\n
Ashley:
This is the Real Estate Rookie Podcast, episode 277.<\/p>\n
Tony:
You\u2019ve learned so much on this first deal, Sarah, that I\u2019m sure if we talk to Sarah today versus Sarah six months ago, you\u2019re two totally different people when it comes to your knowledge of real estate investing. Even if you\u2019re able to walk away from this deal eventually down the road at a breakeven, it\u2019s still the multiple, the return on that is 10x, 100x because you\u2019ve been able to learn and give yourself the tools you need to keep growing.<\/p>\n
Sarah:
Thank you. I knew that this was just going to, hopefully it\u2019d be just growing in equity and break even for a few years. That\u2019s fine. It\u2019s the digging myself into a hole right now, it\u2019s just what\u2019s-<\/p>\n
Ashley:
My name is Ashley Kehr and I\u2019m here with my co-host Tony Robinson.<\/p>\n
Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Today, I want to give a shout-out to someone who goes by the name of Andrew. Andrew left us a five-star review on Apple Podcasts. His review reads, \u201cGreat host, amazing company, unforgettable information, BiggerPockets is one of the most altruistic companies I know. They provide so much value free of charge, and this podcast does not disappoint. Very knowledgeable guests and amazing host. Definitely worth checking out.\u201d
If you haven\u2019t yet, if you\u2019re a part of the rookie community and you have not yet left an honest rating and review in whatever platform it is you\u2019re listening to, please take the few minutes takes to do that. The more reviews we get, the more folks we can reach, and the more folks we reach, more folks we can help. That\u2019s what we love doing here. I feel like we\u2019ve been getting a string of really positive reviews as of late, Ashley, and it really helps my super tiny ego, my super sensitive ego when I hear all this positive feedback.<\/p>\n
Ashley:
Sarah is a special guest today because I did a giveaway on the pre-order that when someone pre-ordered the book Real Estate Rookie: 90 Days to Your First Investment, one person would get to come on the show with me and Tony and we\u2019d get to interview them, but also they could ask us some questions and how we can really help them on their journey. Sarah is completely honest that she bawled her eyes out yesterday and things are not going as she expected with the rehab of the property. We kind of go through what she has accomplished. She was stuck in analysis paralysis for a couple years, finally took action, and we talk about what that action is and how she found that momentum, and now that she\u2019s into the property, something that has come up and how she\u2019s going to work through it and overcome it.<\/p>\n
Tony:
There\u2019s one part of the episode where she gets super vulnerable and really just, we go into kind of a deep conversation about the challenges that come along with being a real estate investor. I\u2019m so appreciative that she opened up to us in that way because I think it sheds a light on the part of real estate investing that doesn\u2019t get talked about enough, and that\u2019s the challenges and the doubt and the fear and how do you work through that. We spend, I think, a decent part of the episode just reframing those challenges that she\u2019s going through and positioning them in a way that actually supports Sarah and her long-term goals of building wealth through real estate.<\/p>\n
Ashley:
When Sarah first found out that she was the winner, she won this, she declined it actually. She said, \u201cNo, I don\u2019t. I just got my first property under contract. I haven\u2019t really done any real estate investing yet. I don\u2019t think this is really for me.\u201d
And so, I had someone email her back and say, just, \u201cYou are perfect. You\u2019re in it right now.\u201d We love how this podcast episode came out because she is literally in the nitty-gritty right now, and somebody who maybe did this a year ago or two years ago. There\u2019s things that they\u2019re not going to remember, things they\u2019re going to forget as they\u2019re telling their story, so I think listening to how this is impacting her right now, it can motivate you and inspire you, but also it can show you what some risks are.
Take a listen to today\u2019s episode and take it with a grain of salt is that it\u2019s not always going to be picture perfect. There\u2019s not always going to be this huge win at the end, or maybe there still will be for her. We just don\u2019t know yet. That was why I thought it was so intriguing and interesting to listen to somebody who\u2019s kind of in the trenches of it right now on their first ever deal. Sarah, thank you for purchasing the Real Estate Rookie book too.<\/p>\n
Sarah:
Oh, you know it.<\/p>\n
Ashley:
I appreciate it.<\/p>\n
Sarah:
I got it. I thought it was spam that I won this. I almost deleted it.<\/p>\n
Ashley:
Well, we\u2019re super happy to have you here. Tell us about before even real estate as to who you are and maybe what brought you to find real estate investing.<\/p>\n
Sarah:
I\u2019m an interior designer in San Diego, and about five years ago I started casually looking into real estate investment just for fun, looking at places I like to visit, and learning about money management and personal finance and mindset and figuring out how I could do it. I didn\u2019t really know, I didn\u2019t have any tools at the time, so I just look at expanders and people who have done it before and how I can do it. Three years ago, I found you guys and just gobbled up as much information as I could. I was buying all the books and watching the podcasts and YouTube and really trying to get as much information and catch up as I could.
Couple years after that, I started realizing I got some analysis paralysis going on here trying to be perfect and get everything and have this fear of failure. It was this mindset balance that I was trying to go through a lot and I watched a couple friends buy properties, and that really motivated me and lit a fire under me to like, okay, let\u2019s get serious. Let\u2019s start making some offers and take some action steps. I was meeting with realtors that I met through BiggerPockets and brokers and getting my spreadsheet lined and my cash flow, figuring out what I could do and what my strategy was. If one strategy didn\u2019t work, I\u2019d pivot and go over to another direction and explore that for a little bit and go over here.
About a year ago, I got serious and ended up, I put one offer in and got outbid by $5,000, but that was good practice. But again, then I pivoted to a different location that had a little bit less competition and it was closer to where I live, and the market started to change and I just kept the big picture perspective and thinking, okay, maybe this is less competition for me, and even though the interest rates are higher, I can re-file later and just made it work with what I had, and then made an offer a week after it was listed and it got accepted.<\/p>\n
Tony:
Man, congrats.<\/p>\n
Ashley:
I want to touch on real quick, one thing that you said that was really important, and you talked about the analysis paralysis. Then you said you got to the point where it\u2019s like, okay, I have to take action. Right after that, you said you started making the offers, and that right there is just such a huge thing where people don\u2019t even make the offers, they never even make it to that step as to feeling comfortable to putting offers in. Why do you think that you decided to make offers? What are some of the things that made you feel comfortable and confident that you\u2019re ready to put those offers in whether they\u2019re accepted or not?<\/p>\n
Sarah:
It was scary, but I had seen a lot of places that I wasn\u2019t really sold on and this one fit and I thought it was manageable and it fit in the cash flow for living in it for a year for me, and then doing a short-term rental after, so just running the numbers constantly. It did feel like a little bit of a stretch at the time. Being in California is a bigger investment for what you get.<\/p>\n
Tony:
Congratulations, Sarah, on just taking that action because I think so many people get stuck at that phase, so the fact that you\u2019re able to push through that I think is super impressive. But something else you mentioned outside of the analysis paralysis was the fact that you saw other people in your network who were taking that step, and that was part of what gave you the confidence to do it yourself. I think that\u2019s such an important thing to call out, because for a lot of our rookie listeners, they\u2019re on this island by themselves. They\u2019re binge-watching or binge-listening to the podcast and they\u2019re binge-watching the YouTube channel and they\u2019re reading all the books, but then they look to their left and they look to their right, and they\u2019re the only person that\u2019s doing this in their current circle.
That\u2019s why we stress so much, Ash and I, the importance of building your network so that there are other people around you who are going through that same journey. Whether it\u2019s the BiggerPockets forums, the Real Estate Rookie Facebook group, joining some of the BiggerPockets boot camps, or other coaching programs, whatever you can do to surround yourself with people, that gives you the confidence to say, \u201cWell, man, if Ashley and Tony can do it, I\u2019m just as smart as those guys are, I\u2019m sure I can do it too.\u201d I love hearing that.
I want to talk a little bit more about your buy box, because you talked about shifting markets. You mentioned that before we started recording, that you live in San Diego, California, which is a pretty expensive market for most folks. I guess two questions, a, why not invest in your backyard? Was it just the price point or was it something else? Then, B, how did you solidify, okay, this is the type of market that I\u2019m looking for because the country\u2019s a big place. How did you narrow it down in one specific city?<\/p>\n
Sarah:
I wanted to be local, and I felt like that was more manageable for me. But at the time when I was looking around San Diego, I thought, okay, maybe I can get a duplex and BRRRR it with an FHA, but I had my parents cosign with me, so that threw a little wrench in to the buy box. Then, I was just pivoting around condos. I only had about a $500,000, that was pushing it at the time too, limit. I had to make sure that I could cover the mortgage and how I would do that. It started to feel out-priced in my backyard for me. Then, I just went out to a vacation spot an hour and a half away that I love to visit and feels good. You get out of the city, it\u2019ll draw people out to just regroup and get grounded and escape rough reality. It\u2019s fun.<\/p>\n
Tony:
Are you in Julian, California? I assume that\u2019s the closest vacation spot to San Diego. Can you just describe what Julian is for folks that aren\u2019t familiar with SoCal?<\/p>\n
Sarah:
Julian is I think one of the only places around SoCal that\u2019s four seasons. Right now, we\u2019ve been hit with a lot of snow and a lot of rain, but then we\u2019ll have super blooms in the spring and then a pretty dry summer, kind of like the desert about 95 degrees, and then goes into a beautiful fall where all the leaves change and it\u2019s pumpkin picking and apple picking. It\u2019s really family-oriented. There\u2019s hiking, there\u2019s a dark sky network.<\/p>\n
Tony:
Sarah, I love, and I\u2019m kind of leading because I wanted to follow up with this is that the majority of our listeners probably have never heard of Julian, California. Even for me, I\u2019m an hour and a half north of you, and I never really heard of Julian either until I started knowing people in San Diego. But for people that are in south of where I\u2019m at, everyone knows Julian. The reason I\u2019m bringing this up is that every pocket of the country, every state has its own local regional spot where it\u2019s like, \u201cHey, yeah, if I want to go to the snow, this is where we go.\u201d Or, \u201cHey, if I want to go to the river, this is where I go.\u201d Or, \u201cHey, if I want to go to the lake, this is where\u2026 If I want to go mountain biking\u2026\u201d
Every state has its own little area that caters to that traveler. And so, many people ask me, Tony, how do I find the right market? How do I know where to invest? Really, I say, it doesn\u2019t really matter. You could pick any state. You could drop a pin on any map in any of the states in the United States, and you\u2019re going to find at least one market that makes sense. The fact that Julian works for you I think is an important thing for us to call out to the listeners.<\/p>\n
Sarah:
I heard somebody say that they put a pin where they live and they went out about an hour and then just went around a radius and like, \u201cWhat\u2019s manageable for me, Mexico, the ocean? Okay, over here.\u201d<\/p>\n
Ashley:
Sarah, what\u2019s kind of the plans with this cabin then, this property? Can you tell us a little more about it?<\/p>\n
Sarah:
One of the selling points was it was a two plus one upstairs and a studio downstairs. Having those two incomes eventually really helped the cash flow and made the price point worth it for me, and it just evenly balanced. As soon as I move out, then I hope to get a long-term renter in there just because I\u2019ve listened to the communities where everyone\u2019s investing and I want to provide some kind of local housing for people as well as using part of it for a vacation spot for people and create that balance.<\/p>\n
Tony:
You\u2019ve got the 2-1 upstairs, a studio downstairs. You\u2019re currently living in the property, correct? Then, the plan is to rehab or how are you-<\/p>\n
Sarah:
Yeah, I got a rehab. It\u2019s more than I thought. There were a couple issues. There was an active leak when I put the offer in and they were dealing with their insurance. I was under the impression that everything would get fixed as they were going through and get the insurance to clear off. Then, they whittled it down to the cause of the leak being these upstairs doors upstairs on the patio and the basement studio is below it.<\/p>\n
Ashley:
Oh, so it was coming in through the doors like the doors weren\u2019t sealed and then coming down as a unit.<\/p>\n
Sarah:
Well, Whoever put these doors in, wood doors without an overhang, so the wind and the water and snow just seeped in. They give me credit to replace the doors, got the property, ordered the doors, have them ready to be installed, and there\u2019s still a leak. There\u2019s so much water on the mountain, it\u2019s just soaking wet. On my first day I got the keys, I shoveled two feet of snow off that 20-foot patio with a huge heavy shovel and was just\u2026 over them. Really, it was a mountain welcoming to me.<\/p>\n
Tony:
That\u2019s got to be one of the best welcome to real estate investing stories that I\u2019ve heard on this podcast in a while. Like the day that you close, you have to shovel two feet of snow. That\u2019s awesome.<\/p>\n
Ashley:
Especially when you live in San Diego. For me, that\u2019s normal to go to a property to do that.<\/p>\n
Sarah:
No, I don\u2019t do snow, really. Last time I was in Telluride for a friend\u2019s wedding and I fell. Anyway, so it\u2019s a learning curve and it\u2019s fine, but it\u2019s just now in the discovery phase of other things that I\u2019m starting to need to put some more focus on and pivot my budget.<\/p>\n
Ashley:
Are you having to remodel both units?<\/p>\n
Sarah:
I was only planning on the upstairs. That would be like, because that\u2019s the cabin vibe, it\u2019s got the wood ceilings and the beautiful fireplace and really cozy.<\/p>\n
Tony:
Just really quickly, Ashley, I just want to pick your brain. Obviously, Sarah, this is your first investment. Every time we buy a property, we learn something new. For me, I feel like, and it depends on the property, but I often try and get the seller to repair depending on what our goal is, but to repair certain things. If it\u2019s something like aesthetic demos, I know I\u2019m going to change that stuff myself anyway, so I\u2019m not going to ask the seller to put a new flooring or redesign the bathrooms.
But for example, we just bought a property and we had the seller replace the septic tank because we knew that the septic tank was bad and it could\u2019ve been on us. He just would\u2019ve given us a credit to go out there and have it done ourselves post closing or to have the seller do it. We push really hard to have the seller repair it because there is that unknown of, okay, what if it\u2019s more than the septic? What happens after that? Ashley, I\u2019m just curious, when you\u2019re buying deals, how do you determine what you\u2019re going to solve and fix versus what you want to push towards the seller?<\/p>\n
Ashley:
All of my properties are pretty much as is. They are so bad that you can\u2019t even pick and choose for me to say, \u201cI want this fix.\u201d It\u2019s just, come on Ash, look at this property. That\u2019s not going to do anything to improve it. I never asked for anything to be done. Maybe if I started to focus more on things that weren\u2019t as big of rehab projects, maybe I would ask for things, but I\u2019m putting in my offers knowing that I\u2019m going to have to be doing a lot of work and a lot of different things. The probably one thing I would ask for though is the septic and the well to be done. I think that is a great example.
When I flipped a house in Seattle, Washington, we purchased the property with no inspection, but we did ask for a sewer scope because in Washington, or at least in Seattle, if there\u2019s some law or regulation where if the sewer line needs to be fixed to your house, if you are the new owner taking it over, you\u2019re not grandfathered into some kind of thing or whatever. But if you are the current owner of the property and you go and make that repair that it\u2019s a lot cheaper because you don\u2019t have to do something, I don\u2019t remember exactly what the law was. That was something the person I was partnering with, they always asked if there was something wrong with that sewer line connecting to the main. They would always ask for the seller to make that repair, even if they had to add on to the purchase price to cover the cost of it because it was so much cheaper to have the current owner purchase the property or repair that thing than to have you, as a new owner, do that.<\/p>\n
Tony:
Cool. Awesome, Sarah. Obviously, that first deal is where you\u2019re going to learn a ton, so I\u2019m glad that we\u2019re getting some good learning lessons from this one. I wanted to circle back quickly to the numbers on this deal. If you wouldn\u2019t mind just walk us through what your purchase price was, what your total cash to close, and what you\u2019re projecting for the rehab costs.<\/p>\n
Sarah:
It was $500,000 and I did 5% down. Here\u2019s where I messed up on my numbers. I only allocated 1.5% for closing costs when I should have probably put 3% down. I had spoken to probably four different lenders.<\/p>\n
Ashley:
Why was that, Sarah? Was there something else that came up in your closing costs that made it double?<\/p>\n
Tony:
Because I\u2019m in California too, and I usually budget about 2% for our closing costs.<\/p>\n
Sarah:
I don\u2019t think I knew to pay a year in advance for insurance, and then four months for property tax or whatever that was. But what was good is I got a $9,500 credit from the seller that went right into closing costs, so it made it really even. After the inspection report, which raised some eyebrows, I called in a contractor to do a walk just to see, is this thing going to fall off the hill? Is this worth it? Am I going into a money pit? He\u2019s like, \u201cNo, but there are some fixes that you\u2019re going to want to do, and you could probably do it for $30,000. Then, furniture would be on top of that.\u201d That\u2019s what I broke down and I was constantly going back to these numbers, like each part that needed to be upgraded, what that cost would be, and then it made sense, but now that I\u2019m in it.<\/p>\n
Ashley:
Did you have an actual inspector come or you just used the contractor? You had both the inspection report and then the contractor. I think that\u2019s a great mix to do if you can do both of those to get two different points of view. At this time, were there things that were different that the inspector said that should be done that maybe the contractor didn\u2019t or anything like that?<\/p>\n
Sarah:
A lot of the leak was pointed again to these French doors on the patio. They voluntarily put in a French drain behind the house at their cost of $11,000 to keep the water going away from the house. When I got in there, water was still coming underneath the house in that location. It could be the water heater, it could just be water coming from who knows what direction. I don\u2019t know, but it makes me wonder because they didn\u2019t disclose any subterranean water intrusion, why did they voluntarily put in an $11,000 French drain that wasn\u2019t really done properly? It wasn\u2019t down as deep as it needs to go either. It\u2019s getting one plumber in, it\u2019s just like, \u201cSell it immediately,\u201d and one guy says, \u201cOkay, let\u2019s figure out what we can do to just keep moving along and take it in stages,\u201d but it\u2019s been overwhelming.<\/p>\n
Tony:
One question I just want to ask because you kind of glossed over this, but as a first time investor, you were able to find a contractor to come walk your property with you, which is a challenge for so many new investors is finding the right contractor-<\/p>\n
Ashley:
Even the experienced investors get someone to come.<\/p>\n
Tony:
It\u2019s good to get someone to actually show up. Can you walk us through, Sarah, how you found that person and what they charged you, if anything, to do that walkthrough with you?<\/p>\n
Sarah:
Yeah, thank you for asking because when I pivoted over to Julian, I really wanted to use a local realtor, and she has been invaluable because she\u2019s had bread and breakfast two or three different spots since the \u201990s, so she knows people, she knows all the subs, she knows the best contractors. It was her high reference of a really good local contractor. He came out, I paid him $350, and then he gave me a report of here are things to address. Then, on the side he told me the estimate of what it would probably run, which is about $30,000. I know, I come from interior design and construction, I know those numbers just get out of hand. Part of me is just kicking myself for being naive or I don\u2019t know.<\/p>\n
Ashley:
What would you have done differently in that situation looking back now?<\/p>\n
Sarah:
Yesterday, I was wishing that I was having buyer\u2019s remorse and a lot of regret, and that was in the morning when that one plumber said, \u201cI\u2019ve dealt with people who just throw money into this situation and spend $70,000 and it\u2019s just like you\u2019re chasing your own tail.\u201d But then, I talked to three other people later that day and I ended up talking to one guy who was trying to find the positive in the situation, say, \u201cLook, let\u2019s handle these three things. Let\u2019s get the flood under control and get a wall up there and start to finish up the upstairs.\u201d<\/p>\n
Tony:
I just want to pause on this for a second because first, Sarah, I totally appreciate the transparency and the vulnerability here on the show, because these are things that so many of us struggle with as investors is like, \u201cMan, am I making the right decision. Am I going down the right path? Did I just royally mess up?\u201d These are all things that we struggle with at times. Just first know that you\u2019re not alone. Let me ask this question first. How much cash flow annually were you anticipating to make on this first deal?<\/p>\n
Sarah:
Upstairs, it\u2019s probably only 52 because ballpark for the upstairs was like 250 a night at 50% occupancy, usually Thursday to Monday, it\u2019s not as much as Joshua Tree area. That was just cutting it close a little bit with the long-term renter eventually, I thought that would be something stable, but when I move out and fix the downstairs, I got to short-term rental the downstairs just to recoup some money and have some pause, just have some pause down there that I have some days to come in and fix things if something\u2019s going on.<\/p>\n
Tony:
Here\u2019s the reason I ask that question, because even if you\u2019re able to break even on this first deal, even if you\u2019re able to break even, in my mind, it still achieves its purpose because Ashley didn\u2019t retire off of her first deal. I didn\u2019t retire off of my first deal. David Greene didn\u2019t retire off of his first deal. Beardy Brandon didn\u2019t retire off of his first deal. Rob\u2026 I haven\u2019t met a single person that did one deal and they were just like, \u201cI\u2019m done. I\u2019m riding off into the sunset.\u201d
The purpose of the first deal is to educate yourself. The purpose of the first deal is to give you the foundation and to give you the structure, to give you the confidence so you can go out and get your second deal and then your third deal and then your fifth deal, and then your 10th deal. You\u2019ve learned so much on this first deal, Sarah, that I\u2019m sure if we talk to Sarah today versus Sarah six months ago, you\u2019re two totally different people when it comes to your knowledge of real estate investing. Even if you\u2019re able to walk away from this deal, eventually down the road at a breakeven, it\u2019s still the multiple, the return on that is 10x, 100x because you\u2019ve been able to learn and give yourself the tools you need to keep growing.<\/p>\n
Sarah:
Thank you. I knew that this was just going to, hopefully it\u2019d be just growing in equity and break even for a few years. That\u2019s fine. It\u2019s the digging myself into a hole right now, it\u2019s just what\u2019s-<\/p>\n
Ashley:
Well, I think too, you talked to that first plumber and he was like, \u201cSell it, get rid of it.\u201d But you went and you talked to other people. There are people that would\u2019ve just given up right then and there and just like, \u201cIt\u2019s over. I need to list it. I need to basically give it away. I\u2019m going to lose $50,000 on it, sell it for less than what I got it for.\u201d But instead, that same day, you talked to other people, and I think that is such a major takeaway is don\u2019t always rely on one opinion, one person that you went and you had other plumbers come and look at it. The fact that one of them was saying, \u201cLet\u2019s tackle these things first. Let\u2019s get into it and take it steps by steps,\u201d where maybe it\u2019s more like taking it in these little parcels, these little segments can break it down for you and build out a plan.
And just like doing a full rehab, you want to have a plan in place, where myself, and I\u2019m sure Tony too, where we have both done rehab projects where it\u2019s like, \u201cOkay, let\u2019s just get it started. Let\u2019s wing it.\u201d But really, the best ones go where you have that plan in place, and I think that you\u2019ve found a contractor that knows that too, where he can help you, let\u2019s take it step by step and try to mitigate the damage. One thing that we have done is look at an issue and to see, okay, where\u2019s something that we can, not even stop the bleeding, but slow the bleeding, so slow down the water that\u2019s coming in and then work on actually stopping it. Then, what\u2019s the actual solution to solving this complete problem so that it doesn\u2019t happen again? That may take a little bit of time, but if you can keep working on the upstairs, because there\u2019s no water coming into the basement, is there?<\/p>\n
Sarah:
It\u2019s in the basement.<\/p>\n
Ashley:
I\u2019m sorry, the upper one?<\/p>\n
Sarah:
No, there\u2019s no water coming in to the upstairs. It\u2019s only the downstairs basement and it\u2019s either the water heater, a subterranean, or maybe a leak from the patio into the storage unit next door.<\/p>\n
Ashley:
I think part of it too is that you can still continue to work on getting that short-term rental operational, so then you have that income coming in to kind of offset some of these rehab costs that you may need to do to get that basement unit finished.<\/p>\n
Sarah:
Exactly, and just wait for it to dry up next month. We have a couple rains coming in again. The good thing is that I came in knowing what this problem was going to be if. I would\u2019ve bought it in the summer when it was dry and then this came and out of the blue, I would\u2019ve been rocked, at least it was like got thrown in the deep end right away.<\/p>\n
Tony:
Sarah, and there\u2019s a reason I\u2019m asking this question, but what are your long-term goals? Are you hustling to replace your income from your interior design business as fast as possible so you can exit that? Is real estate more of a long-term play where you\u2019re looking to supplement your retirement? Help us understand the context of why you got started.<\/p>\n
Sarah:
I will still work. I love doing interior design, but this is definitely a retirement goal. It\u2019s figuring out how to diversify my assets and I\u2019m in my 40s, I\u2019m single, and I\u2019m looking forward to what am I going to do for some stability in 25 years and collecting a portfolio that I can eventually have as passive income would be good, and some stability for me, I\u2019d like to have my own home, but San Diego is\u2026 During COVID, it just got out of control. Everybody moved here.<\/p>\n
Tony:
The reason why I ask about your goals, Sarah, is because I think that helps align or frame this first deal in an even better perspective because you don\u2019t need this deal to work out today for you to feel financially stable. I think what you need to start asking yourself is, does this deal still make sense 5 years from now or 10 years from now or 15 years from now? Just the fact that you bought in a Southern California market, that by itself, assuming history continues the same trend it\u2019s been on, it\u2019s going to appreciate over the next 5, 10, 15 years. Even if you just hold onto this and it\u2019s just break even for those 10 years and it\u2019s just paying for itself, you\u2019ve got an asset that\u2019s wildly appreciated over that same timeframe, now you can refinance and now you can sell it and you\u2019ve got so many different weights to happen to that equity. There are lots of ways to frame this, Sarah, where even though it seems scary in the moment, I still do think that there\u2019s a lot of upside for you.<\/p>\n
Sarah:
That\u2019s what the contractor told me because I was looking at him, I\u2019m like, \u201cAm I buying a money pit? Tell me straight up.\u201d He\u2019s like, \u201cNo, get yourself in the market. Get your foot in the door and then just deal with it as it goes.\u201d He\u2019s like, \u201cLook, this house has been here, it\u2019s lasted this long. All of us are up here on the mountain.\u201d<\/p>\n
Ashley:
Well, Sarah, we really appreciate your honesty and also sharing what your experience has been like. There is nothing better than hearing someone\u2019s story as they\u2019re going through it instead of years later where if you were telling this same scenario two, three years from now, I bet there\u2019s a lot of that that you would just forget about. It\u2019s like childbirth. You have that first child and you\u2019re like, \u201cI\u2019m never doing it again. That was so painful. That was awful.\u201d Then, a year later like, \u201cOh, the baby fever.\u201d It\u2019s like, \u201cOh, that wasn\u2019t so bad. I\u2019m going to do it again.\u201d<\/p>\n
Tony:
I can totally relate to that feeling.<\/p>\n
Sarah:
I might get a partner next time. I\u2019m going to get a partner next time so everyone can have some [inaudible 00:32:31].<\/p>\n
Ashley:
Was my first deal was with a partner because I was scared something like what you\u2019re going through would happen. The partner I chose had a really good network of people who could help us and he also had a lot of cash savings. And so, I think for me, that was my security blanket when I first started is having somebody else to go through it where it wasn\u2019t just me that if I fell down, there was someone else to fall down with me, I guess, in a sense, and just having those two minds to figure out what\u2019s next. What\u2019s your plan going forward and what can we help you with on this property or the next property?<\/p>\n
Sarah:
I think getting the management software organized so that I can just get the flow and take a little stress off of me because now I\u2019m having to focus a little bit more on rehab and staging it. I think you talked about Guesty or Hospitable, I\u2019m not sure which one you guys, what works the best for you.<\/p>\n
Ashley:
Tony, you can probably answer the short-term rental one better, and then I can touch on the long-term side.<\/p>\n
Tony:
Absolutely, Sarah. There\u2019s a few pieces of our software stack. I think the first piece that you need is some kind of channel manager or property management software. There are several out there. We use a company called Hospitable. Another big one is called Guesty. OwnerRez is another big one. I think just kind of finding the one that you feel is most intuitive to you, they all pretty much do about the same thing. I think it\u2019s just the interface and usability that makes the most sense for you to choose one.
The second thing you absolutely need is a dynamic pricing tool. We use PriceLabs. AirDNA is another big one as well. There\u2019s a couple other ones out there. Wheelhouse I think is another one that folks use, but if you want to maximize your revenue, typically you don\u2019t want to use the pricing suggestions that Airbnb and Vrbo give you because Airbnb and Vrbo want their prices to be competitive, whereas us as the host want to maximize our revenue. Those goals are kind of at odds with one another.
Then, the third thing that we use just to help reduce some of the management workload is our digital guidebook. Giving guests both have written and video instructions on how to use the property, we found tremendously reduces the amount of questions that we get from folks and it reduced the amount of time we have to manage the property. Just quickly recapping, you need property management software, you need dynamic pricing tools and you need a digital guidebook.<\/p>\n
Sarah:
Do you have a program that you use for the guidebook or do you do Airbnb\u2019s guidebook?<\/p>\n
Tony:
I don\u2019t use the Airbnb functionality because we book on both Airbnb and Vrbo. If your guidebook\u2019s only available through Airbnb, then anyone who books through Vrbo won\u2019t have a guidebook. We typically go with a third party platform. I\u2019ve seen some people that just do it in Canva, they\u2019ll create a digital version in Canva that\u2019s really aesthetically pleasing. Then, there are companies that offer digital guidebook services. Hostfully has a digital guidebook. Breezeway has a digital guidebook. I think some of these other PMS have digital guidebooks as well, but I prefer the software version because it\u2019s a little bit easier to update it on the fly. You don\u2019t have to print anything out and just send it to the guests when they check in.<\/p>\n
Ashley:
I actually just hired, because up until this fall, I only had one short-term rental and my cleaner just took care of everything for it. She did all the messaging, everything. Then, as they started to add a couple more units, I decided that I should be more like Tony and I should put some systems in place. I actually hired somebody to do the research and I basically just told them what I wanted the software to do for me and they actually put it all together for me. we use Hostfully. We do the guidebook through Hostfully, but it\u2019s also the property management software. We use that side of it too.
Then, we use RemoteLock to set up automated key codes for everyone that integrates into the messaging that we send to everyone as to what their key code is and automatically changes it for each person. Those are really the only two that we use that I know of, at least. She might have something else in there. Tony, for the cleaner, do you use something separate for your cleaner because I think we have that where it sends them an email when a new booking is and then they can accept it or decline it. I don\u2019t know if that\u2019s through Hostfully or not. How we have it set up, I\u2019m not sure.<\/p>\n
Tony:
A lot of the channel managers have some limited functionality to manage your cleaning staff and your maintenance staff. Initially, up until about four or five months ago, we handled that all through our channel manager. More recently, we added in a second software, or not a second software, our fourth software that\u2019s specifically focused on our cleaning and our maintenance staff, and it\u2019s called Breezeway. Gosh, I know we have an affiliate link I\u2019ll share with you afterwards. Oh yeah, it\u2019s breezeway.io\/robinson. I think if you use that, you get 25% off or something like that.
But Breezeway is really cool because it integrates with your PMs. All of your bookings are populated into the calendar and it forces your cleaners to go through a checklist they have to complete in order to mark a clean as done. It actually requires them to submit photos as they\u2019re going through the property and completing all of those steps. I can see, for example, one of the things that we were getting messages on from our guests was that there were no sponges, but we know that we\u2019ve instructed our cleaners to leave sponges, so now in our cleaning checklist, they have to take a photo of the cabinet underneath the sink open so we can see that there are trash bags, dish pods and sponges underneath the sink. There\u2019s a lot of functionality like that where it can help hold your cleaners accountable. We use Breezeway. It\u2019s been really great for us.<\/p>\n
Ashley:
Then, as far as when you turn the basement one into a long-term rental, I think Rent Ready is a great one just for having that one unit or even the first 10 units. They have every aspect that you need in the software such as collecting rent online, doing your bookkeeping, they have leases that you can sign electronically on there, just it\u2019s very basic. You can pay for add-on such as if someone has a maintenance request, you can actually sign up for their call center where you have a dedicated number that the person calls and someone on their team troubleshoots it with them or dispatches a vendor that you would like them to use for whatever the problem is. There\u2019s also Avail, there\u2019s apartments.com, even Zillow has started to build out some kind of rent manager system.
Then, for another piece to doing the long-term management, it\u2019s Rent Ready, Avail, apartments.com. Trying to think. I know there\u2019s one other big one too that\u2019s great for just starting out, but as far as growing and scaling, then there\u2019s AppFolio, Buildium property where these ones have a minimum fee where it doesn\u2019t really make sense until maybe you\u2019re at 20 to 30 units to actually implement that software and they just have more bells and whistles. But the same thing with short-term rental or long-term rental, the software has so much automation in it that it makes it very easy to actually run your units remotely, and then manage them that way.
Also, too, look at just Googling different messaging too. Instead of having to think, okay, what should my message say to the guest when they book, or what should it say to somebody the day they move into their long-term rental unit? You can easily find samples online and then just tweak and tailor it to your property specifically. Then, as you add additional units, you just copy and paste and tweak it. A lot of times, the software will have templates too, at least in the long-term rental side, and so that it will automatically pull the tenant\u2019s name, the property address, and input that, and you can send out everything to all your different units if you need to.
For example, there\u2019s going to be someone snowplowing the driveway on this day and you want to send it to the four units in your quadplex, it will automatically put in each person\u2019s name, things like that and send it out. I think integrating the short-term rental and the long-term rental property management software, it takes some time to get it set up, but the automation that it can provide will really, really help you. Like you said, you need to focus on the rehab side of bit.<\/p>\n
Sarah:
Yeah, I would need to de-stress.<\/p>\n
Ashley:
Tony, real quick, do you want to touch on just using virtual assistants to run some of these pieces of that too?<\/p>\n
Tony:
Honestly, I think virtual assistants are probably one of the most underutilized team building aspects for real estate investors. It doesn\u2019t get talked about enough. Right now, we have five VAs on our team. Three that focus on operations, two that focus on pricing and our software stack. One of my biggest regrets as a real estate investor was not hiring those folks sooner for the amount of cost that you have to pay these folks in comparison to the value that they provide. It\u2019s a really big return on investment there, and they definitely allow you to scale up your business faster with a little less headache.
If you plan to build a decently sized portfolio, if you want more than one property and you know that you want more than one property, hiring those people on that first property makes it so much easier because now, you guys are learning together, you\u2019re able to set those strong foundations so that way, you\u2019ve got really tight processes at one property so when you get to 5 or 10, it\u2019s just a matter of adding more units and not necessarily trying to scale your team at the same time.<\/p>\n
Ashley:
The great thing too is that even if you have one property, you can find virtual assistants who are working for maybe 10 different investors with only a few units, so you can easily afford them because you\u2019re sharing the cost basically because they\u2019re working for a ton of other people, where maybe if you found somebody local, they want a part-time job that\u2019s at least 20 hours or something like that. I think that\u2019s a huge advantage too. Going on Fiverr or Upwork are two great places to start to look for the virtual assistants. Well, before we wrap it up, is there anything else that we can help you with?<\/p>\n
Sarah:
No, I\u2019m so appreciative of you guys. I\u2019m getting feedback, but thank you guys. I really appreciate you for having me on.<\/p>\n
Ashley:
We are so glad that you came on, and thank you again for purchasing the Real Estate Rookie book because it led you to us.<\/p>\n
Sarah:
Never thought that would happen.<\/p>\n
Ashley:
It was great to meet you and for you to share your journey and where would be the best place for people to follow you and keep updated on what you have going on with your duplex?<\/p>\n
Sarah:
Well, I don\u2019t post a lot, but I am on Instagram, @quesarara, Q-U-E-S-A-R-A-R-A.<\/p>\n
Ashley:
You\u2019ll have to share your journey. Post more on it. Hey, and before we close out, do you have an idea of when you want to take your short-term rental live?<\/p>\n
Sarah:
By the end of May. That\u2019s heavy season.<\/p>\n
Ashley:
That\u2019s soon. Okay, great. Well, we wish you the best of luck and thank you so much for taking the time to chat with us. Even though you\u2019re a rookie, you\u2019ve provided so much value to this episode, and I think a lot of people will take away some lessons learned, but also a lot of motivation and inspiration from you. Thank you for coming on. We appreciate it. Thank you guys. I\u2019m Ashley, @wealthfromrentals, and he\u2019s Tony @tonyjrobinson, and we will be back with another episode. See you guys soon.<\/p>\n
Speaker 4:
(singing)<\/p>\n
\u00a0<\/p>\n<\/div>\n