← BiggerPockets Real Estate Podcast
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- [00:00]
A
This investor bought his first property less.
- [00:03]
B
Than 10 years ago.
- [00:04]
A
Now he makes $12,000 per month in net cash flow, even though he lives in a high cost of living area. This could be you if you just go out there and take that first leap. Today we're going to hear his basic repeatable real estate investing formula that almost anyone can follow to take control of their financial future. Hey, everyone, I'm Dave Meyer. I'm the head of real estate investing here at Bigger Pockets. And on this show, we teach you how to achieve financial freedom through real estate. Our guest on the show today is Pratik Shah. He's an investor based in New Jersey. And Pratik discovered real estate investing and bought his first property in 2017 when he wanted a way to use the earnings that he got from his W2 to generate additional wealth and some passive income. And that is still his philosophy eight years later. Work a day job, save money, and buy a new property when the time is right. That approach has helped him grow to almost 20 units in eight years, spread between three different markets. And today, we're going to hear the lessons Pratik learned from overcoming a very difficult tenant situation with his first property. How he got comfortable investing outside the expensive market where he lives, and why keeping his day job has allowed him to scale even more quickly. Let's bring on Pratik. Pratik, welcome to the BiggerPockets podcast.
- [01:31]
B
Thanks so much for being here.
- [01:32]
C
Thanks for having me, Dave.
- [01:34]
B
Yeah, it's going to be a good time.
- [01:35]
A
Let's just jump right into it. Tell us a little bit about yourself.
- [01:38]
B
And your background, how you first got into real estate.
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C
Sure. So I'm a pharmacist by training, live in Jersey. I got into real estate. I was actually on vacation with my wife in Italy and we met an investor on a boat to Capri. And we're just talking to people that are on the boat and he's like, oh, I'm from Jersey as well. I'm like, look, that same here. And he told me about what he did, and he's a real estate investor. So I got intrigued. We came back home, I connected with him, we had dinner, and long story short, fast forward there. I actually bought my first deal off of him.
- [02:11]
B
How big was this place?
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C
It was three bedrooms, two baths. So on each unit it was top down. And I inherited Section 8 tenants. So that's a story in itself. But, yeah, it was in a rough area. This was in 2017, so the market was, you know, going high, but it was. It it was still climbing a ladder. So I got in at a great point. And honestly, I learned a ton off that house itself, whether it's managing tenants, managing toilets. You know, you hear the toilet story, it's always toilets. I never knew what a flapper was until I actually had to.
- [02:47]
B
When you were looking at these deals, did you have multiple options or was this kind of like, this is the deal you should buy? Or how did you pick this one?
- [02:54]
C
So when I met him and I got intrigued about real estate investing, I started listening and doing my own homework, right? So I was listening to bigger pockets, I was reading books, just understanding how to analyze deals. And then when we met for dinner and he brought his opportunity for me, he was getting to a bigger commercial space. And so I was curious. He's like, he was 10:30 wanting some houses, and I was like, oh, okay, these numbers pencil in and why not buy a unit from someone that I could get experience from that can kind of hold my hand through the first deal? In a sense, since I do have a W2 job, this wasn't my full time gig. And it kind of helped me along the way with the goods, the bads and uglies, but it really got me a great kind of dive into the pool of real estate investing.
- [03:35]
B
That's the best way to do it, man. The number one goal for your first deal should just be to learn it's not to hit a home run. Yeah, ideally you do both, but yeah, absolutely. Just to learn. How did you finance it?
- [03:46]
C
Well, I mean. Good question. After our vacation to Capri in Italy, I did have to build up those funds back, but I can't. I had enough saved and luckily with 25% down, we were able to finance enough to purchase the house.
- [04:02]
B
That makes total sense. I think it's a great way to do it. As I talk about on the show a lot, you know, having a W2 job does have some of its benefits, and I assume being a pharmacist, pretty, pretty solid paycheck comes in. So that's a great way to start getting into real estate investing. So you did this first deal here, Pratik. What. What did you do after that?
- [04:19]
C
So after that, I was playing basketball with the same investor that I bought the first deal from.
- [04:25]
B
You guys do a lot of fun stuff. It sounds like a good guy to hang out with.
- [04:28]
C
It's all chance, you know. And so we're playing basketball and we're sitting on the side and he's telling me about another house that he's offloading. For a 1031 exchange. And I'm like, hey, first one went, all right, let's let me hear it. And we talked offline. And I bought a second property off the same investor as well that I met in Capri. Another multifamily around the block from the first one.
- [04:49]
B
Okay, so very nice. And how was it? Similar situation with inheritance tenants? Was it Section 8?
- [04:54]
C
Section 8 tenants both up and down, both units. And these tenants were a little bit more challenging than the first unit that I bought.
- [05:02]
B
Okay, what was going on here? Was it nonpayment or just personalities?
- [05:07]
C
Yeah, personalities. More. So section eight, you're pretty much guaranteed payment from the. From the government. So that part was always covered. It was getting entry into the unit, the upkeep of the unit. I was constantly getting summons from the township for litter outside the house. So they weren't keeping up the unit as much as I would like them to.
- [05:26]
B
Sorry to hear that, man. I mean, I know there is always risk.
- [05:29]
A
There is risk and reward.
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B
I think with inheriting tenants, it's not always bad, but, like, these things definitely can happen. So what did you do about it? Did you hold on to the property?
- [05:38]
C
No, this is too much of a headache. Like I said, I'm a W2, don't have the time to manage bad tenants, bad properties. So I actually went and tried to sell the property and had it listed to. To sell in 2019.
- [05:51]
B
Honestly, I love it. I think, you know, I rant about this all the time on the show, but people say, like, buy real estate and never sell. I just completely disagree. Like, if there's a deal that's just not working for you, get rid of it and go do something else. Before you burn out or lose your money on a bad investment. It's better to recognize that this isn't working for you, Whether it's financial or lifestyle wise.
- [06:11]
A
Like, if it's not working for you.
- [06:12]
B
Just go sell it. That's a better thing to do. So what was your plan? You went to go sell it where you get to just 1031 or moving into something else?
- [06:21]
C
Yeah, you know, I had started going to meetups in different markets. Most, you know, Pennsylvania is not too far. So I started hopping into Pennsylvania as well. But to be able to do that, I wanted to offload this property.
- [06:31]
B
Yeah, okay, that's a pretty good solution. Did it work out?
- [06:34]
C
It would have. We were set to close on July 31st of 2019. I'll never forget the date. And on July 27th, three, four days prior, I get a Call late night and it's the fire inspector of the me to let me know my house is on fire. Everyone's safe, but the entire unit is damaged. Fire water everywhere. Firefighters are breaking in through every window. Yeah, that's the call I got three days before closing. Obviously the deal fell through. And so because not able to sell a burnt down property and that started my journey from just being a new investor to a essentially a flipper in a sense because I do have to learn construction in that sense at that point.
- [07:20]
B
All right, well that clearly that's a very different business. Being a buy and hold investor and having to rebuild a property from scratch. Sorry you had to go through that, but I think there's probably a lot of lessons that our audience can learn from given that you had to do this. So let's dig into that. But we do have to take a quick break. We'll be right back.
- [07:38]
D
Look, we've all been there. You need to buy something for your business. But first you're stuck dealing with procurement bottlenecks. Then going back and forth with approvals and boom, surprise costs that mess up your whole budget. There's got to be a better way. And there is. It's called bill procurement. Bills already helping almost half a million businesses streamline their finances. Now they've rolled out bill procurement, which works with their accounts payable to handle your entire buying process from start to finish. And here's another cool thing. Everything happens in one spot. You submit a purchase request, get approval, make the purchase, pay the invoice. All in bill procurement. No more guessing if you're over budget because you'll know if your spending's approved before you buy anything. Their AI helps catch mistakes too. Bottom line, ditch that messy procurement system. With bill procurement, you can purchase, pay and get back to growing your business. Right now, you can score 200 bucks just for checking out a demo. Head to bill.com biggerpockets that's bill.com/biggerpockets.
- [08:28]
A
Let's talk about a real estate backed investment with major tax advantages. Car washes. PBR's Opportunity Fund offers accredited investors access to a high margin, recession resistant industry with passive income tax efficiency and significant upside potential. With operations in prime locations using best in class technology. Managed via a vertically integrated team, this fund is designed to deliver strong, strong, stable returns. Backed by over $1 billion in assets under management, PPR has provided passive returns to thousands of investors since 2007. Don't miss out. Learn more today@biggerpockets.com PPRCAR that's biggerpockets.com PPRCAR this show is sponsored by Airbnb. This winter we want to take a trip to the mountains and we plan on booking an Airbnb. We're going to cook a few cozy meals and really enjoy stretching out in our own space. This future vacation actually makes me think about hosting my own home on Airbnb. It's now even easier than ever with the co host network. You can hire a top notch local co host to help take care of your guests so while you're away you can earn a little extra income. Find a co host@airbnb.com host real estate it's been a cornerstone of wealth building for generations, but it's also often a major headache for investors. You get these 3:00am maintenance calls, tenant disputes, property taxes Enter the Fundrise Flagship Real estate fund, a $1.1 billion real estate portfolio built for you. We're Talking more than 4,000 single family homes in the thriving Sunbelt, 3.3 million square feet of in demand industrial facilities, all professionally managed by a very experienced team. With the Flagship Fund, you're tapping into real estate's most attractive qualities like long term appreciation, potential hedge against inflation, diversification for the stock market.
- [10:13]
B
All those things.
- [10:14]
A
Check, check, check. All this comes without complex paperwork. Massive down payments are the soul sucking landlord duties we all know about. Visit fundrise.com pockets to explore the portfolio. Check out historical returns and see just how easy it can be to add real estate to your investing strategy. 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@fundrise.com Flagship this is a paid advertisement. Welcome back to the Biggerpockets podcast.
- [10:46]
B
I'm here with investor Pratik Shah talking.
- [10:48]
A
About how you had a really pretty.
- [10:51]
B
Tough start to your vested career with it sounds like difficult tenant situation that moved into a unfortunate catastrophe where you had a fire burned down your entire property. So help us understand this. Like how did you go from not having any experience to rebuilding a multifamily property?
- [11:07]
A
Where did you even start?
- [11:08]
B
What are the steps that you had to go through?
- [11:10]
C
Well first obviously it was the insurance company. So I worked at the insurance company to line up just claims etc. Started interviewing contractors. I had never done that before in my life, but understanding what to ask the right questions. The biggest stories you hear now are just the trustworthiness of contractors to really getting references from other people through forums like Biggerpockets itself That's how I started that process. And once I locked down the contractor working with the insurance company to make sure their systems match for of course, payments and stuff. And from there it was just selecting material from scratch. I mean, when I say material, I mean your handles that you want in your kitchen cabinets, what type of towel holder do you want in the bathrooms, what type of flooring, etc. That meets the insurance company's needs as well from a financial standpoint, but then something aesthetically pleasing you want for your own unit as well. So it's kind of marrying the both and learning how to work within a budget of an insurance company, but within the style of the current state. Right. Because the unit was about 20 years old. So you wanted to kind of transform it since you now have the ability to.
- [12:19]
B
For sure. Yeah.
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C
So I spent a year until we got it completely rehabbed and updated. I had the house listed and to sell July of 2019. A year from that is the summer of COVID And that was when the market was just starting to take off. And so fast forwarding a year when that unit is ready to be sold, I had it listed and at a six figure increase from what I had initially listed the year before.
- [12:46]
B
Oh, damn, that's awesome. I mean, so I know it's hard to say because it's probably a big pain in the butt, but like all told, financially, did it actually work out better that the fire existed?
- [12:58]
C
Financially, yes. I mean I would wish this upon. Nobody took several years off your life, I'm sure. Oh my God.
- [13:05]
B
Got a bigger check at the end of the day.
- [13:07]
C
Yes, yes, it worked out for all intents and purposes and I learned a lot, quite honestly. I mean, this is not a lesson I would want to learn, but in hindsight, I learned so much. It made me so much more comfortable continuing my investing journey through other markets.
- [13:20]
B
Yeah.
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C
Just from the experience I gained from just tenant management to construction to selling properties and working with insurance companies, I just learned so much just within this one deal itself.
- [13:31]
B
Yeah, man. I mean sometimes the, the, the forcing function is actually beneficial to you long term in your investing career. Like you're, you're never going to set out and set a goal for yourself to like have to renovate a property like this when you're that earlier investing career under these exact conditions. But there is a way to spin these things that sometimes happen in real estate if you have the right perspective. It sounds like, like you do critique, you figure out a way to make this work for you and to help you sort of build your portfolio. So once you got through this, sounds.
- [14:01]
A
Like it took a full year.
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C
Yeah.
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B
But once you were almost Back to square one where you wanted to be in the summer of 2019, what did.
- [14:08]
A
You do from there?
- [14:10]
C
Yeah, so during this whole time, I wasn't just sitting and managing and crying. I was networking on biggerpockets, looking for meetups. And I found a meetup in the Lehigh Valley of Pennsylvania, which is only an hour away from me, so it wasn't too far, even though it's a different state. Great market, great market. And I started going there, networking with investors. That's one thing I love to do, just talk real estate. And I met an investor there and rinse and repeat of my first story. I networked with him and I bought a deal off of him. So my first deal in the Lehigh Valley. New market, new area, whole new clientele. And it was great because I was able to, in a sense, just like the first time, transition to a new space, but with the comfort of just having someone there to be kind of like a mentor or coach if need be. And that was my first unit in that space. Built my comfort for the area. I inherited tenants. They were great tenants this time around.
- [15:05]
B
Wow. You went back to it. Okay, I went back to it. Touch the fire once, you're like, I'm just gonna do it again.
- [15:11]
C
So my wife would say I don't learn, But I like to say that I'm just more comfortable.
- [15:15]
B
And so you learned how to deal with it. You knew that, like, you could probably deal with the worst case scenario if it happened again.
- [15:22]
C
Yeah, but it was the best case where I took on and I. And I learned the intricacies of the area. Every market, it has its own specifics. Lehigh Valley has a lot of inspections from townships, but I learned to network with the inspectors, et cetera. And lo and behold, from there I ended up buying 11 more units. So now I have 12 units in the Lehigh Valley.
- [15:41]
B
Let's talk about this, because I think a lot of people in, in today's market live in areas where finding cash flow or the type of deal that they want to buy is inaccessible, either because it's too expensive or there's just not that kind of inventory on the market. So you basically said you chose Lehigh.
- [15:58]
A
Valley, but was there other markets that.
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B
You were looking at as well?
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C
I was looking at Indianapolis at the time and Cleveland, which are all great markets still to this day. But I think I like the aspect of still being able to self manage to a degree, because I was still smaller at the time. Where I take 10% typically is property management costs sometimes 8%, and that was a big chunk of change. So I was able to place my own tenants. And what I've identified by placing my own tenants in that area is if I do the legwork early on and really identify the best tenant for that unit, that will make my real estate investing journey so much easier. Because I'm not just putting someone in there that meets, you know, credit score, a background check, et cetera. I'm talking to the people. I'm getting a feel for their. For, for why they need the unit. And I think that speaks so much more in the long run because they treat your house better, they pay on time. There's so many less issues down the road where I don't really need a property manager for that, that. That area itself.
- [17:01]
B
Yeah. And it creates mutual benefit. Right. Like, it's good for you. Obviously you're probably going to have less turnover, less wear and tear in your property.
- [17:08]
C
Yeah.
- [17:09]
B
But you're also finding someone who's going to be really happy in the unit that you're offering, which is just a win win situation. This is, I think, a really important pivot point for a lot of investors is really getting people in the fastest and at the highest rate is not always the best situation. If you find people who are going to truly love living in your house and who are going to take care of it, that's like a mutual benefit.
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A
That will make your life easier, but.
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B
It also will improve your returns. You'll have fewer vacancies, you'll have less wear and tear, less maintenance costs, and that's just a benefit for everyone.
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C
And I'll share a quick story. One of my tenants in one of the houses in the Lehigh Valley that I placed, and it's a high rental market, so once, once. I've never had a vacancy in that area. Amongst all 12 homes, you have people wanting to rent the next day. And so I had a unit open. I had a bunch of applications and I went there. I'll do phone screens from my house and I'll narrow it down to maybe five or ten folks. I really want to move forward. I'll have them see the unit. And I found this guy that wanted to rent the place and I did a background check and it came up with some red flags. Right. And the red flags were from prior drug use and selling, et cetera. But when I talked to him, I really found a sense of genuine nature and authenticity from speaking with him. So I Confronted him like, hey, David, I like you, and I really want you to use this, rent this unit. However, I saw that there's some red flags, and he explained it to me. He's like, hey, this was in the past. Full, full disclosure. I'm a better person. I've changed my ways. I just can't get a house because this comes up and no one will rent to me. And some of it's just through a conversation. That's where I mean that, where I'm able to do it myself and physically see the person. I. I was sold on the sense of genuineness, and I rented it out to him. And he's one of my best tenants. He's putting backsplash in the kitchens. He's redone some of the flooring, painted the walls, pays on time every month. He's been there for five years, if not longer. And he's one of my favorite tenants. And all because I gave him a chance. Fantastic. And that's something you're not going to get from a credit score check, a background check, et cetera, when you're checking boxes, because you would have never met those.
- [19:14]
B
Yeah, well, good for you. For. For doing the work of being a landlord and actually, you know, meeting people, talking to people, doing the networking. We talk about it all the time, but this is a.
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A
It's a relationship business.
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B
It's a people business. And you were able to find a great tenant who likes your properties, taking care of it. That's the type of mutual benefit that we are always trying to promote here.
- [19:34]
A
All right, so that was what, 20.
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C
21, you say 2018 all the way till current. We're still going.
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B
Okay.
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C
And like I said, I was still, you know, I was just throwing darts at a map, honestly, looking for other markets. So I did find. I did dive into another market, too. And 2020 was my first year. And this is a complete left field because this is not near my backyard. It was not drivable. I still have never been to this area.
- [19:55]
B
Really?
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C
It was in. Yeah. North Carolina. There's a big army base in North Carolina.
- [20:00]
B
Fayetteville.
- [20:01]
C
Fayetteville.
- [20:02]
B
Fayville. Yeah. Okay. Yeah. For Bragg.
- [20:04]
C
For Bragg, yeah. And so I had a buddy shout out to Travis. He was. He was a buddy of mine, and he's like. He lives in Raleigh, and he's like, it's an hour away.
- [20:13]
B
Did you meet him somewhere super cool like paragliding or backcountry skiing?
- [20:18]
C
I wish. I wish. This is more boring, as in, we work together. It's complete opposite. But it's funny you say that where we were listening. We both had mutual interest, not only from work, but from real estate investing as well, or at least intrigued about it. And we heard there was this lady on bigger pockets and she was from Fayetteville. And he's like, hey, that's like an hour away from me. Let's look at this market. I'm like, sure. And we dove in there and have a bunch of units in Fayetteville as well.
- [20:45]
B
Now I want to talk to you about this though too, because when we talk about out of state investing, I think it's intimidating for people just to do one market that they are not intimately familiar with. But you're doing two. And I'm curious, like the pros and cons and how that's working out for you. But we gotta take one more quick break. We'll be right back.
- [21:04]
D
Look, we've all been there. You need to buy something for your business. But first you're stuck dealing with procurement bottlenecks. Then going back and forth with approvals and boom, surprise costs that mess up your whole budget. There's gotta be a better way. And there is. It's called bill procurement. Bill's already helping almost half a million businesses streamline their finances. Now they've rolled out Bill Procure, which works with their accounts payable to handle your entire buying process from start to finish. And here's another cool everything happens in one spot. You submit a purchase request, get approval, make the purchase, pay the invoice. All in Bill procurement. No more guessing if you're over budget because you'll know if your spending's approved before you buy anything. Their AI helps catch mistakes too. Bottom line, ditch that messy procurement system. With Bill procurement, you can purchase, pay and get back to growing your business. Right now, you can score 200 bucks just for checking out a demo. Head to bill.com biggerpockets that's bill.com biggerpockets.
- [21:54]
A
Want to earn passive income every month without the hassle of property management? If you're an accredited or high net Worth Investor, PBR Capital Management offers a proven solution. Since 2007, PPR has helped nearly 2,000 investors earn over $100 million in consistent, predictable, passive returns. Headquartered just outside Philadelphia, PPR manages a $1.1 billion diversified portfolio designed to provide steady income and long term growth.
- [22:18]
C
Growth.
- [22:18]
A
With decades of in house expertise, their team strategically mitigates risk to help investors achieve their financial goals. See how a PPR fund could fit into your portfolio. Visit biggerpockets.com PPR today, that's biggerpockets.com PPR Real Estate. It's been a cornerstone of wealth building for generations, but it's also often a major headache for investors. You get these 3:00am maintenance calls, tenant disputes, property taxes. Enter the Fundrise Flagship Real estate fund, a 1.1 billion real estate portfolio built for you. We're Talking more than 4,000 single family homes in the thriving Sunbelt, 3.3 million square feet of in demand industrial facilities, all professionally managed by a very experienced team. With the Flagship Fund, you're tapping into real estate's most attractive qualities like long term appreciation, potential hedge against inflation, diversification for the stock market.
- [23:09]
B
All those things.
- [23:09]
A
Check, check, check. All this comes without complex paperwork. Massive down payments are the soul sucking landlord duties we all know about. So visit fundrise.com/pockets to explore the portfolio. Check out historical returns and see just how easy it can be to add real estate to your investing strategy. 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 perspectives@fundrise.com flagship this is a paid advertisement. I always felt I was some kind of superhero watching over my house, ready to jump in if anything went wrong. But one night I heard a noise. I woke up, totally didn't trip over my shoes in the dark wearing my boxers, and then realized maybe I'm not really the crime fighting vigilante type. I might need something else to keep me safe. Like maybe an alarm system. But here's the thing. Most alarms, they're really reactive. They only go off after someone's already broken into your house. That's like locking the barn door after the horse has already escaped. That's why I switched to Simplisafe. Their system is different because it's proactive. They have a feature called Active Guard Outdoor Protection, where AI powered cameras don't just detect motion. They recognize when someone suspicious is lurking. Then real human agents get alerted right away and they can talk through a speaker, they can flash lights, they can set off a siren, basically scare off the bad guys before anything happens. And if needed, they can even call the police right away. And with Simplisafe, there are no long contracts or hidden fees. Plus you can try it out risk free for 60 days. And one other thing. Simplisafe's been named the best home security system five years running by U.S. news and World Report. Check them out@simplisafe.com pockets Again, that's simplisafe.com pockets. There's no safe like Simplisafe. Welcome back to the Bigger Pockets podcast. I'm here with investor Pratik Shah talking about how he scaled his portfolio.
- [25:00]
B
First by pivoting to the Lehigh Valley in Pennsylvania.
- [25:04]
A
Then you just picked a market in.
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B
North Carolina that you'd never been to.
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A
To you have a second out of state market. So tell me first why you wanted.
- [25:15]
B
To find another market. Were there just not enough deals in.
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A
The Lehigh Valley or did you want to diversify?
- [25:20]
B
What led to that decision?
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A
Because it can be a lot of work.
- [25:23]
C
It was honestly both, I think just increasing the deal funnel. Right. And as the years progressed, it was getting harder and harder. Numbers were getting shorter and shorter in terms of cash on cash returns. You have more investors that are more interested in the market as well. So you have a lot of competition through other investors that are trying to get and so I figured if I look for multiple markets, I have a better chance of getting some deals and increasing my deal flow.
- [25:46]
B
Did you have some certain amount of units you were trying to build towards per year or were you just basically trying to take any opportunity you saw?
- [25:54]
C
Any opportunity. You know, I didn't care much for the numbers or how many doors I had. I was more so just trying to increase the passive income. Like I mentioned, I have a W2 that I love, I enjoy. I have no desire to give it up up, but I just, I feel like I'm a real estate junkie. I just love crunching numbers and when it makes sense, just why not pull the trigger, right? So it's been working out so far, man.
- [26:17]
B
This is like the kind of investing I love. It's like we're talking about keeping your W2 job and being really analytical about investing. We share a lot of philosophy around real estate investing. So what was it like? You know, I actually always advocate for people to go to these places before they do long distance distance investing. How did you get comfortable with a.
- [26:38]
A
Place you had literally never been?
- [26:40]
C
It was quite a bit of anxiety at the first where not being able to see walk the unit and having trusting an agent to do that. But once you build out the team and get a good rapport with the people that you're working with, you have that sense of comfort, right. And so we did a trial deal and it worked out and that kind of was a proof of concept to purchase more and out of state as well.
- [27:02]
B
In my experience, the calling of contractors and maintenance thing is probably the first thing that gives people anxiety about investing along state. But the thing I have a hard time with not having been somewhere is knowing what neighborhood to buy within a market. Because you can do a ton of analytics and look at all the numbers and all that and say, I know Fayetteville. I mentioned it because it's traditionally been a really strong market.
- [27:28]
A
But within every market, there's good neighborhoods.
- [27:30]
B
You want to buy and there's ones you probably want to stay away from, whether it's because it's just not the kinds of assets, there's not the right housing stock, it's not in the path of progress. So, like, how did you figure that out without ever having gone?
- [27:42]
C
Dave, I don't know if this speaks to you, but I'm sure it speaks to some people. I printed out a Google map of Fayetteville.
- [27:47]
B
Okay. I like this. Yeah.
- [27:49]
C
I went with my agent I was working with and I told them, all right, like, I printed out for myself, just circle neighborhoods. And I got on the phone with them and we went to neighborhood to neighborhood, because everyone knows every city in itself, no matter how small it is, has different neighborhoods. Right. Different school districts. So I circled what's a good area for school districts, what streets that he was like, okay, he mentioned. I'm not going to say the street because I don't know if anyone lives on the street. But he's like, this street, this road. Stay with me.
- [28:14]
B
Right? Yeah.
- [28:14]
C
You know, do not go anywhere near that because that is just rough. So I would have X's on my printed out Google maps. I would put X's on the map and I pretty much had a. Essentially a treasure map, in a sense, of where I circled and where I exed and I went on Zillow or go on realtor.com, wherever. And I would just look for properties within my buy box of like, like three beds, four beds, et cetera, in those circled markets on my map. And that's kind of how I went by block by block. Because like you mentioned, there's some areas that you just don't know that they're near manufacturing sites. So people don't want to live there. And you can't tell that always from just a Google map. Right. So that's where doing your homework is very important. And also having a good relationship with your agent, that is boots on the ground, that has that intricate information of the street by street knowledge is very, very important and critical.
- [29:01]
B
Okay, but why have you still not gone?
- [29:04]
C
Why would I? I have no idea. North Carolina, I don't know. I don't know. It's worked out. I would love to go one day if, if the stars align. But you know, I, I've learned you're braver than me. I've learned, you know, it's not needed. Honestly, if you have trust in a team and like I said, if you do the work ahead of time before you pull the trigger and get the right team behind you, you don't really have to be there physically.
- [29:30]
B
Do you notice a difference between the performance of your deals in the Lehigh Valley and Fayetteville? Are they both doing well?
- [29:36]
C
Yes. And you have actually mentioned this before, so I laughed to myself when you asked me that question because you've mentioned Fayetteville before and I've noticed that the appreciation has stalled somewhat to a point where Fayetteville was historically a cash flowing market and with most markets over the past five, six years, they've all appreciated it pretty much across the radar. I don't think the rents have kept up as much. So I've noticed that the rents aren't as keeping as much as the appreciation. So that's analysis I need to do. I still have those units because they're doing well for me for what I bought in with. But you know, my IRR on my equity, I gotta go back and do those equations.
- [30:15]
B
Yeah, that, yeah, that makes sense. I mean, doesn't mean you can't buy there, but probably means you have to pay less. Right. You need to just be a little more disciplined about what you're offering.
- [30:23]
C
Exactly.
- [30:23]
B
So it sounds like you're sort of like going through that exercise of trying to figure out like should I hold.
- [30:28]
A
On to this or is there a better deal?
- [30:29]
B
So yeah.
- [30:30]
A
Have you done that analysis and is.
- [30:31]
B
There something else you're going to try and pivot to?
- [30:33]
C
I have started transitioning into flipping side of things, so I've looked into another market. So sorry, Dave, I'm going to add a third market on your plate.
- [30:41]
B
You're just like, okay, I work a W2 job. I got into this to be a rental property investor. Now I have of properties in three different markets and started flipping. It's very, it's an unusual track, but I like it, honestly. I say it's unusual, but honestly I'm doing the exact same thing. Like my portfolio looks pretty similar. So maybe we're, we're more similar. But so tell me first tell me why, like what about the analysis led you to think flipping might be the better way for you to go right now?
- [31:09]
C
Quite honestly it's. I, it's like I mentioned, I have a W2. So I have this capital. It's harder to find long term deals that pencil and I've traditionally stayed to single family and small multi families and with just residential buyers, I'm getting beat out. I'm still putting in offers, but I'm getting beat out to a point where it doesn't make sense to invest. But when you have someone emotionally invested into the porch or into the house and the location, that they're gonna spend the extra money that they want to, which rightfully so where it kind of beats you out as an investor. So I started working in new market Pittsburgh specifically and I know you guys have mentioned this before on the podcast and I started doing flips and in the Pittsburgh, Greater Pittsburgh and suburban market there.
- [31:48]
B
Okay, nice. And what, what was the analysis there? You just did the math and that made the most sense to you.
- [31:54]
C
It was the balance between passive income that's coming in from the properties that I have in the other two markets and coupling that with just maybe some, just a different space of higher returns even though obviously they're, they're shorter timeframe. You have capital gains taxes that are different from short term gains versus long term gains, of course, but, but in a sense of just doing construction, I kind of got maybe that bug was put in with that Elizabeth house. But I just enjoy it like you know, being able to look at a house and seeing how, what type of flooring, what type of paint do you want? And to be completely honest with you, and I hate if this is a secret's gonna get out, it's so much easier. I mean I don't once, once you find a deal that pencils and you find a trustworthy contractor, which is hard in itself. But once that that's done, I mean the hardest step is really figuring out what color combinations and paint palettes you want to match the flooring really. And it's quite easy in that sense where you know, three, four months. If it's a typical cosmetic rehab, you could make great returns just in a few, in a short time frame.
- [32:59]
B
That makes sense to me because I'm actually, I, well, knock on wood, I'm supposed to close on my first flip that I'm going to be actively involved in on Friday. So I'm also trying to do the thing because I've done some passes flipping deals before, but I'm going to try this out.
- [33:13]
A
How are you managing that with your time?
- [33:15]
B
Because like you work full time. So how, how much time does this take and is it, you know, is it getting to the Point where you're sort of like reaching a limit in terms of how much you can contribute time wise to your portfolio.
- [33:27]
C
Yeah. So I mean, in terms of the deal flow, that's the agent. The agent brings me deals and within a few minutes you could kind of pencil in to see if it makes sense to dive in a little bit deeper or, or doesn't make sense for your returns at all. And you always want to be cautious, even if you're a trust agent. You want to do your due diligence and look at comps and analyze them and get a real comfort for if you trust those comps. But once that's done, once you lock in a deal and you actually get it. Of course, after running the numbers, I have a contracting team out there that I've built a relationship with that's very trustworthy and the communication's on point. And so I've been working with them, which I really enjoy. So then it's really just picking the material and the specs of what you want. And you know, like I mentioned, I have a W2 job. I'm working throughout the day. I travel quite a bit for work as well, but in the evenings I'm able to just ahead of time. If you give the contractor this is what I want ahead of time, it helps you out because it saves the back and forth with, with them. Right. If you give them all that stuff in a spreadsheet in advance, they can review it and then it's just more of an execution timeline where you're more of just the project manager, that's all.
- [34:30]
B
Would you do multiple at one time?
- [34:32]
C
I haven't yet, but I would love to. I mean, Dave.
- [34:34]
B
Okay, you're just going for it.
- [34:36]
C
I'm just going for it. You know, my, my philosophy is just jump in. I, you could always figure it out in the back end, but if you have the means to it, of course, if you're not completely stretching yourself and, and quite honestly, I enjoy this. I mean, I, I actually enjoy just running numbers, running deals, seeing them come through. It's fun for me. And I think that's partly why I've been able to jump in quite a bit where I, I'm thoroughly having a good time doing.
- [35:01]
B
So that's, I mean, if you're enjoying this and you're making money, I mean, just keep going for it. That's awesome. So before we get out of here, Pratik, just tell us like, what's the state of your portfolio today?
- [35:10]
C
Sure. So I have just under 20 units that are split between the eastern Pennsylvania markets and North Carolina market. I dive into anything that's single family and small multi families of course. And so that's been steady rolling cash flowing just around 12,000amonth net after expenses for those units. And like I mentioned, I'm moving into flipping. I'm just trying to increase that business and that side of things. Look, always looking at new markets and one thing I haven't explored yet, which I'm super interested in is private lending.
- [35:41]
B
You know, I love private lending.
- [35:43]
C
I, I, like I mentioned, I'm a W2 so that, that does afford me the luxury of doing that. And I love real estate and I love crunching numbers. So if I'm able to lend to somebody to do the work where I physically may not be able to since I have a full time job, but at the same point understanding the risks associated with that, knowing that I understand how to crunch numbers gives me a good opportunity where something that I've super, I've really been intrigued in but haven't really jumped in just yet.
- [36:11]
B
Very cool.
- [36:11]
A
Well, is there like, are you working.
- [36:13]
B
Towards a like a unit goal or a passive income goal or are you just going to sort of do this for as long as you can because you enjoy it?
- [36:23]
C
I would love to have one unit and getting to get 12,000, Dave. I would love that.
- [36:28]
B
That's everyone's dream.
- [36:29]
C
But no, I, I don't mind having a number of doors. I think it's more, you know, I have an unofficial goal of like 25,000 and there's no reason behind that number. But I would like 25,000amonth in cash flow. That would be nice. But that doesn't mean I'd quit my job. I, I truly enjoy what I do. So I just, yeah, at the end of the day just want to keep growing. I want, I want to keep having fun on. Right.
- [36:49]
B
Great attitude.
- [36:50]
C
I've understood the market of just renting and purchasing long term investments which has been going well. I'm trying to learn of course about just the flipping business and of course at the same time I would love to privately lend as well.
- [37:03]
B
Sweet. Well, good luck to you Pratik. We'd love to hear from you in the future as you update and continue on this path.
- [37:09]
A
Maybe we'll have you back to hear.
- [37:10]
B
How you've been growing in the next couple of years.
- [37:12]
C
I appreciate it. Thanks for having me, Dave.
- [37:14]
B
Thank you all so much for listening.
- [37:15]
A
To this episode of the Biggerpockets podcast. I'm Dave Meyer.
- [37:18]
B
See you next time.
- [37:19]
A
Thank you all for listening to the Biggerpockets 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 Calico, 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. Do 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. Biggerpockets LLC disclaims all liability for direct, indirect, consequential or other damages arising from a reliance on information presented in this podcast.