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- [00:00]
A
Would you trade your wedding for a rental property? Today's guest did exactly that, swapping vows for equity. And now he's building a real estate empire long distance.
- [00:11]
B
Feeling unfulfilled in the corporate grind, he made the bold leap to real estate investing halfway across the country. And today, he's breaking down exactly how he did it.
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A
This is the Real Estate Rookie Podcast. I'm Ashley Kerr.
- [00:29]
B
And I'm Tony J. Robinson. And let's give a big, warm welco to Dean Pinhas. Dean, thank you so much for joining today, brother.
- [00:35]
C
Thanks for having me, guys. I appreciate it.
- [00:36]
A
Dean, you started your journey unconventionally, trading your wedding budget for a house. Can you walk us through the emotions of making that choice?
- [00:45]
C
Yeah, I mean, it was. To be honest, it was a fairly straightforward decision for us. I don't want to, you know, play the victim or anything, but my wife and I, we never really felt that we were, like, big partiers or, you know, really had that, like, craving for a big wedding. And we said, you know what? We both. You know, obviously, you marry someone that you have shared interests and goals and a vision with, and we both had that kind of desire to start off on the right foot and set ourselves up for financial success. And we thought that was the best way to do it is, you know, we're very fortunate to have parents that were willing to contribute what they would have for a wedding and even to have done that much. We were going to have a wedding, and so we found a house, and it was a great way to start this whole journey.
- [01:30]
B
Did you have any pushback from folks on, like, man, you. You guys have to go, like, the normal, traditional route? And if so, how did you kind of ignore those naysayers to stick with the plan that made the most sense for you?
- [01:40]
C
Yeah. You know, in hindsight, it's funny you bring it up, because I think at the time, there wasn't any pushback of, like, are you guys sure? Are you gonna regret not having a wedding? It was less so that and more so after the fact when, you know, you go on a trip or, you know, we went on our honey. Like, we saw the honeymoon and stuff like that. And then people ask, like, how was your wedding? Or where did you. Where was your venue? And you go, well, you know, I didn't really have a wedding. And then you explain the whole thing of we used the money and we put it sort of down payment. We bought a house. And everyone's reaction is pretty much universally like, wow, that's. That's so smart. Like, I should have done that. So it was actually, I think, pretty positive, like, in hindsight, telling the story and not so much pushback in the moment, which is, I think, great.
- [02:21]
B
Ash. I think that's just like something for our rookie audience to understand is. Is when you're trying to do things that aren't normal in society. And I'd say, like building wealth through real estate is not necessarily normal. Right. Aside from, you know, your primary residence, a lot of folks don't invest in real estate or think of real estate as an investment. So when you're doing something that's not normal, sometimes you try and explain that idea to someone beforehand.
- [02:49]
C
Right.
- [02:50]
B
Right before the results are there. They kind of give you this weird look, like, man, are you sure you want to do that? Or, you know, are you sure you don't want to have a big wedding? Or you sure don't want to do this? And I think at times we can get influenced by people whose ideas and values, like you mentioned earlier, Dean, whose ideas and values don't align with our own. So just a word of advice to all of our Rickies that are listening. You've got to be able to, I think, block out advice from people who aren't thinking the same way that you think or from people who aren't trying to achieve the same things you're trying to achieve.
- [03:17]
A
I think that goes along with, like, even house hacking. Like, you get married, you buy your, you know, first house. And I think some people have kind of the same reaction about that. You're not buying a single family home. You're going to buy a house and rent out the other rooms to each other or to other people, or you're going to buy a multifamily and rent out the other units. Like, I feel like people gauge that as almost the untraditional route of doing things, but then look back and, like, that's actually pretty smart that you're doing that.
- [03:49]
C
Yeah. You know, it's funny because actually I was on social media and I stumbled across these people that, like, moved out of their house and sort of became homeless, intentionally living out of their car. And they're like, we just couldn't get ahead. We just really felt like this could help us, like, get a leg up on our finances. Like, we have jobs, we work full time. We're. We're not, you know, we could afford it. We just really wanted to take this step that, I mean, obviously it's. It's a pretty dramatic one, but I mean, there's. There's so many Examples, I think, out there of, you know, people talk about the classic, like, ditch your daily coffee or this and that, but sometimes going against the grain and doing those, like, really unconventional, big moves can have big payoffs.
- [04:25]
A
And two, you really have to think about why you're going to do something or why you're still doing something. Is it because of what other people will think, or is it because it's truly, this is what you want to do. Like, for example, moving out of your house and living in your car for a while to get ahead. Like, that's something I could see a lot of people not doing because they don't want other people to see them as a failure or see them doing that. And that's the only reason that they're not making these hard decisions and choices that are going to set them up better in the future is because they're afraid of what other people will think or say. And it's like, who cares? Like, if it's going to get you farther ahead in life, like, go ahead and do it. Like, Darrell, he drives this old clunker suv. Like, it. It died the other day. He's so mad. But it's like, no car payment. And it's like, yeah, people probably look at him driving this thing, and he dresses like a homeless man anyway, so, you know, he's already got the Persona. But it's like he does not care what people think of him driving a car. And I. We don't care at all. And it's because we don't have a car payment. I think it's. When you're in these kind of decisions, you really have to think about why are you doing something or not doing it? Is it because you care what other people think? Or is it because you genuinely really want to stay in your home for your kids and not uproot them or something? But, yeah, I think that's a. A, A point where people kind of misunderstand what they really want out of life. Because if there's something you really want, like to have financial freedom, these are the sacrifices you can make to actually get there so much faster.
- [06:12]
B
And, Dean, I think you've done a great job, even just so far, of illustrating that. And, Ash, I love everything you said, but I know for you, Dean, that you were working at the. You're working for the feds, you're working at the Federal Reserve, and you realize that maybe it wasn't the right fit for you, I guess. What was that specific moment that made you feel trapped, that led you to seek Something more?
- [06:31]
C
Yeah, I mean, listen, ultimately I don't want to sound like an egomaniac or, or very arrogant or anything like that, but ultimately I'm a, I'm a pretty confident person and I have faith in, in my abilities and in who I am. And I just didn't feel like I was, you know, getting ahead at the Fed. I, I didn't think that the Federal Reserve, I, I just felt like, you know, maybe I had more potential to give than what they maybe thought or saw in me. And I just didn't think I was cut out for that cubicle life. And so, you know, we, again, it was all part of this big picture decision and it happened step by step. You know, while I was working at the Federal Reserve, I actually tried to get my, I got my real estate license and I thought, you know, maybe that's something I'll do on the side. Maybe it'll help in kind of learning how to invest in real estate. And so, you know, I just ultimately didn't feel like I saw a future there. And I didn't really feel like they saw future in me. And one thing led to the other and here we are.
- [07:29]
A
So at that point in time when you decided to quit, where were you in your real estate journey?
- [07:34]
C
Yeah, so frankly, nowhere. The jump was pretty extreme. You know, my, my wife and I had this vision of one, I was kind of coming home at night and, you know, sitting down, watching tv and I had the laptop in front of me and I was doing this real estate course school to, to become a licensed real estate agent. And then I achieved that and then it's okay, well, what's next? Do I, do I do that full time or not? And you know, again, fortunately, you're going to hear me say it a lot because I really do. As life goes on, I think I've learned that circumstance and kind of like the people who you have around you and your network, it's all very important in the success that you have. I mean, and I think that I'm very fortunate in those things. And I happen to have an uncle who owns a company doing home improvement construction in la. And I happen to go out there just to visit family here, where I'm at now. And a couple things fell into place. I said, I don't really want to be at the Fed. I've got this real estate license. I know I want to invest in real estate and I've got this opportunity to go and to be able to, you know, get a better income so I can afford to invest in real estate. And that's ultimately kind of how it fell into place. So we had bought that first property using the kind of wedding down payment. And then from there we said, okay, how do we grow our income? So whether it's doing the brrrr method or, you know, fixer uppers or. Or house hacking, but we know we knew we needed to get some sort of cash to be able to start with it.
- [09:01]
B
And I definitely want to hear about this move to Los Angeles because I think most people try and move away from high cost of living markets to kickstart their investing career, but you kind of did it the other way around. But I know that growing up, your family rented out their homes after moving. How did witnessing that passive investment influence this decision to really jump in full force into real estate investing?
- [09:23]
C
You know, what's really funny about that is I might tell you something that you may not have heard before, which is actually. So having witnessed it, I saw the potential that it had. Right. And again, fortunately enough, my parents, we were able to. When I say they invested in real estate, basically what happened was is every home we lived in, they kept and then eventually would buy a new home. Right? And so it's not like my parents had an empire, but I think at the peak, we probably had, you know, three homes that, that my parents owned at any given time that were rentals. But funny enough, at some point my dad said, you know what? I don't want to be a landlord. I'm tired of these tenants smoking in my houses and ruining everything and turning them over. And, you know, those are also the times of, oh, eight and, you know, big market crashes and equity going down. And so actually my, my dad was very much against me pursuing real estate investment as a venture. Personally, he cautioned me against it. He thought it, you know, might be better off to go into the stock market and invest in, you know, funds and individual stocks and things like that. So on one hand it was great because I witnessed it and saw the power that it had. But on the flip side, actually I had a lot of pushback from my family from pursuing that as well.
- [10:35]
A
That's interesting. We usually never hear that side of it, of saying, like, I do remember a couple guests saying, like, they're, you know, maybe their dad or an uncle or someone had like, failed and completely gotten out of it. And they say, do not do it or whatever. But, like, your dad seemed like he was successful at it, and he's still telling you, no, don't go this route, right?
- [10:59]
C
And Even to this day. You know, we've, I think I mentioned this to you guys when we spoke before, but I'm on we, we now have our sixth rental property and every time I tell my dad, you know, we're closing on another property, he's like, you should diversify. You, I don't think you should do this. You know, don't get in over your head. Which is obviously great advice, but it is funny that he's very cautionary in that way with real estate.
- [11:22]
D
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- [13:46]
A
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- [15:01]
C
Yeah, so it's, it's actually kind of funny and it's, it's a weird picture to paint. I don't think people really think of it much. So you know, what I, what I do now is home improvement. Right? I, I'm a licensed salesperson in California and I go out and I help people who want to remodel their kitchens, bathrooms, do home additions, garage conversions which are really popular here in la. And really what happened was at some point my, my wife went on a girls trip. I think it was to Nashville or something like that. And I said, you know, if she's going to go there, I'm going to go visit some family in la. And I went to go visit my two uncles that I have here, and they're both in that industry of home improvement here. And I remember one of them took me down the Pacific coast highway in his Ferrari, and we went to Nobu, and he bought me a super expensive lunch at Nobu. It was a great day. And to be honest, you know, for many years, I was very distant from that side of the family because we moved around a lot when I was younger. And so I think part of it was like, him intentionally trying to show me a good time. That wasn't like a normal occurrence to do with my uncle. But I remember asking him some details of, like, you know, obviously I kind of knew on the periphery as a kid growing up, like, he's in construction. But I didn't really know what that meant. And I started asking more particulars of, like, how much does somebody make that works with you, and what does that look like and what's not even the average, but, like, what is just kind of like the okay person doing, and, you know, the numbers. He was telling me. I was like, this is crazy. I would never have thought that or imagined it. And I came back home, flew home to kc, and my wife and I were catching up from our trips. And I think I said something kind of like, you know, if. If all things were the same, if I still would have met you and married you, it would have been great to start off my career in LA just based on what I was hearing. And she kind of gave me the nod of, like, then go. And. And that's what I did. So then obviously we made a plan. We spoke it over. I called my uncle, I said, hey, would you be interested in hiring me? Could I work for you? And he was super open to it and went and gave my notice to the Federal Reserve and actually went out to LA by myself at first for three months to kind of test the waters and see how things were going. And then when it seemed all right, though, the timing was really funny because that was right when Covid started, literally March 2, 2020, I moved out there and there was a brief conversation about, like, literally, I think I went out there and I can remember if it was like the 17th or 19th March or something like that, when everything shut down. And there was a brief moment of like, I think I'm going to go back and try and get my job back, but decided to stick it, you know, see it through, and it was the best thing I could have done. And then three months later, I want to say, in May or June, my wife, you know, we packed up the house and she moved out and stayed with us.
- [17:46]
B
Dean, first I just want to say, like, what, what guts does it take to not only move halfway across the country, but to leave a career as steady as working for the government, to, to go pick up a, a sales job? And obviously all the rookies that are listening, they won't have the same opportunity, you know, in the exact same way. But I think for a lot of folks who are listening, they do have some opportunity in front of them that maybe if they did take that opportunity, could propel them further down the road of actually achieving some sort of financial independence. So I'm sure you were fearful. I'm sure that you had some hesitation. I'm sure that you were like, is this actually going to work out? What did you tell yourself to get past those fears and actually make that move?
- [18:36]
C
You know, in hindsight, it's actually not my personality at all. I'm a very conservative, like, not a risk taker person. And I, I try and think back to those days and, and I think part of it comes down to almost like desperation, you know, like the feel, the feeling of you got to get out of this position if you want to get somewhere in life. And it's, it's just kind of like diving in head first and having the faith in yourself and say, I'm not hoping for the best, but I'm gonna make the best out of it. But, but honestly, I mean, I think back to those days and I almost pinch myself, like, this is so not what Dean does. And it's great that it happened because it also gave me the courage to do it again. Right. Like, now we're having thoughts of, you know, when is it going to be time to move back to Casey, where we have that side of the family and, you know, do we want to grow our family in L. A or do we want to do that somewhere else? And now the thought of going somewhere else and moving and picking up and starting over again is less scary, less intimidating, because we've done it before. So. Absolutely. I mean, to. Based on what you said, and I said it a few minutes ago, the, the opportunities that I had are unique and I recognize that and I'm very fortunate for them. But I think that when you take a step back and you and a lot of people might have something like that they can do to try and take advantage of it. And whatever it is, if it can shake things up and give you those opportunities, go for it.
- [19:59]
B
So, dude, you moved out right at the beginning of COVID which could have potentially been maybe like, the worst time in recent human history to try and make a big life move. How quickly were you actually able to see results? Because obviously you stuck it out. How, how long did it take for you to feel like, okay, this is actually the right decision for us?
- [20:16]
C
Funny enough, it took me a really long time to see results and not to get too much in the weeds, but, like, just the mechanics of a sales job and commissions, which is, is. Is 100% the way that I'm compensated. I had zero. I've. I haven't had a salary since I left the Federal Reserve in 2020. And so I didn't make a dime from home improvement until, I think, August of that year. So I went a good six months. And it's kind of one of those funny, coincidental stories of, like, we pretty much got down to our last cent in the bank. And when I say we, I mean, I mainly mooched off of my wife's money because at the time, the way that our finances worked is when we were. When we were both working at the Federal Reserve and, you know, paying the bills from one account and saving another account. And that savings account was just about dried up when I got that first commission check from home improvement. So it took a good six months or so. And there were definitely scary moments of like, is this going to work? We're going to have to pull the, the, you know, the emergency cord here in a second. But it was tight.
- [21:19]
A
So now that you've made the move, what did you do with your property that you had back home?
- [21:24]
C
So that property, we rented it out pretty quickly. I mean, and I think that's actually one of the things that I learned from this whole process is my, My wife is funny because she says that I'm sort of more of like, the doer, and she's more of a planner, but with real estate, it's almost the opposite. She's very quick to say, like, this is a good property. We should get this one. And what I'm trying to get at with that is that property rented pretty quickly, which my hesitation, kind of being conservative the way that I am, like, not a risk taker, like I mentioned a moment ago, is I would have guessed it's going to take so long, so long to rent these properties, and I'm scared to get another one because maybe no one's going to want to rent this particular property. We got the worst one ever, but that one rented quickly. And again, it kind of like, it's like a light bulb moment. You go, huh, okay, well surely this isn't like a fluke. And then as we started to make money in LA and doing what we were doing then, she's picked every house that we bought and every house has, has rented very quickly. And so obviously that house that we owned beforehand, that was the first one we started with. And then it took us probably, I think maybe a year or 15 months or so to get to the point that we could get the second property, which I kind of view as like our first real rental investment property. And then from there it kind of steamrolled pretty quickly.
- [22:46]
A
So during those next steps, how are you funding those next deals?
- [22:52]
C
So it's a really good question. That's the part that I, I feel like is maybe unique and in the sense that, you know, people in the real estate community are oftentimes taught all types of different tips and tricks and you know, OPM and house hacking and helocs and different things to, to finance deals. And the reality is that we are very lucky to be able to finance all of our deals just with cash. And in the strategy that we use is we put down 25% to lock in the best rates that we can for investment properties and we do them all on 15 year mortgages. And, and that's really just the gist of it. And we have a pretty, we're pretty dedicated to our strategy of sort of intentionally losing money on these properties. Right. The, when you put down 25% on a 15 year note in this, in today's market, just the cash flow isn't there based on what rents go for. Even in a place like Kansas City, which I know is sort of a very desirable rental area. So that's what we've done. And we lose anywhere from 200 bucks to 8 or $900 per property that we own on a monthly basis.
- [24:04]
A
Okay, we need to break this down as to why someone would do this. Right. And I think like the first thing is that people look at, you want a cash flowing property because you want your, the mortgage payment, you want the expenses covered and you want to make money. But explain to us how you are actually investing.
- [24:24]
C
Yeah, so I think it's, it's a different philosophy, right. And a lot of times those few hundred dollars are really crucial to stay afloat and to pay for, you know, capex expenses or whatever it might be. But for us, we viewed it in a way that we're fortunate that our income allows us to support those losses, to be able to swallow them. And then by having them on 15 year notes, I mean, obviously they're going to pay off 15 years faster than a 30 year if we don't pay down anything any quicker. And in doing so, I think we're just accelerating our path to financial freedom. Right. So instead of sitting back and saying, okay, I'm 30 years old today, if I buy a house Today, I'll be 60 when it's paid off, that thought kind of scared me. Like, I didn't, I didn't want that. That was really just the, that was the ultimate factor in the decision of when do I want to be financially free and I want to do it sooner rather than later. So the 15 year note was just so much more appealing when you look at it from the perspective of I don't really want to work in sales my whole life. I don't really want to want to work in an office job my whole life. I want to be able to enjoy time with my family, I want to be able to travel the world. I want to do all the things that most people want to do when they invest in real estate and become entrepreneurs, and I don't want to do it when I'm old. So it's, we're very much investing in it now from that perspective of I want to lose the money now, I want to invest the money now so that I can enjoy it more quickly later on.
- [25:53]
B
And I think there's something to be said too of maybe those deals aren't making sense today, but that doesn't mean anything ten years from now. You know, as, as maybe rents have continued to increase and things like that. So it could be in a decade. All of those are printing money and you're only five years away from getting them paid off. So I think it is, it is a unique approach team, because to Ashley's point, most of the rookies who are listening are probably investing for cash flow today. But I think it goes back to the, the, the point that we touch on a lot, which is everyone has a different motivation for investing in real estate and you've got to understand what yours is in order for you to make the best move for you and for your future. And for Dean, the idea was I can tough it out for 15 or 20 years in this job. I just don't want to tough it out for 30 or 40 years. Right. So let me make a plan that works in that 15 or 20 year timeline. And then, and then let's work that plan.
- [26:46]
A
Dean, offhand, what is the total of your mortgage payments right now? Like, so when you have those properties paid off, how much will you not be paying out anymore?
- [26:56]
C
I'll give you the full outlay. I mean, so, so out today, our mortgage payments are about $17,000. Our rent payments are about 15,000. We lose about $2,000 a month on the houses. Now I'll pause there for a second just to explain another sort of point of perspective that I have, which is our portfolio is worth about two and a half million dollars. When you take the six, the market value of the six properties. I think that if I came to you or any other investor and I said, would you guys pay 2k a month or 2k a month mortgage on a 2 and a half million dollar house on a 15 year note? I think anyone would take that deal, right? And so that's my perspective. And I think that when we look 10 years from now or 15 years from now, I think if you take a standard rate of inflation and just market growth, I would hope that those rents, instead of equaling 15k today, might be closer to 22 or 25,000 10 or 15 years from now, if not more. And if those properties are paid off then, Now I'm making 25k a month in rental income, right? So when you take kind of those three components together of being able to take the loss today and what is the value of that and does that make sense? And then where's it going to be in 15, 20 years? That's how I look at it.
- [28:17]
A
I think it is so interesting to get this perspective because one thing that I've learned so much since starting investing is just like, wow, the equity and the appreciation in the property, that's the real wealth builder. It's not the little bit of cash flow every single month. It is, that is what is building wealth for me is all of that equity. And I do have a couple properties that are on 15 year notes. And it's like some of those properties it's been, we just hit the 10 year mark and it's like, oh my God, five years, like 10 years went fast, like they're going to be completely paid off. So I think this is a really interesting perspective and I think like a word of caution is like, make sure you can afford to put that money in every month. And I think one way to look at it is, you know, a lot of people will put money into their brokerage account, or they'll invest money every month, different ways. And you're investing it into your properties by just paying down the mortgage faster.
- [29:12]
C
Yeah, I think there's something really to be said about. People look at real estate and sometimes they think of it as like a quick fix or like an easy way to make an extra 300 bucks a month, which, like, if that's what you're looking to do, that's totally fine. Right. Every. There's so many different strategies to invest, whether it's real estate or any other avenue. But the thing that my wife and I really consider is we're looking at this like a business because. Because ultimately it is a business. And I think the majority of businesses, when they start from the beginning, they take losses a lot of times. Right.
- [29:38]
A
Or you're putting in a lot of your own time.
- [29:41]
C
Yeah. And. And there's, there's, there's tax benefits to losses and then there's, you know, there's the timeline that we just discussed. But even when you look at it from a business of like, you know, owning six rentals is a lot of work, you know, I think that's also something that maybe goes underappreciated is there's a lot that goes into, you know, filing rental licenses and getting tenants and cleaning after and turning over and repairs. And so we're just looking at it like, like a business. It's not just a quick way to make a few hundred bucks a month. It's. It's something that we're investing in right now for the long run.
- [30:12]
B
Yeah, Dean, it really is a fresh perspective. And I, I think that there are a lot of folks who are listening who maybe now see another path to, or another reason maybe to invest in real estate that they hadn't considered before. So I love hearing that. And so I just want a 30,000 foot view. Overview. Overview of the portfolio you have. You said six properties. Are all six of those back in Kansas City?
- [30:33]
C
Yeah. So they're in sort of the greater Kansas City area. I would say none of them, funny enough, are in Kansas City. But everything from. If you're familiar with that area, you'll know these places. It's Overland Park, Fairway, Prairie Village, which are all kind of like the main suburbs around Kansas City on the south.
- [30:51]
B
And are they all traditional single family homes or did you guys kind of expand beyond what was your previous primary residence?
- [30:58]
C
Yeah, they're all single family homes. And we've learned a lot, even just from testing the waters with different types of single Family homes, right. So what I mean by that is the first one was a 3 2. It's about 1400 square feet. That's the one that we bought for ourselves that we lived in. And then funny enough, the first house we bought after that, like our first real investment property was a 3:1. And I was always very hesitant on the one bathroom configuration. But my wife, you know, was very much set on this is a good part of town. It's going to appreciate a lot. We're going to get a lot of equity in the long run and that maybe we'll find somebody who's single or you know, maybe a young married couple that doesn't need that second bathroom. And that's basically what happened. So we got a 3:1 at first and then after that the Next one was a 2:1, which I, I also didn't love. And I told my wife, you know, this is the last one bathroom house that I'm buying. And then after that we got, I believe it was another three three two. And then we got a really big house that was I think a 5 4. The numbers start to get blurry. I'm sure you guys can imagine is like of keeping track of all these things off top of your head. So that the point being that we have a lot of different configurations. I am definitely hesitant and I don't regret it, but I still don't love the one bathroom homes. I think those are harder to turn over as we've discovered over time. You do really need somebody like an older person living by themselves really. That's the main thing. You know, we, we. There is in one of those homes a single mom living with, with a young child. So I think those are the kind of tenants that you're looking for with just, you know, those types of tenants there is, there are less of them. So I think that the 3, 2, 4 threes in general are much more appealing and easier to turn over.
- [32:48]
B
And I want to talk a little bit Dean, because I know some of these projects came with, with rehab, right. They weren't all turnkey and there were some lessons learned there. So we'll touch on that right after a quick word from today's show sponsors.
- [33:00]
D
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A
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- [36:58]
B
All right, we're back here with Dean and Dean. I know at least one of these rehab projects didn't go maybe according to plan. What was maybe the toughest rehab job you took and what, what made that one so difficult?
- [37:10]
C
You know, it's ironic because of what I do, right? So I, I think part of it, there's almost like a, just to kind of preface it, there's there was a desire that I had, I think almost to make a point of like, I want to use my knowledge to add value to a home and I'm going to remodel it and I'm going to do this kitchen and we're going to do it very affordably and I know how to sub out trades and I think that there was more emotion that went into it than logic. And you know, you quickly find yourself spending thousands of dollars on a project and you look at it and you go, wow, it's, it's beautiful. But then in hindsight, how much more rent did that get you on a monthly basis versus the cash that you spent on it? So that wasn't worth it. I mean, I can just, I can look back in hindsight and say that in fact, my, my, my wife and I, we did an interesting exercise of, we just recently started using a software for the first time to input all of our expenses specifically for each rental. And it has a way of collecting rental payments and things like that, creating contracts. And we summed it all up and we saw for all of the six houses over the course of the last five years or so how much money we spent and what those big chunks were. And I think in a lot of instances it really wasn't worth it. So it was everything from just that, from like a financial perspective that it didn't pan out for us. But also it takes time away. And I, I think I went into hiring a contractor again very ironically, like very willy nilly thinking that it was going to be somebody that maybe was as good or as, you know, trustworthy as maybe I would expect them to be. But then you have those instances everyone hears about of like contractors that don't show up or that do shoddy work and it creates headaches and your time is money also. So we, we learned from that a lot. And I think that I'm much more interested now in sort of the, the strictly turnkey properties. And that's what we're shooting for.
- [38:57]
B
Dean. So it sounds like there were two main issues that, that you bumped up against. One was maybe over rehabbing for the type of rents you could actually command on the back end. And the second was, which is a general, I think, challenge, but it's just finding good contractors. So if we can break down each of those separately on the over rehabbing side, because I think to your point, a lot of rookies get caught up in the emotional aspect of I want to, I want something that's beautiful. Looking back or with the experience you have now, how do you balance the desire for I want a good product with knowing what you can actually get in your rents on the back end? How do you balance those two things?
- [39:37]
C
Yeah, I mean, ultimately, like many things in life, I think it comes down to experience. Right. And you can't really fake that. You gotta just go through it and it is what it is. And we've learned that in that category of property, right, when you're looking at sort of, let's call it an entry level rental, you're not looking at high end luxury properties in General, those that, that difference in marketability is, is very little between a house that has a flipped kitchen. Right. Maybe you're talking about white shaker cabinets and quartz countertops and things like that, laminate or vinyl flooring doing those upgrades versus having a house that maybe has its original cabinetry from, you know, the 50s or 60s that have been painted over a couple times. Really you're not talking about a huge difference in, in what those can rent for and definitely not one that makes sense to do over the, the course of, of the home. Unless if you're looking at things like, you know, just the equity in the home and maybe it will be something that you turn over very quickly and try and resell it or try and get a home equity line of credit, which I think that's the part that we're kind of struggling with. Next is like maybe there's a way to take advantage of these things that we've done to flip it in our favor to now, you know, kind of create maybe a new strategy for investing in properties and how we source that, the cash for it. But in general, on this point specifically, yeah, we just discovered that it's not really worth it.
- [41:04]
B
And I think that's, that's the important lesson for the Rickies that are listening is that the market will always dictate how high your rents can go. And to Dean's point, if you know, I'm just gonna use, I'm gonna make up some numbers here, but if the maximum rent you see in a market is 1500, it's probably at 1500, not because no one's built anything nice enough for, you know, 1700 or 1800. It's just that that specific part of the market can only afford up to 1500. So it doesn't matter how nice of a rental you give it, 1500 is the ceiling for that specific property. And whether you're renting, whether you're flipping, and we're talking about ARVs, whether you've got a short term rental or midterm rental, and you're talking about average daily rates, they're all impacted by the same upper limit within a certain market. So as, as a rookie investor, you've got to do your research to see, hey, what is that ceiling for rents for ADRs for ARVs that I need to be aware of? And then what do I need to do to, to make sure I don't go over that as I'm looking to rehab these different properties? And just. I got one last question for you, but just for the Rookies. We, we recently interviewed my designer, Brianna Michelle, on a recent episode. It was 590something or other. You guys can look back and find it. But she talked a lot about the process for designing renovations and how to make sure you're doing it the right way. So, so go back and listen to that episode. Dean, I've got one last question for you. And first I just want to say, you know, you said you put down about 25% on most of the these deals. So not only are you, you know, aggressively paying down your debt, but you also have a decent amount of equity to start with at 25% down, right? That you've got 75% that your, your loan is taken up. So values are going to go up. So you're probably going to get some equity growth as well. So it feels like you've got a really good plan in place. But I guess when you, when you picture success in real estate, what does that look like for you?
- [42:52]
C
Success in real estate for me is just financial freedom. Right? That, that's, that's the bottom line. I'm not necessarily trying to build the biggest portfolio in the world. I'm not competing with anybody. I just want to be able to do whatever, whatever I want, whenever I want to do it. And, and that's really what it comes down to. So I haven't pinpointed what specifically that is or what that number is or how many homes that equates to, but the success for me is just giving my family comfortable life that we all want to enjoy from that.
- [43:28]
B
That's it.
- [43:29]
C
That's all it comes down to for me.
- [43:30]
A
Well, Dean, thank you so much for joining us today and sharing your story, your journey and giving such a cool perspective on what your strategy is. Can you let everyone know where they can reach out to you and find out more information?
- [43:43]
C
Yeah, of course. So my website is homebuilding.com I like my name. So it's kind of like home building and same thing on Instagram. Home build Dean. On Instagram. We, we try and help, you know, both homeowners here in California with any, you know, remodeling they need to do. But also we give a lot of tips and tricks for people all across the country that are investing in real estate or they need to do any remodeling of what kind of things they can, they can look out for when, when they're in those adventures.
- [44:10]
A
Well, thank you so much. We really appreciate you taking the time to join us today. I'm Ashley, he's Tony, and we'll see you guys. On the next episode of Real Estate. Rookie.