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Real Estate Investing School Podcast
137. How to Build Wealth in 5 Years with No Experience with Tommy Harr
00:45:29
Welcome back to the Real Estate Investing School Podcast. In this episode, we have a great conversation with Columbus based real estate expert and investor, Tommy Harr. Tommy went from making $32,000/year at 23 to having a 65+ unit portfolio worth...
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- [00:00]
A
Real estate investing is absolutely life changing. I mean, it's going to change your family, your family tree and your finances. So I encourage you, if you're in that position, keep at it. Keep at it. It's worth it.
- [00:15]
B
Welcome to the Real Estate Investing School podcast. I'm your host, Joe Jensen. Today we've got our guest, Tommy Har. Now, Tommy is a home inspector turned real estate investor out of Columbus, Ohio. He's been in the real estate investing game for six years. He's renovated over 150 houses, wholesaled over 150 deals, and has a 65 plus unit rental portfolio worth over $15 million. So he's doing some things, you guys, so I'm excited to have him on the show here. How you doing, Tommy? How's Ohio right now?
- [00:54]
A
It's actually good today. So Columbus, Ohio, it's like 55 and sunny today. So yesterday was below, below negative? No, not below negative. It was below 32. So you never know what you're going to get this time of year. But it's, it's nice today. But I appreciate you having me.
- [01:07]
B
That's awesome. Sweet, man. You've got, you've done some, a lot of volume in quite a few different realms. Right. I mean, obviously your, your personal, your portfolio of long hold stuff is, is larger than a lot of people's and then you've also done twice that many wholesales and twice that many flips and renovations and whatnot. So that's pretty cool. So tell us a little bit, I mean, maybe a little bit about your upbringing and how you even stumbled across real estate as an investment and as an active income because you're obviously doing both. This isn't passive income for you, but it is that as well. So you kind of play both games, the active and the passive income. So I'd love to hear about which came first and why. But yeah, we'll just kind of let you tell your story.
- [01:53]
A
Sure. Yeah. I grew up in Columbus, Ohio, born and raised. I didn't really know much about real estate, but my dad has always been in real estate. So he owned a property preservation company when I was growing up. So 0708 09, the banks were foreclosing on everything. He started a business basically to trash those houses out, change the locks, do all that stuff. So I grew up mowing lawns, trashing out houses, all that good stuff. And actually before that he started a home inspection company. So he was a safety inspector for Radio Shack, if you remember what that is back in the day. And I'M one of five kids. So they were starting to lay people off. He saw the writing on the wall and he was like, I gotta use this somehow. So he found a franchise called National Property Inspections. He bought one and he's been doing that now for 23 years. So I graduated college in 2017 and became a home inspector. So I'm the oldest boy and I helped him out kind of my whole upbringing. And I was like, you know what, I want to help out my pops. I want to. I've seen what he's done for my family and it seems like a pretty good avenue. It's not luxurious by any means, but it definitely can, can give you a nice life.
- [03:02]
B
I love that. I always think it's so interesting because there's so many different players in the real estate game. Right. When you go buy a property for whatever you're going to do with it, you know, you've got the lenders, you've got the agents, you've got the inspectors, you've got the appraisers, you've got, you know, there's so many different people playing, you know, and then you get the handyman, the repair guys and, and it's like very few see the big picture, Very few see like what's really going on. They're like, you know, they're just burning, churning, going in and replacing carpets and they're like, you know, making a couple thousand bucks and someone else is building an empire, you know what I mean? And I'm guessing you kind of saw that at some point you're like going in and doing all these inspections. But then when did it start to convert, you know, because you're in the real estate space, you know, you probably did inspections for real estate investors as well as personal home buyers and everything. You're in that space, when did it start to convert over where you're like, well, I could go make a lot more flipping and wholesaling or I could go build like actual residual wealth through long holds, which came first.
- [04:08]
A
Yeah. So it's all, everything kind of came out of necessity, you know. So I'm 29 years old now. I've been in the game probably seven years now or so. So I graduated College, I was 22, living in my parents basement. So I was learning how to be a home inspector and I, my dad was paying me like $32,000 a year. So I did, I wasn't making much money, so. And I always liked money and I started doing inspections and hard money draws for investors. So for what? If People are listening. They don't know what hard money draw is. Is if you get a bank loan, whether it's hard money or from regular bank and you have some sort of a renovation fund to that loan, the bank will hold that back until somebody comes out and make sure the work's done. I happen to be that person for the bank on a lot.
- [04:49]
B
So you do inspections along the way to show that they're doing the improvements they said they were doing to get all sorts of inspection off from not just this inspection for somebody to go buy a house. A one time little thing and then you're out. You're doing it for investors along the way. Interesting.
- [05:07]
A
Yep. So we were doing the full home inspections when you go by. And then these were kind of our. My dad called like filler jobs. They were 7,500 bucks. They weren't really. They just. You're driving around already, you went, you do do them. Just kind of fill the time, make a little bit cash. Yeah, yeah.
- [05:19]
B
They put the drywall up. Here's the picture. Like give them the next draw.
- [05:22]
A
Correct, correct. So did thousands of those. And in the beginning, I just didn't really know what was going on. And it made me reflect back on. Right before graduating college, my uncle called me. He lives in Chicago. He said, tom, I know you're a hustler. I know you kind of always been kind of that hustler attitude. Do you want to invest in real estate with me in Chicago? And at the time I said, no, I didn't know anything about it. And then once I started doing all these draw inspections, I was like, oh man, there's something to this. I was seeing the guys I would have to call for the point of contact were never there. And when they were there, they were driving a really nice car. They were. I'd follow them on Instagram. They were, they were doing a lot of cool stuff. Lifestyle was great. So I was like, okay, I need to learn, I need to learn this stuff. And the first part of that is the active income. I need to move out of my parents basement. I need to figure out how to make more than 32,000 a year. So the glaring thing and the things that I always heard about was going to be wholesaling. So I started digging into bigger pockets, started to kind of figure it out and started to learn every aspect. But to me, wholesaling was going to be my way out of my parents basement and kind of get some active income streams coming in.
- [06:32]
B
And I don't want to put words in Your mouth. But would you say you kind of started with the wholesale because it doesn't take a ton of capital. You don't have to go buy these things and rehab them. You don't need as there's not as quite as many moving parts. But you could actually go make some real money if you know how real estate works. Is that kind of one of the impetus for starting with wholesaling?
- [06:54]
A
Absolutely, yeah. I just fell in love the idea of, I mean, make some phone calls and back then it was handwriting letters. So handwrite some letters and you can get some deals and make kind of fall out of thin air. I was immediately hooked. When I heard about it, I was like, that sounds insane. I need to know more about this.
- [07:09]
B
And it's virtually like risk free. I mean, you know, you're not putting things you don't have, you don't have. You buy this something, you're in it. All this money with a hard money loan and this flip, then the market shifts and like none of that applies to the wholesale. The wholesaler just gets the commitment. And then if they can sell it, cool. If they can't, like, you know, that's not necessarily good for the reputation if they do that, if they can't sell it every time. But, but you're not burned. It's. It's pretty risk, lower capital, if any capital. You know, if you just want to hustle and grind it, you could do it with no money in your pocket and with no risk. You know, obviously as you scale it, which it sounds like you scaled it quite a bit. And we can talk into going from a one off hustler to building a business out of it. I'm sure that had a lot of changes in how your lifestyle was and how you approached it. But so, so you get into wholesaling and, and then, and then you start flipping as well yourself and buying and repairing. Is that just once you learned the system, you were like, I should do this as well or how'd that work?
- [08:10]
A
So I kind of tried to do them all at the same time. So I live in my parents basement and I was still, my uncle still said hey, do you want to invest with me? And I convinced him to do it in Columbus about six months after graduation because I saw what was going on and I was like, hey, do you want to try it in Columbus?
- [08:24]
B
Yeah.
- [08:24]
A
And I met a contractor at one of those hard money draws and he put me onto a foreclosure and me and my uncle ended up buying this foreclosure for 425,000 doll. 18 months later, we ended up selling that for 710 and lost about a hundred thousand dollars on that house. So that was my first flip. So my first deal was me and my uncle diving into this six bedroom, five bathroom, 4,000 square foot house in a very rich town of downtown Columbus, Ohio. Because $500,000 or 700,000, whatever it is, that's a lot of money in Columbus. Like you can still buy houses for 100, 150, 200. It's not like out west where 500 is kind of the median. We, we lost our ass on that deal.
- [09:06]
B
So that's, let's dive into that a little bit. Because one essential that you're still here, if you lost six figures on your first deal, it's kind of like, oh, well, we made a mistake. I'm never doing that again. But you, that's not your story, obviously, because you're still here. But, but let's talk about where you lost money because you bought it for 400,000 whatever something, and you sold it for, you know, 700 something thousand to the average year, like four or five. Damn. That. They made $300,000. Like, dude, I didn't make 300,000. I lost a hundred thousand. So break that down how you lost a hundred thousand on that instead of making a hundred thousand?
- [09:48]
A
Yeah, we bought for 425. We thought we were going to sell at the time. We thought it was going to take eight to nine months start to sell, and we thought we were going to sell it for 800 to 850,000. So as time went on, we doubled our renovation budget. So our scope of work was not tight. We got nickeled and dimed on everything. We weren't sure about material versus labor. With our contractors. It was an absolute mess. So we ended up spending about 250 plus on that renovation. And it took us 18 months to sell it. So the rent, the holding costs alone.
- [10:20]
B
On you're projecting nine months.
- [10:22]
A
Yeah. So double the time, double the money, double everything. And then at the end of the day when you're flipping houses, the things that eat you alive are going to be your holding costs. So money doesn't just drop out of thin air for you on those deals. You raise it, whether it's from your own cash or home equity lines of credits, or private money lenders or hard money lenders, wherever it comes from. But that money's not cheap and it accrues every day. So the lenders, what is holding costs?
- [10:47]
B
For a listener who's Never heard of holding costs. Like maybe list all or some of the things that are like, considered your holding costs.
- [10:56]
A
Okay, so your holding costs are going to be one, your money. So, so your money is not free. So let's say I always give this example. If I raise $100,000 to buy a house and renovate it and I pay somebody 12%, that's me, $12,000 for that year of holding costs. And I'm going to pay a daily interest on that, which is $32.88, 12,000 divided by 365. So every day that goes by, I'm accruing $12.88 a day to that lender. So money's not free. You're paying utilities every single month, you're paying insurance, you're going to pay capital gains, you're going to pay property taxes, you're going to have to upkeep the lawn, you're going to have to do all these things that are just going to eat you alive if you're not careful on the front end of running your numbers on this stuff. So if you don't know it, it's going to hit you like a sack of bricks. You're like, oh my gosh, like, where did these numbers come from?
- [11:44]
B
Yeah, and if you forget some of them, you're like, you know, oh, we forgot about the utilities. Like, oh yeah, we got to pay the electric and the water while there's guys in there working like they got the power for their tools. It's like there's all these different parts. And like I said, if it takes you three months versus 18 months, like that's going to be a big swing. Obviously the biggest expense is paying for that debt, you know, paying for the money that you borrowed to go buy it. That can add up as time goes by. And a lot of them, there's going to be extension costs because they might be like, hey, we won't give you money for six months. And then you're like, cool, we'll be done in four. But then you're not done in four. And then you go back at six month mark and you got to pay another point to renew and extend the debt. You know, a point is 1% of the loan amount and it can vary depending on the lender. But you might have to pay extra money to get the loan to go longer and longer. I mean, 18 months is a long time. Were you guys using a hard money lender or private money and did you have to pay to extend that debt?
- [12:45]
A
No. So my uncle Pulled most of us from a variable rate home equity line of credit and then he pulled a second on, on another second mortgage. So it was like, it wasn't extremely high dollar, it was probably 6 to 8%. But. And then on those hard money and private money loans, a lot of times if you go over the year or whatever the loans amortized, it'll like double in interest too. So it's like okay. Instead of 12%, 24. So the loans are just so sharky and if you're not careful and read the fine print, it can, it can, it can tear you apart.
- [13:16]
B
Yeah, that's. Luckily you guys were kind of self funding it through helocs and stuff like that. Yeah. If it was a straight hard money lender going that long, that really would have been even worse.
- [13:27]
A
Yeah.
- [13:28]
B
So that, that's cool. Yeah. So there's all these holding costs you. And then the after repair, the ARV didn't add up. You're hoping, you know, eight something ended up selling it for seven something. And a lot of that's out of your control. Especially an 18 month swing. It's like the market shifts down over a year and a half and it's not worth as much. Or maybe your projections were just off or the community, whatever. You know, there's so many different pieces to it. So anyway, I don't want to just dwell on this one piece the whole time, but sure. So how did you overcome that? That's a big hit. You know, that's a big loss regardless of where you're at. But when you're first starting out, that's a lot of money. Even once you're in it forever, that's a lot of money. So what was the mindset going in after that big loss to go, let's go bigger, let's go harder, let's stay in this game.
- [14:19]
A
Yeah. So I like, I like to also tell people it wasn't all my money. I had a little bit of a portion in that. Most of it was my uncle's because he was the funding partner. But what I did was during that time period, I didn't stop learning. So as I was doing this, I was still inspecting every day. I was still listening to every Bigger Pockets podcast I could when I was driving around as a home inspector. So I was still learning what to do next and what to do wrong. So if you ever heard of biggerpockets or podcasts like this, people are on here, they have a success story. So if you learn from them, I sat back and I was like, okay, I've listened to 500 people be successful. What am I doing wrong that I can't be one of those people as well. So I just, I realized that I just did it all wrong in the beginning. So I was like, okay, if I want to flip houses again, I can't choose these massive houses. This house was on a main road. We were comping it to houses like right in the pocket of the neighborhood. The neighborhood gets super, super nice one block away. And this area is still nice, but it's a main main road. So it's like, okay. It had not really that comparable of comps. I was like, okay, if I'm going to do this, I'm going to go to a first time home buyer range. I'm going to buy a three bed or three bed, two bath with super comparable sales in the area. And I'm going to do something that's cosmetic. So that's exactly what I did is I went, moved back home with my parents, spent my last 800 bucks in my bank account on postcards. So we buy houses, cash. I was trying to wholesale again and I got three phone calls from that thousand postcard campaign. One of them ended up putting in contract. I tried to go sell it at a wholesaling meetup. There used to be a meet up here in Columbus. It was Columbus deal makers. You would go present deals and people try and buy them. Nobody wanted it. So kind of just went back to what I had learned over the last two years is you got to figure it out. So I called everybody that I knew had some sort of interest in real estate, my phone to fund it and try and flip it. So one of my mom's friends who lived around the corner from us my entire life saw me grow up. She is a realtor. She said, hey, I'll fund the deal, But I want 50% of the the upside. So we bought that house for 54,000, put 20 into it. We sold it for 130. I did all, most of the work. I was there till midnight, 1am Most nights. We made 50 grand and I made 25. Cut her a check for $90,000 back on her dinner table and she was extremely happy. And that was kind of the, yes, this stuff works.
- [16:50]
B
And what was your timeframe on that? Like how long did it take to rehab and sell that?
- [16:56]
A
Four months, start to finish.
- [16:57]
B
Four months, right. And it's funny because before that you're saying you're making 30,000 or whatever a year doing the inspections. You're like, oh well If I can make 25, 000 playing it small. I mean, this wasn't the big crazy foot. This was just the easy base hit giving half the profit away, which is a lot. You know what I mean? Wait, if I play it safe, base hit and can still make that, I do that four times and do one of those a quarter, I'm at six figures, you know, and yeah, the light bulb starts to go off when you, you get the pieces in place on that. Man, there's so many things I want to talk about. I definitely want to talk to you. I want to get into your 65/unit rental portfolio that you actually held. How are you able to pull that off without selling it or wholesaling it, like. But I also want to talk to you a little bit about how you scaled. You went from just you doing these one offs to, you know, I assume, you know, if you've been doing over 100 deals and this and that, like you've probably built a team and has scaled it up and maybe you could speak to either one of those.
- [18:03]
A
Yeah. So I'll talk about the rental portfolio first because it all kind of works in tandem in my, in my opinion. So I took that $25,000 and I, I knew I wanted rental properties. That's kind of the end goal for, for me and myself regardless. And I'll talk about some of the theories behind that here soon. But yeah, once again, it goes back to bigger pockets. I was listening to everything they said. House hack. I was 24 years old. I was young. I didn't have a wife, I didn't have any kids. I had a dog now. So I was like, okay, I'm going to go buy a duplex. I'm going to live in one unit. I'm going to rent the other unit out. And I now had $25,000. So I took that $25,000, found a duplex I hadn't closed on that second flip yet. It was selling and so I bought it. My parents gave me a $6,000 loan to purchase that duplex. FHA and when that closed, I paid him back. And then I used the rest of that 20, 19, 20 grand to put new windows in it, new siding, put a new roof, I laid floors, I did a kitchen. And that was my first rental property. So I was living for free. I got two roommates as a three bed, one bath, and even deeper than that, I ended up living in my living room. So we didn't use one of our living rooms for a while. So I built a Barn door with my contractor, lived in the front bedroom. I made it my bedroom and then rented my bedroom out to one of my best friends at the time.
- [19:21]
B
Because these homes had like the formal dining room and then like the normal table where you pd actually eats. So you just kind of turn that other living room into another bedroom and.
- [19:31]
A
Then you stay up there. So the front door didn't really work and I never really got to fix it. So we never used it. So we always came through the back into the kitchen and then we walked through this one space to get to the living room. And I was like, why would. We're not using this space. Why are we doing this? So I built a door there and I lived in that front room on the house. And then we just made that middle room my living room. And was now making like 500 bucks cash flowing in the house I was living in. So I forced the value of that. And then at the same time, like, I'm still whole, I'm still learning to wholesale, I'm still inspecting building my dad's business. And at that time I met my business partner who we started wholesaling together. He comes from a sales and cars car background. And we just blew up from there. We probably did 50 deals in our first year together. I kind of had what he didn't, which was like the network and the construction side and the people. So I was naturally the dispo and he was the acquisition. So I was trying text message marketing. I had the stuff, but I wasn't really doing it properly. And he looked at what I had. He's like, dude, this is gold. I can turn this into something. And two weeks later we had our first deal. I think it was like 17 grand wholesale deal. And we really just took off from there. And then to kind of answer your rental portfolio question, we started wholesaling started blowing up for me. So we did 50 deals probably in our first year. 75 the next year we did about 100. Last year we just started buying those deals. So we had the deal flow coming in, we had the money coming in. We didn't really need it as much. You know, both of our mindsets were, hey, we should. I want to. But we want to both hold rentals. So in the beginning we would buy deals from the company for ourselves until we felt it out. And then so I had a probably a 15 or so unit portfolio by myself. House hacked again after that, that one a year later. And then we just ended up buying a lot together. So we have about 50 units together. Maybe 60 at this time now. But we just started picking off the best deals from our wholesaling company. And in 2021 we probably bought 40, 45 units together in a four and a half to 5% interest rate environment.
- [21:42]
B
And are these like single families, four plexes, like multi units? What, what kind of, you know, because that's a lot of units.
- [21:49]
A
Yeah, mostly one to fours. So one to four units, that's cool. And then there's an eight unit down.
- [21:54]
B
A 40 unit complex. Like these are a bunch of just boom, boom, boom, just adding up. Yeah, that's cool. I think that's one of the huge advantages of these wholesalers and flippers like yourself, where it's like you, you just take your pick of the litter before anybody even sees it. You've done all the work, you have all the, you know, you're selling these, these deals which, you know, brings in money to give you capital to buy, but it also, and it gives you capital to fund your process because you're spending thousands of dollars on marketing, right? You're spending thousands of dollars on lead guys. And you're, you know, it's not just sitting around, you know, you're, it costs a lot of money to run an operation like you're running, but it self funds itself because it's bringing in money. But then now you can use that as your own little pet to be like, just hand pick the deals you want. Which is like I've never, I've only done like the long whole stuff. I haven't done flips and wholesales. But when I hear that system like, oh, that'd be the dream. I'm begging out scraps. Do you have anything left over? You know, and, and you're, you're taking the best of the best, which is, you know, for anybody listening, like that is a really powerful way to go strategize how to, to do all three. Like I said, make the whole sales, do the flips and the long hold, they all intermingle and you're vertically integrated. And so they're, they're all, they make each one of them more profitable. Because you can do all three. Because if you can't flip a deal, you can also just hold it. You're ready to hold it, you know.
- [23:21]
A
How to hold it.
- [23:22]
B
You probably have a property management company at this point or something like that, you know.
- [23:25]
A
I do, I do, yeah.
- [23:28]
B
And so it's like you're ready to hold it. You're making more money on your holds. And so it's like One person, if all they're trying to do is flip, you know, they're getting hosed. But you could hold it or you could wholesale it or you can do this or vice versa, you know, so it's pretty rad.
- [23:42]
A
Yeah, that's where the inspection company came in. And I didn't realize at the time because I didn't think it was sexy. It wasn't a cool thing. Like going to tell all your friends that have cool jobs like, oh, I'm a home inspector now, but I was learning construction and I was, I was getting confident in a thing that was going to pay me now a lot of money. So. And that's why I'm building this flipping company as much as we are now. So we're flipping 10, 15, up to 20 properties at a time right now. Because when we have the deal flow, I, I have the, I can raise a significant amount of capital from social media and being a good networker. And at any given time, if we want to keep those properties, we just turn the exit one way from a flip to a hold. That's it. So you have the construction wing and you just do the burn method over and over again. And if the interest rates don't make sense, if you can't keep it, you sell it. So we're just trying to churn these properties and if it makes sense to hold it, we're going to do it.
- [24:37]
B
So what would you say to somebody who's like, well cool, like I want to get into wholesaling, maybe flipping, but I don't know about like running a whole company and spending $10,000 a month on marketing and working full time, you know, managing all these deals. But like I want to get in that game. Is it realistic to go make money in wholesaling just doing one offs and not pouring a ton of money into it? Or do you really need to scale and actually build it into something to have the scale to offset the losses?
- [25:10]
A
You don't need to scale it per se, but you gotta, you gotta have the mindset going in that it's going to be a grind. Any like, I really like my business and my brand is the real side of real estate. I try and keep it as real as possible. Like if you think you're going to be a part time wholesaler and make six figures a month and be consistent, it's not going to happen. It's just not. But if you want to pop a deal every other month or every couple months and be a hustler, that's absolutely possible. I know a lot of people that get a lot of active income that way and support a decent lifestyle. But for me the wholesaling is propping up. It's a means to an end, it's a deal finding and it keeps the engine running to then create a lifestyle and wealth machine that's going to pay me more in 10, 20 years. But to answer your question, yes, you can do it. You just have to be a hustler or you have to spend some money on certain types of marketing. So if you don't, if you have a full time job and you can't be on the phones all day, maybe get a really good website or pay per click ads, but you got to be able to answer that phone when that call comes in. So there's different avenues for as much time and as money as you want to put into it. So you got to just learn that side.
- [26:22]
B
That's awesome. Yeah, because I think a lot of people are, are interested in doing that. They're just not ready to go start a business, you know what I mean? But they're like, can I make money with it? And it's always this kind of catchy, like, I don't know, like which way that'll turn, you know what I mean? But so you're saying you can make money doing it part time just on the side, but it's, it's just gonna, but even then it's still going to be a grind.
- [26:47]
A
Yeah, yeah. And yeah, I mean you could, I know a lot of people that do it really well by themselves, maybe with a virtual assistant or two. But it's gonna, it's a hamster wheel business too. Once you start it, there's really no getting out of it. So that's the, that's why to my opinion, I mean in order to get a real estate business, you gotta have some end insight. You can't just build it with and then just go more and more and more and more and more. You gotta put the right people in place.
- [27:11]
B
And I love that. Anybody who listens to me, they know I, you know, I say your number one fiscal responsibility is to build your asset portfolio. Like, like that's why you make money. Like I don't care if you're out there making millions of dollars at some job. Like the only reason you're making money should be to build your asset portfolio because that's your freedom. Right? That's the ticket to owning your own life is you got to own your own assets. And, and, and that's the thing you Know, the wholesaling, the flipping. If you only have this very limited view of, oh, I can make $50,000 on this flip or whatever, like you said, it's the hamster wheel when, what's the end, what's the point? But if you leverage that to go build something greater and actually build your own asset portfolio, it's like now, now there's something to build, now there's something to push for. There's some, there's a reason for the grind, you know what I mean? It gives a purpose to the pain, you know, to actually go through it all, to build something real. So I think that's exciting. I love the way you're doing it.
- [28:11]
A
I appreciate it.
- [28:12]
B
Tell me maybe a little bit of your, I don't know, philosophy or thought process on, on that, on real estate and why you are focusing. Because you're spending a lot of money even though you're, you know, you obviously have the hookup, you've got the leads and you know, you're still putting a lot of your own money and your wealth that you could be playing and doing other things with into building this slow drip portfolio that, you know, doesn't make you, you know, you're not walking around cash flowing, millions and millions of dollars. But he could be making millions, but you're putting it into this, this portfolio. So, like, tell me some of your philosophy and your passion and purpose behind all that.
- [28:48]
A
Yeah, I mean, like I said earlier, I'm 29, that my business has been bootstrapped from the very beginning. So I've been doing it for six years. And once you do that, I mean, you just realize that if you don't have any, somebody pouring money behind you, that it makes it really hard. Like everybody tries to make it on the Internet that you start a business and in three years you can do whatever you want. Like it's a, it's a, it's an engine that once you start, it's really hard to stop. So you got to keep pouring it back in, but you got to have an end goal. So my end goal is to generate a lot of active income, dump it into rental properties and take care of my, my family and, and really show that my. Because I come from a blue collar family. My dad's a home inspector, my mom was a math teacher. Nobody really owned assets, we never really had rental properties, but we lived a decent middle class life. Like we weren't hurting for money, but we weren't, we weren't rich by any means. So kind of showing them that hey, if you do this and you sacrifice for five, maybe 10 years max, you can really have an outstanding future, that you don't really have to worry financially and you kind of whatever you want after that. So if you eliminate that side. So say we grow this portfolio and you don't worry about money, what's next? You never know. So then you can have an open mind of, okay, maybe I do start something else, or I, I don't know. But I do love real estate. It's fun, but it's really all I know too. So you never know what could be on the other side. You just got to get over that financial burden.
- [30:11]
B
You know, I love that I read this quote today. I'm probably going to say it wrong. Let's see if I can remember. And I, and I don't remember who said it, but it was from the, the Wisdom podcast with Chris Williams or something like that anyways in his email, but it said there's two types of people in the world. Those who never figure out how to make money and those who don't know how to stop once they do. And I thought that was really interesting because I wanted to ask you, you know, you're like, oh, I want to, you know, there's an end goal here I want to build up to, you know, there's this end goal, you know, build up my passive income, build up my asset portfolio. I always wonder like, do you have a number or do you have, like, how do you know when you've reached that goal or is it just going to take over and it'll just be the same 24 hour work period for the rest of your life? Because even though you've passed 35 numbers, you could have stopped that.
- [31:08]
A
Yeah, man. I mean, most of the stuff is vanity numbers anyway, vanity metrics. So it's just like, how, like beating your chest. So to me it's sure, it's growth. How can you grow more? How can you. I mean, because I have a very, like, I can't. It's just the way I am. So I want, I'm gonna be growing in some way and I'm about to have a kid. So when I have my, when I have my first kid in June, July, we're right, right there. We'll see, we'll see if that answer changes. But right now it's just, I can't sit them. Like everybody says, oh, you want to go retire? Go get all this cash flow, sit on the beach. It's like, what are you gonna do? I'm 29. Like if you're 34 and you retire, quote unquote, what are you gonna do? You gotta build something. So why not kind of go big and see how much you can. How big you can make it, you know?
- [31:53]
B
Gotcha. I love it. Well, that's sweet, man. Yeah, I'm always interested in that because sometimes people don't want an end game, really. They just want to keep winning. You know, who wants to stop playing? But some people do so each their own, you know? And I don't think there's a right or a wrong way to do it as long as you're being honest with yourself of where you're at, you know, and it's cool, you know, because if you're building something real, then you can pivot, you know, Maybe things will change when you have kids. Maybe they won't. Maybe you'll go harder, maybe you'll go softer for a season. Who knows? Yeah, but that's awesome. Maybe you can break down. We've got a little bit of time here. Maybe you could break down like one. One of your. One of a deal. Maybe it could be like a super blase, like, hey, this is the most boring, normal deal. Like, this is how it worked. It was actually like, that's how cool this is. Even the average deal works like this. Whether it's a long hold or. Or a flip or wholesale, you know, or maybe some unique special one that's like, this was the wildest story.
- [32:51]
A
I can't believe this worked out okay. There's two. So not one is I. I always tell people to get on social media, tell people about what you do, because it's going to come back. It's not. There's a non roi. You can't put a money, a monetary amount on it. But a wholesaler found me from California. He had a deal in one of the nicest areas in Columbus, downtown. He didn't know the areas obviously, so I bought this. It's a triplex. We bought it for $395,000 off market, used a private money loan, put 150,000 into it. Four months later, it appraised for $780,000. So we're all in. We're all in. What is that? 545 plus interest. So 580, 75% loan to value on that. 780 was 580. So I own this $800,000 triplex with $0 down payment, all from posting on social media and going out and networking. So that those deals to me are like, holy shit, this Is like to buy that conventionally, investment wise, you have to put 20% down. You just put $235,000 as a down payment on that house. That's a significant amount of money. Like quarter million dollars just popped into my net worth from posting on social media.
- [34:09]
B
So break it down deeper. Sorry, I didn't mean to interrupt. Break it down deeper. How you're going to get it at without anything out of pocket? Because a lot of times they'll still want 80% of the purchase price even if there's 50% equity on it, you know, so how did, how are you able to fund that with literally zero out of pocket?
- [34:27]
A
Yeah, so most of the, I mean 99% of the deals we do now are funded by private money lenders. So somebody like you, like if I go to, hey Joe, you got any dusty money in a bank account you want to lend on a deal? So the biggest thing I lend cash from are individuals with idle 401ks. They roll them to self directed IRAs and they lend them on my real estate deals. So.
- [34:50]
B
And you use that breakdown payments or.
- [34:51]
A
For the whole purchase, whole purchase, whole purchase and rehab. So that deal there we bought for 395 cash. So somebody lent me $395,000 cash and I actually had another lender lend me the $150,000 cash. So I had two people in on this deal and they were both accruing at, let's call it 12% interest. So I actually wrote this down because I'm doing a private money webinar later. But 12% of that for the whole year is $65,000 of interest. So if I would have held that $545,000 loan for that whole entire year, I would have paid 65 grand. But I only held that for four months. So I was in and out in four months purchase all the way to refinance. So I paid right around $30,000, I think it was $28,000 of interest to that lender. So my payoff to these people were 545 plus 28,000. So $570,000. And the bank lent me 5, 580 because that was 75% of 780.
- [35:54]
B
So the bank didn't care that you, they didn't have like a seasoning period and make you wait six months. You're able to do it in four months?
- [36:01]
A
No, because that's sometimes an issue.
- [36:03]
B
Like maybe you haven't run into that, but sometimes banks are like, oh, they want you to hold it for six months. Or some are saying a year right now before they'll let you refinance. Does that just have a relationship with the bank or what people do to find that?
- [36:17]
A
No. So the cool thing is a lot of people, a lot of people bucket refinances into one thing. There's two types of refinances. There's a cash out refinance and there's a rate in term refinance. So rate and term refinance. And these lenders, for me, they put a lien on the house. So there's a registered lien on the house on title. So that just means I'm paying off my lenders that are on title. I'm not taking any cash, so I'm not cashing out. So a lot of these lenders, they'll do no seasoning on rate and term. They love that stuff because they know they're not paying you. But if you buy that house cash, they might make you wait six months to a year. So I'm putting liens on houses and I'm even pulling money out a little bit more than I need sometimes because I'm playing the game of I know it's gonna be worth this, I know a cash out refinance and this interest rate environment is going to be hard. So let me try and steal my equity up front a little bit and then refinance rate and term and get better terms on that refinance.
- [37:09]
B
Guys, if anybody's listening, like that is a vital part of how this process. And some people are wondering like, well, if you have all this money because you've been doing all these deals, why are you using hard money lenders or private money lenders, like why are you borrowing money if you could just self fund it and then you don't have to pay the 20, $30,000 in interest. It's like what he's talking about is so powerful. Because he borrowed the money, he's able to go and get a bank loan on it without waiting the six months to a year because he's not paying himself back. He's paying a lender back, he's paying a lien off. He's not walking with money. If you just bought your own money, then it's just going to you. And the bank doesn't like to give you money. They want to pay off debt so that they're the first in place for the first lien on it. They don't want anybody else's debt on there but theirs at least in first position. And anyway it's like that, do some research. That's a vital part. That rate and term refinance as opposed to a cash out refinance is powerful. And again, yeah, you're not walking away with, you know, tens of thousands or a hundred thousand dollars of cash in your pocket, but you got a property fully funded, you know, and paid back all the other people, you know, and you're good to go. So anyway, I think that's, that's, I really like the U dived into that and spelled that out because it's kind of a nuance for those that are first getting into it, you know, and, and I remember studying all the burst stuff on bigger pockets, reading their books and like they did it. That nuance there was not broken down. I remember being like, how is this possible? Because they wouldn't break down the difference between the rate and term versus a cash out refinance. But again, when they were doing it, it was different. The environment was like they would do cash out refinances with no, no seasoning back in the day.
- [38:53]
A
Yeah, yeah.
- [38:54]
B
So they don't even know. I don't even know. Brandon Turner knows that's a thing anymore. All he does is chill in Maui, you know what I mean? But nowadays you can't just go get a cash out refinance at most places without some sort of seasoning. If you have a good relationship, you might be able to.
- [39:09]
A
Yeah.
- [39:10]
B
But anyway, the rate and term super powerful.
- [39:13]
A
And you got to also realize too, when you're doing the Burr method, like don't get greedy. Don't, don't think you're gonna cash out. Like if you can own this asset with none of your dollars in it, that's a win. Because once again, this is a long term hold and asset. Like 10 years down the line, you're gonna have 10 years of seasoning on that loan. Any bank's gonna lend you your equity. So get the money, like stabilize the asset today, don't worry about the cash, make more active income doing your job or your wholesaling, flipping, whatever it is. And then as your portfolio seasons, then go restructure your debt and make your equity on the on, pull your equity out that way.
- [39:50]
B
Love it, man. I love it. Well, sweet. I want to dive into our final four questions, but what is a good way for people to, to reach out to you, to follow you, to maybe fund some of your deals? I mean, you're talking about paying your investors 20, $30,000 in a few months. Like that's dope, you know, like, how can People participate in what you're doing.
- [40:10]
A
Yeah. So tommyhar05 on Instagram. That's the best way to get a hold of me. We just launched on YouTube too. So I think it's Omhar a lot of, lot of longer form content. We're not leaving anything to hide. I mean it's a lot of really good high level stuff. So just shoot me a dm. Very down to earth. I always like to tell people I'm Midwest Ohio boy, not much different than anybody else. So would love to answer any questions do deals. I think we paid the last two years we probably paid almost a million dollars of interest to lenders on deals.
- [40:41]
B
That's awesome man. So Tommy T O M Y har H A R R and on Instagram you said it was Tommy Har 05 or 05?
- [40:49]
A
Yep, 05.
- [40:50]
B
Perfect. We'll put that in the show notes. Well that's great man. So, so let me ask you this. What question number one of our final four questions. What's your dream deal or a deal you would love to tackle eventually?
- [41:03]
A
Oh man, that's a good question. Because I've done a lot of single family stuff, dream deals like I want to do. I want like a 50 or 100 unit apartment building, not syndicated. So my own personal resources, my own money, my own banks, own it 100% or at least with my business partner, that'd be great. I just went into contract on a nine unit Friday, so taking down that so bigger deals would be fun. Doing the Burr method on that. So just higher numbers, higher scale.
- [41:33]
B
Love it. What's been one of the most pivotal books that you've ever read or a book that recently just excites you?
- [41:43]
A
I always go to who, not how by Dan Sullivan if you've ever heard of that book. Man, unbelievable book. One of my mentors gave it to me back, man. This had been three Christmases ago and just if you want to actually run a business that and you're tired of doing it all and you're scared to give away like just the power you have to give it away. So who can before it's how can I do it? Who can do the thing that I'm trying to do? So who know how was an absolute game changer when it came to business.
- [42:15]
B
Yeah, that's a great book. I love that recommendation. All right, maybe we've already covered this question though. What's one of the most expensive or interesting mistakes you've made in real estate investing?
- [42:28]
A
Oh man, expensive. I. I would say getting too cocky and buying deals that I shouldn't. So I mean, there, there's deals that you get. You have ego plays and everything. So there's some. There's certain deals that. That take way too long to make it more tangible. Like just be very, very careful when you're running your numbers. So be conservative. We're about to lose $20,000 on a flip that's taken us now 15 months because we just messed up permits and the city wasn't cooperating. So be careful when taking on these giant projects. Make sure that your time reflects the issues that are going to come. At least with pre construction and getting through your mechanical systems.
- [43:09]
B
I love that. That's a good one. All right. So what do you do to enjoy life, Tommy Har? When you're not taking over the world and building an empire, what do you do to just enjoy life?
- [43:23]
A
You know, man, I was. I'm an ex Division 1 soccer player, so I like to still be active. I don't really play soccer as much, but I play basketball. I like to work out. My wife's pregnant, so I'm about to have a kid. But we like to travel, man. So this is what we're recording this Monday, the February 26th. I'm taking my whole entire team to the Philippines here Friday. So we got 15 people, like, including spouses, going to the Philippines. We stay where we ended, off this island because it's the Philippines. I mean, we have also six. We have six virtual assistants that work there too. And they've never been to this island, the Philippines. So we're all staying on this island and it's gonna be a great time. So traveling, getting to sh. Just see. Experience better things in life and. And growing wealth for my family.
- [44:09]
B
I love that, man. I love that. That's great, dude. That's exciting. Well, sweet. Was there anything else you want to share with the listeners before we go?
- [44:19]
A
No, man. I mean, I always like to kind of give people the courage to. You. You can definitely do this stuff. So I. I'm just a. I didn't know anything about real estate. I was lucky enough to have a dad who had a home inspection background, but nobody in my family ever invested in real estate. They thought I was nuts when I told them I was going to do this stuff. So it's not going to happen overnight. It's not going to happen in 90 days. It may not happen in a year. But if you look back, if you try every day and for five years, you look back, you'll be like, holy, I'm so happy I did this because real estate investing is absolutely life changing. I mean, it's going to change your family, your family tree and your finances. So I encourage you, if you're in that position, keep at it. Keep at it. It's worth it.
- [45:01]
B
I love it, man. Well, see. Well, thanks so much for being on the show. Really appreciate your time. Look forward to following your journey and seeing everything that you're doing. I feel like you're just getting started.
- [45:10]
A
Awesome, brother. Definitely appreciate your time. If you're ever in Ohio, if you ever need anything, just let me know.
- [45:16]
B
Heck yeah, man. Well, this is Joe Jensen signing off for the Real Estate Investing School podcast, reminding you to don't be afraid to be the first.