Real Deal: The Real Estate Roller Coaster – Episode 224 Summary

Release Date: January 2, 2025
Host: Real Estate Investing School
Guest: Noah Evans

1. Introduction and Guest Background

Brody (Host): The episode features Noah Evans, a seasoned real estate investor with substantial experience in the Boise market. Brody introduces Noah as not only a skilled investor but also a long-time friend who has significantly impacted his own real estate journey.

Noah Evans: Shares his gratitude towards Brody for inspiring his entry into real estate investing. He recounts his transition from a stable job at Enterprise to pursuing his passion in real estate, highlighting the challenges and successes he encountered along the way.

Quote:
"I almost cried because it's pretty cool... I'm very grateful for our long-term relationship and that we've maintained and become closer recently too." [01:18]

2. Embracing Failures and Personal Growth

Noah emphasizes the importance of learning from failures in real estate. He discusses how initial losses taught him resilience and improved his business acumen. By experiencing setbacks, he became less fearful of failure and more competent in managing his investments.

Quote:
"Once it slaps you in the face a couple of times, you're less afraid of that slap coming." [02:58]

Brody adds that failures often become favorite learning moments, reinforcing the value of persistence and adaptability in a fluctuating market.

Quote:
"It's so fun to chat with you about real estate because... you inspired me to go into this." [01:14]

3. Case Study: Distressed Farmhouse Flip

Noah delves into a specific deal involving the purchase of a distressed farmhouse on three acres in Boise, acquired in April 2022 for $326,000. His initial plan aimed for a $75,000 profit by selling the property for approximately $460,000 after investing $55,000 in rehabilitation.

Challenges Encountered:

• Market Downturn: Shortly after acquisition, the Boise real estate market began to decline, impacting his ability to sell at the projected price.

• Underestimating Costs: Noah admits his primary mistake was overestimating the property's value and underestimating renovation costs, particularly the complexities of adding value through features like barns and acreage.

• Delegation Issues: Attempting to delegate the rehab project without sufficient oversight led to budget overruns and delays.

Quote:
"My first mistake was in underwriting... I sat there, the market told me this house was probably not worth more than $430,000." [09:37]

4. Navigating Unexpected Property Issues

During the renovation, Noah discovered significant plumbing issues that were not disclosed by the seller, despite the R25 form stating otherwise. This unforeseen problem escalated renovation costs from an anticipated $0 to $18,000, further straining the project's finances.

Quote:
"We found out that the bathroom literally drained to the dirt... So from a zero dollar budget to eighteen grand, just like that." [13:30]

To mitigate the financial impact, Noah negotiated with the seller, reducing the owner carry from $40,000 to $27,500 with the help of an attorney. This negotiation, while not covering all losses, provided some financial relief.

Quote:
"We took that $40,000 owner carry down to a $27,500 payout... I'm stepping into this property with none of my own money down." [26:59]

5. Creative Financing and Deal Structuring

Noah outlines his innovative approach to financing the distressed property:

• Owner Carry: Negotiated a $40,000 owner carry from the seller, which was later reduced to $27,500.

• Private Money Lender: Secured $56,000 from a private lender.

• Hard Money Loan: Utilized a hard money loan as the primary financing source.

This layered financing strategy allowed Noah to minimize his out-of-pocket investment, leveraging various funding sources to cover the purchase and renovation costs.

Quote:
"I used a mutual friend’s fix and flip company... They applied it to my down payment, which was pretty cool." [15:59]

6. Adaptation and Revenue Diversification

Faced with a stagnant market and mounting holding costs, Noah pivoted from selling to renting the property to generate cash flow. He creatively divided the property into multiple revenue streams:

• Primary House Rental: Rented for $1,850 monthly.

• Barn Rental: Leased separately for $1,100 monthly.

• Additional RV Pads: Planned to install three RV pads, projecting $750 monthly cash flow.

By diversifying rental income, Noah transformed a failing flip into a profitable rental property, demonstrating adaptability and innovative thinking.

Quote:
"I decided I'm not going to sell it if I'm keeping it. It needs to cash flow." [24:16]

7. Dealing with Market Fluctuations

Noah recounts the rapid market downturn in Boise during late 2022, leading to prolonged holding periods and increased expenses. Despite the challenges, he remained proactive by exploring long-term financing options, such as DSCR loans, to stabilize the investment.

Quote:
"I can't just keep blindly hoping for something to happen. I've got to be more proactive." [18:23]

8. Lessons Learned and Key Takeaways

Noah shares several critical lessons from his real estate journey:

• Due Diligence: Thoroughly vet property conditions and verify disclosures to avoid unexpected expenses.

• Effective Delegation: Clearly define roles and expectations when delegating tasks to ensure projects stay on budget and schedule.

• Creative Financing: Leverage various financing options to minimize personal financial risk and maximize investment potential.

• Adaptability: Be prepared to pivot strategies in response to market changes and unforeseen challenges.

• Personal Growth: Embrace failures as learning opportunities to enhance business acumen and resilience.

Quote:
"Focus on how much you've grown as a person and how much more capable you are rather than worrying about a dollar amount." [06:01]

9. Connecting with Noah Evans

Noah invites listeners to connect with him for personalized real estate advice through his Instagram and the "Freedom Hotline," offering four calls per week to assist aspiring investors.

Quote:
"If you want to book a direct call with me, I'm doing four calls a week now. It's called the Freedom Hotline." [31:19]

Conclusion

Episode 224 of the Real Estate Investing School Podcast offers a candid exploration of the highs and lows in a real estate investor's journey. Through Noah Evans' detailed recounting of a challenging property flip, listeners gain valuable insights into effective deal structuring, creative financing, and the importance of resilience in the face of market volatility. Noah's story underscores the significance of continuous learning, adaptability, and personal growth in achieving long-term success in real estate investing.

Key Takeaways:

• Thorough Due Diligence: Always verify property details to prevent unforeseen costs.

• Clear Delegation: Define roles and maintain oversight when delegating tasks.

• Flexible Financing: Utilize multiple financing sources to optimize investment.

• Adaptability: Be ready to shift strategies based on market conditions.

• Personal Development: Learn from failures to build a stronger investment foundation.

For more insights and detailed discussions, subscribe to the Real Estate Investing School Podcast and stay tuned for future episodes featuring industry experts.