← Real Estate Investing School Podcast
Real Estate Investing School Podcast
236. REAL DEAL: Real Estate, Relationships, and Results
00:23:58
Welcome back to the Real Estate Investing School Podcast! In today's episode, Brody is joined by Parker Vassau to discuss Parker's second real estate deal, a competitive duplex buy in Pleasant Grove, Utah. Learn how Parker secured the deal with a...
Loading summary
Transcript54 lines
- [00:00]
Parker Basal
It absolutely shocks me what five, seven, eight years can do to a real estate deal. Most of the deals that I've purchased, I haven't loved them year one. Oftentimes we overestimate what a deal will be year one, but then we underestimate where it can be five years down the road.
- [00:19]
Brody Fossett
What is up, guys? Welcome back to the Real Estate Investing School podcast. This is your host, Brody Fossett. And this is a Real Deal series. For those of you guys that are joining us for maybe the first or second or third or fourth or fifth time. This is a segment of the show where it's a little bit shorter, more sweet, to the point where we talk about one specific real estate investing deal that somebody did and we dive into how they found it, how they funded it and how they forced it. And this is the best way to learn about real estate because you get an insight on all of these different ways and strategies. People are doing awesome deals. So today it's going to be fun. We're going to dive in with Parker Basal. Parker, what's up dude? How are you?
- [01:04]
Parker Basal
What's up man? Thanks for having me.
- [01:06]
Brody Fossett
Yeah, man, love you. Love everything you stand for. And obviously we've connected on real estate and a lot of other things which has been so fun. But today we're just going to dive into a real estate deal that you did and we're kind of picking through what would be the best one to talk about. And you kind of called an audible last minute and we're going to talk about something that initially wasn't the plan, which I'm excited to dive into. So with that being said, just kind of give us like a brief overview of what we're going to dive into today and what this real estate deal looks like from the 10,30,000 foot view. And then we'll get into the nitty gritty.
- [01:44]
Parker Basal
Cool. Yeah. So this is the, I want to talk about the second deal that I ever did and first deal we ever did. We were living in an owner occupied fourplex and we were looking for our next deal. And so this one to explain it, it's a duplex. It's in Utah. It's in Pleasant Grove, Utah. It's an up and down duplex. And one of the cool things about this deal is to get this deal. I actually it was competitive. The market was really competitive at the time. And when we went, when we went through it, there were like five or six offers on this deal. And I knew I needed to stand out. And so I had read somewhere Listened to someone say that sometimes if you'll send a letter to the seller and send a picture of your family, like it plays to some heartstrings. So I did that and they actually ended up choosing us because of that. Like the, the seller literally said like, hey, your offer's not the best, but like I love the hustle and like how intentional you were. And so they chose us because of that. We lived in the basement. We put really like minimal money down. It's a duplex. It was $320,000 was the purchase price. We put a 16 grand down. And then it's also a brrr. So we renovated the basement for like four or five thousand dollars while we lived in it, added a bedroom, ended up refinancing it. So it's like a burr cool house hack deal that. And we can kind of dive deeper into it. But that's a good intro to it.
- [03:17]
Brody Fossett
Yeah. Yeah, that's awesome. And just kind of touch on the numbers, give people an idea. Purchase price was 320. You said you put 16k down, which. What percent was that of the. Yeah, purchase price?
- [03:29]
Parker Basal
5% down. Just a conventional owner occupied loan.
- [03:34]
Brody Fossett
Love it.
- [03:35]
Parker Basal
Yup. And when we bought it, we kind of bought it before rates. This is like five. So I've had this deal for like five, six years. This, I bought it when rates were at like a 4 and they actually crept down lower. So the numbers kind of are. So we bought it for 320k, put 16 grand down. Renovation cost was like 6 or 7 grand. Between that renovate renovation in the kitchen and then we added the one bedroom. So we're, we're in it like 22 grand, I think total. The payment initially was like 1700 bucks. But then when rates crept down a little bit, we refinanced it and so the payment dropped to 1500. We rented the up finance at that point.
- [04:19]
Brody Fossett
Did you get it, did you get it reappraised and. Yeah. You didn't cash out? I take.
- [04:24]
Parker Basal
Yeah, we did. We did get a. Yeah, good question. We, we did get it reappraised. It. It reappraised for 390. So we forced 70k in equity, which was awesome.
- [04:35]
Brody Fossett
Cool.
- [04:36]
Parker Basal
And that was like maybe two months later, three months later. So kind of a quick turnaround on that. And then we didn't actually pull cash out. I was like really wanting to create a lot of cash flow and so we kept that equity in it. The payment dropped because we were able to get the PMI to drop off. And so the Payment now is like 1500 bucks. I don't remember what we initially were renting it for, but nowadays, you know, the upstairs rents, I think, for 1600 and the downstairs is 1400. So it's really awesome cash flow. And one of those kind of dream deals where you don't have a lot of money tied up in it anymore and it's just printing money, you know, I wish. I Wish I had 100 of these types of deals, but. Right. Um. Yeah.
- [05:25]
Brody Fossett
Cool. I love it. Well, this is gonna be fun to dive into. Just for people that are. That are kind of following along. Like, PMI is brief explanation. It basically, it's your mortgage insurance. Right. And anytime you're putting, usually it's. It's. There's gonna be different things, but usually it's less than 20% down or 20% equity in the home. They're going to require mortgage insurance, which is an extra payment. You know, depending on the purchase price, all these things, it might be 150 bucks, 160 bucks a month.
- [05:58]
Parker Basal
I don't know.
- [05:59]
Brody Fossett
In your scenario, do you remember how much it was when it.
- [06:01]
Parker Basal
Yeah, I think about. Yeah, I think it was about that. Because the payment, like I said, initially was 1700. And I think that was the main reason why we were able to lower the payment is the PM. PMI came off and now our payments like 1500. So probably somewhere in that ballpark. Yeah.
- [06:17]
Brody Fossett
Awesome. Great, Great. Cool. And we can. We can dive deeper into that, you know, in a future episode for sure. But it's like PMI is on end. All, be all, either. Like, if you can put a lot less money down and you're paying pmi, like, sometimes a lot of times it's worth it. Right. So don't feel like, oh, I can't go buy a house because I have to put, you know, all this money down or to get rid of PMI or. It doesn't make sense. That is not the case at all. And that's cool. Like in your case, Parker, you were able to force that appreciation and then you had it drop off versus coming up with that extra $70,000 of cash just to save that 150 bucks a month or whatever it is. Yeah, right. A lot of times it doesn't make sense. Super awesome. So I love that. And then it's what's cool about the deal. Obviously, you're getting a good cash on cash return because you're into it a minimal amount and you got, you know, within the equity, you have all your money back, plus Some right out a couple months of the gate, which is so cool. But what's even cooler than that is essentially you were living in a house for free. And I think anytime just looking at house hacking where you can, especially with it just a duplex or two units, when one covers the mortgage completely and the other one is just like the cherry on top, that's. It's so fun. Like, it's so fun to create that type of scenario. So I'm sure there was a reason that you guys lived in the basement as opposed to the upstairs. What was the reason for that?
- [07:45]
Parker Basal
Yeah, we were still really broke, and, like, even a couple hundred bucks extra in rent meant a ton for us. And that was a season of our life when we were, like, in our younger to mid-20s, where we were just like, in that delayed gratification state of mind. So, yeah, like, we. I think we could get a couple hundred extra 100 bucks by. By renting out the upstairs and living in the basement. Yeah, so we did that. But we joke all the time. Like, that place, the basement has, like, no windows. And we'd have friends come over and be like, it's raining outside. Or it's like, you know, something with the weather, and we'd be like, dude, we had no idea. Like, it was just such a. Such a dungeon.
- [08:27]
Brody Fossett
But that's awesome.
- [08:29]
Parker Basal
Yeah, so that's. That's why we lived in the basement.
- [08:32]
Brody Fossett
Yeah. Cool. Cool. I love that. It's funny you say that with the no windows, because that was literally, like my first house that I bought was same type of, like, house hack, except for I was single, and so there were lots of bedrooms, and I lived in the basement bedroom. It wasn't like, since then we've cut in windows and dug out window wells and everything, but same thing, dude, it was like, you want to go take a nap? You go down there and it was pitch dark, and it was the crappiest room in the house. It was like a seller. But I'm like, yeah, I'm gonna live here because I can get the most of rent, most amount of rent out of the other bedrooms. So I love that. I just want to point that out because I figured that was the case, and it's like, to me, that's part of forcing the deal. And it's all those little things that a lot of people look over or they miss. That just comes down to, hey, we're willing to sacrifice now and this momentary pleasure for this long term, you know, happiness and what this can do for us. Long term. I think that anytime you can get bought in to a big vision like that and get your spouse on board with that, like, those are the little things that obviously have added up and led to where you're at now, which I think is so cool.
- [09:39]
Parker Basal
So, yeah, props to you there. Thanks, man. Yeah, Like, a big part of our story, my wife and I, is just deals like this where, you know, you delay gratification for. For a year or two. I mean, when we were in our 20s, that's just what we did. Like, we house act, multiple deals, and it. You know, I love that quote. Like, if you'll live like others won't for a season of your life, then for the rest of your life, you'll. You can live like others can't.
- [10:06]
Brody Fossett
Yeah.
- [10:07]
Parker Basal
And I. The main reason I wanted to share this deal is like, I am just like, it. It absolutely shocks me what five, seven, eight years can do to a real estate deal. Like, most of the deals that I've purchased, I haven't loved them year one. Like, oftentimes we overestimate what a deal will be year one, but then we underestimate where it can be five years down the road. And, like, I feel like that's true. It's been every single real estate deal that I've done. Like, I actually didn't hate this one right away, but a lot of the. A lot of real estate deals I've done, like, year one, I'm like, gosh, dude, I should have just bought a car or something. Like, but then five years pass, and, like, I've been in the game five, six, seven years now. I think we bought this one, like, five or six years ago, and, like, to see how much it's. It's appreciated and the constant cash flow and stuff. Like, even years four or five and six, it's just so much better than it was that first year or two. But we were living for cheap while we were there, and that was a big part of the. You know, that's a big benefit to house hacking. But I. My main message is just like, right now in my life, I'm seeing those first couple of deals I did, and I'm just like, holy cow. Five, six, seven years can do a lot to your real estate portfolio.
- [11:28]
Brody Fossett
Yeah, that's such a gold nugget. Like, such a gold nugget. And it's so true. It's very hard to lose in real estate in the long term. Like, yeah, almost impossible, to be honest. Like, it's very, very tough. And that's why we say A lot. Like you make your money when you buy, right? Because up, up front is where you're really creating all this value, right, that's going to sustain long term. But it's, it's insane. Like how just in general, not even with real estate, but how many people and how many of us, just in general, like that natural man tendency is to make decisions that affect us in the moment. And it's just such a short term outlook. And like, how does this benefit me now? What does this feel like now? Like as I'm eating the county candy bar, right? Like, what is this doing for me now? And we don't think with that long term cap or that long term vision. And it's just, I love that you pointed that out. And especially as we dive into like a lot of these, on these different real deal episodes and, and a lot of people will share, you know, the first few deals that they did. And it's crazy because they're almost always like successful now in the long term, in the short term, yeah, it can be easy to, you know, do something that doesn't cash flow as much right off the bat or to make a mistake. But long term, it's hard to lose. And I think it's just one of those principles that a lot of people can hear this, like they can hear you talk about, yeah, we got a 4% interest rate and then it went lower. And so they're like, oh yeah, well, Parker bought at the right time. Like, good for him. Like, I wish I would have done that. How many people said to you, like, oh man, if I would have bought a house four years ago, if I would have bought that five years ago, or I almost pulled the trigger on that, I wish I would have had, had done that four or five years ago. And my caution, if you're thinking that or if you're sitting here listening to that is like, it's going to be the same thing in the next four to five years. You're going to look back and say that about the same situation you're in right now.
- [13:26]
Parker Basal
Yeah, I, I agree. Yeah. I think investing is like a lot about the expectations that you have with your emotions going into making moves. And if you have that mindset of like, I'm going to go deploy this money and I'm going to double it in a year or whatever, like you're going to be disappointed in real estate because that's not generally how real estate works. And so I think a lot of investing, as I've like had more experience, it really Is like an emotional game. Like, it's also numbers and there's some technical stuff that you have to go figure out. But, like, it's more mainly emotional. Like, it's mainly like, I'm gonna hold this building and ride out the emotions, and in five to 10 years, I'm gonna thank myself and you're right on this deal. Like, it's on a main road. It's not sexy. It's. I know 320k in Utah sounds like a lot of. Or not a lot of money right now, but like, I don't know, six years ago it was like, I mean, again, like, that's what it was listed for. Right. Like, that was the market value. And so, yeah, that's. It wasn't like, if people were. There were multiple offers, but it wasn't like this, like, home run deal. Like, it's on the main road. It's on the main road. It's got this, like, kind of steeper driveway. Like, it's not this, like, perfect property.
- [14:49]
Brody Fossett
Yeah.
- [14:49]
Parker Basal
So I had people that were like, you know, are you sure you want to buy that deal? Like, of course there was. There's always that noise. And again, like, it's. It's emotions. It's like, I'm doing this, I'm planting this tree now so that in five to 10 years it can give me shade and it can grow. And like, so, yeah, it is. It's a hard thing to. To. To buy into. But that's the benefit of starting young. Like, you know, me and you and like a lot of our group that are young and investing in real estate, like, that's what I'm passionate about is like, helping people start young. Because then you get time on your side as an investor and we're all going to look really smart in 20 years. You know, it doesn't.
- [15:37]
Brody Fossett
You're really smart and it's only been five years, dude. I can't imagine what another 15 is going to do for you.
- [15:42]
Parker Basal
Yeah, you're smarter than I am, but.
- [15:46]
Brody Fossett
No, not. Not a chance, bro. Well, just. Just to kind of like, touch on. Because like I said, we try and focus on finding funding, forcing, which we've talked about all those things. But just to recap and point out to people the way you found this deal, I'm assuming it was just on the mls. Just kind of popped up. Everybody saw it on the mls.
- [16:04]
Parker Basal
I had, I had an agent send it to me. We went and looked at it. We, we. You know, we did that whole letter thing. They were moving out of State. And he was an investor because it was a duplex. And so I kind of, in that letter, I basically said, hey, you know, this would be my second property. This is my vision, this is my family. Like, it would mean a ton to me if he chose us. So I played to the heartstrings and I kind of like just shot him straight on, like what I'm trying to accomplish and then, you know, which is huge.
- [16:34]
Brody Fossett
I've done that a few different times and it's, it's big. So I think for sure we're pulling that out and I think that's a way that you force the deal as well.
- [16:41]
Parker Basal
Yeah, that's true.
- [16:43]
Brody Fossett
But. But yeah, but yeah, that goes hand in hand with how you found it and then. And then funding it. We touched on that and the power of the way that you did that, which you talked about. 5% down, owner occupied conventional loan.
- [16:55]
Parker Basal
Yeah, Yup, yup. And there were some other FHA loan offers and they actually, one of the other reasons they chose us is we were conventional and there were some like, cracks in the stairs on the way up to the house or something. And so we kind of, part of our strategy as well with the seller was like, we almost like, not tried to scare him, but we tried to just kind of play to the whole like, hey, there's some risk with like choosing an FHA offer because it may not go through. So that was another way that we kind of like got the deal locked down and then, yeah, like, again, basement renovated it forced some value there that when I say added a bedroom, we literally added a wall. Like there was a big, long bedroom with windows that allowed for us to just add a wall. So that was like super cheap and easy. This wasn't like some intense where, you know, it took a lot of like, stress or whatever and. And then, yeah, funded it with the 5% down down payment, waited a couple months, we had the option to pull cash out or just try to get the PMI to drop off, and we went that route. I just felt better about that at that point and still have it today. And I don't plan on selling it.
- [18:11]
Brody Fossett
Like, you know what it's worth right now?
- [18:13]
Parker Basal
Yeah, it's actually worth almost 600 grand.
- [18:16]
Brody Fossett
Crazy. Crazy.
- [18:18]
Parker Basal
Which is. Yeah. Which is crazy. So definitely kind of like one of my highlight real deals because it, you know, we have 20 something grand into it and it's like, I think I've like 15x my money on that deal because of leverage. Right.
- [18:31]
Brody Fossett
Dude. And I have so many deals like that and so many examples of deals like that that have literally like 3x in value, 5x in value. And I bought it the exact same way. Multiple offers above asking or asking. Right. Like you're like people telling you like, hey, are you sure you want to do this? Like you're overspending on this. So this isn't like, hey, go overspend your money. This is just like understand how real estate works. It'll go up and down, but over the long term, it's always still going up. And being aware of that, having that long term outlook is huge. The only thing I just want to touch on. Yeah, you talked about literally I just framed off a wall to create another bedroom. That cost you to do that. How much did that cost you?
- [19:15]
Parker Basal
Like literally probably 1200 bucks. I don't remember. But I remember I paid the guy to do the kitchen and that together. And obviously the kitchen was more. Most of that cost because we just paid for like some framing drywall, you know, like it took him a couple hours.
- [19:31]
Brody Fossett
Do you like that bedroom and how, how much do you think that, how much more per month do you think that allowed you to rent it out for by having that extra bedroom?
- [19:42]
Parker Basal
Yeah, it's a big deal, right? Because it was before that it was just going to be a one bed, one bath and a two bed, one bath is just, you can get a lot more rent and so probably to the tune of like cup a couple hundred dollars more in rents and then the value because of that is just, you know, a lot higher and totally.
- [20:01]
Brody Fossett
So yeah, I love that like, these are little pieces that if you guys are listening, like not owed another person. That's house hacking. Cool. I already know about house hacking. No, it's all these little pieces that Parker's gone through and talked about how he's got creative, how he's forced the deal, how he's like that your return on doing something like that versus not doing something like that, it's crazy. You know, it pays itself back in a few months and then increase in equity and increase in, you know, everything else. Cash flow for the rest of its life is crazy. So, so many good nuggets to be able to pull out here. Man, this has been awesome. Anything else that you leave people with or any other pieces of advice or if someone's looking to, hey, I want to replicate this. Any. Anything you would say?
- [20:48]
Parker Basal
I would just say, like, I, I listen to a lot of these real estate podcasts and I definitely, like, I have times where I roll my eyes and I'M like, oh, dude, another deal where some guy bought a property when interest rates were low. And Utah, like, a lot of the west coast has appreciated a lot. So, like, good for him. But I'm not in that. Like, I didn't ride that gravy train or whatever. Like, I just. All I can say, and again, I have no crystal ball for the future, but all I can say is I literally used to listen to these podcasts before I owned a deal and I used to have that exact same mindset. Like, or that temptation crept into my mind where it was just like, dude, they. I didn't. I. I missed the window, right? And, and I'm not saying, like, the market over the next couple years is gonna blow up again. I'm. I'm saying the market goes on runs and that might happen in a couple years, it might happen in 10 years or 20 years, but it's better to be in the game than on the sidelines. And, and if you can get a pen, if I, if you can. I guess I'll finish with this. Like, if you can get a deal to kind of pencil now, like in 5, 10, 15 years, it will look really good. And so the numbers don't need to be amazing short term. Like, buy assets, make sure the rents cover the mortgage, and time will kind of do the rest for you is, I guess, kind of my story. I'm not the smartest dude in the room and like, I haven't used every strategy under the sun with real estate. I've kind of stayed simple. But like, that's been my experience so far is like, if you, if you're in the, if you're in the game, you'll be, you'll be rewarded.
- [22:28]
Brody Fossett
Yeah. So good, dude. I love that. And that's, yeah, so much, so much value. The other piece to that is you're not going to miss the money. Like, you will not miss the money. You go buy something, you're going to spend it on something else eventually. Like, you'll be so grateful. Like, you saved up and spent it on real estate in the long term. So, so good, man. And I'm excited just to kind of continue this friendship and yeah, see each other next, next month. You're in my dream big, fast Mastermind group, which has been a blast. I'm so glad that you're, you're a part of that. If people want to connect with you, what's the best way for them to do that?
- [23:09]
Parker Basal
Probably Instagram. I'm trying to. I've been, I was the guy that was, like, off social media for decade, and now I'm like, I see what you do, and I'm, like, trying to ramp back up. But, yeah, Parker, do Parker Vassa on Vassau on Instagram, and I'm starting to post some content that's real estate focused and sales focused and stuff.
- [23:30]
Brody Fossett
So cool, dude. Well, I apologize for always pronouncing your name wrong, then.
- [23:35]
Parker Basal
Oh, that's okay. It's all good. No one. No one. No one pronounces it right.
- [23:39]
Brody Fossett
So Bassa. Cool.
- [23:42]
Parker Basal
I'll give you a couple more years to figure it out.
- [23:44]
Brody Fossett
Yeah, no, I got it locked in now. Now we're. But. But, yeah, go. Go connect with Parker and hope you guys enjoy this episode, and we'll catch you on the next one.