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Real Estate Rookie
Making $25,000/Year Cash Flow by Buying the Worst Rental on the Best Block
00:51:15
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- [00:00]
A
Today's guest did something most investors swear they never do. She bought a short term rental site unseen over FaceTime while she was literally attending Tony's conference.
- [00:10]
B
And not just any house. This place probably should have come with a hazmat suit. We're talking a drug using, previous owner, cooking in the fireplace, code violations, foundation issues, an old electrical fire, you name it. Most people would have run, but Alex said, yeah, I'll take it. Now what she turned it into is even more impressive, especially because she was juggling a full time job, a TOD and a renovation that ballooned from 100k to 200.
- [00:40]
A
This is the Real Estate Rookie Podcast. I'm Ashley Kerr.
- [00:44]
B
And I'm Tony J. Robinson. And let's give a big warm welcome to Alex. Alex, thanks for joining us today.
- [00:49]
C
Thank you so much. So excited to be here.
- [00:51]
A
So Alex, you technically became a landlord back in 2020 with your Chicago condo but you've said you've never felt like a landlord. What actually changed that identity for you?
- [01:03]
C
Yeah, so my husband, I actually just met my husband and we were moving in together and we were living in Chicago and I, my property that I had bought there probably five or six years before that was also a dilapidated condo that had nothing had been touched since 1962 when I bought it. So I, I renovated that condo. It was my primary home home for a long time. And then when I moved in with my husband we turned it into a long term rental. And so it was, I was essentially an accidental landlord which is sort of a trend right now of people that had a property and didn't really quite, you know, know what to do with it. And I decided to rent it out and it started doing really well. I, you know I had like, I actually like rent, rented it in like less than a day. So it's great property, great area of Chicago was cash, you know, has been cash flowing kind of ever since that point around 800A and so it's been really good for me. And then, but I, I sort of again I didn't really know what, what a real estate investor like looked like. I didn't think it was me I guess. And then a few years later I started working for steadily the landlord insurance company and obviously started to listen to bigger pockets and listening to you guys as part of that my, my role there. And I said just stuff started to click for me. I started to really, the wheel started turning. I started to think about investing very, very differently after that point and then having that, having the opportunity to just work and learn and then do it also, while I'm learning, I think is. Has been just a really wonderful thing for me.
- [02:45]
B
Alex, can we talk a little bit about limiting beliefs? Because you said you had a rental that was doing $800 per month, and that's a really solid first deal. And I think it's so interesting to hear you say that. Even though you had one of the more successful first deals we've probably heard on the show, in terms of just like pure cash flow, you didn't quite feel like an investor. What was missing, like, like what, what wasn't there or what would have needed to happen to make you feel like more of a quote unquote investor.
- [03:19]
C
I think limiting beliefs, I think are. Are. That's such a good word for, for rookies or for people starting out. Because I think like many people I grew up believing or I grew up having my mom and my family essentially tell me that debt was bad. Dave Ramsey, you know, all of those things that you hear about that never, I've never carried a balance on a credit card. And, and then you, you know, you see people in the media that own buildings and there's really no in between of, like, who you can identify with. And so, you know, definitely I've had a corporate job my whole life. I sort of have always had an entrepreneurial spirit, but never, never had the courage to bet on myself, to put myself out there, to really think through what that is. So read Rich. Dad poured out as a, as a kid. Actually, my mom, like, had us listen to it in the car on the way to school. We were probably in middle school.
- [04:15]
B
I love your mom already.
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A
She seemed to be.
- [04:17]
C
I know. So I knew what it was.
- [04:20]
A
A mother.
- [04:21]
C
Yeah. Knew what it was, but, like, had just had this very overwhelming, you know, idea that, like, debt was bad and that you should not essentially invest in things and just get a job, do really good job, try to excel at that job, and hopefully you'll get to retire at some point.
- [04:39]
B
And the reason I bring up the limiting belief, Alex, is because I, I think what you shared is a common thing that I hear from a lot of both investors who maybe have, like, done one deal and those who are looking to do their first is that they don't yet identify as a real estate investor. And I think that one of the most important, not even decisions, but maybe one of the most important things that I did as I, as I started in the world of real estate investing was that I called myself an investor or I like, proclaimed that I was going to become an investor before I even had my first deal. And I think it's like a very small, subtle shift. But I do believe that like the most important conversations we have every single day are the ones we have with ourselves. And I just tried to start telling myself, like, okay, I'm going to do this, this is going to happen, it's going to work. And I think it's important for all the folks that are listening to hear that because if you're, if you're listening to this podcast and you still have this belief that you don't have what it takes or maybe that, you know, that you haven't been able to bet on yourself yet, it all starts with like very small things and, you know, one foot in front of the other before, you know, you've got the first deal. So. But here you are now, you know, and you've, you've built the, built the portfolio. Now I know you have a marketing background. You even worked on the Jake from State Farm ad, which we talked about before, which is probably like one of the, the more well known kind of marketing like experiences in, in, in television. But how did those skills, do you think, Alex, translate to helping you as a real estate investor?
- [06:12]
C
Yeah, I think it really, a lot of it has actually fueled my desire to go into the short term rental space or the midterm rental space. So my background worked for large ad agencies, my whole career, really big brands, State Farm, Uber, all, all, all the brands, all the fun, you know, creative stuff, worked in experiential, so event marketing. And you know, that what brings me the most joy, which I'm very clear on my goals in life is I love to create and I love to bring experiences to people that they've never seen before or that really surprise and delight them. And that is something that fuels me, my regular job and then fuels me with this. So my husband and I actually, when we moved into our primary home about. Okay, so we moved. So by the way, we moved from a condo in Chicago with a doorman and a grocery store. We never had to leave this beautiful condo that we had. We, you know, hard launched into owning a single family home and had the entire sewer system back up into our house about a month and a half after we moved into this house. So, so we had to move out. We had to get a midterm rental, which now I know it was called a midterm rental, didn't. It was just like, I don't know where to live. We got to find a place to live. We found out from Our insurance, which was great, that we were going to get like $7,000 a month to use towards housing. And what could we get with that $7,000 a month? A two bedroom, two bath apartment. Because people were charging so much money and we live in Plano, Texas, we're not in California. So much money for these short term rentals and our midterm rentals, I should say. And then on top of that, the person that we were renting it from had a really like tough time allowing us. We wanted to bring our crib. My son was nine months old at the time. You know, we, we were like, you know, can we move some furniture out of here? They were so unaccommodating to us. So through that process I knew in my head there is a market here for people that are super accommodating, looking, looking to have a great experience. How can we go above and beyond what the status quo is for families and specific for young families and just do better, just do better than what's available. Because there was, there was not a lot of people I found in that process that were willing to be a go giver, as Jesse Vasquez says, and just do, do the right thing.
- [08:41]
A
Now before you decided to implement this strategy that you saw this opportunity at, you actually got laid off from your job. And that can be really life altering. And you've said that moment completely shifted how you saw your future. So what clicked for you emotionally and financially?
- [08:59]
C
Yeah. And I think, you know, honestly listening to you and Tony has been such an inspiration. So thank you guys so much for what you do. But Tony has a similar story. But I was always a very high achiever and was working for a well known retail brand and a global role, was working constantly because you have calls with China at 10pm and all kinds of things and very abruptly got laid off because the company, it's a retail and retail is not doing well. And so that really changed, you know, all that fear I had to start and to invest in myself, that completely changed because I really started to really think about all these companies and all this work I've done in my career and these people trusting me to spend and manage millions of dollars. Why am I not trusting myself to spend and manage the $100,000 that my husband and I had, had managed to save up on a property. And so that. To that fear of the unknown of a company or somebody else being able to take something away from you so quickly that, that fun, it just, it just lit a fire under me, you know. And I just started to say, well, why? Why am I not betting on myself? Why am I not trusting myself to know what I can do best and I know how to market in my regular life? Why would I not be able to market this property and be able to get it rented and, and filled up? So that was, it was a huge shift for me.
- [10:27]
A
We're going to take a short break, but when we come back, we're going to talk about this house that was bought sight unseen while on FaceTime.
- [10:35]
D
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- [12:04]
A
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- [13:26]
C
This is actually the second house I bought via FaceTime sight unseen. Our primary, my, my mom, when we were living in Chicago, my mom had to come walk the house because it was, it was in 2021 when the houses were just like going that same day. So I guess I'm more comfortable with it. But this was a new Western property I had, you know, a new Western, I think, you know, for rookies especially it is a, it's a company that really specializes in basically selling wholesaled properties that you have to buy in cash. You have no inspection, it's done very quickly. It's kind of almost like an auction in some ways. But you are buying a property that you, you know, you know what the disposition price is. So you know what you're kind of like starting at expecting and then you have to have hard money or cash to buy it. And it's just kind of like you, you got to move quick. So a lot of times I think flippers use it and, and then there's usually some type of arv, you know, estimate in there as well as, you know, like what they think the renovation would cost. So the, I had talked with New Western, I talked with Robert, his name's Robert, my guy from New Western. I liked him and I trusted him. He's, he was in a. So I had seen a couple properties with him before this, but he called me the night before. I was like, I said I was at Tony's conference, called me the night before. He said, you know, I've got this property, it's coming on. You know, you have to go see it tomorrow at 2 o'.
- [15:01]
D
Clock.
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C
And it is, it was in the best neighborhood. Like it was in a neighborhood we could not afford when we moved to Dallas. And so I knew the neighborhood well. It was also in a very specific pocket that if there was there currently, currently it could change any time. But currently there are no regulations in Dallas for short term rentals. There's been a lot of legal up like legal flip flopping and lawsuits and all kinds of things. But it's considered a multifamily because it's a half of a duplex. And so I knew most of the regulations around this area usually exclude multifamily, which is what I liked about the property too. So great area, very central to things. The neighborhoods also around the property are older, really well established homes in the, you know, above 1 million. So for a midterm rental, especially somebody that was just like us that maybe has to move out of their house quickly for a renovation, they. It would be just a great, a great situation for that type of scenario. So that's why I liked it. My husband was like. My husband was supposed to go over there but he got called on a client call. So we were both on Facetime. We both just like barely saw it. He sent me some, some videos of it, but the price was so good. It was listed at 2. It was listed at 2. I think it was 201 is what it was listed at. And the comps in the area were all above 450. So I was like, there is a lot of meat on this bone. And even if we compare, completely screwed up, you know. And the, and the recommended like renovation cost that they had given us was a hundred thousand. And I was like, okay, it's probably not a hundred. It's probably more like 121, 25. The house was the worst house you can think of. Like when I think about a house of horrors, it was this house. It, it had, you know, there, it had a small fire in it, there was graffiti all over it. Unfortunately, the owner was not in the best mental situation. She was the owner. The house had so many code violations against it. The city of Dallas another thing. The city of Dallas wanted this thing sold. So I just, there was a lot, there was a lot of interesting things with this property that I was like, what, what can go wrong?
- [17:19]
A
What?
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C
Like there's so many. There's a lot of upside to this. So even if everything goes wrong, it's still not going to like outweigh the upside. Like all the, all the positives of this property. So that's how I was kind of thinking about it and I was like, time to roll the dice. Scared money don't make money. Let's do this.
- [17:36]
A
Alex, I want to go back to this company, as in to why did you decide to use a company to find a deal compared to other routes like direct mail or on the mls?
- [17:50]
C
I mean, I have a full time job and so I'm 43. I have a, at the time I had a three year old and I, it just, I really thought, you know, everything you guys talk about all the time, it's like what' to bring you joy in this investing process. Finding and knocking on doors or direct and, and I have, I actually have experience with direct mail even. But I think that probably scares me more than helps me in it because I don't like it and I don't, I just, there's a lot of waste with it. So I think this was sort of an easier route for me, at least for just finding my first deal. Would I do it again? I probably, probably. I probably knowing now what I knew then I would, I would do this deal again. But there are other ways. Like then, now I have more connections to find just straight wholesalers. The financing part of this was so wacky that I think I would have, I, you know, I wish we had, I would have had a different way, but I still would have done this deal the same way again.
- [18:49]
A
I think that's a really important key point as to. It may not have been the, the best path or the most profitable, profitable path, but it got you started and you got this. Even though you had the condo before, this was like your, your first investment deal that you were focused on primarily as an investment and even, and I think sometimes as investors we get caught up in like making sure we're not spending money, we're getting the best deal. And you know, like, even with wholesalers there's always like, oh, I'm not going to pay a wholesaler an assignment fee. That's not fair. They only deal. I don't want to pay them $20,000. Well, sometimes it's a lot harder to find the deal and negotiate it than you think. And if the numbers still pencil out, it can still be so worth it. That first initial deal doesn't have to be your golden goose. It doesn't have to be the best deal ever. Just has to be good enough to make you money, hopefully and then propel you on your investing journey. And like you said, looking back, you learned a lot of things. And you probably would do the same path again because obviously it worked out for you. And in my case, I partnered with someone and I gave them a lot of meat on the bone. I gave up a lot of equity, a lot of cash flow for them to be part of the deal. But I do not regret it. I probably wouldn't do it again right now because I know so much more and I know I bring more to the table. But getting started, like, having that one person, trust me, it was so worth it to not worry about that. I'm doing everything to maximize every single dollar and I'm getting the best deal ever out of this.
- [20:27]
B
Ash, let me ask, do you have a new western out by you in buffalo?
- [20:30]
A
No, I had never heard of it before. I mean, maybe, but I had never heard of it before.
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B
Yeah, maybe they're more like a midwest, west coast saying because we have new western out here as well. And even when I was in oklahoma city, new western was out there also. But I guess what I found. And again, every market's probably a little bit different, but because they're such a big kind of machine, I found that a lot of times their deals, to Alex's point, they either go really, really fast or the ones that don't go that fast or the deals that no one else wanted. So they're usually not all that great. So I think for all the rookies that are listening, new western is great because it'll at least kind of give you some form of deal flow. But I do think there's a lot of value in finding the kind of smaller wholesale operations because a, they typically have a smaller buyer's list, so you're competing with less people. And then b, there's a little bit more flexibility on, like, the terms of closing. Like, I. I've worked with wholesalers where I was able to do like a full inspection because we. We had that relationship, you know, so if you can source maybe the smaller players in your market, it might be an easier way to get started for a rookie. And we had. We had Dominique gunderson on. She's been on a couple of times now, but her entire strategy was just like going to local meetups and finding the wholesalers that were doing deals there and just meeting as many of them as she could. And that's where she gets the majority of her deals from now is from those wholesalers. So just word of caution or not, word of advice, I guess for the.
- [21:57]
C
Rickies that are out there, that's what I would do if I Did it over again is now I have more wholesaler connections that I've actually met through this process and this deal. And I would probably just go directly to the wholesalers I've known and met over the time.
- [22:09]
A
Another easy way, if you're like me and very introverted, is just Google, sell my house fast in Buffalo, New York, and you will get all of the wholesalers websites that come up and you just, instead of wanting to sell your house to them, you say you want to be put on their buyers list too.
- [22:26]
B
Now, Alex, you, you had a rental budget. You said that they told you initially 100, but then you said, hey, let's shoot for like 125. Did you actually hit that number of 125?
- [22:37]
C
No, we were with furniture, which is a different story because I got a lot of stuff on online auctions, which I highly recommend. That is like the biggest rookie tip I would give to anybody is see if there's any online Amazon return auctions that you can buy literally a whole house of stuff on. But we were all in around $200,000.
- [23:00]
B
Okay, I want to go back to 200k because that's obviously more than what you had projected. But tell me about this Amazon online auction. I haven't heard of this before. Someone who furnishes a lot of properties.
- [23:10]
C
Yeah, there's two. I mean, there's two I would mostly use. So high bid.com, if you go there, there's like, you know, all kinds of auctions on there. And then Auction Hub, Texas, which is obviously I'm in Dallas, which has a lot of building material auctions. So anytime somebody returns something to Home Depot or Lowe's or sometimes even Costco, they have Costco auctions on there. That stuff does not get restocked. It goes to like on a pallet and gets sold off for pennies on the dollar. And then these are the auction sites that they then take that stuff, disassemble it in a warehouse. You go get a box truck like my husband and I rented, and you go pick up a bathtub and a whole bunch of other stuff for, you know, a quarter of what you would pay at Home Depot for it. It definitely is like the time money balance. So do you have more time or do you have more money? Because it definitely takes a lot more time. But at that moment, we were really sweating, sweating bullets with the amount of money that we were burning onto this renovation. And so we were like, what can we possibly do to cut some costs? Probably the best one I found was a and I met and I met, I also met a ton of fun people along the way and that's the joy you have to find in some of this. But I met a guy who had bought a warehouse, like bought a building, and it was filled to the brim with light fixtures. So it was like, had been a lighting company, I believe beforehand, and they were high end light fixtures. And so I bought them. I bought the entire house, like all the lighting, like beautiful designer light fixtures for like 20 bucks a piece. You know, just all kinds of things that I was able to save money through that and really kind of elevated the property, honestly, more than I would have if I would have just stuck with like, I don't even know home, Home Depot and Amazon or Lowe's or wherever you buy things.
- [25:01]
A
You can't even buy a standard boob light for two or for $50 or $20 anymore.
- [25:07]
C
I love the hunt of it too. I think that that brings me joy.
- [25:10]
B
So I'm so I'm on this, the, the high bid website and I would encourage all of our rookies to at least go check it out because there's categories of virtually everything. There's sporting goods, normal toys that seems normal, consumer electronics. But then there's also boats and aviation construction and farm real estate even. This is, this is pretty cool. I've never bought anything from an auction, so I'll just go, go and check that out. But let's go back then, Alex, to the actual rehab itself. So, you know, you budgeted 125, it still ballooned to 200. Where were some of the, maybe the, the gotchas that kind of pushed the budget up?
- [25:47]
C
Yeah. So part of this, you know, I'll start at the beginning. The, the condition of the house, like I said, was, was very, very rough. The first day I walked in, it was filled, filled to the brim. So she was essentially kind of a hoarder. And we spent 6, $6,500 in trash removal and dumpsters throughout the, the, the level, like the time of the process. So, you know, immediately we got in there, we got, you know, as we are, like we closed and I drove over there to meet the junk removal guy because time was like a really big factor in all of this. So the initial, you know, initial walkthrough, really after we had removed the junk and I could see it, there were fleas everywhere. I had to go home and put on my rubber boots and truly like should have had a hazmat suit, honestly in there. The previous owner had been cooking out of the fireplace. And so the, the smoke from that was just in all of the insulation, all of the drywall. We, we had to. We could have saved some of it. And. But we just made the decision of just. It's a short term run all. If there's any type of scent there, people will complain. So that was a. That was a pretty big whopper of just removing all of the drywall and all of the. The insulation, the H VAC system, and then all of the ductwork all had to be replaced as well. Some of that was due to the fire, and then some of it was just damaged again from like cooking in the fireplace. And then there was a sunken living room, which I work in insurance, I know all about liability and people love to sue. And so that was something that I just knew couldn't stay. And so we had to get an engineer and figure out how to fill in the sunken living room, which again, as a rookie I was like, oh, you just throw some concrete in there and that'll be fine. No, that is too heavy for the foundation. And so we had to. Went through several different ways of thinking about it, but we ended. What we ended up doing was filling it in with like sandbox sand, like the really fine sand that my kid plays with rebarb. And then. And that you fill it in mostly with that and then leveling it with like a 2 inch layer basically of concrete. Maybe it's. Maybe it's thicker than that, I can't remember. But that was the recommendation from the engineer. So that it didn't just, I guess, be too heavy for the rest of the house and it could all balance out. We also had to do 20 beams, you know, for the, for the foundation. We had to add those. That was like. Only that was six grand. That was like nothing compared to everything else. So it was one thing after another. We replaced about 80% of the electrical. The house just. It was like we completely just rebuilt the house and there was really nothing that could stay. And I knew the house was bad, but I didn't know it was that bad. So those were some of the bigger ticket items.
- [28:54]
B
I want to talk about budgeting and absorbing those costs, but before I get to that, Alex, I think just hearing everything that you just listed, that is a very heavy rehab job. And you work in marketing and advertising, so it's not like you have a background in construction. Does your husband work in like a trade or related field?
- [29:15]
C
Oh, no, he's in sales.
- [29:18]
B
And yeah, neither of you have like this, you know, wealth of knowledge when it comes to construction management, how the heck did you figure out executing on all those different things? Like, who was your kind of guiding hand here? Was it the. The contractor who was kind of like your. Your right hand? Were you working directly with subs and you guys were just like, YouTube University trying to figure it out? Like, how did you not get overwhelmed? And how did you identify what actually need needed to be done?
- [29:45]
C
I really, honestly, to start with, I think what gave me the most confidence is that I. I had worked. I've worked on events before, and so I know what a project and a budget looks like. I know I'm very used to, like, managing a budget and, you know, using spreadsheets and all of the above. A couple things here. So I did buy. I think it's the James Dainard's book on estimating rehab costs. Okay. So I use that.
- [30:10]
A
That one's J. Scott.
- [30:11]
B
That's J. Scott.
- [30:12]
C
J. Scott. I'm sorry. Yeah, J. Scott. Bought that. You guys told me to buy that. Bought it. So I started there, and we had done the renovation on our primary home, which we was paid for insurance. And so, like, I had a little bit of understanding. We had a general contractor. I did get three bids, know all about the three bid process and trying to, like, compare and negotiate. Know that from my day job. So I tried to do that as much as possible, just up front. But once we decided to go with Carla from Golden Builders, who I would plug, because she was honestly just emotionally really there for me. She was our. Our general contractor. I like that she was female, she worked with all of our subs, really organized everything really, really well. That I would say, like, not to be just completely biased, but, like, I've never worked with a contractor as organized as she was. And I do think, like, having a female of some of those types of things, I think sometimes helps. She was super organized with the timelines and got me everything that I needed. So that was super rare. It was also in my day job in advertising, you get to pick two of the three things. Speed, good, cheap. And so we chose speed and we chose good. We did not choose cheap. And I kept having in my head, like, this idea that, like, every day we're not open, that's $200 in Airbnb rent that we could be obtaining. And so I just kept that in my head as I was just like, how can we get this done as quickly as possible? We had holding costs. We had. Which I'll talk about in a second. The juggling of our. Of our borrowing against our IRAs. And so I had to get it done quickly. And so she really helped with the timeline and with managing all of these, like, very large things. Was she cheap? No, no, not at all. So that, that's just the trade off that we made.
- [32:12]
B
And what about the actual funding piece?
- [32:14]
D
Right.
- [32:14]
B
I mean, because you went over budget by 80 grand, give or take. How did you guys, like, what was the mix of cash and other funding sources you used to actually get through the rehab?
- [32:24]
C
Yeah. So we really had to figure this out as we went along. And I would say that, like, that is the biggest piece of advice that I would have given to myself at the beginning of this. If I could go back and say, like, it's going to be okay. So I'm 43. My husband is 46. And we have, you know, we've been working in the corporate world. We have sizable IRAs, 401ks. We got all the retirement stuff, you know, for somebody that has not been investing in real estate. And so at the end of the day, I was just like, you know what? If we. If we absolutely have to break the glass and cash out one of these things, we've got it. But it turns out we didn't. We didn't have to. We just juggled it all. So we started originally with hard money, which I know, Ashley, you've said that you do not like hard money, and I do not like hard money either. Now after this process, because I don't like the draw process. The draw process is not in your favor. We had to, basically, you get reimbursed, you know, so it's like, I was. I thought they were just going to kind of write us a check for $100,000. If you do private lending, like I would do next time, that's what happens. But they. You have to, like, wait for the inspection. And I couldn't do multiple things at the same time. With Carla needed, like, you know, she needs a check for like 20 grand a day or 30 grand, or I was like, this is literally, I'm giving you a car right now. So I was just like. I was like, how is this going to work? So we. We pulled up HELOC on our primary home, which was about $55,000, which, anyway, that's another story because I should have appraised for a lot more, but it didn't. But that. That was fine for what we needed. So we pulled a heloc. We used that cat, and I pulled it all out. I was like, I need all of this cash Right now. So pulled it out. And then we did use some. Some of that to then pay and get access to the hard money, which we had to do in draws afterwards. Then we took a loan against my husband's 401k, which was about $33,000, which is probably the best tool that I didn't know about until I had to know about it, because all of the interest just goes back into his retirement fund. So he was going to be contributing last year anyway to it. Might as well use that money. And then all the interest that we're paying, which is, I don't even know, I think maybe 8% or something like that. So if you're already going to be contributing 8% to your 401k, you might as well borrow that money, use it if you need it, and then you're paying yourself back. And so there's like, literally no downside to using that. So that was 33,000 of it. And then as we were kind of shifting all this money around for the hard money and for just sort of temporary, we first borrowed. You can borrow. I'm not a. I'm not a cpa. I'm not a whatever, but you can borrow money from your IRA as long as you pay it back within 60 days. So we borrowed $50,000 from my IRA and then we paid it, borrowed another $50,000 from my husband's IRA to pay back mine originally. So this 50,000 was sort of, like, floated for four months. And then, because I knew we just have to get to the refinance, we just have to get this thing appraised and do the refinance, and then we can pay all this back and get it figured out. So I was just trying to get to that. That end game, which I knew I could get to if we opened on November 1 and had everything set for that. So that was the juggling of it all. But all of this was just information that I honestly, like, learned and started asking questions of our financial advisor, our financial, you know, the establishments we have our money in, and just started asking questions. I didn't. I really didn't know that we could do any of this before I started.
- [36:13]
B
Alex. I would think that there were maybe some folks listening whose heads are spinning a little bit with, like, all the different moving pieces you guys have going on with this deal. And even more so, you know, like, Dave Ramsey is probably, like, you know, shaken in his boots right now here and hearing all that's going on right now. How did you. How did you not feel fearful about what would happen if this doesn't work out the way that we want it to. Because I think that's what holds a lot of people back is. Is they can. They can read the books, right? They, you know, they read the book on estimating rehab costs. They can find the contractor, they can even find the deal. But they. They stop because they have this fear of what if it doesn't work out the way that it's supposed to? So with all these kind of different, you know, plates you guys were spinning at the same time, was there any fear around what happens if this doesn't work?
- [37:03]
C
There was a crippling fear to the tune of I actually lost 15 pounds, like, without doing anything, because I was so scared the entire time. I would. I was not sleeping. I, you know, was super scared. But you know what? I kept going back to. And I'll give a big shout out to my friend Sarah Weaver, and who is in the MTR space. I saw her speak at an event. It was my very first, like, very first event I ever went to and really identify with her. I was. You know, we have a lot in common personally, but she talked about stepping into that fear and just owning the fear. And it's almost like an anxiety tool where you're just able to look at it for what it is and say, you know, this is a fear I have, basically. And just saying, at some point, you have to make a decision in your life and you have to say, I am going to step this and I'm going to live my life being a little bit of fearful and having a little bit of that anxiety. But I know that I'm going to bet on myself. And there was a lot of that, like, self talk. And I said to my husband at the beginning, like, I believe in you. I believe in me. I believe in us on this. And we just kept saying that to each other over and over and over again. But, yes, it was absolutely the scariest thing I think I've ever done in my entire life because the whole thing, you know, it could have appraised for way less than we thought it was going to. You know, we could have. I don't know, the whole. We were also. The previous owner was still sort of hanging around the neighborhood. And actually at the very beginning of the project, like, came. Came back and, like, broke or. I don't even know. I don't know who it was. I'm not gonna assume it was her, but I'm assuming it was somebody affiliated with her broke all the windows, you know, and got. Yeah, because, because we cleaned this place out and it. I think somebody was mad about that. So you know, there was, there had been drug activity at the house. Like there was just all kinds of stuff that I was afraid of, of, you know, kind of constantly afraid was going to happen. Like once we put all this drywall back up, was this whole house going to get burned down one night? So all of that stuff definitely kept me awake at night. But like Sarah said, at some point you have to step into that fear and just bet on yourself and go for it. And I just kept saying that to myself. So appreciate her and her that advice.
- [39:15]
A
We also love Sarah and think she's a phenomenal speaker and also investor. I can definitely resonate with that fear though. That was like one of the things that stopped me from getting started. And we always say like time, money, experience or knowledge. And then just that fear, like having the courage to actually take action. And I just thought like all these worst case scenarios and one thing that always helps, helps me is like, okay, what is, what is it that I'm afraid of? What will happen if that happens and how would I have to solve it? So now I have a plan in place. Like, okay, the roof flies off. I'm having reserves in place to make sure my tenants are put up at a hotel. I'm contacting my insurance company and I'm putting in a claim and I'm having the roof rebuild and now I have a new roof. One thing that I've, I've started to realize with guests on the show and just other people I've met in my life and you, you seem like one of these people. I'm going to put you in this box, Laura Sides that we had on as a guest is another one. We have no real estate experience, no construction experience or anything like that. But you're willing to make the phone calls and you're willing to take action upon action until you solve the problem or figure it out. And this. I had this aha moment recently when I am purchasing a house and the owner is in assisted living and I've been dealing with his daughter. She has no real estate background. She. I don't, she doesn't work now. I don't, I don't know if she did at any point what her background is, but I know nothing with real estate or construction. We had some things that we wanted corrected in the inspection. Within a day she had four different vendors lined up, scheduled and will be at the house next week and everything will be repaired and completed. And I'm thinking like, wow, I'm really slacking. Like I can't even move that fast on things. But it was just like she makes a decision, she takes action, she gets it done. And I think that is a more valuable tool than to actually have construction experience or knowledge that you're actually willing to take the time to figure out and make the phone calls to actually get something done.
- [41:32]
C
Yeah, I think to me it's just all project management and anybody that has any type of adjacent role in project management can do a large renovation. I think, you know, as long as you've got some type of understanding of this is what this person told me, I'm going to get a couple more quotes, I'm going to compare that, I'm going to see if that tracks, and then I'm going to move forward with one of them.
- [41:57]
B
So, Alex, you go through this renovation that would have scared 99% of rookies away, but it turns into a short term rental that you're actually running. So we want to hear about what that experience has been like right after a word from today's show sponsors.
- [42:09]
D
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- [43:28]
A
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- [44:34]
C
So you're about to make a trade based on a friend's text, but which you do you listen to is it we could buy a house in Tulum, get optioning those options. We could lose everything. Or let's do a little research, get your head in the trade and make the investment decision that's right for you. Learn more@finra.org TradeSmart why do growing businesses.
- [45:03]
D
Love working in Slack? Let's ask Christy at Ari Bikes.
- [45:07]
A
Running things in Slack saves me so much time.
- [45:09]
D
AI summaries say 97 minutes per week. What say you Rocks from Gosney?
- [45:14]
C
Slack helps us build community. It helps us build connection.
- [45:17]
D
Your partners, vendors and customers all in one place. Take us on home. Ashley from Carraway if we didn't have.
- [45:23]
C
Slack tomorrow, I would explode.
- [45:25]
D
Well, let's not let that happen. Visit slack.com podcast to get 50% off.
- [45:30]
B
Slack business plus we're back here with Alex and we heard the story of how she found the deal, the ups and downs of renovating it, and now we're here. What happens when it actually goes live? So so I guess really quickly. Alex, how long did the full renovation take?
- [45:45]
C
So we started June 28th and we finished the first week of October. So that renovation itself to rebuild this whole house took a little bit more than three months, which Was miraculous.
- [45:57]
A
Yeah. For how extensive of a rehab you had to do.
- [46:01]
C
Yes. Then the more miraculous thing, with two full time jobs and a three year old, my husband and I took, we took control of the property. The first week end of the first week of October and November 1, I hit go live on Airbnb. And so it was, it was three weeks to get it furnished, designed all the little touches, you know, closet, closet rods, hooks, all those things in about three weeks, which was it. It literally almost killed me. But we did it.
- [46:34]
A
So now the question that everyone's wondering is what is the number? Is it, did this end up being a good deal? So your purchase price, your rehab, what did it appraise for and what do the cash flow numbers look on it now?
- [46:48]
C
So we, we are, we were all in, you know, around like 410 or so, you know, give or take a little bit. And the day before the, the appraisal, I, I did not sleep. I was, I was prepared. So I had a full six page document of every single upgrade that we had made on the renovation also. And that was advice that I had probably picked up from this podcast or some, one of the, one of the bigger pockets podcasts was you need to be at the appraisal, the walkthrough with the appraiser. You need to present yourself as the owner, not an investor. And you need to have everything documented, which I did. And they took the information. And so I was sweating bullets. We both were. Because we knew it needed to appraise. Our number was, was it needed to be appraised for basically 460 or more for it to kind of all make sense for us. And that was the realistic number. Like in the, like there had been one other property. We actually waited for the appraisal a couple more days because there was one other property that had just sold. And so we were waiting for that to sell before we did it too, which was also highly helpful for us. So it did appraise for 475. So we were able to get all our money back out and, and be, be okay basically with all the loans and everything we had taken out, not all of our money we didn't get out, but like we, we were able to pay off all the loans and do what we needed to do with that appraisal. So that was one key. And then now where we're sitting now, so we just passed a year. Our gross revenue for the year was right around 62,000 and then our operating expenses were around 36. So basically we're netting around $25,000, which is exactly what I had expected and anticipated when I had run the numbers originally. So it wasn't this like screaming deal. I really didn't need it to be. I just needed it to not bankrupt us. And it, you know, it's done pretty well and it's, for the most part it's been really full. We had a, we had a six month midterm stay almost right off the bat from exactly like our avatar, exactly who I wanted it to be. It was a family with four kids that had an insurance claim in the, lived in the neighborhood. And so that told, that told me exactly what I needed to know, which was I was right. I was right. And I knew this was going to be a great place for people that were displaced from their homes in the, in the neighborhood. And most of the short term stays after that, which have been, you know, anywhere between two and four days, are mostly just people visiting their family in the neighborhood. And it stayed, it's really stayed consistently filled with that type of thing. It's not, it's not necessarily in a location where people who are just like coming to visit the Dallas area, which there's not. I'm a little biased. I don't think there's like a lot to do here, but I guess there's enough to do here. But, but it's just, it's people coming to visit their families and that's what we built the house for.
- [49:51]
B
And you said, Alex, you guys grow somewhere around like 65, I think you said.
- [49:55]
C
Yes, around 62. Yeah, yeah, 62.
- [49:57]
B
So like somewhere in the, in the 60s range. And you guys are all in at 4, 10. So that, that means you've got like a, you know, gross yield or you know, I've heard people use different terms, but basically you divide your revenue by your purchase price. You're at about almost 16%. And you know what I would usually encourage folks is you want that number to be between somewhere between 15 and 20, right? If you're at 20, it's like a screaming good deal. 15 is like a good baseline. So this is like a really, really solid first deal for you because you're like right in that sweet spot and I think even more so. And I would assume that you guys have learned so much on this deal that anything that comes after this is going to feel like a walk in the park because you guys did so much on this first deal. But I want to talk, Alex, a little bit about like the actual experience of running this short term slash midterm rental and obviously you're, you're a marketer focused on experiences and I'm sure you bring that into hospitality. What kind of things have you leveraged from your day job that you brought into your short term rental that might make you a little bit more unique as a host?
- [51:01]
C
Yeah, it is, it's so fun to host because I do, I, you know, I work for steadily, I work from home for the most part. And the ability to connect with people and be there for them when whether it's just like them visiting their family and doing something really fun and extra for them. So I almost always go and I know I need to probably delegate this out, but I love doing it. I go over there and I leave them a personal note and I usually leave some type of gift. So depending on what they are coming for. So if they're coming for like you know, some cousins or a nephew's second birthday, I'll leave them some balloons or I'll go pick up like a $5, you know, muffin situation from the, the grocery store that's like across the street from the property. And so I'll always go do something like that for them. And it just really brings me a lot of joy because a lot of people will always, they'll write notes. We have 100% five star reviews which I'm very, very proud of. Super host all the things because honestly because of that we had, we just hosted a woman for two weeks that was recovering from, from a cancer, a breast cancer surgery. And a good friend of mine just went through breast cancer, a battle with breast cancer. And so that was so meaningful because she lives far away. It was so meaningful for me to be able to be there for this woman. I went and got her extra ice, I left flowers for her. I coordinated extra with a company that delivered like a recliner specifically, you know, for people who are recovering from that surgery. And so I do, I just get a lot of joy from it. You know, apart from money, it is like a true creative outlet for me. The, the family that came in and stayed, the very first one that we stayed, I. It was around Christmas time and I went and got gingerbread cookie making kit. Like all of this stuff costs five, five to ten dollars. And Ashley, I know you, I've seen that you do a lot of similar things. It does not take much to really exceed someone's expectations. And it brings so much joy to me personally to be able to do that.
- [53:02]
A
Yeah, I definitely prefer to set the bar low and then to exceed expecting well Alex, thank you so much for joining us today. We really appreciated having you on. Where can people reach out to you and find out more information?
- [53:15]
C
Well, you can follow us on Instagram. Our continued real estate journey at the Realestate Reeves is our Instagram handle. We're hoping to Our next our next trick of our sleeve is we're hoping to do a live and flip next year. So we're actually about to go look at a property right now to potentially buy for a new primary and then turn our primary into a rental property. So that's our plan.
- [53:38]
A
Great. Well, we'll have to have you back on when you complete that live and flip.
- [53:42]
C
Thank you.
- [53:42]
A
I'm Ashley, he's Tony. And thank you guys so much for joining us for this episode of Real Estate Rookie. Foreign.
- [54:08]
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.
- [54:27]
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.
- [54:39]
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.