BiggerPockets Real Estate Podcast - 95: Multifamily Investments, Partnerships, and Raising Your Kids to Be Entrepreneurs With Curt Bidwell

Episode Date: November 6, 2014

If nothing else, investing in real estate is an adventure, as well as an ever-evolving learning process, where you can alter your focus to align with the needs of yourself, your clients, and your family. This week on The BiggerPockets Podcast, we’ll learn all about what it takes to branch out in your real estate investing endeavors with our guest Curt Bidwell.  Curt’s first real estate opportunity arose while he was working as a pastor, when a few good friends asked if he wanted to partner with them on a local fourplex. Since then, he’s acquired quite a portfolio of real estate, including sixplexes, duplexes, new construction, single family homes, townhomes, and mixed properties. He’s done it all — and now he’s even gotten his kids involved! Listen for interesting tips on how to creatively invest, the best ways to find good tenants, as well as how to encourage your kids to get interested in finances and real estate along the way. In This Show We Cover: What makes a good partnership How to get started with mixed rental properties Ways to keep your children motivated and setting goals Where to find the best commercial locations to increase your real estate value The positives of renting out large family homes How to choose whether you should have in-house management for your multi-unit rentals Methods to teach your children to be financially wise The best ways to go about obtaining lines of credit for your properties Ways to creatively invest and finance your rentals What exactly a 1031 exchange is Helpful tips to finding a good location manager How to work with local commercial lenders Best ways to screen your tenants And lots more! Links From the Show BiggerPockets Success Stories The BiggerPockets Forums Books Mentioned in the Show  Rich Dad Poor Dad by Robert Kiyosaki Gary Keller’s The Millionaire Real Estate Investor Thou Shall Prosper: Ten Commandments for Making Money by Rabbi Daniel Lapin The Effective Executive by Peter Drucker Connect with Curt Curt’s BiggerPockets Profile Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 95. 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. 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. host to the Bigger Pockets podcast here with my co-hosts, the man, the myth.

He's pretty much a myth. It's Brandon Turner. In fact, there's actually a threat about Brandon Turner, which is really funny asking like, how does this guy do all this stuff? Is he real? Is this a real person? Not. Yeah. I'm fake. This is actually Josh talking to himself. Yes. Yeah, you just have that really, really quick voice change. Yeah. Yeah. Good job. Hey, guess what? You're going to be really proud of me. I'm looking forward to hearing this. What's up, dude?

Here's what happened. So yesterday, I officially handed over my first two properties ever to property management. All right. I know I'm not the only one listening that doesn't believe a word out of his mouth. No, I've been talking about this for like seven months now. I finally took two of my properties, though the 80-20 rule of two that gave me the most trouble. And I handed him over. And the lady's like, sure, I can take him, no problem.

Oh, man. Amazing. That's awesome. Do you feel like the weight of the world off your shoulders? I feel a lot better, yeah. It's getting better already. That's awesome. These are the two problem properties.

That's awesome. And well, congratulations. That's great news. And anybody else listening, if you have problem properties and you're tired and you're driving yourself crazy,

you might want to consider the same thing. There you go. Yeah. That's our quick tip for the day. That is a semi-quick tip. Yes. Yes. No,

today's quick tip is success stories. Quick tip. Quick tip. I had to say it. Yeah, there you go. All right. Today's quick tip. if you're out there doing deals and doing business, share your success stories. Not enough people

are doing this. And I really don't think you guys understand the value of this. The people that I talk to who do this, they send me these private messages and they're like, Josh, I got to tell you, sharing success stories was a really good idea because now I have like five more people who want to do business with me. Success breed success. When people see that you're out there doing business, that you're being successful, they want to be with you. They want to be successful a lot of They want to be with you. Whatever, man. They want to do something.

But yeah, they want to be successful as well. So. Oh, chikawao-wow. Sorry, go. All right, keep it clean. This is a family show. We have a minister on the show. We do have a minister today.

So that just crossed the lines. I'm offended. I'm deeply offended. I believe you are. Go ahead. Share your success stories. We have a forum. It's the bigger pocket success stories.

forum. And there's a shortcut to it. It's biggerpockets.com slash success. Go on there, share your success stories and just let people know, you know, hey, I just closed this deal. Hey, I just found a partnership. Hey, I just did this. And I tell you what, in time, that will prove to help you in your business. So hopefully you'll do it. Yeah, that's today's quick tip. Yeah. Yeah. Brandon, I know you've got a very, very, very, very fast pro tip. Yeah. My pro tip of the week is if you have not yet uploaded a video introduction to your profile, and if you don't even know what that means, it means on your profile, you can put a video introduction of yourself talking and saying, hey, this is who I am, this is what I do, I'm the real deal. And it builds your credibility and builds trust in a way that a

one inch by one inch photo on the site can never do. So I'm seriously, one of the best ways to build credibility is just make a quick one minute video yourself post it. So if you have any questions on how to do that, go to bigger pockets.com slash profile video. And we're going to do a redirect to the correct page that'll teach you how to do that. Fabulous. Fabulous. Right on. All right. So today, show 95, we've got a really, really great guest. We've got a man named Kurt Bidwell. Kurt lives up in next to Podunk. He lives right near Olympia, Washington, I believe, near Brandon.

And Kurt has been around since 1990 investing in real estate. He's got a really, really cool story for us. He's a buy and hold investor. He's done a lot of great deals. And to me, the thing that was the most exciting is how he got his family involved in the business, how we get his kids into real estate. It's fascinating and interesting and something I want to emulate.

And so definitely some cool stuff. We also get into some high-level stuff. We talk about mixed-use properties and some commercial real estate. So there's certainly a lot of great stuff for the newbies, but there's also a ton of great stuff in here for folks who've been around. So, you know, pay attention.

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Baselane is a financial technology company and not a bank. Banking services provided by Threadbank, member FDIC. And let's bring them on. All right, Kurt, welcome to the show, man. it's great to have you here. Well, thanks so much. I was real privilege to get asked. Awesome, awesome. Well, Kurt and I met, it was at the Washington Landlord Association meetup, right? Right. Yeah, you heard me talk for a little while, and then you came up and I realized you knew like a thousand times more than I knew, and I was the one talking. So you should have been one up there speaking, but you know, you get your turn today. Nice. Yeah, cool. Well, why don't we start to the very beginning? How did you get into real estate investing?

Wow, getting involved in real estate was really unintentional. It's been interesting listening to a lot of the podcast, realizing a lot of guys got in accidentally or just through a bunch of circumstances. And that was me. I was in my mid-20s. I was a youth pastor. Oh, really? Interesting. Two of my good friends, we had lunch every week, and one was a realtor.

The other guy was an Army recruiter. And they sat down one day and said, hey, we're buying a fourplex. You want to join in with us? And I was like, well, I don't have any money. I'm a youth pastor. And so they say, well, that's no problem. We've already put the money down. And so when it makes money, your portion will go back to pay your share of the down payment.

And it's like, well, how do you say no? Yeah. Interesting. So we bought the place. And a year later, we refinanced it and took cash out. So I was able to pay them all back their share. And at that point on, we've been equal. Wow.

Wow. I'm fascinated by this. I have yet to hear somebody use this model, so I've got to find out more. Why do they need you? Why are they asking you? What do you bring to the table? You knew nothing? You're a youth pastor.

I mean, maybe you bring the big guy down to make sure that things don't go wrong. But beyond that, what did you bring to the picture and what was their incentive to have you on board? Oh, that's a great question. I think you've got to ask them. I'm sure you've asked them before once or twice. In reality, I had some business since. Okay. I was pretty frugal.

Some people call me cheap, but it's frugal. And I knew how to take care of my own finances, and some of the guys on the team weren't as good as some others. And so, you know, one guy was a realtor, he brought the deals. The other guy brought, you know, some maintenance and stuff. And I handled the finances, the money pretty much. And as we grew together and in the business, I realized I had some other abilities and aptitudes and working with the tenants and the people and that kind of thing. And so it was a good relationship.

Nice, nice. And in terms of working off your share, that's a really great idea. I mean, you know, you come in with nothing but, you know, your efforts. And I like that. What would you think about that, Brandon? I mean, you do a lot of partnership deals. I mean, how would you feel if one of your partners said, hey, you know, you're in 50-50. I'm putting down 85K.

you'll get your 50% share when you work the 85K off. It's interesting. I mean, in a roundabout way, that's how I've structured a lot of my partnerships in that, you know, I don't put in anything and they put in. But I typically don't hear from a newbie standpoint, you know, like getting started without a lot of experience and stuff. So I think that's cool. I mean, whatever you can negotiate to get to working. And it worked, obviously. You guys refinanced it.

Well, the irony is the first guy went broke and we bought his. shares out. And so the two of us have been partners for the last, I don't know, 10, 12 years without him. And now my other partner's getting ready to retire. And so we're working out a buyout plan right now that will probably culminate the end of this year. And so here I am the least experienced. And yet I'm the one carrying on and moving forward. So that's kind of fun. That's great. So that's great. Yeah. So my question is about partnerships. You know, like we talk a lot about that. They're very popular topic. So maybe I can just ask you some general questions about your partnership. First of all, I mean, what makes a good partner in your

mind? I think guys that have a common value system, if you're not headed the same direction, you're going to struggle. And I think the three of us that started together had a lot of that. And with the one partner, you know, we've been together for 24 years and we're still friends. But there have been some ups and downs. We've had moments of disagreements. But we each play our role and defer to one another, and that's been pretty helpful. Yeah. Yeah. What the rocky times, what usually leads to that, at least in your experience?

Expectations. Okay. You know, one guy comes with a certain set of expectations and they're not lining up with somebody else's. And so be that financial, be that workload, you know, whatever it is, you know, when those things don't congeal together, then there's going to be some, between you that got to be talked out. Yeah, is there is there a way to avoid that up front? Well, some of it I suppose. I mean a good partnership agreement helps to define what those

responsibilities are, but as you move forward you find at least in our case because we started out together as really rank amateurs and not really knowing like they say we didn't know what we didn't know. Right. And so we grew together with some of those things. And as that developed, I don't know that a partnership agreement would. have resolved everything, but certainly it does define what your specific roles are, and that's important. Gotcha. Yeah.

So do you do all your deals with this partner, or do you do anything on your own? The greatest majority of my properties are in this partnership. I have two other partnerships, and then I do have some of my own property. Okay. The other partnerships are pretty minor. Okay. So can we go back a little bit, and I think we definitely want to get back to partnerships again, but what kind of properties have you invested in?

Just about everything. We started with a fourplex. We sold that, moved up to a sixplex, which was three duplexes on one parcel. We added two more duplexes. And then we sold those out and bought new construction down in our own area. So we have single family homes. We have duplexes. We have some town homes, basically duplexes, but they're separate parcels on each side. We bought several of those when the market was really skyrocketing in 2003, 2004. And after accumulating some of those, we sold off a portion of those in order to buy mixed-use property out in Shelton, which is 38 apartments. And then it has some retail office on the first floor in a restaurant space. Nice. We kept that for a year, two years, refinanced it, took cash out of that and bought 24 units, all two-bedroom one-bath units. And so a little bit of everything, a little bit of commercial, not so much that, mostly resident. single family as well as apartments. And was there a plan?

Was there, hey, we're going to catapult one to the next, the next, to the next? Or was it, hey, let's just find the next deal, figure out if it looks good regardless of what it is and kind of go from there. I mean, you didn't have a, hey, we want to step up, step up, step up, plan, or did you? Originally, no. I mean, when I say we started as rank amateurs, or really did. Yeah. The realtor we were working with, a great guy. I love him still today.

They moved off to some warm place down in Florida, the opposite side of the world from us. But it didn't get a lot of education from him or from a real estate. I learned about landlord. He didn't learn about real estate. And so I got to a point where I was looking at my own self saying, okay, if I was retired today on today's dollars, what would I need? I had half of 10 units, so I had five units. What else did I need? And I decided, well, if I had two more duplexes, we'd be all right.

And so I went looking for him. Gotcha. And I found a gal who had some incredible expertise in real estate, in marketing. She had experience as a landlord. Her husband was a builder. And so she had all these dynamics coming together. And when we sat down and talked with her, we began to realize there's a bigger picture here. And we're really missing out.

So your initial goal, it seems, then, was to aim for retirement. I mean, you were getting into real estate with the purpose of going for retirement. Exactly. As a pastor, I had opted out of social school. security. And so I didn't have that to fall back on other than my non-ministerial activities. And so that's pretty minimal. So I'm looking for other ways to say, okay, how can I care for my family down the road? Gotcha. Yeah, gotcha. And I think that's important too because, I mean, nobody knows what it's going to be like, but there's a good possibility we won't

have Social Security when I'm, you know, that age either. Like a lot of people our age might not have it either. So I think that's a good way for everyone to look at it today. I mean, if it's there, it'll be icing on the cake someday, but I kind of take the assumption that I will never get Social Security, because it'll be bankrupt before then. And maybe they'll fix it, but I don't know. So, and I think that's a cool way

looking at it. So I want to ask just so people have an idea, Shelton, you mentioned Shelton, that's where you live. Now, I know where that is, obviously, because I'm from out here. But for those people who don't... That's in the middle of nowhere, I'm guessing. Yeah. Well, here's the deal. Is that POTONK, Washington? Is that what that is? No, that's where Brandon's from.

Right. Okay. But it's right next store. I live in Olympia. That's the state capital. Shelton's 20 minutes from me right off of I-5. I-5 hits from Vancouver, Canada to Mexico. And when we were trying to refinance this thing last year, I had banks literally tell me it's too far off of I-5. And I said, well, it's 20 minutes. And they would say, yeah, but it's a long 20 minutes. Nice. That's exactly how I think about Shelton. I'm like, it's only a half-hour drive from my house, but it's a long half hour job. There you go. Interesting. Well, the reason I, well, the reason I bring that up is because, like, I guess I want to know, like, pricing in that area because, again, Olympia is very, very expensive compared to Grace Harbor, maybe not compared to a lot of places.

But, you know, how does Shelton compare with Olympia more of a busy, more expensive area? Well, yeah, definitely. It's a smaller market. I mean, the town of Shelton is probably eight or 9,000 people proper. You got over 100,000 in Olympia Lacey, Tom Water. So it's a bedroom community. It's a retirement community. A lot of low income. It was hit big with the timber industry years ago when the major decline.

So, yeah, it doesn't have the draw, the attraction out there. But this being a commercial property still has some value, and we've been able to increase value in it. Nice. Okay. Nice. So you started with multis. I mean, you just hopped right in, obviously. there's a whole story behind it as we discussed

and really kind of went from there it sounds like you didn't really ever go back to single family it sounds like you pretty much stayed with the Maltese unless I can get in it wrong yeah when we made the transition from our original properties up in the

Tacoma area that Brandon would be familiar with when we bought our new construction we had a mix of single family and duplexes okay and then see that's 2003-2004 literally within nine months of buying some of those, we were refinancing because the market was growing so fast. And so we took money out, bought more duplexes and single families. By 2006, we sold about half

a dozen or more of those and bought the multifamily. But your purpose has always been cash flow, right? I mean, you're buying this for cash flow. You're not flipping houses. You're not wholesaling. You're doing buying hold, correct? By and large, yes. I've always had the mentality. I wanted to do some flipping, but I buy something and then I fix it and I keep it and I rent it. Nice. You know, so. Yeah. Yep.

And so of the different asset classes, the multis, the new construction, the townhomes, the mixed use, which has been your favorite and why? Oh, for different reasons. I got a little house that's just been a real fun house. I'd love to tell you about that in a minute. My preference is to have the multifamilies, larger multifamilies. Okay. And if I could trade all my smallers into larger ones, I would probably do that. The reason being is it's consolidated.

I have more control over the. value as I control the rents and expenses and for management purposes and so forth, I think I would like to see. And this has been changing even the last few months. It's been doing some reading and even on the forums getting some input. I had this mentality. I need a 150, 200 unit complex. And as I've done a little reading, I'm thinking, okay, maybe more in the 50 to 75 units,

two or three or four of those instead of one single. And so, you know, I'm still developing and growing and my thinking about where I want to be. Gotcha. Gotcha. I'm curious. I want to hear about that single family, but I'm going to ask you a couple more houses. So somebody hold on to that thought. First, do you have in-house management?

I'm assuming on the big multis? Only on the Shelton unit because it's out there. And the design of that property is kind of like a dorm. It's all interior studio and one-bedroom units. And so we do have a live-in manager there who takes care of just everything. She does a fantastic job out there. I did have management on the 24 unit when I was working full-time. And the problem was I had five empty units and wasn't getting them filled.

And so when I left my position, we let her go. And now I usually only have one or two empty and things are running a lot smoother. So how many do you have right now total units then? About 85. Okay. So, go ahead. Go ahead. Well, at some point of the show, I want to talk about how you do that.

Because, I mean, I have, you know, half that. And I go crazy. Like, my wife works full time and I go crazy with the, with the, so I want to know how you do that. We'll talk about that maybe a little bit. But Josh, did you have something or? Well, you know, he had mentioned going with the three smaller, well, you know, 60, 80, whatever units versus, you know, a 300 unit. Why would that be an approach that would be preferable? I'm just curious, you know, what were people on the forum saying?

And, you know, I guess for the listeners, what does that make sense for you? Well, later on, you're going to ask about books. And one of those is Marketopoly. And he had some interesting ideas about some of that. And some of the other reading, just liquidity of a smaller complex versus a really big one. Okay. It is one big issue. And then just diversification.

Okay. Okay. So primarily those two things. Okay. Fair enough. Fair enough, Brennan, I know you had a... Yeah, so I'm just curious, I mean, how do you do it? What do you do? Do you still show units yourself? Are you doing repairs yourself?

What all do you do and what don't you do? I do everything I like to do. I have a good answer. What does that mean? Yeah, I do most everything. I got to understand that with our houses and townhomes, those are mostly new and like new. So I have very little maintenance. I have a higher quality tenant.

I've got professional people, state office workers, so forth. And so I don't have to babysit those. I get a call occasionally. When somebody moves, obviously you're going to do some turnover. And so that's not a big deal. The apartments, I've got a little lower class clientele. I do have Section 8. We put about 30% Section 8 in those.

I have a couple of other situations, community use services that we've given a couple units to and some of that kind of subsidy. But, you know, some of it's mentenet. It's tolerance, its ability and interest, and how I interact with people. And by and large, I don't find it a big burden. That's nice. Yeah.

And I think a lot of it is I feel like most of mine are like your Shelton property, probably. You know, like they're all one-bedroom studios. I got some two-bedrooms. And they're very management intensive. So, yeah, yeah, Josh, play the violin. So I like, oh, I like what you did, right? Like you, as you, like, grew, at least it sounds like you got higher. quality. I mean, I don't know what your original

Foreplex was like, but it sounds like you diversified into some nice, nice properties. We were having drug busts and all that out there. That's always fun. So you as I tell people, I've seen I think I've seen almost everything and the next week something else happens, but you know,

I've got the hoarders that should be on TV. We've had drug addicts. We've had prostitutes. We've had gun running, meth labs, suicide attempts. Way to go, pastor. We try to work with them, you know. Best and brightest tenants, don't you? Yeah, we work with them all, you know.

But, you know, sometimes we have bad days too. And so... Because a prostitute is kind of a bad day. No, no. Wow. Okay, so you... Okay, so you are at least getting higher quality just to bring us back in. You're getting...

I mean, as you grow throughout your investing kind of career. And I like the fact that earlier you said you're still developing. You're still growing. Yeah. Right? Like, I love that. Like, I don't know. I feel like...

I don't hear that, like we hear it on bigger pockets, but so many people in the world that like, they have this like, I'm, I've reached it, you know, right? Like, I'm there mentality, especially with guys who are teaching and talking, like, you know, I've made it. Well, I was surprised when you called me. I mean, I'm not a professional. Well, I guess I am technically, but I'm not a realtor, never have been, never thought I wanted to be. Still, not sure I would want to be, but I've just done it. It's been a part of my life and developed a love. Yeah. Well, according to the IRS, you probably are a professional, right? I put more than the whatever it is, 700 hours, so yeah, I could probably claim it. So you are definitely a professional. You are indeed. Well, that's true. And,

you know, one of the things for us is this. You know, for those of you guys who are listening, I don't think we've ever actually talked about our philosophy. And I know it's kind of kind of cut out a little bit of your time, but I'll do it really quickly on who we want to bring on to the show. We want to bring it. We don't want to bring on some guy that everybody looks up and is like, oh, okay, I can't even imagine getting to that point. You know, we want to. We want to to bring on. We want to talk to somebody who just did their first deal to somebody like you who's got 80 units to somebody who's got hundreds or thousands. And our goal is to really help people understand how they built their business, how they grew. And I don't think there's been a show,

you know, you can tell me if there has been where I haven't learned something where you, you know, there's always a takeaway, no matter how experienced you are. And that's what we try to do. We, We think anybody and everybody we want to talk to can share something that anybody and everybody can learn from. And frankly, if you were the guy who said, I know everything, there's not a chance in hell I'm going to bring you on my show. We don't want to interview you if that's your mindset because, you know, we want people who don't think they know it all because I don't think anybody does. Right. So anyway, all right, well, let's hop back to partners. You know, we talked about what makes a good partner. Why partner? I mean, at this point, it seems that you're probably fairly successful. You've, you've probably done pretty well for yourself in the real estate world. Why do you continue to bring on partners versus going at it alone?

That's a great question because I was asked that this morning. I actually had a had coffee with a BP guy from up in Seattle came down. He told me to ask you that question. He asked me if I'd partner with him and I smiled at him and I said no. I'm in a stage where I'm moving out of partnerships because I'm at a point where I don't need them. And maybe it's because I'm too controlling and whatnot. And part of the reason a partnership works is because one guy can say, this is the way it's going to be. And everybody else says, yeah, okay. And I was kind of that guy. So, yeah, I'm phasing out of partnerships at this point.

And I have a partnership with my son. I have a partnership with another really good friend. And that's it other than this major one that we're going to be buying out of. probably by the end of this year. Nice. Nice. So I'm going to interrupt the whole flow that we had here because you mentioned your son. And I have been told that you've got a 15-year-old.

And I've also been told that not only do you have a 15-year-old, but you have a 15-year-old who's actually done a real estate deal. Yeah, yeah. Okay, so we've got to hear about that. Well, he's not 15 anymore, but that just means the story has developed and gotten better. I told both of my boys when they were young, I said, you know, they'd watched us grow up with these properties and they've seen some of the benefit. And so they want to buy property. You know, kids want to imitate the parents. And so I said, when you get the money for closing costs,

we'll go look for a deal. And so both of my boys ran businesses. One had a bounce house that he rented to parties and events. How old was he when he had a bounce house business? Oh, I think he was probably 12 when he started. Wow. He did that until he went away to college and we sold it and, you know, he went on to other things. But he's now studying to be a doctor. But my younger boy, he started mowing lawns when he was about nine. He had a lady in the church he'd give him seven bucks in a candy bar. And that was his start. And we went down to, you know, the big box store and he bought a lawnmower on 90 days same as cash and had it paid off in two months and mowed for the neighbors and wherever he could. He got a contract with one of the developments

that we had to do the homeowners association. They found out he was only, I think maybe 11 at the time, and they fired him. So he was kind of It's discrimination. Absolutely. But we learned some stuff about contracting, and learned that a kid

under 18 can't sign a contract unless he owns a partnership or a business or corporation. Oh, interesting. And so as they got a little older, he'd have saved up his money and he had all his closing costs down.

Guy that used to do my computer work, they were selling their house. His wife had gotten an inheritance. They paid off that house and put money down on another one, but the house needed some work, and they weren't suited to do the work, trust me. And he was good with computers, not other things in life.

So I said, well, you know, have you thought about carrying a contract? And they just kind of stared at me, said, what's that mean? And I said, well, you become the bank. And they said, well, we don't have any money. I says, no, your house is the money. Yeah.

And so I just took out, you know, the yellow pad and started right in the way. I said, well, here's a possibility. Here's your value and here's an interest rate and here's what we'd pay you. And, you know, in three years we refinance it or sell it and you get all your money. And we came back again a couple days later and kind of spelled it out more specifically. And they said, yeah, we'd like to do that. So we had this two-bedroom, one bath bungalow, 720 square feet, and we agreed on $150,000 for it. And we moved in the week before closing and started renovating, tearing out the ugly carpets and painting the pink walls and everything.

And we stuck it on Craigslist, and I got slammed with calls. We had the thing rented in a day. Wow. And so this was a 1925 home that had been put on this lot in the 1950s. and they put it on a full basement that had its own entrance from the back. Are you saying they actually physically moved this 1920s home onto the lot where there was a basement already existing? Yeah. Interesting. Okay.

And so as we're walking away from the home for the first time, and my son looks at me and says, Dad, look over there. I says, yeah, what about it? See that door? That's another unit. Wow. This is at fit. And this was at 15.

Exactly. Sharp kid. And so we spent the next year working on the basement together. We had a framer come in and framed it out for us. And then we strung wires and plumbing and all the different things in there. We got it ready. And we got the basement rented out in addition to the upstairs as two separate units. It's kind of unofficial.

Now we've got two people that are related to each other in there. It's working out great. And so over the years, three years went by, we got into the downturn of the economy. We were supposed to pay them off. I sat down with them and I said, well, you see what the market's doing. It's not worth what we even paid for it. You know, you can take it back or you can extend the note. Well, they didn't want to take it back.

So, yeah, we'll extend the note. I said, I really want to go out five years this time. But we're going to, instead of paying your interest only, we'll pay you a full amortized payment. So we went from like 500 to 750. They were excited about that. Well, unfortunately, for them a year later, they split. And so now they want their money so they can go their separate ways. And so I said, well, you know, we still don't have the value in it.

And I'm talking to brokers, mortgage brokers and so forth. And we can get about $120 for it. So if you want to apply all the payments that we've made to you towards principal, basically do a discounted payment, we can get you $120. And they jumped all over it. They were excited. It worked great for them. So this time Riley got it financed in his own name.

because he was old enough at this point. And he got 30 years at 3.75. His full principal interest tax insurance payment was less than we were paying before with just the mortgage payment. And so with the income that's come off of that, we put a new roof on it. Just this week, we finished reciting it next summer. We plan to put a garage on it. And, you know, it's gone up to about $18,000, $90,000 value today.

Wow. So I say it's been a very fun house. So how do you do that? I mean, not the house part, but how do you get your kids to be financially wise? How do, you know, I've got a couple little girls and I definitely want to train them to be entrepreneurs as well. And, you know, I'm sure there's lots of people listening who are in the same place. So what did you do? How did you get your kid mowing lawns?

How did you get your kid, you know, doing all this, you know, bounce house business and everything else? Well, our home has been a home of entrepreneurs. My wife is in direct sales and does very well with that. And so they've grown up seeing us with the properties. They've seen her busy with her stuff and my activities in the church and so forth. And so they've grown up watching these things take place. We talk about money in our home. I never hid things from them.

They knew how much our mortgage payment was. They knew how much money I brought home. It was never a secret as they got older and rich dad came out with his stuff. I got him rich dad for teens and made him endure that. And, you know, they learned from that. And they developed a desire and a mentality that said, we can do something. We never told our kids no unless we really met it. Yeah, yeah.

And so if they said, hey, can I go do this? Well, yeah, you can. Yeah. But there might be some costs and consequences. So consider this. And so, you know, when they're paving the street out front, they ran out there with the lemonade stand with hot dogs and chips. Nice. Smart.

Smart. So it just kind of grew for them. Yeah. Being open about what they could do and giving them permission to do things that weren't necessarily standard. Yeah. But didn't have a reason to say no. Yeah. When I'm driving them around mowing lawns or taking them to do a bounce house rental,

I made them do the interaction with the client. And that helped them grow and mature and get experience in those areas in a, you know, a controlled environment. And so they grow up with some confidence that way. That's awesome. That really is amazing. And I know I came from a family of entrepreneurs and my family came from a family of entrepreneurs. And it's kind of brought itself down. I wonder how much of a challenge it is for somebody who was not raised in such an environment. And so I think a lot of the feedback that you gave just now was really, really priceless in terms of what you can do.

I guess for anyone listening who may not have the entrepreneurial background, do you have any other tips that you think might be helpful? Oh, I think developing relationships with your kids, you know, outside of even the home in that business environment really helped a lot. When I'm driving my kids to their activities, we're talking about how it's going to work, and we're talking about other things about life. And so, you know, my kids, I can brag about them. They never really rebelled in the classical sense. And I think because it was those interactions and giving them a purpose, I would say graciously that I thought one of my boys was either going to be a great successor in jail. Nice.

Because he was so aggressive and he was, you know, we had to stay ahead of that. And we had to give him purpose and direction and creating a positive direction for him where he benefited from it as well as benefiting other people in the process, I think really helped him. That's fantastic. That's really, really great. What age do you think is appropriate to start, you know, that train? I mean, from the time they're a baby, I mean, like, do you wait until they're 10? I mean, where do you begin that process? Well, my youngest son, both my boys played T-ball, and, you know, they had to sell candy bars.

And everybody hates selling candy bars. But there was a bike to be earned. And so my younger boy, he walks up to the lady and he says, now that bike that we're going to win if we sell 10 boxes, is it a new bike? It was innate. I was a youth pastor. I didn't have big income. We shopped at the garage sales and whatever, you know. And so he saw that new bike and he had a goal.

And my boys never saw obstacles. They just saw the goals. And the obstacles, you just work your way through them and you get to the goal. And so he stood out in front of Safeway for eight hours at a stretch. And when my wife would say, are you tired? He'd say, how many boxes are left? Nice. That's cool. And so, you know, giving them goals,

giving them purpose something that they're going to benefit and win with. Yeah. And you know what? I think that applies to adults as well. You know, a lot of people find that they have a hard time motivating themselves. They have a hard time getting themselves work. You know, people look at me. I, you know, in the past 10 years, I've worked more than most people would dare to say they've worked. Probably more. How many days off have you had now, Josh and left? In the last eight years, I've taken a single. day off, one day off. I've worked

every other day, the birth of my kids, you name it. Well, I have a goal though. And for me, you know, yes, I need a little bit a little bit of time off. You'll find out how much more efficient you are when you come back refreshed. No, I don't disagree with you. I don't disagree with you.

But, I mean, you know, for me, I love, I love, I love what I'm doing. And I have a goal and my goal is getting closer and closer and closer. And for me, it's like I, I'm that person type. I can't stop until I get there. And, you know, my brain is always going. I'm always thinking. And so, you know, I've been thinking about it. I'm like, hey, you know, I'm going to go take a week off and go somewhere. And then I was talking to somebody last night and I was like, wait a second. I'm going to thaw, quote unquote, thaw. The entire time I'm thawing, my brain is just going to be going to be going. The clear I get from this thaw, the more I'm going to be thinking about the goal. And so even when I'm off, I'm never off. I can't shut up.

it off. And I think most entrepreneurs, and I think the same applies for real estate investors, you know, you go take a day off. It's not a day off. You're still thinking about your portfolio or, you know, you're on vacation and you look at a condo. Oh, that might be a good rental. Let's go. Let's go Airbnb, that sucker. I mean, you're not, come on, come on. Oh, yeah. We look at properties all over the world, wherever we go. And we always dream and imagine, what if we own this, what if we own that? How much would it take to do that? And it's a fun, time but yeah but the bottom line is the motivations

it's either in you or it's or it's not and if it's not then you got to find a way to build it and you know creating a goal you know whether you've got the job and saying hey I want to be able to get out of my job that's your goal or I want to make X amount of dollars or X a month you know whatever it is if you're listening to the show

and you don't have the motivation create that goal figure out what it is maybe make it you know easy or you know attainable at first so that you're not disappointed. And then once you see that you can do that, you kind of extend it and extend it.

And we do this all the time at bigger pockets. Brandon and I, it's funny. I mean, the goals that we have are ridiculous. You know, sometimes we set our goals so high that when we actually make, achieve those goals, you know, we look at it. We're like, oh, man, that was kind of disappointing. Yeah, it'd be really, you know, why didn't we triple that?

Why didn't we set a higher goal? And so creating those wins for you and the staff and whoever that motivates you forward. Absolutely. And you got to get a few wins under your belt and experience that to excel. Yeah, for sure, for sure. Here's the truth about passive investing.

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Well, so that's great about your son. It's fascinating. And hopefully everybody listening also thinks it is. I think, you know, getting your kids and really training them to become financially smart beyond just real estate too is really important. I was a teacher for four years, and one of the things that I did outside of my curriculum was financial education to the kids. I thought it was extremely important. I realized that when I had gotten to college and into the real world, I didn't have any. And I had to teach it to myself. And so we really do need to work harder to do that stuff for our children, I think. I'd like you to jump back. You talked about this fun story on this single family house. Can you dig in on that a little bit? What more do you want to know?

Well, you said it was fun. Oh, was that the same story? Your son? Yeah. Oh. Oh, we covered it and didn't even know it. That was fun. The beauty of that is it's growing and appreciating, so he's now looking at getting a helock on it so he can go get another one. That's cool. That's very cool. Hey, for those

people who don't know what that is, because I'm a big fan of those. What is the helock? That's a home equity line of credit and some places will do them on non-owner. Yeah, and what does that mean? I mean, like for somebody who wants to use one, Why is that helpful? Why would we want to do that? It's cash in your pocket, ready for another down payment.

Well, how does it work exactly? So you've got a property, explain the property. Yeah, okay, so you go to the bank and you say, I want to get, it's basically a second, but it's a line of credit. So it's money that you can take as you need it. You can pay it back, take it again, pay it back, and you might have 10-year draw period where you can use that money back and forth, and then usually maybe a 10-year payback period after that. And during that draw period, you're only required to make interest-only payments. In our case, we try to pay it back as quick as we can, so we've got that money available to go put into something else. But it gives you flexibility as opposed to a straight second where you're amortized over a set number of years.

Do those interest rates look similar to conforming rates on mortgage? Pretty close. They're going to be typically a little bit higher. I've had my line of credit for about six or seven years. I'm running about 5%. that I've seen some a little lower currently, four and a quarter-ish. Nice. I know a friend of mine has a line of credit that, I mean, but instead of a home equity line of credit, like on one property, what he did is, he went to the bank and said, I've got these, you know, eight properties, each one with a pretty significant chunk of equity. Can we just do one big? And he got, I think it was $550,000 line of credit from the bank.

Wow. They were just like doing a ton of stuff. I mean, new construction. They could finance anything they wanted to. Oh, yeah. Out in Grace Harbor, that goes a long way. You can buy half the town. And so, yeah, they were doing a lot of stuff.

I think they still have it. I don't know if the banks that were, you know, are still as generous. But, you know, he just, he had the equity in a lot of different properties. So he just combined them together and got a blanket, a blanket line of credit. I'm trying to temper my son right now because they do typically tend to value the homes a little more conservatively on those. And so you say, well, it's worth $180,000. They're going to say, yeah, but we think you're worth $170. So they're not necessarily going to give you everything that's there.

And the danger of those, I mean, in its very basic sense, it's almost like a gigantic credit card that if you don't pay it, you lose a property. And so they are very dangerous things. But I think the key is, like what you guys are doing is you're buying further assets with that liability essentially. So it kind of like cancels out the evil of it and makes it better, hopefully. Well, and you've got to calculate the total cost of capital in that so that those costs are included in whatever you're going to receive from your new property. Yeah. You know, my in-laws recently a couple years ago, they bought a, there was a duplex they wanted to buy and they owned their house free and clear.

Duplex came up on the market and they wanted it, but the way that they worked it ended up doing it is they went to the bank, got a home equity line of credit on their own home, not on the rental house, and then went out and bought the duplex with just that money. So they did the entire deal with no money down. Because, you know, if they would have gone and got a mortgage on that property, they would have been required to put down 20, 25%. But when they used their own property, the equity to cover it, they did the, entire deal, nothing out of pocket whatsoever.

And now they can go and refinance that property if they want to, pull up the cash and do it again and again and again. It's a very cool strategy of getting in there creatively. Nice. Yeah. Okay. How about, I'll talk about creative investing. We've been talking a lot about that lately.

You know, with my new book that came out, we've been talking, you know, it's kind of been a big. Oh, man. See how I. Shameless. Do you see how I slid that in there? BiggerPockets.com slash no money. Check it out.

That was shameless. Shamed. By the way, this is show 95. of the Bigger Pockets podcast. Check out the show notes at biggerpockets.com slash show 95. Thank you. All right. Nice. All right. So I guess I want to know creative finance. Is there anything in your career? I mean, we talked about the very first deal that you didn't have any money. Have you ever done anything like that since? Or do you have any other like creative techniques that you've used ever to buy real estate? Well, most of them have been, you know, standard bank financing. But like what you just talked about, when the market was moving up, we were refinancing homes, taking seconds, taking cash out. lines of credit out of existing properties in order to buy additional properties. So we've done a number of those.

We've done a couple of the owner finance ones. We've done where we'll get an owner to carry back a portion when we bought the 24 unit. The owner carried back $100,000. And so standard bank commercial financing, but with an owner carry back on that, so that that minimized how much we had to come out of pocket. How much did you have to come out of pocket? And how much was the property? The 24 unit was just over 2 million.

Okay. And so it seems like we were bringing around 400 some thousand plus the carryback. And that was pulled out of the other commercial. Yeah. When we refied that. So they carried 100. So it was 400 plus plus the 100 for five. So you still have, I mean, you still had to put money down.

They weren't financing the property for you. Okay. Gotcha. Gotcha. Yeah. And that's, I mean, that's a. pretty common strategy, isn't it, on commercial property, is getting some kind of cash back, at least from the seller? I think so. That is pretty typical. And, you know, you're dealing

with a lot of money. And either you don't have it or you've got it tied up. So if a commercial guy is not willing to pitch in and help out, it's going to make it a deal a little tougher. Yeah. That makes sense. That makes sense. So you went from one property to the next and you kind I forget what it's called. My brain is a little fried here, but Cag getting rid of one property picking up the next one, you know, sizing up. I know there's a word and it's escaping me, but that's okay. Were you doing a 1031 on these properties? Were you exchanging them? Most of the time. Not always. We would kind of balance out what the advantage was to have a higher basis or if it was better to just transfer the property on up. And if it didn't affect us tax-wise,

we would take the hit right then. But you need an accountant at that point to decide how much of this should be pushed forward because you're building massive equity when you do that and your basis goes all the way back to those first properties. And so we tried to balance whether or not there was a tax advantage or how heavy the hit was in a given year. So in other words, yeah, talk to a CPA if you're going to do that kind of thing. Yeah, yeah.

Nice. Can you explain really quickly? What is a 1031 for those people who may not know? 1031 is a tax deferred exchange where you're taking income property and exchanging it for income properties like kind exchange. And so there's a lot of rules that regulate that. I think you have to have more debt when you finish than you had in the beginning and so forth. There's some rules about all of that kind of thing.

But that you can carry your basis and your property forward. that basically you're never paying capital gains until the day you die and pass it on to your airs and keep rolling. Nice. Nice. There you go, kids. Here's a big, bad tax bill. I know there are ways to, like, even at that point, I like, I don't know what they are,

but I know there's ways to move that money that, you know, the rules that the rich people know that we have, you know, we're still learning. So I know, I know Amanda Hahn mentioned that back forever ago when she was on the podcast and she's a CPA. So, cool. Well, I want to talk about the mixed. use property because yeah we i mean i don't think we've had anybody on the show that like we've talked about the mixed use so uh i think it's been talked about in passing but yeah but never like

yeah so let's dive into that i mean first of all what does that mean mixed use uh basically it means that the property has multiple primary uses so in our case we have residential use and we have commercial use, we have retail, office, and restaurant together with the residential upstairs. So we've got a mix of purposes. And what's attractive about that? Well, that's a good question. I think they're cool. I would love to have some mixed use property.

I just think they're cool. But like, you know, outside of that. When the market tanks and businesses hurt, then the mixed use can hurt. Now, we've got some smaller. offices 500 square feet. We've got nail salon and hair salon and those are like seven, 800 square feet. And I can get those red at almost any time, you know, as needed. But when you get bigger, the restaurant's over 3,500 square feet, probably the biggest restaurant is based in Shelton, I'm thinking. And we've been empty for a while, a long while. And people are intimidated

by it. We'll make them a great deal. But we've looked at a lot of options. the city limits some of what we can do. And so larger commercial requires somebody who can come in and support it with their business. And so that's a liability in some cases. So that's definitely a challenge. Are there any other challenges that kind of come along with mixed use? Oh, making sure that your use is complement one another. The restaurant that we had initially, they wanted to build out a lounge.

And we had to put some limits on them time-wise. and they wanted to have some live music, but we've got residents right above them. And so he said, you know, it's got to be acoustic. It can't be after whatever time in the evening. And so some different things so that the one use doesn't detract from the other. So you don't want like a machine shop underneath your apartment. There you go.

So how do you advertise a rental in a commercial space like that? How are you looking for tenants to take those, whether it's the small ones or the big ones? For the commercial side, yeah. Craigslist, like everybody else. Okay. Put a sign in the front window for the restaurant.

I have a realtor working with us as well. And so, yeah, every way we can. Okay. So that sounds pretty standard. Now, do you find in terms of running out the apartments that there's anything different about running out a mixed-use apartment in a mixed-use complex versus a house or just a regular apartment building? Not really.

It's subject to that property and the needs and interest of people. And so we're downtown. We're in the core of the town. We're on the corner of Highway 3 and Railroad, which is the two main roads in town. We are studio in one bedroom, so we have a little bit more of a transient population. They'll come in for a year or six months and then move on. But we've got a pretty good arrangement in there with our management. so people have a sense that they're at home there.

So we've developed a living room space, a common area, and so they can come down and watch ball games together, or they can have a pizza feed. Nice. They get together and do holiday dinners and that kind of thing. We've got a little park area in the back, so they do barbecues in the summer. Oh, nice.

That's great. Yeah. I was going to say, it's cool to kind of develop that community. Do you feel like you did that on purpose, or did that just kind of happen because of the manager you have in there? I think it happened because of the manager, but if I was to do it again, I'd be looking for that kind of manager.

Yeah. I'm just thinking, yeah, go ahead. I was thinking I got my, you know, sorry, my 24 unit. I'm like, man, I never see the tenants do things together. But if I could, like, cultivate that sort of, and I remember when I bought the place, I used to think, oh, yeah, we should have like Fourth of July parties outside. And then I realize I don't want to be in that area on the Fourth of July.

You know, like, I want to go hang out with. We're always being invited out there, and sometimes we'll show up, you know, and it's good to do. Do you think that that sense of community attracts a better type of tenant? Does it make any kind of difference, or is it just kind of a feel-good thing that doesn't really add any value to your bottom line? And meaning, you know, are you going to rent it faster because you've got that community or anything else? I'm not sure if we read it faster, but I think people stay longer. And so we have less turnover. And I've been really pleasantly surprised. We have below a 3% vacancy out there in the apartments.

That's great. For that kind of a complex to have that low of a vacancy factor, I think is attributed to that relationship that people I have with one another. That's great. Do you have any good tips for finding that kind of manager that can handle that? And by anybody, I mean, like, do you have any tips for me on how I... That manager? Always what's in it for Brandon.

And if you can give me their phone number, I'll give them a call. Oh, that's right. Right, you live nearby. Yeah, don't do that. That would be a bad idea. You know, the irony is my realtor told us to get rid of her when we bought the property. Really? Interesting. And yet, we communicated to her, talked with her, worked with her, and found that we were able to mold her and shape her kind of the direction we wanted to go. And she was very well suited to the community. She was very well suited to that building and the structure. She had some leadership abilities

that I don't think had been developed before, but she's risen in that. And she's not the same person she was eight years ago to the better. And so our relationship with her has grown. We've done some things together. We sent her and her husband down to Disneyland after they had been there for five years. It's a big thank you. And so really kind of doing some special things and some mile markers for her to acknowledge that and to build some loyalty has really paid off for us.

That's great. Do you pay her just in free rent or do you guys give her money as well? or how does that work? In that case, yeah, she gets a room plus a little cash bonus on top of that.

Okay. Okay. Cool. Yeah, I think that's idea. Not a bonus, it's a stipend. Yeah,

yeah. You know, it's, and she knows what that is every month, but then we'll do bonus things from time to time. Yeah,

that's very cool. I love the, I love the concept in theory of a resident manager. You know, but I've gone through three or four of them now, and they all,

they're okay. And really what I, what I think, especially after hearing you talk, like, the words you use, are like, you know, we molded her, we shaped her, we led her, we guided her. It's the same words that like Josh used as right as like the CEO of like, you know, in developing a team. And I think

that's where I've fallen short. And I said that before is I'm just not very good at managing people. And as a result, I don't mold them. I just, oh, they're not good enough. Get a new one. You know, like, let them go. So actually this afternoon I have, I'm having dinner with my resident manager to go over some training. So you're going to mold her? It's a him. But yes, I'm going to work on molding him. There you go. That's awesome. That's awesome.

Hey, Kurt, I know I'd mention the negatives. I asked you what the downsides were, what are the upsides? What are the positives? And then we're going to really quickly wrap this segment up and move on to our next section here. positives to the mix use. A diversity of income sources, I think would be the most obvious. And when one thing isn't performing, the other is. And so I think there's some flexibility with that.

And it attracts people to that property. Hopefully they complement one another. So I've got people upstairs in the residents that come down to get their hair done or they come down to get their nails done at the nail shop. And I've got an attorney in there. So it's one-stop shop. You go get your nails done, get your hair done, get your will updated. Do you need to have experience?

You know, as a newbie, say somebody decides, hey, you know what, this sounds interesting. I want to go buy my first multifamily, not my mixed use. And I found one and it's got a restaurant downstairs and apartments upstairs. Do I have to know about the restaurant business to get into that or do I have to generically kind of understand how to rent out a commercial property? What do I need to know to kind of get into this? Because I think there is somewhat of a transition from going from residential property to some of that commercial and retail. Yeah, I think there definitely is. I don't think you need to know about every business, but you need to have some. some people on your team that do. Okay. And so be that your realtor, your attorney, whoever, they can look over that contract and say that's appropriate for this type of business.

And there's some things with the restaurant, particularly as opposed to the attorney in an office where he doesn't use anything but a little bit of heat in the front door. Yeah. You know, so yeah, there's definitely some things with liability, your insurance, utilities, all those kinds of things, common use maintenance area, some of that kind of thing. And the other thing you've got to know is your percentage of, commercial versus residential. And lenders are going to look at that.

And they're going to say, oh, you got too much commercial exposure. We don't want to lend to you. And so they're going to look at a percentage and you'll want to talk to your lenders to say, well, how much, what's your typical percentage is probably an 80-20 or something to that nature? They want mostly residential as opposed to commercial.

Gotcha. Gotcha. That makes a lot of sense. So, I mean, would you recommend that newer investors invest in mixed use or you would say wait until you've got a little more experience? If you've got a good team behind you, you know, go for it. My personal preference is residential. And if I were, as I move forward, I'm not so sure I'm going to be looking for more mixed use or commercial.

I know there's some other guys on the forums that are all hyped about it and they love it. And that's their wheelhouse. They understand it and they're going with it. But that's not mine. Hey, really, really quickly, you had mentioned realtor, lawyer, other folks. And this is a broad generalization that's going to piss off a lot of real estate. but that's okay. So generally, you know, I've found that residential real estate agents don't know anything about investment property. On the other hand, commercial agents tend to be far, far,

far, far, far more sophisticated. And so, you know, if you need somebody to lean on, I think turning to a local commercial agent is probably going to be a really, really good bet. And I think there's probably a lot less training that would need to be done than would be, would need to be done on a residential agent. I concur fully. Yeah. Yeah. So, you know, folks, lean on those local commercial guys, because they can certainly help you out. Yeah. Well, you mentioned your strategy is not necessarily to go to more commercial. What is your strategy? Like what does your future look like? Like I told you, I'm still growing. Still learning. Nice. Yeah, my future, I anticipate, you know, this transition that should take place by the end of this year. It's its own acquisition in itself.

Right now I'm in a 50-50 partnership. I'm going to take over both of these properties. I'm going to take over an additional 33 units that will be mine. Zero down. And then a graduated payment structure. So, you know, a partnership buyout is another way to buy property. Zero down. Yeah.

I didn't put that in my book. Which you can get at bigger pockets. Oh, stop. I got to tell you, I'm sitting here. I'm looking at these two guys and I'm thinking, what did I do wrong? I'm like, I'm sitting. I got two pastors. on me the whole time here on Skype.

I'm just a leader. I don't get the big P word. All right. All right. Well, let's move on, Kurt. We've got the next section of our show, which is... It's time for the Fire Round. All right, the Fire Round.

These questions come straight from the Bigger Pocket's forums. So let me throw them at you. Number one, if a landlord doesn't want to manage their own property, Should they get a property management company, and I'll add to this, or should they, like, raise up a resident manager? I'll kind of tweet the question to be a little more fitting for this. Should they hire just a typical property management company or raise up their own? I'm assuming you've got enough property to do that with and not a single family residence or a duplex. Yeah.

It's a good assumption. Yeah. So, again, again, depend on your interest, abilities, and tolerances as to, whether you're able to work with the individual who's doing it and oversee your on-site manager, or if you are wanting to travel the rest of your life and leave it in the background and just collect a paycheck. And it depends on, you know, where you're headed. So I think there's some advantages to both of those, and there's some downsides to both of them too. Great, great.

Next question. When a renter pays a security deposit to a landlord, where does it go? I mean, does it all go into a single bank account or are there separate bank accounts for the rent checks and the security but deposits, how is that kind of handled? Pizza fund. Yeah, there you go. Washington state law requires us to put that in a trust account separate of our operating fund. Okay.

Yeah, and I think most states are probably like that. Yeah. And by the way, if they're not doing that, happen to me, you know, yeah, bad things can happen. Bad things can happen. You don't want to spend that money and not have it available in the end. Yep. Yeah. I had a property manager who was co-man.

Not only were they doing that, they were commingling funds of all their people. Yeah, that was fun. Yeah, that was awesome. All right. Number three, how do you screen? How do you screen for good tenants? Oh, well, I meet my tenants. I talk to him on the phone. I meet him at the site. You're sure you're asking the right guy that question? I mean, he did say he's got prostitutes and drug lords. We're living in his apartment unit. So I don't know, maybe we should find a different question. They're not living there now. Sometimes they find friends and get influences that redirect their life. I'm just kidding, Kurt.

Sometimes I do wonder if I'm screening, but I use a professional agency to do that. And currently I'm using the Washington Landlord Association to process my residence. Nice. And what do you look for? I'm just curious, like, what are there red flags that you would say, no, I will not rent to this person? Well, first of all, I want to know that you can pay. your rent on time every time and I want to know secondly that you're going to take care of my property. So all the questions are going to revolve around that. They're going to come back down to those

issues. How long have you been on your job? Is it a brand new job? Did you just move to town? And I just talked to a guy who just moved here from as far away as I can imagine and he's ready to jump in tomorrow. And so, you know, if they're looking at something right now, right today, as quick as I can get there, that's a red flag. And so I tend to put the brakes on them and say, hey, well, it's going to take us a couple days to process this. I let them know, you know, we're looking at your criminal history. We're looking at your rent history. We're looking at your income history.

And sometimes when I tell them that, they just decide not to call back. Yeah. What are the criminal things that would give you red flags? I mean, do you let any kind of criminals in or just prostitutes? Don't tell my wife. I tend to be a second chance kind of guy, but I'm not a third chance guy. Okay. And so I have takes in some people that others, I'm sure wouldn't, but it depends on the property that I'm putting them in as well.

Yeah. And, you know, if you've got some assaults or you've got some domestic issues, you're not going to fit into my complex. If you've got some theft issues, that's not going to fit real well. Some of the other issues, you know, I talk to people. I talked to him pretty straight. I had a guy that showed up and I knew that he had some issues and that's why he was talking with me. And then he shows up at 10 o'clock to see the place and I smell alcohol in his breath. And so I looking straight in the eye and I says, is this going to be a problem with us?

And what are you doing to work with this, to deal with this? Are you going to meetings? You know, it is $1,100 a month unit. So, you know, I want to know that you're not going to trash my unit. I want to know you're not going to have big parties there. I want to know your income source and how long you've been there and some of those kind of things. Right on. Right on. Great. Well, final question here for the fire round is do you use the same rental agreement for all of your properties? Yes. Okay. Fair enough. Even commercial ones? I'm assuming that

would be different. Yeah, that is different, but all the residential are the same. Perfect. Cool. Now, in fairness, some of the rules sheets are a little different out in Shelton at the mixed-use, You know, dorm-style housing, it's a little bit different than it is, you know, in the other complex. Gotcha. Cool. Fair enough. No fraternizing in the common areas. There you go.

No smoking in the building. Of course, we have no smoking anywhere in our buildings, but it's a bigger issue there. Gotcha. Right on. Cool. Cool. All right. Moving on to the end of the show, the segment that we were going to call our...

Famous Four. All right, the Famous Four. We ask everyone these questions, and I'll see what you've got to say. Number one, what is your favorite real estate book? Favorite's a tough word. It's usually the one I'm reading. But I've benefited from a lot of them that I've read. And I would say the Rich Dad series, particularly McElroy's Advanced Guide to Real Estate,

a millionaire real estate investor with Keller, and the one I mentioned earlier, Mark McKinsey's Marketopoly, was written right after, I think it was 2007. And it really dealt with some of the downturn and how to make money in that and how to evaluate properties. They did a good job of that. But let me throw one out just for landlords especially. And if you just want a couple hours of some humor and practical insight, a little bit of a cynical edge, the care and feeding of tenants by Andy Kane. Never heard of it. It's a bit of a kick.

Seasoned landlords are going to really enjoy it. They're going to identify it. New guys are going to certainly learn from it as well. Oh, great. That's great. That's great. Yeah. All right.

What's your favorite business book? I like Drucker, Peter Drucker, the effective executive, you know, getting things done and the right things at the right time. But more recently, Rabbi Daniel Lapin, now shall prosper, Ten Commandments for Making Money. And I'll tell you why. We're in a strange, you know, anti-capitalist climate, it seems. And he really gives us permission to be successful. shows us the moral imperative of being ethically successful and how that translates to benefit,

not just you, but society and the community in general. That's cool. That sounds really good. Yeah, you know, that's a pet peeve of mine, this anti-capitalistic thing that's happening in our society these days. I mean, I don't know. It's always the guys who are sitting there on wads of cash that are bitching and moaning about how bad it is. So, you know, what are you going to say about it?

All right. Hobbies. What do you do for fun? Oh, we have a lot of interest around my house. We love to travel. My home is fairly simple because we like to go other places and spend our money doing things and making memories. So that's a big thing. My boys and I took up scuba diving.

We do have done Puget Sound, but we really enjoy going to the warmer climates. Nice. And so we like that. So dining out, traveling, both stateside and international. Oh, right on. Cool. Cool. All right.

My final question of the day, what do you believe sets apart successful real estate investors from those who either give up, fail, or never get started in the first place? Yeah, I think people who bring value to the market succeed. And so I think it's kind of key to find ways to serve other people. And now, here comes my ministerial hat, you know, a paraphrase Jesus' discussion with his disciples. And they were wanting to know who's going to be the top dog in Jesus' Jesus' basically said, if you want to be great, be the servant of all. And so I say, whatever you're doing, find a way to meet the needs of others, find ways to benefit others and make a win-win situation

out of it. And that brings a lot more benefit than a one-time shakedown. Yeah, right on, right on. I think that's great. And even for those of us who do not ascribe to the J-Man, I think we all could agree to that. I mean, you know, just be good to other folks. And I think it kind of pays itself back. Yeah. So that's awesome. Well, Kurt, this has been fun. It's been fun, you know, except for the part where you eyeball me and making you feel guilty. But that's been a lot of fun and we definitely appreciate having you on board and sharing your wisdom.

And we love that you're part of Bigger Pockets community. Can people find out more information about you? I'm assuming, obviously, on the site. Yeah, I'm on the site. And, you know, you can message me there and connect, connected with a fellow this morning, had a great time together. and so we appreciate the opportunity to be there and what you got going on it. That was the fellow that you had breakfast with who you decided you weren't going to partner with. Maybe you shouldn't message you.

Hey, but we're going to be in touch and we're going to bounce ideas back and forth and some deals and hopefully we'll both glean from that. Sounds good. Sounds good. Well, listen, thanks again. Really, really, we do appreciate it. Hey, thanks so much. All right, guys, this is Show 95 of the Bigger Pockets podcast with Kurt Bidwell.

we really do appreciate his time and energy. You can find the show notes at biggerpockets.com slash show 95. If you are not already an active member of BiggerPockets, we definitely encourage you to jump on the site at www. www.biggerpockets.com. Create a profile. Engage, connect with your peers, get involved. Follow us on our other social media, Facebook, Twitter, Gplus, LinkedIn, YouTube.

And, you know, get out there. Do things. Do it the right way. Be moral. Be ethical. teach your kids, teach your kids how to do this stuff, get them excited about business and about entrepreneurship. I think that's just really, really important. And that's it. Make things happen, guys. Have a great week. We'll see you next time on the Bigger Pockets podcast. I'm Josh Dorkin.

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