Real Estate Investing School Podcast - Episode 238: REAL DEAL: Sweat Equity & Smart Investing

Release Date: February 20, 2025

Introduction

In Episode 238 of the Real Estate Investing School Podcast, host Brody Fossett engages in an insightful conversation with real estate investing students, Kade and Takara. Titled "REAL DEAL: Sweat Equity & Smart Investing," the episode delves deep into their journey of acquiring and renovating a duplex, emphasizing the strategic use of sweat equity and smart financial planning to build wealth through real estate.

Meet the Guests: Kade and Takara

Kade and Takara are emerging real estate investors who have recently embarked on their first significant property investment. Their story is one of perseverance, continuous learning, and strategic action, making them exemplary figures for aspiring investors.

The Journey to the Current Deal

Initial Attempts and Setbacks

Kade and Takara's foray into real estate investment began shortly after their marriage. Their initial goal was straightforward: purchase a rental property. However, their first attempt to acquire a duplex in November of the previous year fell through after an unfavorable inspection, resulting in the loss of their earnest money. This setback became a pivotal moment for them.

Takara [00:46]: "We ended up losing our earnest money. And we said, you know what, let's invest in the real estate investing school, invest in ourselves and figure out how to do this."

Determined to learn and improve, they enrolled in the Real Estate Investing School, where they acquired essential skills in analyzing deals and running the numbers effectively.

Finding the Right Property

Their persistence paid off when they discovered a promising duplex listed on Zillow. Initially priced at $485,000, the property experienced two significant price drops, making it a viable opportunity for Kade and Takara.

Kade [05:00]: "I would say it was a little better than we expected."

The property's favorable location in South Ogden, coupled with its potential for additional bedrooms and separate entrances, made it an attractive investment.

Evaluating the Deal

Price Drops and Maximum Allowable Offer

Understanding the importance of making a financially sound offer, Kade introduced the concept of the "Maximum Allowable Offer" (MAO), a critical metric they learned from their coaches at the Real Estate Investing School.

Brody Fossett [08:00]: "You guys used a word which I want to touch on. You said maximum allowable offer. Tell everybody what that means and how you came to that, essentially."

By meticulously analyzing comparable properties and estimating renovation costs, they determined that $430,000 was a competitive offer, which the sellers accepted.

Kade [07:15]: "We offered 420. I think they had it listed at 460. And they met us at 435."

Financing the Investment

Securing financing was seamless, thanks to Jason Griffin from the Real Estate Investing School.

Takara [08:14]: "We beat the wholesalers because they wanted someone that was going to live there and remodel and take care of the house as well."

Jason Griffin played a pivotal role in advocating for Kade and Takara, ensuring their loan was approved without hindrance amid competition from other buyers.

Renovation and Sweat Equity

DIY Efforts to Save Costs

Kade and Takara embraced the concept of sweat equity by undertaking significant portions of the renovation themselves. This hands-on approach not only reduced costs but also accelerated the renovation timeline.

Kade [15:41]: "We're on track to hit the number we initially had for a goal as far as the cost for repair, which is $10,000."

Specific Renovations and Savings

Their frugality and resourcefulness were evident as they sourced materials from platforms like Facebook Marketplace and leveraged family expertise in construction.

Takara [16:09]: "We've been very thrifty, so it's not, you know, doing it ourselves cuts a lot of the cost."

For instance, they acquired 2,000 square feet of hardwood flooring for just $500, significantly under budget.

Kade [16:35]: "That's amazing. It reminds me of like my, honestly, like my first house too."

Financial Projections and Outcomes

After Repair Value (ARV)

Based on their thorough analysis, Kade and Takara project the property's value post-renovation to reach into the mid to high $600,000s.

Kade [17:57]: "Close to seven for that area of South Ogden."

Rental Income Estimates

Their strategic approach includes renting out the basement, anticipating a conservative monthly rent of $2,000, with potential increases based on market demand.

Kade [20:10]: "I would bet at least the numbers I've compared with both top and bottom rented out about $4,500 a month is the kind of low ball number of what we'd bring in monthly on the house."

The total investment, including down payment and renovations, amounted to approximately $37,000.

Kade [20:27]: "About $27,000... plus renovations, about $37,000."

Lessons Learned and Advice

Importance of Diligence and Running Numbers

Kade emphasizes the significance of defining one's "buy box" and rigorously analyzing each deal to ensure profitability.

Kade [25:44]: "Have a keyword for yourself. Be diligent, find out what you want to do, work towards it, but find out exactly what your buy box is."

Takara echoes this sentiment, highlighting the necessity of mastering financial calculations to mitigate risks.

Takara [26:16]: "Figure out how to run the numbers. That's the biggest thing."

Overcoming Fear and Building Momentum

Brody underscores the psychological challenges investors face, such as fear and anxiety, and how a solid financial foundation can alleviate these concerns.

Brody Fossett [09:02]: "You guys got that down. Chase the phenomenal teaching that. And then you move forward with it and it makes you feel good. Like you made a logical decision without getting so many emotions involved."

Final Tips for New Investors

Both Kade and Takara advise new investors to stay persistent, continuously seek deals, and remain flexible in their strategies.

Kade [27:18]: "Find the number that works for you and send it to them and see what just start sending out offers."

Takara [27:41]: "What's important is putting the work in."

Motivational Insights

The episode highlights the transformative power of real estate investing, not just financially but also in personal growth and skill development.

Takara [22:43]: "It's just been fun. I mean, we also just get to spend every night hanging out together and painting or demolitioning or, you know. We're working. We're learning valuable lessons, all these skills, and on top of it, we're building so much money and opportunity for ourselves."

Brody encapsulates the essence of momentum in real estate, emphasizing how initial efforts pave the way for future successes.

Brody Fossett [21:39]: "This is why it's like momentum, right? And real estate's momentum. And especially like early on, it's hard to get that momentum going."

Conclusion

Episode 238 of the Real Estate Investing School Podcast serves as an inspiring blueprint for novice investors. Kade and Takara's journey from initial setbacks to securing a lucrative property deal underscores the importance of education, diligence, and proactive effort in real estate investment. Their story is a testament to how strategic planning and hands-on involvement can yield substantial financial rewards and personal growth.

For those looking to embark on their real estate investment journey, this episode offers valuable lessons and motivation to take decisive action toward building a prosperous future.

Notable Quotes:

• Takara [00:46]: "We ended up losing our earnest money. And we said, you know what, let's invest in the real estate investing school, invest in ourselves and figure out how to do this."

• Kade [05:00]: "I would say it was a little better than we expected."

• Brody Fossett [09:02]: "You guys got that down. Chase the phenomenal teaching that. And then you move forward with it and it makes you feel good. Like you made a logical decision without getting so many emotions involved."

• Takara [22:43]: "We're working. We're learning valuable lessons, all these skills, and on top of it, we're building so much money and opportunity for ourselves."

For more insights and to connect with Kade and Takara, visit the show notes or reach out through the Real Estate Investing School Podcast channels.