← Real Estate Rookie
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- [00:00]
A
Real estate investing feels a little different today, but it shouldn't stop you from getting started. In today's episode, we're going to break down how we're navigating interest rates, why we're maybe changing our strategies, and what our portfolios look like today.
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B
We're also going to get a little insight as to what market Tony is looking at today and also why Ashley is now a short term rental manager. Welcome to the Real Estate Rookie podcast. I'm Ashley Ker.
- [00:32]
A
And I'm Tony J. Robinson. And with that, let's get into a few updates on the market.
- [00:36]
B
First, Tony, let's start the discussion off today with some of the market conditions in 2025 and some of the changes that we've seen happening and maybe will be happening. So the first change I want to discuss is the big, beautiful tax bill. So, Tony, is there anything that maybe you are going to do to pivot and change your strategy going forward?
- [01:02]
A
Um, I, I think for me a lot of it is more so doubling down on what we've already done. You know, part of the reason that we started investing in short term rentals was because of the short term rental tax loophole, which allowed W2 employees to leverage depreciation of their short term rentals and apply that against their W2 income, which is unique to short term rentals. You can't do that with long term rentals unless you're what's called a real estate professional, which is virtually impossible to do if you're working a W2 job. But as a W2 employee, the short term rental tax loophole allows you to do that. And the way that it was initially set up when we started investing was that you could buy a short term rental, do this cost segregation study, and There is this 100% bonus depreciation which allowed you to basically get this big massive write off in year one that was phasing out year over year. So it went from 100% you could use to 80% to 60% to 40%. But now with the one big beautiful bill, it's back up to 100%. So I think there's going to be a renewed interest in short term rental investing if no other reason than the tax benefits that come along with it. So we did a lot of cost savings in the last few years. We've got like a good bank of, of tax benefit, but I think it is starting to run out. So if we kind of get back into the acquisition mode, I think it'll help us make sure that we can keep those taxes offset. So I think I'm happy to see that more than anything because it just validates the path that we've gone down.
- [02:26]
B
Do you think that it will create like this influx of short term rental investors? Because I feel like there was kind of a mix of that in, you know, 20, 20, 21 and a little bit into 22, where we had saw so many people buy short term rentals. And. But that was also because of the great daily rate, the nightly rate that you could get, how everyone was traveling, also the low interest rates. So now we're not seeing as high of nightly rates for everybody, just the unique experiences. But do you think we'll see a surge because of this tax loophole that's back to 100%?
- [03:06]
A
Yeah. If, you know, if I had to make my most educated guess, I'd say no, because to your point, a lot of the folks who were jumping into the Airbnb space, the short term rental space before they were doing it, many of them with the goal of like, increased cash flow, thinking it would be an easy play to get more money on, on a monthly or annual basis. Whereas this change is going to be more so targeted towards the folks who are already high income earners. And they're looking, looking at the strategy more so from a tax strategy perspective of preserving more of the money that they're making. And I think just naturally there's lots of those folks in the United States and there are people looking for extra money. So I would be surprised if we saw like the, you know, the massive amount of folks getting into the space of what we saw before. But I do think we'll see maybe renewed interest within that specific subset of folks getting back into this. I think the other one too. Ash, I don't know if you saw this, but the. There was a lot of talk about the 1031 exchange maybe getting axed, but the one big beautiful bill preserved that as well. And I think that's another, I guess, like, it's a tax strategy, obviously, but it's just another way that real estate investors can scale their portfolio without losing a bunch of money to taxes. So I was super happy to see that get preserved as well, because I think the goal for us is how can we maybe get rid of some of these smaller deals that we have and parlay those into larger properties, maybe more hotels or motels.
- [04:26]
B
Yeah. Without paying taxes on the sale of the smaller one and then just being able to use those funds into, you know, the next deal. One thing I really like about the 1031 exchange too is like you don't have to use all of the funds or the proceeds from the sale of that property. So like, if you wanted to keep $50,000 in cash, you could not roll that into the next, but you're just going to pay taxes on that 50,000. So I really like the flexibility of the 1031 exchange. Obviously you have your timelines and things like that where you have to identify a property close on a property. You can't just say, oh, eventually I'm going to buy another property with these funds and let it sit in a high yield savings account for five years until you decide to buy something else. There's a strict timeline you have to find follow. But the other thing that I saw that was kind of interesting and this isn't something that has gone into effect. There's just been different people from Congress who have kind of put in their ideas of what should happen with primary residences and being exempt from capital gains tax. And so there's a couple different things where one is increasing it so that it right now it's at 250,000 for single and 500,000 for married, where that would pretty much double. And then another one was just to completely eliminate taxes altogether on the sale of a primary residence, which I don't think that one will happen. I don't think they will completely eliminate it. But the reason they're looking at this is because the values of homes have changed so much since this, these amounts were set. And I can't remember offhand, but it was a long time ago that they actually set these metrics of 250,000 and 500,000 in place. And you know, you live in a city like Seattle or, you know, a high cost of living area, you can very easily live in your property for three years, five years, and obtain more than $1 million in equity, especially if you bought it five years ago.
- [06:45]
A
So I think the next thing that's going on right now that's really impacting real estate investors obviously are interest rates. We're holding like just south of 7%. I think I checked last night. We're at like 7 or 6.7 and some change. Right. Like around 6.8, though it is coming down, you know, and I think there's a lot of pressure economically on interest rates to start falling. Ash and I are not economists, but there was a job report that came out recently that was, I don't know, it was like 73,000 jobs got added, which is really low. They revised the previous month's Numbers down by a big margin as well. So we're starting to see signs that the economy is starting to weaken, I think a little bit. And as that happens, we'll start to see interest rates, I think, dropping. So I think a lot of signs are pointing to the Fed. I think their next meeting is in like September, right? So a month from now. And I think there's a lot of signs that they will drop the Fed funds rate. But I think in anticipation of that, we're already starting to see interest rates come down on the, on like the mortgage interest rates. So I, you know, I, I've talked to a lot of folks who are a lot smarter than me when it comes to this and there's this big consistent consensus that when rates can kind of get 2, 6% or lower, that's when you'll unlock a lot of the kind of buyers that are waiting on the sidelines. And I think it's a double edged sword, Ash, and I'm. Here's what your take is, right? It's a double edged sword for investors because if rates get below that like threshold that a lot of folks are talking about, obviously it makes deals more affordable, right? We're getting our principal and interest payments down to a more affordable level, which makes it easier to have those deals pencil out. But then it also unlocks all of these other buyers, which then means we're competing with more people, prices are going to go up and now we're kind of fighting a different battle. So I think we are, I think we're in the sweet spot. We had Jeff Wogan on a few episodes ago and he talked about this as well. But I think we're in this sweet spot where if you buy a deal today that is still cash flow positive, we probably have an opportunity in the next 12 to 24 months to refinance that deal. And your worst case scenario is that you have a deal today that cash flow is okay, and your best case scenario is that you have a deal that cash flow is okay today and cash flow is amazing in 12 to 24 months when you refinance. So I think if you're waiting for rates to go down, I think that is a wrong move. I would rather challenge you to find a deal that makes sense today. And then if the opportunity presents itself to refinance and turn it into an even better deal, then you take that opportunity. But I think waiting, I think waiting is a wrong move. What's your take, Ashley?
- [09:13]
B
Yeah, I definitely agree. I don't think going into a deal Relying on interest rates to be cut, that is the wrong move. Also, like don't get into a deal saying, oh well, I'll just refinance and rates go down. I can weather this property for a year with negative cash flow and just wait that that is also the wrong thing to do. But if you work harder to find the deals and you'll see investors, maybe they're not getting as many deals because they're really focusing on finding the good ones and that is harder to do today. I do listen to a lot of podcasts about the economy and the market and it seems as though the prediction, and they will say these are just predictions, is that there will be two rate cuts this year, each a quarter percentage of a point. And so we'll see that in the end of the year. But who knows? Those are just predictions of what will happen when you are thinking, okay, I'm going to get this property now and if rates do drop, I do want to refinance to get that lower rate. Make sure you're taking into consideration closing costs. I don't want you to get excited that you're able to refinance because rates should. They just announced a rate cut and you're going to have a little bit more cash flow. Look at what the closing costs are. Is it actually going to be worth it for you to refinance for half a percentage point less and still pay the closing costs? I the two DSER loans that I have done, they both have required two year prepayment penalties too. So if I do go and refinance in the first year, I'm paying a 2% fee on the balance that is paid off. And then if it's the second year, I'm paying a 1% balance on the balance that I'm paying off. So, so there's that to look at. And also too the purchase price. Whatever you purchase that property for, you owe that money. That is money that somehow you have to pay back or money that you already spent if you paid for it in cash. Okay, that is there is no changing what you purchase the property for. The interest rates that can change. So I think I would rather find a really good deal now, pay less for the property than wait until it's easier and pay more for the property even if it's going to cash flow a little bit more because I have that lower interest rate. But it also could not cash flow that much more because you're going to be paying more for the property if there's more competition and more buyers come back into of the market. So always look at that too as to, you know, that you can pay off the property and that that payment is gone. You can, you know, pay the property off and your interest rate is gone too. So I think make sure you're just looking at all sides of it and not just thinking, oh, if rates drop, let's go ahead and refinance.
- [12:27]
A
Yeah, Date, date the rate, marry the house. Right. So I think there's something to be said there, there as well, I think. Next, Ash, let's talk about what's going on at a regional perspective because we talked macro, right. Interest rates are affecting everyone. Macro tax changes, that's a macro impact as well. But regionally I think we're seeing a lot of shifts in markets as well. A few years ago it felt like Florida was one of the hottest real estate markets on the planet. It's like everyone was leaving California, they were going to Texas, they were going to Florida. But I think we're starting to see some of those trends reverse and I think part of it is insurance costs. Places like Florida are getting harder to insure. Places like even parts of Texas, hurricanes, New Orleans and other place where insurance prices are rising. But I think we're seeing some regional trends that are also starting to impact investors. How are things looking where you're at in Buffalo, Ash? Are you seeing the market improvement? Is it getting shakier? What are you seeing in your neck of the woods?
- [13:31]
B
We're definitely seeing more inventory, more days on market. But the property type that is actually selling the best is the mom and pop home that isn't updated, but it is extremely well taken care of. It is clean, the foundation is strong. They've just. There's not repairs and maintenance that need to be done. It just cosmetically would need some updates, but it's still good. And those are the properties that you're seeing going for over asking, getting flooded with showings as they're somewhat still affordable because they're not completely remodeled, but they're in really good shape and condition. And that's what I'm seeing at least just looking at the inventory in the different little neighborhoods that I invest in are those are the ones that are going so fast. It's not the high end luxury homes. It's not the dilapidated. It's almost like starter homes I would say in a sense. But overall like Buffalo made a list of like number two for least days on market. Rochester, New York was number one. But that was also several months ago.
- [14:49]
A
That list came out and I think what we're seeing. So, like, I'm in Southern California, right, which is a very, you know, I think, distinct real estate market. But what I've noticed is that I, you know, because we flip homes, probably flip a couple of homes a year. We only bought one flip last year. And part of the reason that we only bought one was because I felt like I was seeing sellers even, especially like the wholesalers that we work with who were presenting me with deals where the price point relative to the margin, it, like it was just way too tight, you know, like they're sending me properties like, hey, you can pick this up cash offer at, you know, 565 and your ARV is 615. It's like, that is such a tight difference between what they're trying to wholesale it to me for what the ARV is. And it's like, okay, do I want to go out there and risk half a million dollars to maybe make 15,000, you know, or can I go into a different market? And, you know, I've talked about on the podcast that we, we took a trip out to O about a month ago, and the goal of that was, can I get the same raw dollar amount but do that in a market where the entry price points are significantly lower? And there were a lot of things that we saw in the OKC market that made me more confident starting to build a flipping ecosystem there, as opposed to trying to continue to bang my head against the wall and flip in a super competitive, overly expensive market like California. So that's a big shift we've made, just kind of seeing where buyers are at, where sellers are at. The type of risk that we're willing to take on is, hey, I'm just going to leave that to the side. Let me go focus on a market that's a little bit more. A market that can present a little less risk. And I think that's what we found in okc.
- [16:34]
B
Okay, we're going to take a short break, and when we come back, we're going to check in on mine and Tony's portfolios to see how they performed so far in 2025.
- [16:45]
C
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- [18:29]
D
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- [18:59]
B
Okay, we're back after a short break. Thank you guys so much for checking out our show sponsors. So Tony, give us a little oversight of where your portfolio is at today because I don't even think I know what, how many short term rentals you have now and everything that's. Oh God.
- [19:17]
A
So we've, we've sold off a couple. We sold one one of our short term rentals maybe three months ago. And that was like one of our earlier cabins that we bought. And just like when we looked at the cash flow relative to the equity, we feel like it was the right move for us to make, allowed us to inject some capital back into the business. So we're again our, our single family short term rentals are really in two main markets. We're in the Smoky Mountains, we're in, in Joshua Tree, the Smoky Mountains. That market's been pretty steady for us, right? It's just like, you know, obviously it came down from the super high peaks of 2020 and 2021, but like after that we've had pretty consistent performance year over year. So that market's been, been pretty solid. Joshua, on the other hand, that one really like bottomed out I'd say in probably 23. Like that was like a, you know, like if you looked at, if you graphed our revenue market wide across our portfolio peaked in 2022 probably or maybe 21, a little bit of a dip in 22, bottom out in 23. We saw a rebound in 24 and 25. We pretty much paced mostly to kind of what 24 has done. And that tracks mostly with how that market has performed as well. Now that's aggregate across our portfolio. If we were to like drill down on certain properties, we have some properties that are outperforming and I've probably got, I don't know, maybe four out of the 18 properties that we have in Joshua Tree that are just like underperforming, like losing money. So the goal with those is like, how can we stabilize those properties? Can we reinvest back into those? So we're building a pool at one of them right now and we're just trying to see like, hey, what other levers can we add to get these bottom performers performing like our, our top performers in that market.
- [20:57]
B
I was going to ask what do you notice a difference between, between like the top performers? Is it maybe they're like in a different neighborhood or they're bigger, can fit more people? Is, are you noticing anything like that?
- [21:10]
A
We've dug into this data pretty extensively and those four properties, those are all the larger renovated homes that we have in that market. So we've got a couple, three bedrooms actually one of the two bedroom that's slightly newer, so that one's a little bit of an anomaly. But the other three are three bedroom properties that we rehabbed. The majority of our portfolio in that market are new construction, tiny homes that were built between 2020 and 2022. So these are like new products. And what we've seen in that market is that the top performers tend to be new construction. So when we look at the other three bedrooms, we're talking about properties that were probably built between, you know, like the 90s, maybe early 2000s. So these are products that are, you know, 30 years old at this point. Right. And although we've done a good job rehabbing them, These are still 1990s products that we're trying to compete with purpose built, short term rentals that were, you know, built in 2024. And I think we're seeing better amenities added to the new construction. We're seeing higher ceilings, we're seeing better floor plans, like it just flows better. They're both three bedrooms, but the square footage is bigger. So we, we came to the realization that if we can't compete on a footprint perspective, okay, can we take the resources that we do have, which in a lot of these bigger properties is like just space in the backyard, like outdoor space, and try and compete there. So we added our first in ground pool last summer or last, last spring actually. And that one helped a lot with one of our three bedroom properties. We're adding that now to a few of our other properties as well to see, okay, if we can't, if we can't get them within the four walls, can we just make the experience better? So that's what we're focusing on right now.
- [22:55]
B
And then what about the motel? So you have your one motel in Utah, go over that and any other properties besides the motel and the short term rentals.
- [23:05]
A
Yeah, the motel has been, I think the, like the bright spot for sure of the, the portfolio because it's, you know, we launched it in spring of last year and like, I'll give you guys the numbers really quickly because I think it's, it's interesting and it's really like kind of shifted my mindset of what kind of properties you want to buy moving forward. Because I'll tell you guys, like, just like hands down, managing the 13 room motel significantly easier than managing 13 separate single family Airbnbs. The quality of guests and like their expectations on the 13 single family Airbnbs significantly higher than what we see on the, on the motel. The reliance on a single OTA very high with the short term rentals, single family homes very low. We've got a really good mix of the different OTAs are on direct booking website with the motel and Airbnb has recently made a lot of changes that I'm not super stoked about. So the fact that we don't have that same reliance on the hotel has been awesome as well. So it's really, I think encouraging me to like, our next purchase will most likely be like another motel. But we again, we bought that, that property for just under a million bucks. We dumped in another just over 400k on the rehab. So we were all in for like 1.35 I think was like our total all in cost. And the first year, so From April of 24 through the end of the year, I think we did like $190,000 in revenue. But our last 12 months, if I look at, you know, August, we're recording this in August. If we look at August of 24 to August of now, we've done, I think it was like 310,000 in revenue and our projections were to do about 350. So we're a little bit behind. But it's encouraging for me to see that we're like actually trekking towards what that projection is. And I feel like we're getting into our rhythm now from a management perspective, from a pricing perspective. And all signs point to this deal being a really, really solid deal for us. I'm super excited about it.
- [25:07]
B
Now, does this qualify for the short term rental loophole?
- [25:10]
A
It does, but it's because we had to, we had to set it up in a very specific way to do that. If it was a traditional full service hotel where guests come in, they walk up to the front desk, someone greets them, they say, hey, you know, Mrs. Kerr, you're in room number, you know, 12, here's your room key. Housekeeping knocks on your door in the morning saying, hey, would you like some service? If we did all of that, it wouldn't qualify. But we run this hotel the same way that we run all of our Airbnbs. So it's full of self check in like the, there's no one stationed at the front desk. It's not even open to guests. We don't offer any midterm stays or midterm. Sorry, we don't offer any mid stay cleaning. If someone asks for something like specific then, you know, we'll drop off more towels or more, you know, coffee pots. Whatever it is, we're not going in and turning the rooms at each during each day. And that limited service allows us to still operate as a short. We're just a short term rental that's in a motel. And because we've set it up that way, it allows us to still qualify as a short term rental.
- [26:10]
B
We're going to take a short break, but when we come back, we're going to find out what is going on with my current portfolio. We'll be right back.
- [26:18]
C
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- [26:58]
D
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- [28:32]
C
Later this year we plan on taking a winter trip to the mountains and we're definitely going to stay in an Airbnb. We're really looking forward to cooking a few of our own meals, seeing a few sites and relaxing comfortably in our own space. We also love the idea of being able to offset some of our vacation costs while on vacation. Have you thought about hosting your home on Airbnb next time you're away? I know I have because it's so simple and now it's even easier than ever. With the co host network, you can hire a high quality local co host to take care of your guests while you're away so you can travel stress free and earn a little extra cash for your next vacation. Co hosts can create your listing, manage reservations, message guests, provide on site support, and they can even do design and styling. Find a co host@airbnb.com host.
- [29:24]
B
So you're about to make a trade based on a friend's text, but which you do you listen to is it we could buy a house in Tulum, get optioning those options. We could lose everything. Or let's do a little research, get.
- [29:45]
A
Your head in the trade and make.
- [29:46]
B
The investment decision that's right for you. Learn more@finra.org TradeSmart okay, thank you guys so much for checking out the show sponsors. Let's get into what I'm doing today with real estate. I think that's very interesting as to how you can manipulate the operations to tailor and obviously your goal wasn't the tax benefit like that was your goal going into buying. That was probably just a bonus that you found out that you were able to do that because you want you went in to buy that motel to operate as a short term rental. But like very interesting to think about when you are taking a different property type and turning operating it as a different kind of strategy.
- [30:31]
A
I'm just, I'm super excited about scaling up this model. But you know, Ash, you, you and I did an episode not too long ago where we talked about mistakes that we made and both of us kind of reflected on the, the mistake of scaling too quickly. And we're trying to really, really make sure that we don't make that same mistake with the motel. And that's why we've had it. You know, it's been operational for like 14 months now and we haven't bought another one. Yet. Because you really want to make sure that we've got the operations down, we've got the inventory process down, we've got the scheduling down. I just spent the last three days there at the motel, and, like, my only focus there was putting in a better inventory process in our. In our laundry room because we had, you know, 50 gallons of bleach, we had no conditioner, we had 80,000 K pot. Like, just. We were over ordering a bunch of stuff under ordering a bunch of stuff. And it sounds so small, but when you think about a hotel, those little things really do add up.
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B
So.
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A
Yeah, anyway, I'm super stoked for that. Super excited for that, that next step. What about you, Ash? Give us the update on the care portfolio.
- [31:27]
B
Well, Tony, we see each other every Wednesday when we record podcasts, and, like, there's always these little random things that you're off doing. I feel like you need to start, like a vlog on YouTube or something, sharing some of these things. I actually think that would be super interesting to watch as you're in the supply room of the laundry room, like, taking inventory. This is how I'm doing it. This is how I'm tracking it. Like, I feel like I would watch that.
- [31:50]
A
You're gonna give me trouble with my wife. Cause she literally told me, she was like, babe, you need to record while you're out there. This is good content. People wanna see this stuff. And I think it got like two videos and like, one of them was me just like at the charging station waiting for my car to charge. So, yeah, I got to do a better job. Yeah, just. Just some B roll of me charging my car. But, yeah, I got to. I got to jump on that trend for sure.
- [32:11]
B
So for my portfolio, I sold a single family rental that I had this year. It was. I had bought it in 2020. I just sold it. And we made about 100k profit on this property. And we do have 20k being held in escrow on this property because it did not pass the septic inspection. So they're gonna have to make repairs on the septic and then they'll use the $20,000 to pay for that. And if there's any leftover, we'll get that back. If not, they get the full 20,000. So that's even with the. The 20,000 being taken out of it already. So that was nice. Just to be done with that property. We only had two tenants in it the whole time, so it was a very easy property. Just the reason we decided to sell it was there so much appreciation in this area and the amount of cash flow we were getting. It just the, we wanted the equity and I have a partner on this deal where we both had different things we wanted more capital for. So it made sense. We didn't do a 1031 exchange because we would have had to stay in the same partnership. So we're just each taking our, our equity and putting them into different things.
- [33:29]
A
No. Yeah, just very similar thought process for us on, on selling ours is like. And I think that is a decision that real estate investors need to think about is like compare your equity to your cash flow as well and see how big of a gap there is. And it's like, you know, could we maybe better use that equity somewhere else? You know, or how much, how, how much time would it take for me from a cash flow perspective to equal the amount of equity that we have in the deal?
- [33:50]
B
Yeah. And to like this property, we actually bought it. My partner actually funded the deal. So we made a mortgage payment to him every month too. So he's actually getting his, he's made like, I think it was 6% interest off of this deal, you know. And then he's also going to get paid back the balance of his principal. So he'll be getting that big chunk of money back. I think we owed him maybe like 78,000 maybe on it or something like that. That will be paid back for him too that he can use into another investment that he wants to do. So besides that, as of the end of July, I no longer have a short term rental manager for my two short term rentals. I got rid of my Airbnb arbitrage. I just have the two little unique cabins and they. So part of the reason my manager, she start had a full time job and she wanted to learn more about real estate. So I hired her and paid her like a chunk of money. Be like, learn everything you can about managing a short term rental and you can manage it. And for like, I think it's been like almost 2, 3 years I've paid her 5% of the revenue which is very, very cheap. But part of that was she didn't have any experience and she was going to learn everything along the way and I was her guinea pig. She ended up getting a job with like a very, a much bigger short term rental operator, co hosting and stuff. And so she eventually said, you know, I, this is just like becoming, you know, such a big opportunity for me. I'm going to have to drop your properties, which is fine. And so I've taken on kind of that management role and I've been, you know, confiding in Tony and also Garrett from bigger stays of like different things. And I'm proud to say that we are now on vrbo. We never were before. And I figured all that out. And my next one is to figure out booking.com. i went to do it the other day and I got this alert from our property management software that said, beware, before you do this, please know there are multiple steps that you need to do and take. And I was like, I don't have the time for that today. I'll save this for another day. So I feel like I'm relearning how to properly manage a short term rental and really make it unique because I used to manage ours in, you know, when we started 20, 18, 19, 20 and it was very, very casual. You didn't need to provide an exceptional experience. Like if I didn't get send someone a message or respond right away like it was not a big deal at all. And now it's like if you're not responding, responding within five minutes, it's considered a big deal.
- [36:42]
A
Well, I think what I'm most curious about, Ash, is your, your living flip. Give us the, give us the update on that. How's that project going? Did you move in already? Are you moved in? I don't even know this. Are you, are you in it?
- [36:51]
B
Yeah, I'm in it. We actually hustled and got it livable within one month. This property was vacant for about two years before I bought it. And I had it under contract almost that whole time. And the person that owned it, she passed away during the process and so we had to wait for, you know, the executor of her will to be named and things like that. So we closed on it in February, did a month of renovations on the property and we were able to get moved in. We replaced all the flooring, refinished the hardwoods. The kids got really nice bedrooms just because we knew they would have to be living in somewhat of a construction zone and rehab. So like we at least made sure their space was really nice. And yeah, so right now I'm up in the loft, which I've turned into my, my podcast area. There's also a little couch and stuff over there and a little TV area. But yeah, so we're very, very slowly going through the renovations. We have new siding that's going on next week. And the thing I'm really excited about this is like, okay, we hustled during that first month of like getting everything done, we replaced all of the plumbing, we repaired the septic, all these different things, put on a new porch. And then, you know, it was kind of like, this isn't like a flip or like a rental. Like I don't consider myself having holding costs because I'm living in the property. So it is my cost of living. So it's very, very nice and relaxing. I will say to not be on a super strict timeline because even if we don't finish everything in two years, worst case scenario, we get to live in a really nice house for a couple more months while we finish up loose ends. And then just the thinking about how much equity and how much forced appreciation by adding value I can put into this property without paying taxes on it is really motivating. Thinking about how much I would have had to work at a W2 job to actually make that same amount of money after taxes. And I ran the scenario the other day if like I made $200,000 and I worked at a job that, you know, paid me, like I can't remember what I use, like 85,000 a year or something like that, or I don't, I don't remember the exact numbers I did, but it was like almost like three times. You know, I'd have to work that many more years than what I would have made on the flip or whatever just from living in the property and you know, living in a construction zone. But if you do it at a nice pace, I mean, it would be nice to be able to do it all before I moved in, but that just wasn't feasible for me at the time. So we're going to slowly do it over time.
- [39:52]
A
So having started the process, at least do you think that you'll, you'll repeat it? So like when you guys sell this one is a plan to move into another live in flip.
- [39:59]
B
I've already identified my. And now I'm like in this position of like, how do I buy this other one and still fulfill my two year commitment? So do I. I buy this one as a rental and rent it out for the next year and a half and then I move into it as my primary and sell the other one. And the reason this is an off market deal that I've been talking to the sellers with the dad had to move out and go to assisted living and I'm talking with the daughters, but the property is on the same street as my sister. And I have to say, never ever thought that I'd want to live next to My sister, but she's about to have her third baby. And just seeing our kids grow up together, we can't stop thinking about it, talking about it and it's like, okay, but I got a, you know, strategy. I don't want to give up to, you know, $200,000 plus and tax free money to live next to you. But so, yeah, that's also the thing is like, you got to be very strategic about it. And we just had Matt Krieger on who talked about how he would go from, you know, he'd live in one property for a year and then rent it out after. And he said he even got denied one time and lost out on a deal because it wasn't exactly one year and the lender for the next property denied his loan and he lost the contract on the house because it wasn't over a year. So being very strategic and make sure I'm following the rules of this so that I can get that primary residence exclusion, that's kind of where I'm at in my portfolio is, you know, just holding on to my long term rentals, focusing on my two short term rentals and then also doing this live and flip and trying to, to figure out how to get the next one already. But Tony, you had mentioned an, you know, another example of the secret trips where you don't vlog for us is you actually went to Oklahoma City with your son. Have you gotten any deals out of that? And I, I think we should do a whole nother episode on, you know, we kind of covered today what were we've done so far this year. But we could do a whole nother episode on what we're looking into. But quickly, if you could just recap what's going on in Oklahoma City and why you've been traveling there.
- [42:23]
A
Yeah, so we, so what's going on there is. Yeah, we're focusing on that market specifically for flips. Again, we did a few flips a year here in Southern California, but as this market has gotten, I think a little bit more aggressive and the margins have gotten slimmer, we're just not willing to take that risk at these high purchase prices for the amount of profit that we're getting. So I'd rather go to a market where price points a little bit lower. Even if the actual profit amount is smaller, the actual margin on a percentage basis is bigger. Right. So I think that's the goal for us there. So, yeah, we went out there right at the end of last month or beginning of last month at this point. And we met one of our, an agent that we met through bp, through the Bigger Pockets Agent Finder. And she spent two days with us just taking us around town and kind of gave us a lay of the land. And we've probably submitted 20 offers. Vast majority of those were just like hard nos, a couple we got counters on. But I'm okay with that. Like, I know it's going to take, you know, I know we probably need to submit on a, on a hundred deals before we're going to find the one that the track. So it's like every time I see a deal that pops, I'm just sending off Lois to my agent and she's kind of giving me her feedback and we're getting them out. And yeah, right now we're just kind of working the numbers until we find one that actually makes sense.
- [43:32]
B
And I think that sounds like such a rookie tip. Like, oh yeah, everyone says as a rookie you should be analyzing 100 deals a week. You should putting out 100 offers. Look it, Tony is no longer a rookie in a lot of things, but he is still sending out as many, many, many offers as he can. Because it's not just something investors say to give you busy work to do. It's actually an effective tool to get your next deal.
- [44:01]
A
And you guys are actually here. Coming up on episode 612, we have Dominique Gunnison and Henry Washington just kind of give a an update on the state of flipping and they echo that same idea that they're seeing. They're having to put out double the amount of offers to get the same number of deals. So it's just the reality of where we're at. Otherwise, you know, if you're just, if you're getting a bunch of accepted offers right now, it's probably because you're over offering, right? Your offer price is too high to actually make those deals work. So yeah, we're going into it knowing it's going to take some time to find that first deal, but we just need one. And I think once we get that first one, we build some momentum. It'll. It'll start snowballing from there.
- [44:34]
B
Thank you guys so much for joining us today for this episode of Real Estate Rookie. I'm Ashley, he's Tony, and we'll see you guys next time.