Month: March 2022

Californians might be facing new taxes, again.

Waves were stirred last week when Assemblymember Chris Ward (D-San Diego) introduced the California Speculation Act (AB 1771).

The bill is the Assembly’s latest attempt to curb rising housing costs and bludgeon investor profits. If passed, the Act would add an additional 25% tax on the capital gain from the sale or exchange of residential properties within three years of its initial purchase.

In other words, California lawmakers are trying to disincentivize investor activity in the state’s housing market. Yet, the bill’s language will also affect the traditional homeowner, including the most vulnerable.

An Overview of the California Speculation Act

The California Speculation Act carries the following provisions:

• Homeowners would be taxed up to 25% on capital gain if they sell their home within three years of purchase.
• The tax applies to all “Qualified Taxpayers”.
• Applies to most residential properties with few exemptions.
• First-time homebuyers and affordable housing units are exempted.
• Properties sold within three years are subject to a 25% tax. After three years, the rate declines by 5% each year until seven years have passed.
• Collected taxes would be put towards community investment, with 30% designated for affordable housing.
• If passed with a 2/3 vote in the Assembly, the bill would become law on January 1, 2023.

What’s The Story Behind It?

California’s housing market is notoriously expensive. San Francisco usually charts at number one for the most expensive real estate market in the U.S. State tax rates are also among the highest in the nation.

AB 1771’s intention is to lower home prices by preventing investors from taking advantage of the market with cash offers. According to the bill’s sponsor, Chris Ward, the Act will dissuade institutional investors who buy up homes with cash and flip them at inflated prices soon after.

“We’ve heard of people getting into their first home getting beat by cash offers,” Ward said at a news conference. “When investors fall out of the buying pool, that will give regular home buyers a chance to buy a home,”

For Ward, prices are a major problem. As a representative of San Diego, historically one of the more affordable spots in California, he’s overseen skyrocketing real estate appreciation that’s put San Diego on par with San Francisco, a voting issue that does not bode well for him.

Unfortunately for Ward, his bill is being faced with significant opposition.

According to detractors, the main issue facing California’s real estate crisis is the severe lack of housing supply. Demand has been through the rough over the past few years and supply has been exceptionally slow in catching up.

California housing starts in 2021 totaled about 120,000. That’s a slight uptick from 2020, but right on par with the last four or so years. It’s way down from 2004 or 1988 levels though, where total units rose well above 200,000. The state is also below its construction goals, which is targeted to fall around 180,000 units per year.

In essence, California is short several million housing units and is still not on track to meet demand. This, paired with high tax rates, has created a catastrophically overpriced market, locking out millions and putting an enormous amount of pressure on low-income and first-time buyers.

In fact, many real estate experts are pointing out that the Act would likely exacerbate the inventory crisis.

“California has a meaningful affordability crisis. Unfortunately, this bill would tax most homeowners and investors alike, leading to an even worse lack of inventory, one of the leading reasons for housing price escalation. We believe this is well-meaning legislation with significant unintended consequences,” said Nema Daghbandan, Partner at Geraci LLP, the General Counsel for the American Association of Private Lenders.

A leading issue with the bill is that it applies to all qualified taxpayers. Unless you’re on active-duty military service or deceased, you’re considered a qualified taxpayer. If you were to sell your home within a seven-year period, then you will be subjected to the tax, investor or not.

The argument, of course, is that most Californians don’t sell their homes that quickly, which is true. For instance, residents of Los Angeles tend to keep their homes for a median length of about 16 years.

However, it begs the question of whether it’s an infringement of the property rights of sellers? Let’s say you bought a home in Los Angeles in 2020 but were just offered a fantastic job in San Francisco. The catch is that you need to relocate.

Should you be taxed up to 25% for needing to move? A joint statement by multiple California real estate trade associations, including the California Association of REALTORS®, says absolutely not.

“According to the Neighbor 2020-2021 American Migration Report, over 20% of those surveyed stated they planned to move based on job changes, financial challenges, or additional space requirements. Under AB 1771, property owners with a growing family seeking to move into a larger home, downsizing due to the job loss of one of the occupants, or even those who must relocate to act as a caregiver for a loved one who became ill would be harshly penalized for simply needing to move” the letter stated.

The statement continued to scorn the bill, citing critical data that suggests investors who paid with cash only made up 3.8% of all transactions in 2021. It also ensured to address the bill’s primary reasoning, which is to lower prices.

“Further, [the bill] does nothing to ensure that first-time or other homebuyers are guaranteed access to homes, nor does it create more housing opportunities. Rather, the bill will cause unintended consequences for the market by reducing the number of homes available for sale. In January 2022, new home listings continued to drop by the double digits – with listings declining from 13,301 in January 2021 to just shy of 10,000 in December 2021. The reduction in listings would be exacerbated by this bill as it incentivizes investors to actually hold on to their properties longer and would force homeowners who need to sell to wait – further depressing California’s ownership housing supply.”

Closing Thoughts

Overall, the California Speculation Act is a senseless attempt to curb housing prices and will likely cause more harm than good to the real estate market.

By targeting all qualified taxpayers instead of investors specifically, it’s hard to see this bill as anything more than a government money grab off the backs of highly valued homes.

We’ll keep you updated on further developments.

Buying a home for the first time is an exciting experience. While the process can be stressful at times, there are ways to limit unnecessary anxiety, and one of the most significant ways is to get pre-approved for a mortgage before you begin your house-hunting adventure.

To put it simply, being pre-approved for a mortgage means that a lender says you have qualified to borrow a specific amount of money for the purchase of a home. Pre-approval is based on various factors, and the process involves several different steps.

As the borrower, you can shop around for mortgages and compare options from different lenders. Throughout this process, you will learn the maximum amount of mortgage you qualify for and the estimated mortgage payments on the amount borrowed, while locking in an interest rate for up to 130 days from the date of the pre-approval.

On the lender side of the process, they will look at your financial circumstances including your income-to-debt ratio, credit score and financial history. The lender uses all these factors to assess your borrowing risk and determine the amount of mortgage, interest rate and terms you’ll qualify for. It is important to note that the mortgage pre-approval process does not guarantee you will be approved for a mortgage.

5 Reasons to Get Pre-Approved for a Mortgage Before You Begin Your Home Hunt

1. You’ll Have an Idea of How Much Money You Have to Work With 

Buying a home is a significant investment of your money and time. This time investment only increases as competition in the housing market rises. This is precisely why having a mortgage pre-approval is essential before starting your search. By beginning the process with the knowledge of just how much money you can spend, you can keep your search realistic and give your real estate agent an appropriate price range.

Being well prepared with realistic expectations and a clear price range will save you time, eliminating homes that are out of your reach financially. You’ll also be able to give your real estate agent the information they need to find you a home that fits both your desired specifications and your budget.

2. Your Scope of Search Will be Narrowed

Continuing on the point above, knowing how much mortgage you can afford will narrow your search considerably. It will also give you a more realistic idea of what the market has for you. Perhaps the home of your dreams isn’t in the cards just yet based on your pre-approval, but maybe you can afford to buy a home that you can renovate and put back on the market at a higher price in a few years.

Being aware of your buying power before starting your hunt will cross any homes you cannot afford off your list.

3. You Become a More Competitive Buyer

The real estate market in Canada has been known to heat up from time to time, and in some of the larger markets, competitiveness never really dies down. In some areas, you could be competing for the same home with dozens of other potential buyers. When the market is hot, and competitiveness is high, time is of the essence. During the time it would take you to ask a lender if you can afford a home, that home will be snatched up by another buyer who already has their pre-approval in hand.

 4. You Become a More Desirable Buyer

When the market is tight, and there are competing offers on a home, the prospective buyer who makes a firm offer is more likely to win over someone who doesn’t – that’s just a fact of the market.

 5. It May Shorten Your Closing Period 

The closing process on the house starts with securing financing for the home. The process itself can take almost two months from start to finish. By already having your financing pre-approved, you can move on to the next step in the closing process.

As you begin your journey on purchasing either your first or your next home, getting pre-approved for a mortgage has many benefits and should be your first step to make the home buying process smoother. When you’re ready to buy, ensure you work with an experienced, professional real estate agent who can help you navigate the market. Click HERE to find a RE/MAX agent near you.

 

Sources:

The Ontario government announced plans this week to increase penalties on real estate developers who behave in an unethical way, particularly as it concerns pricing on new condominium developments. 

The proposed changes would double penalties for developers found to be acting against the provinces Home Construction Regulatory Authority’s Code of Ethics for builders. Those found in violation could face fines up to $50,000 for individuals or $100,000 for corporations on a first offence. Repeat offenders could face even higher fines or have their operating licenses revoked.

The change comes after widely publicized stories of buyers being asked to pay more than they expected for new condo developments after entering into preconstruction agreements with developers. These price hikes caught buyers by surprise and put them in a challenging position. Those who are unable or unwilling to pay the increases have their purchase cancelled and are abruptly forced back onto the market. Though they will get their money back, those who bought in years ago will now find their money doesn’t go as far in the current market.

For the developers, the hikes are explained as simply a result of increased construction costs. They are faced with a tough decision as well to ask for more from buyers or be forced to severely delay or even cancel the project entirely. It’s true that in the last two years, the costs of materials required for home construction have been particularly volatile, potentially exceeding the honest expectations of developers when planning the project.

You could also frame the price increases as price gouging on the part of the developer. In a market with such low supply, many have called for increased developments as a necessary need to help cool things off. If developers are allowed to freely increase prices on a whim, affordability remains incredibly hard to achieve and consumers bear the burden of corporate greed.

Whether or not a price increase is, in fact, a necessary result of material costs or an attempt to increase profits will vary from case to case, and in reality, could lie somewhere in the middle. Though measures are set to be put in place next month, the province will still have to undergo lengthy investigations and deliberation on a case-by-case basis to reach a clear decision on whether to impose penalties. Though investors in the preconstruction market may be happy to hear about increased protections for their purchase, it should also be noted that situations such as the ones that lead to these new regulator changes are really quite rare and are not something that most investors face.

Overall, consumer protections are a benefit to buyers. However, the actual impacts of such regulations rely on a proactive and diligent regulatory body and some have concerns on how stringently these new regulations will be enforced.

Mindy:
Welcome to the BiggerPockets Money Podcast, show number 286, Finance Friday edition, where we interview Eric Dunn and talk about getting real with your finances.

Eric:
After having 30,000 grand in debt, seeing that cash accumulate, it feels good, but also at the same time, I got to realize, seeing a zero credit card balance is also a good thing.

Mindy:
Hello. My name is Mindy Jensen, and with me as always is my Girl Scout Cookie-loving co-host, Scott Trench.

Scott:
I’ll take Samoa those types of introductions, Mindy.

Mindy:
Scott and I are here to make financial independence less scary. Thus, just for somebody else. To introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting.

Scott:
That’s right. Whether you want to retire early and travel the world, going to make big time investments in access to real estate or scale your personal business, we’ll help you reach your financial goals and get money out of the way, so you can launch yourself towards those dreams.

Mindy:
Samoa introductions like those.

Scott:
I had to Tagalong to the Girl Scout Cookie theme.

Mindy:
Oh, that was good. It is. We are in the middle of Girl Scout Cookie selling season here, and I am the Girl Scout Cookie troop manager. I have, whew, so many cookies in my house. Boy, let me tell you, they are very, very, very tempting.

Scott:
I ordered a bunch of cookies from Mindy, and actually Claire, and they haven’t arrived yet.

Mindy:
Yes. Do you know what has arrived? Snow. Every single time I’m planning on into the office, there’s this huge snowstorm. I guess I’m not going to get them to him today, but tomorrow, physically, tomorrow they will be in the office.

Scott:
All right.

Mindy:
Today’s Tuesday. Wednesday. Yes, I’m in the office tomorrow and Thursday.

Scott:
Sounds great. Looking forward to them.

Mindy:
Yes, they’re very delicious. We are not here to talk about Girl Scout Cookies. We are here to talk about Eric Dunn and his finances. Eric, this is a super fun show. Eric is 26 years old. He’s a young guy. He has made some traditional financial mistakes. He maxed out some credit cards. He wasn’t paying them off. He has now fixed those problems, and he has a small business where he is making six figures.
But, he is making some classic mistakes financially by mingling his business expenses with his personal expenses. Some business expenses, he’s paying out of pocket from his personal life. I think that we’ve given him some good things to think about along the way, with regards to separating those out. Business expenses should come out of the business income. I think that is going to be a big catalyst for him towards getting his finances in order.

Scott:
Yeah, I think that’s right. Eric has most of the core foundational elements of good financial management in place. He spends much less than he earns. He’s paid off all his bad debt. He’s investing for the future. He’s thinking about real estate investing. He’s got his own business that has a really exciting amount of possibility ahead of it, and income generation potential.
Really, it comes down to his lack of systems for managing his business and personal finances, are really having impacts on his ability to execute a good long-term personal finance strategy. That’s where it comes down to the tactics, really, or the barrier to the strategy here today. I think we had a good discussion about how to think about resolving those.

Mindy:
Yeah. I think that we are being a little too harsh on him. This is something that’s super common with people who are starting a business. When you first started out, you’re not sure how much money you’re going to make, so you are the one who’s funding the business. Then, at some point, you need to decide, okay, the business is making its own money. It needs to be paying its own way now, too.

Scott:
Yeah. Let’s also be real that most people who have assets like Eric’s, those assets aren’t actually generating hundreds of thousands of dollars in annual income. Eric has built a real social media podcasting business in his niche, that is producing big income, especially in the last two years. My guess is, that it wasn’t the case before those past two years.
Building these systems would’ve been unnecessary or irrelevant, or maybe even a waste of time previous to the last year or two.

Mindy:
Right.

Scott:
Certainly nothing he’s doing wrong. He’s crushing it, and he will have a very … He’s already a success story with personal finance. That will only continue to grow in the next couple of years.

Mindy:
Absolutely. Scott, before we bring in Eric, I need to tell you that the contents of this podcast are informational in nature and are not legal or tax advice. Neither Scott, nor I, nor BiggerPockets is engaged in the provision of legal, tax or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal, tax and financial implications of any financial decision you contemplate, which is something we bring up again during this episode, because Eric does have some tax questions and tax preparation, tax planning issues that he needs professional advice on. We give him some ideas, but then also tell him to go to an actual person who knows what they’re talking about.
Our guest today has a weird income, super weird income. His monthly pretax income is anywhere from $1500 a month to $27,000 a month. I’m going to repeat that. He makes from 1500 to $27,000. This makes it incredibly difficult to budget and plan. But, it makes it far more important to budget and plan, so you can cover the lean months when the money is flowing in. It can be really, really tempting to spend it all when the money’s flowing, but what you really need to do is be very disciplined.
Eric Dunn, welcome to the BiggerPockets Money Podcast. I’m so excited to jump into your story and look at your money.

Eric:
Thank you guys for having me. I’ve been listening to you guys since 2019. I’m really happy to be here and share my story.

Mindy:
Eric, before we jump into what money’s coming in and where’s it going, let’s get a little bit of your backstory. What does your journey with money look like?

Eric:
I’ll try to keep it short, but it’s kind of a lot. Not really. I don’t think so. I graduated college in 2016, and college is where I started my career, doing this digital media, this social media thing. I gained three plus million followers on Vine back in 2013. I was on the Vine app, and that’s really where I decided, okay, I’m going to do this social media thing full time.
In college, I didn’t really know what to do with that money once I was getting it and doing brand deals with companies. I didn’t understand that I had to put money away for taxes, and I wasn’t getting taxed on this 1099 income that I was making. Throughout college, when I graduated in 2016, I moved back home with my parents, and I was there up until last year in April, just trying to get my mind right, and my financial situation back together.
I ended up paying off $13,000 that I owed in back taxes over the course of 2014 to 2017. I also, when the pandemic hit in 2020, I decided I was going to buckle up and pay off all of my consumer debt with my credit cards. That was over 17 grand. I forget the number, but it was pretty high up there. Total accumulation of debt I had was 34,000. I remember that, because I had all of my accounts listed on Northwestern Mutual site, and it tells me my net worth based on my liabilities and assets, and I had no assets, it was all liabilities.
That number was upwards of 33 grand. Seeing that number come down and down and down over the months was really good. How I got started with that was, I think in 2019, I was like, man, I have so much debt. How do I get rid of this? I was going through the bookstore, just looking for books to read. I came across Erin Lowry’s book, Broke Millennial: Get Your Financial Life Together.
Of course, that title stood out to me, because it says Broke Millennial in the title. I picked it up and I got it. It was the first finance book that I ever picked up. In her book, she mentioned your guys’ podcast. When she mentioned your podcast, I started tuning in, and I had been listening all of 2020, and listening to all the people that you’ve had on, and tell their stories. It really inspired me to pay down my debt. That’s what I did in 2020. With the type of lifestyle that I have, with the variable income that I make, it’s been tough to budget for that, and keep that debt out of there, while still trying to make income.
I think I’m right on the cusp right now of being able to manage that, because I don’t keep thousands of debt around anymore. I now have a cash savings emergency reserve, that Scott mentions in his book, Set For Life, 10,000 to 25,000, which is another book that I have. I have several books that you guys have had guests on, that’ve recommended. Every episode when you guys do the famous four, and they mention the book, I go on Amazon, and I would buy it. I have a bunch of finance books that I still have to read.
That’s my background with my finances, in college and post-college. Now, I’m ready to take the next step, to find where I need to go to get to financial freedom, because things have popped up since 2019, and I have to manage all of that, and try not to fall back into that debt hole that I once had, because I’m not trying to go back. That was a rough time.

Scott:
It’s so awesome to hear that the show has been at least a part of your money journey, and great to see all the success that you’re having so far. It seems like things are in a pretty good spot. We can help accelerate things hopefully today on the show.
Quick question before we get into the other stuff, can you give us a little bit more of the money story with respect to your income generation, and the various interests that you have there? We heard about the Vine and brand sponsorships, it sounds like in college. What about in the years leading up to today’s show?

Eric:
That was the main source of income in college. It still is pretty lucrative source of my income currently, is the brand sponsorships, the collaborative campaigns with companies like Old Spice, McDonald’s, anybody that could email me and say, “Hey, we have a campaign and we think you’d be perfect for it.” Sure you’ve seen them on Instagram, Twitter, Facebook, TikTok, all of those channels.
That is still my main source of income, where the big five-figure dollars can come through. Now, I have this podcast brand that I started in 2017, where we have exclusive content through a subscription on Patreon. We also sell merch. We do separate brand deals for the podcast channel than my personal ones. I also model. I signed with a modeling agency back in 20 … If you guys are watching, I don’t know if you could tell, but I signed with a modeling agency back in 2017.
That got started in 2019. It’s picking back up. I’m in the big and tall industry, so that one’s still slow to grow right now. That one can be really good money as well, especially if it comes in every couple months. I just did Fruit of the Loom last month. I’m with waiting to hear if I’m doing a Levi shoot next month. Those are really awesome campaigns to be a part of.
Also, I’ve got a YouTube channel with the podcast. We’re hoping that can grow, and we’re going to probably be rebranding and re-strategize to help grow that channel, because we’ve … I just moved in with my roommate and podcast co-host in 2021 of last year, and we have been doing the podcast since 2017. That’s just another income avenue for us.
Then, I have a couple albums on Spotify, and those bring in grocery money every couple months. I get a trickle in of $100 here, $40 here, every couple months. That helps with just small things that I can purchase for myself.

Scott:
Awesome. We actually did hear about the income statement that we would go through normally on the show here just now. Mindy highlighted this earlier on in the show, but can you give us an idea of what that income looks like? Is it seasonal? Does it peak in certain parts of the year, or is it truly variable, and you’re very opportunistic about a lot of these opportunities?

Eric:
It peaks in the fall months, because I’m a sports guy. A lot of the brands will reach out to me for sports content, mostly football, when football’s going on, between August and December. It starts, it’s pretty good in the beginning of the year, it kind of drops off around March. Coming up here, March, April, May, June, July, summer months are the slower months. Having those brands come to me at the end of the year and then at the beginning of the year, is when I usually have to budget for the next few months coming up, in case something is slow, and I need that money to fly out somewhere to create content, or something like that.
I’ve been learning that over the years of, what’s the peak and what’s the down, so I can have money ready for when I do need to go somewhere to keep my personal brand alive.

Scott:
Okay. It falls. Generally speaking, we have bigger opportunities coming up in the fall. That’s where the bulk of the income’s going to be made, or at least there’s going to be more income being made there. Then, there’s a big dip, I guess, in the late winter, spring, early summer months?

Eric:
Right.

Scott:
Okay. Awesome. How much are we spending per month? How much control do you have there?

Eric:
The fixed ones, I have 650 rent currently. I’m renting a room in my podcast co-host’s newly purchased home. We broke a lease back in November, because he found a house here in Jacksonville that he liked, and now I’m renting it out. It dropped my rent $200. That will probably change here coming up soon, but we’ll get into that.
I’ve been here since November now. I’ve paid about three months in rent so far, and it’s only $650. Utilities is 80. I have a website that I use Wix for, and it’s 22 a month. Gym, 24 a month. Groceries, I use Hello Fresh sometimes, some weeks, and some weeks, I’ll actually go get groceries. That’s usually 200, 300 a month. I use a community text platform, which is a social media platform that is just a personalized number, that I can tweet out or post on social media, that people can connect with me directly to, without giving them my actual number, and to have up to 1000 people use that, it’s $99 a month.
I use that for just helping promote my podcast and other ventures that I’m in. Then, outside of those expenses, I invest into a VTSAX Vanguard brokerage account, $250 a month right now. I have a custodian account for one of my nieces, which I put $165 in. When she turns 18, she can have some money when she gets into the real world.
Those are the expenses that won’t really change right now. Then the other monthly expenses are all of the things that I do to travel for my work, which I love. These are my splurges, really, because I can’t stay in one spot too long. I like to explore cities and meet up with people and other content creators, and my fans in other cities, like at Jaguars games or anything like that.
I create vlog videos of my experiences and put them on YouTube, which in turn, I hope, creates more income for me. In a way, these expenses, I’m investing into myself. These will be flights, hotel, Airbnb, Lyfts and Ubers, restaurants when I’m traveling and I eat out, and then rental cars, which are really high right now. Those can be a lot of money. Then, Amazon, which isn’t that much. I’ve seen some guests you’ve had that really splurge on there, but I don’t really splurge on Amazon. Only when I need updated protein powder or vitamins.
Those are, monthly expenses can get upwards of a couple thousand dollars, if it’s NFL season.

Scott:
One thing I want to call out here real quick is, you said you’re a big guy, right? How big are you?

Eric:
I am 6’5″, and I weigh about 280 pounds.

Scott:
Awesome. The reason I asked that, you said you spent $200 on groceries, and that is remarkable, I think from a lot of folks’ standpoint. How do you manage that?

Eric:
It’s mostly because I used to splurge on DoorDash, but I didn’t include that, because I deleted the app from my phone and I want nothing to do with it anymore, because that … I would spend $600 plus a month in DoorDash. I would gain a lot of weight doing that. I’m trying to start this new thing early this year, where I buy healthy stuff, fruits, veggies, and Hello Fresh is really filling. They make good meals. The meals I get, I can make two servings for myself, so I can spread out a three meal week, all week.
I’m learning to do that, Scott. I’m trying not to overeat, because I want to drop weight. I know it sounds like 290 for my size is not that much, but I’m starting to go outward. The more I age, I don’t want to do that. I’m trying to watch my diet a little more.

Scott:
Fair enough. I’m sure you’re not that out of shape, if one of your income streams is modeling for Fruit of the Loom and Levi’s.

Eric:
True.

Scott:
Okay. I think the first point Mindy and I would have here, is to separate out business and personal expenses. How much, if you exclude what you’re traveling for work, if you can do that, how much are you spending per month? Then, if you layer it back in, how much are you spending in total here?

Eric:
You mean personal, what am I spending versus my business?

Scott:
Yep.

Eric:
Personal is pretty much nothing. I don’t drive. I pretty much just go to the gym. Every day, I wake up and I figure out what kind of content I can do, or who can I email to get the next brand deal. It’s a lot of planning in my day-to-day, and trying to stay in shape. There’s not much that goes into personal expenses outside of the groceries and the day-to-day stuff, but the business expenses are where I spend the bulk of my money, which, with taxes, is one thing I’ve learned, because back when I did have all that debt in college, I had upwards of eight credit cards, and I was just using any old card for any expense.
As I’m learning taxes now, I’m learning that, hey, you should be using certain credit cards for your business expenses, and certain credit cards for your personal expenses. That’s one thing I’m trying to organize as I’m doing this career path a lot more, but my business expenses are way more than my personal expenses. I try to keep those down, because I know when tax season comes, everything I do in my life is pretty much for my business. That’s going to be the bulk of my expenses.

Scott:
Okay. For our purposes here, Mindy just wrote this out, we’re going to pay your monthly expenses at around $1500, from what you just said, from an ordinary course [inaudible 00:19:39]. That’s the low end with very little business activity. Then, it will skyrocket depending on what you’re doing from an income generating perspective, and traveling, and all that stuff. Can you walk us through your net worth real quick, with investments, plus any debts?

Eric:
Investments, I have the VTSAX, which is about 12,000 in there. Started that last year, got a Roth, which has 9000 in it. I just transferred that one over from a different financial institution. I didn’t put any in there last year, really. I was letting the weeds grow. I don’t know what phrase to use for that, but I was just letting it sit in the new account for a little bit. I got 4000 in crypto, just dabble money, in case it goes up, and then a cash reserve of 17,000 that I started after I cleared all my debt back in 2020. That’s what I’ve been trying to build up while reading Set For Life. Then, the custodian account for my niece has $1100 in it. My student loans, I have three student loans that are a total of $10,930. It’s a 4% or so interest rate, but it’s nothing right now until May.
I was paying on those last year, just to get the principal down while there was no interest on it, but I haven’t paid any this year. I’m satisfied with what I did last year on it. I’m content not paying, until the payments are back. No car payments, because I don’t own one, never owned one. No house, just the rent. Then, I do have five credit cards left after I clear all that debt. I’ve been keeping them paid off as best as I can. I still use them for a majority of my travel expenses. I just put it $1100 on an Airbnb for the Honda Classic Golf Tournament in Palm Beach this upcoming week. I get paid for that event, working that event.
When I get the money, I’ll pay that off before the statement closes, and I try to do that as best as I can. If I can’t do a slow month or something, then I just try to keep them below 30% of the balance as best as I can. I’m just trying to keep my credit score above 750, because the end goal eventually here is to get into real estate investing. I don’t want to have to be coming from behind with my credit score. I’m just trying to keep that maintained at the moment.
I do have two credit card balances currently, because my birthday was this past week. I’ve been using them. They’re manageable right now. One of them is, I think one is about to be 1200, and then this other card is going to be 1200. I do have income coming in, that I did not account for yet, because it’s not actually in my account. I’m not worried about paying those off, because I have a few jobs that I do have accounts receivable, to get those cleared.
I only really am counting the student loan debt, because the credit cards will be paid off. Net worth, looking about 20 grand, probably.

Scott:
Okay, great. 17,000 liquid. You have the ability to pay off these credit card balances if you wanted to tomorrow, you just choose not to, and you roll over time with them. Is that right?

Eric:
That’s correct. Because my philosophy is, do not touch $17,000 cash savings for debt. I don’t want to touch it at all.

Mindy:
I get that, but credit card debt is obscenely high interest rates. If I was in your position, and the credit cards are coming due, and the income hasn’t come in yet to pay them off, I would take the emergency fund, pay off the credit cards. Then, when the income does finally come in, replenish the emergency fund, rather than pay 10, 14, 29% interest on these credit cards, because $1200 at 29% interest is still going to be a lot of money, and credit card companies should be ashamed of themselves for charging so much. That’s outside the scope of this conversation.

Eric:
Right.

Mindy:
Because it’s so little relatively speaking, and there’s income you’re anticipating, I would pay them off rather than pay the interest on it.

Scott:
The goal here is to get into real estate investing. I think we have a number of Finance 101 things that will be helpful here that will get you in position, that’ll make that a more accessible opportunity going forward. I think Mindy’s right on this one, or at least I agree with her, where that cash savings account, that $17,000, that’s funding your business. That’s your personal emergency reserve. That’s this safety net for you.
The purpose of that for me, or one of the purposes, is to not accumulate bad debts on a go-forward basis. The fact that there is a bad debt, a credit card balance, even if it’s a relatively small balance, would be something I’d use this money to pay down, rather than have that. If we’re getting below 1000 or $2000 in that cash shavings account, that’s when, okay, I’m not going to even pay off the bad debt, because I need that to be a buffer between myself and the world. You’re nowhere close to that.
I think that I would use some of that to pay down the credit card debt, and then maintain a position where you never essentially have a rolling credit balance, that you don’t pay off in full each month.

Eric:
If I had a daily balance, but it’s paid off before the statement closes, do the credit bureaus know that, or do they only …

Scott:
That’s perfectly fine. What I do is, my credit, I use my credit card, and then I actually pay a balance two months later. That’s just the automatic payment mechanism that my bank chooses. I carry that balance, and then pay it off on when the statement comes due in full every month. Is that what you’re doing?

Eric:
Yes. Because, the reason that I’m carrying the balances right now is because I’m trying to … I try to time it sometimes to use the card that isn’t about to close. I know that the cards that I’ve got balances on right now, they don’t close for a couple weeks or a few weeks. If the money does come in, that I’m owed before that statement closes, then I’ll pay that. Just, usually what I’ll do is, I’ll send some to my emergency reserve first, then pay off the balances of the cards, and then save some for taxes.
If the timing works out like that, then yes, I do pay off the balance first, but sometimes, I do leave it rolling over, because I got to get out of my own head about seeing that cash savings reserve drop. After having 30,000 grand in debt, seeing that cash accumulate, it feels good. Also, at the same time, I got to realize seeing a zero credit card balance is also a good thing.

Scott:
I’d think about it net. My cash position is my cash savings net of my credit card debt. Just because it’s in the bank, doesn’t mean you can actually access it, if you have $10,000 offsetting it. You have $7000 in cash, not 17 in that scenario. I would just reframe it to think around that.
The second observation I have here, and this is something we mentioned earlier is, the separation of business and personal. I think that’s going to be a really important challenge for you, and it may be right now, it’s all intertwined, and it’s all one thing. That’s not a sustainable approach over a five, 10-year look-forward period here. And, it’s going to hurt you when it comes to real estate investing, and these other opportunities, where you want to use those income streams to help you qualify for debt for other assets.
I really put together a plan there to think about how do I separate out my business or businesses, right? Are some of these things all together, one business? BiggerPockets has a YouTube channel, a podcast, books, those kinds of things. That’s one business with this.
Can you put a bunch of them together in one business? It sounds like you have a partner on another line here, so maybe that’s a second business. The simpler you can make this, the better off your life is going to be from this. You can get out of thinking about, how do I time my five credit card payments, and it’s just, no, I’ve got one credit card for business and one credit card for personal. I’m separating those expenses out. The personal expense goes on this one, the business expense goes on that one. Both of those balances are paid in full each time the statement comes due, automatically with your bank feed.

Eric:
With the credit cards, I do a lot of the travel rewards. The only actual business card that I have is a Chase one. Then, with flights, I like to use my Delta Amex card. Then, with hotel stays, I like to use my Hilton card. Am I spreading myself too thin with rewards cards that I use for business as well, but they’re not actually business cards? They’re just expenses for business.

Scott:
I think the goal has to be, how do you keep that super simple? Everything’s automated, if you know how things are going to get paid, and then you can move on to the more fundamental items in your financial position here, and be worried about those things. If you’re spending mind share, thinking about how to time the payments on these credit cards, you’re probably doing too much, in my opinion, on this, and would benefit from simplifying to a certain degree. If it’s super straightforward, I use this one for this, this one for this, this one for this, and I’m maximizing my benefits, maybe there’s something there, given how much you travel.
That’s a good context.

Mindy:
Yeah. You’ve mentioned that you have five cards, you’ve got one for business, one for hotels, and one for airlines. What are the other two? If they’re not giving you rewards, unless one of them is the longest card that you’ve had open, I would close those out, just because it sounds like there is a lot of mind space being taken up with the credit cards, that doesn’t really need to be.

Eric:
The other one is what you just said, it’s the oldest card that I’ve ever had. It’s a student credit card that has no benefits, but it’s not even my highest limit anymore. It once was, but I just keep it around for the credit age. It’s some small private bank in South Dakota that I’ve had since 2012, when I first started college. I just kept it around for that reason.

Mindy:
Oh. That’s 10 years old. I would keep that. I would use that, put a calendar note or something on, buy gas every month with this card, swipe it, and then come home and pay it off, so that’s not taking up any space in your head. You just want to make sure that you’re using it regularly enough that they don’t close it, because that is your longest credit card. The length of your credit history is now 10 years. If you close that, then your credit history shrinks, and that could have a detrimental effect against your credit score.
Also, you can go several months without charging before they’ll cancel it. Yeah, that one, I would keep. The other one I would get rid of, unless it is some amazing card, but you’ve already got a lot that you’re thinking about.

Eric:
Yeah, this one’s a JetBlue card, because I fly Delta and JetBlue.

Mindy:
Maybe only use those four flights on their respective airlines, and then don’t use them. We have multiple cards, but we have one everyday card. This is just what we put everything on. We swipe it, and then that’s the one card that we’re paying off all the time. We’re not really thinking about the other ones.

Eric:
That is what I do with the longest age card that I have. I just used it for that community text platform, for a monthly payment. I just added that as my card for that monthly payment every month, because I know I need to keep it in use.

Mindy:
Yes, but that community text platform is a business expense.

Eric:
Yeah, true.

Mindy:
I agree with Scott, that you need to sit down and separate out your business expenses from your personal expenses, and as somebody who has an LLC of my own, I’m always looking for things that I can call a legitimate business expense. If I don’t personally have to pay it, if I can pay it on my business instead, that’s just better for me.
Your community text platform, absolutely a business expense. Website, 100% a business expense. Gym, this is where we need to get a CPA in here, because I don’t know, since you’re a model, can the gym be considered a business expense? I’m also wondering if your expenses are actually this low, and I’m not trying to call you a liar, but how do you get to the gym? You don’t have a car. How do you get to the grocery store? How do you get to modeling shoots? How do you get to the airport? I don’t see any expenses for Lyft and Uber.
If you’re not driving and you’re not taking a Lyft or Uber, how are you getting to all these places?

Eric:
I did mention Lyft and Uber, but I didn’t say a number. I-

Mindy:
Oh, that’s in the other … I’m sorry, I have it in a different space.

Eric:
Right. That was the other monthly expenses, where I said that they can get upwards into the thousands with the flights, the hotels, the Lyfts and Ubers, the rental cars. Since moving here to this new house from the apartment, I’ve gone to the gym less, I’ll admit, but it’s also because I sprained my ankle back in December. It was tough to do anything. When I did, I went for a week straight, couple weeks ago and I was Ubering round trip, to and from the gym for a week.
I was like, this isn’t very efficient. I need to figure out a way how I can get to a gym without a car and without paying for-

Mindy:
A bicycle.

Eric:
… 10 to $15 Ubers every …

Scott:
Yeah. I think a bicycle actually is a really good option there. For $200, go to a couple yard sales or buy one used, that’s how I got around Denver for a couple of years primarily. I did have a car, but I probably would’ve been better off if I had used Lyft or Uber in a lot of those scenarios. It’s actually a remarkably practical way to get around for somewhat in your situation.

Mindy:
Yeah. Lyft and Uber around town is a personal expense. Lyft and Uber to the airport, because you’re flying to an NFL game, which you’re covering for your podcast, is a business expense. I think it’s really important to be very, very careful about tracking your spending, and which one is business and which one is personal, and separating those out, and as much legitimate business expenses as you can throw into the business, that’s just better from a accounting perspective.
I’m saying legitimate business expenses. Going out to dinner when you’re visiting your girlfriend is not a legitimate business expense. Going out to dinner when you are out covering an NFL game is a legitimate business expense. You want to keep really, really meticulous track of, because it’s a deduction, right? Scott, how does that work?

Scott:
Yeah. It depends, with a lot of this. This is where, we’re not CPAs and can’t get into the … There’s something around, for example, meals change from being at least fully deductible or partially deductible to being less deductible, as they relate to business expenses. I think that, based on what we’re discussing here, I think there’s a lot of spreadsheet work that you need to do here, in the next couple of weeks or months. I think that’ll be your homework to say, last year I went on these trips. How much is a trip costing me, and what is the business asset that I’m producing? It may be hard to calculate the income directly from that trip, because it may be just helping you with your podcast, or whatever it is.
I think you need to say, from this trip, I created these assets that related to my business, an asset being a podcast, a video, a social media post, whatever. This is what it cost me. Here was the flights here, here was those types of things. I think that will tell you a lot. You’ll be like, that trip was definitely not worth it. That trip definitely was. Even if I can’t quantify the straight-up income, I’ll get something there.
Then, at the end of the year, you can hand that to your CPA and say, here’s what I spent from my standpoint, believing in how I’ll judge it, on my business, which of these items are tax deductible, which are partially tax deductible, and which are not? I think that will be a really helpful conversation for you, because you can categorize those things. Then, you can have a discussion over a few hours. If you can get to that point, BiggerPockets will sponsor your visit with a CPA, either before or after tax season this year.

Eric:
Yeah. That’s my biggest hurdle currently, was figuring out how to break that down for tax season, because as I mentioned earlier, I had back taxes owed since 2014, up until 2020. Really figuring out how, as a business owner and being employed by myself, how to figure that out for tax season, is what I need to learn, so I can go into this thing full steam ahead. I haven’t filed yet this year. I just went home where all my 1099s went.
The next step will be going back, because last year, I got so overwhelmed with how much traveling I did. I did a lot more last year. I was keeping track of my expenses on a monthly basis. Then, as the year came to an end, I fell off with it. I’m going to really have to sit down and take the month of March to go through all of that, because from the book, Your Money or Your Life, that’s when I started really tracking my expenses and getting on Excel, and putting numbers in, because I actually like doing that.
I like going on Excel. I have one open up right here, and I put my numbers in and plug and play. For this year, I’ve been writing them down, actually writing them down in a planner. Every single expense, I’ve actually been putting on pin, but I don’t label it as business or personal. I just write it down.

Scott:
It sounds like you have all the data from this. You need to organize it in a way that makes sense to you. I would think about it. You can take my suggestion and do it by trip or by activity set. You can do it by business line. There’s a lot of right ways to do this, but that’s going to be a big, I think, strategic question for you is, how am I going to organize my life and how I think about managing my money since my personal life and business are so intertwined, or most of my expenses are coming through this business?
I think that’ll be a big challenge for you. There’s an art to that. Again, you have those choices around, per trip or per opportunity, or per gig, if you want to do it that way. Hey, I’m going to fly out to this place and do a shoot or whatever. That’s a gig. I would put that into this business line. There’s some way to do that, but those systems are going to get really tough for you if you don’t invest the time to setting them up or thinking them through upfront, I think.

Eric:
Right. Especially, the gigs start coming in more frequently, I’m going to get very overwhelmed with that. I really need to find me a good accountant as well, because …

Mindy:
Travel with one of these. There’s an envelope. Number 10 envelope, random old envelope, travel with one of them, and a pen, and write the name of your trip, and put your receipts in here every time you go anywhere. When you’re out to dinner, you take Scott out to dinner because you’re going to interview him on your podcast, you write on the receipt, dinner with Scott, to talk about the podcast, and then you slip that in there.
Then, when you come back from your trip, you’ve got all your receipts. You can, oh, I had the airline, and it cost me this much, and the hotel was this much. All of the things, all of the surrounding things, maybe you missed a receipt, but missing one receipt, as opposed to missing 14 receipts is going to be better for your taxes. You’re right, you do need to get a great CPA. You need to get a CPA who understands small business, and what is deductible, and what isn’t. I think most CPAs would understand small business.

Scott:
What we’re talking about here is called accounting. Obviously, depending on how much you think you’re going to earn next year, this is something you should either be doing yourself and placing the system, and building it, and investing the time to figure out, or if you’re making a lot of money, then you hire a bookkeeper to do that. Maybe a lot being over $200,000 in net income.
That’s an art. It’s like, who knows what actually, that line is. If it’s going to be, hey, I’m going to make $50,000 after expenses, that’s probably a really activity to do yourself, because hiring the bookkeeper is going to be more expensive than your hourly rate. If it’s going to be $200,000 in annual income, that’s where you might invest in a bookkeeper to help you set those systems, so you don’t have to spend quite as much time thinking through that and learning the ins and outs there.
The other part of finance that’s really important for what you’re doing is what we call financial planning and analysis, or FP&A, in business jargon. That’s estimating what’s going to happen in the future, and are things happening as I plan for them to happen? The million dollar question for you is, how much income do you think you’re going to bring in, net of expenses, over the next … Separating out your personal expenses, over the next 12 months. Do you think that’s sustainable?

Eric:
That is tough to guess, because it is so random. The number is so different every month that it’s … They are consistent. If the podcast that we’re making currently can grow at the rate that I know it can grow, then I’m not sure what number to put there. I think this career is sustainable, and has been so far.

Scott:
I’m not saying your career is not sustainable. It sounds very sustainable. It sounds like things are going very well in most cases. I’m saying that, you need to have an understanding or ability to forecast your income across at least some of your bigger income generation channels, especially if you want to get into real estate investing. That’s going to be essential challenge for you.
To some degree, you’ve got to be able to look a lender in the eye and say, I make this amount of money from this business line, and this amount from this business line, and this amount from this business line, and you can expect that to continue on a go-forward basis, which is why you should give me several hundred thousand dollars to buy this piece of property. Here are my tax returns from the last couple of years, showing something that’s consistent with what I described there.
It is harder for a self-employed individual or a business owner to get access to mortgages and debt, than it is for someone with a job. It’s not impossible, especially if you’ve been generating that income reasonably consistently over the past couple of years. You may look back, if you look back at your tax returns and say, “Wow, this business line or that business line actually was pretty consistent. I made 50 this year, and 75 this year with that.”
Okay, great. That’s going to help make your case to this person. I think that’s where it’s really important to have that breakout and say, this is one business. This is a separate business, and this is my partnership. These are my personal expenses. What is that business line actually bringing in? Yes, you want to be able to categorize these expenses to save money on taxes and offset that income, but you also want to show income so that you can get a loan in the future against one of these properties. Also, you want your business to make money.
Can you give us your best guess maybe, over the last couple years, of what the business income … How you would set up or categorize your business income, and how much it’s brought in?

Eric:
The YouTube channel, this podcast, then we have the brand deals that we got for that. Then, the premium content we got for at. I’m not sure the numbers, because I’m not organized, like you’ve been saying. I just jumble it all together. For the 1099s that I’ve gotten from the modeling that I do, the collaborative campaigns on social media, my YouTube channel and the music stuff, last year, I know I did well over 100,000. Then the year before that, was my first year actually making over 100,000.
Back to back years, 2020 and 2021, six figures from my personal business income. Then, the podcast channel, I’ll have to go through that, but our best year was last year, for sure, because we moved in together and we started … This is why we moved in together, is to create better content and to be able to make more income from it. I know last year was definitely our best year from any other year, and that was probably $20,000.
Those are the two businesses right now. I don’t know if modeling is … Because they sent me 1099s, but it’s under Eric Dunn, and not under my LLC. I think with the modeling-

Scott:
You have all your assets in one or two LLCs, and then you have a separate sole proprietor income as well?

Eric:
Correct. Which, I think that’s where the modeling stuff goes, if I’m not mistaken, it goes to just Eric Dunn, and then the social media stuff, I give them my EIN for my personal LLC, and then the podcast stuff. We just made an LLC for the podcast a couple years ago. We’re starting to get organized with that. Those would probably be the three different categories for the jobs that I do.

Scott:
That’s great. You’re in really good shape with that. I think that’s a perfect structure to have some things in your personal … If your modeling income were to get my much larger, then you can consider creating a second or separate LLC for that. That makes sense to me, the way that you’re setting this up, and it seems pretty organized.
The next question is, how much money are you expensing against the income you’re generating from those areas in the LLC? If you brought in 100,000 inside of your LLC for your brand, and then you offset that with $80,000 in expenses, you’d show $20,000 in income to the IRS on your tax return. That’s going to impact your ability to get a loan. If you didn’t expense any of that or expense it in your personal name, you’re going to have two years of $100,000 in income.
Do you have any idea of what you might have been showing to the IRS the last two years, or …

Eric:
This year, I haven’t gone through it yet, but last year, it was, I think 116 gross. After the expenses and all that, it dropped down to 85,000 in net income to the IRS.

Scott:
Wonderful. I think you’re going to have to talk to a few lenders, but when you file your taxes this year, if you show a number similar to that, and growing, I think that you’re probably going to have a case to be able to get a loan equivalent to somebody who’s earning 85,000, $90,000 a year at a W2 job, or more. You’ll have more paperwork, but I believe that should be the end result. Something that we can confirm perhaps in the Facebook group, if we have some lenders there that could chime in and help us.

Mindy:
Yeah. I will post a question for our lenders to talk about how you can best present yourself as a borrower, when you go to get a loan. What I do know is that, you need to start talking to lenders now, or as soon as you start getting serious about looking for a property, you need to talk to lenders and see what they’re going to say. You don’t want to get a property under contract, and then talk to a lender, and the lender’s like, “No way,” or the lender’s like, “Hey, give us 10,000 documents.”
You want to be able to get those to them in advance, because there is a process to getting a loan, and it’s long and drawn out, and it doesn’t matter how much stuff they ask you in the beginning, they’re going to ask you for more later. That’s just the … Sorry, lenders. I love you, but you ask for so much stuff.

Scott:
Yeah. This is something I would change going forward, but because I think it hasn’t been quite as clear in the past year or two, what expenses are business and what are personal, that may be something to think through as you’re talking with your CPA and bookkeeper. Hey, this meal expense is not tax deductible. I don’t want to offset my LLC’s income with that, since it’s not going to affect my taxes either way. I want to show a consistent number there.
That’s something to think through. You need to do what’s legal and what’s correct with these types of things, but you may have gray zones in there, and you want to think about what that’s going to say at the end state about your business, when and where it is fuzzy, and then on a go-forward basis, make sure it’s not fuzzy, it’s super clear.

Eric:
Right.

Scott:
That’s something to keep in the back of your mind. I think from a real estate perspective, it took us a couple minutes to pick through this situation, but you’re going to be in great shape to invest in real estate. You’ve got $17,000 in cash. You’ll probably build up substantially more cash over the course of the year. If you file taxes and your income from your LLC is close to that 85,000 you filed last year, I think you’re going to have two years of tax returns that showcase income from that business, that might be reasonably stable. That’s an unknown.
I think after you file your taxes this year, would be a really good time to begin talking to lenders, and see what you can qualify for. There are some question marks around whether that modeling income, in my mind, will count for loan purposes. Hopefully it does. There’ll be questions about whether the podcast income will count yet. I think you’d be able to qualify somewhere in that three to $450,000 range, from a financing perspective, would be my very cursory initial hope, based on what you’re telling us.

Eric:
Before I talk more about the real estate, the reason I started actually looking this year, even though we just moved into this house and I’m renting from it, is because I have a girlfriend who wants to move from Ohio down to Florida with me. Obviously, I don’t want to bring her here to this one bathroom house. We want to have our own space. I was looking at houses, just because I had been consuming all of this finance content, and just wanted to finally get my feet wet, because I had been sitting on this idea for a while. Then, this life opportunity, a girlfriend that wants to move in with me, presented itself to move forward with the idea.
We actually just went apartment shopping as a backup plan, but I have … It’s a funny story. On a Facebook post, one of my Facebook posts, sometimes I’ll go through the comments to see the type of people that are commenting. I hovered over this one woman’s name, and she was a realtor here in Jacksonville. I messaged her, and I said, “Hey,” I told her my situation, “Hey, I’m in the market for a house, girlfriend coming down and self-employed, I know it’s a little bit harder to get lending and all that.” Then, she told me she would help me, and that her husband is actually a lender.
He got on the phone with me, and we took an initial call. He was going through all these terms and phrases and asking me my income. He actually asked me, Scott, what I was projecting for next year. I just didn’t know. I told him the last two years, that I had made pretty good money, and I could see it continuing for sure. He just ran through some simple numbers for a $300,000 house with a FHA loan and said, I would probably get approved for a $300,000 house.
That was good news. It was a good intro call, but I knew in the back of my mind that, I had to get through this tax season first, because I was stressing about that, because every year, I’m trying to do it a little bit better, and every time it comes around, I’m a little bit more stressed about it, because now, there’s more businesses involved. There’s a relationship involved now. I’m bouncing between places. The business is picking up. I’m getting more distracted from all the work that I’m getting.
I’m really just going to have to take some time to actually get it done this year, and pick through some accountants, so I can organize this better, and especially organize it for this year, for next year, because I’ve already got the bookkeeping for this year’s expenses from January and February. I can just go through that, and categorize it better for this year. Last year’s expenses, I’m really going to have to sit down and actually do the homework for that.
I think I’m going to be really good for next year. It’s just, I’m worried about this year, because everything’s going to be coming up so quickly. I know I need that tax return from 2021 to even be able to talk to lenders about getting a house by summer.

Scott:
Yeah. It sounds like the big … You’re doing great from a overall financial perspective. You’ve paid off a ton of debt. You clearly have a positive cash flow. You clearly have low fixed, regular ongoing expenses from that. There’s probably opportunity to analyze your business expenses, and make sure that you’re actually getting the ROI that you want on those.
It really comes down to accounting at this point. It’s just, the system is going to get worse if you don’t invest in it, I think, in the next couple of months, and figure out, how am I going to track all this stuff? How am I going to make sure, here’s what a business expense is? Here’s what it is. If you do it in real time, it’s a few minutes that day, or that week, to handle those expenses, or it’s a miserable slog that you’re going to want to keep putting off around tax time.

Eric:
That’s what it’s been the past seven years. A miserable slog.

Scott:
Now, you’ve got a six-figure business. You got a real business. It is time to treat the financial piece of that like a business with this. I think that will solve a lot of a day-to-day problems and admin … And, it will give you insight on how to fix things that are not making you money, that you’re spending money on.

Mindy:
Yeah. That’s a good point, Scott. There’s just because these streams of income are bringing in some money, doesn’t necessarily mean that they are good, long-term options or things that you should be focusing on, or even allowing to continue to grow. It seems weird to be saying, or even giving advice, “Hey, somebody he wants to give you money.” Just say no. That’s mental energy that you’re spending, and physical energy that you’re spending doing something that might not be generating a lot of income.
Whereas, if you cut that part out of your life and focused on your podcast or your YouTube channel, or something that is bringing in more income, you could exponentially grow that. The three hours you’re spending here to make a $1.50, you spend three hours over here and you’re making $10,000. It’s a better return on your mental investment and your time.
I love that you’re getting 2022 expenses all set up and great. In addition to getting a CPA, we want you to talk to a tax professional about tax planning, because now, we can’t plan for your taxes for 2021. Whatever you owe is what you owe. I’m sure your CPA can find deductions that you may not know about, but going forward, your CPA can give you advice, or your tax professional can give you advice on, hey, if you do this, you can save this much money in taxes, but you have to do this during the tax year.
Like Scott said, we’re not CPAs. I am not a tax planner. I’ve got one, and they’re great. I don’t try to figure out what I’m going to do by myself anymore, because I have complicated taxes. You have complicated taxes. If you had a W2 and you were straight income, no deductions, it’s a lot easier to not have to worry about things like this. Once you start having self-employed income and all this financial monkey business, you need somebody who knows what they’re talking about, that can help guide you, so that you’re taking advantage of all of the tax loopholes that are out there, and tax deductions and tax advantages of running your own business, that there are, so that you can pay less taxes.

Scott:
Are you paying taxes periodically throughout the year?

Eric:
I just started last year, doing that.

Scott:
Okay, good. You’re not going to have an enormous tax bill that you need to save up for, from a cash perspective this year.

Eric:
I hope not. If I’m doing it right, I hope not, because in 2020, I put everything pretty much, after I paid off the credit card debts, I put everything into the emergency reserves I have now. Back then, it was to prepare for this enormous bill that I was expecting. I ended up paying 18,000 in taxes for the 2020 year. I think it’s because I didn’t go through all of it like I should have. I just shrugged my shoulder and said, okay, I saved for this, let me get back right next year, because I-

Scott:
Yeah, this is another example of where the accounting system’s going to come into play here, because what you can do is, like most businesses, you can close your books monthly and say, January, we made this much money, February, I made this much money, March, I made this much money. The IRS for businesses or individuals who have this type of self-employment income, if you don’t pay taxes throughout the year, you will pay a penalty, which accrues about a 3% interest rate over the course of the year, and pay that.
That’s going to be unavoidable in some circumstances. Frankly, I’d rather pay a little bit of that penalty, or err on the side of paying a little bit of that penalty, than prepaying too much and getting a giant refund. That’s a philosophical debate we can have.

Eric:
Right.

Scott:
I don’t want it to be a big surprise either way. I want it to be pretty close at the end of the year. Again, that’s philosophical. That’s how I feel about it. If you can close your books monthly and set up your accounting systems, you can say, okay, in the first quarter of 2022, I’m going to make this much money, 10 grand, because it’s a slow season, or whatever, and I’m going to set aside 35% of that, 3500, for taxes, and that’s going to go in a separate savings account. I’m going to write that check to the government, and do it on my periodic payment date.
In Q2, which I think is actually just two months, there’s a weird quarterly schedule, it’s not first quarter, second quarter, third quarter, fourth quarter, it’s January through March, then April, May, then three months, three months, it’s something … Or four months, three months. Something weird like that.
Anyways, then you can go through and say, okay, great, over the course of the year, every couple of months, I’m going to close my books. I’m going to say, here’s how much I made. I’m going to write that check to the government. I’m not getting surprised at tax time with that. Maybe I’m being a little conservative in my estimates, so I’m making sure I don’t get a huge refund, I’m going to manage my cash flow poorly and giving them an interest-free loan, but I’m not going to figure out my taxes and be like, whoa, I owe 20 grand. That’s going to ruin my real estate investing.

Eric:
You said 35. I’ve been putting 30, I think, 30% for taxes. If I get a big chunk of cash, I’ll do 30% and put it … I have a bank account solely just to direct deposit to IRS for quarterly payments. It’s usually 30%-

Scott:
30%’s probably good.

Eric:
… but I don’t know if that’s enough or not.

Scott:
You’re in Florida, with that. If you have a good year, it won’t be enough.

Mindy:
This is where a tax professional can come in and give you actual advice instead of Scott and Mindy-

Scott:
Yeah, there you go.

Mindy:
… who’re just flying by the seat of their pants, because they also have tax professionals who tell them what to do.

Scott:
Yeah. All of this stuff, it’s funny, because this is usually not where we spend a lot of the time, but the strategy for your finances seems pretty good. You spend very little, you have a variety of business interests that seem to be growing, that you seem excited about over time, and seems like you know what you need to do to grow those businesses. We can also talk about that as another topic, if you’d like, and you want to invest in real estate to grow your wealth.
There’s not much in the way of strategy here, that we’ve gotten to yet, but it really has been about the basics of putting your systems in place, to get a really fundamentally strong view of what’s coming in, what’s going out, how can you plan around that, what’s making money, what’s losing money?

Eric:
I think that’s where it starts with us here, because I have been educating myself from the other conversations you guys have had with everyone else. All the other stuff that you guys would’ve talked about, I have been putting to work in my own life. It’s just the tax part of it, is what’s been keeping me bogged down all these years, and what I really had to come out of back in 2020.
The paying off the debt, I already knew I wanted to do that. Then, building up a cash reserve, I had to get that implemented, but it was the tax, it’s the business expenses, calculating that, organizing that. Then, when more business comes in, different from my personal, that’s where it gets even more confusing. Now, we’re here, and need to get this nice and tight, so we can keep this going.

Scott:
I’d also look at it as an opportunity, not just from the tax angle, but to understand the value of the business activities you’re doing. I think that’s where you can come down, again, going back and saying, I did this trip, these assets were produced as a result of that. It was necessary for my job to … it’s like, I talk about football, I need to go to the game for this.
How can you break apart those things? I bet you, since you’re not doing that at a high level, that there have been a couple of activities that have lost your money, or that you wouldn’t do again from an ROI standpoint. Is that fair, do you think there’s a couple?

Eric:
Definitely, most likely. Yes.

Scott:
Every business will have those, but if you can analyze those and learn from them, that’ll be really helpful. Okay. What else, what’s another area that we could help you with today? What are some other things that you’d like to ask while we’ve got some time here?

Eric:
I wanted to know what your advice would be in terms of … Because the market is so hot right now in Florida, and I do have a realtor showing me listings. I get an email for the new listings that pop up on the MLS, just because I want to stay in the know of what’s going on as I get further into wanting to purchase. Would you guys recommend me waiting a year, maybe renting for 12 months, while I build this cash reserve to something greater than 25,000? Or, should I get my taxes in order and be looking and try to jump on something as early as July or June or May?

Scott:
What would you buy if you bought in June?

Eric:
I’m looking for either a town home or a single-family residence. The thing is, I don’t know if Jacksonville’s going to be a place where I want to be long-term, but I don’t think that matters, because you can always sell a property or leave and rent out and stuff like that.

Scott:
What would your payment be?

Eric:
For the mortgage, or the apartment?

Scott:
Right now, you’re paying 650 for a bedroom essentially in a house. What would you be paying for the apartment?

Eric:
Apartment is anywhere between 15 and 1900. That’s going to go up.

Scott:
It sounds like you’re paying 650 a month right now, and you’d be looking to buy an apartment or a condo or a town home, that would have a payment of 1500 to 1900 in the Jacksonville area. How much would you pay in rent if you were to rent instead of buying?

Eric:
Oh, I was saying, that would be rent for a one bedroom, plus amenities at an apartment complex, that’s the rent, 1500 to 1900. That’s what rent’s going for, for those kind of places around here.

Scott:
Okay. What would the mortgage be then, if you were to buy instead of rent?

Eric:
I’m sure it’d be a lot less if I could build a substantial cash position to be able to put down something. Because my credit’s good. I think that’s one of the factors of having a lower mortgage, is good credit and a high down payment, if I’m not mistaken. The research still has to be done on that, but I think it would be lower than paying rent in an apartment complex, because this house here, the mortgage is 1200. That’s why I’m able to pay 650. I know the house is a better decision.

Scott:
I’ve got a spreadsheet for you that would be helpful. It has the rent versus buy decision on there. Personally, I’m actually leading towards, based on what you just said here, renting instead of buying as a better option once your girlfriend moves down to Jacksonville, because you don’t plan on living there for a long period of time.
When you buy a house, there are a number of factors that come in, that actually, that are expenses that don’t show up on the simple back of the napkin math. You’re going to spend 2% of the purchase price in buyer’s closing costs, to close the deal. If you were to turn around and sell the house right after a year from now, you’d spend seven or 8% of the purchase price, let’s say a $300,000 property, you’re going to spend six grand buying it, and you’re going to spend three times eight, 24,000 or so, 21 to $24,000 selling it, in terms of commissions to the agent, and the agent on both sides, the seller’s paid transaction costs, all those different types of things.
You’re going to have the mortgage payment, which may be slightly less than the rent, and you’re going to be building equity and appreciating, and the property may be appreciating to some degree. Yes, those will offset that, but that payback period in a three, three and a half percent appreciating market, can be five to seven years. It depends on the circumstances in your market.
I’ve built a spreadsheet that will be available at the show notes here, at biggerpocket.com/moneyshow286. We’ll send it to you, that you can use to do that math in your area, based on what you believe. If you believe appreciation’s going to be at 20% next year, then buying a house will be better than renting. That’s, I think, a pretty bold assumption [inaudible 01:06:57]

Eric:
I don’t know, Jacksonville’s got out a lot of land and a lot of things are getting built up here. I could see it.

Scott:
Yeah. Something to think about there is, and I’ve done that math for myself, and because I’m not 100% clear on what I want over the next couple of years, from a housing situation, I rent right now, and I rented for the last year and a half. I’ve been perfectly fine with that, because I’ve done that math and said, if I’m not clear, I should probably rent instead of buy. If I am clear about what I want to do long-term, then I can buy.
Another way to avoid that decision in the first place is to buy a place that makes a lot of sense as a rental, be like, I’m just going to buy it and I’m going to convert it into a rental within a year or two. That will be the first property in my portfolio. Because that way, you’re going to hold the property. You don’t have to live in the property, but you have to own the property long enough to allow the magic of appreciation, debt amortization, and then ideally a nice solid cash flow spread to work to your advantage.

Eric:
I would … Oh, go ahead, Mindy.

Mindy:
I just ran the numbers on a $300,000 mortgage with a 20% down payment at 3.8% interest, and some random made-up numbers for property tax and homeowners insurance. It’s $1,500 a month for that. It’s the same price monthly, approximately, as the rental, and the house. Now, if you can house hack, where you’re paying $1500, but then you’re renting out a room to a roommate, and they’re paying you $500 a month, now, your payment is only $1000, and you’re renting out another room, and they’re paying $500 a month. Now, your payment’s only $500 a month.
All of a sudden, it looks like a better deal to buy. I would agree with Scott, that you should absolutely run these numbers and make sure that you’re buying a property that makes sense as a rental. Not every property makes sense as a rental. You could buy this house with your $1500 a month mortgage payment, and then all of a sudden, you need to leave, you can only rent it out for $1000 a month. You just bought yourself a $500 a month deficit in your monthly budget, because you can’t rent this for more than your mortgage payment, and you don’t choose what it rents for. The market chooses what a property rents for.
I once heard Brandon Turner say, “Oh, I ran the numbers on a property, it would only make sense if they paid me to buy this house.” There are some properties that just don’t make any sense. Knowing that going in, you can then not purchase that property. Purchase the one that makes sense as a rental. Purchase the one that’s in the great neighborhood, or right next to the school, so you can rent it out to students, or near the beach, or wherever you guys are living. I can’t remember where Jacksonville is in Florida.

Eric:
The north side, northeast.

Mindy:
Do you guys have a beach? Are you close to a beach?

Eric:
Yes.

Mindy:
Yeah. Go buy the beach. They’re probably not $300,000 by the beach. The closer you are to the beach, the more Airbnb opportunities you have.

Eric:
Yeah. The future is just, like with everything is, it’s hard to play in for the future. I don’t know if this city, I’ll be in it long-term, even though the content that I make right now for the podcast business is around the local NFL team here. That could possibly keep me here for a longer period of time. In the end, I just don’t know.
That’s why I’ve been hesitant for a home purchase, but buying a home to rent is obviously on the top of my list, because I do want to build a portfolio of rental properties, because that’s what you guys are about. That’s all I’ve been listening to.

Scott:
I think that’s a great move. I think you’re thinking about it perfectly there. If you buy a nice house that doesn’t have good numbers from a rental property perspective, you’re going to be stuck, and that’s going to impact your career to some degree, because it’s going to make you weight more towards local things, than the broader opportunities that it may come up over a long period of time.
I like the idea of buying a house hack, or a house that … Buying a rental property that you’re just going to happen to live in, instead of rent for a year or two, and then will make sense as a rental long-term. If you’re going to buy a house, I would lean towards … And that didn’t factor those things in as primary considerations, I would personally lean toward renting. That’s why I personally rent. I wanted to live in a nice place. The second bathroom is a game changer when you have a girlfriend, or a wife in the house.

Mindy:
Always buy a house with two bathrooms, two toilets.

Scott:
The shared shower is one thing. Yeah, the toilets is a good one.

Mindy:
Yeah. I want to invite you, if you haven’t yet listened to Monday’s episode, I want to invite you to listen to Monday’s episode with J.L. Collins, talking about how he lost money in real estate. He lost a lot of money in real estate, and yes, it was a very different market, but there’s nothing that is preventing our current market from switching and turning into the kind of market that J.L. was talking about during his episode and during his rather tragic real estate experience.
There’s no changing, or there’s no predicting the future, like you said. You want to make sure that you’re buying a solid investment. J.L. didn’t. He just bought on a whim and flew by the seat of his pants. We didn’t have BiggerPockets when he was buying in, when was it, 1979, Scott? That he bought this property.

Scott:
Yep.

Mindy:
Slightly different market, but still, same outcome. You can lose a lot OF money in real estate. It’s super easy.

Eric:
On that episode, does he talk about the ways to analyze whether a property is worth getting as a rental?

Mindy:
No, I think it was more of just a cautionary tale. Lucky for you, we have an entire website about how to analyze real estate properties to make sure that they work out as a rental property.

Scott:
Yeah. If you have any books that you would like to read on that, that BiggerPockets produces, or you want access to the calculators on our website with a pro membership, just reach out to me or Mindy afterwards, and we can connect you with any of those titles, or the pro membership, to help you analyze the deal.

Eric:
I do have Brandon Turner’s, what’s that book, real estate …

Mindy:
The book on rental property investing.

Eric:
Yes, I have that one. I feel like that would be a good one.

Mindy:
House hacking. Oh, hey, let me get all mom on you right now and say, what are your plans when your girlfriend moves in? Who’s going to pay what? That’s a conversation to have before she moves in. Who pays the rent? How are you splitting it? Are you splitting it based on income percentages? Are you splitting it 50/50? Who pays for food, utilities, all the things, you want to get that all hashed out before you move in together, because it’s super exciting before you move in together, and then once you’ve moved in, you’re like, “Hey, you owe 50% of the gas bill.” She’s like, “Wait, I thought you were going to pay for everything.”
You want to know that in advance, that there are different expectations, or that you’re all on the same page, and that’s great. Then, you can have a celebratory Hello Fresh meal.

Eric:
We’ve talked about that, because all of the finance has been on my mind the past few years, and I’ve been teaching and telling her about all the things I’ve learned from BiggerPockets as well. She’s in the same mindset as me with money. Before we even-

Mindy:
Yay.

Eric:
… started looking at places, we were talking about opening … We have it written down already. When I was in Ohio visiting her last week, we were writing down the monthly expenses, what we’re going to have.

Mindy:
I love it. Yay. Okay. That’s fantastic.

Eric:
Yeah. We’ll be all right with that. We’re going to know who’s owing what.

Mindy:
Good.

Eric:
That’s the least of my worries.

Mindy:
Okay. I’m glad that that’s the least of your worries.

Scott:
Have we answered your question about housing in this point, or what else would you like to talk about today?

Eric:
Definitely. I think I was just trying to get direction for just renting versus buying at the moment. I think you guys have cleared it up. I just need to get it my tax situation in order, so I can keep a clear head. You guys have definitely given me a lot of information that I can use for the rest of this year, and beyond.

Scott:
Awesome. I want to reiterate that you’re crushing it here. You’re building an awesome brand. You’re bringing in great income. You’ve paid off a tremendous amount of debt. You have a great money story coming into this. You’re clearly going to continue stockpiling wealth over the next couple of years. Real estate can be a great avenue to that. If you decide to rent, stock market’s another great avenue for that, just keep piling it into those retirement accounts and after-tax brokerage, things there.
Put a vision together for that business as well, and what that’s going to look like over the next couple years. Get a little tighter on that forecasting. You’re doing great. It seems very clear to me, based on our conversation, the little I know about your brand, that things are likely to accelerate over the next couple of years for you, from an income standpoint and a business standpoint, in particular.

Eric:
Yeah.

Scott:
Where can people find out more about you and what you do?

Eric:
My website is Eric V. Dunn, V as in Vincent, podcast is Dunn and Drew, it’s Dunn and Drew across all social media accounts. Eric V. Dunn on all social media accounts. Google either one of those names, we are pretty easy to find, because social media is our business.

Scott:
Awesome. You can Google all those things. Eric V. Dunn, D-U-N-N. You can also find all of the … We’ll link to everything he just discussed there at the show notes, biggerpockets.com/moneyshow286.

Mindy:
Eric, this has been super fun. Thank you so much for spending time with us today. I really enjoyed talking to you.

Eric:
I enjoyed talking to you guys as well. I’m glad I could finally come on here and talk to you guys after all the consumption of your podcast that I’ve done.

Scott:
Yeah. Thanks so much for having us. I’ll need to check out a bunch of your stuff as well. This will be fun.

Eric:
Hey, check out the vlogs at Jags games. They’re funny but sad.

Scott:
Absolutely.

Mindy:
Okay. Eric, we’ll talk to you soon.
Okay, Scott, that was Eric Dunn, and that was super fun. We ran a little bit long, but I thought we had a really great discussion with him with regards to lots of things, including, like I said, in the beginning of the show, the very real issue of not really wanting to separate out your public, or your business and your personal finances in the beginning of creating a company. Then, at some point, you need to start creating two separate entities. There’s personal you and business you.
I think once Eric fixes that situation, a lot of other things are going to fall into place.

Scott:
Yeah. Now, if you’re trying to do it by the book, you start that way and you keep it that way forever. In a practical sense, a lot of these business ideas can not really generate any income. Going to all that work to set up those systems and those types of things at first, nine out of 10 businesses fail, 90% of the time are going to be a waste of time, but eventually, they need to be set up, they need to be structured, and they need to be able to give you insight into where you’re spending, what’s producing a good ROI for you inside your business, what’s not, how you can eliminate waste. That’s just straight up, not adding value at all, and how you can sort that out from a tax perspective.
I think we also touched on this as well, expensing everything. If and when there is a blurry line between personal and business, in some cases, Eric is not doing this, to his credit. He declared a substantial amount of income on his tax return, but trying to play the game of reducing your tax income too much can actually have adverse effects on you in terms of your ability to get mortgages and loans and those types of things, if you are interested in investing in real estate.
Something to think about, if you have expenses that can go either way with it is, try to draw that line really clearly and stick to it. Then, you want your business to make money at the end of the day, that you can spend and fund your lifestyle with this, and showing a big loss can have drawbacks as much as benefits.

Mindy:
Yeah, I thought that was a really good point, Scott. We are going to ask in our Facebook group, we’re going to ask our lenders, if you are a lender, Seth, John, if you’re a lender and … Oh, Seth is in Florida too. Let us know in the Facebook group, what a self-employed person can do to show a lender that they are generating income, that they do have a lot of money that they are making, because it is more difficult for a self-employed person to get a loan, more difficult than a W2 employee.
Also, Scott, I thought you made a really great point by telling him to check the ROI on each individual trip, and each individual thing that he’s doing, because like I said before, sometimes it’s really tough to look at a thing that is paying you money and say, I don’t want that money anymore. Sometimes, it’s better to take that time off of your calendar, so you can put it into something else that’s going to be generating a lot more income.

Scott:
I think it was a wonderful discussion, and learned a lot from him. What an unusual personal financial situation, but also, what an exciting one. I think there’s a lot of folks out there that, maybe if you don’t like your job or you don’t like where something’s going, he’s got a really exciting career trajectory that you could learn a lot from.
What makes it all possible, at the end of the day, or what allows him to build so much wealth is, his fixed expenses are pretty low from a personal standpoint, that keeps it there. He’s renting a room in a house with a buddy, with that, to keep those expenses low. He’s experiencing the benefit of what sounds like, somebody else’s house hack, there as a tenant.
It’s a really strong financial foundation that he’s got to enable this. It obviously took him a few years to recover from some mistakes and build that.

Mindy:
That’s not something we really focus on, Scott, is the people who are helping you hack your housing by renting a room from you. They’re getting a good deal out of it too, because they’re not paying full rental price. He’s only paying 650. Now, he cut $200 off of his rent expenses. That’s another point, you can’t really house hack if you don’t have anybody there to help you hack your housing.

Scott:
That’s right.

Mindy:
Okay. Should we get out of here, Scott?

Scott:
Let’s do it.

Mindy:
From episode 286 of the BiggerPockets Money Podcast, he is Scott Trench, and I am Mindy Jensen, saying go forth and prosper.
(silence)

 

Something interesting happened during the coronavirus pandemic. Many Canadian housing markets are reporting an average sales price of more than $1 million, even if the homes themselves do not look like something you’d typically expect in the luxury home market.

Is it time to update the term “luxury real estate”? Perhaps. But the trend also spotlights how hot the Canadian housing market has become – especially when many detached, attached and condominium properties are topping $1 million, from Toronto to Victoria to Halifax.

That being said, there has been considerable demand for luxury real estate in Canada. But what were the numbers like last year, and is this strength likely to continue in 2022?

Canada’s Luxury Home Market is Skyrocketing!

While it can be challenging to track luxury real estate data, some reports can be extremely helpful in defining the state of Canada’s luxury home market.

The RE/MAX 2022 Luxury Market Report confirmed that 18 of the 19 markets analyzed enjoyed double- and even triple-digit percentage gains in home prices. Sales activity was just as sizzling, too.

For markets that saw homes sell for more than $1 million, here is a look at the cities making the top five list on a year-over-year basis (outside Toronto and Vancouver, of course):

• Saint John: +1,400% to 15 units
• Moncton, New Brunswick: +600% to seven units
• Barrie, Ontario: +517.8% to 278 units
• London, Ontario: +255.1% to 561 units
• Kitchener-Waterloo, Ontario: +208% to 1,312 units

The country’s largest luxury markets also recorded significant gains. The Greater Toronto Area reported a 112.8-per-cent jump in sales of homes worth more than $3 million. Metro Vancouver saw a 75.8-per-cent increase. In the GTA and Vancouver, transactions of homes with a price point of $10 million saw a spike of 156 per cent and 167 per cent, respectively.

The only market to see a drop in unit sales of properties worth more than $1 million was Charlottetown, Prince Edward Island, which recorded a 42.9-per-cent decline.

“The currency of home ownership has clearly taken on a new dimension in 2021,” said Christopher Alexander, President of RE/MAX Canada, in a news release. “Canadians are moving to secure their future. The pandemic fuelled a run on real estate that has encompassed every segment of the market, and the value of housing has increased exponentially as a result – not only as a form of shelter but a desirable asset class that provides an attractive return on investment.”

Are investors driving this part of the market? The Bank of Canada (BoC) recently published a report that noted as home sales ballooned and prices soared, it was purchases by investors that grew the most. With thousands of high-end units being sold nationwide, it is safe to say that investors are also eating up the luxury home market, which is also experiencing low supply of listings.

“More so than ever before, it appears that buying a home is a retirement strategy, which many people believe will help the next generation achieve home ownership,” said Elton Ash, Executive Vice President of RE/MAX Canada, in a statement.

Luxury Trends Seeping into Broader Housing Market

The RE/MAX report revealed several other trends, some of which show that the effects of the luxury real estate boom are seeping into the broader housing industry. For example, luxury home-buying activity has spilled into the smaller markets where prospective homeowners can enjoy greater purchasing power. Or, as another instance, home sales and buyer competition are contributing to higher price points across Canada.

And the supply of luxury homes could decline in the coming months. It was reported that sales of building lots at the top end of the luxury market slipped because buyers are apprehensive about construction amid labour shortages, supply chain woes and unclear costs.

Will a million-dollar luxury property advance even more over the next year? Although interest rates are expected to climb in the coming months, borrowing costs are still near historic lows. So, homebuyers can continue to enjoy more purchasing power, even for these types of homes, be it in Metro Vancouver or Halifax-Dartmouth.

Will Canada Become a Luxury Market?

Will Canada itself turn into a luxury home market in the next year or two?

According to the Canadian Real Estate Association (CREA), the average house price climbed to an all-time high of $816,720 in February, up 20 per cent from the previous year. The only way to reverse this trend will be supply, says CREA’s chief economist Shaun Cathcart.

“The ideal situation between now and the summer would be that a huge surge of sellers come forward looking to sell,” Cathcart stated in a news release.

But will this be enough to curb the affordability crisis and monumental surge? Analysts, economists, and public policymakers will keep monitoring the monthly CREA data.

Source:

David:
This is the BiggerPockets Podcast show 587.

Dominique:
When I would meet certain sellers, or go on appointments, even with the buyers that I was potentially bringing deals to, there was always that kind of gut reaction of like, oh, this is who I’m meeting? Do I have the right person here? So that was definitely a thing I had to overcome, especially if I was going to check a property and walking around at a job site or construction site, I just don’t look like the person that would be showing up there.

David:
What’s going on, everyone? It’s David Green, your host of the BiggerPockets Podcast, the best dang real estate podcast on the planet, here today with my co-host Rob Abasolo. Look, if you’re trying to figure out how to build wealth through real estate, or maybe you want to find a better life and you know that real estate can help you get there, you, my friend, are in the right place. BiggerPockets is a community of over 2 million members, full of people that are all on the same journey as you, and we take full advantage of that to bring you people that will help you with your goal, building wealth through real estate.

David:
Today’s guest, Dominique, is very young, but very successful, and is a great example of taking action, leading to growing skills, which leads to growing success. Now, I’m not going to tell you too much about her, because I definitely want you listen to this podcast, but you’ll be incredibly impressed by both the business that she has built, and her skill at communicating what she’s doing, and realizing how simple it really can be to build wealth. Rob, it’s great to see you, as always. What were some of your favorite parts of today’s show?

Rob:
Man, this was a very inspiring one, because as you mentioned, Dominique is a very good communicator, almost like… It’s a very annoying how easy she makes this feel, because she’s just so good at what she does, and I’m like, “Man, how do I get there? I want to get there.” Some of the things that she talks about, from a high level here, is like, she’s talking about hiring a project manager to help you manage your long distance rehab. That one, to me, it always seems a little jarring, when you’re taking on a big project like that, and she just of walks us through the steps, and by the end of it, I was like, oh, that makes a hundred percent sense.

Rob:
Now, she also talks about how to build the perfect buyers list. She’s just a really storied person. She had like 40 to 45 deals in her first year and a half, and also just a little plug there for the end, we get some advice for those looking to actively invest along the San Andreas fault line. So you’re definitely going to want to stick around until the end.

David:
That’s a great point. If you have ever wondered, what’s the best way to invest on the fault line, this is the episode. Make sure you listen all the way to the end, because you’re not going to hear it anywhere else. All right. Today’s quick tip is, consider doing more than just learning. Look, learn earnings is very important. BiggerPockets has an amazing bookstore, biggerpockets.com/store, where there’s lots of books, some of them written by me, many of them written by other people that will explain to you how to be successful in this world. Dominique mentions a books that was her favorite book by a BiggerPockets author, Matt Faircloth.

David:
But here’s the thing, it’s not about what you have in your head, it’s about what you actually put into action. So the quick tip is going to be, load yourself up with the ammunition that you need to be successful, but then get out there and start doing things. Dominique is the best example I can think of, of somebody who found big success at a young age because she just started doing stuff, and she didn’t listen to that little voice that sits on your shoulder that says, you can’t, you’re not smart enough, you’re too young, you’re too old, you’re too rich, you’re too poor.

David:
There’s always reasons that we have, that tell us, hey, this isn’t going to work for you. She’s a great example of how that is not always the case. So, everything that you’re learning, ask yourself how you can take action today. All right, Rob. That’s all I got before we bring Dominique in. Anything you want to say?

Rob:
I’ve thought about it, I’ve outlined it, I’ve hopped it, and I’ve ultimately decided, I do not have anything else to add to what you just said.

David:
Very nice. Let’s bring in Dominique. So let me tell you a little bit about today’s guest. A lot of people start in real estate very young. Dominique took an interest and action real estate at 17 years old. Not only did she start learning about real estate, but she started to actually take action and learn through doing, not just from listening. As many people as are getting into real estate younger with the new information that’s out there, even fewer people are doing this are as young as Dominique. So we brought Dominique on to share a different angle.

David:
Dominique cut her teeth on wholesaling in Los Angeles doing 40 to 45 deals in a year and a half. She moved into long distance, self-funded flipping in new Orleans, 70 to 80% of her business coming from fix and flips with less of her own capital. She’s still [inaudible 00:04:35] and wholesaless several properties a year, while flipping five to six properties at a time. Most of the deal that she finds comes through off-market and six other strategies, and she uses her age to her advantage, instead of seeing it as something that holds her back. Dominique is driven by the chase for the next deal, and is looking forward to bringing her husband deeper into this business as he transitions from military life. Dominique Gunderson, welcome to the BiggerPockets Podcast.

Dominique:
Thank you, guys, so much for having me.

Rob:
Wow, quite the intro.

Dominique:
Thank you. Yes. I know. It’s been a fun ride since a young age, so I’m stoked to dive into it all.

David:
And you’re 24 right now, right?

Dominique:
Correct.

David:
Yeah. I don’t know how long your bio’s going to be, if it’s already this big by 24 years old. Your bio’s going to be its own book. We know you were interviewed on episode 170 of the InvestHer podcast here on BiggerPockets. So if everybody would like to get a little more insight and nuance into Dominique’s story, that’s a great place to start. But for those of us that are first hearing about you now, can you give us a brief background of how you got started in real estate, and what sort of drove you to get into this world?

Dominique:
Sure. So yeah, I got into real estate at a really young age, I was in high school. I was probably 15 or 16, when I first found out about real estate. It didn’t necessarily come from any background or my family wasn’t in it, it was actually pretty random. It was around 2012, 2013 when the market was really down, and my mom had finally been in a position to purchase her first home. We lived in Southern California, so it was very expensive, and neither of my parents had ever owned real estate or done anything in that realm. So I didn’t know anything about it, but she ended up purchasing a short sale that came on the market for a really low price around that time, and that was my first hook to the whole process.

Dominique:
The fact that she got a short sale was an even greater hook for me into the actual renovation and potential to add value to the property, because it was… it wasn’t bad, but it was a little bit run down. And so that was my first… gosh. Yeah, I was probably 15 or 16. That was my first introduction to it, and I knew that I loved it, I loved the idea of being able to add massive value to an already massive purchase and create huge wealth, and I just knew that that’s what I wanted to do for a living as soon as I graduated high school.

Rob:
So that’s awesome. So you were… you said that was 15, 16. And then when was like the… I imagine that was the catalyst that started everything off, but from that point, did you go straight into wholesaling? What was your transition into doing this a little bit more consistently?

Dominique:
Yeah. So when I graduated high school, I was 17 team, and I started working, actually, for a real estate agent at that point, someone local that was really successful in the Southern California market. My goal there was to do some deals. I wanted to get my real estate license and just dive in. But more than that, I wanted to work for somebody who was really successful just at being a real estate agent. I wanted to learn sales, and the contracts, and all of the basic foundation before I actually got into the investing side of it. So I worked for the agent for about two years, and then at 19 is when I started the investing side, when I jumped into wholesaling.

Rob:
So that this is really impressive, because in your very grand intro that David… He’s never given me a very grand intro like this, but he said that you closed between 40 and 45… or you did 40 to 45 deals in about a year and a half. So I think that’s about… I’m not the most math-forward person here, but about 30 a year, sounds like. So this was in partnership as somebody’s mentee, and working with a mentor?

Dominique:
So those deals were when I started jumping into wholesaling. So that was after I was working for the mentor real estate agent. So the wholesaling deals were more so done on my own. I was working with a small group of people, a wholesaling team, I guess, you could say. So that was also a really cool aspect of it for me, because not so much that I did a bunch of deals with other people, although we would work on stuff together sometimes, but just being surrounded by that team of people that were doing the same thing, it allowed me to jump in, and I could ask questions whenever I needed to, I could figure out about the process and what’s the best way to do things. And so that definitely helped me. But as far as the actual mentor we were talking about, that was before any of those deals.

Rob:
Okay, cool. So you learned from your mentor very fast, you went, you jumped straight in, and you’re crushing it here at 40, 45 deals. What was your goal? Was your goal, when you were doing this, to just get as much experience as possible? Was your goal to expand your… yeah. I guess like, was it the experience side of it? Were you just trying to make money? Were you trying to save up for any specific thing? Tell me a little bit about what was the actual fuel to that? Because most people, I don’t know if you know this, they’re not actually doing 40 to 45 deals in any capacity, in any form of real estate in the first like one and a half years of really going solo.

Dominique:
Definitely. I had pretty strong goals at that point. I actually knew I did not want to do wholesaling, but I also knew that I needed to start somewhere like that to build capital, learn, get deal experience, meet people that were farther ahead than me, and could train me up. So my main goal, from the start of doing wholesaling, was yes, to get the experience, but mainly was actually to build the capital and save the capital that I could go and start my own house flipping, buying rentals, more my own deals that I’m going to keep and hold. I wanted to do it for maybe a year, year and a half, two years. I didn’t know how long it would take. It ended up taking about a year and a half. That was always the goal, to start building capital, to flip houses, do other things on my own.

Rob:
So I imagine from doing this amount of work, were there processes or was there steps that you would take to basically build out this business? Can you tell us a little bit about any kind of process or… If I know you a little bit, because I did hear that podcast, you have a six-step process that actually kind of walks us through this general business, right?

Dominique:
Yeah. So I can definitely dive into a couple things. The six steps is probably more so on the side of some of the off-market strategies I used to get deals, six or seven different ways that I have gotten deals. So I’m happy to dig into that. I can also share a couple things that helps me be really successful in the wholesaling space. So I’ll start there, just a couple quick points. One thing that I think is super important, I think a lot of people, when they’re starting wholesaling, they focus on the deal, which is really important. You can’t make money or wholesale anything until you have a deal to wholesale. But I also realized how important the other side of it, which is selling the deal, was. I didn’t want to get a deal before I had anyone solid to sell it to.

Dominique:
So I actually spent my first couple of months… I didn’t do any deals. I was just building a solid buyer’s list, and that was really, really key to my success down the line. These are a couple of reasons why. One thing I always did is I met all of my buyers in person. It took some time, it took extra networking and driving to them, if they didn’t want to drive to me, but it was huge for my success and building that relationship. I wasn’t just somebody that they got emails spam from, I was a face that they knew, and I know what they were looking for. So that was huge, building a strong buyer’s list, with deep relationships with these people.

Dominique:
The second thing that that helped me do is actually get deals. Because I knew these people and they knew me, and we had a more personal relationship, I got several deals sent to me to kind of JV with investors who would buy properties off-market or at an auction or however they got it. Once I built that relationship and they knew that I was successful at wholesaling, they knew, hey, you just sold that home in this neighborhood a couple weeks ago for 50 grand more than I just bought this home for. Yeah, I was going to put in all the work and flip it, or whatever, but if you can help me make 50 grand just by wholesaling it, let’s do it. Let’s do it together. And so I got a ton of deals passed onto me that way from my buyers’ list, which was also huge to my wholesaling success.

Rob:
I did want to kind of just ask here, because obviously you got started very, very young at 17, and now you’re 24. Just genuinely curious, as someone getting started, what role did age have in all of this? Did people take you more seriously because they saw someone young and hungry. Did people write you off? Tell me a little bit about that journey.

Dominique:
The age thing was definitely a factor for me. The other thing was being a young female. There was a lot of younger guys that are out there hustling, doing wholesaling, getting started. I did not meet one or anyone else that was as young as me and was a female doing this. So it was pretty unique. Shen I would meet certain sellers or go on appointments, even with the buyers that I was potentially bringing deals to, there was always that kind of gut reaction of like, oh, this is who I’m meeting? Do I have the right person here?

Dominique:
So that was definitely a thing I had to overcome. Especially like if I was going to check a property and walking around at a job site or a construction site, I just don’t look like the person that is showing up there. So I think it had its setbacks. I had to overcome that initial like, oh, you’re the person I’m meeting? Is this actually going to go well? But on the other hand, and I still use this to my advantage today, it’s super memorable. It sets you apart. People remember the young, 19-year-old girl that walked into their job site, and maybe not the mid 45 age guy that five others of them walked in.

Dominique:
So it definitely helps set me apart. The main way that I got over the obstacle of just getting in the conversation with these people and having them take me seriously was my knowledge. I had to learn and know anything and everything about what I was going to say, the numbers on the deal before I would go into those given situations. That definitely helped people take me seriously, and it still today. I know everything there is to know about the market I’m investing, the deal I’m looking at, my rehab numbers. I know all the stuff. You can fire questions at me about it, and I know what I’m talking about. And so once you start building that kind of relationship with people, they quickly realize that you are professional and you know what you’re talking about.

David:
Now, Dominique, you met, I’m sure, a lot of other younger hustlers in your travels that were trying to do the same thing as you, and I’m assuming most of them did not have your success. Would you say that’s because they didn’t put as much emphasis on the knowledge of what they were doing, they put more emphasis on the hustle itself?

Dominique:
I think that’s a great point to, yeah, keep in, is the hustle is one thing. You have to have the drive and the motivation to do it, but you’ve got to do it wisely. Yes, I think that’s a huge point to really dive in, take the time to learn. Read good books, listen to podcasts like this, figure out… talk to other people that are in your market, or see other people are doing, look at deals that are getting listed on the MLS, know what’s going on, not just the hustle to chase after and have no idea what you’re doing.

David:
Yeah. I think there’s an allure to making money in real estate, where people see opportunity, or maybe there’s a little bit of greed that’s involved, and they think I want to wholesale, because I make a bunch of money, and they don’t think about the fact that the person who you’re going to be assigning that contract to, or if you’re a real estate agent, the person you’re going to be representing, they want to know, do you know more about this asset class than I do? I have questions. Can you answer those questions? Am I making a good decision by buying a house from Dominique? If Dominique can say, well, here’s where they’re building on this side of town, and this is the plan is for the city with how they’re going to develop, and this is why this deal’s better than the one down the street, it gives people a sense of confidence that they should move forward, versus just looking at a deal and then asking a bunch of questions, which is what you get when somebody doesn’t trust the person that they’re getting the deal from.

David:
So that leads me to my next question I wanted to ask you what. What most people in your world do is they Google a list of homes, they call every person on that list, they try to wrap one up, and then they go wholesale it to a list of buyers they probably met at a local meetup. The problem is you end up calling the same people on the same list that everybody else is calling, and you’re fishing in the same waters that everybody else has already fished in. So what advice do you have or come up with a technique to create a list that is unique, that isn’t already being hammered by everybody else?

Dominique:
Absolutely. That’s a great point, and that’s a huge way that we actually get a lot of deals today. I buy most of what I buy off-market. Now, I’m flipping more than wholesaling, but it’s the same concept for getting deals. So here’s a couple of strategies that I’ve used. A lot of people probably use these strategies, but here’s a couple things that maybe you can add to the tool belt. So one would be networking with realtors, wholesalers, local people in your market who have deals. That’s the easiest. You don’t have to go out, do pay for your marketing, talk to sellers. So go to networking events. I have actually done a lot of work, just cold calling real estate agents, looked at like, say, in the last six months, all the fixer uppers that have sold, and I’ve just called all those realtors and been like, “Hey, I’m Dominique. I saw you just sold this fixer upper. I’m looking for one in the neighborhood. Do you have another one coming? Could you keep me in mind?” So, talking to those types of people.

Dominique:
The second thing I would say is email blasts to those types of people, to real estate agents, wholesalers, people that you’re trying to target. I’ve gotten deals like this, and it’s super cool when it happens, because all you did was send out an email, and you probably sent it to like 500 people at the same time, and then people start sending you deals. So, same kind of idea. I’ll build lists of… I usually do it for real estate agents, because those are the types of people you want to keep in contact with like once a month, or once every other month. You can’t call 2,000 real estate agents that are in your market every month. It takes up a lot of time.

Dominique:
So if you can come up with something simple and something of value. Something that I have done before is say, hey, I know that it’s a tough market out right now for your buyers. So I’m a local investor, and we have this property, this property, and this property that are currently under renovation, and they’re almost done, and we’re going to be looking for buyers in the next 60 days or 30 days. Just let me know if you’ve got any buyers that have been losing out on bids and want an option for an off-market deal. Send something that’s of value, not always just, hey, call me with your deals, send me what you’ve got. Those are good, too, just as touching base points, but try to add value to the people you’re email blasting or marketing to.

Dominique:
Direct mail and cold calling are definitely things that I’ve done a lot of direct to seller marketing. A lot of those leads that come on the lists we send to or call to have been more targeted. So I personally have never pulled like the list, David, that you’re talking about, just pull all the foreclosures, or pull all the out-of-state owners. Those are the ones that everybody’s targeting. So I’ve never done that. When we make direct mail or cold calling lists, it’s much more targeted. We go in a specific neighborhood that we are buying or we have three or four renos going on, and we target like… either driving for dollars, specific houses that are in need of repair, or just the entire street, just market to everybody that’s in that little zip code or neighborhood that you have a lot of renovations going.

Dominique:
I can talk in more depth in a minute, too, on if you pull a list like that, how to get the data, and how to actually get in touch with those people that are maybe just not readily available for-sale lists that you can buy with the phone numbers. But we’ve done a lot of that. Facebook has actually been a big one for me, as well, just networking with people on Facebook that have deals. This is probably more or less largely available in specific markets, but it’s really big in new Orleans, which is where I currently invest. There’s a ton of just networking real estate investor, real estate agent, all these types of things, Facebook groups. And so I’ve joined all of them, every single one that’s in the area and just constantly monitor them. People put deals up there, people just post stuff like, hey, I’m just new. I’m starting in real estate, I’m a new wholesaler. I get in touch with all those people, join their lists, talk to them on the phone, try to be really active if people are asking for advice in those groups, and stuff like that.

Dominique:
And then the final strategy that I actually just started working on and using, but it’s been great for off-market deals, as well, is going to the local auctions that happen at the courthouse or the sheriff sale auctions. They usually have them once a week. At least in the market I’m, in new Orleans, they have them once a week per county. So if you go to all the counties, you have a ton of off-market properties available to you each week, and there’s not that much competition or much lesser, because it’s a more risky strategy. So those are a handful of ways that I have gotten deals off-market, that have really performed well as far as fix and flips go.

Rob:
Yeah. So I guess diving into that a little bit, because I think you mentioned you do out-of-state fix and flip. Is that right?

Dominique:
Correct.

Rob:
So tell us a little bit about that. Because, obviously, the concept of doing a fix and flip, anything farther than an hour of where you live is pretty seemingly scary, understandably. The logistics seem like they can be a nightmare. But, when you have a system in place, I imagine it’s probably no different than running a flip that is an hour away from you. So can you tell me a little bit about what it’s like to manage an out-of-state property and the rehab behind it, and flipping, and that whole process?

Dominique:
Absolutely. Yeah. I currently live in Los Angeles, California, and all my investments are in new Orleans, Louisiana, so completely across the country, and we do renovations on almost all of them. So it’s not like we just buy something and throw it on the market or wholesale it. There’s a whole process in between me in the buy and the sale, and managing that from a distance, I think the key to my success has been my team on the ground. David, I know you talk about this a lot, having your core four team members that you can trust with anything and everything. I would totally piggyback and agree that has been the key to my success.

Dominique:
I’d say two people, in particular, that have been really important for me… other than my realtor, because you got to have a good realtor when you’re constantly selling properties. But the two people that have been really key, one, is finding a really it in reliable contractor that matches your personality. So for me, I am very hands-on, I want to see what’s going on. I always want updates, I want to be able to pick up the phone and not have to wonder why they didn’t answer or when are they going to call me back.

Dominique:
So finding someone that matches that, knowing that I’m going to need you to FaceTime me, I’m going to need you to call me, because I can’t see what’s going on has been huge. It took a few tries, it’s trial and error, finding people that… to find the ones that work best with you. But that’s been huge, having someone who is great at communication and really willing to take on that extra little step of like, hey, I’m not going to be there every day, so I’m going to have to call you and ask you some questions about what’s going on in this job site versus that one, and why are supplies not transferred from one to the other yet, and stuff like that.

Rob:
So you mentioned just now, there’s a trial and error with finding your contractor. What do you mean by that? Are you saying that the first contractor you find is it going to work out?

Dominique:
Not always, but that’s how it went for me. I think the contractor I use now, I almost always use and exclusively use, but he’s probably number three or four that I’ve worked with to find the right one.

Rob:
Would you say one through three, just based on what you were talking about, didn’t necessarily match your personality? They weren’t willing to jump on a phone call or report back every detail or be quite as hands-on?

Dominique:
Correct. Yes. I think it’s that. Personally, the ones that went wrong for me, as well, just had other issues. One of them was going through family personal stuff, and just became super unreliable. And then yeah, there was a handful of other that were and still are great contractors, good to work with, but I could tell when I picked up the phone and called them every morning, it’s like, oh gosh, you again, and I need someone that’s really willing to have that extra communication, because I’m not there.

Rob:
That’s funny. I feel like with my contractors, at the beginning of the relationship in rehab or build, I’m always the one that’s trying to call my contractor, and they’re always like, oh gosh, you again. And then at the very end, they’re trying to get me on the phone, because I have to make like a thousand tiny decisions, and I answer the phone, and I’m like, oh gosh, you again. So I can definitely relate with that.

David:
Or When they want to get paid. That’s the other time that you’re going to get-

Dominique:
Yes.

David:
… your phone is going to ring a lot.

Rob:
Yep. Are there any tips or tricks? Because I think the idea of finding that magical contractor that does fit our personality type, and is prompted, will FaceTime, and will order supplies for you off Amazon and do a lot of that stuff, that’s always a little daunting. So can you speak to like, how do I find this unicorn contractor out there, if they so exist?

Dominique:
I would say you can learn a lot from people just by the first one or two phone calls, the intro call, and then maybe you send them out to one job site to do a bid, or something. How quickly they get back to you and respond, how quickly they’re ready to go out there and take on new clients… Because a lot of people are just really busy. Those are good indicators, just how they are on the phone. Are they short and brief and want to get you off the phone, or are they really interested in hearing what your job is and how much future business this might correlate to? I think those are really good signs to look for upfront.

Dominique:
Ultimately, I’ve found you have to do like one job or a section of a job, one kitchen or one bathroom or something with the person to really fully know how their work quality turns out, what their communication style is like, if they’re responsible, if they keep a tabs on everything and they’re well organized. So I always have started just giving them one job or one section of a job just to see how it goes, and if it goes well, then give them more responsibility from there.

David:
How often do you rely on your real estate agent to go look at the work and tell you if you think that it came out well?

Dominique:
I personally don’t on my real estate agent for that. The second person that is really crucial to my team, that I didn’t get to mention yet, is I have someone who works for me as kind of like a… call them project manager, like boots on the ground type of person, kind of a Jack of all trades, not really specifically doing any of the construction work or doing any of the work, reselling or listing the property, but just there, on call to do any and every little thing that might come up from meeting sellers, if we need an appointment, to do like a walkthrough or a video of the property, to taking deliveries, or if something’s… an appliance is showing up to the house, to be there to open the door, all the little things that I just can’t personally be there for. Honestly, even if I was on the ground, I wouldn’t want to waste my time or spend my time doing those things. So that person, David, is the one who I rely on more heavily to be on the job sites, running around every day and keeping tabs on things.

David:
Yeah, that’s better, because most agents aren’t going to be experts in construction. So they aren’t going to know if it looks nice or not, they have no idea if they put hardiebacker down before they lay the tile, or if they just glued it right onto the existing floor or something. So I like that. It sounds like, Dominique, you have an understanding of find what people are good at and use them for what they’re good at. Don’t try to use people in areas that they’re not that good. I have two questions I want to ask you. The first is, being as young as you were, when you got started as young as you still are, and you’re currently married, what would you say drives you to take this much action and push through this many obstacles?

Dominique:
I would say for me, it’s in my nature. Even before I got into real estate, my brother and I ran our own little business growing up, and I’ve always just been an entrepreneur, had that kind of spirit about me. It’s just who I am. I love the hunt, the chase for new deals, new opportunities, and also just the joy that comes from… well, now it’s real estate that I’m doing, but there’s so many things that you can take gratification in what you’re doing, changing neighborhoods and giving people affordable places to live that look amazing, and giving people jobs, and all these things. There’s joy in that, as well. Honestly, the hunt and the chase of like having your own business, being your own boss, that has always been something that’s just in me, and I love it.

David:
My second question is, what obstacles have you found that popped up, that you were not expecting, or that you had to grow personally in some way to overcome them?

Dominique:
In relation to my age, or just in general?

David:
No, into the business. When people are listening to this, like, I want to do what Dominique’s doing. I want to go out there and wholesale 40 to 45 deals in my first year and a half. They get on the phone and they just start calling people. They’ve got that energy, they’ve got the hustle. But what things popped up that stopped you from being successful? One of the things I’ve learned in the business we’re in is let’s say you have to have a hundred things go well in order to close a deal. If you do 99 of them right and one of them wrong, it’s the same as if you only did one thing right or nothing right. You get the same results.

David:
So it’s very frustrating that you are constantly having to be perfect in most cases to actually get a deal to close, and you’re always trying to solve new problems. It’s usually not the problems you thought you were going to have when you start. So for those listening that want to be you, what are some things that you encountered or that you faced that you were not expecting, that forced you to grow as a person to overcome where you see some of your competition was like, oh, that’s too hard. I’m just stopping right here.

Dominique:
Definitely. I would say it’s the mindset behind it. Like you said, there’s going to be a hundred things you have to do right, and you may not even know 90 of them. You might just know the 10 steps that you have to do to start, and then the arrest come later, and you have no idea. You don’t even know what those words mean or those contracts mean. Just go in knowing that and be okay with it. Be okay with the fact that there’s going to be struggle, and that you’re not going to know everything that you have to learn and put up with the hardship, and find joy in that, too, or find excitement in the fact that every day, you go into work on this deal, you’re going to learn something new, and it’s going to help you on the next 20 deals that you’re going to do.

Dominique:
I totally remember doing that when I started wholesaling. I remember very specifically, the first deal I ever wholesaled, I actually met the buyer on BiggerPockets. We networked that way, which was awesome. But I met him out at the property, and he came ready to buy it, had the cashiers check ready and was ready to move forward, and I was so stoked. I finally got supposedly this sale. t’s ready to go into escrow. I just remember standing there thinking like, man, I am the one running this deal. I’m keeping the seller in line, the buyer, the escrow, everything happening, and people are going to be looking to me to know what to do, what’s the next step? What do I have to fill out? And I had no idea. I didn’t know a single thing that was coming next. I just knew that it was coming.

Dominique:
And so just being aware that’s going to happen up front. You’re going to have to ask people questions, you’re going to have to rely on someone who’s done this a thousand times before, and just work through, work through every little struggle that’s going to come up. Just know you have to do that a few times. And then 40 down the line, you’re going to be the one that knows everything and helping someone else.

David:
That’s really good.

Rob:
I agree. I personally think that you can coast on success, but you don’t really… what you learn from is failure. You learn from failure, you coast on success, and it really requires being uncomfortable and just going into the unknown. For me, when I was building one of my first constructions, I had no idea, but I was like, okay. So how bad could it be? And yeah, it was pretty bad. There was a lot of things that went wrong. But for me, I was just like, okay, well… For example, permitting was a big one for me.

Rob:
There are a lot of things I didn’t know about permitting, and I was like, well, worst that could happen is, I submit for my permits, and they rip me to shreds. Guess what, that’s exactly what they did, and I learned that entire process because they were like, “Hey, by the way, you did literally everything wrong with your plans.” And I was like, “No.” I had to get them redrawn, and re-engineered, and it was several thousands of dollars of mistakes, but now permits aren’t really something that shake me.

Rob:
So even in that vein, as someone who is managing out-of-state rehabs, obviously, I got to imagine that permitting is something that’s pretty heavy. If you’re not there, are you able to get permits without actually showing up to the county office and physically signing?

Dominique:
Yes, you can do that remotely, but that is definitely a great point. Permits is same story. It sounds like that you had one of those things where you just… you never really know exactly how it’s going to work until you do it, and you figure out all the ins and outs of what the city that you’re working in is going to require, because everyone is different. We can get permits remotely. Most of the permits we have to get are.. I’m able to file for them online. And then if it’s a specific, like plumbing, electrical, or mechanical permit, we have to get it filed by a licensed plumber, licensed electrician, licensed mechanical contractor. So I am not any of those things, so I do not file for those. But if it’s just a general permit to lay floors and do paint and stuff like that, I can get those, just being the home owner, online.

Rob:
Yeah. Nowadays, I think it’s actually pretty convenient, because more and more, I’m seeing cities that have online permitting centers, where you don’t necessarily have to go in. But believe it or not, in LA, when I was building my ADU, I couldn’t do that online. And so that was very frustrating. I had to actually go out, spend $50 on plans, actually go in, talk to the person, have them redline my plans and go back. It can be a pretty exhaustive process. I got to imagine, even in that whole process, is that something that your project manager can fill in and help… could you delegate those tasks to your project manager?

Dominique:
Yes. We have done that before, where there’s been certain things, you just have to get a signed letter or something saying that he can be here on your behalf, and I’ve done that for the city, or turning on utilities. If there’s ever anything that has to be done in person, it’s usually something that can be delegated, as long as you have a copy of your ID and a assigned letter, or something like that.

Rob:
Yeah. I was actually really curious about this. I didn’t ask this earlier on your project manager, because this is really interesting to me. A lot of the stuff that I’ve done, my contractors really managing a lot of that for me. But with your project managers, are they affiliated with your contractor at all, or is it someone that you hire completely independent, that is biased to maybe your contractor’s philosophies or point of views or their workflows and all that stuff?

Dominique:
For me, the guy that I hired is totally independent of the contractor or anything else. He mainly just works for me in any capacity. So it doesn’t necessarily have to just be project management, it’s just anything that I can’t be there for. So a lot of times, it’s like going on seller appointments, and I’ll say, hey, one of my guys that manages our projects is going to come meet you instead of me, or going, if the house is vacant, and just like taking a video or walkthrough of the properties. So there’s a lot of other responsibilities that he handles, that aren’t necessarily in conjunction with the renovation, but that definitely falls under his belt, as well.

David:
I love that you’re sharing this, because I think so many people hear about long distance investing and… Everything we talk about, we typically describe the concept, but it’s hard to get a feel for what it actually looks like in practical terms. Dominique, I think you have a really good skill and talent, even as a communicator, in addition to the business that you’re doing, of just explaining, this is how the pieces fit together. As I hear you talk, I’m like, yeah, it really is that simple. It’s not easy, it’s hard to find a boots on the ground person that can get what you need done. It’s hard to find a contractor that’s reliable. It’s hard to find an agent that’s good at their job.

David:
In general in, our industry, the top 10% of the people tend to dominate, and it’s very difficult to get into their worlds, unless you’re doing a lot of volume, and new people aren’t doing volume, so they’re in this sort of catch 22 scenario. But it isn’t complicated, even though it’s not easy. It is simple. You’re doing a very good job of just explaining how I have this person that does this part, and they work with this person to make this happen. I wanted to ask, from your perspective, of all the moving pieces that you’re managing, what would you say is the most important or the most crucial element to running the successful business that you are?

Dominique:
I would say comes in with the buy, the purchase of the property. So there’s a couple things that come along with that. But the biggest one, I would say, is successfully estimating your rehab costs without me ever actually seeing it. So yes, I rely on the people on the ground to take the videos and send me the picture and do a good job of what type of damage is actually happening. But, at the end of the day, I’m the one that makes the decision on the final purchase price and what our rehab budget’s going to be. So I think that is the most key thing in everything that happens.

Dominique:
You can do an awesome rehab, but if you overpaid for the property, you’re not going to make money. So estimating it up front is huge, and that is difficult, because there’s things you just can’t see when it’s just over video or pictures, or you can’t see what’s across the street, necessarily. So that’s one thing that I have had to learn from trial and error, of something I missed on this first deal, I’m definitely going to make sure to tell everyone to send videos or pictures of this very specific thing on deal number two, so it doesn’t happen again.

David:
So follow-up question to that. Obviously, we’re in a market now that’s… Well, you’re 24, so you haven’t seen a whole lot of different markets, but I’m sure you’ve heard. This is very unique. Prices are going up faster than… The only time we saw it happen was in 2005, which was a terrible crash. And so there’s a lot of people that are afraid that we have the same thing happening. If you really study the fundamentals, it’s not the same thing. The rising prices are not based on bad loans being given out and homes people can’t afford, they’re just being based on how much money the government is printing. But, a lot of what we do ads real estate investors is look at numbers and make them work.

David:
So you start with the end number, what’s the ARV, then you say, what’s my… how much money is it going to cost for me to sell it? What are the commissions? What’s the holding cost? What are the taxes? What’s the rehab? You work backwards from there, and then you say, okay, if I want this profit margin, I got to pay this price. It’s relatively simple, like what we described. But when the number you’re going to be selling it for is changing so quickly, it gets really hard to actually… The target’s moving a lot of the time. So in your business, how have you accounted for that, especially in different markets, where you might be seeing prices increasing at faster rates than in others?

Dominique:
I always go based on the current resale value of when I purchase the property. So perfect example for you is a property I bought in November of 2021. At that particular time, it was going to be used as a simple fix and flip. It was a cosmetic rehab. At that particular time, for a property of that size in that neighborhood, there was no way that… no doubt in my mind the property was going to sell for 160 to 165 when it was done, and I bought it for 75. Needed a little bit of rehab. We ended spending like 40 to 45,000 on the rehab. So I had no doubt in my mind, it was going to sell for 160, 165. So that’s what I ran my numbers based off of.

Dominique:
I knew, however, in the back of my mind, that we’re in an increasing market, there’s maybe potential for, okay, let’s say 170. But I did not run my numbers based on the deal working with a 170 exit, I made sure it work with where the market currently is. Come to find out, we listed it in February of 2022, so just recently listed. It got bid up to 185, like an absolute… way over what I was ever thinking. Nothing for that size in that neighborhood has ever sold that high, and that’s just happening right now. Across the country, I think, prices are going to record highs that people couldn’t budget for, per se, when you purchased it even like six months ago or four months ago.

Dominique:
But for me, I always analyze the deals based on where the market currently is, not projections of where it could go, because that’s where… if it doesn’t go there, you’re out of luck. If the deal still works with where it cur the market currently is and what you’re confident, even if the market doesn’t raise as much or doesn’t raise at all, the deal still works. That’s how I buy.

Rob:
Well, I got to imagine that it’s… Your rehabs, they’re not just your typical rehab. I’m sure you really do put some really nice things in there, and really make it feel at home. So can you actually just walk us a little bit through what level of materials, what kind of design aesthetic are you going for to command some of those prices?

Dominique:
Absolutely. I think this is one thing that anyone who wants to do a renovation, get into flipping houses, or even the bar strategy, anything that requires a reno, you should pay a lot of attention to your competition in your particular market. Look at a couple of other fix and flips or rental-grade renovations that have recently been done and sold. Just look at the pictures, see what your competition is. This is just me and my strategy that’s worked really well. I have always targeted to be at least one or two steps above what my competition looks like as far as the renovation goes on fix and flips. If it’s going to be kept as a rental or something, it might not be as important. But if I’m fixing and flipping, and trying to sell for top dollar, I always want to be at least one or two steps above my competition.

Dominique:
In the new Orleans market, it just so happens a lot of the people that are fixing and flipping a lot of the renovations are very rental-grade looking. They’ll do like shower inserts, instead of tile, things like that, like cheaper flooring products, maybe not pick the right paint color, just little things, but it tends to overall make the feel of the property very rental-grade. So a couple tips or things you can do that I do to try to get my designs up to that next level. One thing I like to do is go on to just like Lowe’s or homedepot.com, where you can search for materials, and pick a category of something you’re looking at.

Dominique:
A good example of something I just did was kitchen cabinets. Go into the kitchen cabinet section and look up… look at all of the different options they have and the price of each one, and just… If you look right now, just based on the color and the style of the cabinets, the white cabinet are the cheapest, and then you go into different shades of gray, and that’s a little bit more expensive, and then there’s like this new trend where people are doing like dark blue cabinets with gold accents, and that’s the most expensive. So just by looking at something like that, huge indicator for me.

Dominique:
If I’m going to just, let’s say, paint cabinets in a property, why not paint them blue? It’s the most expensive trend out there. It’s what people are paying the most for, if you’re getting materials. So something simple like that. Just look at what is the top trend that’s going on? Or what’s one to two steps above your current level for renovation competition? That’s easy. If you’re going to paint the cabinets white or blue, might as well go with something that tends to look and feel more expensive. Just paint and blue. So there’s little things like, that I’ve done to just make my rehabs look a little bit better than the competition, and still price them at a very similar price point of the competition, which usually adds for multiple bids and quick sales.

Rob:
Very smart. Yeah. I like that. There’s this very iconic book, it’s called The Buy, Rehab, Rent, Refinance, Repeat, and the author of it, David Green, talks about how if you’re rehabbing a bathroom, for example, all the labor in the actual shower, that’s the expensive part. So to upgrade from the a $3 per square foot tile to the $3.50 cent per square foot tile, it’s not really going to cost you all that much from a labor perspective. Hopefully, I didn’t butcher that too much, David. What do you think?

David:
I am so flattered that you actually read and remembered that. I never get the details from anyone that they actually read the book. I get told that they like it, but who’s going to go up to you and be like, “I read your book. Eh, mediocre, man. I’ve had better.” But it wasn’t terrible. Of course, people always say like, “I love your book.” But that’s really impressive, Rob, that you remembered that.

Rob:
Well, Hey man, I told you I do my… I read it last night. No, I’m just kidding. I read it in Maui like two years ago, whenever it came out. Yeah. But yeah, same concept applies.

David:
It’s so funny that you brought that up, because as… Dominique, as you were speaking, I was thinking, this is exactly how I used to think when I was young, it’s literally the same way of looking at it. Like, well, how do I figure out what everybody else is doing, and how do I do it cheaper? And the easiest way is to just ask the contractor, well, what do you see the rich people putting in their houses? That was one of the questions I would ask all the time. What you said is brilliant. Like, what’s more expensive at Home Depot? That means that people like it more. And how can I do that cheaper?

Dominique:
Yeah, absolutely. Yeah, exactly what you were just saying, Rob and David, in your book, totally. The labor cost, if you’re going to do tile, comes from installing the tile. If a tile, it’s just going to cost you a total of a hundred or 200 extra dollars when you’re all said and done looks like way higher end, it is going to get $2,000 more on your sale price. Of course, go with spending just a little bit more to get that extra margin.

David:
Yeah. But you wouldn’t want to do that if it a 3,000 square foot house, and you’re talking about tile for the entire floor. But when it’s in the master bathroom, and it’s a small amount of tile, you can pay three times as much for the tile, and it costs you an extra 200 bucks. It’s not that big of a deal. So, thank you.

Dominique:
Absolutely.

David:
By any chance, have you read Long Distance Real Estate Investing?

Dominique:
I haven’t actually, no.

David:
I knew you were going to say that, and here is why I asked. It’s not to shame you because, that’s totally fine. It’s that-

Rob:
Shame.

David:
… whenever I find someone that’s doing well, long distance investing, it’s not a surprise to me when they haven’t read the book, but they’re doing the same things that are in the book. You’ve mentioned several things right. Like, I have this person that oversees this person’s work, this person oversees this person, I have boots on the ground people, I rely on pictures and videos, I have to know the market inside and out, I need a strong team. You didn’t need to read the book, you’re doing the same thing. So I just wanted to highlight that. I don’t know anyone who’s doing well, that isn’t doing exactly what you’re describing, and the book just sort of puts it into a system that can be followed. But the book isn’t what makes people successful, it’s taking action, like what you’re doing, Dominique, that makes people successful. So kudos to you on crushing.

David:
It’s embarrassing when you’re someone like me, that looks back, and I think, what was I doing at 24 years old? I was like, oh God, I was… What was I doing? I was still working at a restaurant. I just got out of college, or maybe I was in like my last year of college. No, I had probably just graduated. I was trying to get hired as a deputy, and you already own ton of properties, and it’s just very cool to see you get off to that start. All right. That’s going to be a great transition into the next segment of our show, which is our deal deep dive. Dominique, do you have a deal that we can discuss on the deal deep dive?

Dominique:
Absolutely.

David:
All right. We are going to fire questions at you, and if you could just answer those questions, we will rotate. I’ll go first. Of the property we’re going to describe, what kind of property is it?

Dominique:
It’s a single family residential property.

David:
How’d you find it?

Dominique:
This one came from one of those agent email blast that I was talking about earlier. Email went out to a bunch of people, and one of the ladies responded to me. Was actually a property that was… she was going to be listening it, but it was her family’s property. She sent it to me directly before it hit the market.

David:
What city was it in?

Dominique:
It Was in Avondale, Louisiana, which is just outside of New Orleans.

David:
How much did you pay for this property?

Dominique:
$70,000.

Rob:
Pretty good. How did you negotiate it?

Dominique:
There was actually not too much negotiation needed on this deal. They were hoping to get 70,000 for it. But I will say the key to this one was getting it off-market [inaudible 00:50:52]. It was a realtor that was in the family that was going to be able to list it, and I know, for a fact, that if they did put it on the MLS, they would’ve got more than 70,000. So getting in contact with her right away, as soon as she sent me that, showing major interest. We had just done another renovation around the corner, too. So having familiarity with that neighborhood definitely helped me secure it and make her feel comfortable that she did not need to list the home on the market.

David:
We call that speed to lead. When you work in the industry that the three of us are in, I’m sure you guys all get the same thing. When you see that deal will come across you and it stands out, because you know the market really well, you get the shot of adrenaline, and I get like a tiger, like, oh, there is the gazelle I have to get it before it gets away. Everything else just fades out of your mind, and you just get tunnel vision on that one thing.

Rob:
Yeah. I’m just like, who do I text first? Is that my wife? Is it my business partner?

David:
there’s definitely this heightened sense of like… everything else disappears. And so if you don’t get that feeling, you’re not doing something right. Keep working at it, but you should have that like, oh, someone’s going to buy this thing. This is a great area. I know it’s a good price. And then you’re sort of gut leads you in that direction. So even just hearing you talk about it, I’m like, oh you, I remember those feelings. Okay. How did you fund this? I guess, was this a wholesale deal?

Dominique:
No, it was a fix and flip.

David:
Okay. So how’d you fund it?

Dominique:
The funding came both from my money, I put up probably about 20 to 25% of the total costs, reno and purchase, and then private money funded the rest of it.

Rob:
Okay. I think you mentioned this, but what did you do with it? It was a flip that you just… you rehabbed?

Dominique:
Yes. Yeah. Renovated it and resold it about six months later.

David:
How much was your rehab budget on that thing?

Dominique:
The rehab budget was between 55 and 60,000, and we ended up at 62,500. So a little bit over budget. I can talk around this a little bit, too, on one of the further questions, but there was… This particular property happened to be owned right during Hurricane Ida, when it hit, and that was September of last year. We had just bought it in July. So we were just getting going and then the hurricane hit, and that was a big lesson on this one, that added to our budget.

Rob:
You teed it up as a softball, really. What lessons did you learn from this deal?

Dominique:
Yeah. So the biggest one, I would say, to phrase it simply is, always be open and ready for any obstacles that may come, that are completely out of your control. Having a major hurricane hit is completely out of my control, and knowing which area, which city would get more hit than others, totally out of my control. Unfortunately, this particular city of Avondale hit really, really hard by the hurricane. It was devastating driving down those streets afterwards. Everybody had lost their roof, there were just huge, huge piles of trash, dumpsters full, just lining the streets, because everybody had to throw their couches away, and all the insulation drywall came through the ceilings, and all these things. So we were right in the middle of that neighborhood after the hurricane hit.

Dominique:
And so huge, I’d say lesson, was just to prepare for the unexpected. We ended up still making it work, the deal went great, we made a profit. We didn’t go too high over budget, but it was just one of those moments where like, we had not crazy hurricane damage, but we had just got everything to the point where we were ready to put the cabinets in and put the floors, where it was just like a blank slate, and walk into the home after the hurricane, and just all the drywall had poured through the ceiling, water everywhere, starting over basically from high in the drywall stage. So it was a rude awakening, I should say, just walking into that.

David:
Well, that’s an amazing deal. Thank you for sharing that, especially when you see things go wrong and you still made it go right. So many people ask that question, what if? What if this happens? What if that happens? I don’t know if there’s anything that could happen in real estate that hasn’t already happened. I suppose we haven’t had like an alien abducted house just suck the whole thing right off the ground and take it away. I don’t know how I’d answer that question, but everything else, it’s happened before, and people have figured out how to deal with it. Rob, you have a wry grin. Are you going to say something there?

Rob:
No, no. No, I thought that was funny.

David:
You just thought aliens were funny, didn’t you?

Rob:
You tickled me.

David:
I tickled the eighth grade version of Rob there. Okay. Thank you for that deal deep dive. We’re going to move on the next segment of our show, which is the…

Speaker 5:
It’s time for the fire round.

David:
This segment of the show, we take questions directly from the BiggerPockets forum. So sort of like Willy Wonka with his golden ticket… Dominique, I don’t expect you to understand that reference. Don’t worry. You may write a question in the forums and have it answered on the podcast unknowingly. So go to the forums and ask your questions. There’s people that interact there that you can get your question answered. You also might be featured on the podcast, and it gives us good ammunition to use with Dominique to let her showcase her brilliance. I’m going to take question number one and fire it at you. I’m looking to invest in a flood zone. That’s just a funny way to start any conversation. I’ve never heard those words said before. I am looking to invest in a flood zone.

Rob:
I’m actively looking to invest in a very risky area.

David:
That’s the first criteria that it needs to be, is in a flood zone. That’s very funny. I already like this one. What are some major things I need to consider with insurance or operating it? If I am flipping it, is it the same as a buy and hold?

Dominique:
That’s a great question. Flood zones are not common everywhere, but I deal with them in new Orleans, or anywhere that’s subject to hurricanes and flooding. So a couple things to keep in mind. It’s mainly to look at it for the perspective of your end buyer. For you as an investor, it’s not really that big of a deal. Maybe one in a thousand percent chance, or whatever, that the house is going to completely flood while you’re in mid renovation. Because you’re in a flood zone, it doesn’t necessarily mean that you have a high risk of flooding, just that you’re nearby water, or there’s a potential of it happening in the next a hundred years or something.

Dominique:
So the main thing that it’s going to affect is your end buyer, if you’re looking to flip the home. Anybody who takes out a mortgage on a property that is in a flood zone, the lender will most likely require flood insurance. So it’s going to cause the end buyer, who may already be in like a tight position, or they’re just qualifying for the entry level home, that might push them over of the edge of no longer being able to qualify for that purchase price that you’re asking for. So I’d say that’s the main thing to keep in mind. Just know that for anyone who’s going to buy it with a mortgage, it’s going to add costs onto their monthly payment.

Dominique:
You can take out flood insurance as the investor, if you want to lower your risk during the time you own the home. I’ve personally never done that, because I just don’t think it’s that big of a risk. But I also like to buy in non-flood zones for being able to target the top resale value, because your buyers won’t have to worry about insurance.

Rob:
Great. Awesome. Okay. Question number two, I am looking to actively invest along the San and Andreas fault. Who is submitting these questions? No, I’m just kidding. Okay.

David:
[inaudible 00:58:33]. I’m looking to buy a haunted house. What type of insurance do I need if someone dies in it?

Rob:
Oh man. Okay. I had to. I am new to wholesaling, but want to build a solid list. Any tips here?

Dominique:
Yeah. I think one of the best ways you can do that is going into your local market that you’re looking to invest. If you’re not there, then obviously you can’t do this in person. But I would start, personally, in a market that you are in, just so you can be hands-on. When I did my wholesaling, I started in Los Angeles, and did it here in Los Angeles, got my experience hands-on with the deals. So I would recommend that to start. When you’re there, you can drive for dollars, you can go see the neighborhoods that have more rundown homes, or there’s more opportunity.

Dominique:
One thing I would do is just make a list, write them down. The data is actually… you can find it publicly for pretty much any county. If you just search whatever your county is, plus property records, or property search, you can go in there, and you can type in pretty much any address and come up with the owner’s name or how long ago they purchased it or all these details that are public knowledge. There’s a ton of sites out there that you can also use to reverse search and skip trace data once you have an address and a name.

Dominique:
So all that stuff is really easy to come up with, it’s just finding those houses that not everybody else has on their lead sheet, because they’re foreclosure, or because owned by someone out of state, or they’re non-owner occupied, or whatever it is. Go and find the ones that not everybody else is… they’re just a regular home that maybe somebody lives there, it’s the owner’s home, but it’s run down and needs work. Go find those ones, and try to target those with cold calling or put a letter on their door, whatever it is.

David:
Awesome. Okay. Last question of the fire round, are there benefits to private money versus hard money? Which should I target first?

Dominique:
There are definitely benefits to both. I would say the main benefit to hard money is the accessibility of it. There’s a lot of lenders out there that will offer it to you at a somewhat reasonable rate, even if you’ve never deal before, as long as the deal is good. So, if you’re just starting out, it’s a really good option. For me, I fund almost everything privately. Now that I have the experience under my belt and the track record, there’s just more people that are willing to trust me, and it doesn’t have to be as institutionalized, it doesn’t have to fall in to all these check boxes that a hard money lender is going to look for. You can set the terms, whatever you want. As long as you and the private money lender agree to it, you can do whatever you want with the loan. So the main advantage to private money is the flexibility of it, but it’s probably going to take you a couple of deals, a track record, to be able to raise that money from people that are going to trust you.

David:
All right, that wraps up the fire round. The next segment of our show is going to be the world famous…

Speaker 6:
Famous four.

David:
In this segment of the show, we ask every guest the same four questions every episode. I’m going to start off. Dominique, what is your favorite real estate-related book?

Dominique:
I will say it’s Raising Private Capital by Matt Faircloth. I know that’s a BiggerPockets-produced book. That one, for me, really changed how I did things when I was at that place. We just talked about going from like, your own funds or hard money into private. It gave me… opened my eyes completely on how to even start doing that. I can say, single handedly, raising funds like that, of anything else, that was the one thing that led me to change my business and scale drastically.

Rob:
Question two, favorite business book.

Dominique:
I will say this is maybe not all time favorite, but one I recently read that I really liked, it’s called Storyworthy by Matthew Dix. Maybe not a typical business book, but it helps me, business wise, a lot. The book is all about how to talk people and share stories for them to be best received by your listener. And so it was really helpful for me, just like… I talk to people all day long on the phone negotiating, whatever. To be able to put things into a good story and say things right has been actually really helpful in the business realm.

Rob:
Do you have any hobbies?

Dominique:
Yeah. My hobbies, I love the beach. Grew up here in Southern California, I love to surf. That’s probably my favorite hobby. Love to travel around with my husband. We go to like a lot of fun, just new surf spots or different little towns across the country. I love doing that. So yeah, probably surfing and traveling.

David:
Which branch of the military is your husband in?

Dominique:
He actually just got out, but he was in the Navy for like 10 and a half years.

Rob:
Awesome.

David:
Tell him thank you for his service, and if he’s not a real estate fan, have him listen to the episode we did with Jocko Willink. He will definitely know who Jocko is. That can be the gateway drug into BiggerPockets.

Dominique:
Yes.

David:
All right. Dominique, in your opinion, what sets apart successful investors from those who give up, fail, or never get started?

Dominique:
I think it has to do with, you’ve got to want it. You’ve got to want it more than anything else. Maybe not in your life, but it’s got to be up there at the top. When I say that, I don’t necessarily just mean you’ve got to want the money or the financial freedom or being your own boss or having your own schedule. I think you’ve got to want real estate, specifically. There’s plenty of other things you can do to be an entrepreneur and achieve great success, but I think there has to be some element of you that specifically loves something about real estate, and is going to drive you and push you to continue when things get really hard, because you somewhat actually really enjoy what you’re doing.

Rob:
Love it. Okay. Well, finally, Dominique, tell us where people can find out more about you.

Dominique:
Probably the best way, you can either check me out on BiggerPockets. My profile there, Dominique Gunderson, or Instagram, I’m at Dom Flips NOLA, for New Orleans. Those are the best places, I’d say, to reach out, message, or ask any questions any way I can help.

David:
Well, thank you very much, Dominique. This has been fantastic. I think this is one of the better interviews. Not only are you a skilled businesswoman, but you’re also a very good communicator. Has anyone told you that before, out of curiosity?

Dominique:
Maybe once or twice.

David:
Okay. So you’re just like, yes, yes. I know I’m good at everything, please. My ego doesn’t need more padding.

Rob:
You should start a YouTube channel, show people your journey. I think a lot of people would get value from it.

Dominique:
Thank you. No, I really appreciate that, though. All joking aside, David, thank you. I really appreciate the compliment.

David:
Yeah. Thank you for sharing your time with us. If you guys would like to hear more about Dominique’s story, you can catch her out on episode 178 of the InvestHer Podcast, where they go into a little bit more depth and detail. I just want to thank you for your time here today. Any last words you want to leave the audience with before we get out of here, Dominique?

Dominique:
Thank you guys for having me. I really appreciate it. I would encourage anyone who’s listening, if you’re trying to get started in real estate, go take action one way or another, do something that you don’t know how to do currently, and find someone to mentor you, find someone who you can work with. But if you’re just constantly consuming and never actually taking action to do it, you’re never going to get a deal done. So go take action on something, even a little thing that you don’t know how to do, and figure out how to get better at it.

David:
That is awesome. Rob, any last words from you?

Rob:
Oh no. It would not be nearly as cool as what Dominique said.

David:
It’s tough to follow. Right?

Rob:
Yeah. That’s a tough act, for sure.

David:
That’d be like trying to follow a children’s choir singing, You Are The Wind Beneath My Wings. Nobody wants to take that on.

Rob:
That is oddly specific, but I’ll take it.

David:
All right. Thanks a lot, Dominique. This is David Green for Rob Sing Song Abasolo, signing off.

 

If you’re looking to sell your house and make the most out of the sale, you can do so by boosting the exterior’s curb appeal. This can be done in a few different ways, including giving your house a completely different color.

An enhanced curb appeal can make your house sell faster

It’s not just the interior of your house that matters most to prospective buyers. While that definitely plays a large role in the sale, you should also impress people with the exterior. The more positive effect you create as soon as people pull up to your home, the faster it can sell and for more money too. It’s one of the first thing’s that people notice, so why not try to make a lasting first impression? Why not try to make your house stand out from the rest? You may think that this is easier said than done, but there are very simple and affordable ways to make this happen.

Add bushes and shrubs

Adding greenery like bushes or a flower bed can make the lawn look more well-manicured and help bring a pop of color to the scene. Opt for annuals that grow back themselves every year and are easy to maintain to appeal to people even more. If it’s wintertime, add some winter-friendly trees and plants to your front porch.

Add outdoor lighting fixtures 

Not only can outdoor lights make your space look nice and bright, but they can also add safety to the exterior of your house by reducing tripping or falling, brightening dark areas, and adding an extra sense of security.

Repaint/restain the fence

If you have a fence surrounding your house that looks like it’s peeling or has just seen better days, it’s best to give it an upgrade. There are some buyers who are specifically looking for a fenced-in yard, so why not really impress them with one that looks brand new? 

Repaint the exterior of your home

It’s bound to happen eventually – whether you have stucco, aluminum, or vinyl siding, they need to be repainted after many years of wear and tear. It’s worth hiring a professional to repaint the exterior. This includes doors, shutters, trim, windowsills, garage doors, the porch or deck, and the siding.

Repainting can rejuvenate the entire home

Giving the entirety of your house a new color can make it feel brand new; something that appeals to many buyers. There are also certain colors that can affect buyers’ moods. For example, a light blue can mimic the feeling of calmness or even being by the water. Yellow, a sunny sensation, can evoke emotions like happiness or even warmth. Red can promote cheerfulness, confidence, and energy. Green, the color of nature, can also evoke energy and bring more balance to one’s mood. White, a popular exterior home color, can cause a feeling of cleanliness and even make a house appear larger than it really is. 

On Wednesday, March 16, 2022, the Federal Reserve announced it would be raising interest rates for the first time since 2018. While the 25 basis point hike (one basis point=0.01%) was largely expected, the underlying shift in Fed policy will impact the housing market, and real estate investors should understand and pay attention to it. 

In this article, I will provide a brief overview of what the Fed is doing, why they are doing it, and how it could impact real estate investors. 

At the conclusion of the March meeting of the Federal Reserve, it was announced that the Fed’s target for the federal funds rate would increase by 25 basis points. The target federal funds rate is the interest rate at which banks borrow reserve balances from one another. It doesn’t actually impact consumers directly. 

However, when the target rate rises, it sets off a domino effect that ultimately hits consumers. An increase to the federal funds rate makes it more expensive for banks to borrow; this, in turn, makes it more expensive for banks to lend to consumers—the cost of which is passed along to consumers. 

This week, it got a bit more expensive for banks to borrow and lend. It’s a big shift from the stimulative policies the Fed has embraced since early 2020. 

The federal funds rate is one of the primary tools the Federal Reserve has to manage the economy. In difficult economic times, it is lowered to stimulate economic growth. We saw this after the Great Recession, and then again at the beginning of the COVID-19 pandemic.

By lowering interest rates, the Fed incentivizes business and consumers to finance their spending by borrowing money. For businesses, this could mean new hiring or expanding into new markets. For consumers, this could mean buying a new car or house while rates are low and debt is cheap. The impact of cheap debt is an increase in the amount of money circulating in the economy, also known as monetary supply. An increase in monetary supply generally stimulates spending and economic growth. 

There is a downside to so much money flowing through the economy: inflation. Inflation is commonly described as “too much money chasing too few goods.” So to fight inflation—and reduce the monetary supply—the Fed raises rates. As interest rates climb, businesses and individuals are less inclined to borrow money to make big purchases, which means more money sits on the sidelines, helping curb inflation. 

Raising interest rates is a bit of a dance. Rates must increase to fight inflation, but rising rates also put the economy at risk of reduced GDP growth—or even a recession. Again, the potential for reduced borrowing and spending that comes with increased interest rates can hurt economic growth. 

This is why people like me watch the Fed’s moves so closely; we want to know how they will balance their dual responsibilities of fighting inflation and promoting economic growth. It’s a tightrope walk. 

What happened this week was expected. As they have been signaling for weeks, the Fed raised rates by 25 basis points. There’s nothing particularly interesting about that announcement, in my opinion. 

The data that interests me the most, however—and the data that will impact real estate investors the most—is contained in the dot plot.

 

This graph shows what the people who actually make decisions about interest rates believe about where the federal funds rate will be going forward. Each dot represents the opinion of one Federal Open Market Committee (FOMC) participant. 

Another way to look at this data is presented here: 

From this, you can see that the median projection of FOMC participants is now about 1.875% for 2022—a very dramatic increase from where we are today. This shows a clear position by the Fed. They intend to raise interest rates aggressively through 2022 and expect rates to keep climbing to 2.8% in 2023 before flattening out in 2024. Over the long run, the FOMC would like to see rates at around 2.4%. 

For context, the highest the upper limit of the target rate has hit since the Great Recession was 2.5%, which is where it sat for most of 2019. The Fed is planning to go higher than we’ve seen in years, and then bring it back down a bit, presumably once inflation is in the 2%–3% year-over-year range that the Fed targets. 

For real estate investors, interest rates are hugely important. As I’ve discussed already, they impact the entire economy. Importantly, rates also impact real estate investors and the housing market more directly—through mortgage rates. 

The reality is this: Although the Fed announcements make for a lot of news, the Fed’s target rate doesn’t impact mortgages that much. Check out this chart: 

The green line is the federal funds rate (the chart hasn’t been updated to reflect the announced rate hike), the blue line is the average rate on a 30-year fixed-rate mortgage (owner-occupied), and the red line is the yield on the 10-year U.S. Treasury bond. 

If you eyeball the relationship between the green line (federal funds rate) and the blue line (mortgage rates), you can see that there hasn’t been a particularly strong correlation between the two variables, at least since the Great Recession. 

Instead, look at the relationship between the red line (yields on 10-year treasuries) and the blue line. There is a robust correlation. If you want to know where mortgage rates are going, you need to examine the yield on 10-year U.S. Treasuries—not the Fed’s target rate. 

Yes, bond yields are impacted by the federal funds rate, but they’re also influenced by geopolitical events, the stock market, and many other variables. I am not a bond yield expert, but bond yields have risen rapidly this year, and given recent events, I wouldn’t be surprised to see yields hit 2.5% or higher this year. 

If that happens, I think mortgage rates for a 30-year fixed owner-occupied property could be around 4.50%–4.75% by the end of the year. That would be a significant increase from where we’ve been over the last few years, although still very low in a historical context. 

Before the Great Recession, rates were never below 5%, for as far back as I have data. Keep that in mind as you navigate the current investing environment. 

Mortgage rates will rise, and this will put downward pressure on the housing market. Rising mortgage rates decrease affordability, which then lowers demand. In a more typical housing market, this would have a pretty immediate impact on housing prices. But the current housing market is different, and “downward pressure” on housing prices does not necessarily mean “negative price growth.”

Remember, there are other forces driving the housing market right now, many of which put upward pressure on prices. Demand is still high, driven by millennials reaching peak homebuying age, increased investor activity, and higher demand for second homes. Additionally, supply remains severely constrained, and as long as that is the case, there will be upward pressure on housing prices. 

What happens next is hard to predict. On the one hand, we have rising rates putting downward pressure on the housing market. On the other hand, we have supply and demand exerting upward pressure. Without a crystal ball, it remains to be seen how this all plays out. 

If I had to guess, I believe prices will continue to grow at an above-average rate through the summer, and then come back down to normal (2%–5% YoY appreciation) or even flat growth in the fall. Past that, I won’t even venture a guess. 

Although I like to make projections to help other investors understand the economic climate, in uncertain times like these, my personal approach to investing is not to try to time the market. Instead, I try to look past the uncertainty. In my mind, the housing market’s potential for long-term growth remains unaffected by today’s economic climate. Short-term investments, to me, are risky right now. (Full disclosure, I don’t flip houses even during more certain economic times.) But long-term rental property investing remains a great option to hedge against inflation and set yourself up for a solid financial future five years or more down the road. I’m still actively investing because inflation will eat away at my savings if I do nothing. And I know that even if prices dip temporarily in the coming year, investing now will still help set me up to hit my long-term financial goals. 

 

In early April, the Canadian government is set to reveal the 2022 federal budget, with government sources telling reporters that it will be a “back to basics” document. In other words, it is a post-pandemic budget that addresses the broad array of fresh economic challenges on the other side of the public health crisis and the geopolitical uncertainties stemming from Russia’s invasion of Ukraine.

Prime Minister Justin Trudeau is expected to release a more “prudent” budget, which scales back the myriad of COVID-related benefits and aid packages. At the same time, the Liberal budget will still need to venture through murky waters amid skyrocketing price inflation and global supply chain issues that were apparent before the military conflict in Eastern Europe.

“With COVID restrictions being lifted at long last, the focus in this year’s budget can shift from economic support and recovery measures to initiatives that stimulate economic growth,” according to an EY report. “As always, there will be tax measures, some of which were proposed during last year’s election campaign and the government’s fall economic and fiscal update.”

But industry observers purport that the prime minister and his government need to spotlight another component of the Canadian economy that is leaving too many people on the sidelines: real estate prices and housing affordability.

The Canadian real estate market continues to grow at an impressive pace. In February, average Canadian house prices surged 20 per cent to an all-time high of $816,720. Even when Toronto and Vancouver are removed from the equation, the average sales price for a residential property is north of $638,000.

Indeed, the housing affordability crisis is becoming apparent across the country, from major urban centres in British Columbia and Ontario to the rural communities of Atlantic Canada.

Will the 2022 federal budget target these concerns?

What Will Ottawa Do for the Real Estate Market?

Over the last year, there have been many policy prescriptions proposed as a cure for soaring housing prices, but some argue that these measures would only deepen the affordability hole. From a suggested capital gains tax on home sales to the suspension of foreign home ownership, there have been many discussions among market analysts, economists, academics and officials.

While experts do not think an introduction of new higher tax schemes will be announced amid this inflationary environment, they do anticipate that the Grits will reintroduce most of their 2021 campaign platform promises.

In 2021, the Liberals pledged to ease housing prices. One of the promises was a doubling of the First-Time Home Buyers’ Tax Credit from $5,000 to $10,000. Another proposal was creating the First Home Savings Account (FHSA), a plan that consists of tax-free contributions and withdrawals of up to $40,000 for Canadians under 40. Trudeau had further pledged to “cool excessive price growth” in the real estate market by mandating that residential properties be held for a minimum of 12 months to receive the principal residence tax exemption.

Because it would take time to structure the policies and manufacture the necessary framework, housing and finance professionals believe these ideas would not go into effect until 2023.

Meanwhile, in December, the federal government introduced Bill C-8, slapping a one-per-cent annual tax on the value of vacant or underused homes owned by non-resident, non-Canadians. The legislation passed the second reading in early February, and the bill is now being assessed in committee.

Tax experts suggest that Ottawa could re-examine some previously discussed measures to further crack down on housing investors. This could include reconsidering the tax treatment of Real Estate Investment Trusts (REITs), down payment requirements for investment properties, and home equity lines of credit to fund the down payment on a rental property.

In a recent report, KPMG urged the Liberal government to strengthen its Environmental, Social and Governance (ESG) commitments by homing in on strategies to enhance housing affordability and accessibility.

Supply, Supply, Supply

All three levels of government have considered some form of intervention to curb red-hot housing prices, be it taxation or regulation. However, the consensus within the sector is that new supply needs to be injected into the market. The latest new housing construction activity data brought some relief on this front.

According to Canada Mortgage and Housing Corporation (CMHC), the annual pace of housing starts rose eight per cent month-over-month in February, totalling 247,256 units. Most of the gains were concentrated in urban starts of apartments, condos and multi-unit housing projects, rising 13 per cent. Single-detached urban starts edged up two percent to more than 60,000 units.

The overall six-month moving average of the monthly seasonally adjusted rate (SAAR) of housing starts was 251,579 in February, slightly down from 253,864 in January.

In the coming months, many market analysts will be monitoring higher interest rates and their effects on the sizzling housing market. With the Bank of Canada (BoC) pulling the trigger on a 25-basis-point rate hike at the March policy meeting and promising more rate hikes are arriving this year, there is a modicum of expectations that meteoric price growth could finally cool off.

With demand remaining strong and inventories continuing to trend at historic lows, many homeowners and homebuyers will be monitoring the 2022 federal budget with bated breath.

 

Sources:

Ashley:
This is Real Estate Rookie, episode 167.

Hashim:
The markets I was interested in when I started, people that are investors, brokers, real estate agents, general contractors, all of those, I started pulling and reaching out. The way I approach it was more around the networking piece and then helping each other.

Ashley:
My name is Ashley Kehr, and I am here with my co-host, Tony Robinson.

Tony:
Welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, information, education to get started, or keep going in your journey as a new real estate investor. So, Ashley Kehr, what’s going on? What’s new in your world?

Ashley:
Well, I think we should talk about how me and you got to hang out because that’s always an exciting and fun time when we get to see each other in person and not on Zoom.

Tony:
And this one was actually for a really good cause. Last year at BPCON, all the hosts for the podcast, they decided to offer up different things for a charity, and I think it was called A Hero’s Home?

Ashley:
Yeah, it was. Yep.

Tony:
Yeah. So it was a charity that the benefited veterans. And what Ash and I decided that we’d offer up is whoever won us, got to spend an entire day with us. We were going to fly out to whatever part of the country they were in. And this past Tuesday, Ash and I got to hang out with Susan [Lee-Hill 00:01:24] and spend a day in Tacoma, walking around some of her properties and then just really getting to know her and hopefully giving her some value on her journey as a new investor.

Ashley:
Yeah. So Tony and I have both actually met Susan before, she was in two of the Rookie Bootcamps and then we also met her at the BiggerPockets conference and also at an event in Seattle. I met her another time too. So it was awesome to get to hang out with her again and to see the first investment property that she purchased. And we got to walk through it while I was in the middle of rehab. We actually brought with us our friend Serena from Fixated Real Estate and she took Susan through the property and said… just because she was familiar with the Tacoma area, and gave her some tips and pointers on things she could do to really increase the value, but also to save money. So that was awesome. Thank you so much to Serena for doing that with us.

Ashley:
We got to have breakfast, we got to go out to eat. Who doesn’t love eating?

Tony:
There was some mimosas, some Bloody Marys.

Ashley:
Yeah. We also got tour some of the properties that Fixated Real Estate is doing too to also show Susan other projects that are going on in the area. So hopefully, she took a lot of value from it. And I think Tony and I actually learned a bunch of things too getting to hang out-

Tony:
Oh, totally.

Ashley:
Yeah. So it was definitely a great day and lots of fun.

Tony:
Yeah. We’ve got a great episode line for today as well, right, Ashley? This was a fantastic episode, I think really, really crucial listen for anyone that’s a new investor that’s looking to invest out of state. Our guest today was Hashim Ismail. He’s based in SoCal, not too far from where I’m at, but he’s actually investing in Memphis. So you get to hear his story about how he built his team, how he leveraged BiggerPockets, how he renovated and rehabbed from afar. And he’s been able to complete seven deals, so he’s got seven units done in only 11 months. Amazing, crazy story.

Ashley:
And he tells you exactly what kind of financing he used to be able to do this, how he could grow and scale sales quickly within that short amount of time, but also building a team out of state and leveraging the BiggerPockets Forums to do so. I had Hashim in one of my bootcamps and he talks a little bit about Tyler Madden, who was a TA in one of the bootcamps and just finding a mentor that can provide value to him. And then he talks about a couple other mentors and goes on to thank a couple people at the end of the episode, which I think was really awesome. I don’t think we’ve ever had anyone actually do that before. So that was really nice.

Tony:
Hashim, welcome to the Real Estate Rookie podcast, brother. We’re super excited to have you. Man, why don’t you start off by telling us a little bit about your story, your background, who you are and how you got started in real estate investing?

Hashim:
Yeah. Thank you, Tony. Thanks, Ashley. I’m excited and humbled by the opportunity to be here. I’ve listened to a lot of you guys’ show, and I’m excited. Man, I’ll say I’m a dreamer, I’m a lifelong learner, I’m an optimist, and I’m a catalyst. But I have a daytime job and I work in the life science industry and my background is engineering and science and I’ve done different things in the industry. And currently, I do business development and sales, that’s my W2. And then about 11 months or so ago, I happened on and discovered the passion for real estate investing, and I also do that as well.

Tony:
You said how many months ago?

Hashim:
About 11 months, going on a year now. Last April, 2021.

Tony:
Okay. And just really quick, if you can set the table, Hashim, in those 11 months, how many transactions deals have you done? What does your portfolio look like today 11 months later?

Hashim:
So currently I have seven and there’s another one that I’m working on in a different market right now. So seven to eight.

Ashley:
Awesome. Well, congratulations. That’s great momentum. So let’s start with that first purchase. Did you get stuck in any analysis paralysis? Did you just jump and dive right in?

Hashim:
Very good question. I was in somewhat of analysis paralysis for, I want to say maybe two years prior to that. I was listening to the OG podcast prior and then the Rookie Podcast and reading books, but it was hard to actually take that first step. There’s all this information and it’s a matter of, “Okay, how do I actually do it?” And then finally, I put a goal for myself end of 2020, and then 2021, I decided to pull the trigger. And one of the things that I actually leveraged was the networking piece and using the BiggerPockets forum. I was like, “Let me start.” And then I went to the forums and started looking for people I can talk to and started connecting and talking to people in different markets, and that’s how it all started.

Ashley:
I definitely want touch on that on how you used the BiggerPockets Forums and leveraged that. But before we do that, let’s talk a little bit about you set a goal for yourself. Can you tell us what that goal was specifically and then how you held yourself accountable? Did you have action items that you created to reach your goal?

Hashim:
Every year, I try around December and sometimes it goes to January to set goals for myself for the coming year. December 2020, I remember I put different goals for myself, and one of them was around real estate investing. And by then, obviously I hadn’t done anything. But that’s a good point, Ashley, because I normally use goals and I read it down to push me to do things outside of my comfort zone and things that I haven’t done before. At the time when I wrote it down, I didn’t have everything mapped out as to how I’m going to do it, but I brought it down and I was going to push myself and use it as a form of accountability to get it done.

Hashim:
Obviously, I had some ideas because I’ve been listening to the podcast, reading the books, and I had ideas and I used the goal to drive me to start executing and hold myself accountable.

Ashley:
Then for the forums, how did you take advantage of them? I’m very curious as to what really worked for you because you can go into the forums, you can ask questions, get great responses, you can go through and read through other people’s questions, but you said you used it to network.

Hashim:
Yeah. So what I did and I know there is another tool on the platform that you can actually network and you can apply different filters, which is really cool. But at the forums, what I do is, I actually put in keywords for what I’m looking for. So for example, when I was just starting, I had a couple of markets in mind and I would type those keywords, and then a whole lot of information around that market would come up, which is good. Some of it helps me understand the market at a very high level of different perspective and some of it is me meeting those people that, “Hey, an investor from so-and-so market or a contractor from so-and-so so market or a broker or real estate agent from so-and-so market.”

Hashim:
So I start figuring out who I want to reach out to, write their information down, start connecting with them, sending them messages. And I get on the phone and talk to people who’s available, who’s willing to talk.

Tony:
So Hashim, a couple of follow-up questions there. First, I love of your use of the BiggerPockets Forums. And honestly, that echoes a lot of what my situation was like when I first got started as well; the markets that I was interested in, I was just searching through the forums to see who I could connect with in those markets. But I want to talk a little bit about where you are. So what city are you in and then what city or state are your investments in?

Hashim:
Yeah. So I live in Southern California, similar to you, Tony, specifically San Diego. And I actually invest out of state, I invest in Memphis, Tennessee.

Tony:
Got you. Okay. So many people who are listening, they’re going to be in a similar situation where maybe they live in an expensive market like San Diego and they want to make their dollar stretch so they’re going to go out of state. So when you went into the forms, who did you start looking for first? Was there, “Hey, I want to find an agent first”? Or, “Hey, I want to find a lender first”? So who were you looking for first? And then as you were reaching out to those folks, what was your pitch? How were you breaking the ice and opening up that dialogue with those folks?

Hashim:
When I was just starting, Tony, I knew in my mind I needed to find a team, and that means somebody reliable as far as general contractor, ideally, and a realtor or a broker. Either a realtor or broker or some way to get deals and some way to understand the market. So when I was just starting, I didn’t have it all mapped out as to who is priority, but what I was going after was a certain persona and profile of people that I wanted to connect with. And part of that was also actually investors in the local market to see what they can share with me, anything I can learn from them going into the market, if it’s even a good idea from their experience, what their take on the market is, anything.

Hashim:
So the markets I was interested in when I typed people that are investors, brokers, real estate agents, general contractors, all of those I started pulling and reaching out. And that’s a good point, Tony, you bring up around that initial reach out, these people don’t know me, I don’t know them and the way I approach it was more around the networking piece and then help each other. And that’s how I phrased it. And it’s true in business for me, even in my W2 side of things. I network with a lot of people, I reach out to a lot of people. And part of it is, “Can we find ways that we could possibly help each other out?”

Hashim:
Obviously, at the time I needed more help from them, but there could be other ways possibly that I could give in return. I didn’t know what that would be, it depends on the person, what they’re looking for. But if there is a way I can help them in return or I can add value to them, that’s always something I have in mind as I’m talking and reaching out.

Ashley:
So do you put that in your first message that you’re willing to provide value to them? There’s that book, Bluefishing by Steve Sims, where he preaches that you provide value by giving somebody what they need before they even know they need it, or something that they want before they even know that they want it. So are you going in and messaging someone and saying, “Hey, I could do this for you,” or are you just saying in general, “Let me know what you need and I can help you”?

Hashim:
So what I do is initially when I was just starting and reaching out, just because I was not experienced in real estate investing at all, I would give a little and I would keep it brief, because I don’t want to bore people. But when I reach out, I keep it brief, what I’m looking for. And then I give them a little bit about my background, “Hey, this the industry I’m in. I’ve been in this industry.” By the time I’ve been in industry for a while and I’ve done different things, and I’m decently connected in my industry, so I offered that, “If you need anything within that, I’m happy to help, whether you or somebody else that you know.”

Hashim:
And that’s almost like a hook. If they have a need, I’m genuinely happy to help. And if not, at least they can possibly see that I want this to be mutually beneficial. And if not, at least we got to network and connect, and that’s how I lead it.

Tony:
Yeah. I just want to share one story because this is real life for me. A lot of you guys know I got my first deal back in October of 2019, that was my very first real estate deal. And around that time, I knew that I wanted to get into apartment syndication. That was my goal when I first started, is I wanted to just learn the ropes of real estate with a couple single family transactions, but my goal was to graduate into apartment syndication. And apartment syndication is like a much bigger ordeal than regular single family investing from the money raising to the syndication creation, to the property management. There’s a lot that goes into it.

Tony:
So I knew that I wanted someone that could teach me the ropes. And there was a guy on BiggerPockets, I literally logged to my BiggerPockets profile, and I’m looking at the messages I sent him two years ago. And he had posted on BiggerPockets that he was writing a book and he was looking for feedback on the first chapter of his book or something like that. So I saw that, jumped on the survey, read the book, gave him some feedback, and then I shot him a separate message. And I said, “Hey, my name’s Tony Robinson. I just finished your survey on your book, etc, etc.” But I said, “Hey, I think I might be able to provide some value to you as you work to launch the book. I worked in digital marketing for several years while I was in college and I have a pretty good handle on Facebook ads and so on and so on.”

Tony:
So I pitched this guy on saying, “Hey, I’ll help you market your book for free if you in exchange, give me some guidance on the syndication piece.” And his response back to me was, “Tony, yes, Facebook marketing will be of value to me.” And then he connected me with his assistant. I did some work for him. We never did a deal together or anything, but it just proves that if you can find a way… I hadn’t even done a deal yet. This was before I’d even done my first deal, but I still found a way to provide value to this other super experienced investor.

Tony:
So for all of you that are listening, I guarantee that you have some skill, ability, capacity, even if it’s just time, even if you’re just offering time to do the task that this other investor doesn’t want to do, you are going to be able to provide value to that person. If someone came to me and said, “Tony, I’ll come to your house and sort the big stack of mail that’s piled up in the corner of your office in exchange for short term rental advice,” I’ll probably do that. So Hashim, I love that you did that, but I just wanted to share my story because hopefully, it resonates with folks as well.

Hashim:
Thank you, Tony. That’s an awesome story.

Ashley:
I think that never goes away, even when you’re just learning something, doing that is super valuable. But all your life, you can do that in all aspects of creating value for someone, or in return, hopefully getting something that provides value to you that you need to learn more of or you want to be a part of. I wanted to learn house flipping, so I reached out to my friend, James Dainard and said, “I want to flip a house with you.” So what I’m doing is I’m creating content for him that he can put on his social media, he can put onto his YouTube, all of the things that I’m learning, and that is of value to him because that is a pain point for him, is creating content.

Ashley:
So I’m doing that for him, in exchange, he’s giving me 50% ownership and we’re splitting the money on a property and I’m learning every little single thing that you can do during a house flip. So I think that value never goes away of trying to help somebody and figure out what they need too, like Tony said, that was great. He didn’t ask for or even know that he probably needed the Facebook ads yet, and then you provided value.

Tony:
So I just want to ask one question, Ash, is there any one that you’re looking at right now that you’re thinking about like, “Man, how can I provide value to this person?” Someone that you’re looking up to,

Ashley:
Well, the most recent is James, because we’re doing our house flip right now. So I just got back last night from flying out to him to create content. So I’m spending money to fly out there, stay in hotels and film content with him, and then I invested into the deal too. Yeah, he’s my most recent one, I guess

Tony:
For me it’s Grant Cardone I’ve always been a fan of Grant, but I’ve been watching a lot more of his interviews and stuff and just his perspective on where he’s trying to take Cardone Capital. And a lot of what he’s doing, I want to replicate in the short-term rental space. If anyone knows what Grant Cardone’s looking for, help me out so I can start working with him to… So Hashim, thank you for letting us go on that tangent man, I thought it might be of value to the listener to hear that story. Anyway, you hit the around running, networking on BiggerPockets, you were able to start building some relationships.

Tony:
So who was that key person that allowed you to find that first deal? Did you find an agent and they gave you a deal? Was it a wholesaler? How did those relationship that you built lead to you getting that first out-of-state deal in Memphis, Tennessee?

Hashim:
I quickly realized I was going through that exercise having… especially being out of state. So these places I was looking at, I have never been and I don’t really know the market that well and I was learning as I was going. It was very apparent to me immediately, people on the ground, people that know the market, A-team, you’re going to need that, instrumental to succeed or else there’s no way on this. And I came across a gentleman by the name of Steven [Akerndona 00:16:53] and he has a business in the area and essentially he’s a one-stop shop and he’s a broker on one end, if you want to buy or sell homes. But also on the other end, he has a general contracting and project management business.

Hashim:
And I connected with him. And I remember we had a call, and our call was supposed to be 30 minutes, we ended up over an hour. I told him all about my goals, what I’m looking to do in the market, where I am in my journey, which is very beginning, but where I would like to go. And I share with him what I’ve done in the past. In the past I’ve been able to navigate different parts of the business and teach myself and learn and grow, and I’ve done different things within my industry. So I correlated that and said, “Although this is where I am, I can do it.” And I shared with him what my goals were.

Hashim:
And then in return, he shared with me what he’s done in the past, where he is also in value, how he can help me get to my goal. And we clicked. I started working with him. For me, my mind is also process-centric. And Ashley, I know you’re big on that, even during the Rookie Bootcamp that we took, you were one of the whole… Well, the sessions was just dedicated to processes, that’s how my mind works. And for me it was more, do one proof of concept, and then see if it works, see how you can scale. And within that, also try to narrow and mitigate your risks as much as you can.

Hashim:
We can’t control everything at the end of the day, anything in life is probabilities. But try to narrow and mitigate your risk and lower your risk as much as you can and then go for it. And that was my first deal.

Ashley:
Hashim, what are some examples of ways that you mitigated your risk?

Hashim:
And that may go a little bit into my approach to how I pick deals or how I select deals. Do you guys want us to-

Ashley:
Yeah, let’s go into that. Sure.

Hashim:
Okay. So what I do is I have maybe a three or four steps, and this is again, me trying to create processes around things that I do. I have about three or four steps that I take when I’m looking at potential deals, so we can go through that. So the first thing I do is, and this is like a prequel for anything, any property I’m looking at, is really looking at the zip code and neighborhood, “Do I want to own a property in this zip code or this neighborhood?” That’s the first thing I look at. And then I use Google Maps to look at Street Views and just see what’s around it. Are there parks? Are there schools? Is there a Starbucks? Is there a Walmart? How does the street, how does the house look streetwise?

Hashim:
That gives me also an idea of the kind of tenants I’m going to be expecting, younger tenants, more family centric, and so on and so forth. If it checks what I want, then I go into a four-step thing. And the first thing I do is data gathering. In that step, I want to understand, what is the market value or the ARV for that property? What are comps around it? What sold only recently? What’s not sold? What price range are they selling at? What are rents like? And that’s really important because different markets can withhold and absorb different rents. And then ultimately, what the rehab is for that property.

Hashim:
So I focus mostly on BRRRR, and that is a key data and key input to the whole BRRRR process, as you guys know. And what I do for that is I go online, I use Zillow, Realtor, Redfin. These are all sites that I use to start getting…. And this is all just rough data that you start gathering. And then I go to the rehab piece. And that is not a strength of mine, I will say. I have so much more to learn on that front. But I’ve done a few and now I can take a guess, take a guesstimate, “Okay, I need to do a bathroom, I need to do kitchen, the roof. This is what I’m looking at ballpark.”

Hashim:
And then by then, I know what their asking price is for the property. And then I just look at that and you can quickly tell, “Okay, is it feeling like it’s going to work or no?” And then from there, I actually go into my plug… Now, I have all that data, plug it into the calculator and I use the BiggerPockets calculator and then also use an offline calculator. And then I see what the numbers look like. And if they all check the boxes, I get with my team, my mentor, I have them look over it, make sure I didn’t miss anything. And if it’s all good, them and their team, they go and physically walk the property and they fully assess it.

Hashim:
And that means taking pictures, understanding what exactly we need to do by different categories now, later, later down the road, and then what that estimated cost would be to bring it up to what we like to rehab it to. And there’s reasons behind it, getting better rents, getting tenants, better cash flow, so on and so forth. I’ll pause here. With all these steps, if you guys see, there’s already redundancy in the steps. So I take a stab at it, I have my estimation. My team take a stab at it, they have their estimation and they go and physically walk it. And all of that is validating all this inputs and data that we have.

Hashim:
And on top of all of that, one last thing that I do is what I call a desk appraisal. And when you’re doing a BRRRR, the ARV and the rehab is so crucial to really making a break in that deal for you. And I use professionals to give me estimates on both of these. I do take a stab at them myself, but ultimately I use professionals. So the desk appraisal is literally using your license appraiser and providing them with your scope of work as to what you’re going to do to the property, and they tell you what their opinion of the value of that property would be if you did what you said you were going to do on it. And if everything checks, then it’s a deal and we move forward with it.

Tony:
Hashim, I can tell that you’ve got an engineering background because you’re so methodical and systematic with your approach to investing. So I love that part, man. So first, thank you for sharing that framework. I think any new investor can copy those same steps and use that as a way to gain some confidence in their ability to look at deals and give them the thumbs up or the thumbs down. Now, one piece I want to dig a little bit deeper on is the rehab estimation. I think most rookie investors that are listening to this podcast, they probably feel good with the first step of checking out the neighborhood, how does it look? And what do the schools look like? Are there jobs and things like that?

Tony:
They probably feel good about the sales comps as well. Most people feel confident going into Zillow and saying, “Hey, this is a really nice house. What did it sell for?” Most people can do that. I think where a lot of new investors get stuck is estimating the rehab costs. You’ve done this now seven times in the last year or so, so I’m sure you’ve figured it out. But if you go back to Hashim on that very first deal, so deal number one, how did you go about estimating those rehab costs and were your estimates in line with what we actually ended up spending?

Hashim:
Tony, that very first rehab or first BRRRR that I did, I had no idea where to even start with my estimates on the rehab, because that was my very first time doing it and I’m looking at the pictures of the house, I’m looking at my assessment. By then, I didn’t have all this process in place, I was doing these steps, but it wasn’t fully mapped all like I have it now. What I did though is I started Googling and going online and saying, “Hey, bathroom remodel, what is that roughly?” And obviously, the data is not necessarily easily found, but I started just rough estimates together.

Hashim:
But also at that time, I needed to lean on my team a lot more. They’re the experts, I am not. And that is when I call my team, the gentleman I mentioned and his team, and I needed a lot of help, them helping guiding me as to what that may look like. Also, I took a lot of inputs from them and that was also a way of me to start to learn. Because after that, offline, I went back to them and I was like, “Hey, help me understand. So each of these, how would you break it down? A three bedroom, two bath home, 13, 14, 1500 square foot. If these are the things we need to do on them in the future, help me understand, roughly, how do we break it down?”

Hashim:
And then that started giving me some data points and some ideas. And I started noting that down and everyone, every deal I went through, I would try to apply that. And to this day, I’m not 100% spot on, I’m still learning that aspect, but it helps. But the more you do it, the more it helps and the more you become better at it, anything else.

Ashley:
Yeah. We’re actually having… Or if you guys haven’t listened yet, you go back to James Dainard’s episodes, we did two of them, a Wednesday one, and a Saturday one as a Rookie Reply, and he talks all about estimating rehab costs and construction costs. It is a deep dive coming from expert. Tony, I know you know everything. Do you have those episode numbers?

Tony:
165 and 166.

Ashley:
I knew it. Yeah, but I loved how you talked about doing the breakdown and you said you just wanted to understand what the costs would be for everything in case you went and got another property the same. And that’s so valuable. So my asset manager, Darrell, he is working with a contractor where they gave us a quote for one apartment, and then a little bit later we got a quote for a different apartment that was smaller, but the painting charge was higher. And so we went back to them, well, he went back to them and said, “Hey, look at this huge difference.” And we actually talked to the owner where the guy that was doing the estimating was just throwing out numbers and there was really no math to it.

Ashley:
So going forward it’s, “Okay, how much per square foot is it going to cost us in paint?” So I think that’s really valuable to understand exactly what you’re getting charged for, then you can build out an estimate based on those prices each time you go and look at a property that needs to be rehabbed

Hashim:
Absolutely.

Tony:
I want to talk really quickly about my first experience rehab as well. So very similar, Hashim. I went out of state for my first rehab and had no real sense of what it would cost to do that kind of work. But I found a contractor and the first thing that I asked him, I was like, “Hey, here are the kind of houses that I’m looking at.” I was just sending him the Zillow listing and I’d say, “Here’s what I wanted to look like,” I’d send him a comp, and I’d say, “Just like ballpark, what do you think this might cost. Without you even walking it, but just give me like a ballpark number.” Or he would send me a property they had recently renovated and I’d say, “Hey, what did that cost? What did you charge that person?”

Tony:
And if you talk to enough contractors and they give you those ballpark numbers, at least now you’ve got a good rule of thumb to use. Now, when we started rehabbing in Joshua Tree, I had friends who are already flipping out here and I said, “Hey, what’s your price per square foot that you guys are typically seeing on your rehabs?” And they were able to share some numbers with me as well. So asking the contractor for their most recent cost to other customers for comparable jobs, and then talking to other investors about what they’re spending is another way to give you a good ballpark.

Hashim:
That’s a really good point, Tony, and that’s one thing I’m starting to shift my mind more too. And the more I do, the more I’m learning is it boils down to a square foot. Even when I’m looking at deals now, what’s the price per square foot? When I was just starting, I remember a year ago, 11 months ago, and I was just starting, it was, oh, how many bedroom? How many bath? It still is today how many bedroom, how many bath, but also what’s the square footage? What’s the cost of square footage to rehab or to buy? That’s a good point.

Tony:
So I just really quick before we move on to the financing piece, Ash, I know you want to get that, but I just want to go back to the desk of appraisal that you mentioned, because I think that might be a new concept for a lot of folks. I don’t want to pass up on that. So first Hashim, what is the benefit of a desk appraisal versus a traditional appraisal? And then what’s a typical cost and turnaround time on the desk appraisal?

Hashim:
Yeah. So for me in my process desk appraisal is really important because I want to be as certain as I can, nothing’s 100%, but I want to be as certain as I can in that ARV value because that’s really going to make or break the deal for me, especially with the kind of rehabs that we do. They’re extensive and we’re putting quite a bit of money into doing the rehabs. So to me, that is important. The benefit of that is, A, it gives me more confidence and I know for certain that the deal would work out numbers wise. And then as far as the difference between that and actual appraisal, the desk appraisal as the name suggests, they don’t actually need to physically go into the property, they can do it from their desk.

Hashim:
And what they use is the scope of work, so I provide them with the scope of work. This is what we’re going to do in the property. And then obviously they have information on the property based on their tools and online, where the property is located, square footage, so on and so forth. And then they factor in what we’re going to do to the property. And what that gives them is what the end product would be. And so they can give an opinion on what that end product is valued at that current market. So that’s what I do. And as far as pricing, when you think about it, the only cost, it depends on the appraiser, but roughly between 150 to $180 is what it costs.

Hashim:
When I think about that in my business and process, $180 is so worth me knowing what I’m getting into and also so worth me knowing what I’m expecting out of this deal and mitigating, talking about risk, like mitigating the risk a lot. So it’s totally worth it for me, that $180.

Ashley:
Well, that’s a great tip for anybody that is looking for that ARV as to get a pretty close estimate as to what it’s going to be. And I agree that $150 is well worth the opportunity cost of getting that information instead of not having any idea and just winging it as to what the ARV could be. So thank you for that. Before we move on to really digging into one of your deals, I just want to know, how are you financing all these properties as a rookie investor? You can get one, two properties and then it gets to that point, like, “Okay, well, how do I get the next deal? How do I pay for it? I just spent all my money.” So how have you been able to grow and scale so quickly on the financing side?

Hashim:
What I did is for my financing, part of my analysis paralysis for years actually was around the amount of money that it takes to actually get real estate going. I learned that I can leverage my assets and my stocks and brokerage accounts and get a line of credit on that. And then I can pull as much as I want to up to the limit, of course, and I can use that money to invest. And that is how I got started. So I called my brokerage E-Trade and I was able to leverage my stocks and assets in there and get a line of credit against that at a very decent interest rate, by the way. So that’s how I financed that very first deal, and that’s how actually I finance all my deal so far.

Hashim:
And then in tandem with that, obviously when you do the BRRRR, you’re able to refi, the money is not stuck or sitting. So all my deals are at different stages right now, but what I’m expecting is for most of these deals, I’m able to pull back all my money, and some of them I’m actually able to pull out even more of what I put in it. So I’m able to go back and pay down that line of credit.

Ashley:
Let’s talk about that line of credit because I think that is one of the greatest tools that someone can use if they have it available. So if you have a non-retirement brokerage account with investments in it, you can have a bank put a line of credit. So those investments are acting as collateral for the loan. And since that is so liquid, pulling out your investments, that’s more liquid to a bank than using your house as collateral, that you’re willing to get way better terms such as a really low interest rate on it. And then it does vary, doesn’t it? So if your brokerage account dips or increases, doesn’t the line of credit, the availability and the interest rate change with that too, Hashim, is that correct?

Hashim:
It does. And I think every brokerage does it a little different, but yes depending on what you have. So when I did at the time, roughly it was a rough math, they took about 50%. It could give you a line of credit up to 50%. And I know that changed since I did it. And some brokerages do it differently. So every stock or asset actually carry a different weight. So some stocks are able to give you up to 60, 70% of it, some stocks only 50%, some stocks, less than that. So it’s weighted depending on the stock, how much they’re able to give you against.

Hashim:
And then you’re right, Ashley, when they give you a line of credit, as you would imagine that asset or the stock is going to fluctuate with the market, it’s going to go up., it’s going to go down. As that fluctuates, how much line of credit you have is going to shift as well. So you want to be mindful of that also as you’re using the line of credit, you don’t want to exhaust it all the way and not have a way to pay back in case the market go down and you need to pay some of it. One thing I want to add actually on the financing part, maybe before we shift gears is, where I am right now in my journey and the way I’m looking at this, that’s how I started and I’m still leveraging line of credit mainly.

Hashim:
Ashley, you remember when I took the Rookie Bootcamp, one of the sessions was entirely dedicated to financing. And at that time, I literally had offers in three properties. If all those offers would’ve gone through, I had no idea how I would’ve gone. And I remember we talked about it and Tyler, so Tyler was TA. And I remember we discussed that at length in one of the sessions, but now where I am is my mind is so much more open to other avenues of financing, the hard money, the private money, different ways of being creative with the financing. And as I’m growing and expanding, my line of credit or the refinancing piece is not going to be enough. I need to do other things if I want to keep growing at this rate so it’s not a limiting factor.

Hashim:
And that’s where having your mind open to other ways of financing, like the hard money, the private money, local banks is crucial, and I encourage everybody to explore that option as well.

Tony:
Hashim, you just hit on a really important concept of maturing as a real estate investor. And I want to take a second to really drive that point home. When you first get started as an investor, there are so many things that seem scary to you. For most people, the idea of just submitting the offer is exceptionally scary. But once you start submitting offers, you put offers out in your sleep. But that first one, there was so much fear and anxiety and nervousness around it, but once you do more, you get the hang of it. Your first rehab, you’re probably tense and checking in on the GC every other day and like, “Hey, what’s going on? How’s this? How’s that?”

Tony:
And now, you got rehabs and maybe you’re checking in once a week, maybe once every other week and things are humming and going. From the financing piece, I love what you said there about had all three of those deals hit at once, you probably would’ve panicked. But the good thing is that every time you experience something new as a real estate investor, you’re able add one more tool to your tool belt. You’re able to add one more skill to your skillset. And if you do that over and over and over again, you start expanding the world of opportunity that’s available to you as a real estate investor, because if you can take down one deal with hard money, another deal with private money, another deal with your line of credit, another deal with a JV, now, you’ve got the ability to scale faster than other people do.

Tony:
So my point in all this is saying, for all of you that are listening, accept the fact that it’s going to be scary at the beginning, but understand that the only way that you mature and the only way you get better is if you push through that fear and you find some creative solutions to keep going. So Hashim, you dropped the knowledge bomb there, I don’t know if you’ve realized it, but I had to go back and really, really drop that point home for you.

Hashim:
Thank you.

Tony:
So Ash, anything else for you? Should we hit the deal review here?

Ashley:
Do you have a deal for us, Hashim, that we can go through?

Hashim:
Yeah, let’s do my very first and scariest one.

Ashley:
Let’s hear it. So we’re just going to ask you a couple of brief questions real quick just to set the stage for the deal review, and then we can get into the story of it. Where was the property located

Hashim:
In Memphis, Tennessee?

Ashley:
What strategy were you using for the property?

Hashim:
It was a BRRRR.

Ashley:
How much did you purchase it for?

Hashim:
The purchase price was $100,000.

Ashley:
And how much did you put into the rehab?

Hashim:
The rehab was $45,000.

Ashley:
Okay. Do you want to start off with telling us how you got the deal and then how the rehab went and then afterwards, renting it and refinancing it?

Hashim:
Yes. I got the deal from wholesaler and that was all also new for me, working with wholesalers, exploring wholesalers. And actually, that deal took from the first time I saw it to the first time I purchased, it took about two months. And the reason for that is I was really hesitating and running the numbers over and over and over before I pulled the trigger and then the deal went off. So somebody got under contract. And then I was very bummed and somehow they fell through contract and he came back and I pulled the trigger immediately on it. Anyways, I purchased it from a wholesaler, $100,000, and then I went through all the steps that I talked about as to how I select or make sure the deal it fits my criteria, what I’m looking for.

Hashim:
It wasn’t as totally defined back then, but these were the framework that I went by. And then we went under contract and then after that we closed, and then we started with the rehab. Total rehab was $5,000 and it took about two and half to three months to do the rehab. It was extensive rehab. And then after that, with closing costs and then with refi… Actually, before I went to refi, after that, so the deal was done about three months, and then by then I’m 145,000 into the deal. And then I went to the bank and while I was looking to rent, I handed it over to a property management company at the time. And then I started on the refi because it was my first refi too.

Hashim:
So I was learning it and trying to figure things out. I was able to find a lender that, and I’m not sure if all lenders do that, but essentially, they were able to have me file and do everything ahead of time. So that once that six month hit, the very first day of the six month, the funds are immediately released into my account. So that’s pretty much what we did. You guys want to know what the ARV of that deal was?

Ashley:
Of course.

Tony:
Please. The big smile on your face is either really, really good or really, really bad. So I got to know.

Hashim:
Luckily it was good. So when we did the appraisal initially it was for 271,000. And the actual appraisal came in at 281,000.

Ashley:
Oh, that’s awesome. Congratulations.

Hashim:
Yeah. Thank you. So with that deal, I was able to get, I verified at 75% LTV and I was able to get all my money back that I put in it plus another 60,000. So I maximized what I can pull out of it. And then right now as we speak, the house is rented and it cash flows about $130 a month after expense. And I want touch on that because that is lower than what my goal is for cash flow and cash-and-cash, part of my criteria to the deals that I look for. But the reason it is that is because I was able to get an extra 60,000 out of that house. And I run different analysis. If I would’ve left that 60,000, what I put back into the house, the cash flow would’ve been in lieu what my criteria is, which is about 300 to 400 per door.

Ashley:
I think that’s so important. I’m so glad that you broke that out as to why your cash flow is lower. Sometimes we get a lot of people on here or even just you see it on social media, like, this house is cash flowing $1,000 per month, but also you don’t know how much money they put into the deal. So calculating your cash-on-cash return, so how much cash did you put into the deal and then how much cash are you getting out of it, I think is really important to look at and not do just what that cash flow number is, because like you said, you pulled an extra $60,000 out of that property. So for you, it was worth it getting that $60,000 more than that extra couple hundred a month going forward. And plus, your tenants are paying down that extra 60,000 for you.

Hashim:
Yeah.

Ashley:
I just had one question before we move on to our next segment here, but are you using a property management company for your tenants or are you self-managing remotely?

Hashim:
Right now I’m self-managing and I think whether rookie sees an investor out there, I think listening it is good in your journey to define really what you want, and whether you go with a property management company or you self-manage it yourself, I think there is value in being involved and at least learning it. And I know Ashley, you started in property management, you’ve shared that story multiple times, but I really like when you share that story and different times you bring it up. I think it’s really important for people, even if you outsource, and I don’t think I’m going to be able self-manage, especially my goals and where I want to go and growth, there is no way I’m going to be able to self-manage and that’s not what I want to do.

Hashim:
I’m trying to build a business and I want to leverage processes and systems and outsource as much as I can so I can focus on what I want to do and what I enjoy, but for now, I’m doing it. And I like it because I’m learning it and I’m learning inside out. And I think it’s much, much better for me to understand it by doing it and create processes around it so that when I’m ready to outsource, I know how to do it best, I know what to expect, I know how to pick the right property management company that fits my goals and my objectives of where I’m trying to go.

Tony:
Hashim, man, I love your story. And even if you’re only cash flowing $10 per month, you still did that with no money into the deal. That is still an infinite return, you’re still getting equity, your equity’s growing over time. So I don’t think you need to explain why you got this $130 per month in cash flow because it’s a great deal, man. Hashim, want to take to our next segment, which is the Rookie Request Line. So for all of you that are listening, you guys can reach us any time at 8885-ROOKIE to leave a voicemail, we might use it on the next show. So Hashim, are you ready for today’s question?

Hashim:
Let’s do it.

Kristen:
Hi. My name is Kristen, I am from Maryland. I had a question about growing a business exponentially with using the BRRRR method. Essentially with the BRRRR method, it takes about six months before you can refinance and get your cash out to get onto the next project. And doing that seems like the max amount of deals you could do per year would be two. So what’s the best way to exponentially grow your business if you can only get limited to doing about two deals a year? Thanks so much for any answer you can provide. Thanks. Bye.

Hashim:
Great question. So the first thing I’ll say is, and Tony and Ashley, open it up if you guys have anything else to add to it, but the first thing that’s coming to my mind is you don’t need to wait six months, which they call the seasoning period to do a refi on your property. It’s a different kind of refi though. So if you wait the six month and you have more equity into the property, you can maximize how much you can pull out of it. But if you do less than six months, you can pull out, lenders operate differently under this, but typically, you should be able to pull out at least what you put into the property if you don’t wait the seasoning or the six months period. That’s my first thought on that. And then I think scaling is really important and I touched on that as I was sharing my story.

Hashim:
One thing that also jumps to me is different sources of funding as Tony summarized it while I was sharing my story. Maybe think about different ways if possible in your end of how you can get funding, whether it’s hard money, private money lender, different banks, different types of loans possibly. I would encourage you to explore that if you can. Another thing that jumps at me is partnership. Perhaps, and I’m not sure where you are in your journey or maybe what your ultimate goals are, but if partners are a possibility or things that can fit into your goals or your business, or maybe something to also explore, people can have different things and strengths that they bring to the table. And sometimes it’s money, it’s funding.

Hashim:
You may not have that, but you may have other things that you can bring to the table, then you can find a partner where you guys can complement each other. And it’ll help create a win-win situation for both of you. That’s like my three thoughts and take on this, but Tony, Ashley.

Ashley:
Yeah, I think that was great. Definitely looking for other banks that will do less than six, that don’t require a seasoning period, looking at the commercial side of lending, where there usually is no seasoning side at all. And then also just, I said finding a partner. That’s how I got started., and I did pretty much all of my deals in the first two years was with partners. So I think that’s definitely a huge advantage to be able to grow and scale that way. So now we’re going to move on to our Rookie Exam. Here we go. Are you ready, Hashim?

Hashim:
Should I have studied for this before?

Ashley:
Yes, you should have, it’s graded.

Tony:
Yes, that’s definitely. If you don’t pass, we actually don’t hear your episode. So there’s a lot hinging on this.

Hashim:
Oh, man. Okay. Let’s try.

Ashley:
One actionable thing rookie should do after listening to this episode.

Hashim:
I want to say, just do it, and perhaps before doing it, just really sit down and write down, what do you want to do. If you’re considering real estate investing, really write down what you want to do and have that goal drive you. So as Stephen Covey puts it in The 7 Habits of Highly Effective People, begin with the end in mind. And if you haven’t done that yet, I would highly encourage, sitting down thinking about it, writing it down. And Ashley, I know you said actionable, but I think that is writing the goal is action, I think it would drive a lot more actions and things coming out of that.

Ashley:
I 100% agree because you may think of something that you want or you want to do and that isn’t as impactful as actually taking the time to write it out, then even putting it somewhere where you see it every single day.

Tony:
All right. Hashim question number two. What is one tool, software, app or system that you use in your business?

Hashim:
Oh man, Ashley gave me so much, Ashley and Tyler during the bootcamp. I use Rent Ready for property management. And I also use Rentometer to help me gauge what my rents are going to be for a given property in a given market. I know you guys talk about Stessa as well, I haven’t fully used it yet, but that’s also the software I’m looking at as I’m growing. So these are three different softwares.

Tony:
Can I make a comment on Stessa really quick, please? I always thought, funny name, whatever, but I realized that Stessa is assets spelled backwards. So I was logging in the other day and the logo did this like spin around thing and I was like, “Holy crap. That’s what Stessa means.” So anyway, if anyone else was wondering where Stessa came from, it’s assets spelled backwards.

Ashley:
I remember on Instagram, this is probably like a couple of months ago, I feel like everybody that used Stessa was posting about it. One person realized it and everyone else was sharing it like, “Oh my God, I’m 30 years old, I just realized that [crosstalk 00:47:15].

Hashim:
I never thought about that, Tony.

Ashley:
Yeah, those are all great popular views. Go ahead, Hashim, were you going to say something else?

Hashim:
No, I was just going to say I’ve never thought of it, but now, my mind wouldn’t stop thinking of it that way when I see Stessa.

Ashley:
Okay. And then the last question is where do you plan on being in five years?

Hashim:
The way I’m looking at it is my focus is mostly… The reason I do BRRRR is because of cash flow ultimately. And I would like to be between 20 to $30,000 in cash flow in the next three to five years. And I’ve done some number crunching on the back end and the number of doors needed to get there is a bit scary, but it’s a goal I have for myself and I’m working towards that.

Ashley:
That’s awesome. Congratulations on that goal. And we’re excited to follow your journey to get that done.

Hashim:
Thank you guys.

Ashley:
Well, Hashim, can you tell everybody where they can find out some more information about you and reach out to you?

Hashim:
Yeah. I am not so active on social media, but you can find me on LinkedIn and also searching by my name, Hashim Ismail. Also you can reach me through my email, [[email protected] 00:48:24]. That’s where you can reach me via email. So these are two ways that you can connect with me. And maybe before we wrap up, I do want to give a shout out or thank you to a few folks if that’s okay.

Ashley:
Sure. That’s of course.

Hashim:
Yeah. I’m going to start with Stephen and Tyler. Thank you guys for all the coaching, mentoring and help throughout, I’ve learned a lot from you guys. Definitely my family for not doubting me, my girlfriend for always being there and keeping me fed. There’s days I was in my computer working so much and I forget to eat, but she’s there. So thank you for that. And definitely, the BiggerPockets community and you guys. And I’ve learned a lot over the years through the podcast, the bootcamp, books, forums, and all. And my Rookie Bootcamp Accountability group, thank you guys. You guys rock.

Ashley:
You forgot one. You had to pull a Snoop Dog and say, “I thank myself.”

Hashim:
There you go.

Ashley:
I want to thank me.

Tony:
I want to thank me. Well, Hashim, before we get out of here, one more person we want to highlight, and that’s our Rookie Rockstar for this week. So if you guys want to get highlighted on the show, get active in the Real Estate Rookie Facebook group, get active on the BiggerPockets Forums, get active in my DMs and Ashley’s DMS, we’ll try and pull some folks from there. But today’s Rookie Rockstar is Roberts Anthony Sr. And Roberts shared some numbers from a recent flip. So they bought it at $185,000 using a hard money loan, the repairs and the interest payments only came out to $40,000. They listed it at $297,000, which is already a good spread, but they actually end up selling for $320,000. So this is a six-figure flip. So Mr. Robert, Anthony Sr., congratulations on an amazingly well done job.

Ashley:
Well, Hashim, thank you so much for joining us. And it was definitely a pleasure to have you in the bootcamp and to have you on the podcast episode. So thank you so much for joining us.

Hashim:
Yep. Thank you guys.

Ashley:
I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson on Instagram. And if you guys are enjoying this podcast, please go to your favorite podcast platform and leave us a five-star review and tell us what you love about the podcast. And don’t forget to join the Real Estate Rookie Facebook group. We’ll see you guys on Saturday.