← Real Estate Rookie
Real Estate Rookie
$5,000/Month Cash Flow from 3 Small Multifamily Properties in JUST 5 Years
00:45:13
Loading summary
Transcript75 lines
- [00:00]
Ashley Kerr
We've said it before, but real estate is one of the best wealth building strategies the beginner investor can engage in.
- [00:07]
Tony J. Robinson
And today's guest, Daniel and Becca Hawthorne, are the embodiment of that principle from growing up with housing instability as a young person building a 32 unit portfolio in just five years. It's literally a blueprint for how ordinary everyday people can create extraordinary wealth through strategic real estate investing.
- [00:29]
Ashley Kerr
This is the Real Estate Rookie podcast. And I'm Ashley Kerr.
- [00:33]
Tony J. Robinson
And I'm Tony J. Robinson. And let's give a big warm welcome to Daniel and Becca. Guys, thank you so much for joining us today.
- [00:40]
Daniel Hawthorne
Absolutely, thank you.
- [00:41]
Ashley Kerr
Well, welcome to the show. I want to start off with Daniel. Could you walk us through on kind of a high level, your journey of getting your first multifamily property.
- [00:50]
Daniel Hawthorne
I had heard about real estate investing, had a number of friends who either had parents who got into it or they themselves did. And it seemed somewhat impossible for me. But nevertheless, I started looking at the Bigger Pockets podcast. Really. I think what happened for us was that I end up in the spot where we had some good capital coming in. And then I started to take a deeper look at the BiggerPockets forum in particular, because I realized I had a lot of questions, despite all the research I had done. And the forum allowed me to tailor the questions towards what, you know, whatever it was that we were looking for, whether it was, hey, we need to have insurance or how do we find an agent, how do we even identify what the right market is? Do we invest in the city we live in or elsewhere? And just got a bunch of information through that and was able to really leverage the forum to validate some of the things that I had. And then of course, we, we pursued our first property, which was an eight family unit and not the best part of St. Louis. So we did decide to invest in the city we live in. And it wasn't the best property, but the investment, the listing price and things like that, it allowed us to get into it. And it was also, it was turnkey, so it was an easy lift, so to speak. And then we have property management set up and things like that. And so I would say it was, you know, not a part of our portfolio today, but it was certainly the exact multifamily unit that we needed to get started.
- [02:27]
Tony J. Robinson
Daniel, I want to go back to something you said. You said it seemed impossible, and I think that's such a, such a big statement. But I resonate with it because I know for me it seemed like a reach When I first got started, and I'm sure for a lot of rookies that are listening, it can almost feel impossible. But for you specifically, why did it feel impossible and at what point did you realize it actually was a possibility?
- [02:49]
Daniel Hawthorne
So outside of the capital component. Right, which, so this was a $300,000 eight family, you know, multifamily building. And when I say that some, some people in other markets may be like, wow, 300,000. And with that many units, that, that's, that's quite the steal. But, but it is still quite a bit of money, especially for a new investor. But outside of that was just the fact that you're stepping into something you're unfamiliar with, don't have any experience with at the time. This was in 2020. Our, our youngest was just 18 months, I believe, and our oldest was three at the time. So two young kids bouncing off the walls. You know, at some points I felt like even our marriage was at risk. Right. Just because of, that's what happens when you have young kids. So let alone now we're stepping into investing in something that's going to provide housing for, you know, other people and, and all the sort of things that come along with that, even with property management. So it was, when I say impossible, it was because of just all the other things we had that we were juggling that was going to make this, you know, less, less likely to succeed in theory, but in actuality that's, that's far from what we experienced.
- [04:06]
Ashley Kerr
Becca, why did you both decide to end up going towards multi family as your strategy? There's, you know, short term rentals, there's flipping, there's all these different strategies. Why did you end up deciding on multi family?
- [04:21]
Becca Hawthorne
So for multi family, we sort of felt like just getting more units at once and being able to take care of them all together at the same time. Seemed easier than just like, you know, adore, adore, all in different places. And you know, even I have two midterm rentals in our four plex and just being able to always be there and flip there, clip them like about every three months. It's just easier just to have everything under one roof.
- [04:50]
Ashley Kerr
I have to agree with that. Like when I worked for a 40 unit apartment complex, like just having everything under one roof, it was, you have one roof to take care of, everything's in the same place for like one handyman to come take care of that property. Instead of having 40 single family homes located all around the city, there is that huge advantage. I do want to get into more of your story. But first we're going to take a quick break and we'll be right back after this and we'll hear more about your investment strategy and how you guys have been able to increase your cash flow in just the last couple of years. So we'll be right back.
- [05:31]
E
Hey investors, quick question. How many hours did you waste this month chasing down rent, sorting through receipts, or manually reconciling transactions? If you're like most landlords, it's way too many. Every minute lost in busywork means less time finding deals and growing your portfolio. That's why I'm excited to introduce our new BiggerPockets Pro partner, Baselane. Baselane's banking and AI powered bookkeeping platform automatically collects rent, tags transactions in real time, and instantly shows you cash flow reports. Stop chasing receipts and start chasing returns. Sign up now at baselane.com/biggerpockets and get a $100 bonus to jumpstart your journey. Baselane is a financial technology company and is not a bank. Banking services provided by Threadbank member FDIC.
- [06:08]
F
Want to invest in real estate but don't have the time or know the best local markets? Rent to Retirement has you covered. Now look, here's the deal. They've helped thousands of investors just like you find turnkey homes across the best US Markets. And best of all, they do all the heavy lifting for you. With over 250 five star reviews on bigger pockets, Rent to Retirement experts help you build strategies to retire early through real estate. And right now, Rent to Retirement offers some amazing incentives on Turnke construction properties like up to $30,000 off of new build prices, 0% down loan options, 3.99% interest rates so guys don't miss out. These deals won't last. Text REI to 33777 or visit biggerpockets.com retirement start investing in top cash flow markets today. You ever thought about diving into real estate but got kind of stuck on where to start? I mean, of course you have. You're listening to this podcast. Well, we've got something that might just kickstart your journey. Enter PropStream, your secret weapon in the world of off market properties. With over million properties at your fingertips, PropStream lets you uncover hidden gems right from your phone, tablet or computer. PropStream's got over 120 search filters from pre foreclosures to bankruptcy, helping you find motivated sellers faster than ever. And with public record data and MLS sales estimate accuracy of over 99%, you'll nail those comps every single time they're even throwing in a learning academy to get you started on the right foot. Dive in with 50 free leads during their seven day free trial@propstream.com BP that's propstream.com BP like BiggerPockets.
- [07:36]
G
All right, cool.
- [07:37]
Tony J. Robinson
So we are back here with Becca and Daniel. And I know for both of you, like many real estate investors, part of the motivation to get started is the desire to build generational wealth. And everyone, I think, kind of strives for that for different reasons. But what does it mean to you or why is it important for you all to kind of have that given the circumstances you guys grew up with?
- [08:01]
Daniel Hawthorne
I was born in Los Angeles, born in South Central in the 80s, which was really, really tough time to, to live in that part of the country. And not only that, but there was a period of time where myself, two older brothers and my mom, we were homeless and I was a little boy. But my mom, you know, would share stories with me around what that was like, living in shelters and things like that, having two, you know, three boys, three little boys at the time and being a young mom herself. And so those stories throughout my life have been, like, motivation for me whenever I feel like I can't do something or something's impossible. Like I shared earlier, those are the things that I kind of look to, to bring out the inspiration and really to say, you know what, this was also impossible to be a, you know, black boy in South Central in the 80s, to make it out to be where I am today at that point in time, that was also impossible. So I just have defied the odds in a lot of areas of my life. And this real estate is just another way to, to do that and to bring, you know, some, some value to our kids and the family that we're, we're building so that they don't have to experience that. You know, certainly there are other challenges that then come with, how do you not have, you know, entitled kids and all those sorts of things that come with this. But, but making sure that from the foundation that we're creating, we don't have to be in a situation. They don't have to be in a situation where they aren't, you know, experiencing lack of housing or situations like that.
- [09:37]
Tony J. Robinson
And I appreciate you, Daniel, being, being candid with your, you know, your, your experiences growing up, because I think a lot of the challenges that we face as people shape who we become. And there are different ways to respond to challenges. You can either use them as excuses to not get better, or you can use them as a motivation to find a better situation for yourself. And it sounds like you, you focused on the latter. But I think the question that I want to ask you that really applies to everyone that's listening. And for all of our rookies that are listening, even if they're not growing up in a tough neighborhood, there's still probably people around them who don't see real estate investing as a path to go down or who have negative ideas or limiting beliefs, who around what's possible. So the question that I want to ask you, Daniel, is what do you think it was that you did differently to push out the noise, focus on what's important, and actually put yourself in a position to experience all the success that you found so far today?
- [10:28]
Daniel Hawthorne
I think once we realized that real estate was the path we felt we wanted to go down. Surrounding myself with individuals that had already established some level of success, individuals who were in the same stage that we were in where they're. And then also seeking out within those groups, seeking out people who were maybe in similar stages, right? Like, so maybe young, young parents, interracial couples, others that, that, you know, people of color and things like that. And what that did for us is to again, validate that, hey, this is possible. And it's not just, you know, someone who's been doing this for 20 years and they've got billions of dollars of assets, right. This is. These are people who again, don't either haven't gotten their first deal or maybe earlier in their journey. And that I think it creates again this mindset that this is doable, this is something I can achieve. And then from there you become that person for someone else down the road.
- [11:33]
Ashley Kerr
That's such great advice right there. And I seen a lot of other really successful investors talk about that, how they are pretty open about how they've dropped friends because they don't fit into what their goals are. And they're like, you know, it's awful. And as mean as that sounds, they want to surround themselves with other successful people. And there's also that saying of like, you never want to be the smartest person in the room. Like, you always want to be, you know, the person that trying to achieve where these other people are at and surround yourself and will help you 10x your life, 10x your goals, 10x your success, being around other people, that you have these kind of lifestyle skills and, you know, things in common that will be able to help you achieve the success that you're looking for. And that's not necessarily using these people for the resources they have. This is really just being around people who are like minded can just change what you're capable of. When I first started real estate investing, I didn't know a single investor except the guy that I worked for. And he didn't even know anything about investing. He just did as a side hustle to his regular business. And when I found just like you and I found bigger pockets, I was in the forums every day I'm like, oh my gosh, I can do seller financing, I can do all of these things. And it was life changing just being able to talk and interact with other investors. But you guys have been able to grow your portfolio over this time from three properties to 32 units altogether. So what have you been able to do to be able to create this really impressive portfolio?
- [13:20]
Daniel Hawthorne
I think to start, we. The first property we acquired we did do. We had a property manager. We said that hey, if any, if we purchased anything over four units, that our lifestyle was, was too busy and too consumed already, that, that trying to manage that ourselves was, was, you know, would, would be a failure. And that. So that pm, although very costly, you know, a lot of things we talk about where it's not their property. So you know, not necessarily bargain shopping for maintenance and things like that. Whenever things have to happen or even capital expenditures and things like that, it's not their property. So they have certainly allowed us the capacity to do more and even with dealing with some of the tenants, right. Like early on we would, even when we were doing some showings, we had some tenants that were asking us, hey, are you going to be the new owner? And I got this thing that I've been waiting on and already trying to pull us into some of their personal things. And, and in that moment for the very first unit, the property manager, the projected property manager was like, see, this is exactly why you need us kind of thing. And it certainly resonated. But I think just this was also during a time where there was the eviction moratorium. So this we purchased in late 2020 and so that in 2021 it was full on Covid and we. You couldn't evict tenants. Right? And so tenants are very savvy, they're very informed with some of these laws. And so tenants weren't paying rent and they knew that they didn't have to and they weren't going to get evicted. Our property manager knew about the different ways to navigate that and get tenants access to funding that would cover their rent and basically filled out these forms for Them and just had them sign that stuff, we wouldn't have been able, been able to do ourselves that through that relationship with our pm, we felt like, okay, this is, this is going well. Next time we get some more capital to invest, let's, let's do it again and let's do it again. And so we've, we've scaled up quickly through leveraging. I'd say the, the property manager having established like insurance, having a playbook for our lease agreements and attorneys and all that sort of stuff and to the point where now we're, we're doing some things which Beck can share around long term versus midterm, but also being able to take on some of this more ourselves. So in areas where we can, because of the profile of tenants or the area location of the property, it's maybe not as busy. And so we're currently doing some self management as well as leveraging PM for some of the others.
- [16:02]
Tony J. Robinson
And I think that's normal to kind of see rookies go from hiring a manager to do it initially to eventually bringing on a PM to help. And I want to get into some of the, the strategies that you guys are leveraging to, to really juice some of your cash flow here. But before we jump in, I, I think the question that, that might be on every rookie's mind right now is, you know, 32 units, you know that, that, that's a lot of scale in a relatively short period of time. So it sounds like guys that you, you just kind of saved up for that first property. But just kind of give us the quick overview of how you funded those subsequent transactions. Because I think most people can wrap their head around the first deal, but the second or the third and beyond I think is where people start to get a little fuzzy. So how did you actually fund the subsequent transactions?
- [16:45]
Daniel Hawthorne
We leveraged HELOCs throughout the entire process. Essentially we, we did a HELOC on our primary residence. We had enough equity built in, so we did a HELOC on our primary residence and we're able to just continue paying that down through some of the cash flow and some of the commission. You know, we made from our, just our corporate jobs, our day to day jobs.
- [17:06]
Ashley Kerr
And when you did this, when you worked with the bank, did you, what type of loan did you do with them? Was it just a conventional investment Property? Was it 20 down, 30 down? What were the terms of the loan?
- [17:19]
Daniel Hawthorne
Yeah, so we did the first one and so we've done four deals total. We did a 1031 exchange for one of the buildings. So we've, we've done a total of four deals. Three of those deals have been with five year ARMs. And so you know you have the, after five years you have the big balloon payment. We haven't hit five years for any of the ones we own today. But the interest rate, the first one was 3.7 somewhere around there. And this last one we did last year the interest rate 6.2 but it's also a five year ARM.
- [17:55]
Ashley Kerr
Did you do these on the commercial side of lending instead of with a residential.
- [18:01]
Daniel Hawthorne
All except one. So we have of the bill. So we had the eight family, 214 families and then one four family which. That one was more of the conventional. That's a, that's a 3.26% interest. So third 30 year for that one.
- [18:16]
Ashley Kerr
I would love for you guys to explain what you mean with a five year arm. And maybe some of the differences you've experienced going with the commercial side of lending compared to residential side.
- [18:26]
Daniel Hawthorne
We've done all three of the, the bigger units, the commercial multifamily through US Bank. We've probably interviewed 15 to 20 different lenders out there and US bank just has. For us it's worked and it's come back with the best packages and really what we look for is paying the least amount down as we can but then obviously balancing that with interest which then drives those, those monthly mortgage payments. And so we've had scenarios where maybe we don't pay as much down but the, the that interest rate's rather high and, and therefore the mortgage payments high. U.S. bank has been really good from that perspective for us to where they have basically we, we take. It's. It's been about 20% I'd say the first deal, 20% of the, the listing price was what we had to put down. But as the markets have tightened they've, and also the value of our, you know, where we're going is increased. They have different limitations around how much they can lend. So the property we just bought last year was 1.4 million. The max they could do for a loan was 900k. So it's well above the 20% benchmark previously. But that you know that, that through the interest rate that they had and the mortgage payment and everything else it, it made the most sense for us.
- [19:51]
Tony J. Robinson
And one of the other strategies you mentioned to help you scale was a 1031 exchange and I've done one of those as well to kind of help move from one property to the next. But can you just kind of give a quick overview of what a 1031 exchange is. And, and what did you guys sell and what did you end up purchasing with it?
- [20:08]
Daniel Hawthorne
Yeah, for sure. So essentially it's a vehicle to, if you have some capital gains. Meaning so your what you're all in on the property for what you know, at least the IRS sees as, as you all in on the property for. If you sell the property for something above that, then that's considered earnings and you get taxed for that. So with a 1031 exchange, you can put all, all or some of that money in a vehicle, a third party, you know, sponsor that basically allows you to sit, sit that, that fund those, those monies there until you find something. And I believe you have 180 days to go under contract on something. And there's another limitation around how like when you have to close but essentially you're just, you're, you're saying hey, I don't want to pay taxes on this. I'd rather reinvest this somewhere else.
- [20:59]
Ashley Kerr
And how much did you pay for your 1031 exchange? Because in my experience they're not relatively expensive to do and it's worth the cost to save on those taxes.
- [21:09]
Daniel Hawthorne
Yeah, the, so we've done one and it was a few hundred bucks. Very inexpensive.
- [21:15]
Ashley Kerr
So let's talk about cash flow. Can you guys break down some of the numbers? How are the properties performing and kind of give us a little insight into that.
- [21:24]
Daniel Hawthorne
I think our, with our strategy changing, which I think we're going to get to probably here in a second, we've, we've realized some, some different things. Basically if we continue to operate the way we are or had been with just all long term tenants, we, the cash flow is going to take us a little bit longer to get to the cash flow goals that we have. And essentially we were about you know, the first year for all properties. And this is kind of one of the expectations sometimes people said is don't expect to make a lot. Right. There's, you're taking over property, there's some learnings that you have. Tenants are going to go maybe because different things, different management, all that kind of stuff. And so just, just being patient. Right. And so because we've purchased the property over the past four years, once one property every year that's, we've kind of continued to have that situation where at least our recent acquisition we, we see a loss for. And once you get more mature, we've seen about 100 to 125 per door on with Our long term units. So you know, multiply that by 32 units per month. And then we've shifted recently to furnished midterm units. That's allowed us to really magnify our cash flow and really optimize a lot at the same time.
- [22:57]
Ashley Kerr
So now that you have these properties and you've built up the successful portfolio, it seems like Daniel, you kind of took the lead as to being the person that wanted to start in real estate. So Becca, how have you been able to kind of integrate yourself into helping build this portfolio?
- [23:15]
Becca Hawthorne
I was working in health care during COVID you know, just the regular hours. And then we had our two daughters and I, you know, well actually I was pregnant so I left the hospital. And whenever I did that, our CPA was like, becca, like if you're interested, it would really help you guys if you would get your real estate license. The first year I wasn't able to get it in time. We ended up just like calculating my hours and like logging everything, which was sort of difficult. And then the next year I was able to get my license, which was helpful. And then it also is very helpful because whenever we're looking at properties, I just cutting the middleman out and being able to just do all the things, having direct contact with people, selling the properties and such was very nice. And then my broker, I actually ended up asking our property management, that broker and he's like, oh yeah, I'll hold your license. I'm like, okay, well you know, I'm not, I'm just doing this for us. Like I'm not going to be doing it for other people and homes. But it's a nice little group of investors so it's fun and I learn a lot from all of them. But then, yeah, so then after I got my license, I became a little bit more involved and I. What were we doing to where your friend mentioned I wanted to do midterm. I wanted to furnish, I really wanted to furnish some stuff. And he said, yeah, you can list it on furnish finder. So we renovated and furnished our first unit in a fourplex. Listed it and I had so many healthcare providers from COVID like it was just non stop. I think we were charging like a thousand for a unit. And then I listed it for 2000 and for two years with barely any vacancies, like maybe two weeks in between if that. Sometimes I would have them, the next tenant moving in like the next day. But yeah, it was, I even had like a one one that was three months and then they Kept resigning for a year and they had their baby in there. And I like saw the little baby, like become one year old. I'm like, oh, wow, that's a long time that you guys have been here. And so that was pretty awesome. And then we did it again and kept him busy and filled. I, you know, dropped it down a little bit just once. Covid sort of leveled out because the nurses and well, not just nurses, all the healthcare traveling travelers were getting paid a little bit less. And I joined Facebook groups and would talk to traveling nurses and sort of just sort of see from the outside in and look at like what was going on. They were getting paid more what they wanted in their units and that kind of stuff. But really they were on there just to like look for furnished places. So yeah, I would get my leads from Furnish Finder and then most recently we switched over and started using apartments.com and I still get my leads from Furnish Finder and then we sort of use apartments.com to manage and collect rent and all that. It just makes it easier to have it all together. But oh yeah, and then I just did another one. So I furnished another unit in January. So now we have three midterm rentals that are doing pretty well. I really like to do all the handy stuff myself because I sort of grew up doing it. My dad was a contractor and so that's been fun. And one, my first one actually flipped completely myself with my little cousin on winter break. He helped me out and I gave him some cash and gave me an extra set of hands. And we did that in eight weeks and we gutted it.
- [27:14]
Tony J. Robinson
I love that and I love that you guys are experimenting with different strategies. And again, I feel like that's a, A hot button topic right now for rookies is asking the question, like, well, where can we get the best returns? And you know, Daniel, you mentioned earlier, 120 to 125 somewhere in that ballpark per door on the long term side. And you know, if you can exponentially increase that number with a little bit more work furnishing the place, getting it, getting it renovated, it may be worthwhile. Do you, do you guys anticipate? Because you said right now back it's three out of the 32. Do you guys anticipate converting more of your current long term over to the furnished midterm?
- [27:50]
Becca Hawthorne
Yeah, I think so. I think also from what I'm seeing, like a lot of young professionals, they don't really have the cash to put down furniture, but they want to live in that really cute space and make it feel like home. And I think not only just traveling healthcare providers, but just people wanting furnished property their liking. And with the healthcare providers too, it's like they're pretty low key tenants. They just sleep or work and pretty respectful of our stuff. And I mean, after several years, I don't really have to fix. Nothing's really been broken. And I really try to get furniture and textiles that are, will stand the test of time to sort of help with that. But I think we'll keep doing it if we can.
- [28:44]
Daniel Hawthorne
Yeah, we, we looked at short term, right. The whole Airbnb VRBO style and then with all the uncertainty around that market, but then just hearing different things go on in some of those units, knowing that you'd have to potentially turn over a unit or clean the unit daily. Right. Like all those things really turned us away. And so meanwhile, St. Louis is a, is a pretty big hub with traveling healthcare professionals. There's a shortage of them. And so they'll, they'll bring them in and looking for a place to stay and, and so what, what better place to stay and what we have to offer. And I think, you know, in addition to that, Becca loves to bargain shop. And so she's going to Restoration Hardware, like, or Pottery Barn Outlet.
- [29:31]
Becca Hawthorne
Pottery Barn outlet, yeah.
- [29:32]
Daniel Hawthorne
Finding stuff and saying, oh, this would be good for a future unit. And I'll be like, I'm numbers guy. I'm like, well, we don't have that unit right now. So Even though it's 90 off, we don't need that, that furniture. And so just sit in our basement until we're ready to use it.
- [29:47]
Becca Hawthorne
Yeah. Or like we switch out furniture in our house a lot. Like buy furniture and we'll put it in our house and be like, yeah, well, we don't need that anymore. So we'll like push it off to the unit. So that's fun.
- [29:58]
Tony J. Robinson
I'm laughing because we have, we have the same conversation in my household. And it's, it's like my wife will buy things for properties that don't yet exist and then they just like live in our garage for months of time, months at a time. And we actually, we just like cleaned out the garage not too long ago. We end up giving away blinds that only fit a certain specific window, you know, and it's like, yeah, we, we got to, we got to get rid of some of this stuff. But I, I want to go back to one thing you mentioned was like, hey, you're, it was your tax Professional that encouraged you guys to, or for at least one of you to, to go out and get your, your real estate license for, for rickies that are kind of unfamiliar with look why your tax professional encouraged that. What was the benefit of you guys.
- [30:38]
Becca Hawthorne
Doing that for the tax cuts? Pretty much she said, well like Rebecca, if you can make this your job, like your career, then we can, you know, give you more tax breaks. Which is great because whenever you see it on the paper, you know, before we turn in our taxes, it's like, oh wow, okay, this is really helpful.
- [30:58]
Daniel Hawthorne
Yeah, we, so I have a full time corporate job. And essentially she said, hey Becca. So Becca stopped working full time before we had our second daughter. And she's been doing some stuff on the side, even started her own design business which is, which ties back into what we're doing here. But essentially because of that, our CPA said hey, you know that you could be a real estate professional. You just got to demonstrate 750 hours a year which not having a full time job you can do. Like obviously me having a full time job, that that would be a little red flag, right? Like hey, this person's not doing that. And so that first year we heard about it, our CPA basically said you could save $20,000 in taxes if Becca was a real estate professional. And so I think probably the next week Becca's, you know, signing up to get into that program.
- [31:51]
Ashley Kerr
Well, we have to take our last ad break, but we'll be back with more after this.
- [31:56]
E
They say real estate investing is passive, but let's get real, it's anything but. If you're tired of losing valuable hours on financial busy work, there's a better way. Meet Baselane, the all in one platform that can help automate your day to day. Baselane's banking and AI bookkeeping auto tags transactions, organizes cash flow and preps your schedule E for tax time. You can also automate transfers and enjoy free wires. Ready to spend less time managing money and more time growing your portfolio. Baselane is giving BiggerPockets listeners a $100 bon when you sign up at baselane.com BiggerPockets Baselane is a financial technology company and is not a bank. Banking services provided by Threadbank member fdic.
- [32:31]
F
Are current interest rates making you depressed about cash flow? What if it didn't have to be that way? Rent TO retirement has 2.99% seller financing available on turnkey properties. You heard that right. That's a seller financed 2.99% interest rate where the average cash flow is over $900 per month. They also have options where you can put as low as 5% down on multiple investment properties with no PMI. Rent to retirement is the nation's leading turnkey investment company that understands what it takes to be successful in today's dynamic real estate market. Their reputation speaks for itself, with more 5 star reviews than any other company on the BiggerPockets website, rent to Retirement offers fully turnkey properties that are newly built or renovated, leased and managed, allowing you to invest with confidence in the markets that offer the best returns. To learn more, visit renttoretirement.com that's rent t o retirement.com or text REI to 33777 again, text REI to 33777 hey listen up aspiring real estate moguls. I've got a secret weapon for you. Say goodbye to the traditional real estate grind and say hello to Propstream, the ultimate tool for finding off market properties. With a whopping 155 million properties in their database, Propstream opens doors you never even knew existed. Propstream also delivers public record data and MLS sales estimates with pinpoint accuracy, making comps a complete breeze. Ready to seal the deal. Propstream's got lead automation, skip tracing and top notch marketing tools to help you close deals like a pro. And the best part? They're throwing in a free learning academy to help you level up your skills. Try it out with 50 free leads during their seven day free trial at www.propstream.com bp. That's www.propstream.com BP.
- [34:23]
Ashley Kerr
Like BiggerPockets, you just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job noticed on other job sites. Indeed sponsored job posts help you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on indeed get 45% more applications than non sponsored posts. The best part? No monthly subscriptions or long term contracts. You only pay for results. And speaking of results, in the minute I've been Talking to you, 23 people just got hired through Indeed worldwide. There's no need to wait any longer. Speed up your hiring right now with Indeed and listeners of the show will get a $75 sponsored job credit to get your jobs more visibility@ Indeed.com rookie just go to Indeed.com right now and support our show by saying you heard about Indeed on this podcast that's indeed.com rookie. Terms and conditions apply. Hiring indeed is all you need.
- [35:31]
G
Nobody does selling better than Shopify. Shopify is the home of the number one checkout on the planet. And the not so secret secret with shop pay that boosts conversions up to 50%, meaning way less carts go abandoned and way more sales going through. So if you're into growing your business, your commerce platform better be ready to sell wherever your customers are scrolling or strolling on the web, in your store, in their feed, and everywhere in between. Businesses that sell more sell on Shopify. Upgrade your business and get the same checkout that Skims uses. Sign up for your $1 per month trial period for three months at shopify.com Westwood One all lowercase go to shopify.com Westwood One to upgrade your selling today show shopify.com Westwood One.
- [36:21]
Ashley Kerr
Okay, welcome back from our break. So I did hear that you guys had a very unfortunate tenant situation that cost you $30,000 on one of your recent acquisitions. How did you handle that and what actually happened with this tenant?
- [36:41]
Daniel Hawthorne
Yeah, so we bought what is by far our best property so far, and this is one that we were very excited about. The day after we closed, I get a call from the seller that said, hey, we need to talk. Got some just information I want to share you. Nothing big, but just, you know, got to kind of update you. And what he shared was that there's a tenant that had basically a fraudulent caretaker in the unit, someone who was supposed to be taking care of this elderly tenant but didn't have the credentials, ended up being someone who was more of a nuisance and had been doing drugs in the unit, had been threatening other tenants, and all sorts of things have been going on. They had a right to possession with an attorney that it was supposed to happen within weeks of us taking over the property. That didn't happen because there's just so much that has to go into actually taking possession over property and also depends on the state that you're in. And so two or three months of multiple calls with attorney, going to the unit ourselves, multiple calls with the police and the.
- [37:54]
Becca Hawthorne
And yeah, the tenants always like keeping us updated too, because they were always letting us know, like, what was happening around with that guy.
- [38:04]
Daniel Hawthorne
Tenants moving out because of it. They just couldn't deal with it anymore. And essentially it was just someone who said, hey, I don't have the credentials to get, get paid for, you know, taking care of this, this tenant. So I'm just going to destroy this tenant's unit. To, to get my money's worth. That was, that was effectively what he told the tenant. And the tenant was sort of hostage deal there. They were not fully disabled, but this person actually put. Nailed a two by four on the other side of the single door that got you into the unit. And they also nailed the windows so that way no one could get in. And you know, if they needed to get out, they could drill, you know, drill unscrew the, the, the, the two by four that was on the window and they would climb through the window. But this elderly guy couldn't really do that. So it was just a big.
- [38:58]
Becca Hawthorne
Yeah, he was actually in a wheelchair. And one night tenant like sent us a video of the wheelchair that was like down the basement steps. So that was like sort of scary for us because we were worried about back our tenant.
- [39:11]
Daniel Hawthorne
So yeah, so it was, it was months of these stories, tenants moving out. And it was, it was definitely not the highlight of our investment at that time. And so as, so finally we, we got past it. The tenant and the individual ended up being out of the unit, threatened someone had some, some drugs on him and that, that resulted in that the police coming out and because of the drugs they actually booked them. They took them, took him to jail and they said hey, he's probably going to be released in the morning. This was late at night, 11pm I believe he's probably going to be released in the morning. Whatever you need to do, do it now. And so myself and we did have the previous property management, they were kind of helping out as they transitioned. And so myself and that the lead guy over there, we went to the actual tenant and said hey, you know what's going on? Got his side of the story and just we're like hey, do you want this person in here? He said no. So we had him file a restraining order. And that ultimately is what allowed us to keep this guy who was the, the fraudulent caretaker away. And from that point on we still had to go to court to make it official. And then that was sort of our finally like at least them in the unit, they, they both transitioned out. But then it was. We had a bunch of damage to, to address. And that's where Becca's handy, handy woman work came in. And you know, we spent another basically turning.
- [40:46]
Becca Hawthorne
There was a motorcycle in the kitchen and diapers were like shoved in the wall for some reason, you know.
- [40:55]
Daniel Hawthorne
Yeah, yeah, it was, it was. They had street signs.
- [40:59]
Becca Hawthorne
They had, oh yeah, street signs they stole which the police couldn't prove that east doll.
- [41:04]
Tony J. Robinson
Yeah We've heard some interesting stories, but that, that's got to be one of the more interesting. Like it's not even a tenant issue. It's the someone that the tenant hired issue, which is all the, all the. All the more interesting, I guess. Just, Just one other question, just from my own understanding. The lease was signed with the, The, The. The disabled person in the wheelchair, not this caretaker, right?
- [41:28]
Daniel Hawthorne
Correct.
- [41:29]
Becca Hawthorne
Yeah.
- [41:29]
Tony J. Robinson
And it's interesting.
- [41:31]
Becca Hawthorne
Pretty much a squatter, the other guy.
- [41:33]
Tony J. Robinson
Oh, okay. Is that how they would handle it? It's interesting that they could squat in a unit that someone else has assigned lease for, and it wouldn't be easier for you guys to get them out. I've never, you know, I've never experienced anything like that, Ash. I don't know if you have, but I, I guess just going through that experience, guys, like, I mean, I don't know if there is a way that you could have like avoided that or handled that differently, but I guess. Were there any lessons you learned going through that experience that you would apply to any future deals or transactions?
- [42:01]
Daniel Hawthorne
Yeah, it. Fortunately, it's one of those things where it. There's some protections you can do. One is like extra. Extra due diligence, like making sure you check every unit, getting the leases up front, all this. But even with that. So in this case, and they don't necessarily. They don't call them squatters because squatter is someone who took possession of a property that they didn't have necessarily, and then they established residency over time. Whereas this case, they were invited by the tenant to be there. They kind of had a key, so they're. They're considered a tenant at that point. So in, in the state of Missouri, you. There's just not a lot of laws around that. I know Texas recently passed something that in these types of scenarios there's more protection, but that doesn't exist in Missouri.
- [42:51]
Tony J. Robinson
There's. We. We talked about this in the podcast. Gosh, I don't know, maybe 18. 18 months ago, give or take. But there's a. There's a guy, I think he was like a previous bounty hunter. Do you remember this, Ashley? And he started this service.
- [43:02]
Ashley Kerr
Yeah. He has like a really cool name. What is it? It's like Flash or something. I don't know.
- [43:08]
Tony J. Robinson
Yeah, some. Some name that you would assume would. Would do a job like this. Right. Just like a real cool guy name. But he would basically squat on squatters so landlords could pay him. And then he and his team, they were all like, again, they were like bounty Hunters, like ex military, some sort of, like, field like, that they would observe, get to know, like, when they go in and when they go out, and when the squatter would leave the property, they would go in, break in, and squat on top of him and just live there until the person moved out. And he had done it multiple times with multiple different squatters, and the success rate was like 100%. So I guess for anyone that's listening, that needs like a. I wouldn't say like a nuclear solution, but if you're looking for maybe a creative way to get a squatter out, go find someone who's a better squatter than they are to. To kind of invade their space.
- [43:55]
Daniel Hawthorne
Oh, that's great. I wish. I wish we had known we ideas we came up with that we didn't go through with were, you know, put a snake in the unit.
- [44:06]
Ashley Kerr
Well, you definitely had a tricky situation where there was an actual tenant in there that wasn't giving you problems, and then it was just the caretaker. But thank you guys so much for joining us today and sharing your story. Can you let us know where everyone can reach out to you and find out more information?
- [44:24]
Daniel Hawthorne
Yeah, absolutely. So my email is hawthorne d12gmail.com Facebook is Daniel Hawthorne. I'm off all other social media, but that's. Those are the ones that. That I have right now on LinkedIn is the other social media.
- [44:40]
Becca Hawthorne
Oh, I don't really look at my email that much. So just connect him and then he'll let me know if you need me.
- [44:47]
Ashley Kerr
We really appreciate you both taking the time to come and share your experiences here with us on the Real Estate Rookie podcast. I'm Ashley and he's Tony, and we'll see you guys next time.