Ashley:
This is Real Estate Rookie episode 331.

Lyrva:
I’ve learned a little bit about how to screen tenants, how to write up an agreement, how to enforce my own rules, how to do renovations even though they were small renovations, but that’s a big part of being an investor, getting bids, all of that. So it’s just changed my life and to where I’m confident now that if I venture out and do another deal or another project, I have confidence in myself. I do know something.

Ashley:
My name is Ashley Kehr and I’m here with my co-host, Tony J. Robinson.

Tony:
And welcome to the Real Estate Rookie podcast, where every week, twice a week, we’re bringing you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And in today’s episode, you’re going to get a healthy dose of all of that. You’re going to get a little bit of inspiration, a little bit of motivation, and a little bit of kick in the butt to really make something happen. Today’s guest is Lyrva Sanchez. And when you hear Lyrva’s story, you’re going to hear something that a lot of you’re probably struggling with, which is there’s so much information out there, there’s so many different strategies.
How do I choose one that makes the most sense for me? And you’ll get to hear Lyrva’s story of how she went on this journey of identifying the right next step for her.

Ashley:
And the way that she talks about choosing her strategy, you’ll be able to relate to it as to like, “I read this book, I listened to this podcast,” things like that. But she breaks down as to some of the reasons she ended up going with the strategy that suited her. She talks about her lifestyle, her why, just the kind of person that she is. She actually started out trying to wholesale and she will tell you one thing that happened to her that was actually going well.
If you’re a wholesaler, you’re like, “Yes, I want this to happen.” And she didn’t take action on it because it was not her and go through that explanation. But I think she makes a very valid point that if you are uncomfortable and don’t feel that this is something that really suits you and fulfills you that you may not be that successful with it. So she talks about trying to tie in what are things that are going to suit you to picking your strategy. But also we learn about sourcing deals, how she was able to find off-market properties.

Tony:
Now, before we jump into the conversation with Lyrva, I want to give a quick shout at someone by the username of DeLauro who left to a five star review on Apple podcast. This person says, “This show is great for people like me who work a full-time job, but want to learn more about investing. Real estate investing seemed overwhelming at first, but listening to Ashley and Tony every week helped me get more comfortable with all the terms being thrown around and investing in general. I’m on the BiggerPockets forums now and learning as much as I can. Thanks for all the tips, guys.”
So if you’re part of the rookie audience and you haven’t yet left a review, please do. It only takes a few minutes. And the more reviews we get, the more folks we can reach. And no, the more folks we can reach, hopefully we inspire more people to take that next step or get that first deal. So do us a favor, do someone else a favor, leave that review.
Lyrva Sanchez is a registered nurse, single mother of two boys living in Southern California. Actually not too far for where I live in SoCal. And after her separation, she spent two years chasing down the shiny object syndrome of wholesaling and a little bit of out-of-state investing. But then she doubled down on a real estate strategy that really worked for her, for her kids and learned that one property could really change her life. So Lyrva, welcome to the show.

Lyrva:
Hi. Thank you, Tony.

Tony:
Super excited to have you.

Lyrva:
Thank you. Thank you so much. Thank you.

Tony:
Excited to have you here on the show with us, but I want to get right into the nitty-gritty, Lyrva. So what would you say drove you into the world of real estate investing?

Lyrva:
So as you mentioned, I was newly separated. We have two young boys and that was a really difficult time. Actually, there were a lot of good things going on and not so great things going on. I had just paid off all of my debt. I had school debt, I had car loan. Just paid off everything.

Ashley:
That is amazing. Congratulations on that. That’s not typically an easy thing to do.

Lyrva:
Thank you. Thank you. So I was on a Dave Ramsey trip and it was just full on saving and saving, and putting everything towards the debt. So when we made this choice, this decision to separate, it was a really, really obviously difficult and difficult challenging time in my life, and it just made me shift towards working on myself. So I dove into personal development, self-help books, all of that. But part of that process, I also came across real estate investing, building wealth.
How do I still carry on with my dreams and the life that I want for my kids now that I’ve pretty much lost half of my income overnight basically. So that’s how it just came to be. It was part of that whole process of going inward and just trying to do better, be better, and have the same or better life for my kids regardless of my status.

Ashley:
So after your separation, how long was it before you actually got started into real estate and maybe give us a little bit of what your life looked like. Did you go and rent an apartment? Did you stay in your house? Were you working somewhere? Fill us in what your financial picture looked like.

Lyrva:
Financially, I was doing well because we had paid off and we had started saving, but I didn’t feel good because obviously I didn’t have access to… Previously, we had dual income. I did stay in an apartment. I moved out of the apartment that we had together and I moved to an area that I wanted to be closer to, so better schools, all of that. So I was already working at the company that I’m still at now. I’m a registered nurse, but it’s not really a traditional role, so I work from home for a health plan, and that was something that I consciously made an effort to do because I had my second child and working in a hospital, it just wasn’t going to work out for me.
So it helped out that I was working from home and living in an apartment and I really tried to minimize any expenses. Just still stay in that very savor mentality at the time. So that’s where I was at.

Ashley:
Okay. So then you started learning about real estate. I’m very curious as to in your role where you were able to work at home, do you think that played a large part in being able to become a real estate investor? What are some of the advantages if there is someone listening right now who maybe has an opportunity to work from home, what are some of the things they should be thinking about to get started in real estate and how this can actually benefit them?

Lyrva:
So I think it played a huge part because… Well, now, I have a short-term rental, and so it’s actually on the same property. And so just being on the property itself helps. I have a cleaner, so I’m not actively doing a whole lot, but just to check on things to be present there, that’s helped a lot. Also, at the time of learning and going through the process of learning what was going to work for me, I was driving neighborhoods and seeing what areas I could possibly get into.
So I would drop off my kids from school and drive neighborhoods on the way home. And driving for dollars, seeing if there was… Everything that I learned on the podcast, I was trying to implement it like, “Oh, is that a vacant home? Is that a potential property that I can pick up?” Just trying to implement the things that I heard on the podcast.

Ashley:
So you looked for vacant homes. What were some, and you said there was things you learned. What are some of the other things you learned as to houses that could be a potential property for you?

Lyrva:
So I never acted on those, but I think it was just something that I was going through the motions. I would look up property values and I would see, “Okay, this is a vacant house, really how much could it be worth?” And without seeing inside, could I even take that on. I guess I was just playing investor at the time. I don’t know if it really has to do with working from home, but just that you have a little bit more flexibility in your time too. I drop off my kids and I picked them up. And so during those times, during my breaks and stuff, I would be able to drive areas and see properties, new listings that would come up. I would go see them just drive by them as soon as they came on the market.

Tony:
Lyrva, you said something that kind of stood out to me is that you listened to a lot of the podcasts and you try to implement everything you learned. I think that’s a path that a lot of new investors go down is where they hear all these different strategies, they try and go after everything. So I do want to touch on how you were able to take all of the information you learned and implement it all at one time. But before I do, just one other question. What would your advice be to someone that is maybe in a similar situation where they’re going through this big life change?
A separation, divorce is something that’s unfortunately kind of common today, and there are a lot of folks that have these aspirations of becoming a real estate investor, but they might use this life event of a separation or a divorce as an excuse as to why they can’t invest in real estate. So just what is your advice to someone who’s in a similar situation that’s looking to get started?

Lyrva:
I think my advice is to keep hope. Somehow you can figure out a way. It’s not that you can’t, it’s just that haven’t figured out how yet. And finding a way to make it work for you and your lifestyle. I would say going through the motions, it took me a long time not giving up, trying to find information, like reading things, you’ll come across random articles, things that help you. That’s kind of how I found it play out for me. I was really tight on cash to purchase a property. Not for my expenses.
And these little clues would come up or opportunities. There was an opportunity at work for me to get a promotion and I took it I was thinking in the back of my head, real estate that’ll help me. So just try to stay motivated and don’t lose sight. The shiny object syndrome is a really big thing and it really did impact me for a good two years.

Tony:
One thing that I think is incredibly important to point out, and I love that you said hope, Lyrva, because I think that’s something a lot of people lose when they go through difficult times in their lives. But when something challenging happens to you, you can never control what life throws at you, but you can always control how you respond in those situations. And someone could take something. It could be divorce. It could be a death in the family. It could be the loss of a job, and they could take that moment and let it break them down.
Or they could take that moment and use it as motivation to become a better version of themselves. And it seems like, Lyrva, you took the second approach of using it to catapult you towards something better. So on that note, let’s talk about what you did next. So like I said, I want to go back because you said you tried to implement everything that you learned on the podcast. That sounds overwhelming almost. So I guess walk us through that process of trying to implement everything and what worked and what didn’t work from there.

Lyrva:
I started going to meetups. It was like the topic of the week. I’d get super excited about that and then look into that and try to see if that was something I wanted to get into. So I started thinking, “Well, what does everyone else do?” So I started looking at what does everyone else do where I could potentially start wholesaling?
So I looked into it, I thought, “Well, I don’t know, it doesn’t seem very genuine for me or something that I would do, but that’s kind of where it seems like everyone gets their start.” So I met one of the organizers at one of the meetups that I was at, and everyone socializes afterward. I told him what I was interested or what I thought I was interested. Everyone is really helpful at those meetups. What do you need? What are you looking for?
Everyone’s just really just sharing and everything. He was a flipper now, but he started out as a wholesaler and he had this program that he purchased that helped him wholesale. He’s like, “I can burn you a copy of the CDs if you want them, and that can get you started.” I was like, “Sure, great.” So took that home, implemented it to a tee, everything. And then I quickly realized it was just not for me. I was getting phone calls and I could not answer the phone. So it was like this feeling I can’t explain. It was just not for me.

Ashley:
What did you do to get those phone calls, I guess? Why were people even calling you? What were the steps you took before that?

Lyrva:
So the whole steps of the program, so they teach you, you get a list and they tell you about the different types of lists that you can get. And then I decided to go with letters. So I was like, “Well, I can just shoestring this together and create the letters, print them at home.” I got a case of envelopes. I did the whole stamps and everything with everything that they say, the tips about how to get your letter opened, make it a color so that it pops in the mail and just all that stuff that… I mean, there’s so many different tips.
So I just wanted to get it perfect and it took me forever to even get the letters out because I was like, “I’m going to make a mistake and no one is going to open my letter.” Well, people actually started calling and then I couldn’t even answer the phone. I was so scared to answer the phone, so these calls were going to my voicemail. I had to set up a Google number, so I knew they were calling from that specific number. And so I was like, “This feels so fake. This is not who I am.”
The letter, I’m pretty sure said something like, “I buy houses for cash,” and I did not have a buyer, and it just felt so sleazy. So it just didn’t work for me. So there were a couple other things that I can think off the top of my head. Someone did a talk on mobile homes and how they invest in mobile homes and do that. And so I bought a book and that’s as far as I got with that.
So it was just like whatever the topic was, I’d dive into it and then I’d be frustrated because I was like, “Well, that doesn’t work for me either.” And then the next thing was out-of-state investing because it was maybe the more of the price point that I thought I could actually invest in. And the one thing was that I was very torn between should I buy a home and I’ll be house poor, or should I rent and invest out of state?” It was so hard for me to decide and it felt like I can’t have the two.
So I started, “Well, let me just see what’s out there.” I looked at turnkey properties, which I didn’t feel comfortable because I felt like a lot of the numbers were being inflated at the time because I was actually doing my own analysis. I also just looked at Zillow and was trying to find on market properties. The thing is I was trying so hard to find the perfect market out of state, and now I realize there is no such thing.
So that was another thing. I probably analyzed hundreds of deals in different pockets of states, and I probably could have bought a property at that time because I had done so much analysis. So then when I was like, “Okay, I just need to maybe go for it.” A friend of mine had moved to Kansas a few years before and another girlfriend from college said, “Why don’t we go visit her?” And I said, “Okay.” And maybe I can make this also a trip where I actually go see properties out of state. Kansas is probably a good area. I looked at the area and what the job market and all of that was doing. So I was like, “Okay.” And it works because maybe I can go visit my friend while I’m out there or I have a place to stay if I ever need to go out there.
So we worked on that trip. We set it up and then I mentioned it to my friend like, “Hey, I’m going to spend a day while I’m out there. I’m going to be looking at property.” And she said, “Well, do you need a realtor?” And I said, “Well, yeah, I don’t have one yet.” And she said, “Oh, I know someone who might know someone.” So she got me the number. I reached out, got in touch. She sent me properties beforehand. This is what you might see while you’re out here. I can’t promise you that any of them will still be available when you’re here, but this is just to get an idea.
He was working only with investors at the time. It was like a hot market. It seemed like his broker had just started this investor only department. And so he was only working with investors. So I felt pretty good like, “Okay, I’m working with someone who should know what the market is and what I am looking for.” Flew out there. We saw eight to 10 properties, I think, and one day my friends were so tired. It started off with, we were all happy and excited and everything.
I was the only one that was like, “No, we have to finish the list.” Got through the whole thing. But I was starting to feel like, “Okay, these properties are…” Because of my price point, we were looking at C and maybe B minus areas and I was just feeling a little uncomfortable. It looked like the systems were probably… Maybe the major systems had to be replaced yesterday or it was just on the verge of breakdown or there was just something funky about them. There was nothing where I was like, “Oh, this is in my price point and everything is great about it.”
And just being out a state and being new, it made me really uncomfortable. But I said, “Well, it’s about the numbers.” So I just went home and I picked the top three that I could potentially go for and the numbers didn’t work for me. It was just clear. And I think the property values were from 110 to 215 between the three. I don’t remember where the one in the middle landed.

Tony:
But the numbers didn’t work.

Lyrva:
Cash on cash was less than 3%. It was just [inaudible 00:20:30]

Tony:
That’s such an important thing for you to call out, Lyrva, because I think a lot of rookies, when they invest all of this time and energy looking into a market, you fly out there, you walk a bunch of deals, you start to get this kind of emotional reaction where it’s like, “Hey, I’ve already invested so much time, energy, and effort into this. Let me maybe pat the numbers a little bit so I can feel better about it.”
But you made the decision to not do that. So it sounds like you were dipping your toes a little bit in wholesaling. You sent the mailers that didn’t work out. You went to this out-of-state market and met with agents and analyze deals, and that didn’t work out. So how did you actually land on the strategy that was right for you?

Lyrva:
Okay. Yeah, this is… Exactly. I came back from Kansas, saw the numbers. I was like, “This is still…” I’m so frustrated at this point because I feel like nothing is working for me. It’s working for everyone else but me. I was like, “Okay.” Back to, “I want a house. I don’t want to be house poor in California. It’s just doesn’t seem feasible for me, but I really, really want an investment property, an income generating property. How do I have that? How do I have the two?” And it just came to me. I have to have a property with an ADU on it.
That’s the only way I can get the two, the best of both of what I want. And it was just like, “Yeah, yeah.” I was talking like, “Yes, that’s exactly… That’s it.” And once I made that decision, it was like nothing could stop me. I was honed in like, “That’s it.” So however long it would take me, I don’t think… It actually only took a couple months after I made that decision that that was going to work for my lifestyle for my family and it took a couple months, but if it would’ve taken me even longer, I think that’s kind of what my strategy was going to be. I knew that was going to work for me.

Ashley:
Can you explain to us real quick what an ADU is?

Lyrva:
So it’s another unit, like an accessory dwelling unit that’s on a property. I mean, there are other terms for them or like guest houses, a converted garage. So I was looking at any of those types, but it had to be a separate unit like a back house where I could live separate with my children because if I had been single, I could buy a house and rent out the rooms, but it was just not an option for what I wanted. So that’s very popular now and it was already gaining some traction in ’20 that… By then it was 2019 or late 2018, beginning of 2019. But not as popular as it is today. Now, it’s like ADU booming in California, but at that time it was still gaining traction.

Tony:
The ADU strategy I think is something that, especially if your house acting can be exceptionally powerful, and I think hopefully we’ll get into a little bit later how that ADU has worked out for you, Lyrva. But I want to point something out really quickly. Your journey of finding the right strategy for yourself, it started with the educational phase of, “Hey, let me just learn as much as I can about all the different options that are out there,” which is the right thing to do. And then you kind of dipped your toes in these different strategies to understand like, “Hey, what’s the one that works for me?” You said wholesaling doesn’t quite mesh with who I am as a person. Out of state investing, I’m not quite comfortable with the idea of doing that in these other marks. I don’t understand.
But this strategy of house hacking with an ADU, that lines up perfectly with who I am and what I want out of my investments. And I point that out because if you’re a rookie that’s listening that hasn’t identified your strategy yet, I think you can follow what Lyrva did of tons of education and then testing in a small way the different strategies that are available to you. But I guess, Ash, when you think about choosing your first strategy, do you remember what steps did you take to say, “Hey, I want to focus on BRRRs in my backyard?” Did you try anything before you did that first deal?

Ashley:
I just didn’t know there was other strategies. I worked for one investor and he did long-term rentals, and that’s all I knew there was like this is real estate investing. So I was just a limited mindset and naive that that’s why I did mine. But I think too, when you’re looking at different strategies to start with is where’s your opportunity? Where do you have… And so, Lyrva, you looked at which one best suits my lifestyle and what I want to accomplish and achieve what your why is for going into real estate investing.
Some of them didn’t fit what you want to do like wholesaling. You didn’t want to be answering the phone. That would defeat the whole purpose of you becoming having some kind of time freedom and getting to that financial freedom because you were doing something you did not like to do and dreaded it. So there’s so many different things you should look at when you are choosing that strategy. So Lyrva, what were some of the things that were important to you that this is why this strategy, if for anyone listening, if they’re kind of stuck deciding, what would be your advice?

Lyrva:
Yeah. Definitely evaluating your lifestyle. My why was my kids. I didn’t want to let this separation and then eventually the divorce that was part of this whole process of that was going on in the background to really define our future and for us to have a different lifestyle. I still wanted to give them the same lifestyle. I still wanted them to live in a good area with good schools and to have that feeling of being in a home. I grew up in a home that my single mom lived in and owned. And so it was really important to me.
I just didn’t feel like I knew how, but once I figured it out, that was so important to me. It’s just something that I couldn’t give up. Once I figured out how to do that. So just figuring out your lifestyle and where your strengths are. If it’s not going to be answering a phone because you’re so scared to answer sellers, calls. Don’t do that. Just try to see what works out. What’s your zone of genius? Where you’re going to shine? And I get creative on things. And so that’s how I figured out when I finally got my property. I got creative. So that’s one of my areas. I can come up with a solution for how to make something happen. So that’s my advice. I could figure out where your talent is and kind of go with it.

Ashley:
Once you identified that you wanted to find a property within ADU, was that because you just saw a property within ADU or you learned about it and then you started searching? How did you find that first property?

Lyrva:
How did I find it? Well, I learned about them at the meetups. And like I said, this was 2018, 2019. There was already a buzz about ADUs and they were hard to come by at the time. So they come up once in a while. Usually maybe an investor is the one to buy it. So there wasn’t a whole lot on the market. And so how I found it is… Well, that’s part of my journey. So I was looking online. There wasn’t very many that would come up. I think maybe every few months maybe one would pop up.
So I knew about how much they added value to a property like if it was a two bedroom, one bath and there was an ADU on it like, “Well, how much more it would be than just a two bedroom, one bath.” So I had an idea of how much it would add to the property. But I was like, “Well, I don’t want to wait. I want to take action. I know what I want now, so I need to flush it out somehow.” I reached out to my friend who’s a big sister and she’s a realtor, and I told her my plan. I said, “Okay. And I know you’ve followed me on this journey and I’ve been talking about all these things that I’m doing, but I know what I want now.”
I said, “I want a property with an ADU like a Backhouse or a guest house and I want you to show me the property. If it comes on the market, I want you to be my realtor.” I said, “But I also want to be honest with you.” I’m going to look for properties off market. I had already a little… That my experience from wholesaling, so I knew how to get a list from ListSource, how to pull a list and what to look for. But I also asked her, because we were friends and we had that relationship, “Would you be able to get me a list from the MLS? Can you scrub a list for me with some keywords and some timeframes that I gave you?” And she agreed. She was a supporter.

Ashley:
Yeah. What were some of those you used?

Lyrva:
So I think on the MLS, you could look for backhouse. You can just free type in something [inaudible 00:30:10]

Ashley:
Mother-in-law suite or something.

Lyrva:
Mother-in-law suite was one of them. Yeah, converted garage. Any word that could potentially mean like there’s another unit on there. And then there were some timeframes I think if they had bought in the last two years then it was like remove those from the list. So I gave her some parameters and she gave me the list and I had gotten my list from ListSource and I combined that. And then I went and I searched these properties online. I was on Google Maps. Again, I drop off my kids. I’d go look at the list, I’d drive by them. I was trying to check off the ones that wouldn’t work for me and just condense it to like, “Okay. Well, I’m not going to buy up in the hills and have a four or five bedroom house. It’s just not feasible, so let’s just keep it real.”
So I brought it down to about a dozen properties. And around that time, I also came across something that was super important for me to actually be able to buy a property. I found information that you can pull $10,000 from an IRA to use it for the purchase of a new home. So if you’re a new home buyer. And so that put me in a slightly different price point because I was like, “Oh, that’s more money for closing costs.” I was so tight on the budget at that time and it made a huge difference, which I wouldn’t have been able to use out of state.
So I was like, “Oh, this is just another sign that I’m on the right path.” Actually, I’m not saying this out of order. Before I had asked my friend for the list, I found this article from a designer like a decorator and she had put out a blog post that said how to buy a property that’s not on the market. And that was really helpful because I knew about wholesaling, but it was from a different fresh perspective. It was just a regular person that wasn’t an investor and she wanted to live in a specific historic neighborhood, and they didn’t come up very often.
So she wrote a very genuine letter about why she would want to purchase in that area and she reached out to that specific area. And I was thinking, “Oh, I can do that. It’s not like that sleazy I buy houses for cash. It felt just so much more me.” And so I thought, “Oh, I can definitely do that and I think I can answer those phone calls.” So putting that together with that list, and I brought it down to a dozen and I got the letter, used her template because she put it all out there and I finessed it to my story.
So it was just about me and my kids and that we lived in that area. And the reason why I would want to purchase a home, their specific type of home. And those letters wrote in my car for about two to three weeks. I could not get them out. It was this fear of like, “Well, what if… My name is unique. What if they’re like people that go to my kids’ school, their parents, and they’re like, ‘Oh, you’re sending us this. Why do you want to buy our house?’” And I just thought what are people going to think about me? And then it just came to the point where I was like, “I don’t care what people think about me. I did this. I am going to make this work somehow.” I sent them out and I was like, “I’m done. I don’t care what people think about me. This is what I want and I’m going to go for it.”

Tony:
That’s super inspiring, Lyrva, but I just want to pause you on that because I think that fear of judgment is something that a lot of new investors struggle with is even just the idea of, “Hey, I want to own property.” And especially if you come from a background or a community where that isn’t something that’s done often to own investment properties, people might think that you’re dreaming too big or like, “Oh, it’s Lyrva and crazy dreams.” But you have to have, I think, the confidence in yourself that, “Hey, if I’ve set this goal, I’ve spent the time educating myself. I’ve built up the resources that I need to do this. Why not take that next step?”
And obviously, it turned out really well for you. So I’m assuming you finally get the courage to drop those letters in the mail. Does your phone start immediately ringing? Do you wait months on end before you hear response from someone? And then how do you actually go about negotiating with the sellers once they reach back out.

Lyrva:
I didn’t expect anything. I was like, “Well, you know what, now I’m just doing it and I’m going to move on.” But it was part of like my, “I’m doing this.” So I contacted my friend and I said, “Hey, I sent those letters out. Thanks for sending me the list, but I’m still… This is what I really want.” So there’s two that came out on the market, two properties that had ADUs about a week or so within that timeframe. And I said, “Can we make an appointment to go see them? Like I told you on market or off market, I’m going for it.” So she said, “Sure.”
We went to go see them that weekend. I think maybe a week, a week and a half had passed. When I had sent the letters out, I kind of forgot it, put it out of my mind. We went to see the properties and while I was at one of the properties, one of the owners reached out to me via email. It’s like, “Oh my God. This is actually happening.” And my friend was with me, the realtor, and I was like, “Help me formulate an answer.” And I was like, “Something is happening.” I don’t know. Whatever it is, something is happening.
I formulated a response. We went back and forth a couple times and they invited me to see the property that evening. My friend couldn’t go with me, so I got someone else to go with me. I don’t know these people. I’m going to go meet them at their house. But I was like, “But I’m going.” Because when I got the email, I recognized the name. I had stocked these properties. I knew where they were. I was like, “It’s the greenhouse on the corner. It’s so cute. I wanted to go see it.”
So I went to go that evening to meet them and super nice couple, super nice family. They took me around to their property inside, outside. They showed me the ADU. It was a little funky, and I didn’t let that scare me. I was like, “I could work with this. I could totally work with this especially if I get this at a deal. If their price isn’t out of my range, I will totally work with this.”
So of course I didn’t say that to them. We had said, “Let’s both think about this. You take your time and we’ll take our time to decide if we’re going to move forward.” They said, “Take a couple of days and reach out to us and you’ll know so that we know either way.” They did tell me a little bit about their story and why they even reached out to me. So it was a family that was trying to get into the area. Again, the schools, the whole thing, it was difficult to get into a property at that time.
So they had been there for three years. They bought it off market from friends of theirs, and they tried to make it work like a property that really wasn’t a good fit for them, but they really wanted to get into the area. So they were a family of six. They had four kids. And so it’s a small home. It’s a two bedroom, one bath. So their two older kids were living in the ADU, and it just wasn’t a good fit to have your teenagers and the ADU. So they thought, “Well, it’s a really large property. Maybe we can renovate it and extend it.”
And they went through the whole process of the planning and doing all that, but it got really expensive for them. So then they said, “Let’s just scrap this, buy a bigger house and we’ll keep this as a rental.” And so they were fixing it up at the time to fix it as a rental, and they were an escrow for another house. At the time that I reached out to them, they said they were maybe thinking that they were biting off more than they can chew. So they were thinking, “Maybe we can’t be landlords. Maybe this is too much for us. Maybe we’re making our lives difficult and we should just move on.” And there’s this person that’s reaching out to us.

Ashley:
When you were looking at this property, did you know the rehab that this was something you could take on? You were able to finish it?

Lyrva:
Yeah. So the primary residence was turnkey for me to move in with my kids. For the guest house, it was, I think small enough to where I was like, “I could work with that. I could have a small budget and it was drywall. I think that really was the major part that would need to be.” There was a funky closet in the kitchenette instead of in the bedroom. And I was like, “Well, the bedroom is right next to the kitchen, I could just flip it and leave a space and make a functional cabinet like pantry in the kitchen.” I just was like, “I could do this. I could work with this. What’s drywall cost?”

Ashley:
Can you us the numbers of this whole thing? I’ll kind of do it rapid fire at you. What was the price that they wanted or did you just offer a price?

Lyrva:
So they started out with a price, 605. They gave two prices, actually. One with a kitchen renovated and one without, and I took without because I was like, this.

Ashley:
Okay. And then is that what you ended up paying for it, the 605.

Lyrva:
I did because I knew what an ADU, a property with… So it was under market.

Ashley:
Then how did you end up funding this deal?

Lyrva:
So it was a conventional loan. I put 10% down just to make my payment doable, and I used that IRA that I had from a previous job, and I used that for the $10,000 for closing costs.

Ashley:
So you borrowed money from your IRA or did you pull it out?

Lyrva:
It’s pulled out penalty free, so I pulled it out.

Ashley:
And then how much was the rehab that you had to do in the ADU?

Lyrva:
I think I spent… I think it was maybe 35, 4,500. It was like the bare minimum, paint and do that little switchover of the closet, and I needed to do it fast.

Ashley:
Then what did you decide for rent on this property and are you long-term or short-term, or even midterm renting it?

Lyrva:
So I started off, I did that for two years. The first year it was 1375. So it’s a one bedroom, one bath. It’s a little guest house unit.

Ashley:
What was your mortgage payment on that? A month. So how much did that cover of your mortgage payment?

Lyrva:
So at the time, because I’ve refinanced a couple of times since then, it was, I want to say, it was about 3,000.

Ashley:
So a little more than a third of your mortgage payment? It covered.

Lyrva:
Yeah.

Ashley:
Okay. So then what happened? You said for a year you rented it long-term. Then what happened?

Lyrva:
So for a year, it was 1375 and then the pandemic happened, so I waited to bump up the rent and then I got it to 1425.

Ashley:
Oh, awesome.

Lyrva:
So she stayed, the tenant stayed for two years, and when she moved, I was like, “I think I want to do short-term rental.” I think I want to dabble at that. And so I had seen in the area, there were a few at the time and they had been doing it for a really long time and it was kind of like that. Maybe they just put regular furniture in there or old stuff that they had found and guest house, back house units. I’m talking about not houses.
So I thought I could do it and I could do it better. I could actually get all the new furnishing and make it match. I could tell that these were seasoned hosts that were kind of doing it, I want to say the old school way where it was just like a hobby and they just put their maybe used furniture in there. And it was working for them. But I was thinking like, “I want to do it and do it like a real business. I want to just furnish it, make it nice, and do the whole thing.”
So by then I had a budget. I had two years, been a landlord and been in this property and was a little bit more comfortable. So I did a little bit more renovation. I was like, “Well, I have to do a little bit more work in the bathroom.” I redid the flooring and added some light fixtures.

Ashley:
With doing these renovations, were you able to get a lot more as a short-term rental than you were a long-term rental?

Lyrva:
I doubled my revenue.

Tony:
Wow.

Lyrva:
It’s been pretty [inaudible 00:43:12].

Ashley:
It was worth it.

Tony:
Almost covering your entire mortgage then, it sounds like, right, with ADU?

Lyrva:
Yeah, almost.

Tony:
Yeah. That’s fantastic. I mean, to be able to live in Southern California and spend almost nothing on your mortgage is insane. It’s a very difficult thing to do. So kudos to you for figuring out a way to do that. Lyrva, I love everything about your story. I love the fact that these different elements of the strategies you tried, you were able to roll up into this one deal that made the most sense for you, right? You were so confident by sending those 12 letters because you had already dabbled in sending all the mails for the wholesaling. And the work you did of analyzing deals out of state, it helps you be more confident when it came time to analyze the property in your own backyard.
So everything you learned culminated in this one deal, and it seems like it’s turned out incredibly, incredibly well for you. So are you ready for today’s question, Lyrva?

Lyrva:
Sure.

Tony:
As you’re listening and you want to get your question featured on one of our episodes, head over to biggerpockets.com/reply, and we just might use your question. So today’s question comes from Judy Underwood and Judy says, “For those of you who have borrowed against your 401(k) to purchase a property, did you refinance your home afterwards to pay yourself back? How did you use your 401(k) funds for real estate investing? I really don’t want to withdraw other than getting a loan.” So what’s your recommendation, Lyrva, I’m sorry for Judy.

Lyrva:
So that wasn’t exactly my situation. So I had an IRA that was not with my current employer. And I feel like everyone has those because you’ve worked somewhere else before. So I would say before going to your current, your 401(k) or 403(b), whatever your current retirement is, go to see if you have a pension or some kind of retirement fund with a previous employer, and then you can roll it over into an IRA. And then those are the $10,000 penalty free that you can use towards the purchase of a home.
So I don’t know if I necessarily would borrow from my current retirement plan. I guess it just depends, but I would do that first before I would use those other funds.

Ashley:
Awesome. Thank you. Okay, we’re going to move on to our rookie exam. And the first question is, “What is one actionable thing rookies should do after listening to this episode?”

Lyrva:
I’m going to go back to evaluate your lifestyle. What is important to you? What do you want your future to look like? What’s your family life like? And use that as the stepping stone to decide what your strategy is going to be.

Tony:
All right. Question number two. What’s one tool, software app or system that you use in your business?

Lyrva:
Well, now that I have the short-term rental, I use Airbnb obviously is one of the big ones. But like I said, I’m doing it as a business, and so I’m trying to be a little bit more sophisticated. And even though I only have one, I use pricing software, which a lot of people don’t do because they think, “Well, it’s costing them money, but it’s actually making me money if I use it the right way.” So ever since I transitioned into that, I’ve surprised myself at how much more I can get for certain nights where there’s events going on and things that I wouldn’t even have thought of.

Ashley:
Okay. And our last question, I want to tailor a little bit different to you today, but how has real estate investing changed your life?

Lyrva:
Wow. It changed everything for me. I feel like this experience, this whole thing, it’s helped me teach my kids like, “This is what you can do. You make things up as you go and you figure things out.” But also just my lifestyle, I feel like it’s been able to help me have the lifestyle that I want to live in southern California in an area that I want, making really good money on the property that I live on right next door. It’s in my back versus a state or few away and just to have eyes on that and just the learning that I have made through this entire process.
I’ve learned a little bit about how to screen tenants, how to write up an agreement, how to enforce my own own rules, how to do renovations even though they were small renovations. But that’s a big part of being an investor, getting bids, all of that. So it’s just changed my life to where I’m confident now that if I venture out and do another deal or another project, I have confidence in myself. I do know something. I do know a little bit about real estate.

Tony:
Isn’t it crazy what one deal will do for your confidence? And that’s why a big purpose of the rookie show is just to give everyone that’s listening that confidence to get that first deal. Because once you get the first one, the second one is exponentially easier. There’s so much more momentum and confidence behind you. So I appreciate you sharing that, Lyrva. Before we wrap up here, I want to give a shout-out to this week’s rookie rockstar. Today’s rockstar is Aaron Nygaard. And I can’t say the last name, Nygaard without thinking about the TV show Fargo. So if you know Fargo, anyway, I love that show.
But Aaron says, “Closed on property number two through a mutual friend. I let everyone know my goal of doing real estate investing full time. My first property I acquired through handwritten direct mail.” And he gave the numbers. It’s a 105 purchase price. $20,000 for renovation, and then it appraised for 225,000. Aaron says, “Now, out for a cigar to celebrate closing on this unit.” So Aaron, congratulations brother.

Ashley:
Well, Lyrva, thank you so much for joining us today on the podcast. Can you let everyone know where they can reach out to you and find out some more information about you?

Lyrva:
Thank you. I am on lyrvasanchez.com and on Facebook also Lyrva Sanchez. And then you can check Rustic & Chic B&B on Instagram.

Ashley:
Awesome. Thank you so much. I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson on Instagram. Don’t forget to check out our new book at biggerpockets.com/partnerships to get a copy. We will be back on Saturday with a rookie reply.

Speaker 4:
(singing)