← Real Estate Rookie
Real Estate Rookie
From a Foreclosure & 200 Credit Score to Building Wealth with “Grandma” Houses
00:52:19
Loading summary
Transcript99 lines
- [00:00]
A
Today's guest went from foreclosure, a credit score in the 2002 and leaving the country to owning multiple properties, house hacking and dealing with bats in her rentals.
- [00:10]
B
And what I love about this story is that it proves you don't need to be perfect to start in real estate. You just need to keep going. And if you've ever thought, man, I've already messed up, so maybe this isn't for me, then this episode is going to hit home.
- [00:27]
A
This is the Real Estate Rookie podcast.
- [00:29]
B
And I'm Ashley Kerr and I'm at Tony J. Robinson. And sure to follow us on Instagram @BiggerPockets Rookie or Ashley at wealth from Rentals. Me at Tony J. Robinson. And now let's give a big warm welcome to today's guest, Sarah. Sarah, thanks so much for joining us today.
- [00:42]
C
Thanks for having me, guys.
- [00:43]
A
So, Sarah, take us back to your very first home purchase. What did that deal look like and what went wrong with this property?
- [00:51]
C
Hard to call it a deal. And what didn't go wrong? Well, it was definitely in my mind at the time that I was just buying my primary residence and I really, I found, I think on Zillow, you know, picked that realtor that they recommended to view the property and then followed them around to a few houses, pick their lender that they recommended and I was sure just went along with the flow. They said this is what I could afford and so bought a cute little two bedroom, one bathroom bungalow in St. Petersburg, Florida. And it was great little house, super cute. The first year, you know, it was right at the top of my budget. I was a science teacher at the time and my partner was also a teacher. So we're on teacher salaries, you know, and, and then I didn't know about homestead exemption and I think the next year the rent went up even more and we were like really strapped. And that was 2007, going into 2008, which we all know was the real estate bubble. And I was definitely a victim of that. And it was, it got out of my control, couldn't afford that property anymore. And so we thought, and also my partner's school shut down at the time and I got pregnant. So it was just like this wild storm of events. And we ended up moving to Nicaragua and which is where my partner is from. So I went down there. It was a honeymoon actually. And I was like, you know what, I'm just gonna stay, let's rent the house. This seemed like the best alternative. And they had said, you know, if you can't afford the rent. Don't make partial payments. Just don't pay it all. So that's what we did and kicked that can down the road, lived in Nicaragua, rented it for, I think, 900amonth when the rent was like 1500amonth at the time. And. Yeah.
- [02:49]
A
So when you say the rent, you mean the mortgage payment?
- [02:51]
C
The mortgage, yeah. I was still in rent mindset.
- [02:54]
A
Yeah. So that's a big difference. That's they're paying 900 and you're paying 1500amonth for the property.
- [03:01]
C
But we didn't. We didn't pay. That was the advice. They said, you know, everyone's kind of in the same boat, so you can apply for forbearance. So that's what I did. I kept. I applied for forbearance of the loan, said I couldn't pay. I was pregnant. My. The school shut down for my partner.
- [03:17]
A
We.
- [03:17]
C
We can't pay right now. And we rented it and lived off that 900amonth down in Nicaragua.
- [03:24]
B
And how, how long did that go on for, Sarah? Like, how long were you out for before you kind of came back and rebuilt things here?
- [03:31]
C
I did that for about a year and a half, actually. And at that time, we wanted to move back to the States, and, you know, it seemed like we kind of kicked that can down the road maybe as long as we could and. And wanted to move back to the States. So we came back to that house. And it wasn't shortly after coming back home to the. To Florida that I applied for a deed in lieu of foreclosure. That seemed like it might be a little better than foreclosure.
- [04:00]
B
And Sarah, explain that, because I've actually never heard that before. What is a deed in lieu of floor foreclosure?
- [04:05]
C
So basically it means I was working with. With them. So a foreclosure, they're. They're kind of kicking you out at that point. So a deed in lieu was. They had offered me this, and I replied, yes, I will trade you the deed in lieu of foreclosure. It's what it sounds like. So I, I said, we're even. They did end up selling that property for, you know, a ridiculous low amount. But I agreed to get out. I think a lot of times foreclosure, you know, the tenants are destroying the property. They're, you know, just not taking care of it, maybe. So in that sense, I was willing to work with them and get out peacefully.
- [04:48]
A
So basically you're just. You're cooperating and you're just giving them the House back and then they're washing out your debt and you're starting over.
- [04:57]
C
Yeah, but it did count. I mean, it was a huge ding on the credit report. And it's funny because at that time I didn't believe in credit. I was like, you know, I just pay for things with cash. And then when I had the house debt, it was really my only debt. And it did show up as a foreclosure on my credit score, my credit report. So that was something I had to work really hard to bring back up. I had to embrace credit after that. So it did show up negatively. It was a huge negative. I think my credit score might have gone down to 200. And I used credit karma. They were really super helpful in showing me, you know, you should have X number of credit card account or, you know, accounts. And here's how length of credit history matters. Here's how this hard, hard inquiries or these negative reports affect your credit. So I was able to get a credit card for rebuilding credit and I just, you know, put things on that and paid it off. Put things on it and paid it off. And I did end up building my credit back up eventually. It took, it does take seven years though. That was on my report for seven years. I wrote to the credit experian and whatnot and I asked to have it removed as it was deed in lieu of foreclosure. And I did get it removed and.
- [06:20]
B
But that was after seven years of waiting.
- [06:21]
C
Yeah, it was.
- [06:23]
B
So there, there are probably folks, Sarah, who are listening that might be in a similar situation where they've had some sort of life event that has had a negative impact on their credit. And I guess two questions I have for you. The first one is if you were to give someone like a roadmap on how to systematically build themselves back up, what would that roadmap look like?
- [06:47]
C
That's a great question. I think there's many people in my situation from even the housing bubble or just normal, normal life. But you do need to embrace credit. It's real, can't ignore it. So I followed, I thought credit.
- [07:03]
B
Dave Ramsey's turning over. Not in his grave because he's still here, but like Dave Ramsey's skin is crawling here. And you say that right now. I'm not trying to wish death on Dave Ramsey. So please don't, don't take that.
- [07:12]
A
That is going to be a viral clip right there.
- [07:15]
C
Oh no. Yeah, they had some great advice. You know, you should have at least 11 lines of credit. I, I remember opening credit. I just Whoever would give me credit, I will take it and I will pay it off. And a credit card just to put gas on and. And also maintain that first account you get. I got a credit card for rebuilding credit. They charge me an annual fee now, and I hate that kind of. But also we're keeping that one forever because that is my longest open account. So the credit history, length of time is really important. And just paying it off before it is due. So they will report to Experian and TransUnion and the credit bureaus maybe a week before it says it's due to you. I paid. I pay them off so fast now. And so that's important too, is paying it off before it is due. Who would have thought having the appropriate number of accounts and the length of credit history and then also hard inquiries. So now. Now that I've rebuilt my credit, when I do need to apply for a loan, I am very strategic. You have maybe, I think it's two weeks credit. Karma tells me they're like, you have 11 days left to shop your loan. And I'm like. And I tell them, like, don't pull my credit yet. But when I say, go, pull my credit. And you know, I tried to get all these inquiries within that period of like, they know you're shopping for a loan, so you can do. And because those stay on for the hard inquiries stay on for a little bit. I think it's six months or so.
- [08:56]
A
It is really interesting to me, the rebuilding of credit and just, like, how credit works. Like, I just learned about that. There's a company called, like, Smart Credit, and I did a demo with them. And like, one of the things was, is like, they will literally tell you to pay off your credit card on this day, but pay this one on that day. Like, to like, play the game of credit utilization and like, your credit score to, like, make it the. So you can get the most points. Like, it would literally say, if you paid your credit card balance on this day, you'll get 12 points, but if you pay it the next day, you'll get three points. And I was just like, who has time for this? But, like, I guess there's softer out there. You know, it's a. I like that.
- [09:41]
C
You called it a game. I feel like this is a game, and this is what I tell my kids. I. I have two kids. They're teenagers now. I'm like, this is like the game. I don't know if it's the game of life, but it's the game of credit anyway. And you're playing a game and you've got to be strategic if you want to rebuild from 200 credit score, which I think I'm at an 800 now, so I did pretty good.
- [10:02]
A
Well, I think too like as far as like being a landlord, this is like a great tool to like offer to tenants too. Like some of my, like even to, you know, they've come in with maybe not the best credit or whatever, but like offer some of these softwares. It was just like, here's like a nice thing that we as a property management company offer is to like here's something to help you rebuild your credit if you want to buy a house today or something like that too. There really are so many like good resources out there now too.
- [10:30]
B
So Sarah, I think the big question for me is like after you go through all of that, right, like your, your very first kind of venture into real estate ends in foreclosure. I think for a lot of folks that would permanently scar them and discourage them from ever trying real estate again. So what was going through your mind after you cleaned up all of that to say, hey, let me see if I can actually do this again the right way?
- [10:54]
C
Yeah, it was a big fail, big womp womp. I could have given up and been like, obviously this isn't for me, but I'm resilient, I got a strong hustle gene in there. And, and I think just also I saw what they sold my house for in the end. You know what, I, I just signed it back over to them and I think they sold it for just dirt cheap. You know, maybe it was a 200 something thousand dollar house at the time and they sold it for 80k maybe.
- [11:30]
A
So you saw that potential of being the buyer of that property.
- [11:34]
C
I'm like, I'm no dummy. Okay, I see what. And if I had just waited a gosh darn year or two, I could have gotten one of those properties. And so for the seven years of rebuilding my credit stockpiling just like a little bit from every paycheck because I knew I was going to get a down payment. I knew I was going to do it again. I can do this. And this time I'm going to be smart. I'm not just going to trust whatever, you know, my realtor to recommend the lender and just that, no, I'm going to shop the loan. The loan is the most important part. So I just, I had in my mind that I can do this again. Almost doubt me, please, because I'm going to do better Sarah, just.
- [12:16]
B
Last question. I just want to understand, how do you separate failing at something from feeling like a failure? Because I think a lot of people can go through things where the results aren't what they were hoping for, but they can't separate that instance from their identity. So how, how did you do that? How did you separate, man, this is a really big failure. You said wap womp, which I like. How do you separate that instance from it becoming your identity?
- [12:44]
C
Wow, that's, you know, that's a really good point. I mean, I mentioned the hustle gene. I don't really think it's a gene. I think that you teach yourself to pick yourself up from your, you know, pick yourself up by your bootstraps and try again. And you guys have said a lot of times, and I learn and I read and I, and I get bolstered by others who have done it to know that it is possible. I just need to know the right way to do it. And I had built confidence in myself over the years through college and life, just knowing that if I put my mind to it, I can get it done. I can do that. So it was a belief in myself that maybe I had earned through other avenues. But I do think surrounding yourself with others who know who have done it can help bolster your confidence. You just need a little bit of confidence that this was a learning, this was a learning experience. I made a mistake. Mistakes are kind of real negative connotation, but they're all learning experiences that make you a better person. And now I'm going to do it. Good.
- [13:51]
A
Coming up, Sarah shares the deal that completely changed her trajectory and how one decision funded everything that came next. We'll be right back.
- [13:59]
D
For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time consuming and expensive. But imagine if real estate investing was suddenly easy. All the benefits of owning real estate, tangible assets without the complexity and expense. That's the power of the Fundrise Flagship Fund. Now you can invest in a $1.1 billion portfolio of real estate starting with as little as 10 bucks. The portfolio features 4700 single family rental homes spread across the booming Sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities. Thanks to the E Commerce wave, the Flagship fund is one of the largest of its kind. It's well diversified and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com bpmarket to explore the fund's full portfolio. Check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship fund before investing. This and other information can be found in the Fund's prospectus@fundrise.com flagship. This is a paid advertisement okay, we're going to shift gears for a minute to cover something important, especially for new landlords. The shows often talk about getting stuck doing everything ourselves and the cost of sweat equity. The key question is simple. Is my time better spent elsewhere? I use a tool that cuts down on a lot of landlord hassles and the wild part is it's just $12 a month. It handles rental screenings, rent collection, maintenance requests and accounting all in one platform via a mobile app or desktop. It saves me time and tenant communication and keeps me organized for tax season. It's called RentReady and you can sign up for a six month plan for just $1 with promo code BP2025.
- [15:36]
B
Pro.
- [15:36]
D
Users get it for free because we believe in it. Just sign in through your Pro account to get started. RentReady helps ensure rent with auto reminders, keeps communication professional, and lets you post listings to multiple sites. Check it out@rentready.com BiggerPockets that's rent R E D I.com BiggerPockets Quick question. If you made more money this year but kept less of it, would that really feel like a win? As you plan your financial goals, one thing that's easy to overlook is tax efficiency. Real estate offers advantages most investments don't, like depreciation helping you keep more of what you earn. BAM capital structures, multifamily investments. With those benefits in mind, aiming to pair tax efficiency with strong operational performance. It's a smarter way to think about long term investing, especially if you're focused on what actually ends up in your pocket. Make this your most efficient investing year. Learn more@biggerpockets.com Bam all right, so we're.
- [16:25]
B
Back here with Sarah. So Sierra, I want to know about the deal that kind of got you back into the swing of things. So tell us about the property in St. Petersburg. What was this deal? How did you find it? Give us the initial backstory.
- [16:37]
C
I'd say once I'd rebuilt my credit, saved up some amount for a down payment and I started looking with my realtor. This time it was a realtor, it was a trusted friend. This time I had already started looking at lenders plural and I felt more ready. I had a letter of what I could afford, but I had in my mind of what wanted to afford. Knowing. Knowing what I learned with my first deal. So I had been. I looked at a lot of properties. I think maybe my. My poor realtor was tired of me. And then I was watching Zillow and the mls. Like, as soon as a property would come up, I was like, we need to jump on it at this time. This was 2018. Now I'm ready to go. Properties are not staying on the market a long time at that point. And, you know, things are now in. In the 200ks we're gone is the time of the housing bubble where you could get my house for 80k. So I. I just kept looking. And one day a property came on. It was 110k. It was right by the water, but not in a flood zone. It was Goldilocks. And I. I called my realtor. I was like, we have to go look at this right now. And he's like, no, we'll go later. I'm like, I'm going without you. And he's like, all right, fine. Let's go. And we went over there, and I was like, this is the one. It was what I kind of. I think now. Now, I would call it a cosmetic rehab, but at the time, I called it a grandma house. I'm like, it's been well maintained for her entire life, I can tell. But also, it's painted Pepto Bismol pink. There's quilts hung up.
- [18:19]
A
I love those houses. Also, like, taken care of. Immaculate. And you got to take out the shag carpet, but.
- [18:28]
C
Yeah, well, in this case, it wasn't shag. They had put tile over terrazzo, but terrazzo was coming back. So I was like, oh, we can bang out this tile and we can restore it. And I said, we got to put an offer in today. I think it was listed that day. And I said, we got to put an offer today. And we did. We put in an offer. And sure enough, someone else had put in a cash offer. And here I am with now my. My little FHA loan and, you know, low down payment, and I have all these requirements and that are associated with that kind of loan. And, you know, they could have taken that cash offer, but I actually asked my realtor. I was like, tell her, beg her. Tell her I love her plants. I will take care of her orchids in the side yard. Like, I can tell this woman has the plant. The garden was beautiful, you know, and so that worked. The letter to the REALT or from realtor to realtor to them worked. And they picked me. And so that's how we got the deal.
- [19:31]
A
It's always, like, interesting to me to, like, hear these stories of, like, somebody cared so much about that thing and it, like, swaying their decision on it because, like, me as an investor, it's like, I don't care. Let the flowers die. Pay me ten grand more. But I do care about, like, you know, if they say, like, oh, no inspection, then I'll be like, okay, I'll take ten grand last, because I know this house needs a lot of work anyways and, you know, so. Yeah, but that's interesting, but, like, that just proves a point. It's like you never know what someone's motivation is or, like, what they actually care about for the sale of the house, especially if it was, like, their primary residence. I had a house before where. And it wasn't even a primary. It was a rental. It was a six unit. And one lady in the six unit had lived there for 30 years, and she played ridiculously low rent. And the owner of that property, the seller, it was so important to him that she knew that she was going to have a place to stay and, like, just wanted me to assure. And, like, here we are seven years later, and she's still living there. Great tenant. She's, you know, wonderful and takes care of the place. So, like, you never know what someone actually cares about in their motivation.
- [20:48]
C
Yeah. If they have a lot of orchids, it's probably plants.
- [20:53]
B
Sarah, aside from the, the letter to the, to the seller, what else do you think? Major offer, competitive. Like, was the. Was the price the same or were you actually offering less? I'm just trying to understand if there were anything or any other elements in your offer that also kind of made it at least comparable to that, to the cash offer.
- [21:12]
C
I think it was just timing. I literally, I had been. I was living and breathing Zillow at the moment, and it was timing. My offer was in before theirs, but theirs came in shortly after for, you know, cash. So I think timing was pretty much the only other factor. So. And you know, to my credit, I was on top of these dillow listings. As soon as they would hit, I'm like, we've got to go. And just. Just to be that first offer.
- [21:44]
B
So once you actually get this offer accepted, you mentioned it was a quote unquote, grandma's house. I'm assuming that there was some renovation that went into bringing this property up to its current standards. Now, my understand is you'd never renovated a house before. So how did you. How did you even begin to unravel the process of your very first rehabilitation?
- [22:04]
C
You know, I had been watching this, like, I think it was the Greater British Home Renovation Challenge show. And I was like, oh, man, look at how they redo furniture. And they were talking about, you know, color schemes and what's your accent, color versus your main color. It's just like learning a little bit about making a house look nice and how to do that personally.
- [22:31]
B
And.
- [22:32]
C
And the property didn't need a ton. I mean, it was Pepto Bismol pink. The kitchen, I'm telling you, it was pink cabinets, pink. Pink on pink, and then a pink checkerboard tile. And I just did a lot of YouTube university and learned how to prime and paint tile and cabinets and put little knobs on them and just made the kitchen look really nice. Also, it was listed as a two bedroom, one bathroom. And it was 1,200 square feet. And I was like, that's kind of, you know, that's kind of big for a 2:1. Because my previous was 900 square feet, and that was a 2:1. Right. So I was a little bit like. And when I toured it, I saw opportunity for a third bedroom. And there was a secret second bathroom or half bathroom. I don't think it was to code, so that might be why it wasn't. It was listed as a 2:1. Yeah. So we kind of fixed up. I was like, we can fix this up. We can close off this wall to make this a third bedroom. You know, in my mind, I'm like, beep, boop, beep. And I think, honestly, I'm a big, big fan of learning, and I listen to a lot of podcasts, watch a lot of shows, and that gave me the confidence to be like, we can. We can turn this grandma house around.
- [23:53]
A
So once you close down the property, what was like the first step? Are you doing these improvements yourself? Did you start finding contractors?
- [24:00]
C
So funny. We. Literally, the first day, me and my kids went in there, and I remember my son swinging a hammer at the tile because we were like, there's Terrazzo under here. Let's find it, buddy. And he likes whacking at the tile. And. And then he got hit with a little piece of tile, and I was like, okay, maybe we should stop, you know? But in advance of that, I had reached out to some contractors. I knew a guy who did fl, and he had told me on another property, I looked at how much it would be to redo the wood floors, and I said, well, how about Terrazzo? I'm looking at this property now, and so I think it was maybe 4k in the terrazzo. Also, I knew the AC was kind of limping along, so I got that replaced. That was another 7K and then the rest of it I mostly did myself. Closing up a wall, fixing up the bathroom, painting the cabinets and the tile. And just a. You'd be surprised what a. A coat of paint can do for a place. It was in really good shape. Honestly, it was just kind of ugly.
- [25:01]
A
So closing up a wall, that's not. It sounds like easy, but that's not a simple feat. That's framing, drywall, and then the painting. And so did you just figure it out or YouTube University just figure it out?
- [25:16]
C
Yeah, no, this wall wasn't that bad. I have since had to do the framing and that part. But this wall at more like a window in the kitchen to, like a dining room. And so we closed up that window, so it wasn't too bad. Oh, and they had this huge tile table sticking out from it. And she was so proud that she had tiled that giant table. That's like right in the way of the kitchen, like, totally non functional. I'm like, huh? You know, talking to her at closing, like, why'd you tile everything? Okay. And the first thing we did was bang out that table, close up the wall. I didn't have the heart to tell her about that.
- [25:56]
A
For the funding of this renovations, for the materials, any labor, how did you fund that? Was that just with savings on top of your down payment?
- [26:03]
C
Yeah, I had saved up, you know, over those seven years. I was biting my foreclosure time. I had saved up enough, and I was only putting 3.5% down. So I had a little bit extra to fund, you know, the floor and the. The AC. So it was really only $11,000 out of my pocket for that.
- [26:26]
B
And how long in total did the renovation take you, Sarah?
- [26:29]
C
Oh, we, man, we did that the first year, probably within six months. There was a few other things that came up along the way that year. I remember our first heavy rain. Water just shooting sheet flowing into the Florida room. And also ants. We had a lot of ants. Ants and water. It was a problem. I youtubed French drains, and I spent the summer digging a French drain and laying a little pipe and diverting water. And now it doesn't flood in the Florida room. So a lot of it was, you know, on me and just figuring it out.
- [27:07]
A
And you guys were living there during this time, right, that you were doing the renovation? Yeah. But eventually you ended up renting out this property. So tell us about that experience.
- [27:16]
C
Well, 2020 then happened. I've lived through so many things already, but yeah, 20 when 2020 occurred, you know, times were crazy. I'm from Maine originally, and my kids had spent a couple summers when I was digging the French drain, they spent a summer in Maine. And we're like, you know, let's send the kids to Maine. They had two cases of COVID when St. Pete alone had 2,000, something like that. So we sent the kids to Maine to do remote school at the time. And I was living in, still living and working remotely, struggling a little bit in Florida. And I was like, you know what? I'm gonna try to get employment up there in Maine. And I did. I'm a natural resources scientist. I do a lot of permitting and things like that. So I found a company in Bangor, Maine and moved up here. And I was like, I'm just gonna rent the property. Finally replaced the trim on the house and listed it. Well, I was going to list, I didn't even list it. My friend knew a real, she's actually a realtor who was going to rent the property. And I said, okay. And I was not interested in making money at the time. To me, in my mind, I was just gonna rent this to cover the mortgage, maybe a hundred dollars extra in case something happened. And, and also rent was really unaffordable for the average person in St. Pete at this time. So I felt like I was doing, you know, a service providing this property and someone's going to help me pay the mortgage while I go up to Maine and wait this whole Covid thing out. So I did that and lived and worked in, up in Maine here in the Bangor area. And it seemed like maybe I, I was gonna stay up here. But also renting was, I don't know how you long term rent, Ashley. Like, it is exhausting. People are just the dryer. We went through three dryers. I don't even know how that's possible. I'm cursed with dryers. That's my curse.
- [29:18]
A
That's probably the difference is I, I had that problem too. And I don't supply appliances anymore because that is a headache. We have like one vendor in our town that does like the repairs for appliances. And so, yeah, I don't supply appliances anymore in my units because that was like such a big headache for me.
- [29:38]
C
I should have written that into the deal for sure. I, I, this was my first lease that I had. You know, a friend gave me, here's a lease you could use, you know, And I. I did have my lawyer friend up here look at it. And I was like, I hope this is good. And then the. The microwave went out. She replaced that. The dog kind of tore up all that native landscaping that I had put in. And the orchids, the orchids are just dead. You know, this. And I was just like, oh, but I'm looking on Zillow and I'm like, man, the property value of this house, you know, I paid 110, and now it's worth double at least.
- [30:17]
A
So what year is this? And now is this still 2020 or is this 2021 now?
- [30:22]
C
This is 2020, the end. We're 2021 now. We're in 2021 now.
- [30:28]
A
The great year to sell.
- [30:30]
C
Oh, I just. I'm partially lucky or just really lucky person. My Realtor, though, I said she pulled comps for the area, and she's like, I think you could easily get 235. And this is when people are bidding, bid warring over properties. So. And I, I was like, you know, I don't know. I love that house. I have an emotional attachment to it. This is my win. No more wap womp. I did good. You know, like, part of me wants to keep this property forever and maybe we'll go back to Florida, but we also had gotten really established up here in Maine, which is my home state, after all. And, you know, in the end, I remember talking to my friend. She's like, well, you know what the market's doing right now, you don't know what it's going to do in the future. And I was like, truth. So, you know, let's sell it. And I. I did a little research. When's the best time to sell? And it's like, I think it's March and April. You're gonna get the best. I'm like, okay, let's plan for that. And also, how am I gonna get this lady out? And I learned about cash for keys. And I'm like, okay, we've got a plan. Meanwhile, my bestie down in Florida has been kind of property managing for me. I use that term loosely. Neither her nor I had done this before, but she's over there helping get dryers on repeat. So. But she said, sarah, I want to buy the house. I know this house, and I love this house and I love this area. You know, we were on the south side of St. Pete, and it was just a beautiful up and coming kind of area. And I said, well, you could. I would love for you to buy my house. And we decided my bestie would buy the house and we wouldn't pay realtor fees. Sorry, realtor friend. We're gonna do this between us. And we didn't really tell the tenant too much about that because she also wanted to buy it. She's like, oh, you're sell.
- [32:21]
A
I.
- [32:22]
C
What if I bought it? Maybe we could work out an owner financing. I'm like, no, I'm good. So my. My Bessie ended up buying it for the 235. We had no realtor fees, and she knew the state of the plants and everything, which, by the way, the native landscaping has come back. When I go down there, I stay in my old house with my bestie, and I still feel like it's like, you know, mine in a way. So that's pretty great. She took the cash for keys and left. And then my bestie bought the house.
- [32:57]
B
So what did you end up netting on that deal after your friend bought it from you?
- [33:01]
C
I, you know, I was like, not even super keeping track of, you know, what's my rich, my ROI and my. Who knew? But I did know I had spent 11k on those things and did most of the other things myself, and it was 110 plus. I had paid the mortgage now for three years. In the end, I just checked my bank account, and I was like, how much money did I make exactly? It was $132,554 into my bank account, and I was just like, I feel as though someone's gonna catch me. What have I done?
- [33:40]
B
Is this.
- [33:40]
C
This is too much money. I was scared of that much money.
- [33:44]
B
Had you ever gotten a deposit that big in your life before?
- [33:48]
A
No.
- [33:48]
C
Goodness, no. I think probably this lady's deposit and, you know, maybe a tax refund. Maybe a tax refund was my biggest amount of money at that point in my life, so. And then I did give 2k back to the bestie. I wrote her a check for 2K to cover some of the things, and she had wanted me to replace the fans, I think. And I was like, sure. So I had done a few things. So really, maybe I netted 130k, minus my 11 that I put in.
- [34:19]
A
And this was tax free? Correct. You had lived in the property for at least two years. Yeah.
- [34:23]
C
And this was tax free. And so I. My. My first thought was, like, oh, no, I'm gonna have to pay some. What do I do about the taxes? And I started doing research after the fact and found out that if you've lived in the house for two out of the last five years, you do not pay capital gains tax. So this money was gifted to me tax free. And I did my own taxes, turbo tax at the end of the year. And I. But that I had, I think there was a question, like, have you lived there two out of the last five years? Yes. And that was it.
- [34:52]
B
So then you went out and bought your first Ferrari.
- [34:54]
C
I'm assuming it's a RAV4 actually.
- [35:02]
B
Close enough.
- [35:03]
C
Yeah. We talk about. I know you guys talk about lifestyle creep a lot. And, you know, I was raised to be very frugal. And, you know, I had all that money. It was a scary amount of money. I'm like, what am I gonna do with this money money? And my first thought was a car, actually, but that's because I just moved to Florida, you know, from. To Maine, from Florida. And I'm like, I kind of should have all wheel drive at this point. So I did get. I did upgrade the vehicle and, you know, actually I bought it in Florida, made a little road trip up to Maine with the bestie. It was. We were both going to celebrate this money. And so a little bit went into the car. A lot of it went into the store stock market. My dad had recommended Vanguard's total stock market index fund that he had been a big fan of. And I had learned that that, you know, gives you maybe an 8% return over all the time. And so I had put most of the money in there, put some into 529 college savings accounts for my kids, my two kids, and then, yeah, the rest of it I just put in the stock rehearsal. I'll figure out what to do with that later.
- [36:12]
B
Well, Sarah, what a phenomenal deal. And congratulations to you for not only having the resilience to bounce back after that first deal that didn't go as planned, but to have such a successful second deal, it's got to be one of the greatest comebacks in the history of the real estate rookie podcast. So after the break, Sarah's going to break down how she scaled into midterm rentals, house hacking bird deals, and how she handles things when rentals don't go according to plan. We'll be right back after a quick word from today's show sponsors.
- [36:37]
D
For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time consuming, and expensive. But imagine if real estate investing was suddenly easy. All the benefits of owning real, tangible assets without the complexity and expense, that's the power of the Fundrise Flagship Fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as 10 bucks. The portfolio features 4,700 single family rental homes spread across the booming Sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities. Thanks to the e commerce wave, the Flagship Fund is one of the largest of its kind. It's well diversified and it's managed by a team of professionals and it's now available to you. Visit fundrise.com bpmarket to explore the fund's full portfolio. Check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's prospectus@fundrise.com Flagship this is a paid advertisement. The rise of the tech savvy investor is here. You don't need a huge team or tons of overhead to manage rental properties, just the right tools. So I want to tell you about how I use Rent Ready to get ahead for landlords who treat their time like capital and recognize the cost of sweat equity, this tool gives you everything you need to scale rent collection, tenant screening, maintenance, accounting so that you're organized come tax season and you can run numbers in preparation for future deals and more all in one platform via a mobile app or desktop. Modern landlords don't just own property, they optimize it. Rent ready will keep you organized, running leaner and ready to grow. Start with RentReady. Visit rentready.com biggerpockets that's rent R E D I.com biggerpockets and use code BP2025 to get RentReady's six month plan for a dollar. Making money is great. Watching it disappear at tax time, not so much as you plan your financial future. Tax efficiency is one of the most important and most overlooked pieces of the puzzle. Multifamily real estate offers advantages most investments don't, including depreciation that can help you keep more of what you earn. BAM Capital structures their investments with these benefits in mind, aiming to blend tax efficiency with strong operational performance. It's a more intentional way to invest. Focused on efficiency from day one. Make this your most efficient investing year yet. Learn more@biggerpockets.com Bam tired of traditional lenders holding you back? Host Financial is here to change the game. They've ditched the DTI restrictions and they zero in on what really matters your property's income potential. So no more chasing papers for Tax returns or personal income statements. Think about it. A lender that values your property's worth over your paycheck, that's the Host Financial difference approved in 47 states. They are ready to help you make your next big move. Curious if you qualify? Just head over to HostFinancial.com and find out. Stop letting outdated lending practices hold you back. That's host financial.com where your property's potential meets unlimited financing.
- [39:30]
A
All right, let's jump back in. So we're here with Sarah and you basically have taken, you know, a bad deal. A deal. And then you had a very successful deal. So after that, after that successful deal, what are your next steps in Maine? Did you end up buying another property there? Are you investing anymore into any other real estate?
- [39:53]
C
So, yeah, I did actually think like, well, I'm going to buy a property up here in Maine. I had been staying with my mom, which, you know, if you've ever moved back in with your mom, you know that that's not a long term solution. So I very quickly was like, we're going to buy. And I, I, you know, I'm also on Zillow, man. I'm just on Zillow all the time. And I, and I was like, man, you can get a whole lot of house up here for way less than Florida, St. Pete prices and a lot more area, you know, more land. And I had already been looking and actually before I sold the Florida house, I bought a house up here in the Bangor area, it's Brewer, and a big old 1900 colonial house. Another grandma house. This time it was wallpaper and horsehair plaster and that house. But it just, we loved it. It spoke to us. It was also really big for the bedroom bathroom count. And so I saw an opportunity there and I think we paid 175k for that. And it was a pretty big lot. It wasn't super rural, which was going to be a good transition from St. Pete for me and my kids. So we, we bought that house. And I remember owning two houses for a minute and was like, that's cool. And, but, you know, had sold the other house. So I actually had. Because I was staying with my mom during COVID I did also have another down payment saved up, so I didn't have to. But I, I remember not wanting to put down 3.5% because I was negotiating a better rate. And I know, Ash, you're gonna love this. I got a 3.3% interest rate on that one. Yeah, it's like, so we, we lived there I renovated. I figured out how to take down wallpaper from horsehair plaster. It's very crumb. I don't know if you know, horse hair. It's literally made of horse hair and plaster.
- [42:06]
B
I had to actually google that. When you said it, I was like, I've never heard of horsehair plaster before. Were you familiar with that? With that Ash. Did you know horse hair pl.
- [42:13]
C
No, I'm. Yeah. Florida. We have just. It was like concrete block home.
- [42:19]
A
Cool.
- [42:20]
C
It's not made of wood, so the termites won't eat it. That was pretty much what I was thinking in Florida when I came up here. You know, now you can have a timber frame house. Not really a big concern for termites. And then I. I did not know it was horsehair plaster until after I bought it. And I started taking down the wallpaper and someone said horsehair plaster to me. I'm like, what's that? And I also googled it and figured out. Took down the. The wallpaper and primed it. Or there's a special kind of. It's not. It's a, like primer to prepare a surface after wallpaper has been taken down because the glue can make your paint not stick. So I did that. Then I primed it and I painted it. I had to learn how to repair with sheetrock mud. Figured all that out myself. There was an old vintage tin ceiling, which I kind of restored. And what else did I do? Oh, added a second half bathroom. A very unsexy renovation was replacing a rotten framing, like, important board underneath the front door that my dad observed was almost rotten through. It was, you know, maybe four grand of. And it was not, I call it not a sexy renovation because it didn't improve the value, the face value, the curb appeal or, you know, anything really. But we knew the house wouldn't fall down, so that was good. And then there was a third floor. And they had painted the floors, which is a normal thing to do in a kind of attic third floor space here in Maine. But I sanded it off. I listened to so much crime Junkie podcast and I just. I rented a floor sander and sanded the floor and varnished it. I added a heat pump, two heat pumps. They call them heat pumps here in Florida. They call mini splits or they do both AC and heat. So now I have this third floor which is a heated and cooled space with a beautiful hardwood floor and a second half bathroom. So it's 1.5, a four bedroom, 1.5 bath. And I was kind of like, you know, Kind of bored. Like, what else do I do? I'm done. After I renovated, I thought, what else can I do? I'm getting a little bit more bored. And actually, I was out west. I remember very distinctly. This was like September 2023, and I was out west for work. And I re. Listened to Rich Dad, Poor dad, which I had listened to a long, long time ago. But it really hit different this time. And I thought, you know, I'm working for this big tech company. I'm managing projects. Maybe I could manage my own projects. And I'm remembering the most money I've ever made was on real estate, selling that house in Florida. And I should repeat this. We should do this. And also what really hit home was thinking, if something happened to me, you know, I'm single mom with my kids, like, if anything happened to me, this all falls apart. If I can't work, if I get sick, you know, And I. I wanted something that could keep us all sustained if I got sick, me too, you know? And I was thinking, the Rich dad, poor dad led me to the Loopholes of Real Estate, which was a really great book for me, just learning about. He talks about living in a house to add the last five years and not paying capital gains. Also, I learned about 1031 exchanges and all these different tactics, the. The loopholes, the tax advantages. And I just. Like this light bulb went off that. I mean, and I love this. I also love this. I love the joy of renovating a house and restoring it to its glory and making it beautiful. And I could do this, and I could do my regular job. So I came back with that epiphany, and I was like, we're gonna rent this house and get a new one. And my kids, God bless them, they were on board. And I said, well, what if we get a house somewhere in another town? You'll have to go to a new school. And they're like, that's cool. It's aura, Mom. Like, we're. We're into it. So we found. At first, I wasn't sure. I didn't, I didn't. My goals were not set, maybe super concrete. I didn't have a buy box. It was like, I'm going to find another grandma house. I'm going to find another good deal, and we'll either move into it or. Or we'll stay here and rent that. I don't know. I just love the primary owner financing, you know, that interest rate and. And the money you have to put down. It's just such a good Deal. And I loved my house. The only thing I wish I had was a view of the water. So I ended up finding a house in Hamden, Maine, just across the river. And it's on the river. And I was like, ooh, this one. And this was my next. I'm really, you know, I was really nervous because this was quite a renovation. I didn't know how big of a renovation it was until after the inspection. And I realized this is like a camp. I don't know if you guys know, in Maine, everybody's got a camp. Your camp is basically seasonal and you only go there during the good months of the summer, unless it's an ice fishing camp. But this was not. This was no insulation. The walls were made of cardboard. I say it was built with cardboard and sticks. Literally. The lumber was. You could see bark on some of the timbers in there, which is actually good. As it turns out, it's dimensional lumber. It's like, it holds up over time. But the cardboard walls and the lack of insulation was a problem. So we. They had asked 199. I offered 195. And then after inspection, Tony, you say this all the time, like you have a list and here's the math, right? And I did that. I was like, here's the math, by the way. We didn't know about the suspected asbestos tiles. We didn't know there's no insulation in the walls. And, you know, this, this, this, and this because the roof had been leaking into one of the bedrooms. And you could see that, but you didn't know it was because there's no insulation and the roof is, you know. Anyways, so I had this 20k that I wanted them to take off. I wanted 175. My realtor and I joke, this is. My magic number is 175. No. And she asked, she. She sent them this counteroffer and they said, no, we do not accept. And I, I wrote to my realtor at the time and I said, I'm so sorry. You know, the math just doesn't. Math, we'll find another deal, you know, And I was really dish. I was like, I remember being in bed texting with her, like, we're so close. We've looked at so many houses. And then maybe it wasn't even an hour later, a half hour later, she said, they accepted. So we called their bluff. Or they called my. Someone's bluff was called and they accepted it. And my realtor said, congratulations on getting $20,000 off the price.
- [49:41]
B
I just, I love the Resilience. Right. I think it goes back to that same mindset you had after the foreclosure of, like, hey, either things are going to work out or things aren't going to work out, but either way, I'm still moving forward. And I love that you didn't get emotionally attached to the deal because I think that's where we see a lot of rookies kind of go off the rails, is that they. They spend all this time hunting and searching and they find something. They're under contract. It feels like they're so close. Then the inspection happens and big things pop up. They try and negotiate, negotiations break down, and they just still want to move forward for the sake of all the time they feel put into it. But kudos to you for being willing to walk away. And as you said, someone's bluff got called, right. And the deal worked out in your favor. I. I want to fast forward, though, a little bit because I know you've got a crazy story about bats, like actual bats, and I. I think that a lot of Rickies have this fear about, like, crazy things happening to them inside of their rentals, and bats might be one of the more crazier things to happen. I've also had an experience with bats. My rentals. But what happened to you and, and, and how did you handle that as a landlord?
- [50:39]
C
Yeah, everyone's always worried about toilets. It's the bats that we don't talk about nearly enough. I want to hear your bat story, too, though. But, yeah, that Brewer house, man, we knew there were bats because I heard squeaky squeaking upstairs, and I was like, well, we've got mice. And I remember my dad putting out mouse traps, and we never caught a mouse. And I actually hear the little squeaking in the walls. And then I. And I think it was the summer we had a bat come in the house and it's flying around in the middle of the night, which is a bit horrifying. You know, you're not expecting that. But also, I'm a natural resources scientist. I'm like, oh, it's a little bat. You know, we caught it and released it. No big deal. And I didn't even think of that when I rented the house. I didn't even think that the bats would come back and maybe with a vengeance. So this year, my. I've. I've got a bat guy now. Bat guy says this has been the year of the bat. They were off the chain here in Maine. I don't know if it was in other places as well. Which is good because honestly, poor bats, they're not doing well as a, as a species, you know, they're not doing great. There's several species in Maine and they're all doing poorly. But this. My tenants in there. The first tenant, my. I get my first tenant. I'm so happy. She's like, I hear squeaking. I think you have mice. You need to get pest control over here. And I was like, yeah, it's probably bats. Like, does that make you feel better? But she actually did make her feel a little bit better because they were really afraid rodents, which mice are also really common here. But I. It wasn't a super problem until the next tenant. This is the, now the season of the bat. And they were, they came into the house and they called me. I got my son, you know, my 17 year old. I'm like, got the hoods, we got like gloves and I got, you know, I go in there with a cup and catch it and, you know, the proper PPE on and we release the bat. No big deal. They're like, oh, thank you so much. I'm like, yeah, you know, no problem. And then I literally, a couple days later, there's another bat. And now it's in the main part of the house. And also, what if it has rabies? And I was like, yeah, it probably doesn't, but let's check. So the state will come and gather your bat and send it off for testing, which is kind of sad. I think they, I think the bat does have to, you know, someone has to take one for the team. So they, they came over and caught the next bat. Actually, is this the third bat? I lose track. They came over and caught the bat, sent it to the state for testing. It is negative. So likely the colony is negative. And then my current tenants, now it's winter, they should be hibernating. My current tenant said, we heard mice. And I'm like, no, it's bats.
- [53:39]
A
That actually reminds me of like a childhood memory. When I was younger, we would get bats in our house sometimes and, and I think I was like 15 and I was babysitting my siblings and we got a bat in the house. And I, like, threw a blanket over my little brother and I'm like, calling my friend down the street and I'm like, I need you and your brother to come over here. We have bats. They show up, like, dressed in his hockey gear. We have tennis rackets, the full face mask on from hockey. You're like, okay, let's get this thing. And yeah, yeah, we obviously did it. I think we like chased it out the door maybe or something like that with a broom. But that was like my bat memory. But Sarah, thank you so much for coming on the show today and sharing your story, your experience as a real estate investor. Where can people reach out to you and find out more information?
- [54:23]
C
I'm on Instagram Family Reno Bees for like Weatherby.
- [54:28]
A
Well, thank you so much. We really appreciate you taking the time to share your journey with the real estate rookies. I'm Ashley, he's Tony and we'll see you guys on the next episode.
- [54:37]
D
Episode okay, we're going to shift gears for a minute to cover something important, especially for new landlords. The shows often talk about getting stuck doing everything ourselves and the cost of sweat equity. The key question is simple. Is my time better spent elsewhere? I use a tool that cuts down on a lot of landlord hassles and the wild part is it's just $12 a month. It handles rental screenings, rent collection, maintenance requests and accounting all in one platform via a mobile app or desktop. It saves me time in tenant communication and keeps me organized for tax season. It's called Rent Ready and you can sign up for a six plan for just $1 with promo code BP2025. Pro users get it for free because we believe in it. Just sign in through your pro account to get started. Rent Ready helps ensure on time rent with auto reminders, keeps communication professional, and lets you post listings to multiple sites. Check it out@rentready.com BiggerPockets that's rent R E D I.com BiggerPockets hey rookies, if.
- [55:33]
B
You'Re watching this, we want you to apply to be a guest on the Real Estate Rookie Podcast. That's right. Ashley and I are looking for amazing stories just like yours to be a part of our Real Estate Rookie Podcast. Now look, you don't need to be an expert. You don't need to have done thousands of deals. Even if you've done one deal, your story could help inspire the next listener.
- [55:50]
A
As a rookie investor. Especially if you just got your first deal. It is all fresh in your minds and you are the best person to tell your story. Give your experience on how you got it done to help someone else get their first deal.
- [56:03]
B
So head over to biggerpockets.com guest if you want to be a part of our show. Again. That's biggerpockets.com guest and we'd love to have you on.