BiggerPockets Real Estate Podcast - The "Creative" Framework for Low-Down, High-Return Rentals

Episode Date: September 9, 2024

Are high interest rates and large down payments stopping you from investing in real estate? If so, creative finance might be precisely what you need. It’s what today’s guest, Ankit Lodha, used to go from zero rental properties to THIRTY in just a couple of years. Sounds risky? What if we told you Ankit was walking into equity when he bought these deals, keeping him from being overleveraged and helping him build wealth faster? After saving up for over a decade to buy his first property, Ankit quickly realized that building wealth would be a slow grind if he didn’t solve his down payment problem. He was working hard as a data scientist by day, looking for real estate deals by night, and needed a solution to help him creatively buy real estate WITHOUT putting twenty-five percent down on every property. After finding a sweet spot in his local housing market, where he made substantially more rent than other landlords, he knew he needed more properties. Today, Ankit talks about how he scaled from zero to thirty properties using creative financing, seller financing, and traditional mortgages. He’ll talk about how he dodged the high mortgage rates most investors were forced to accept, how he built a team and runs his properties remotely, and the ingenious ways he buys houses for very little down with high cash flow. In This Episode We Cover: Creative financing explained and using it to build your real estate portfolio faster Low money down real estate with seller financing and creating a win-win for you and the seller Making twice his mortgage payment in rent by tapping into this “gray area” of his market Building his team while working full-time and managing his rentals remotely Making a fifty percent return on one very creative real estate deal The risks of creative finance you MUST know about before you start And So Much More! Links from the Show Invest in Turnkey Properties with REI Nation Join BiggerPockets for FREE Let Us Know What You Thought of the Show! Learn Creative Finance with “Wealth without Cash” Property Manager Finder See Dave at BPCON2024 in Cancun and Email [e-mail] For a Chance to Dine with Dave! Creative Financing: How To Use It In Real Estate Connect with Dave   (00:00) Intro (01:47) Data by Day, Deals at Night (05:51) Moving and Remote Management (11:07) Making 2x His Mortgage (17:15) Building the Team (20:38) Creative Solutions with HUGE Returns (29:16) Low Money Down Strategies (30:11) Next-Level Seller Financing (34:25) Creative Finance Risks (37:41) Long-Term Vision Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1015 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

It felt like almost everyone picked up a new side hustle in 2020 when you were just sitting at home during the lockdowns. And for a lot of you, it was probably real estate investing. And today's guest was no different. Ankit Loda made his first two deals during the first year of the pandemic. But what does make Onkitt different is his 9 to 5 main hustle during that time? Because while a lot of us, or at least I was sitting at home watching Tiger King. trying to figure out when we would be allowed to go out.

He was working in pharmaceutical R&D, helping to develop the COVID vaccine. Now, fast forward a few years, Ankit uses his skills from that job to make his real estate investing more strategic, more profitable. And honestly, Ankit is one of the most creative investors I've ever spoken to. So I think you're really going to enjoy this. Hey, everyone, it's Dave. Welcome to the Bigger Pockets Real Estate podcast, where we bring you a new, investor story every single Monday. And today's guest, On Kit, spent 25 years climbing the corporate ladder.

And then during the pandemic, he decided to apply those skills to scale a real estate portfolio from zero to 30 properties in just two years. And he's still going even as interest rates rise. In today's episode, we're going to hear from Onkitt about how he reimagined the property manager role to create a bespoke concierge service. This is super cool. You're going to going to really like this. We'll also talk about why he's not afraid to propose creative financing arrangements, even in his real estate journey that he's relatively early on in, and how he finds opportunities even in high-priced markets. On Kit, welcome to the Bigger Pockets podcast. Thanks for being here. Hey, how are you, Dave? I'm doing great. I'm super excited to talk to you about your real estate

investing journey. Why did you decide to get started in, was it 2020? Is that right at the beginning the pandemic? Yeah, you're right. I mean, just like everybody, we had a lot of time at our hand after our typical 9 to 5 job. So we did a lot of cooking and a lot of baking, and still we had a lot of time. So from an investment perspective, I know we had almost a decade worth of experience and money saved up. So me and my wife, we decided, you know, we every now and then used to invest in stocks here and there a little bit. But we thought to take a leap of faith and invest in real estate as an asset and understand, you know, the nuances and the fund that goes behind the scene. So that's exactly when we first got our investment property, your typical 25% down payment,

which took almost a decade of savings to put together. And that was our first one during COVID. Wow. That's that's super cool. I want to hear more about that because there's so many challenges during COVID to getting started in real estate. But, you know, our producers before the show put together a little info sheet where I learn a little bit about you. And it says you sort of just went through and said you casually had this nine to five job, but were you working on the COVID vaccine at the same time? Yes, that is absolutely correct. I was having too much fun in my day job. Yep, I was on the data science team on making one of the COVID vaccines over here. And it was a fun life, almost 100 hours a week, no weekends and no Christmas or Thanksgiving, because it was a time

of a need. And just as a data person I am, I was also enjoying taking break from my vaccine and for my work and diving into the real estate numbers that just kept the fun going. That is unbelievable. The fact that you described that as fun is very admirable. It sounds very stressful, but, you know, thank you for all your work on that. And still, you somehow found time for real estate. Actually, that kind of makes sense to me sometimes when I'm really busy at work and I work at Bigger Pocket. So we talk about real estate a lot. It's kind of nice to have a different professional activity to sort of just like take your mind off and just think about something else in a productive way. Is that sort of how you saw real estate?

What I would say is I realize, you know, my day job is basically a warm up. The grind is actually in the after hours. And then over time, being a data person, I loved diving into numbers and investing, you know, be it stocks or real estate. What I wanted to focus on really having an asset that. would produce cash flow over a period of time. In my day job, I do a lot of predictive analytics and machine learning algorithms. And with this first real estate investment, I realized how much time it took for me to lead to that end of one. And within no time, I might reach a ceiling where my mortgage or lenders won't lend me any more money based on the debt-to-income ratio.

So I need to figure out a way to be able to do this more creatively. Got it. And so what was the creative approach you took? If I can say this, overnight, me and my spouse, we basically ate up the entire Bigger Pockets website, if I can use that word. I told this insight to my wife, and she was all over the internet and trying to find resources because she realized we not might be the only one thinking about this. There might be other investors in that space. So that's when we stumbled upon creative financing options, seller financing options. And then when we started looking at deals, we started to think through that angle, even though with time, we started saving our day job, money, our bonuses and everything that we could typically buy with an investment, but we forced

ourselves to do more and more creative thinking and think outside the box, thinking that we might not have the resources. We need to save that money for a rainy day. So that's how we started and we started talking to brokers and sellers through MLS, you know, nothing, any secret sauce behind it, just your typical MLS listing and just being creative with that approach. You live in New York. So were you trying to invest in New York or were you looking out of state. So we started our journey in Cambridge, Boston area, because that's where me and my wife were based out. In COVID, we were locked down. So that's where we were starting to anchor more and more investment properties. And then once the pandemic was behind us, you know, my

pharma company is in the New York, New Jersey area, which made us to move to New York City. This forced us to manage a real estate portfolio remotely. You know, coming from a pharma background, we believe a lot in standard operating procedures, your SOPs and guidelines. So for my own team, we started establishing that. Now, you could think that, hey, you don't have a really big portfolio to even start thinking in that direction. But coming from pharma where drugs take 10 to 15 years for approval, I worked for a brief time for a Japanese pharma company where the visions were for 100 years, not two or five year,

right? So I started thinking from that lens that, hey, I might not have 100 property or 200 property portfolio today, but bit time I might. So if I establish my SOPs and guidelines today and build the team around it, it will force me to automate this and live my lifestyle from anywhere. And that's why when we move to New York City, it forced us to build that team and processes for our Boston properties. And that just opened the floodgates for us to invest literally anywhere.

And that's when we started looking creative deals in New York area, in Pennsylvania area, and Florida area, and so on. I've had a very similar experience, and this is such good advice. and a really valuable insight. Because I moved not just into a different state, but I moved to Amsterdam. And at that time, I was self-managing. I think it was eight or 10 units, something like that. And I felt like I had that under control.

And at no point was really thinking about hiring a property manager or building a team. But when I moved, I had the same experience where I was forced to just figure everything out. And I realized it's really not that hard. It's, you know, real estate, it takes time. it takes effort. It's not the most complicated business in the world. You know, if you can find good, reliable people in four or five positions, you can probably do it. And I think what you said about setting up this team and sort of creating an infrastructure before you have a lot of properties,

makes a lot of sense because it's sort of a chicken and egg problem, right? Because you can't wait until you have 100 properties to figure out how to manage 100 properties. you sort of have to build the infrastructure, and then once you get good at managing eight properties or 10 properties or 12, you can see a clear path to 15 or to 20 to 25 because you've already built the infrastructure to support a bigger portfolio. I 100% agree. I feel like I'm literally speaking to myself, a mirror image, because, you know, having done those self-management, right, we have rolled up our sleeves, been there for lockouts,

for toilet clogs, for net not working, for leakage and whatnot, right? doing that self, now you exactly know when you're building the team, what are the types of best practices and emergencies you need to make ensure, you know, whether you're in the country, outside the country, anywhere, right? If you have that systems and process in place, it's a well-oiled machine. The fun is in building that team. It is fun. I know people see this as daunting, and it can be at the beginning. But if you just jump in and start talking to people, you realize that it's not that challenging, you know, have a conversation with three agents, five, agents, go meet five property managers. You're going to learn so much just from those conversations,

even if you don't hire any of them. You're going to learn so much that you're going to gain a lot of confidence about what to look for in the next conversation you have, in the next conversation you have. And at least personally, I like doing that. I feel like I'm getting closer to like the business that I want to be running. We've got to take a break, but if you enjoy these insights from the Bigger Pockets Real Estate Show, you may want to check out our premier real estate event. It's called BP It's the Bigger Pockets Conference, and it's taking place this year, October 6 to 8th, in Cancoun, Mexico. And whether you're a seasoned investor or just starting out, B.P. Khan is a chance to hear from industry leaders. You can learn cutting-edge strategies and network with potential partners.

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and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. Welcome back to the show. Here's more with investor, Ankit Lodak. Now, Enkitt, let's talk about your first deal. So it was 2020. You're in Cambridge. I lived in Boston very briefly for work many years ago. And it's a very expensive market.

So how did you make your first deal work? Yeah, you're right. I mean, like I said, 25% down payment from the property. in Cambridge, the way I see Cambridge is as a recession-proof market, and that's why we decided to invest there first, mainly because of Harvard, MIT, and all the amazing universities that small little town has. And coming from pharma biotech background, the way I call Cambridge is the silicon value of biotech, right? So I realize, even though it's super expensive, but it is that recession-proof market. I think you're hitting the point very well, where even by just renting that out as a long-term rental, your typical 12-month lease, I would barely make the break-even

or, you know, maybe a few dollars here and there that could buy me in Chipotle a couple times a month maybe, right? Like, that's the break-even point. So I realized I had to do something creative to do that. And then I'll take you to a 30-second journey in my grad school and the few early years of my career. What I had done was I was staying in L.A. where I studied and I got my first job. and apartments were expensive, right, in LA for an early graduate student. So what I did is rather than renting an apartment, I rented an entire house, and I fully furnished it. You know, as you see an Airbnb today, I furnished that house as a bachelor pad. And what I decided is the other rooms, I house hacked it.

So rather than buying and doing your typical house act, in a rental, I housed acted by having roommates and charging them a premium for these amazing decor, amenities and furniture that I added in the house and give them flexible leasing options for that premium. What that allowed me back then almost a decade ago is to live literally rent-free. I was paying literally little to nothing. And my tenants would basically cover the payment. So I'm here 10 years. Pass forward in Cambridge, matted and settled,

I realized, why don't I do that? Why don't I buy this house and furnish it, decorated as I would love. And anybody moving in this area would love to just get their bags and all settled in. And Cambridge is a very notorious market from a landlord perspective, you can only sign 12-month lease starting from September to September cycle. There's no other options. I thought to be that disruptor and offer flexible leasing options. You know, if you're not end your lease in December, fine, we can do that. You know, there is a premium, obviously, for that. And you'll be surprised, you know, the people who move here

are part of that category who are ready to pay that premium for that extra service. So in this first house, we fully furnished it, all utilities included. They don't have to worry about getting any connections, any setup, just get their bags, pots, pants, everything's included. And the response was amazing in this first house. And I literally was making 2x than my P-I-T-I. And I realized that, wow. And for the first six months, I thought maybe I'm just lucky. I have to wait for the December cycle to go when the leases are up.

Maybe I wouldn't find anything in January. But boy, I was wrong. There are people always moving for a postdoc for a spring semester or some courses at Harvard or even internships. And the flow just kept coming in. And then very quickly, I just doubled down on that approach and provided that extra Kwanciat service, if you will, you know, professional deep cleaning services, change of sheets, pillows, maintenance service resolved in less than 24 hours. So it's that Ritz experience, but on a lower budget, if you think about it, which never a tenant has seen.

Wow. Okay. I have a lot of questions about this. First, I want to just explain what Ankit said. if you've never heard of PITI, it stands for principal interest, taxes, and insurance. It's just when you wrap your insurance and taxes into your mortgage payment, it's sort of the full package PITI. And it sounds like I'm Kate was doing double his PITI, which is typically your biggest expense. So that's very impressive. But I want to just clarify what you said. So in Cambridge, you can only

sign a 12-month lease. But basically, you sort of got around that by saying to perspective, tenants, you sign a 12-month lease. But if you want to move out in six months, I'm going to let you out. And in exchange for that flexibility and generosity on your part, you will charge a bit more than the normal rent rate. Is that what you did? That is correct. Yeah, but I wouldn't allow my tenants to sign a 12-month lease. And if they want a four-month lease, they have to lock in at this point. So I know in January or February, I have to start posting and start looking for tenants. So I wouldn't wait for them to tell me. You have to tell me today so we can adjust the rate accordingly and charge you.

This is brilliant. If I can just add one more comment. My comparison was honestly, as myself, when I moved first to the city, if not in a rental apartment, I was looking at Airbnb's or hotels. And the price difference was enormous. So I realized there is a gray area between your long-term rental amount that you pay versus your or Airbnb or hoteling charges, right? There's this gray area where I could potentially explore and dominant. Wow.

So you basically created your own midterm rental market in a way. This is brilliant, I'm kidding. I'm super impressed. Did you just come up with this idea on your own? Yes, I did. I mean, I was so amazed that there is a term called MTR after this and all that. I had no idea. I came this on my own personal experience.

I just thought to replicate that and solve all their toilet clogs or internet issues or whatever they need. Wow, that's unbelievable. And were you self-managing during this time? Yeah, for the first few ones initially self-managing, because I had no idea in terms of what are the types of services, my tenants could need, things like snow removal was completely new to me. Moving from L.A., a beach boy, I had no idea of snow cleaning.

And Boston is a beast. In more than six months in a year, you have snow. So, you know, that's the service you need and property management. So for the first few times, I didn't do all these on my personal, house, but I did for my tenant's house. And until they, I tell them, you guys are really lucky. Well, this makes your journey to outsourcing this management even more interesting because I imagine it would be difficult to find a property manager who could take this over easily because you sort of invented a whole new style of lease and service. Was it hard finding someone?

Did you have to train someone from scratch? That's the beauty. I was not finding. I was creating. because I knew this is such a niche space, even when I was explaining to leasing agents and property manager, they were like, wait, what? You're doing only three-month lease, six months, and then I have to do this again? This is so much work or this is not, you don't do this in Boston, and there were just so many nose and wise. And if I didn't even bother to waste my time and energy, you know, because like I said, I had a day job. This is my side hustle and the way I started this, you know, just spending one to two hours on a daily basis. So I thought to create this team. So I created a concierge team, a lead generation team, a maintenance team, and I trained this individual, you know, basically

there's a quote that I read in one of your previous guest, one of the guests had said that there's a big difference between working in the business and working on the business. And initially I was working in the business, right? So I took a step back and I broke my job duties and different components. And I realized that, hey, I do this concierge service. Let me have a person dedicated for that, one person for maintenance, and a lead generation, a showings person, because Boston is such an area where there's a lot. lot of scams going on in terms of there's no real houses, agents try to, you know, all those

things everywhere in the world. So people want to see the place. So I had a showing team to do that, right? So with time, I started breaking my role into these different components and started to train people in-house completely, even the cleaning team, right? We provide professional deep cleaning service. Everybody does a good job in keeping the place clean. But if you do deep cleaning it as that extra bonus to the tenants, right? So we started building those capabilities in-house over time. Wow, that's super, super impressive, especially because you were working full time, right? You were in the process of developing a COVID vaccine while you were doing all of this. Unbelievable. Well, in addition to the systems, which are super impressive, I think one of the main lessons, I hope

everyone listening is taking away from this is how Unkit really understood his customers and what they need. We often in real estate talk about landlords and tenants, but it's no different from any other business. We are business owners and we have to provide a service to our customers. And it sounds like Ankit found a real niche inside of his customer base that people needed and wasn't being offered because of regulation in a city. And so there is this amazing opportunity when you're the one who does the work to find that niche and you can offer something truly needed, something special, something people are willing to pay extra money for. So I just want to commend you on that on Kidd. And I know that there's no way to easily replicate this in every

city. Like obviously Cambridge has this unique thing. But the mindset here is replicable and applicable to almost every situation. If you try and put yourself into the shoes of your prospective tenants, your prospective buyers, you are usually able to find better opportunities than if you're just carbon copying, you know, what everyone else is doing in your market. All right, Ankit, so let's move on. So in 2020, you were doing all this amazing stuff, which, you know, obviously the pandemic came with its own set of challenges. It was easier in some regards because interest rates were super low. So tell me how as interest rates have evolved over the last few years, how you have grown your business. Interest rate has been my

best friend, you know, and I don't get scared by them. Being a number of If I can crunch the numbers and understand the value, not today, cash flowing, but over the period of time, right, that can really make sense. I'll give you a very good example that is a high interest example. It was a property in Philadelphia around half a million price point during pandemic that we were trying to expand in another geography where you have these amazing schools and grad students and everything to start something similar. And interest rates were higher. we approached the seller and they were not ready to reduce the price down. And we thought that, all right, you know, we will try to make this work. It's a new area. And we did the inspection of the new construction house here. We're talking about interest rate at this point around 7, 8%

you know, when it had gone up. So we did the inspection. It's a new construction and we saw four or five major issues, even in a new house. So I told the seller that, hey, your house has major issues. I'm not going to pay this top dollar price. I will give you this price and I would ask you to fix all these issues. And, you know, the seller was an arrogant in a way where he was like, I'm not going to do it. And, you know, I'm like, that's fine. You know, I'm not tied to this city or this house. It's not for my personal. It's an investment. That's fine. This was a December time frame right around Christmas. So me and my wife, we had a vacation planned in Paris for a month. So we went to Paris. we left the seller that, you know, even though we put a lot of money in inspection and all these things,

no, thank you. We bow down, you know, from a sunk strategy perspective, we don't want to put more money in to just recoup that money. So we went in Paris, we were enjoying our New Year's over there. And one fine day, we get a call from the sellers that, hey, I'm ready to fix this issues. Are you still going to buy it? And we told them that, hey, we are in Paris right now. We're not in the country. But you know what? I will buy it, but you have to bring the price to this price point. And you will be amazed, Dave, you know, sometimes all it takes is to ask them. The seller was so open at this point. He was telling me that, you know, you guys wouldn't believe I have a really high interest

for Owen and I've been trying to sell this property for over four or five months and it's just killing me. I just want somebody to take this from my neck to somebody. I just don't want to deal with this house anymore. And that's when I realize it's an opportunity for me to help him, right? And also make a wind-in scenario for me. And that's what excited me, right? So what I proposed him is a completely unique approach and from a creative finance,

you know, learning from bigger pockets, obviously. What I told him that I will do a seller financing deal for 12-month period, balloon period. I didn't know what balloon payment was absolutely. So I had to learn on the go. You know, it was building the plane and flying the plane at the same time. So balloon payment means after 12 months, I will pay him the entire principle that is remaining. So what ended up happening is I told him, I'll make you interest-only payments for 12 months. And after that, I will get a typical traditional lender in, refinance it and give it to them.

And the best part was I told him, even the down payment, I will not pay you together. Because all he was looking for is to get rid of that high interest monthly payment. So I told him, I'll pay you the down payment, which is 20% of that purchase price, in 10% every six months. And he agreed. So we got this property at an amazing discounted rate of $380K, right, going down from $4.450. and I only paid him $38,000, which is 10% on the day of closing and 10% after six months. And every month, we had an interest only payment for six and a half interest rate around $1,600 a month.

And I immediately opened an Airbnb and I was cash flowing from day one. $1,600 a month is peanuts if you think about it for a market like Philadelphia. Wow. Okay. There's a lot to unpack there. So just so I understand, first, great deal finding strategy. you know, just being patient honestly does so much. If you just ask, you put yourself out there enough times.

And if you're patient, these types of deals start coming to you. It's not going to work with every deal. But if you play the numbers game, these types of things start working out for you over the long run. But let me just understand the creative finance here. So the restriction is you wanted to put down less money because I'm just curious why not just buy it out right away and just get it over with? why come up with this creative but somewhat complicated structure that you used? The beauty is to use as little cash as possible and use that other savings or cash that you have to deploy in other parts of business.

Could be hiding a team, could be investing in house number two, could be exploring another area, right? Or even just as simple as putting in stock market and having that few percent return for that six months rather than giving that seller that 10 percent, if I can hold on to my money for a little bit more, I can make some little bit more. I can make some little more percentage to that. So that's the whole idea of getting your maximum ROI and being a numbers person, I formulated this complicated structure as easy as possible. So it's very simple for the seller to see what's in it for them and where I'm coming from

and if these deal makes sense for them. How much communication did it take to hammer out this deal? Because it sounds like you did something great, which is finding a mutually beneficial situation where something that worked for you, reduce the amount of cash you had to invest, allowed you to cash flow from day one. But you also created a situation to get the seller specifically what he wanted, which was money to pay off this high interest loan. Were you guys constantly negotiating? What was that discussion like? It was not that difficult. You know, it all required to be patient, like you said, and to hear out, what is it exactly he's looking for?

So he had an high interest rate of around 5%. I told him I'll pay you 6.5%, so you'll have that extra cash flow. So rather than he paying off his hard money lender, he would get that extra cash flow, and then he's getting this 10% upfront payment that he could use for his Christmas or New Year with his family, and then the next 10% he will get in six months, and the other 80% he is guaranteed to get that in 12 months. As long as he is leaving that obligation out, and he's making a little positive cash on that, it works for him. And it worked for me also by not putting that extra 10%

in doubt, I could force appreciate that house by putting an amazing STR features and amenities. So by the time at that end of 12 month, when I go to a traditional lender to refinance it, I force appreciate that house. And that's exactly what happened. And at the end of 12 month, I again went to bigger pockets, looked for, you know, lenders by sharing my situation that, hey, I had a balloon payment coming up. I need to find a lender. Can anybody help?

And the community is so amazing. I had so many outreach from different banks and mortgages, and one of them whom I work with now for many, many deals, they said, yeah, we'll do it no problem. And you'll be amazed. In 12 months, it almost doubled in value because of this creative approach that I did and what I did. So the house purchased was $380K. And when the appreciation came in with the lender, it came at $560K. So I essentially pulled out almost $160 to $170k off that house, which I used to fund. my another creative finance deal in Florida, and then this one was a cash flowing beast as a

well-old machine. Unreal, amazing deal. That's a great example. Thank you for sharing that with us. And Kate, you sound like a guy who understands the time value of money, which is not exactly something we have time to get into today. Maybe we'll do another episode on that. But, you know, this idea of figuring out how to use every dollar you have as efficiently

as possible, you don't have to do this on your first deal. I think when you're doing your first deal, it's honestly better to just like do something that's relatively simple, figure it out. But as you progress as an investor, this to me, at least, is the fun part. It's like it's almost like a game where you're still buying the same houses. You're doing the same kind of deals, but you come up with these little strategies, these little tricks that help you eke out a better and better return. And I'm kidding. It sounds like you've learned to do that relatively quickly in your career. Okay, we've got to take one last break.

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Sign up for free at Avail.co. That's AVAI-L-C-O-BiggerPockets. Welcome back to the Bigger Pockets podcast. Let's jump back in with OnKit Load Hub. So are all the deals you're doing now creative finance? Most of them, yes. Yeah, because it takes a lot of time, as you would imagine, after your typical W2, your blood, sweat, and tear to save up the money,

and there's emergency requirements and funding. So you can typically buy, and also from a debt-to-income ratio perspective, it's like one house maybe in a year or two-year at the max, depending on your income and debt-to-income profile. So now we are forcing ourselves more into the creative side of business. And every two years, when we clear up, have that rental history to show from a tax return perspective, we then buy a typical investment property once the savings and DTI are met. So you're doing both.

You're sort of like grinding a little bit with the creative finance. And then as you can afford sort of the traditional, I assume long-term rental kind of deals, similar types of business plans, you buy those. That's that's super cool. I'm curious on Kip, because honestly, I've been investing for 15 years, and I have never even asked someone to do seller financing to be perfectly candid. And I've done some off-market deals, but I've never even inquired. I would probably think about it more now, but how do you get that confidence?

It seems like you were learning on the fly, but you were willing to take on one of the more challenging or daunting elements of deal finding in today's environment. Whenever I look at an MLS listing or talk to an agent or a property, I don't approach that, hey, I'm going to target this one as creative finance or, you know, an investment. I never do that, right? I let numbers do the talking. And what I mean by that is, and I'm sure to walk you through my entire journey, there was a house in Florida that we saw.

We just loved it. It was an amazing house at the canal with a dock, a pool, and everything, right? And when I saw that house, we were really in love with it. And what I mean by love with it from a number standpoint, right? It just made sense. And at that point, we start to realize that, hey, is it a good investment property with 25% down? Or is it a good vacation home that we could use on a personal name? Or can we do a creative financing, right?

And we try that approach. So in this example for Florida, we asked the Asian that, hey, what is the seller looking from a price standpoint, right? And we got to know, just by having these human conversation, right? We got to know that, you know, it's an older woman. She's looking to stay closer to her daughter. And all she's looking is $3,000 a month so she can use that payment for staying closer to her own daughter. And I realized, well, maybe this is an opportunity. You know, the seller didn't come saying with a banner that, hey, I will do seller financing.

No, no, she didn't do that, right? So what I had to do is basically come up with the plan, right, and come up with the numbers, right? Again, back calculating, being a numbers person, how can I make a deal work where she gets $3,000 a month? and she didn't want a huge tax payment also altogether, which didn't say in the first, but I proposed that as a benefit. So what I ended up doing is I made a proposal that I'll pay you $3,000 a month, right,

which comes around to $4.5.5 interest rate, whatever. You know, so she has a little bit money. I'll buy the house at her price or even a little bit more if she wants, right? She'll get the cash every month. We'll do seller financing for three years. Learning from a Philadelphia example, I realized 12 months was too short, right? you don't always get a property doubled so quickly.

Maybe I got lucky with that one. Taking advice from all of your previous interviews, I thought, let's do a three-year balloon payment this time with a lower interest rate. And then for the down payment, rather than the 10% six months, I took that to the next level. And I propose, you know, it doesn't hurt to ask. At the max, you'll just say no. So I propose that a 5% down payment plan every quarter for the first 12 months.

She had a little hesitation in terms of trust that how will I believe, you know, that you will pay me because it's not a traditional lender and everything. So I showed her my portfolio, you know, our reviews online and our companies, finance sheets and everything. And then the trust was built at that human to human level. And she agreed. And she, in fact, said that, you know, this will actually work in benefit for her by not having that entire cash together from a tax perspective. If she can break that 5.5% which is 35,000 every quarter, and that cash flow for the next three years is just an ideal scenario for her. And even for me, where in three years I could make an amazing Airbnb,

have those numbers and force to appreciate and refinance it at a later time. Man, you are one of the more creative investors I have spoken to on this podcast. And I don't say that lightly, but I really appreciate your approach to this. Because we were talking earlier, yeah, you're a business, there's customers. And you treat your tenant like a customer and try and find the right situation. But what you're talking about is treating the seller like a customer. to you truly understood what the seller was looking for and did a lot of work and put in a lot of effort to figure out how you could create a mutually beneficial situation. And I love that

because you're not taking advantage of anyone. You're helping the seller figure out and get what they want and you're getting what you want. To me, that's like the perfect type of real estate deal where everyone is getting exactly what they want. So I want to commend you on that. Now, seller finance and creative finance, it sounds great. It sounds amazing all the time. But there are risks to it. So I'm curious if you have any examples of times where it didn't work out for you or any cautionary tales that the audience should look out for if they're doing a seller finance deal

or looking to do creative finance. I think there was a deal in Florida itself that we were looking where it was a creative finance, similar to this 5% down payment model. It was a million dollar property. The seller had agreed, right, because nobody was buying their house. But one thing to be caution in seller financing is she was selling me this house, right, the title was not getting transferred or I was not getting an ownership. It was more of a lease to own model. So she agreed that, okay, you can pay me this fixed amount of money per month for X amount of years. And after that, we will do the closing. If me or my company's name is not on that title or not on that house, I don't want to do it.

And I'll tell you why, even for making small renovations or updates or even installing a security camera system such as ADT, the first thing they ask is, is the house in your name? If not, then you need to get approval. Then I'm not going to hunt that seller down wherever they are in the world to add a wall or add a pool or something, right? Like I'm buying the house. I'm investing my hard-earned money and soul and time in that house. I want full control of it.

So what I encourage people is the devil is always in the details. You know, it's not only the numbers, but also the qualitative information where sometimes there are some sellers which are sharks, right, and they are there for the blood. And they just want to make the deal work for them, right? And they could anchor you in a lease to own option, right? Which is good for certain business models, right? But if you are thinking in a least to own, you will have the full control, and then insurance becomes a completely different challenge, right?

in Florida, which is prone to hurricanes and storms, if that hits, what happens in that case, right? I am the tenant and the landlord, but I have owned the property. So which insurance policy kicks in and who kicks the can. And with all that time, my roof would still be open and prone to more damage over time, right? So there are these so many unknowns to be caution of. So you have to really take small baby steps and not approach as a house that, hey, I'm going to do this creative finance on this one, right? Like, I could buy a house outright with 25% any point, right, by raising money and other things, right? But take time, have that patience. Look at the fine print, right? Have the best of the lawyers, right? Don't be just a person with an opinion in the room. Have all these

veterans and experts to support you in your journey. That's great advice. And especially with these seller finance deals, just hearing you speak and you do a great job explaining it simply, it can get complicated really quickly with all of the different deeds, titles, insurance policy. Like, it's complicated, especially if you're new to it. Totally agree with Enkitt. It's absolutely worth figuring out hiring people, spending the money to make sure that you truly understand what you're buying, the situation you're getting into. So no one gets screwed over, you know, whether yourself or the seller, you don't want to create that situation. You want to make sure everyone's crystal clear on what kind of deal they're getting.

themselves into. I'm kidding, I can ask you questions all day, but we got to, we got to wrap this show soon. So I want to turn to just ask you about your vision. Like, what, what are you looking forward to? What are you trying to create in the next year years? I'm really excited to create a portfolio of properties which solves people problem, you know, in the corporate leasing or student housing section or weed vacation. My vision is to really provide that customer experience, you know, that Rills Carlton experience when you go in Paris, you have that service, right? I really want to give that level of service to all my tenants, not only just on short-term rentals, but also on long-term rentals and medium-term rentals.

So the goal is to build the portfolio creatively because, you know, let's say if I get a lottery of $100 million, I could buy a half a billion portfolio in one day, right? But that's not the goal. That doesn't build the character, right? The character comes in gradual progress and going through these learning. So my goal is to go through these bumps and these experiences in the next few years to have that personality and character build up to be able to manage that remotely. And one day I could sit with you in Amsterdam and we could go for a waffle together while our portfolio is in US.

Awesome. I love that. Okay. Well, it sounds like you're well on your way. And I love the mission. I think it's so important to think about everyone who's involved with your business and make sure that everyone is getting mutual benefit. This is what being a good business person is all about, whether it's your tenants, your real estate agent, your lender, the seller. I think you do a great job of exemplifying one of the core values we have here at Bigger Pockets, which is mutually beneficial investing. And I think you're doing it all the right way and you're clearly doing it in a profitable way. So everyone's winning.

So thank you, Ankit, for joining us today. For everyone who wants to connect with Unkit, will put his contact information below. And of course, sounds like you're pretty active in the Bigger Pocket. forums and community, so you can also find them there. Thank you so much today. Thank you all so much for listening for Bigger Pockets. I'm Dave Meyer. We'll see you soon. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calicoe content. And editing is by Exodus Media. If you'd like to learn more, about real estate investing or to sign up for our free newsletter, please visit www.w.w.com.

The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.