, you know, we all have a different strategy. And I think what a lot of newbie real estate investors think, you know, or even folks who, you know, have just kind of been around a little bit,

but don't necessarily know the direction that they're going in is realist. There's niches, there's strategies. What works for one guy isn't necessarily going to work for somebody else. You know, this is dependent upon your age, your risk tolerance, how much money you've got in the bank. You know, you go and you ask somebody, hey, what should I do as a real estate investor? If somebody tells you, well, you've got to do this. This is the path. Please do not give them a dollar, first of all.

Yeah. But, you know, listen and then and then think about what else there is because there's a lot going on. There's so many ways that you can go. And it's all going to be dependent upon you. So there really is not a single place to go, a single path for anyone to take. And we like to harp on that for people. You know, find your own path, figure it out and do what works for you. And listen, if that first deal doesn't work or if it's not going in the right way, try and pivot. and look at other directions to go. So this is really good. We've got to kind of wrap this thing up. Before we go, we've got our world famous. Famous Four. We've been done that in a while. We have not.

Yeah, we usually have the recording that does that. We've got like this, this is the famous four, and it's grenades and all sorts of craziness. But we used to do that. All right, so we're going to have you. I didn't see where your hands were, while you guys were making that high-pitched sounds. Yeah, now you can actually see us doing it.

It disappeared for a second. I don't know what happens. Don't worry about it. That was really. awkward. All right. So we're going to ask, all right, we're going to ask,

we're actually going to shorten the famous four, I think, because we've got to get off stage here. But we're going to actually ask just two questions to you, so it's the famous two, I guess. And that is, do you have any good book recommendations? Could be real estate,

could be business, whatever. And then where can people find out more about you? So why don't we start with Matt down here, who we heard from first? So you want a good book recommendation for us? Business or real estate. And where can people find you? Business or real estate?

Well, I haven't read many real estate books, obviously, from my situation. So I'd say, believe it or not, but I think business book, I would have to say, like everyone else, four-hour work week. I mean, that was, like, kind of the start for me. Wow. Yeah, what page you on, Josh? Huh?

I'll have everyone know here that four-hour work week. Josh brought it with to New Orleans to read on the plane, and then he just didn't read any of it. You haven't ready yet? Wait, hold on. It's like 10 years old. Let's clarify. Okay. I got on the plane.

and you sat next to me, and then you just kept talking, and talking, and talking. I think we were talking. It sounds like me. No, I can de misery. Yeah, so I am not quite done with that book. Yeah, you'll get there. Where can people find you? Where can they find you?

Listen, money matters.com. It's a podcast, and it's a website to talk about personal finance and all things money. Awesome, awesome. All right. Romeo. All right. Book, and then where can people find more about you? Of course, let me see.

Real estate book, I would say the millionaire real estate investor. I know people recommend that a lot. Gary Keller, I think. Yes, you wrote that yet. It is. But if you're talking about just a straight business book, then I would recommend the wealth number. The wealth number.

Okay. You never heard of the wealth number? Well, it's my book. Oh. Too far. But I'm bum. Nice. Of course.

Well, that's where people can find more about you. You have a website? Exactly. So the website is actually the wealth number.com. So you do realize you're not supposed to plug your own book, but whatever. You broke the rules. Rules are meant to be broken. Let's go to the next guy.

Casey. All right. Well, of course the wealth number. Wait, aren't you, you've got a quote on the cover, don't you? Romeo, he wrote the full word. He is an amazing author. And this book is fantastic from Josh. Exactly.

Well done. Once you're done with the wealth number, of course, Then you move on to the Bigger Pockets forums because who needs a book after that, right? Are you guys going to both send both your, be sure to send both your checks to my house. All right, and then, I don't know, I really like the E-Myth. I think the E-Myth was one that was good for me and my, I mean, e-commerce business is how I made about a lot of money. So, I like the E-Mith. Great, great.

Where can people find you? Casey, over at GenX Finance. GenXFINCE.com. Cool. Yes. All right, guys, this was great. This was our first live show. time I've actually gotten to record next to Brandon.

Amazing. Amazing. We didn't punch each other in the face. I thought something smelled over here. Wow. Right. All right. Well, I'm Josh Dorkin.

Signing off. All right, guys. That was showing 90 of the Bigger Pockets podcast coming to you live from New Orleans. God, those bignets were good, man. Those were good. Those were amazing. Yeah. Yeah.

I got a recipe. I got a recipe to make them at home. Did you buy the box? No. I didn't, but I bought a postcard that had the recipe on it and I sent it to my wife. Oh, nice. S subtle hint to her. Yeah, yeah, yeah, yeah.

I was going to buy some at the airport, but I don't know. Well, anyway, guys, listen, hopefully you guys like that. We wanted to mix it up a little bit and try something new and hopefully the live in-person show worked for you. But if not, go back and listen to the other 89 shows that we've got that weren't live and there you go. But anyway, just want to thank everybody for listening. We really appreciate it as always. And of course, make sure to follow us on Facebook, Twitter, Gplus, LinkedIn, Pinterest, all over the place. If you don't already have an account on BiggerPockets, please sign up today, get involved and get to hang out and meet lots of great people like our three guests.

And that's pretty much it. Check us out on the show notes at BiggerPockets.com slash show 90. ask any questions you've got there. And we'll see you next week with show 91. Thanks for paying attention. Thanks for being a part. And good luck to you guys. 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,

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