← Real Estate Rookie
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- [00:00]
A
This is one of the easiest ways to become a real estate investor using an asset you already have.
- [00:06]
B
Today's guest is Alex Bozzie, and he just became a landlord. Everything is fresh in his mind to share all of his experiences with you rookie, so you guys can hopefully get your first or your next deal as well.
- [00:20]
A
This is the Real Estate rookie podcast. I'm Ashley Kerr.
- [00:23]
B
And I'm Tony J. Robinson. And with that, let's give a big warm welcome to Alex. Alex, thanks so much for joining us on the show today.
- [00:29]
C
Hey, Ashley and Tony, thanks for having me on. It's great to be here.
- [00:32]
A
So, Alex, let's start at the beginning. When you bought your first primary home, did you already have plans to turn it into a rental someday or did that kind of happen about later on?
- [00:43]
C
Yeah, when we bought, our obviously our first goal was just buying a house, but I think, you know, my dad was a landlord, my mom was a landlord. They both owned rental properties. So I was always in my mind that I would do that one day if the opportunity came up. And I think after we were able to buy our first home, that obviously became a reality that, you know, if we moved into another house, we can rent this out. So, you know, the prospect of passive income was always in my mind, and I was always interested in that being a part of my future.
- [01:11]
A
And how long did you live in this primary residence before you decided to rent it out?
- [01:15]
C
So we moved in in 2019. It was my wife and two kids, and they were pretty young at the time, and we lived there for about six years.
- [01:24]
B
And Alex, as you. As you came to the decision of. Of moving from that residence, how did you decide between keeping it as a rental and selling it? Because sometimes you can sell that, maybe use those funds to get a nice, bigger, better primary for the next one. So what was your thought process on keeping it as a rental versus selling it?
- [01:42]
C
Yeah, it's always been in the back of my mind that we could make some passive income from our home. And I think that was always something we discussed, and that was something that was at the forefront of our minds. Obviously, the Denver market was pretty pricey, so we. We thought about selling as well. But I think the main thing that came up was that we had locked in that refinance post Covid and had a 2.6% interest rate.
- [02:09]
A
Definitely a motivating factor to keep that.
- [02:11]
C
Absolutely. And I think, you know, you could because you hear for a lot of people, they're the golden handcuffs or it's the golden goose depending on what you're trying to do. And for us, we were like, okay, we're not going to sell this when we've locked in historic rates. Let's. Let's figure out how we can rent this.
- [02:26]
A
So when was that decision made as to, okay, we've lived here for six years, we're gonna go and buy another property? What was involved in the timing of that decision that, okay, it's now is the time to turn it into a rental.
- [02:40]
C
We had been casually looking at getting a new place, and it just wasn't the right time just for us to make a down payment. Just financially didn't make sense yet. And I think really the biggest precipitator of us moving into our new place was we had our third child and our original starter home. We were just outgrowing it, and we had lived there for a long time, so we wanted a little more space. And it was just a matter of what are we going to do with our starter? Are we going to sell it? Are we going to rent it? And like I said, I've always had it in the back of my mind, you know, we're always daydreaming about ways to make that extra cash, whether it's through stocks or through rental investing. And, you know, obviously rental investing and renting out your property is a stable way to go about, you know, growing equity and, you know, making money passively. So that was always the reality that we would do. And I think we realized once we found the house that that was what the route we were going to take, especially because we locked in that post Covid interest rate.
- [03:38]
B
We recently interviewed Matt Krueger on the Ricky podcast, and he followed a very similar process to what you just described, where I believe as chicken if I'm wrong here. But it was like every year for a decade, he, his wife, and their growing family would every 12 months go move into another primary residence and turn the previous property into a rental. And that, you know, he was able to, you know, reach financial independence by doing that. But part of the reason that he liked that strategy was because of the financing options that came along with living in that property as a primary residence. So when you guys bought that first starter home, what kind of financing did you guys use to take it down?
- [04:16]
C
We just did a conventional down payment. We had saved up for a few years. We were very fortunate to just have a stable jobs and to be making decent money. And, you know, we, like I said, that first hurdle is always the biggest of buying that first home. But we didn't do any unorthodox financing. I mean, for the second home, we did kind of look into home equity loans and helocs, but once again, you know, those are additional payments you got to make. And once again, I said we're fortunate enough to have just been saving and to use that for conventional down payment.
- [04:47]
A
And Alex, you say fortunate enough, but also there's discipline involved there because there you have to give yourself some credit as to not just being lucky, you know, because there's a lot of other people that aren't taking the time to build that personal foundation first to actually take the leap into real estate investing by just going the. The boring, simple path of saving up money and living below your means and budgeting and things like that so that you are able to afford that down payment. Now, did you do 20% down or how much did you do down on that first one?
- [05:22]
C
For the property we just bought our new primary, we did 15% about that.
- [05:27]
A
And then for your first primary, I.
- [05:30]
C
Think that was less. That was probably five to seven. I want to say thereabouts, but I.
- [05:35]
B
Think that's an important point, right? A lot of people hear conventional and they automatically think 20% down. But you said 15% on this one and 5 to 7% on the first one. There are options out there at 5% down on a conventional. So it's just, you know, Rickies need to understand that there's more than this 20% when we say conventional.
- [05:53]
C
Yeah, I think there's a lot of options out there, you know, depending on your financial situation and, you know, even to just bring up the fortunate. But like, you know, we've. We've just had stable jobs and we've been able to have jobs that have given us the luxury to be able to save. But yeah, you know, definitely taken and put in a little way each paycheck. That's. It takes a little discipline not to spend that, you know, going out to eat that week. But it's worth it because, you know, you want to live in a nice home, especially if you're raising a family.
- [06:18]
A
Now, when you went to go get the second property, did you have any trouble with the financing as to keeping the first property, the loan in your name, or was there no problem at all with that?
- [06:31]
C
No, there was no problem with that. Yeah, that was very straightforward.
- [06:34]
A
And I think a big thing too is that you went conventional for both loans where, like, we often see it as to someone gets an FHA loan, they've gotten the low interest rate, they don't want to Refinance out. But then they can't use the FHA loan again to purchase the second property because they already have it in their name once. So like their option would be to use conventional for the second or, or they have to refinance out of the FHA loan and go ahead and go into the conventional. So just another reason we like the conventional loan. Less hoops to jump through. And you still can like sometimes get down to 5% for your down payment where FHA is, you know, three and a half percent. We have to take a short break. But before we do, what are the things and the steps that you had to take to prepare your home for, for your tenants before you actually moved out of the property? Did you have any repairs or changes that you needed to make to the property to actually get it rent ready?
- [07:31]
C
Absolutely. And you know, we, like I said we had, I had three children at that point living in that home for six years. So it was lived in. And you know, when you, when, when you're living somewhere, you know, working hard and you're busy and you raising kids, you know, repairs and a lot of those things aren't always at the forefront, you know, oh, this light doesn't work. I didn't replace it, you know, right way. There's just things. I have a pretty low tolerance for.
- [07:57]
A
Repairs and that you learn to live with things.
- [07:59]
C
Yes, exactly. So, you know, but when you're about to prepare that home for someone to come live there and you want them to be happy, you start noticing how many things you might have left or swept under the rug, so to speak. So we had a fair share. We obviously had plenty of cleaning, lots of repairs, painted the walls. We, we had some plumbing things we needed to fix. Of course there were some last minute maintenance issues that cropped up just, just as bad luck at would have it. But we were able to, you know, get it ready. But yeah, no, there was lots of prep that we had to, had to do to get ready for the tenant now.
- [08:37]
A
And did you do this before you moved out of the property or did you wait until after you moved out and would you do it differently if you did it again?
- [08:45]
C
I think we would have just, you know, you can always say this. We probably procrastinated a little longer than we should. We should have. We did. We did have like a week gap where we were able to move into the new house and also be before the tenant came. I think it was actually more like two weeks. The tenant came and the house was just empty and vacant and we were able to go back and like just really walk through the house and make sure everything was up to par for her to live there. And yeah, no, it was like I said, I think if I could go back just giving ourselves more time. It always just feels like a rush during move week because you're not only preparing the house for the new tenant, but you're trying to get your new house ready to go for you.
- [09:28]
A
Coming up, we'll go through the steps that Alex took to go from homeowner to landlord and the operations he put together, from listing the unit to getting the first tenant moved in. We'll be right back.
- [09:40]
D
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- [10:26]
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- [11:02]
D
Explaining a sandwich lease to my insurance guy once and he just blinked at me like I made it up. And that's sort of the thing, right? Most insurance companies don't understand how we invest. You go vacant for a few weeks, you switch strategies, you hold stuff in an llc and suddenly your coverage doesn't fit.
- [11:16]
C
Fit.
- [11:16]
D
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- [11:38]
A
Welcome back from our short break. So, Alex, part of the listing process is actually listing the property for rent and how much it's going to cost. How did you decide on a rental amount to charge for your property?
- [11:54]
C
Yeah, it was a combination. Obviously. We looked at what other properties were going for in the area and what they were renting for. Also, I used Turbo Tenant. You know, I was fortunate enough to have been working for a property management software all in one landlord software for the past year and a half. And like I had said, that really contributed to me being motivated to do this in the first place. I think it just reinforced everything I had always wanted to do by renting out the property. But I'm just blessed to have had this. I think, you know, the biggest thing going into this and renting out your property is you want to have systems in place to be able to do that and processes. And I think Turbo Tenant for me, kind of streamlined that and made it all there in one place and I didn't have to think too much. It kind of holds my hand during the whole process. So in that initial step to list it, I was able to list it through Turbo Tenant. I was able to use a rent estimate calculator to kind of determine what we could rent that for. Also, in addition to just looking at what other properties we're renting out for in the area.
- [12:57]
A
I actually just did this yesterday on Turbot. I listed a property for rent. And like, it is so easy just following the process, going step by step. But yeah, and I also use the comparables and looked up the rent estimator. I'd never used it before on Turbo Tenant, but there's a ton of other ones. BiggerPockets has a rent estimator, but you can do that to pull comms. And then also just looking on Facebook Marketplace, I always look there to see what's listed. I also look on like Zillow Apartments.com to see what's listed. And even though those aren't rented, like, you can usually tell, like if it was just listed, you know, it could be a good comparable comp. But if it's like been sitting listed for like 60 days and no one's renting it, it's probably not a good comp then because that's you know, rental price point is probably not accurate. Then another way you can get comparables is like calling property management companies in the area and asking, you know, like what does a two bedroom in this market go for? You know, what do you have available? Like are there even any units available you can kind of get Also what's the vacancy rate in that area too? Based off of calling the property managers and then posting in, you know, local groups, Facebook groups for real estate investors and asking, you know, what are other people charging for 2 bed, 1 bath x amount of square footage, decent shape in this area and you'll get people that respond to and even in the bigger pockets forums also Alex, one of.
- [14:25]
B
The decisions you made was to self manage. And I think for a lot of folks, even when they're following your process of buying a property, moving out into a new primary, turning the old one into a rental, they still don't necessarily want to become landlords. So what was your thought process or how did you come to the decision to self manage versus hiring a property manager?
- [14:45]
C
We didn't have the budget for a property manager. Also, you know, we're starting out with one property. We're really attached to that property too. I can imagine like hiring someone to watch it. Like I said, we raised our kids in this house. So it's just, it's got that sentimental value that I'm willing to take the extra steps to go there and you know, do upkeep and have a relationship with the tenant to see how they're treating it. So yeah, I think that played a big part in it.
- [15:09]
B
I got one follow up for you so it makes sense why you chose to self manage. What was your first step in educating yourself on how to do this correctly? Because you know, every state, every city, every county has tenant landlord laws. There's a certain way you're supposed to do, you know, the listing and the tenant screening. What was your first step in educating yourself on how to be a good landlord?
- [15:30]
C
You know, it's one thing to learn about something and read so many books about it, but then it's a completely another thing to actually do it right. I think that us for anything and it was no different in this case.
- [15:42]
A
Now Alex, you've had a good support system to help you get started on this track. What about the actual showings of the property? How was your turnout? Did you get a lot of interest? Did you get a lot of applications? And were you the one that actually went and showed the property to people?
- [16:01]
C
Yeah, no, that, that's probably the most exciting part of the process for me is because you just get to meet people who might live in your home.
- [16:09]
A
This is like the one process I avoid doing. I do everything on the computer, but I send someone out to do the showing.
- [16:16]
C
I'm a pretty social guy and just interested in what people are looking for. So for me, it was really exciting to just meet these people that are going to live in the house that we spend so much time in. But, yeah, we, we had a pretty good turnout. I think we, we had a good turnout. However, we did have a pretty short turnaround time to avoid vacancy. So that was always like, the big concern for us. So we wanted to get as. And get in as many applicants to pick the perfect one as possible. So we went through, I think ended up 10 to 12 people ended up coming to look at the house.
- [16:44]
A
So did you do, like an open house where it was a window of time for people to come, or did you set individual showings?
- [16:50]
C
Individual, yeah, individual showings. So, yeah, they, they would come by and we'd show them the place. And a lot of just different people in different stages of their life. We, we had a group of college girls fresh out of college that wanted to stay there. We had a couple families that wanted to stay there. We had people with extended family. Like, yeah, it was all walks of life. So once again, which I found interesting, got to meet these people, and eventually we settled on someone who didn't even come in person to do the walkthrough. I did a virtual walkthrough, and that was enough for her to want to rent the place out. And she ended up being the tenant that's there now.
- [17:30]
B
Alex, for since you did all of these showings yourself, to me, that kind of sounds like a lot. You know, you said 12, 15 different showings. Would you have done it the same way moving forward, or would you have done, like, the open house that Ashley mentioned?
- [17:41]
D
I would do.
- [17:42]
C
I, you know, I didn't even think about it. We're just trying to accommodate people, get them in as quickly as possible. Yeah, I think that probably would have made more sense is to do something where they all come at once. However, like, you know, the tenant who ended up staying there, for example, she didn't even live in Colorado, so I had to do a virtual walkthrough with her. So that might not have been something that would have worked out for her, but I think, you know, you know, there's plenty of scenarios where that would have been something that would have been more pragmatic to do wherever you moved.
- [18:10]
A
To, was it like convenient for you to do the showings?
- [18:12]
C
Like I should have said this. The house we moved into is two blocks away. We, we did not even leave the neighborhood. We're really happy with the school there. It's a great little neighborhood. We've got a big beautiful lake and we're pretty much just settled there. And like I said, our kids are, are both well into elementary school. My son's about to go into middle school next year, so we didn't move far. This wasn't like really inconvenient for me. I had to drive less than a minute away to go show the house.
- [18:39]
B
Ash, what about for you? Like, what's your preferred way of showing units today? Are you doing virtual show or remote showings where you're not even meeting them, they're doing themselves? Are you doing open houses? What's your preferred method?
- [18:50]
A
First of all, I'm doing none of them.
- [18:54]
B
That's the preferred method. I don't do.
- [18:57]
A
The last time. The last time I did a showing, we did an open house and Daryl and I did it together. But usually for properties that are like 20 minutes or more away, I'll set it for open houses and we'll usually do like one in the evening and then like maybe one a Saturday morning or something. But for other or we'll do like Turbo tenant has like the scheduling and like when we use that folio. They had that too. Where you can set your availability. So, so we would just do like 15 minute windows for like an hour and then we would set it so like multiple people could schedule the same 15 minute window. So I do think people like to schedule their own window. So I do think that is better for the tenant and you're more likely to get people than just saying like, oh, we'll be here from 5 to 6 if you want to come. I've seen better results with more people attending from doing the actual window blocks and them setting their showings. But we only do that with like having software that shows like and not like playing like going back and forth like, oh, are you available at 1? Oh, no, 1:30. Okay, let's do that. Like they have to pick from a calendar. Just like if you're scheduling a meeting from someone and they have their availability, that's the only way that we'll do like individual showings is setting it that way. But we still kind of like block that time. Or it's not like you can pick any 15 minutes within an eight hour window. It's like literally pick a 15 minute window from 5 to 6:30 or something like that. So we know someone has to be at the property from 5 to 6:30. And then, you know, nobody books at 5, but somebody books at 5:30, they don't have to come till 5:30 or whatever. So we've definitely done both. I prefer the open house model just to like get it all done with and. But I think for the tenant perspective, they seem to prefer and you get a better outcome with doing the individual ones for sure.
- [21:01]
B
And there's a lot of nuance that goes into that. Asher, I appreciate you walking through that. I think the other piece that I'm curious about, Alex though, is the actual screening of the tenants. Right. Like you said, there is an emotional kind of element to you in renting this house out. So what does your screening process look like to find the right tenant?
- [21:19]
C
Once again, we used turbo tenant to screen and it was really useful. We did have, you know, a lot of people that. I don't say a lot of people, but several people that didn't qualify after we screened them and we did have to deny them. So it was good to be able to check for all that and have a tool where we could jump in and see those things and have it be accurate. Because obviously we wanted good tenants. We wanted people that would take care of the house and where there wasn't a lot of risk involved. So that mitigated that.
- [21:46]
A
Yeah. And I think when going through the screening process, one thing that's really valuable for a rookie investor to know is like what your state laws are and just fair housing laws are in general as far as when you can deny someone and when you can approve them. There's a lot of like local housing authorities that will give you free classes virtual or in person or like they cost $10 or you can go to your city hall and they have pamphlets that's like a landlord guide to the state laws and know what you can and cannot deny. And then I think setting some kind of metrics like Alex, you said like some didn't meet your metrics or your criteria and like having that set and clear as. So like mine is depending on the area, it could be two and a half times the rent or three times the rent. They need to make an income to be able to be approved. Their credit score needs to be sometimes at 600 or above. Sometimes we do. In some markets we had gone down to 550 and above. But just setting those metrics for that area, for that property as to what is going to be approved and what's going to be denied and you can even put those right into the listing too. So it's very clear. And that also can like cut out the people who already know they don't qualify. Don't waste your time for showing. They don't spend, you know, the money paying for the application to be completed for the screening. So before you're even, you know, starting to list the property, you should know what your screening criteria is going to be and that it really fits the criteria. The requirements by state and local laws and fair housing laws too.
- [23:29]
C
Yeah, I think, you know, ours were, luckily they weren't super nuanced. It was like people with an extensive criminal history or even. Yeah, that kind of thing. So it wasn't anything like super nuanced in that way. But it was, it was good to have that in able for us to be able to see that this tenant is going to be someone who's going to take care of the place.
- [23:49]
B
All right, up next, we're going to get into Alex's decision on his next property which is his new primary and we'll cover that right after Quick word from today's show sponsors.
- [23:58]
D
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- [24:42]
E
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- [26:52]
C
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- [26:55]
A
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C
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A
I got them delivered free from 1-800-contacts. Oh my gosh, they're so fast.
- [27:07]
C
And breathe.
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A
Oh sorry.
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C
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A
The discount they gave me on my first order. Oh sorry. Namaste.
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C
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A
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- [27:21]
B
All right, Alex, I'm curious. So the the new property that you bought, that's two blocks down from your current rental. As you were shopping for that home. Were you also thinking about the possibility of that becoming a rental in the future?
- [27:33]
C
Oh, absolutely. I think one, and especially when you're renting out one and you move the tenant in and it's working out, you kind of get excited at the prospect. Oh, I can do that with this one. And you kind of. Like I said, I'm. I'm excited at the prospect of being able to rent this one out potentially in the future. So it's absolutely in the cards to do that.
- [27:54]
B
Just one follow to that. Alex, I'm curious as, since you had that in mind already, were there certain things that you maybe learned from your first, you know, primary to rental experience that you're like, okay, we need to make sure that we have this in the next property that we do this primary to rental in.
- [28:10]
C
Yeah, in a general way I will say like, luckily the house was just an overall upgrade. I, you know, as it should be if you're moving into the next place. But so it was, it was a newer house and it was way better kept up. There was so many less repairs and maintenance that needed to be done on move in or that we even had. The inspection process was so much cleaner and yeah, just overall a better experience than our first house. I think our first house loved it at the time and we were super excited about it. But there were a lot more things that came up during inspection in the, in the new house. It was like the best inspection experience I've ever had. We hardly had to ask for anything, which was awesome to have to have happen for us.
- [28:56]
A
Do you have a plan in place for how long you want to stay there?
- [28:59]
C
No, and I think that's where kind of the personal aspect comes in. Because I would love to be able to rent out this place when the time comes. But we're even closer to my children's school. So they've started walking to school. So that kind of comes into place and we'll definitely be all the way or at least in this, this location, you know, for the next several years till they're through middle school. Because that's where the school goes all the way up through eighth grade. I think maybe once we're choosing a high school for them, then the possibility of moving again and renting this one, renting this one out come up.
- [29:32]
A
Do you foresee yourself buying other rentals outside of them being your primary residence?
- [29:37]
C
Yeah, that's definitely something I want to look into more. I. Once again, I think, you know, you grow up and you think of ways to make money outside of your passion? My passion has always been, you know, producing videos or music and that kind of thing. I'm in that creative sphere. But, you know, in addition to your 9 to 5, you're just thinking, oh, how can I make more money? And real estate is always touted as the most stable way to do that. So I've always thought about it and I think just like working here and you know, hearing influencers such as yourself talk about how they did it has piqued my interest in just buying a property as a rental.
- [30:12]
B
So I think my last question for you, Alex, is do you have any maybe last minute advice for Rickies who are thinking about turning their current primary into a rental from your experience going through this for the first time?
- [30:24]
C
Yeah, I mean, I would say, you know, it, it's funny because I think it brings me all the way back to, to my first jobs that I had. And customer service is, it feels like a very customer service oriented business when you, when you rent it out specifically for me. Like I said, everything from the showings to hearing your tenant ask for requests and accommodating that to make sure they're happy. I'm still in customer service to a degree, or at least that's how it felt to me during the process. So, you know, treating it that way and having respect for the tenant as a customer, I think that that would be, you know, the biggest advice I have for someone. It's not something where we say you're making passive income income, which is true to a degree, but I still think you're actively having to participate and make their experience better if you want to have a successful business.
- [31:16]
A
Now, Alex, the question that everybody's wondering is what is the cash flow on this property?
- [31:23]
C
Okay, yeah, so we. What was our mortgage for the original property was 1800 and we charge rent for 3000. So it's at $1200 cash flow.
- [31:37]
A
That's great. That's awesome. We should have started the episode with that. And I'm assuming your mortgage payment, does that include escrow, your insurance and your property taxes?
- [31:47]
C
Yeah, yeah, yeah, yeah.
- [31:48]
A
Wow, that's great. Congratulations. Well, Alex, thank you so much for joining us today to share your experience getting your first rental property. We really appreciate it. We love when rookie investors come on right after they got their first, first deal and it's fresh in their memory. So if this is you, please go to biggerpockets.com guest and fill out a form to come on, just like Alex said, to share his journey. Alex, where can people reach out to you and find out more information.
- [32:13]
C
Yeah, if anybody has any questions or can take any value from my experience, you can shoot me an email at. Alex Turbotenant.com would love to help anybody on their journey if I've got something of value to offer.
- [32:24]
A
Well, Alex, thank you so much. We really appreciate it. And you provided a ton of value today for our rookie investors. I'm Ashley, he's Tony, and we'll see you guys on the next episode of Real Estate Rookie.
- [32:37]
B
Hey, rookies, if 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.
- [32:55]
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.
- [33:08]
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.