← Real Estate Rookie
Loading summary
Transcript130 lines
- [00:00]
A
Today's guest was on the show before, but what's happened since then is where the real lessons are. Because buying the deal is one thing, refinancing it in this market, that's a whole different game.
- [00:11]
B
So if you've ever wondered, you know, what actually happens after the episode ends, after the Instagram posts. This is the behind the scenes of how a real estate investor navigates a refinance in today's lending environment.
- [00:28]
A
This is the Real Estate Rookie Podcast.
- [00:30]
B
I'm Ashley Kerr and I' Tony J. Robinson and today we're welcoming back Danielle Daly. She's previously been on our show talking about her investing journey and now she's back to catch us up on what's changed. And we're going to go deep on a refinance you just completed, Danielle, welcome back to the show. You are now a two timer on the Rookie podcast. Happy to have you back.
- [00:49]
C
Hello. I feel honored. Not sure how I got here, but you know, second time's the charm. Thanks for having me.
- [00:55]
A
You've also been on the BP Rookie panel at bpcon several times too, also. So a familiar face to the rookies. But for anyone who didn't catch your first episode, give us the 60 second overview of who you are and kind of what you've been working on since we last spoke.
- [01:14]
C
Yeah, 60 seconds. Oh man. I will do my best. Well, hello everyone who I do not know. My name is Danielle Daly. I currently work at BiggerPockets on the advertising sales team and I'm also an investor. So last time if you saw me on the Pod the Berkey podcast, I had just bought my first property. I am now on property number three. So since then I've been maintaining co living strategies and I'm also living in my house on my own. So my first two properties are now fully rentals but really been working on getting a property per year since we last spoke.
- [01:49]
A
So the first two properties were house hacks and this third property, you're not house hacking.
- [01:54]
C
So I'm sort of house hacking. I'm actually renting out to my brother right now.
- [01:58]
B
So I. Oh, that's the easiest house hack.
- [02:00]
C
Yeah, it's the easiest house hack. But I did go into this without wanting to house hack and then he decided to move so it worked out great. But you know, I just hit a point where I think I'm kind of not wanting to have roommates anymore. So that's the go back really quick. That's the shift in strategy.
- [02:20]
A
Besides the house hacking element, have you done any Kind of short term rental, long term rental or has it just been kind of the co living having roommates in the extra bedrooms?
- [02:33]
C
Yeah, so I've only done co living right now. So it's long term strategy, co living. I'm looking at leases anywhere between 6 and 12 months. I am considering diving into midterm rentals as the market does sort of shift, which I'm sure we'll dive into during this episode. But yeah, I've only done long term
- [02:48]
B
as of right now as your portfolio has kind of shifted and grown. Danielle, I guess is your, is your. Well you actually just kind of hit on that. Hold on, let me see. There was a different question that I want to ask too. Oh, I think you had actually both of those. Actually, let me ask one follow up question. So now that you've turned your first two properties into like true investment deals, give us the quick numbers. Like what, what was it doing when you lived there and what are both of those properties doing now in terms of cash flow?
- [03:15]
C
Yeah, so when I was living there, I'll just go each property at a time. So the first property I was making about 250 bucks a month. So it was pretty minuscule. But I also lived for free. Right. So that was my first house, I live there, rent, rented out the rest of the rooms. And then my second property between having now two at that point. Right. Living in the second house, hack, renting out the rooms, I was breaking even. So between both properties, still paying nothing, there was no cash flow but I was not paying anything to live. So the first two properties, what would
- [03:48]
A
you have had to pay if you were renting a room? Very similar. And like if you rented your room to yourself, like how much were you saving in rent?
- [03:56]
C
There's two ways to look at that. If I was going to go rent a room in someone else's house, hack call it about 900 on average in the Denver metro. If I was going to go get an apartment, that's a different story. That could be upwards of 2500 to have a one bedroom apartment within Denver. So big range obviously, but definitely saving at least call it 8 to 900amonth at the low end. If I was renting just a room
- [04:19]
A
in a house and you're making $250 cash flow and you're building equity in a property that is appreciating and your tenants are paying down the mortgage.
- [04:29]
C
Exactly. Yeah, it's, it is a no brainer. Absolutely. It was, it was an amazing thing to do. It's gotten me to Where I'm at.
- [04:37]
A
So today, what has been, like, one of the biggest lessons that you've kind of learned through this, you know, experience that you've done so far in your investing journey?
- [04:46]
C
It's a great question. I think there's, there's a couple of different lessons. The first one is you should have reserves. Like, I am all for being a little bit risky, right? It's just me. I don't have a family yet, so I'm all for it. However, I think I got lucky with my first property where the entire year, nothing went wrong. Like, literally nothing. I think I maybe called a plumber once in the first year. So I'm like, oh, real estate's easy. This is great. I'm making 250 bucks a month living in this property. Living for free. This is awesome. I think that reality hit me when I got the second property. So the second property. Love it. It's a great property. So this is not a complaint. However, the things that went wrong were almost like, almost funny, for lack of a better word. Like, I was like, this is crazy. This is like a movie. Like, I had a couple flooded bedrooms that happened in that house, dude, that was a whole other story in itself. Had a lot of plumbing issues, had to get a new AC unit, ended up having to get an entire H vac unit for one of the houses. It was just like thing after thing that popped up. So it made me realize, like, wow, okay, I need to have reserves. And the reason that is a huge learning lesson is when I got to the third property, my tti, my debt to income ratio was actually a little bit too high. So I was not even able to get a loan for that H vac system. That was quite expensive. So I would have been in a little bit of a tough spot if I did not have reserves to be able to pay that in full. So definitely have reserves. And then the second thing is I have to remind myself, and for all of you listening, definitely keep this in mind. This is the long game. Like, we're playing a long game here. This is for me, houses that I plan to hold for the next at least 30 years. So I have to remind myself when expenses like capex do pop up, that, okay, we're in it for the long game. This is part of the expense of owning a home. This is just part of the process. And if I can just hold on, I will be like, completely set for retirement with just these three properties. So those are my two, my two learning lessons.
- [06:50]
B
Danielle, you talk about reserves. How Much do you feel is like maybe a baseline? And then Ash, maybe even a question for you too, like how much is too much? Because I also think you can get to a point where you've got too much sitting in reserves, right. If you just always kind of continue to collect that. So how did you kind of set a threshold for yourself, Danielle, on what the minimal amount of reserves are that you want for a property?
- [07:12]
C
That's such a good question, Ashley. I definitely want to hear from you after in terms of the too much because Tony, just as a quick side note, I really love that you asked that because I'm actually diving into just setting myself up in terms of investing outside of real estate, making sure I'm diversified. So as I've gone down that rabbit hole I realize if you have money sitting there, you're just, it's wasting away, right, due to inflation. Like I don't want it just sitting in my account. So for me I'm trying to figure out how much do I need for real estate versus how much do I want to allocate to other investments and potentially more real estate. So for me that number is about 10,000 per property. Let's say 15,000 per property if you really want to be like a little bit more risk averse. But I would say at least 10,000. So for me, 30k, having it cash liquid or in like a high yield savings, like something that I could just pull out very easily so that I have it in case something like that pops up. Because I don't think something crazy would pop up in all three houses at the same time. But you also never know. So that's my number actually. I would actually love to hear what you think is too much.
- [08:17]
A
Yeah, in mine fluctuates. Oh, we're going to buy a house. Okay. Let's pull money out of reserves and let's use it to buy the house and then we're going to pay it back when we finance. And so it's constant money management and moving. But baseline is between 30 and 50,000. I keep in a savings account. Like I would say it probably never drops below that 30,000. And I have about, I think I'm at 20 properties now. But also small, like single family homes are 1100 square feet, you know, so my roof replacement costs, my H Vac replacement costs are not as large as what are you buying? Four five bedroom homes up to Denver? Yeah, yeah, yeah, in Denver. So my capex expenses are way lower per a property. But one thing that I also do is I have $200,000 line of credit. So I also keep my line of credit for if I ever needed to pull off of it. So when I do do the no, no. And pull money out of my reserves to, you know, pay for the down payment on a new property or something like that, I have my line of credit still. But then I work to replenish my reserves. But I used to think that I needed a lot more. But I'm definitely not as conservative as I used to be. Kind of knowing in my head, okay, not all of my H VAC systems are going to need to be replaced at this single moment in time. So I've definitely am not as conservative as I used to be too. But I think that having the line of credit as kind of a backup has really, like, helped me with that too. But as a rookie, I recommend being super, super conservative. And I also have other income streams that I can pull from if I needed to put cash in. But I'm also keeping my, like, besides my savings, just my actual property accounts. I usually leave like, you know, a pretty healthy amount of cash just sitting in those two that. Just from the cash flow building up in there too.
- [10:27]
B
Yeah, for me it's slightly different. Right. I mean, because we a. We have a lot of different partnerships that kind of infiltrate our business. So I can't have just like one large bucket. So we actually do have a separate reserves account for every single property. And the goal for us, again, it depends on the property. For our bigger properties, we try and get closer to maybe like six months of reserves. And then on the smaller part, like, you know, I have, you know, tiny homes that are less than 400 square feet that were built in 2022. I'm not super concerned about having a lot of money in reserves for those. So maybe it's, it's three months of, of reserves for those properties. But we do have our separated out by property. And the reason that we, you know, it's a little trickier for me is because if property A has an issue, I can't necessarily tap into the reserves for property B because they're two separate partnerships. Right. So we really do have to make sure that each individual property is funded appropriately.
- [11:16]
A
We're going to take a quick break, but when we come back, we are going to cover Danielle's refinance. And what you need to know if you're planning to do one too. We'll be right back.
- [11:25]
D
There are two kinds of real estate investors. Those who have reviewed their insurance and those who think that they have most don't realize their coverage wasn't built for how they actually invest. Vacancy periods, rehabs, short term rentals or LLC held properties. These gaps surface only when filing claims. That's why investors work with nreg. They specialize exclusively in real estate investors understanding portfolios, risk at scale and cash flow protection. One claim can erase years of returns. If you own a rental property, don't assume you're covered. Have NREG review your insurance with someone who gets investing@nreg.com bppod that's N-R-E-I g.com bppod my home and I have a
- [12:02]
E
very one sided relationship. I work hard to pay for it and it mostly just sits there. It's got no side hustle, no part time gig, just four walls living its best life while I'm covering the mortgage. Here's something I recently learned. When you're away from home, it doesn't actually have to sit empty. You can list your space on Airbnb and now there's something called the Co host network which makes it a lot easier to do and takes a lot of the pressure off getting started. A co host is a vetted local with hosting experience who can help take care of all the details. They can help set up your listing, manage reservations, message guests, and even provide on site support. So hosting stays stress free and manageable. So instead of your home just sitting around waiting for you to come back, it could actually help bring in a little extra income while you're away, whether you're traveling for work, visiting family or just taking a vacation. And that feels like a much healthier relationship. Honestly. Find a co host@airbnb.com host a lot
- [13:01]
A
of businesses do not start as businesses. They start as side hustles. Shopify helps you turn that into something real. Shopify powers millions of businesses and 10% of all E commerce in the US. You can build your store, reach customers through email and social campaigns, and manage everything in one place. If you get stuck, there's 24. 7 support start hearing with Shopify sign up for your $1 per month trial today at shopify.com/riotic. Go to shopify.com/rievie that is shopify.com rookie okay, welcome back. So Danielle, let's start. Why did you even decide to refinance your property in the first place?
- [13:44]
C
Well, I've been wanting to refinance at least one of my properties since buying all of them. Unfortunately I missed the wave of the 2020 through 2021 crazy interest rate era. So unfortunately all of my properties and Then you.
- [14:00]
B
I don't, I don't want to, you know, pour salts on the wound, but. Ash, what's your lowest interest rate right now?
- [14:04]
A
I didn't buy anything when interest rates are low and I finance. So my lowest interest rate is I think a 4, 4.25.
- [14:12]
B
Got it. My, my lowest right now is a 2.65%.
- [14:15]
C
Oh my gosh.
- [14:16]
A
So every time you do bring this up on an episode, Tony, it is.
- [14:20]
B
I'm pouring salt on your wound too.
- [14:21]
A
Yeah. Affecting me too.
- [14:24]
C
I don't want to pour salt in the wound, but I'm gonna do it anyway. That is half of mine. My lowest is. What is it right now? I think it's actually 5.1. So it is pretty, it's pretty, pretty good. But my second property is 6.6. And then my third property that I bought was a 7.1. I say was because that is the one I decided to refinance rates basically got down to. I mean, they're, they're around 6 right now, but they were down to like 6.2, 6.3 ish when I went to refinance. And I have a really great lender who helps me watch rates and he actually reached out and said, hey, this could be a good time to look at doing a refinance. So decided to move forward with it and we'll get into the numbers, I'm sure. But it just was something for me to reduce my, my monthly mortgage because that's what I care about, right, Is having the lowest expenses possible over the long term.
- [15:19]
B
And as of this recording, I just saw this news earlier this week, but rates dropped below 6% for the first time in I think like three years. And I just pulled it up right now and the 30 year fix is at 5.98% percent. So we're just under 6. But there's, you know, I think 6 was like. And just based on, you know, from people who are much smarter than me. What a lot of folks are saying is that there's this psychological barrier at six and once we get below six and that number swaps from a six to a five, that starts to change the buyer psychology. And hopefully we'll get more people kind of coming back into the market and kind of building up the, the, the real estate industry again. But with that, as more buyers come in, so too does the, you know, maybe the competition and, and we put some more upward pressure on prices. So I'm really curious to see how rates and supply and buyers kind of play out for the Rest of this year, because five, we haven't been here in so long, it feels like. So, yeah, we'll see what happens.
- [16:11]
C
Yeah. And even, like, that's a great point too, Tony. On that note, there's also, I think, for rookie investors, like, we're just getting started, who have their first or second properties, you want to figure out like, one, how much reserves do you have on hand? Right. How much. How much is your income? Like, how much money do you have to be able to spend on a refinance? Because it does cost money. Right. So for me, we ran the numbers. It was a pretty low cost. I'm in a position where I have the extra cash, and so I wasn't going to sit here trying to time the market. I kind of had a feeling we would get below a 6 at some point this year. But I also knew I can always refinance again. That's number one. Technically, you're supposed to wait six months, but some lenders will work with you. You could just do it again. But two, it was a low cost for me because of a few different factors which we can dive into, but it was a low cost. So for me to save, to have savings for my mortgage moving forward, it was worth it to me. But I think it's more of like a personal thing at that point of someone trying to wait and time the market versus being okay with the savings that they could lock in.
- [17:12]
A
Now, now, Danielle, with the. The thing I think of is refinancing is like, oh, my God, all the closing costs I have to pay again. The, the fees, the commitment fee, like, all of these things. Can you break down before we actually get into the. The loan amount and things like that as to what was the, the. What were the fees like for the refinance process and how did you decide that it would be worth it to go ahead and refinance?
- [17:37]
C
Yeah, so the closing costs, I should have had them pulled up right in front of me, but they roughly ballparking it, there were roughly about 8,000 for closing costs. So it's pretty similar to closing a normal loan when you do a refinance. The lender I work with, because I've consistently worked with him on all three properties, he offers a little bit of a discount. So it's typically in credits. So it was, I think, roughly maybe like 2,500. Do not quote me on these numbers in terms of the discount that I got towards those closing costs. No.
- [18:06]
A
We're going to fact check you at the end of this episode. Please supply the document,
- [18:12]
C
we'll never know.
- [18:14]
A
Even if they're way off, we'll never know.
- [18:17]
C
Totally be off here. But yeah, between his credit and then another thing is the timing that I closed on the loan. It was earlier this year back in, I think it was January, like late December, early January. Because of that timing, I actually didn't pay. You basically skip a month that you have to pay for your mortgage. And so my mortgage was at the time already at roughly 3,400. So that's another 3,400 towards closing costs that I basically like you pay it over the course of the loan. But considering, you know, as our mindset should be, as an investor, I don't really care about like an additional payment towards the end of the loan because I expect tenants to be paying that off. So that was also part of the savings, so to speak, of what I didn't need to pay. And then I might be missing something there, but whatever it was, it basically came down to me paying like a couple thousand dollars for the refinance. Right. Like out of pocket. So it wasn't really a huge cost to me. Uh, and then I end up saving about $250 a month on my mortgage. So if you do the back of the napkin math on that, that's taking you what, a couple, couple of years I think, to get back to, to pay off basically what you paid for the refinance.
- [19:29]
A
Yeah, probably even less.
- [19:30]
C
Yeah, even less than that. Right. Like for me in the position that I'm currently in, that was worth it.
- [19:36]
A
Right.
- [19:36]
C
For me to lock something in, to know I can always refinance again, but to spend a minimal amount for me to be able to lock in a lower rate, especially considering I also have a 2:1 buy down to complicate things even further, that was worth it to me.
- [19:51]
A
Right.
- [19:51]
C
For some people it might not be. At that point in time it wasn't a super reduced rate. It went from a 7:1 to a 6:6. Right. So it's, it's something. But for me it made sense. And at this point in time, Danielle,
- [20:04]
B
were you able to wrap any of those closing costs into the actual loan itself?
- [20:08]
C
That's a great question. Actually, I'm not a hundred percent sure.
- [20:11]
A
Well, I guess. Did you take more? We could kind of get into that piece, Tony, as to like if she took more. And did you. I guess the way to answer that is did you take, bring like write a check at closing?
- [20:23]
C
Yes.
- [20:23]
A
Okay.
- [20:24]
B
Because I refinanced my primary residence when rates got super low. Right. I was able to get, I think when we bought our house, this was in 2018. We're like a 4.7 or something, or 4.8 or something like that. When we bought. And when race got super low, we refinanced, we got down to a three. And I just looked it up while you were talking through your numbers, and our total closing costs were 11 grand, but we had zero out of pocket cost for that, and it just got rolled into the new loan. So we were able to refinance without actually spending anything out of pocket on this deal. So I'm just. I was, you know, and every lender is slightly different on how they allow you to do that, but that was the benefit for us.
- [20:58]
A
I have a question, because I've never refinanced a property that had escrow. So in the escrow. So is your escrow money rolled over to the new loan or as part of that closing cost, you prepaying for another year of insurance and property taxes?
- [21:17]
B
That is a good question. And I'm looking it up here.
- [21:19]
A
I don't consider that really a closing cost because you're going to pay that anyway. So that would even, like, reduce the amount of fees that you're paying.
- [21:29]
B
Yeah, so that. That was actually separate. Right. So they. I did have to prepay some of, like the insurance and property taxes, but that 11,000, that was the appraisal, the origination fee. Right. Which is the. The majority of that and then, you know, all the other escrow fees.
- [21:44]
A
What was the origination fee on that?
- [21:46]
B
It was 8 or 8800.
- [21:49]
A
Oh, my God. Wow. My small local bank charges like $1000.
- [21:54]
B
That's crazy. Then I had another 500 for the appraisal and then another 1800 dollars in escrow fees, but zero out of pocket.
- [22:01]
C
I wish I had that. Definitely.
- [22:04]
A
Okay, Tony, let's. Let's just wrap up your example real quick. So you paid that or that money was wrapped into your loan. How did your payment change? And, like, how much were you saving each month?
- [22:17]
B
Yeah, gosh. I. I would have to look up what my original principal interest and taxes payment was, but after this refinance, it was $2900. Was the. The principal interest, taxes, and insurance before that? We were definitely. I don't know, I think it was like 35, maybe 36, if I recall.
- [22:34]
C
Correct.
- [22:35]
B
So it was a. It was a pretty big reduction in our actual monthly payment.
- [22:37]
A
So you recouped that money in the same, like, less than two years?
- [22:41]
B
Yeah, easily. Easily, easily, easily. And we locked in this, you know, 30 year fixed 3% rate.
- [22:45]
A
Well, really, you didn't even have to pay it out of pockets there.
- [22:49]
B
Right. So it was like a no brainer
- [22:50]
C
for us, you know, that's substantial. Yeah. I wish we were in that kind of market, unfortunately. Numbers.
- [22:57]
B
Different times. Different times.
- [22:58]
C
Definitely different times. Yeah.
- [23:01]
A
Now, Danielle, let's go over the numbers of your house. What was the purchase price, your original loan balance, what did it appraise and what did you take actually at the refinance?
- [23:11]
C
Yes, my original purchase price. This was a year ago, roughly a year ago. It was December 25th or sorry, December, that is not a year ago, December 24th. I originally bought it for 565,000 and it did actually appraise at the same value it was again only a year later. The loan amount before the refinance was 528,000 and it was 524,000 after that year. Since most of you know, most of it has gone to interest versus principal. Most of my payments, unfortunately, which is
- [23:44]
A
so depressing to look at when you look.
- [23:48]
C
It's so sad. I paid off 4,000 in principal in a year. That's like one mortgage payment. Great. But hey, progress is progress. And I didn't pay most of this because of my first two rentals having more than half of this mortgage. So there's that for the numbers. In terms of rates, the rate was initially 7.1, but I actually did have a 2:1 buy down. So the 2:1 buy down being you're locking in that 7.1 rate. But for the first two years you basically have a rate that is a point lower each year. So for example, year one was a 5.6 rate that I paid at that house it was about. Or at this house, it was about 3,400amonth that I was paying for the mortgage. And then year two it was structured to be a 6.6, which would have been about, call it almost 3800, a little bit under that for the mortgage. And then I would have been locked in for years three through 30 at that 7.1 interest rate, which would have been a little bit over 40 or, sorry, 4,000amonth for the mortgage. So that's what it was. I basically locked in a 6.6 rate. But because I was only halfway through the 2:1 buy down, I'm currently paying at a 5.6 rate. Right.
- [25:05]
B
They still honor the 2:1 even though you really.
- [25:09]
E
Wow.
- [25:11]
C
Yeah. So it's kind of cool. So like it worked out where I am. Yeah. Like I'M right now paying about 30, 30 500amonth. So pretty similar payment to what I was paying or. Sorry, no. Now it's at a 6.6 because I am in your. Or no. Yep. No, 5.6 because they honored it and then I locked in a 6.64 years 30. So they're, they're honoring being able to stay within that two one buy down.
- [25:37]
B
I was just gonna say, Danielle, I actually never knew that when you refinance it, if you were on a 2:1 buy down, that the new loan would be able to honor that original buy down. I've never heard of that before for. So I just learned something new. So for all the rookies that are listening, that's a question to ask if you did buy something and you're refinancing and you've got some sort of buy down, ask if they can honor that going into the new loan. Because imagine if you went from a 7.1 to like a 5.98 what we just saw today and you still got that buy now, now you're in the fours, which is, which is crazy.
- [26:06]
C
Exactly. And that's what. That was kind of what made me want to do this. Right. Is that they still honored that because in theory, if I, I'm in year two of the buy down right out of 6.0.0.6. So if they didn't honor that, I would just be kind of like there wouldn't be a huge sort of upside because I could have saved another year of money right. During that two one buy down. But so it kind of, it made sense, right. Like for me. But it is, you know, worth noting. I still paid a little bit out of pocket.
- [26:33]
A
Right.
- [26:33]
C
It just in my situation made sense. And if I get the chance to do another refinance, I probably will. Right? Like if it's, if it makes sense.
- [26:42]
A
At that time with the, with this. When you switch loans, did you stay with the same loan company and is that part of why they honored it?
- [26:50]
C
That is another great question. No. So my lender, he was with a specific company and he actually switched companies. But he's still someone that I love working with. So now I have a loan that is with a different provider versus my other two loans. But like, realistically, at first I, I'm very kind of like detail oriented and sort of OCD where I'm like, I want them all at the same place. And I know that sounds like such a small minute detail.
- [27:15]
A
No, trust me, that would be so nice. Like I have a couple loans with shellpoint. And like, their dashboard is like, here's this loan, here's this loan, here's this loan. I'm like, oh, if only all of my loans could be. And then, you know, one just got sold, of course, to somebody else. And now it's a new dashboard and stuff.
- [27:33]
C
Business idea for whoever wants to create that. Right. Like some sort of consolidation platform where you could sell, see all your loans and just access it through one. Through one platform dashboard. That'd be great idea. But yeah, no, I just have basically two different loan providers now. But they're. It's simple. I mean, it's the same. The dashboard is the same. It's just two different logins, so.
- [27:53]
A
Which seems minuscule, but it actually gets annoying.
- [27:57]
B
Well, Danielle, walk us through the actual process for the refinance. Like, you know, from the moment that you decided to, hey, I think I might want to refinance to actually sitting at the closing table. What were those steps in between?
- [28:10]
C
Yeah, so it was actually very simple and it really replicates buying a house. Like, it replicates the loan process of just a normal purchase, aside from it being one, a little bit more simple. Two, you just already kind of have experience. So I already had the documentation and the paperwork ready of what was needed. And three, I was actually able to close virtually, which I don't. I would assume you might be able to do that maybe with a regular loan as well. But with this, I was able to just have like a. A notary online and just be able, like sign it. And everything was done virtually. So it was much more simple. But realistically, it was a very similar process as buying a house in terms of, like, the paperwork that's needed. It takes a few weeks. You're working with your lender just to kind of get what's needed. But it was. It was really simple. It's just basically providing a bunch of paperwork and making sure that you run through the numbers with your lender and you understand what you're committing to.
- [29:06]
B
And what kind of loan was it? Was it like a traditional conventional loan or some other type of, you know, super secret refinance weapon?
- [29:13]
C
I'm not that cool yet. I'm not that experienced. We just. A conventional. This is standard conventional.
- [29:20]
A
Was it still your primary at the time that you got to do it? Refinance it as a primary, or did you have to refinance it as an investment loan?
- [29:28]
C
Yeah, so this, luckily, is my primary.
- [29:30]
A
Oh, okay.
- [29:31]
C
Okay. Yeah, that's a great point. Just to call out is that my first two properties, if I ever want to go refinance that. Those would be investment loans or. I don't know if that's the proper word for it. But having an investment loan means a little bit of a higher rate, right? So, like, with my primary, is it. That's another reason that I felt not at all pressured, but I felt like this was the right time to do it while I lived here, just to not even worry about the market. Don't really care if interest rates go up or down. Obviously I want them to go down, but if they don't, like, let me lock it in now. And that's what I mean by not caring what happens in the future. I don't want to time things while I'm living here since I potentially will move again. This isn't like my forever home, necessarily. I wanted to just be able to do it now while I had that lower rate of it being a primary.
- [30:18]
A
And then after that, you've got to get a HELOC before you move. So you have the HELOC on the property.
- [30:24]
B
Hey, get all those in place.
- [30:26]
C
Yes, you should. That's on my list.
- [30:28]
B
I'm actually going through a HELOC process right now in my primary, and they don't even do like a. Like a true appraisal on the property. So just like a virtual kind of desk appraisal where, you know, they just do like a quick summation of what they think the value is. Was it the same process for the refinance, or did they actually do a full appraisal?
- [30:47]
C
So what's interesting is originally they weren't going to have to do an appraisal. And it was. I don't remember the exact reason, to be honest, offhand. I just know my lender was like, we're good. We don't have to do one. We'll be able to get away with it. Probably just because it was so soon that I bought the property. And unfortunately, that actually changed throughout the loan process. And so this is one thing worth noting. So because of the relationship I have with my lender, the appraisal would have cost, I think, like 800 bucks or something. Like, it's somewhere between five and a thousand bucks to do an appraisal that I would have had to pay out of pocket. And my lender ended up covering that cost just because originally I was presented with not having to do an appraisal. So that would have been slightly frustrating to be like, all right, hang on. Like, I was told one thing. So he was great about just covering this Cost for me, but we did end up needing one.
- [31:35]
B
And then what was the time frame from like start to finish to actually get the refinance done? Was it a typical 30 day time frame or was there, you know, was it maybe faster because it wasn't as involved of a, of a line.
- [31:45]
C
Great question. It was a little bit less. It was like three and a half weeks. So very similar to a normal, a normal time frame by, you know, faster by a few days.
- [31:52]
A
Tony, for the heloc, I've never actually gotten a HELOC like on my primary residence, just investment properties. But what is the timeframe looking for that? Especially if they're doing just a desktop appraisal? I would assume that it would be an even shorter timeline.
- [32:05]
B
Let me, I'm going to, I'm going to tell you right now because it's, it's moving pretty quickly, I want to say. And I'm like looking up when, when I started that, that application with them and I want to say that I started that maybe 10 days ago and I've already got a conditional pre approval. I'm like in the final stages of underwriting where there's Sachs and Flex and final documentation. But it looks like potentially next week we should be at a point where we're closing. So we're talking start to finish, like potentially less than three weeks, which is insane. I wasn't expecting it to move that quickly but, but it is now. Part of that I think too is that I've been like just super on top of it. And much like you, Danielle, just being a real estate investor, you tend to have a lot of those things that they request just kind of like already dial up and saved in a fold that you can upload quickly. So I would get an email about like, hey, we need this and I'd have it up to him like same day. Right. So I think me really being on top of it has allowed it to move more quickly. But I mean, yeah, less than three weeks and we're able to tap into all the, all the equity.
- [33:08]
A
Are you using the same like bank or lender that you have your mortgage with for that property? No, I didn't know. Maybe like because they already have a lot of the information.
- [33:18]
B
No, yeah, it's my bank, right. I have like my, my car loans with them and you know, they're just like a super easy to use credit union and I just call them. I was like, hey, what do you guys have? And ends up working out great.
- [33:29]
A
What's your, did you get an introductory
- [33:31]
B
rate I did and it was like five point something. You know, you have to like put a certain amount on it to start with. But I'm like, I could probably swing that. And then yeah, it's like five something I think for the first however long. So it's pretty, pretty solid, you know. All right guys, we're going to take a quick break, but while we're going, if you have not yet, please subscribe to the real estate rookie YouTube channel. So you can not only hear mine and Ashley's voices, but see our lovely faces. You can find us at Real Estate Rookie and we'll be right back afterward from our show sponsors if my house
- [33:59]
E
had a resume, it would probably say great at structure and not much else. I'm the one paying the mortgage. My house mostly just stands there looking supportive when you're away. It doesn't actually have to sit empty though. You can list your space on Airbnb. And now Airbnb has something called the Co Host Network, which makes it a lot easier to do. A co host is a local, experienced host who can help manage all the details. So hosting stays stress free and manageable. So instead of your home just sitting there while you're away, it could actually help bring in a little extra income. Find a co host@airbnb.com host people love to call real estate passive income, which is interesting because most of the investors I know are very busy. Busy finding deals, busy managing teams, busy worrying they picked the wrong market. Rent to Retirement flips that model. They help investors buy turnkey new construction homes, often 10% below market value in top rental markets across the country. Their local teams handle the build, the property management and the details so you don't have to. In some cases, Investors even receive 50 to 75% of their down payment back at closing. And there are interest rates as low as 3.75%. They've been trusted partners with Biggerpockets for over a decade, and if you want to learn more, visit biggerpockets.com retirement when
- [35:17]
D
I bought my first rental, I thought collecting rent would be the hard part. Nope. The admin crushed me. Every night was receipts, tax forms and checking who was late on rent. I kept thinking, if this is one unit, how do people run 10? Baselane changed that. It's BiggerPocket's official banking platform that handles expense tracking, financial reporting, rent collection, and even tenant screening all in one place. It's the system I wish I had from day one. Sign up today@baselane.com biggerpockets and get $100 bonus Baselane is a financial technology company and is not an FDIC insured bank. Banking services provided by Threadbank Member FDIC
- [35:47]
E
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 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 bp market 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 tax season reminder for all the real estate investors listening. If you own rental properties, short term rentals, commercial buildings, basically anything that's not your primary residence, you need to know about Cost Segregation. It's an IRS compliance strategy that lets you accelerate depreciation on your properties, which means you're paying less in taxes this year and keeping more cash in your pocket for your next deal. Cost Segregation guys is the go to firm having done over 12,000 of these studies with 500 million in total depreciation identified. Head to cost segregationguys.combp to get a free proposal and see your potential tax savings.
- [37:28]
B
All right, we're back with Danielle. And now that you've gone through this refinance and you're at this kind of next phase of growth in your investing journey, what does the next version of Danielle as a real estate investor look like and what are you intentionally doing differently this time as you go into your next deal?
- [37:45]
C
That's a great question. Just to be completely transparent, I am not looking for a deal right now. I'm on a little bit of a pause from buying my next property though. I love real estate and absolutely plan to buy more, but I think I'm just transitioning from co living. I want to kind of take a pause on that and potentially get into multifamily in the future or something that is not co living. And I love co living so don't get me wrong, love it. It's been fantastic.
- [38:14]
B
Let me ask any right, like why, why shift away from that strategy if it's worked well for not necessarily co living in the sense of like co living plus house hacking but just strictly co living. And the reason I ask is because, yeah just renting by the room because we actually have a lot of investors that we've interviewed who have leaned into that strategy and I, I think about the nose in the Pacific Northwest who you know, buy four bedrooms and turn them into eight bedrooms. Right. Like there is I think a lot of momentum in that strategy. So what, what's what for you specifically is making you lean towards something else versus where you already have some experience.
- [38:48]
C
Yes, it's a personal decision. Right. Like co living is an amazing strategy. I absolutely make more cash flow like objectively by renting by the room versus renting to a family. But I think totally. Tony, you touched on most of the reason that I think I'm going to make a switch is that it's becoming pretty saturated. A lot of people are in the market in this co living or a lot of people are doing this co living strategy now. So it's getting to the point where it's a little bit saturated and really competitive on pricing to where you have to list rooms for a lot cheaper. So like when I first, this is just a very like basic example but when I first listed my first property I got about 950 per room. I for that same house am listing rooms for 850 or lower between 850. So rent, I'm not saying rent has necessarily fully gone down as a whole in the Denver metro but specifically with house hacking it's just really competitive. Right. So rates or rent is slightly reducing in multifamily and that pushes downward pressure on renting by the room to be a cheaper option. And then when you have more people doing that you have to be more competitive in order to make your room stand out. So I think that's why I wouldn't necessarily want more. But I do continue or I do plan to continue maintaining my co living properties as co living strategies. I don't plan to convert those yet because the numbers would not make sense. The second thing to note on co living is if you are not self managing it is more expensive to hire a property manager. So call it anywhere between what like is it 10 to 12% maybe to hire a typical property manager called Ballpark. It would be closer to that like 15 to 18% to do or call it 15 to 16 or 17. I've seen on the high end to manage a property that is co living. So I eventually would like to be hands off. That is my next phase, my next version of Danielle is to be a little more hands off with my properties. I've been so hands on, I manage literally everything. So that is part of why I would want to not necessarily purchase more of those. I just, I think that that would either a, be more work for me, right, or two, it would be more money taking out of my cash flow versus me just having a family in there and then having them pay utilities and having a property manager be a little bit cheaper. So that's at least my, my thought process.
- [41:19]
A
I think there's a lesson in this story and is that you can build a strong foundation with something like you have with co living, but then you also have to be flexible to pivot as the market changes, as your strategy changes. And I think that's exactly what you're doing. You know that, you know, this strategy has worked great for you, but it's also time to pivot and not, you know, and maybe even like diversify a different market, a different strategy, things like that. And that's such a great attribute to have is to recognizing when it is time to pivot and change your strategy into something else. But Danielle, before we wrap up here, you are self managing, you have a full time job. What tools are you using to help you manage these properties?
- [42:04]
C
So I only use a couple tools at the moment, but they've been absolute lifesavers. I work or I use rent ready, right, to kind of work through all my property management needs in terms of managing tenants, running background checks, applications, my tenants pay rent through there. It's made it really, really simple for me. So love that tool. I also use Baseline, which is a newer tool. I just started using this actually. I hit the point where spreadsheets are just becoming complex and I now have a CPA and she does not like spreadsheets. You know, it's just something that it's like, all right, let's like get a little more advanced here, let's make this a little more professional. So basically this is sort of like a banking tool where you could basically have a debit card for each of your houses to be able to transact and have everything be super organized for bookkeeping. So I personally only use those two tools right now. But it's been a total game changer because the organization is key and I was 100% working from a spreadsheet for the past three over three years. So it's been really helpful to start feeling like, okay, I'm running a business. I'm not just doing a little side thing with one house and it's mentally allowed me to be a little bit more hands off. Like, of course I'm still managing the property when things come up, but having systems, processes, tools that I'm using, it makes me feel like I'm running a business. So I think I've actually handled situations that occur with the houses in a more professional and business minded manner because of using these tools, if that makes sense. So yeah, those have been great for
- [43:37]
A
me and Danielle and I both love Baselane and me specifically their bookkeeping aspect. And if you are a pro member, you also get Baselane smart bookkeeping. So all you have to do is log in to your BiggerPockets.com PRO account and you have access to these features and so many more as a pro member. So you can go ahead and check this out@biggerpockets.com. danielle, thank you so much for joining us today. Where can people reach out to you and find out more information?
- [44:04]
C
So feel free to reach out to me on LinkedIn. Just go ahead and look up my full name, Danielle Daly. You can also reach out to me on Instagram. It's Danielle F Daily D A L Y. Feel free to reach out. We'd love to connect if you're in the Denver Denver metro area, but those are probably the best ways to reach out to me.
- [44:20]
A
Well, thank you again for taking the time to join us and share your experience and also the refinance journey for yourself. I'm Ashley, he's Tony. And we'll see you guys on the next episode of Real Estate Rookie.
- [44:33]
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
- [44:51]
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.
- [45:04]
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.