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- [00:01]
David Green
Welcome to Real Talk Real Estate, the show where we cover how to build wealth in real estate with no fluff, no BS and no sales pitches. I'm David Green and I've been doing this for over 10 years. I've seen the ups, the downs and everything in between. This is the show where we pull back the curtain and show it to you too. So if you want to build wealth through real estate or you just love learning about it, you found your home. Welcome everybody to the David Green show. Real Talk Real Estate. The show where we pull back the curtain and reveal exactly what goes on in the world of real estate and business. So if you're a real estate investor, you're going to love it. And if you've ever just wondered what's it like to be full time in real estate, to be a real estate agent, to be a loan officer, to be a house flipper, a short term rental operator, a buy and hold investor, whatever it is, this is a show where you can see a full view into what goes on behind the scenes, not what you see on hgtv. I'm joined today by Don and Janelle Carlson who are here to talk about their first two deals they did and how terrible they went. Thank you guys for being on. Most people only want to come on shows and talk about their big wins and their six figure profits with no work. You guys are here to talk about the real deal. So thank you.
- [01:08]
Don Carlson
Yes, thanks for having us excited to talk about this and show the real side of real estate. Right. That no one talks about like you mentioned. And that's what we like to focus on even on our social medias is just the real side of real estate.
- [01:19]
Janelle Carlson
Absolutely. We've been kicked in the teeth so many times. We have dentures, man, it's rough in them streets.
- [01:24]
Don Carlson
We look like hockey players at this point.
- [01:26]
David Green
That's how you know that you have a good hockey player when they don't have teeth. And it's the same way that you know you have a good real estate investor. They're not walking around super excited about everything. There is a healthy amount of skepticism from all the times they've been kicked. So let's get right into it. Tell me about this very first deal. Where were you at in life? How did it get introduced to you? What were you feeling when you found out about it?
- [01:45]
Don Carlson
All right, yeah. So our very first deal was actually a partnership deal. So I was brand new into the real estate industry. I had just, we both had just graduated college trying to figure out what we wanted to do in life. And when you're confused, you of course get your real estate license, right. And try to figure things out. So that's what we did. He was a mortgage broker and I was a real estate agent and hated that, really did not like being a realtor at the time. Didn't like the schedule or anything like that. So I started looking to the investing side of things. Of course we watched the HGTV shows and how flipping is just so easy. Right. And that's something that we wanted to get into eventually. So I was talking to some people in my office about it and the broker owner of my real estate office mentioned that he was doing flips and he was doing a lot of flips every year with a partner of his. And he looked successful. You know, he had a Rolls Royce ghost and all this stuff. Very flashy lifestyle, Rolex, whole nine. Oh, yeah, like, of course he's successful, right? So I was like, oh, cool. Well, I have some money to invest. Maybe we can partner up on a deal and we can flip together. And so a couple months later, he ended up bringing us a deal. He needed some money to finish off the rehab and so he needed about 35,000 bucks and that's how much we had at the time. And so we lent it to him and for lending it, he was supposed to give us about $15,000 back. So that was a crazy good return, right? Yeah.
- [03:10]
Janelle Carlson
Three month old, pretty quick.
- [03:11]
Don Carlson
Oh, amazing. Nothing could go wrong. So I of course trusted him because he's the broker, owner of my real estate brokerage. Right. And he's in a lot of flips, he's successful. So trusted the guy, basically did a gentleman's agreement, didn't really have any paperwork in, and handed him 35 grand just like that. So super cool, very smart of me to do so. Then a few months go by and I stop hearing from this guy. You know, I'm like checking in, how's the project, all that kind of stuff. I even walked the project. It was in Montebello, California. And so, you know, like, as the months are going by, I'm hearing less and less from him, not really getting updates. And then he kind of starts ghosting me a little bit and I'm like, what's going on? And come to find out that he ended up selling the property, didn't tell me about it, and didn't get me in touch with escrow or title or anything like that so that I could get paid out and obviously wasn't returning my calls or anything like that he ended up actually blocking me, and I had to try and call him from other people's cell phones to try and get in touch with him. And then as I was trying to figure out how to get my investment money back, I was advised to try to put a lien against his house and see if that would work. And as I was researching that, found out that his house actually sold in foreclosure the day before I researched it, so that was out of the question. I also didn't know at the time that you could put liens on properties that are owned by businesses or LLCs. I thought they had to be owned by that person in their personal name. So I kind of stopped looking from there and then just tried to keep going after him and followed up for a solid few years. He did end up giving me a couple thousand dollars. We met up, like, six months, and then six months later, we'd meet up again, and he would, like, finally reach out. I'm so sorry, blah, blah, blah. But he ended up owing a lot of people a lot of money, and so that's why his house went into foreclosure. Pretty sure he lost his license and. Yeah. And so I never saw that investment again. So, yeah, that was our first deal and first partnership ever.
- [05:16]
David Green
All right, let's break down how this guy came across that got you to feel safe, because it's easy to say, I shouldn't have done it. I should have signed a contract. You hear that on every single podcast everywhere. I want to get into psychology of this and how he came across, what he said, how you felt, so that we could recognize potential scams like this in the future. He had status, at least. He projected that. Rolls Royce Rolex. That's usually a cringe thing for me, but I think you said you were, like, 23 years old, so you're not going to be thinking of it that way when you're 23.
- [05:47]
Don Carlson
No.
- [05:48]
David Green
You're also gonna be much more trusting of people. So was this a person you had some kind of a relationship with? Did they have credibility from people in your office that sort of transferred onto them? What was the situation?
- [05:59]
Don Carlson
Yeah, for sure. I mean, because he was the broker owner of my office. That alone, I was like, oh, this guy knows what he's doing. He's built a business. He's built his lifestyle on real estate. Right. So I just automatically assumed that he was successful and he knew what he was doing and he would take care of me being one of his agents. Right, right. And we hung out with him and his partner as well. Yeah, we hung out with them quite a bit. They were. I thought they were friends of ours.
- [06:24]
Janelle Carlson
Yeah. Went to Kings games and his. He had family that was, like, a longtime mortgage broker in the area, too. Like, they had. Technically, they kind of had referral partners, too, like, all around, so.
- [06:36]
Don Carlson
And another big thing that we had in common, or that I thought we had in common, was he mentioned to me that his mom had passed away and that he was doing a lot of things that he was doing because his mom had passed away, and my mom had recently passed away, and I was using her inheritance money to start this flipping. So all the money that I gave him came from my mom. And so I thought that, oh, because we have that tie, he's going to take care of me, and it's going to be okay because he understands my situation. That was not the case.
- [07:06]
David Green
So this isn't about real estate, but I still want to go there. I noticed what you just described happens to a lot of women when they're dating. So they start seeing a guy and they're like, look, if we have an emotional connection, if he cares about me, he's going to be less likely to hurt me. He's not going to take advantage of me. He's not going to lie to me. So rather than vetting the character of the man, which is what I would recommend that women do, is this a guy that feels comfortable lying? Has he ripped off other people? Do. Does he have people in his life that have been there for 20 years, or is he always have a new group of friends? Those would all be things I'd be concerned about. You'll hear them say, like, well, he showed he cared about me because he says sweet things. He writes me love letters. He. He's empathetic. Right. And it. It gives you this feeling that this person wouldn't rip me off if they care. But as you learned, I don't know if narcissists is right or. But sociopaths are probably a better way to put it. Don't care about hurting other people. They just want to get that next check coming in to buy the next Rolex. And I would guess from what you're describing, he probably had other deals going on with other people and some kind of system where money is always coming in from one person to pay for the projects that he already has. Was that the situation, or was he a legit investor and these deals just went bad?
- [08:18]
Don Carlson
No, this guy was not legit. He was 100% running a Ponzi scheme with real estate. So, yeah, it was kind of crazy. And he was still living this lavish lifestyle, which was nuts to see that knowing this guy has ripped off so many people. And he was still living the high life, like, a year after this deal happened. We saw him at a Mike Ferry event in Vegas, and we were in a suite that one of our lenders had to kind of, you know, wine and dine everybody. He walks in with the girl, wear. Wearing red bottoms. And I'm like, you're effing kidding me. And then I hear that he came and flew in here, flew to Vegas on a jet, one of the private jets. I was like, you're lying. So I went up to him because obviously you have to be kind of nice. And I was like, introduce myself to the girl, said hi to him. And I was like, did my money buy those shoes for you, or did my money buy the jet that got you here? Because I still haven't seen it. And so, yeah, he was still. He's. I'm sure he's still ripping people off. He. I don't think he's going to change. But what was different about him, too, was that a lot of the people in our sphere, like in the brokerage, they were friends with him for quite a bit of time. Like, they. They were doing deals with him still, even though they lost money from him. So, like, it was a weird thing. I don't know how he got these people under his spell like that.
- [09:37]
Janelle Carlson
Maybe not investing with him again, but still, like, there was, like, one of our friends was a mortgage broker and was still doing his deals and, like, stuff like that. Yeah, it's not like they're gonna lend another 100 grand to him, but, yeah, it was strange.
- [09:50]
David Green
So looking back, if Don and Janelle today go back in time to where you were at 23 years old and you see the same person, what are some of the signs that you would recognize now that you didn't recognize then that would make the little hairs on your neck go up and say, bad deal. I don't want anything to do with this person.
- [10:07]
Don Carlson
Yeah, definitely his flashy Persona, I would say, like, he wants you to think that he's successful, and most successful people aren't like that. Right. Like, and being from the LA area, we did see that a lot, where it's like everyone was kind of just, you know, they.
- [10:22]
Janelle Carlson
Yeah, they could tell you make it kind of thing.
- [10:25]
Don Carlson
Yeah, Yeah, I love that. And so, yeah, that was a big. That's a big red flag. I think now for sure. And I think also the way that he would talk to people, it was almost like he was sweet talking. He had this, like. I don't know, like, just this vibe about him.
- [10:42]
Janelle Carlson
Very charismatic. So, like, it's.
- [10:44]
Don Carlson
And. But like, in a way where it's like he's trying to get you to like him and trust him, but there's an ulterior motive behind it. Like, now. I can see it now. Like, thinking back to all the conversations, I was like, wow, you're. Yeah, so.
- [10:59]
Janelle Carlson
And not to say likable people, like, stay away from him. No, but, like, more looking into, like, referrals and making sure the correct documentation's in place, like that. That is now a standard operating procedure for us, obviously.
- [11:15]
Don Carlson
Yeah, but you get those gut feelings too, with people, right? Like, if someone's being, like, super, super nice or trying to schmooze or whatever, you get this vibe or just, like, not sure about that.
- [11:25]
David Green
So, like, trust that your gut feeling today has been. I think what we call a gut feeling is your subconscious. The algorithm that you put together over life, where you've recognized, this is bad, this is good, this is safe, this is not safe. The longer that you alive, the more data that you collect, the better decisions you make. And what we call a gut feeling is an algorithm running through the back of your head telling you, this feels bad. I would get that as a cop. When I was a new cop, I rarely ever had a gut feeling about anything. I did it for a while. I saw enough stuff. You start to get a, why is that door open that should not be open. That doesn't make sense. Or why is everybody looking that way when I would think they'd be looking this way? But you don't have a gut feeling. When you're new at 23, you didn't have a gut feeling. Right. You're sharing the things that you've learned that you used to acquire that gut feeling. And one of the things that I. I noticed about the story is he was trying too hard to make you like him. He was intentionally being likable as opposed to being authentic and letting you decide for yourself if you like him. I think there is a takeaway in that. The people that don't have anything to prove, I think, are usually more trustworthy. Yeah, they just are themselves. And if you like them, you like them. If you don't, you don't. They're not all that worried about it. But if this guy's whole livelihood, private jets, Rolexes, Rolls Royces, is dependent tricking Someone into liking him, he's going to be syrupy sweet. Right. And that's just a good lesson, I think, to take away in general, when you meet a new person and you're single and you start dating, if they're really, really good at being super likable, they've learned that's how they get their needs met is by tricking people as opposed to, well, I'm just going to be what I am and I hope that you like it, but if you don't, that's okay. Those are usually more trustworthy people, for sure.
- [13:08]
Don Carlson
Completely agree.
- [13:09]
David Green
So you get taken for $35,000. You're new to real estate. This was a really like a mentor in a sense. If it's a broker, owner of a company, this is your first time doing a deal. You could easily say, hey, I got food poisoning. I never want to eat real estate again. I'm leaving this and I'm going to do something else. How did you guys sort of digest what had happened?
- [13:29]
Don Carlson
Yeah, I mean, it was tough, right? Because you feel so stupid at the time. Like, I can't believe I did that. You know, and especially with inheritance money, I'm just like, I am just an idiot. But we still knew that real estate was going to give us the lifestyle that we wanted to live. And there was just no other avenue out there that would. So we had to make it work. Like, we didn't really have a plan B. We never really did. So we're like, we know this is, this is it. That just wasn't the right path. So we got to figure out another way to do this. Like maybe it's, I say investing long term rentals, something like we just got to figure it out. So we had to kind of lick our wounds and keep on going and just try to learn from our mistakes. That's one thing we also did, is we wrote down everything that we learned from that deals to make sure that we never did it again. And then, and even now to this day, like, we know what it feels like to lose money. So we're like, if people ever invest with us, that's something that we will never make them feel like. We do not want people to feel the way we did. So we always want to make sure our lenders are solid and good with us. So, yeah, I think that is how we just got through. We wrote down what we learned from it and just kept going. And you don't fail until you quit. Right? So we just didn't quit.
- [14:42]
David Green
I love it.
- [14:43]
Janelle Carlson
Yeah. Moving on from that too. We ended up. The next few deals that we did, we did that all ourselves, we didn't do partners. So we became really self reliant and self sufficient, so that couldn't happen again. So there was some other problems that went along with that, but that's how we course corrected essentially.
- [15:02]
David Green
Okay, so you guys now do another deal. And this is a six unit package that you found out of state. So tell me about how you found that deal, where you were when you found it. What kind of thoughts were you thinking when you came across it?
- [15:15]
Don Carlson
Yeah, so about a year later we kind of used our commissions that we made in real estate to kind of replenish our funds and our investing fund and started investing again. But this time we did it all on our own, not with any help, and we started investing out of state because being in California we had the limiting belief that we couldn't really invest there because we didn't have the money or the resources to do it. So we read the books of course, and started investing in Indianapolis area where his family was living. And we bought a triplex from a wholesaler first. And we're like, well that was kind of easy. Let's buy more stuff. So we, I found a six unit package on the mls. It was sitting for a really long time for who knows what reason, I don't know. And so it looked good. We ran our numbers and it looked like we could burr it pretty easily. So we're like, why not? It was very close to a university and so we decided to put in an offer and try to buy it and burr the sucker. So. Yeah. And it did not go well.
- [16:21]
David Green
All right, so how did you buy it was just like a standard loan. Was there any kind of seller financing involved with this?
- [16:27]
Janelle Carlson
So we negotiated it down enough to where I think we paid like 20k for the, for the six, for the six units and then we had an extra like 35, 40k to, to put into the property. They needed like they had asbestos siding and a lot of the units needed to be like redone floors, paint, kitchen, stuff like that. So ended up paying for it in cash. We first few properties we paid for like all in cash. So like we didn't have an appraisal or anything, any like other vetting sources, like third party stuff. So that's probably where some of the issues came into place. Home inspection, stuff like that.
- [17:06]
Don Carlson
Yeah, and we were working with an agent out there, but he was actually an agent in the Indianapolis area, not in the suburb of where we bought this property. And that was one of the major things that we also Learned being from LA. You know, it takes 45 minutes to.
- [17:21]
Janelle Carlson
Get to Costco, Right?
- [17:22]
Don Carlson
Like, if you're in LA and an agent there, you kind of know all the surrounding areas. Right? Like, you don't have to be hyper. Hyper local. It helps, but you don't necessarily have to be out there and in the Midwest, you have to, because things are so street by street, block by block, that you need someone that is active in that city to be able to invest correctly. So we didn't know that. So we got an agent that was working in Indy, but we needed one that was working in the suburb and in this town. So we bought on the wrong side of the river, all this kind of stuff. We did get an inspection on the property, and the inspector mentioned that there were no gutters. 1. And that the foundation looked a little soft. So definitely take a look at it and it'll. We'll probably have to repair it within the next. He didn't really give a time frame. He said it could go out in the next, like, six months or it could go out in the next couple of years. It's really going to vary. Just take a look at it when you go through the renovation process. So we're like, okay, great. Again, being from California and investing in a state, we didn't realize how important gutters were. We don't need gutters, really, what's right. I know. So we're like, okay, that's not that big of a deal. It's totally fine. So three days after we closed escrow, the foundation completely caved in. On the right side of the building. There was a massive pit, and we had to call up all the tenants because we did inherit some tenants. So we had to call up all the tenants. We had to book hotels to make sure that the tenants were safe and the foundation didn't crumble beneath their units. So we had to move them all out and address the foundation issue, get it secured, to then move everybody back in and do the whole renovation and what needed to be done. So I think it cost us an extra, like $20,000 for it.
- [19:01]
Janelle Carlson
And I got the call literally on our way to the airport to fly to Indianapolis to check on the property, but also just visit some family in town. So that was a fun call.
- [19:09]
Don Carlson
It was an absolute nightmare. It was horrible.
- [19:13]
David Green
Okay, so let's. Let's get some of the numbers of this. You said you paid $20,000. It's six units in which area it was in Muncie.
- [19:20]
Don Carlson
Indiana.
- [19:21]
David Green
Okay.
- [19:21]
Don Carlson
Muncie, Indiana, where Ball State University is. Y.
- [19:25]
David Green
There was something in this area that people might recognize.
- [19:27]
Janelle Carlson
Letterman went to college there.
- [19:28]
David Green
Okay.
- [19:29]
Janelle Carlson
That's the claim to fame.
- [19:30]
Don Carlson
It's not great.
- [19:33]
David Green
So somebody was trying to dump these things if they sold two triplexes for $20,000. So they've clearly got. Were they like condemned? Like, no one could live there. The city had tagged it up.
- [19:41]
Don Carlson
No, like people were living there. Not in a great. They weren't great units, but people were there. I think we inherited two or three tenants.
- [19:50]
Janelle Carlson
I think. Yeah, I think we inherited three tenants between the six units. And the plus was there was a property manage management company literally right behind the units. They shared like a parking lot. So I'm like, oh, it's great. And they're managing it. So, like they're right next door.
- [20:04]
Don Carlson
What can go wrong if anything does go wrong? Because property management's right there.
- [20:09]
Janelle Carlson
It's perfect.
- [20:09]
Don Carlson
Obviously. Can't miss that.
- [20:11]
David Green
Right? So you are planning on. You said $35,000 to do the renovations?
- [20:16]
Don Carlson
Yeah, Isn't that funny?
- [20:17]
David Green
Okay, of course. But I mean, you haven't done a deal before, so that's probably what you're being told and what makes sense. And then you realize the roofs are bad, the gutters are bad, the asbestos is going to be more to fix than you thought. What did that rehab bud? It end up becoming?
- [20:29]
Don Carlson
$80,000.
- [20:30]
David Green
$80,000. Okay, so now you're all in for 100 to buy two triplexes. What do you think they were worth if the work was done?
- [20:37]
Don Carlson
Oh, my gosh.
- [20:38]
Janelle Carlson
The agent said they were supposed to be 90k each. I think they ended up. We ended up selling the deal too, and we broke even on it. So it was about, about 60k a pop. I think that's what it. The math breaks down.
- [20:53]
David Green
That's crazy. And how long ago was this?
- [20:55]
Janelle Carlson
2019.
- [20:56]
David Green
Yeah, it's not that long, man. Like, people are like, what? Even though you're saying this is bad, there will be people running to Muncie, Indiana saying, give me that cash flow.
- [21:05]
Janelle Carlson
Have fun.
- [21:06]
Don Carlson
Yeah, I mean our, our very first deal, we bought for 20 grand a triplex in Anderson, Indiana, and put about the same 30 grand into it. And I think it appraised for like 60. So. And this was in 2019.
- [21:19]
Janelle Carlson
Yeah, and today I was looking at comps because it's honestly our best performing rental, which is hilarious. Cash flow is like 1500amonth or no thousand a month. And it's. I think it's a prey. It could sell for like 90. So it went up like 30 grand.
- [21:33]
Don Carlson
Yeah.
- [21:34]
Janelle Carlson
After all the boom.
- [21:35]
David Green
And how are you finding these deals? Were these on the mls?
- [21:38]
Don Carlson
So our first one was a wholesaler off of the bigger pockets marketplace actually. And then the other two was just. Yeah, on the mls.
- [21:47]
David Green
All right, what's your advice to people that are looking to buy into these cash flow markets? Because they want cash flow and they want to quit having to work and they're missing out on all those mai tais. They could be drinking on the beach while they're going to their job like a loser. What are we going to tell these people that go after these markets where they think that they're going to make it work when nobody else could?
- [22:06]
Don Carlson
Oh man, so many things. But I would definitely say one, get a hyper local agent that is investor friendly because like I mentioned, streets are so block by block. Like you can be on one street and be totally fine and the other one not. So then that was our thing with this one specifically. If we were just over the river by literally one block, we would have been totally okay. It completely changes the market and all that kinds of stuff. So get someone who is local and knowledgeable and somebody that's willing to work with an investor. Because not all agents are. They want the quick, easy, normal retail buyers. When with us, we're submitting multiple offers potentially a day. Right. So make sure your investor is willing to work with or and your agent is willing to work with an investor.
- [22:51]
Janelle Carlson
Anyone ask that asks us like, how did you guys learn how to invest out of state too? Like we traveled to the market, like if we were going to spend like 100, 200k on properties and we'd probably at this point spend over a million dollars in these markets. Like buy, buy a plane ticket. Like walk the streets. Get a feel for it. Do you, do you feel safe walking around in specific areas? Do like what do you see that? I think that helps a lot so you can get a better picture of what you're investing in as well.
- [23:23]
Don Carlson
Yeah, because we thought we were investing in a C area, you know, like perfect for like a, I don't know, decent student rental or whatever. And we ended up investing in like a D minus. Like it was not good.
- [23:33]
Janelle Carlson
Yeah, we've had, I think we had two evictions. One was arrested for, for, I think narcotics and gun charges and another eviction very similar. So yeah, tough area.
- [23:46]
Don Carlson
Yeah.
- [23:47]
David Green
Here's the catch. When you're in an area like that is you're right, you're on the Wrong side of the river, you're in the wrong block. However, those are going to be the properties that come up for sale. Because people that have the properties in the good neighborhoods that are performing wonderfully, that are these cash flow cows that everybody's looking for, don't sell them. They want cash flow just as much as we want cash flow. Right. So the ones that do come up for sale are the ones in the bad area. They're the ones that the person's like, I'm tired of dealing with these tenants and their narcotic violations and their drug running and their gun running and the prostitution. I just want to get rid of it. And I'm willing to take a loss to get out of the headache. And that looks like a big sparkling, shining deal for the next investor who's wanting to jump in and buy these things. And that's what you get marketed when you're the person going into the market that you don't know exactly.
- [24:34]
Don Carlson
Just because a deal, a house is cheap does not make it a good deal. So just don't buy it or look at it. And usually in those rundown markets or that type of market as well, landlords aren't really incentivized to take care of their properties. Right. Because their tenants are usually trashing the place anyways. So when you're buying something like that, you're usually inheriting a lot of long term problems that have not been addressed. So that, that can get super costly as well.
- [24:58]
Janelle Carlson
And our risk, our risk assessment right now is like just, there is definitely a difference between like a war zone and a C class working class neighborhood. So we try to stay out of the war zones essentially. And, but we're fine with like C C minus because those can cash flow and you just get regular hard working people in there, which we love those types of tenants. So that was the lesson we learned there too.
- [25:26]
David Green
You make a solid point. When the tenant is just going to trash the house, the landlord learns, I need to, I don't want to keep painting it, I don't want to keep fixing it, I don't want to keep putting new appliances in because they just steal them. They just let the house get trash. So it's, you're wasting money by continually fixing up properties that a tenant isn't going to take care of. That's one element. The other thing that people don't think about is you mentioned that this house didn't have gutters that's going to lead to the water pooling directly underneath the house, which is Going to lead to the soil getting soft, which is going to lead to your foundation starting to get moldy and soft. And then you have a foundation repair. When you're making a foundation repair in $1 million house and it costs $12,000, that's a very small percentage of $1 million. When you're making a foundation repair on a house that's worth $40,000, it's more than 25% of the value of the entire house. And so what you thought was cash flow isn't there because three years of it goes away when you have to replace the roof and fix the foundation. And there is an equity growth to kind of take the sting off of it. When I have to replace a roof on a house I bought in a market that appreciates like Arizona, California, Florida, usually by the time the roof goes out, even though I lost cash flow, I gained equity that was much more than the cost of the roof. So there's like a balance where wealth isn't disappearing. But when you go into these sub $50,000 market, even sub $100,000 markets, with today's inflation, you're kind of playing Russian roulette. Like, if you happen to be the owner, when that thing goes out, it's a huge chunk of the value of your entire asset that you're going to have to fix. And then how are you going to get that money back? It's not going to come from the cash flow a lot of the time, because the tenants are going to trash the house. It's not going to come from the equity. If you didn't get into a great market, what's your advice for people that are trying to find a happy balance between, well, where can I get some cash flow and how can I avoid investing into one of these death traps?
- [27:15]
Don Carlson
Yeah, similar to what he said, definitely go. And if you are looking at a stake, because that's also. So it depends where you want to invest and what your goals look like. If investing out of state makes sense to you or investing in your backyard, I personally believe that investing in your backyard is a lot simpler and easier because you can go and meet your team, build that relationship, see what's going on, and you know the area is a little bit better. Right. So if you don't want to do that and you want to go ahead and invest out of state, go and visit the area, talk some to some other investors, too. Usually investors are pretty open about what's going on and what's happening. So go to those local meetups while you're there visiting the area and just talk to people about certain, certain locations and what they're seeing and all that kind of stuff. Even contractors too. Contractors, they're all around and they can, they know what areas are good, what areas are not good. So they get their advice and perspective on things too, you know. So I would just say network a lot when you're getting started and don't be afraid to like do more research before you jump in. Like don't get the analysis paralysis or anything like that, but do your research before jumping into those markets and get those calculators, run some numbers, do some practice numbers, all that kinds of stuff before you go ahead and submit your offers and get a deal under contract.
- [28:26]
David Green
Any markets that you two like right now for cash flow, Cincinnati, that's mainly.
- [28:31]
Janelle Carlson
The market that we're in now. We do some stuff in Indianapolis as well. But we love the, love the city as a whole. I mean you have two or three, you have three larger sports teams. The downtown scene is really nice and it's got the suburbs, a lot of good suburbs there too. So you can invest like an hour and a half around like a circle around the city. Obviously there's, there's some better and worse parts, but if you know what parts to go into and stay out of the rent for price of the home is pretty good. And you can still flip there as well. And that's kind of the main strategy that we're into right now is flipping.
- [29:12]
Don Carlson
They also have two major universities and a lot of hospitals. So you get a lot of those doctors or the traveling nurses, all that kind of stuff. So we love it.
- [29:21]
David Green
Yeah. So that's my next question. Are you thinking short term rentals, medium term rentals, small, multif family, single family? Other than flipping, is there an asset class you think works best?
- [29:30]
Don Carlson
I think long term rentals honestly do work really well there, but I don't think you could go wrong with midterm or short term. So it really depends. I have seen a few of our friends, they do the short term in the summertime when more people are visiting and then they transition to midterm in the winter months. Months like around the October to March, April, and then they'll put it back. So that's how they keep their cash flow going throughout. Through the winter.
- [29:55]
Janelle Carlson
It's a great hack for, for those Midwest markets that the seasonality just plays such a big role into it.
- [30:01]
Don Carlson
Yeah, for sure.
- [30:02]
David Green
All right, last question for today's investor that's trying to figure out how to build wealth through Real estate, what do you think is the best strategy going forward?
- [30:10]
Don Carlson
Ooh, I think it's definitely going to depend on your risk tolerance and how much money you have. Right. And your goals. So if you're trying to get money right, then I think wholesaling and flipping is definitely the best way. If you have some money to spend and you want something that's a little bit less hands on than long term rentals and building up your equity that way, if you have the time to wait for that equity to build and to build your cash flow that way. But if you need money right now and you want to replace your income immediately, then wholesaling, flipping, for sure.
- [30:43]
Janelle Carlson
We really like wholesaling for that too, because it's almost like practice on. On making sure that you find actual good deals because people won't buy them if they're not good deals. So. And it's. You're not actually owning the property and going through the rental or in the rehab portion of it. So like, that's what we did to learn the Cincinnati market. We wholesaled there pretty exclusively for two years until we started buying our own stuff.
- [31:06]
Don Carlson
Yeah. So definitely make sure you're wholesaling the right way because there's a lot of people out there that teaches you how to do it the wrong way and you can take advantage of people and screw sellers over all that kind of stuff. So do it the right way. Do it ethically, but it could be a great way to learn your market and make money while you're doing it.
- [31:20]
David Green
What is the past tense for wholesaling? Wholesaled. Like Don said.
- [31:25]
Janelle Carlson
Wholesale.
- [31:25]
Don Carlson
Wholesale.
- [31:26]
David Green
Wholesaled.
- [31:27]
Don Carlson
Wholesale.
- [31:27]
David Green
Wholesale. Did. Wholesale.
- [31:30]
Don Carlson
I wholesale. Did. The property.
- [31:32]
Janelle Carlson
I like it. Wholesale. Did.
- [31:34]
David Green
I don't know that I've ever heard anyone say that word in past tense before.
- [31:37]
Janelle Carlson
Wholesale.
- [31:38]
Don Carlson
Wholesale.
- [31:38]
David Green
Yeah, Wholesale.
- [31:39]
Don Carlson
Wholesale.
- [31:39]
David Green
Wholesale does sound better than wholesale.
- [31:41]
Don Carlson
Wholesale. Wholesale. Yeah.
- [31:45]
Janelle Carlson
Throw that on a T shirt.
- [31:48]
David Green
All right. Thank you two for being on. Really appreciate it. If people want to reach out and ask any more questions or learn more about you, where can they go?
- [31:53]
Don Carlson
Yeah, our Instagram. Janelle and Don Invest is the best place to reach us at. You can shoot us a DM. I'm usually the one answering all the DMs, so my VA does not do that. I do that still, so go ahead and contact us there.
- [32:04]
David Green
So now I have another question though. Why is it Janelle and Don not. Or not Don and Janelle? Is it because you're the one answering all the dm, so your name gets to be first?
- [32:12]
Don Carlson
No. Because honestly, we have friends on social media and they did the girl's name first and then the guy's name. And I just think it's different. Different because usually it is the guy's name first and then the girl's name. So I just wanted to be a little different.
- [32:23]
David Green
That's exactly right. Just stand out, right?
- [32:25]
Don Carlson
Yep. Let's just be a little different. Why go with the norm?
- [32:29]
David Green
All right, thanks, guys. We'll see you on the next one.
- [32:30]
Don Carlson
Sounds good. Thanks for having us.
- [32:32]
David Green
Thanks for listening to Real Talk Real Estate. If you would like to be featured on the podcast, I'd love to have you visit davidgreen24.com Ask and submit your question there. Also, please do me a huge favor and share the show with someone that you love that you think would benefit from this message. Message and make sure you're subscribed to get notified for future episodes. If you want to reach out directly, you can also DM me on Instagram or social media and check out davidgreen24.com.