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Pandemic accelerated value of home ownership at luxury price points to new heights in major Canadian centres in 2021

Demand for Canadian luxury real estate shifted into high-gear from coast to coast in 2021 as both domestic and non-resident consumption of tangible assets, such as homes, reached new levels, according to a report released today by RE/MAX Canada.

“The currency of home ownership has clearly taken on a new dimension in 2021,” says Christopher Alexander, President, RE/MAX Canada. “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.”

The RE/MAX 2022 Luxury Market Report examined Canadian luxury real estate trends and developments in freehold and condominium sales over $3 million in Metro Vancouver and the Greater Toronto Area (GTA), and tracked sales over $1 million in 17 additional markets including Victoria, Kelowna, Edmonton, Calgary, Regina, Winnipeg, London, Kitchener-Waterloo, Hamilton, Barrie, Kingston, Ottawa, Halifax-Dartmouth, Moncton, Saint John, Charlottetown and St. John’s.

According to an analysis of sales provided by RE/MAX brokers and agents based on local real estate board data, RE/MAX Canada found that 18 of the 19 markets recorded percentage increases in the double and triple digits. The greatest appreciation occurred in smaller urban markets such as Barrie, London, Kitchener-Waterloo and Hamilton, where sales of homes priced over $1 million have climbed 517.8 per cent, 255.1 per cent, 208 per cent and 199.5 per cent respectively. Canada’s largest markets for luxury product – the Greater Toronto Area and Metro Vancouver – experienced increases of 112.8 per cent and 75.8 per cent respectively for homes over the $3-million price point, while transactions of homes priced over $10 million rose a substantial 156 per cent and 167 per cent respectively. The only outlier was Charlottetown, where sales over $1 million declined to four units, down from seven unit sales one year earlier.

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“As high as these numbers are, we believe they just scratch the surface,” says Alexander. “In our view, these levels likely do not truly reflect what is happening in markets across the country, given an abundance of exclusive sales and in white-hot markets such as Toronto, instances of private sales where buyers approach sellers whose listings have expired.”

Last year marked the continuation of a pandemic-fuelled buying spree that started in 2020, shattering existing records for Canadian luxury real estate sales and in some instances, price points from coast to coast.

“Despite a third and fourth wave of Covid-19 in 2021, real estate markets continued to rattle and hum,” says Elton Ash, Executive Vice President, RE/MAX Canada. “Tight inventory levels were prevalent in at least half of the markets we surveyed and contributed to an uptick in values across much of the country.”

RE/MAX brokers who were surveyed for the report attributed the increase in luxury activity to abundant economic drivers, as the national roll-out of the vaccines continued. Stock markets rallied, with the TSX, the S&P and the Nasdaq reporting some of their best years on record. Interest rates remained at historically low levels. GDP growth for the year is estimated at 4.5 per cent in 2021 as businesses returned to pandemic norms–including hybrid schedules—restaurants, bars, gyms, sports venues and theatres finally opened their doors.

Trade-up activity was brisk in most markets, as buyers cashed in on substantial equity gains realized when selling their existing properties.

“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,” says Ash.

Real estate has traditionally been an essential asset class in the investment portfolios of ultra-high net worth individuals, usually comprised of multi-unit residential, commercial, industrial, and land. Residential performance, however, has been undeniable over the past decade, and that has generated global attention. Financial communities have also tapped into the trend, with Real Estate Investment Trusts (REITs) now investing in single-family residential housing in the US and to a lesser extent, Canada.

Canadian Luxury Real Estate Highlights

• Luxury home-buying activity is spilling into smaller centres where the dollar goes further. While the pandemic accelerated the trend, bigger bang for the buck is likely to continue to draw purchasers from larger centres, particularly in Ontario. Inventory is reaching critical levels in markets like London, Kitchener-Waterloo, Hamilton, Barrie, Kingston and Ottawa.
• Home sales are pushing into higher price points across the country. The luxury segment over $3 million represents approximately four per cent of total sales in Metro Vancouver and 1.8 per cent of sales in the GTA. Sales over $1 million in Halifax-Dartmouth represent 2.2 per cent of total sales.
• Records were broken for luxury sales over $3 million in the Greater Toronto Area in 2021, while Metro Vancouver fell short of 2016 record levels by just over 200 sales.
• Condominium sales over the $3 million price point in the GTA and Metro Vancouver have rebounded from 2020, setting a new record in the GTA and matching the existing record set in 2016 in Metro Vancouver. The GTA saw 106 condominium units sold in 2021, an increase of 82.8 per cent over 2020 levels, while 144 units changed hands in Metro Vancouver, up 44 per cent over the previous year.
• RE/MAX brokers have reported an upswing in non-resident buyers in Metro Vancouver and Halifax-Dartmouth in 2021, however domestic buyers continue to drive luxury sales in the Greater Toronto Area.
• An increase in young entrepreneurs has been noted in the GTA, with some utilizing crypto-currency gains to make their way into the housing market. Family wealth has also contributed to the increase in luxury home sales, with many parents freeing up the reins so the kids can enjoy the fruits of their labour.
• Non-resident buyers are returning to Canada’s residential housing markets, despite the existence of three taxes aimed at foreign ownership in Metro Vancouver – the 20-per-cent Foreign Buyer Tax, the two-per-cent Speculation and Vacancy Tax (SVT), and the three-per-cent Empty Home Tax and the 15-per-cent Non-Resident Speculation Tax targeting sales in Ontario’s Greater Golden Horseshoe Area.
• Sales of building lots have declined at the top end as buyers are reluctant to embark on construction when costs are unclear, labour is hard to find, and supply chain disruptions can add years to the custom-building process.
• Inventory is balanced over the $3 million price point in Metro Vancouver while just 200 such homes are currently listed for sale in Toronto proper. Supply levels are exceptionally low in 50 per cent of markets surveyed for this report, including the GTA, Victoria, Kelowna, London, Kitchener-Waterloo, Hamilton, Barrie, Kingston and Ottawa.

About the 2022 Luxury Market Report

The 2022 RE/MAX Canada Luxury Market Report analyzed 19 Canadian luxury real estate markets, using data and insights supplied by RE/MAX brokerages. RE/MAX brokers and agents were surveyed on market activity and local developments based on local real estate board data and market activity in 2020 and 2021.

Outside of perhaps David Greene, I have been arguably the biggest proponents of buy, rehab, rent, refinance, repeat—otherwise known as the BRRRR strategy. The BRRRR strategy has been very good to me and many others, but alas, my dear friends, all good things must come to an end.

OK, the word “end” might be a bit hyperbolic here. The BRRRR strategy is by no means completely over—and it will certainly come back in full force one day. No real estate market stays the same forever. That being said, the BRRRR strategy is not the ideal way to invest in real estate at this particular time. And, the reason for that is simple: There just isn’t much out there.

Unprecedented low levels of inventory

It’s strange to think back to the beginning of the Covid pandemic when virtually everyone was screaming that the sky was falling—and that the housing market would be doing a redux of 2008. Yeah, about that…

That is not what happened, obviously. Rather than the bottom falling out, the housing prices have skyrocketed during a nearly unprecedented nationwide lull in for-sale housing inventory. Back in April of last year, Jackson County, where our operation is based, had an unheard of 0.6 months of inventory! For reference, a “balanced market” that favors neither buyer nor seller typically has a full six months of inventory to offer buyers.

And, as late as December, the dial had barely moved—and only 0.8 months of inventory remained.

That means that for every five properties sold in a month, only four remained on the market. The likelihood of getting a property under contract in less than 30 days is over 50%.

For example, I was recently trying to buy a home to live in and everything—I mean everything—was getting multiple offers and going for over asking. (I’ll remind you I live in sleepy old Kansas City, Missouri.) One home had 14 offers in its first week. Eventually, we were able to sneak through for only $15,000 over asking.

I should consider myself lucky. In Washington D.C., a home recently went for a cool million dollars over asking!

As did a house in San Francisco…

And one in San Jose, too…

Meanwhile, home prices set records, as noted by Forbes:

“Home prices hit an all-time high of $359,975 in the four-week period ending November 21… This was up 14% year over year, the largest increase since early September. … Active listings… fell 22% from 2020 and 41% from 2019.”

And the hits keep coming.

“43% of homes sold above list price, up from 35% a year earlier and 21% in 2019. … The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, has declined just 0.1 points from 100.6% to 100.5% over the past month.”

Given this information, it would seem rather obvious that it is not a particularly easy market for buyers.

The challenge for BRRRR in this market

Please don’t get me wrong. It is still possible to “BRRRR out” in this market (i.e., be all in for 75% of the market value of a property so you can refinance out all your investment). We have done so on several occasions recently, including a rather large portfolio. It’s just quite a bit more difficult to find such deals. 

If you are actively marketing for leads, you will likely have to spend more on mailers or SEO to find sellers motivated enough to sell to you at such prices. From the MLS and wholesalers, such deals are few and far between, to say the least.

Indeed, there are very few REOs or people in foreclosure right now, as anyone who’s behind on their mortgage can simply list their house for sale, and odds are, they will get a full-priced offer the same month. The same would go for an out-of-state landlord with a fixer. 

Thus, it’s difficult to hit that 75% ARV on new purchases. Again, it’s not impossible, but it’s very hard to do so consistently at volume. So, if you demand only BRRRR deals, you will either likely be spending a lot in marketing dollars, which will make any extra profit on these investments a wash, or may find yourself sitting on the sidelines while twiddling your thumbs and waiting for the next crash.

Speaking of which, I should probably address why twiddling the thumbs is not a recommendation I would make.

Why the market is unlikely to crash

This qualifies as a “prediction”—so take it with a grain of salt. That said, it appears unlikely that the real estate market will crash in the near future. We may see a leveling off or even a minor correction due to affordability issues, but the dynamics of the economy overall don’t look anything like they did in 2008.

The first major thing to note is inflation. Right now, inflation stands at 7%, the highest it has been in decades. (We’ll return to this shortly.) And even if the supply issues are resolved, this is unlikely to stop any time soon—as an enormous amount of dollars have been added to the money supply by the Federal Reserve since the start of the pandemic in early 2020. All things being equal, more dollars in circulation makes for higher prices. As such, it would appear inflation is here to stay for the foreseeable future.

During the last great inflation of the 1970s, house prices did not crash—but kept pace with inflation instead (other than a brief dip when Paul Volcker jacked up interest rates in the early 1980s to “break the back of inflation”).

Plus, the United States is in the midst of a major housing shortage that didn’t exist in the 1970s or prior to the 2008 crash. According to Freddie Mac, there was about a 3.8 million shortfall in single-family houses necessary to meet demand last year. 

To give you an Economics 101 refresher: When demand exceeds supply, prices don’t go down.

Much of this problem came from banks and regulators getting excessively stingy with developers after the Great Recession. As I noted before: “From 2000 to the end of 2007, total housing starts were over 1 million each year and went over 2 million from 2004 to the crash. That was evidently too much. But even still, the number of starts cratered down to around 500,000 and only slowly increased from there. The number didn’t even cross over a million per year until the beginning of 2020. Then COVID-19 hit, and the number of starts crashed again.”

And while many lenders, most notably FHA lenders, are still only requiring very low down payments, the days of the stated income approval, teaser rates, and NINJA loans are mostly in the past.

It’s possible that Jerome Powell will find his inner Paul Volcker and the resulting increase in interest rates will cause real estate prices to stumble—or that a general recession could pull real estate down. But as of right now, it certainly looks like a crash is unlikely. 

Moving beyond BRRRR

So, we find ourselves in a bind. If the market is unlikely to crash and BRRRR is a much more difficult model than it once was, what are buy and hold investors to do? 

First of all, it’s certainly worth considering refinancing any old higher-interest debt you may have. Of course, if you pull money out, it’s not a good idea to simply hold it, as that money will likely depreciate in value rather quickly. So it’s still worth investing—and there are many options available, from syndicating apartments to build-to-rent or ADUs—or focusing on AirBnB properties (or any other type of property outside of BRRRR).

The key is to think in terms of arbitraging money. As I mentioned above, inflation is at 7% right now, and by some estimates, even more—yet interest rates are in the 3s and 4s. My home loan was just 3%. We’re getting investment loans at around 4.25%. According to NerdWallet, the average interest rate on a 30-year fixed mortgage was a mere 3.559%. On a 15-year loan, the rate drops to just 2.659%.

Needless to say, those rates are absurd.

Inflation should not be higher than the interest rate you can get on a house. Such a situation—assuming it continues—means that by borrowing money you are effectively making money, as the amount you are paying is less than the rate at which the dollar is depreciating. On my home loan, I am basically arbitraging a 3% payment with a dollar that is going down in value at a rate of 7% per year.

And that doesn’t even account for all the other benefits of real estate ownership, such as principal paydown and the depreciation right off.

Of course, inflation might abate some, but with all of the money that has been printed recently, it’s hard to see a major change coming. Right now, the big opportunity is to lock in extremely cheap loans. 

Go for the fixed rate loans, though. I would avoid adjustable-rate mortgages. And, the longer a fixed period I could get, the better. It’s hard to imagine this state of affairs can continue much longer. 

I would still not settle for buying at market prices, though. I would always look for at least some sort of discount. A much smaller discount would suffice, however, if I could get in with long term debt immediately on a property that cash flows well (i.e. can ride out a short term storm in case there is a recession). 

Final thoughts on moving beyond BRRRR

This is a great time to get a house hack or buy a fourplex and live in one unit while renting out the other units. Or, you might want to partner with someone to buy a small apartment or use a part of those savings sitting in a CD earning 0.2% as a down payment.

Be creative. After all, taking advantage of the ridiculous financing options that are available right now is the way to go. Just make sure to get fixed loans on assets that will cash flow. 

Ashley:
This is Real Estate Rookie episode 100 and forty-niner.

Emily:
I was talking to Tony, about the tornadoes had hit our area recently in Eddyville, Kentucky. And everybody’s scrambling for somewhere to live. So you don’t realize how important having real estate is, especially when somebody’s in emergency and it’s so needed, and it’s a way you can give back also.

Ashley:
My name is Ashley Kehr, and I am here with Tony Robinson.

Tony:
And welcome to the Real Estate Rookie, where every single week, twice a week, we give you the inspiration, information, education you need to get started in a real estate investing career. So, Ashley, what is new, what’s going on in your world today?

Ashley:
Well, I still have a bum leg. I’m still awaiting my ACL and MCL surgery. I did find out that I tore both of them, so my leg can’t bend enough yet to really fit into my podcast closet.

Tony:
Closet.

Ashley:
So that’s why I’m still out here in my living room.

Tony:
Well, I’m so sorry. I’m so sad that you’re bumming it right now, but sometimes it’s good that life makes us slow down a little bit to take it easy. So hopefully you’re enjoying the extra downtime at least.

Ashley:
Yeah. Actually, I took my kids snowboarding for their first time yesterday at the ski resort. We have no snow here in Buffalo, and the ski resort actually ended up closing for today. They’re closed until further notice because we have no snow, just the snow that they made. So I had to crutch through mud holes, and everybody’s just feeling so bad for me. I’m like, “Honestly, this is better than ice,” because then I would just die on crutches, where the mud at least held me steady-

Tony:
Held you up a little bit.

Ashley:
… in the crutches. But it was so fun getting my boys out snowboarding for the first time and getting them that first lesson. It was great. So hopefully they don’t end up like me, though, with the leg.

Tony:
Yeah, no torn ligaments. Yeah.

Ashley:
One thing real quick, before we talk about what’s going on with you, I have one thing I have to ask for. I noticed during this episode, you did not once mention that your Louisiana house is for sale. So this is your opportunity right now to mention it.

Tony:
Well, fingers crossed, but the best news I’ve gotten all year is that we have an offer accepted on that property right now. So, fingers crossed it all goes well; we can actually sell that house in the next 30 days. But maybe we’ll do a-

Ashley:
Oh my gosh.

Tony:
It’s good news, right? But maybe we’ll do a Rookie Reply on this, because we’re actually selling it for a little bit less than what we owe on it. So we’re literally going to have to write a check at closing to cover the balance. But, for us, it still made sense just because we’ve been holding on this property for 11 months now. We’ve been no tenant, but, yeah. Christmas came a little late, but I’m happy that we got it under contract. Hopefully we can get it closed in the next 30 days or so.

Ashley:
Oh my gosh. Wow. That’s exciting. At least even just to have an offer on it.

Tony:
Yeah. It just happened-

Ashley:
How long has it been? How long has it been since you purchased that property and then since you put it on the market? What was that timeline like?

Tony:
We had the house with a tenant in there for about a year. That tenant moved in in January of 2020, maybe February of 2020, and then they moved out in February of 2022. So we started paying the mortgage without a tenant in March of 2021, the year that we’re in right now. So it’s been from March to December, we’ve been paying that mortgage every single month, $1,400. So that’s like $14,000 we spent out of pocket on this house. Then we spent another $8,000 doing some repairs on the house because there was some foundation issues, a leak that we started to find. So we’re all in to this house right now about 22, $23,000. And then we’re going to have to cut another check for a couple grand once we actually close on it. So big learning lesson for us.

Ashley:
Yeah. So you’re not even getting back the money you put into the property for that $8,000 because you’re basically just getting paid a little less of what the mortgage balance is.

Tony:
Yeah. Yeah. We are literally going to have to write a check at closing to cover the balance, because we still have to pay our closing costs, we still have to pay our agent commissions. So we’re literally writing a check to get rid of this house right now.

Ashley:
Okay. We need to do a Rookie Reply on this.

Tony:
We’ll have to do one, yeah.

Ashley:
Yeah. And break down the numbers. Maybe after you actually close on it.

Tony:
After we actually close, yeah.

Ashley:
So you know the final numbers and stuff. Yeah, we’ll do a rookie reply on it. So the infamous Louisiana property-

Tony:
Louisiana house. Yeah. It’s finally gone.

Ashley:
And I can’t wait for somebody to reach out after the episode and be like, “Hey, I’m the one that bought it. I got this great deal. This is what I did with it.” So if any of you listening actually bought that property from Tony in Louisiana-

Tony:
Please let me know.

Ashley:
… please reach out to us, because we would love to know how much you’re profiting off that property.

Tony:
Off of my heartbreak. Yeah.

Ashley:
Well, Tony, today we have a great show. We talk about mobile home parks. We talk about doing your first flip, and how it takes 17 months when you think it’s only going to take four months; how to deal with contractors. So much stuff packed in today’s show.

Tony:
Yeah. We’ve got Emily Fackler on, and she’s a great guest. We met actually in Maui a couple months ago, and just hearing her story, I was like, “Okay, we got to get her on the podcast here.” The other piece that I really like is that she’s dipped her toes in a few different things, right? She’s got, like I said, the mobile home park, she’s got a short-term rental resort, she’s got some flips that she’s worked on. So you get a wide breadth of different strategies in today’s episode as well.

Ashley:
Yeah, and at the end, she tells you what she’s going to do going forward, and what her niche is really going to be. And I think that’s the power of not working and getting yourself into situations like the Maui Masterclass or different events, like the BiggerPockets Conference, or the Rookie Conference we’re going to do. Doing things like that, you learn different things, and it changes your mindset, and it makes you pivot, and it helps you realize, “Okay, this is what I need to focus on. This is what I need to do.” And this year for me, the BiggerPockets conference was really that turning point for me.
So, let’s get Emily onto the show. Emily, welcome to the show. Thank you so much for joining us. Can you tell everyone a little bit about yourself and how you got started in real state?

Emily:
Yes. Thank you for having me. I’m very excited to be here and honored as well. In order to talk about how I got started in real estate, I have to tell a little bit of a backstory because it builds up from there. So I was in a very corporate job. I say it’s very corporate-y, meaning you’re dressing up every day. I had to go to the downtown building every day, the tower, and have meetings all day long. And it was just very, very stressful. Before I got my last job, I was in a sales job, and I just loved it. I love sales, I’m highly motivated by money, and I was getting into that situation where you’re just reading all those things about the top five successful people, what they do every morning, and et cetera.
One of them was… I’m sure you guys have heard of it, but seven streams of income to be a millionaire. And I’m like, “Oh, I’m doing that. I am going to be a millionaire.” So I actually started doing direct sales through a company. I sell beauty counter, and I’m like, “Okay.” So I started getting my feet with that. I never thought about real estate at all.
And I was talking to a friend that I worked with in my corporate job, and he was like, “You should really listen to BiggerPockets.” I’m like, “I have no idea what that was. So that’s when I first started listening to that podcast. And I honestly didn’t think I would even do anything with it. I started listening to that podcast, the original one, MFCEO, Ed Mylett. So I started listening to all these entrepreneurs, and then I just took off from there.
So I started thinking to myself, what can I do? Even in the direct sales role, when I was selling the beauty products, I was telling my husband, “This can’t be it. I can’t do this all day. I can’t go to my nine to five job, not see my kids.” So at this point I have three kids. I’m driving my son to day care every day, and then I drive into traffic for 40 minutes. And then I’m there all day. Same thing. Do the traffic, come home, and I’m not seeing my kids. It’s two hours, and I’m screaming at them about doing their homework, bathing, all these things. And I’m like, “I haven’t even seen my kids. I don’t even know my kids at this point. I’m paying somebody to raise them.”
I remember typing on instant message to my mom, because she worked at the same company as me, and I’m like, “I just want to be at home with my kids on Christmas. I want to be at home with my kids in the summer. So I’m going to do this full-time.” Well, I wasn’t extremely gung-ho with that, and then I started learning about real estate, and that’s when I’ve tried to start searching for my first property. So that’s how I got into it.

Tony:
Now, Emily, you’ve got a unique background in that you came from sales, and I think a lot of what you learn as a salesperson can probably translate to being successful as a real estate investor. So what are some of the things that you picked up in your sales career that you think have benefited you as a real estate investor?

Emily:
My biggest thing is no does not mean no. No means no for right now. Somebody tells me no, it doesn’t hurt my feelings. When I was at my corporate job, the last job I had, I had a sales team. I think there was 11 of us. I had retention executives working for me, and then the inside sales execs. And some of them… you either you’ve got it or you don’t, I feel, inside of you, where a lot of people are like, “This person told me they were going to go with us, and then they changed their mind, and they said, ‘No,’” and they would get really upset about it. And in sales, you can’t do that. How many times have you guys been told no about a property, et cetera. I’ve been told no about a property and then you go back to it and keep going back to them.
So I think no’s just a right now. And then follow-up is key. Every sales job, period, I don’t care what it is, if you don’t follow up… and when I say follow up, I mean follow up like 10 times, because a lot of the times you think you’re bugging someone, and you’re not. Half of the time, they didn’t even know you called or text them or emailed them, because they have their own life, and they’re not thinking about what you’re doing.
I’ll just give an example. I had been texting this gentleman last month, and I texted him about three times, somebody gave me his number to reach out to him. So I gave him some space. And finally he texted me and said, “Well, I guess it’s about time for me to call you back.” And I was like, “Yes!” But if I had gotten upset about it and not kept going with that, then I never would’ve followed back up, and I wouldn’t have the opportunity. I’m actually meeting him tomorrow to discuss two of his properties. So those two are just probably the top two in sales, besides your typical relationship-building. Those are a known one.

Ashley:
That’s too great advice, just being a person that’s really bad at responding to people, that I might see something and be like, “Oh yeah, I got to find out more information about this later.” And then it’s just out of my head by the end of the day-

Emily:
I do that too.

Ashley:
… that when people do follow up with me, I’m actually grateful and thankful that they did because I wanted to learn more. I just didn’t have the follow-through to follow up with them at that moment, and then it’s gone.

Emily:
Yep.

Tony:
I want to give the listeners, just an overview of where you’re at today, what your portfolio looks like, what kind of deals, how many deals you’ve done. So give us the 30,000-foot you of your journey so far. How many deals, what does your portfolio look?

Emily:
I started in December of 2019, so just now it’s probably… I think it’s today was the day I got my first property. So it’s two years ago. Yeah.

Tony:
Congratulations.

Emily:
We’ve completed three flips, and then we have a mobile home park of 39 pads. We have a 10-unit resort on the lake that we do short-term rentals here in my hometown, and then we have three side-by-side duplexes that we have as apartments. I am currently looking for more mobile home parks. I love them. And there’s this little area where people aren’t going after the size I’m going… I mean, some people are, but there’s not a lot of people in Kentucky going around, looking for mobile home parks that are… I’ll go down to 20-plus, 15-plus if the numbers work.

Tony:
That’s a lot of growth.

Ashley:
Yeah, and a wide variety too.

Emily:
I’ve got ADD. I’ve listened to every episode of this and the other podcast. I know I need to go deep into something. Well, Tony, when we were in Maui, I was like, “All right, I’m doing trailer parks.” Well, you’re not supposed to say the T word. Mobile home parks. I’m going to do mobile home parks. I love them. I just love offering affordable living. And everybody’s in the tiny home space. I’m like, “Mobile home was the original gangster. Come on, guys. Why are the tiny homes getting so much love? These have been around forever.” So I just love them.

Ashley:
Let’s talk about your progression. What did you start out with? What was your first purchase?

Emily:
My first purchase was a single-family home, and I don’t know if you want to go into that later or now. It’s kind of my deal deep… or whatever. I don’t know what you guys call it, but the one where you take a-

Ashley:
Yeah, your deal analysis. We can go into it now.

Emily:
Yeah.

Ashley:
Yeah.

Emily:
Okay.

Tony:
Yeah.

Ashley:
We’re a pretty easygoing show.

Emily:
Okay. Yeah. It was a single-family home, and I had… Listen, I’m pretty much like, “Okay, if somebody’s done it before, I’m going to take those steps; I’m going to do it.” So I was listening to Brandon saying, “If you have a house that is over 1,000 square feet and it has two bedrooms and one bathroom, it’s instant equity. You can add a bathroom and another room in there.”
So I had set up Zillow in my hometown. I currently wasn’t living there at the time. I’m living here now, but we moved last April. And I set up a Zillow alert so it would send me any houses that fit that criteria. So, finally, it sent that, and it was so cheap. It was listed for $25,000. I saw the picture. It needed a ton of love, but it had this gorgeous front porch, and I’m like, “This is it. This is the one.”
So I called the realtor. My friend is a realtor, and I was like, “Oh, I’ve got to have this house.” Left him a voicemail. He didn’t answer right away. In the meantime, I saw the realtor that was listing it, and I texted my lender and I’m like, “Do you have her phone number so I can text her?” And he said yes. So he sent me her phone number.
Both real estate agents came back to me and said, “It’s under contract.” It was six hours ago. I’m like, “No, this is the one. This is it.” So I texted the selling real estate agent, and I said, “If this falls through, let me know.” And she said, “Well, it’s a cash offer, and it’s going to be in seven days, so it’s not going to fall through.” So I followed up seven days later, and I said, “Did you sell the house?” And she said, “Yes, we did.” And I just texted her and I said, “Well, congratulations on the sale,” because she is a saleswoman; I’m like, “Good for her. I’m rooting for other people too.”
I get a text back a couple hours later that said, “The buyer says he’ll sell it to you for $25,000.” He bought it for 19, so he is going to make 6,000. I don’t care. I’m like, “Yes, this is it. This is my first one.” So we bought it 30… well, I think it was less than 30 days later, and we bought that house from him, so he did wholesale. And I heard around town that he had told somebody later, “That’s the easiest $6,000 I’ve ever made,” and it probably was, but I was just tickled to death because this was my first deal getting into it.

Ashley:
That’s such a good point too to bring up, that wholesalers sometimes get a bad rap because they’re making a profit. But did this turn out to be a good investment for you? And you were willing to pay that extra money to get the property.

Emily:
Yes.

Ashley:
That just because somebody else is making money off of you, that isn’t a bad thing. That’s a good thing that you’re both able to work together to make that happen. So after you close on the property, what happens next?

Emily:
I knew I instantly wanted to put a bedroom in and a bathroom to add that equity. And I was texting around town, who could I hire to do this? And we got started on construction. It took us 17 months to finish this house, and I can go into that. But basically it was a lot of mixture of, okay, we’re going to do some of it ourselves. We’re going to drive in every weekend, and we’re going to paint it ourselves, and my husband’s going to do this, and I’m going to do that. And it didn’t work. We were tired. We’re not good at it. We’re not skilled in those things, but we were trying to save money, which was a big mistake.
We under budgeted. We contacted a contractor and he’s like, “Yeah, it’ll probably cost about $25,000,” which it didn’t. It cost way more than that. And one of the big mistakes I made was I gave my plan to the contractor and then I just thought it would magically get fixed, your fixer-upper’s going to be done, and he would say, “It’s going to be finished in two months.” And I’m like, “Yes! Oh my gosh. I can’t believe we got this great deal. It’s going perfect. Who said this is hard,” right? And it didn’t.
So I wasn’t checking up on its budget and timeline, and I wasn’t checking on those things very well because I didn’t know what I didn’t know, and I thought if somebody says they’re going to do something that they will do it. So it was a long, a long journey, and lots of lessons learned for that one. And I don’t know what other questions you have about this deal, but I have a really interesting story about the end. So just remind me at the end for a crazy story.

Tony:
Yeah. Well, we always love a good, crazy story, but I just want to make one comment, is that your experience with the contractor and it maybe not turning out how I was originally promised here, I think that’s a common thing that a lot of new real estate investors have to deal with. And I’m fortunate because I’ve been on both sides of having a good contractor and having a bad contractor. I feel like my first few BRRRRs that I did, I had a really, really solid contractor that was just a standup guy, pretty much came in spot-on on budget, timeline was pretty close to what we’d originally anticipated, and just really did a phenomenal job. I was in California. The job was in Louisiana, managed it from afar, and everything was great. And I was like, “Man, people make this sound a lot harder than what it really is,” right? But it’s because I had a really good contractor on my team.
Now, fast-forward, we just finished a rehab in Joshua Tree a couple months ago, and it was the exact opposite. This guy was like the worst contractor I’d ever worked with in my life. And I was closer to the property. I was able to drive there every week, and that project still took longer, went over budget because the contractor just wasn’t doing a good job of managing.
So I think that the person that you choose plays a huge role in the amount of time, energy, and success that you have in any given project. So my question, Emily, is, how did you find this contractor, and is there anything you would’ve done differently knowing what you now know?

Emily:
I really just ask around and do word of mouth. And if I know someone, I trust what they’re doing. But on the flip side, I want to say that I was a terrible homeowner. I was a terrible person to work with as well. And what I mean by that is, I didn’t have a plan for them. I didn’t have, “This is what we’re going to use for this room, and this is…” I had our contractor go in the very first day and lay down flooring. The very first thing I had them do… because I had the flooring. I bought the flooring, found it off Facebook. It was a dollar a square foot. Let’s get this flooring in. It’s going to look so good. And it did look good until it was trampled all over.
It turned out fine, but I was terrible. I wouldn’t have wanted to work with me. Like looking back, I would’ve been like, “She doesn’t know what she’s doing.” And they were trying to be nice. I ended up saying to one of the contractors later… because we had so many people in this house over the course of 17 months. And I said to them at the end, “Why didn’t you tell me not to put the flooring down?” He was like, “I just met you. I didn’t want to ruin our relationship and boss you around.”
So I’ve had to redo a lot of the things that I’ve done. I don’t want to say anything bad about any of the contractors that worked in there because I wasn’t doing that great of a job either, but I just didn’t know what I didn’t know.

Ashley:
Emily, what would be some advice that you could give to our listeners so that they can be more prepared as the homeowner to manage this project? Do you have any kind of systems or processes in place, or contracts, anything that you do now that you would’ve done on this first property?

Emily:
Yes. You can go as simple or as extravagant as you want with your systems and your checklists and stuff like that. I think if you’re starting out at the very beginning, find someone close to you or online or whatever it is that has done it before, that has systems. Not just somebody that’s done it before, but somebody who has even a little checklist that they use or something that has helped them go through it.
I think you need to have… I’ve read the BiggerPockets books, the rehab book, and that’s still that… even after I even had that spreadsheet, if you don’t follow it, it doesn’t matter if you read it and downloaded all the checklists. If you don’t look at it every week and say, “Where are we on budget? And where are we on timeline? And who needs to do this?” and have that ready for everybody, then you can get all the knowledge you want in the world, but unless you’re very organized, it’s going to go over budget probably. So that’s my biggest thing in any sales role, period, that I’ve been in, if you’re not organized, it’s just not going to go well.

Tony:
I want to ask both of you a question to get your insights. Ash, I’ll go to you first, then, Emily, we’ll have you answer afterwards. But if you have to choose between there is a rock star general contractor who comes highly recommended, maybe you’ve used them in the past, you know their work, but say that they’re four months out from being able to take your job. You have a property that you own today, but you got to wait four months before they can start; or option B is you go with a different general contractor who comes with maybe a couple question marks, but they’re able to start today. Which contractor do you go with? The one that’s going to make you wait four months or the one that’s ready and available today, but you’re not as sure of their work? Ash, you go first, and then, Emily, we’ll jump to you.

Ashley:
Well, I would get freaky in the spreadsheets on this one, and I would run the numbers. So with the bad contractor, I can estimate that maybe the project is going to go longer, maybe it will go over-budget, so I play with the numbers a little bit to show that, but then I also build out a model showing a four-month longer hold period to wait for that good contractor to see what the difference is there. But I have to say, I love convenience, and I think that waiting for, just off the top of my head, waiting for that good contractor would actually be my preference.

Tony:
Yeah. Emily, what about you?

Emily:
I’m the same because I have experienced this a few times, and it’s worth paying that… just to go off of this, not just waiting, but paying them more. It’s worth every bit of it, because if I look at how many months I paid a mortgage, electricity, water, a lot of people don’t think about all the fixed costs, the holding costs that you have to pay, like you said, Ashley, in the spreadsheet. What’s going to cost you more? Getting a contractor that delays the whole project. This flip that we’re talking about now, I could have gotten it done, I want to say, four months, four or five months. And it happened in 17. Well, you’re paying all those costs for 17 months. So I would use the one that I trust, for sure, and wait for three months.

Ashley:
Emily, how did you finance this deal?

Emily:
This is kind of crazy, but I actually had it financed by my bank. So I know it’s a tiny amount, like 25,000. We were so scared to throw all of our money into it and just… I don’t know. Anyway, we didn’t know what we were doing. I’ll just tell you right now. We had put the down payment down. Our bank financed it. They did it at a six percent, which, I don’t care. I’ll do it all day long because they gave me a shot, gave me a chance.
And then we were pouring our own money in for the rehab. We’re both in sales and both make commission, and we thought it would only take $25,000. It ended up taking 65. So this actually hurt us so bad because at one point I was like, “Oh my gosh. We are broke. We are poor right now,” because we spent every… What is it, the entrepreneurial poverty? We spent every bit of our money, because I wanted prove myself. I didn’t want to use anybody else’s money, because I need to show that I did this, and this is my project. So we spent all of our own money on the project, and finally got that money back. But it was rough for a little while. I was like, “Ryan do not spend money on anything. Don’t get on Amazon. Don’t do anything.” So that’s another lesson learned too. I was so proud. I wanted to use my own money, but now I’m trying to never use my own money.

Ashley:
Yeah. That OPM, other people’s money.

Emily:
Yes.

Ashley:
So, Emily, how did the deal turn out? You’d bought it for 25,000. You put in, what was it, 65,000 for the rehab? And then what did you have to [inaudible 00:24:46]-

Emily:
We had two buyers. This is my crazy story. We sold it to this young couple, and they had a VA loan. I’m like, “Cool. I don’t care. I don’t want to discriminate on people’s loans.” I’m like, “I’ll wait it out. It’s not a big deal.” They were a sweet, young couple. I’m like, “This is perfect. A little starter home for them.” And we had the walk-through, the inspection. Everything was fine. They signed off on it. And then their VA loan, they needed five more days before they could close. So they had to move their closing later on.
And they were homeless at this point because they were going to an apartment to our house, and they said, “Can we rent here?” I’m like, “Great. We’ll just charge you rent for those five days,” or whatever. So they move in, and they call me and they say, “The heat is not working.” We already had inspection, remind you. And I’m like, “Okay, we’ll have somebody come out there.”
Well, they came out there and they said that the water heater wasn’t connected to the gas line. So they never hooked that up. So they got upset and said that we lied to them and that we were being dishonest sellers and said… the wife of the husband, so he’s the one getting the VA loan. And he was gone, so she was going to be the only one signing on it. She texted the realtor and said, “We are not buying the home. I’m not showing up tomorrow, and we want to earnest money back.” And I’m like…
So I’m texting her, the agent’s texting her. The agent’s calling me because I’m selling the house by myself. I didn’t use an agent. But I know the agent, and she’s like, “I’ve never seen this happen, and I’ve been doing this for years and years and years. I’ve never had anyone not show up, even after the inspection and whatever.” And it wasn’t just not show up. She ghosted. She didn’t talk to any anyone for two days. So there wasn’t any like, “Hey, can we talk this out?” Complete ghost. And we did not sell the house. I kept earnest money, but we had to find another seller. It was crazy.

Ashley:
As you should.

Emily:
I know!

Ashley:
You wasted all that time on the VA loan, waiting for it, and then right before closing, for her to back out, wow. And just think, they probably lost more money too, paying the appraisal-

Emily:
They did.

Ashley:
… or I guess it depends what state they’re in and stuff. Sometimes with a VA loan, you get a lot of the closing costs covered, but just waiting on buying that house, and to back out last minute for one thing that really wasn’t an issue. Wow.

Emily:
And the inspector didn’t catch it, so that’s another thing of, you need to double-check some of the things. But the worst part about it was that… this is crazy, but we had two other flips going at the same time. It was so dumb of me, but I found these houses, and I’m like, “Let’s go.” So we were like, “We need this money that we’re getting to fund these other ones too,” so we’re stuck in terrible positions. I ended up having to get partners on this other deal, which was fine. It worked out perfectly. It was my dad and his best friend. And we all came out on top and made money, but the way I had planned it all worked out. It was just crazy. So we had to find another buyer.
We sold the house for 119,000 at the end with that second buyer, so I actually used the agent that the seller, the first seller that backed out, I was like, “Will you just sell my house? I don’t want to mess with this anymore. I’m not going through this anymore.” And she was like, “Sure.” She ended up selling the house for more than they were going to buy it for. I know a lot of people are like, “Should I use an agent? Should I sell my house on my own?” I’ve done it both ways. I love talking to sellers, but the buyer part, it’s so much easier for me to have a agent sell my house than just having to do all that stuff.

Tony:
I’m glad that it worked out for you, that you were able to sell it for more as well. That’s like the universe giving you some good karma back. How long did it take after that first buyer backed out for you to find the second buyer and get everything closed?

Emily:
It was on the market for two weeks, and then I think it was a 45-day close. So it wasn’t too bad.

Ashley:
One question I have… so you mentioned there briefly, for the next two flips, you had to take on partners, and then it was your dad and his best friend. How did you approach this? Asking family, especially, to partner with you on a deal can be kind of a hard situation. What did that look like? How did you structure it? Did you actually put together a contract?

Emily:
I’m very lucky. I have super supporters in my family. I’ve done a deal with my mom, I flipped with my mom. I’ve done a flip with my dad and his best friend. And then we own the resort with my in-laws who… they’re fabulous. And with that one in particular with my dad and his best friend, they had said, “If you see something in your area, let me know.” And I thought they meant a house that they can rent out, because in our area it’s very… it’s on the lake, so a lot of people will buy a house just to come down from their area. We are an hour and a half from Nashville and Evansville, so a lot of people come here to go out on the lake. So I had mentioned to them, I’m like, “I can’t do this myself. I’ve taken on too much at one time.” And we were in contract with the resort, so I was just overwhelmed. I’m like, “Can you guys help me with this?”
And I said it to my dad’s best friend, because he told me he was interested, and he’s like, “I think your dad would want in on this too.” So we just met together and did that. We did not do any sort of operating contract or anything like that. We are doing one that we have to show for taxes, so I kept the mortgage in my name, so when we get that money back, I just have to have something for my CPA. But it was very informal, and I’m just lucky to have that trust.

Tony:
I think one thing that’s important to comment though is that you were already talking to them about working together before you actually found that deal, and I think that’s something that we harp on a lot on this show, is that be very communicative about the journey that you’re going on. Even if you haven’t actually closed on a deal, just talk to your friends and family about the fact that you’re looking for something, and you’ll be surprised at what kind of connections you’re able to start making just by having those preliminary conversations. Because if you can plant those seeds early on, then when you do have the deal, when you have found the deal, it’s easier to go back to those folks and say, “Hey, do you want to work with us?”

Emily:
I asked my mom. She had some money in her house. She bought her house for $100,000, and she’s fixed it up a little bit. And she went to get it refinanced. She’s like, “Oh my God, it’s $250,000.” And she’s like, “I’ll do a deal with you.” And I’m like, “okay.” She’s like, “But I can’t do anything.” I’m like, “I’ll do it all.” So I had called her midway through, and I’m like, “This is what I think we’re going to make on it.” She’s like, “I just feel terrible you’re doing all the work on this. I just feel awful.” And I’m like, “I’m not spending any of my money. You’re spending all your money.” I didn’t spend a dime. I’m like, “You are spending all of your money, a big chunk of money. So I feel bad.”
The point of that is, you’re not bugging anyone or asking them to do something bad. You’re helping them. You’re helping them make $20,000 or whatever it may be. So I think that’s another thing. People are so nervous about bugging people or hurting their feelings or asking them of too much, but you’re bringing them a solution. If they have the money, why not get an investment on it?

Tony:
I’m so glad you said that, Emily, because I think this is something that newer investors struggle with a lot. And I had a friend, a mentor, tell me this early on, is that when you have a good investment and you share that with somebody else, you’re not doing them a favor… or they’re not doing you a favor. Let me rephrase that just to make sure I’m saying it the right way. They are not doing you a favor by investing into your deal. You are giving them an opportunity to invest in your deal. And I think that change in language is what a lot of new investors have to work on, because they need to understand that they’re not going around asking for handouts. You’re giving people an opportunity to passively make a return on their money.
Your mom did zero work. Outside of maybe wiring in the funds that are needed for this transaction, she did zero work, but she got a really good return on her money. And you, on the flip side, you put in no money, but think about all the sweat equity, all the time, all the energy you put into making that deal happen. So there is a value to be had on both sides. So for all of the rookies that are listening, change your perspective. People are not doing you a favor; you are giving them an opportunity to make a smart investment.

Ashley:
So, Emily, you did a couple flips. And then when did you decide to pivot? Was it the mobile home park next? The resort?

Emily:
We bought that first single house in December of 2019. And then I was listening, of course, I’m listening to BiggerPockets, and I heard Brandon talking about mobile home parks, and I was like, “I know there’s a mobile home park in my hometown.” And it’s right in town. It’s really nice. It’s really peaceful. And I’m like, “I wonder who owns that?” So I had that in my head. Then I started asking people, I was like, “Who owns the mobile home park in our town?” Kept asking. I asked my best friend’s mom. She’s like, “Oh, Dennis owns it.” I’m like, “I know Dennis, he’s really good friends with my parents.” So she actually called me the next week. She goes, “Emily, I saw Dennis at the courthouse. He said, he might sell you that trailer park.” And I’m like, “Oh my gosh.”
So I called Dennis. I got his number from my mom. And he was in a situation where he was like, “Yes, anything I have is for sale,” is actually what he said. And he gave me a price, 130,000 for a 39-lot in Kentucky. My best property ever. Nothing’s going to beat it. It’s so awesome. And that really changed my life because, at the same time, I’m redoing the single-family house, and then we have the mobile home park, and it’s giving us money, and I’m putting out so much time and work on the single-family flip and I’m like, “What? What am I doing? I need to be doing more of this.”
So I really enjoy the long-term renters because, one, we have a property management and that type of thing, but you do have this sense of relationship with the tenant, even if you aren’t talking to them every day or permanent… working with them normally, because you’re giving someone somewhere nice to live.
One of the joys I get is, in our apartments, we’re putting in new floors, we put on new roofs. And it’s nice to be able to help… Everybody wants a nice place to live, no matter who you are. They do. And it’s nice to be able to give someone a really nice place to live. Especially recently, I was talking to Tony about the tornadoes had hit our area recently, in Eddyville, Kentucky. And everybody’s scrambling for somewhere to live. So you don’t realize how important having real estate is, especially when somebody’s in an emergency and it’s so needed, and it’s a way you can give back also.

Ashley:
Emily, with the mobile home park, how did you finance that property, and what does it look like today? What are some things you’ve learned going from flips to being a landlord at a mobile home park?

Emily:
We partnered this deal with my best friend, which was probably my most exciting thing because we had always talked about, “Let’s do business together.” Of course, when we were young, we’re like, “We’re going to run a physical therapist company,” because both into health care, and neither one of us are doing that. We’re both stay-at-home moms with no jobs. That’s what I was telling my people. I don’t have a job. But we loved it.
So she put in half the down payment; I put in half the down payment. And it was… both of the money that we had were both from our grandma, or my husband’s grandma who had passed away and her grandma had passed away. So it was very sweet that we got to use both of our grandma’s money at the time to do that for the down payment.
And then we started managing it ourselves, which we were terrible at, and we’re just not very good at administrative work. We both don’t like it. And at this time it was COVID, and all of our kids are home, and we’re homeschooling our kids, and it was just a nightmare. So one of the things I’ve learned is I love my property manager. They saved my life. They’re amazing. They’re honestly… I guess it’s because I love it so much, it hasn’t been a pain at all. I’ve really enjoyed it. I’ve liked trying to get… I guess the hardest part would be getting homes in there, into the park, because right now, it’s a grind. You have to get on Facebook and try to find a good deal. Or, a lot of the times, the people that are moving there, they want a lower rent, so bringing in a mobile home that costs three to $4,000 just to move is difficult.
So, right now, one of the main issues we’re having is getting homes in the park. And that’s what we’re really focusing on in 2022 so we can bring our revenue up. So we bought the park. They were paying $60 a lot for rent. And our market rent is like 175.

Ashley:
I can’t even imagine that $60… even anywhere, $60 for lot rent. Wow.

Emily:
Yes, $60. And so we were like, “Let’s raise it to 75,” because we don’t want to hurt anyone’s feelings. And we’re managing the park, and we’re friends with people that live there. That’s why we hired a property manager. Courtney and I are so… we don’t want to hurt anyone’s feelings, and we’re like, “We’ll just raise it $15? I hope nobody’s mad at us.” So after we were working with our property manager, she’s like, “No. You need to raise these up, and we’ll stair-step it, and we’ll go up, and it will be okay. They won’t be mad at you. They will understand. Nobody can live anywhere for $75. And you’re basically eating the cost of this. This is your business. You need to run it as a business.” So using the property manager’s been the best.

Ashley:
Yeah. Can you just explain real quick what doing the stair-stepping is, what that would look like for somebody that’s looking to increase rent, one of the ways to do it?

Emily:
Right. So when we think about it, we just don’t want to hit anyone hard with a huge increase. The market rate for our tiny town is 175. If you go about 30 miles from us, they’re charging all the way up to 250, so we want to take it… when we first bought it in April, we immediately moved it to 75, and we haven’t changed that. And then they were just notified that it will be going up this year up to, I believe it’s 125. So we just want to do that in a way that we step each year. Or you could even do it six months if you want, to where people aren’t surprised and shocked and don’t want to live there anymore because they had a fixed income of a certain amount and then you’re doubling their rate. So you can step it up as you go by month… by not really month, but every few months or every year, however you want to do that.

Ashley:
Yeah. I love that method for increasing rent. I did that with a tenant. She had paid $300 a month for that… because she lived there for 30 years, and it was like a 500, $600 unit that she was living in. So we did, just for six months, we did just raised it by like $25 a month until we got her to that increase. But that definitely is a great way to work with tenants instead of giving them a huge increase right off the bat too. But having that property managers as a buffer… how did you find your property manager?

Emily:
This is funny. The realtor that was the seller that we just talked about, that I had sell my house, her broker is a property manager. So now I use her.

Ashley:
So you got the property manager from a referral?

Emily:
Yes. From the agent, yeah. She’s like, “My boss does property management,” and I’m like, “Sweet.” I had used another property manager. I’ve been through other property managers before that, where we weren’t aligned. So I used other ones or another one before, so… You got to figure out what works for you.

Tony:
Yeah. I just want to dig in a little bit, because $139,000 for 39 lots, that’s a really low per-unit cost, right? So what kind of revenue, now that you guys have had this for a little bit longer, what kind of revenues are you guys generating on those 39 lots today?

Emily:
Monthly? What do I get monthly?

Tony:
Annually, monthly whichever, yeah. Whichever number makes it easy for [crosstalk 00:40:02]-

Emily:
Monthly, right now, I get… [inaudible 00:40:06]. It’s about $1,000 a month, right now, as of today, that we get on the property. But it’s got huge potential. Another thing we learned when we bought the properties, Dennis, who I told you this, the seller, he’s like, “By the way, the rest of that land, it’s approved to have 11 more lots. So you can have up to 50 lots.” I’m like, “What? This is like a gold mine. I love this property.” So once we fill the eight, we’re going to look into that as well. And you’ve got to be patient and look at the long-term game too. If we would’ve looked at what it was making at $60 a rent, it may not have made that much sense. You’ve got to look at the big picture.

Tony:
So when you say fill those empty spots, does that mean you have to find someone that has a mobile home that’s willing to bring it into your park?

Emily:
Yeah. Right now we’re looking for investors to move one in there because you’ll make a good amount renting too. And some will rent it immediately. I have people ask me almost, I want to say, every five days, if we have something available, and we don’t. It’s a huge rental need. So I’m working with investors to try to put mobile homes in there. I’m working with people on Facebook all the time to try to get them to move there, and then getting ready to meet with like a mobile home… I’m sure you’ve heard of Clayton Homes. There’s some girls that call themselves the Trailer Chicks or something locally, so I’m going to try to work with them so we can get mobile homes in those eight lots that aren’t rented right now.

Ashley:
And do you have no interest or desire in owning them yourself and then renting them out? Do you want to keep it strictly lot rent? Because I know that’s one thing that Open Door Capital does, is they really focus on the lot rent only. So you don’t have to deal with maintenance and repairs and things like that, and it’s also very costly to move a mobile home. So when people do decide they want to leave, if they own that trailer, it’s very expensive for them to move it to another park. So you most likely will have more long-term residents because they own their trailer too.

Emily:
I have this battle and like, “I don’t want to use my own money anymore.” So I’m battling that, but I also love cash. I love income. So I’m like, “What do I do?” I’ve been working the numbers. I think we will bring in a few of our own, because the numbers just make so much sense. And then you can use that depreciation for your tax purposes too. So it’ll end up helping us out in the long run. So we’re going to look at that.

Ashley:
What about doing rent to own or seller financing on the trailers too?

Emily:
I would definitely do that. I would do either. Now that I have a property manager, it doesn’t seem tough. So I’m like, “Okay, I just want to do the lot rents. It’s so easy.” Well, if you have a property manager, you’re not the one getting called anyway, so what does it matter? That doesn’t really seem like an issue to me anymore. Now you’re like, “Which house are you going to get?” So when you bring in a mobile home, you want to make sure it’s not so old that you know you’re going to have to repair it and spend all that money on that. So it’s just getting particular about what kind of home that you bring in.
Doing at lease to own, I would totally do. And I think people need that too. A lot of people can’t put a huge down payment on it right now. So that’s another thing where you’re helping people in your community get the financing that they can’t get at a bank, and giving them somewhere to live and own their own home.

Ashley:
Unless you’re in New York state, I don’t recommend doing rent to own, because there’s some weird law that was passed a couple years ago, where if you do rent to own for a mobile home trailer, if the person pays their monthly amount and then it’s time for them to buy and they decide not to buy it and they’re going to move out of it, you have to give them all that money back. You have to give them their payments back because they didn’t end up purchasing the property. And I don’t know a ton about it, but that is just such an outrageous law to me, that you would have to do that, because the people still live there-

Tony:
Right.

Ashley:
… and it still should be considered rent, so-

Emily:
Right.

Ashley:
… don’t do a rent to own in New York.

Emily:
Yeah, I will not.

Ashley:
And I think that’s one of the reasons Open Door Capital doesn’t invest in New York either too.

Tony:
Yeah. Interesting. Well, Emily, thank you for giving us the deep dive on your experience investing in mobile home parks. I know there’s a lot of folks that are interested and intrigued by that, so we appreciate you sharing your insights there.
I want to take us to our next segment, which is the Rookie Request Line. This is where we give our listeners an opportunity to call in and ask some questions to our guests. If you guys listening would like your question featured on the show, give us a call at 888-5ROOKIE. Leave a voicemail, we might use it on the show. So, Emily, are you ready for today’s question?

Emily:
I’m ready.

William:
Hello. My name’s Will, William, calling out of Columbus, Ohio. I’m a new investor. I’ve purchased my first duplex about three months ago. I ended up using the VA loan. And then the second one, the deal was so good that I couldn’t pass up on it. I had to put 25% down. That was another duplex. And I’m trying to figure out strategies to pick up a third one, preferably a four-plex. If could help you out, I’d appreciate it. Thank you.

Emily:
I know it’s easier said than done, but I would say use someone else’s money. So if you can show somebody why it’s beneficial to them, we touched on this earlier, and I’m like you, Ashley, I like the spreadsheets. If you can show someone why it’s beneficial to them, they’ll do it all day. And you might ask three or four people and they tell you no. And they’re just not ready for that. And you may ask someone else, or you may even… you could seriously put it out on Facebook and say, “I’m looking for somebody to partner with me on a duplex,” you’ll be so surprised on what you get back. And just show them the amount of money that you need, what it’s going to cash flow. Like if you’re going to bring the rents up, what are the expected rents, what you’re holding back in reserves; really show them that you’re a professional and that you have it taken care of, and they’ll be like, “Why not?”
A lot of people are waiting for something to do, somewhere to put their money besides the stock market. There’s so much money out there available that I think if you just put yourself out there and ask other people, that you’ll have someone help. And then you guys can negotiate how you want that to be. Do they have equity in the property? Or is it just a note to where you’re paying them back after a certain amount of point of time? And that’s all up for discussion. If they said, “No, I don’t want to pay the $25,000,” you can say, “Well, would you be open to having equity in the deal?” “Okay. That might change the discussion.” So you need to bring a couple different ways to form the deal and just find the right partner.

Ashley:
I think that’s the hardest part, is figuring out how to structure the deal. There’s always this thing, what is right, what is wrong? And once you do your first partnership, you realize there’s no wrong way as long it’s as legal. But then you go into something different. You’re buying another type of property, or you’re looking for different kinds of partners, and it’s just the same thing. How do I structure it? What’s right? What’s fair? If you’re doing just one partner to do your first flip compared to doing a syndication, how to structure that? There’s always that mindset hurdle of, how do I do it? How’s everybody else doing it? And I think just using other people as benchmarks, looking at how they’ve structured it, but then tailor it as to how it’s going to work for you and the people that you’re partnering with.

Tony:
Let me add just one more thing for William here, and this is something that I’ve shared before as well, is that I feel that everyone who is a new investor should have some sort of platform to document their journey. It could be that you start a separate Instagram profile, if you want to start a YouTube channel, if you want to start a blog, you want to start a podcast, but just start documenting your journey, wherever you’re at. If you have five deals already, if you’re at zero deals, wherever you’re at in your journey, start documenting today and sharing it with people, because the more you can get in front of people and they get to know you, they get to like you, they get to trust you, the easier it will be for you to find someone who’s open and willing to partnering with you.
So, William, if you’re not doing that already, I would highly encourage you to find some platform that resonates with you so you can start sharing that journey with other people.

Ashley:
Yeah. A great example of that is our friend Lili Thompson. She was on episode 91, and she started a YouTube channel just documenting her journey and just the connections she has made and the partners she’s been able to find through her YouTube channel, just really just showing people what she was doing when she decided to get into real estate, not trying to even teach anything or pretend that she knew all of the answers or giving tons of advice. She literally just showed what she was doing, the mistakes she’s made, what she excelled at. And now it’s kind of turned in where she’s become a very experienced investor through all the deals she’s done, and she can give advice now and everything like that. But just, Tony, that was a great comment. Just start documenting it to show people. And be honest and show what you can and you can’t do.

Tony:
One last thing, Ashley, a lot of folks know that I have my own podcast before I joined the Rookie show, and I launched that podcast when I had absolutely zero deals done. I was interviewing other investors before I even closed on my first deal. And it was through that podcast and all these other things started to happen. So you don’t need to be super experienced to start documenting that journey.

Ashley:
And that was how you learned too, and you got to make those connections with other investors because you were the host of the podcast, yeah. I don’t think I ever realized that, that you had started it before you even had any deals.

Tony:
I had no deals.

Ashley:
That’s interesting. Yeah. That was such a great idea, because the podcast was… what was it? Getting for first deal, or-

Tony:
Your first real investment.

Ashley:
Yeah. Your first deal.

Tony:
That’s all it was about, right? It was your first deal. Yeah.

Ashley:
Yeah. Okay. Emily, we’re going to the Rookie Exam. This is a newer segment that-

Emily:
Gosh, I’m scared.

Ashley:
… Tony and I have put together. This is just rapid-fire, quick answer. You can get to it. The first question is, one actionable thing rookies should do after listening to this episode?

Emily:
I’m going to target someone who hasn’t done anything yet. Maybe somebody who wants to leave their W-2 job or wants to get started. Back-end to how you’re going to do what you want to do. Let me give an example of that. When I wanted to quit my job, I would never have made that jump if I wouldn’t have taken a spreadsheet and put in what I make, what my husband makes, what our commission is, every dumb thing I’m spending money on, Netflix, Hulu. List all the things, all the subscriptions you have that you don’t need. We had my son’s day care, which we were paying for, school that we were paying for, because in this area it cost that much money. And then eliminate what you don’t need out of that. And some of it’s going to be a hard decision.
For example, we moved town. We cut our mortgage in half. We did all these things. If you really want to do it, back-end your way into the financing and say, “How can I do it?” And then you’ve got to figure out how you’re going to make that money. So you’re basically… you’re cutting all the money that you don’t have to spend any anymore, you’re sacrificing. And then you’re going to make a goal on how you’re going to make up that money.
So let’s say you make $1,000 a month. I’m just making that up. That’s your job, that’s your income. What can you do to replace that $1,000 to get you started? Or let’s say you’re trying to get a down payment for something. Can you sell 10 things in your home to make $1,000 each month? People have stuff sitting around; there’s money available. Start taking action now and figure out how you’re going to do it before you do or you’re just never going to do it.

Tony:
Love that advice, Emily. Let’s jump to our next question, which is, what’s one tool, software, app or system that you use in your business?

Emily:
Okay. I just started using this, and it was a referral from Alex Camacho, PropStream. I love it. I’ve gotten so nerdy in there. I’m in there every day, stalking properties. And I do Google Earth too, where I’m looking over, and then I see all those mobile homes. I’m like, “Nailed it. This is the one.” And I’m going deep into that. I love PropStream. And you can do that for seven days free, I think. Free trial.

Ashley:
Yeah. It’s a seven-day free trial. We need to get them as a sponsor, I think, Tony.

Tony:
For sure. I feel like we talk about some way too much.

Ashley:
Yeah. I love them too, but you’re right. It’s just like, you can get lost in there. For people that love going to Realtor.com or Zillow and just looking at listings, PropStream you will love even more. And I think it ends up being $99 per month. And my business partner is like, “You pay that for this?” I’m like, “We literally use it every single day.” What would we do without it?
Okay, Emily, the last question in the Rookie Exam is, where do you plan on being in five years?

Emily:
I’m going to be the mobile home lady. I’m going to be rocking it with mobile home lady. My three-year goal… or, no, my five-year goal starting two years ago was to make $10,000 a month. I’ve moved that this year for 2022 to 15,000. So that’s my goal. I want to be generating 15,000 a month, and mainly by mobile home parks.

Ashley:
That’s awesome. Congratulations on moving up your goal too-

Emily:
Well, thank you.

Tony:
[inaudible 00:53:13].

Ashley:
… knowing that that 10,000 is too easy for you to achieve and you need to make it higher.

Emily:
It’s not too easy, but I was like, “After I’m around people,” the importance of getting around like-minded people, you were like, “My goal sucks. I’ve got to raise it.”

Ashley:
It’s too small. Yeah.

Emily:
I know.

Tony:
Yeah.

Ashley:
Yeah. You got to think bigger. Emily, you let everyone know in the beginning of the show that you are the mobile home park person, and that you are looking for mobile home park, so where can people send you leads and find out some more information about you?

Emily:
Yes. So if you’re driving by your hometown and you see a mobile home park, preferably that doesn’t have a name or is not on Google, you can send it to me on Instagram. It’s emilyjfackler. And then I’m on Facebook as well. I’m on BiggerPockets. Any of those.

Tony:
Awesome. Emily, I want to give a quick shout out to our Ricky Rockstar before we wrap up for today. So, again, if you guys want to get highlighted, feel free to reach out to Ashley and I on Instagram. I’m @tonyjrobinson, she’s @wealthfromrentals. Or you can get active in the Real Estate Rookie Facebook Group. We’re at like 40,000-plus members in there. Or you can get active in the BiggerPockets forums. We’re pulling them from all places these days. But the Rookie Rockstar for today is Cali S. from Iowa, and Cali says, “Wrapping up our very first BRRRR. Purchased it at $56,000 using a HELOC and some savings. The rehab was about $16,000. It took four and a half months. And the property just appraised at $124,000. Currently rented at $1,200 per month with great tenants so far.” So Cali, congratulations on knocking that first BRRRR out of the park.

Ashley:
Cali, that’s awesome. Great job on that. Well, Emily, thank you so much for joining us. We loved hearing about your journey and all the advice that you shared with us and our Rookie listeners. Make sure, you guys, if you guys want to get into one of the boot camps, registration closes today. So make sure you go to BiggerPockets.com/bootcamps to sign up.
And I am Ashley, @wealthfromrentals, and he’s Tony, @tonyjrobinson on Instagram. But before you guys go, let’s check out something at BiggerPockets.com.

 

70 RE/MAX Affiliates Named in “Canada’s 2021 Top 100 Real Estate Professionals” ranking, 32 of the “50 Top-Rated Real Estate Teams in Canada 2021”

RE/MAX® has always held that our network is the best in the industry, and now there’s even more proof to that claim. RankMyAgent.com has released its list of Canada’s 2021 Top 100 Real Estate Professionals, with RE/MAX affiliates claiming 70 of the top 100 rankings, based on online customer reviews. This builds on RE/MAX’s success in last year’s ranking, which saw RE/MAX affiliates take 33 of the top 100 spots for Canadian real estate professionals. In addition, 32 RE/MAX teams were also among the 50 Top-Rated Real Estate Teams in Canada 2021, as ranked by RankMyAgent.com.

“These awards recognize your commitment to clients, your offices and the communities you serve and are a true testament to the outstanding service you consistently provide,” said RankMyAgent.com founder and CEO Riti Verma in a press release. Rankings are calculated based on the quality, ranking and rating of reviews recorded on transactions (not sales volume) that occurred between January 1, 2020 and December 31, 2021.

RankMyAgent.com hosts more than 55 000 verified reviews from clients that have closed transactions, offering valuable insights for the 90 per cent* of homebuyers and sellers that use real estate agents.

Without further ado, here’s where they ranked:

100 Top-Rated Canadian Real Estate Agents in 2021

 .

50 Top-Rated Canadian Real Estate Teams in 2021

.

Congratulations to all the winners!

Why Online Reviews Matter in Real Estate

According to a recent survey by BrightLocal, three out of four consumers said that user-generated online reviews play a significant role in their money-making decisions. Real estate is one of the biggest financial transactions most consumers will make in their lifetime, so online reviews are even more important in this industry.

Recent challenges impacting consumers in the Canadian real estate market, such as rising competition and critically low supply levels, mean having a trusted, experienced professional to help you through the process can go a long way. Short of getting referrals from family and friends, online reviews are a great way for consumers to get first-hand opinions. On the flip-side, online reviews are also a great tool for businesses to gain new clients.

Check your sources and be mindful of the legitimacy of the review site. To that end, if you wish to leave a review for a real estate agent or team that you’ve worked with in the past or are currently working with, visit www.rankmyagent.com and click ‘Write a Review’ to get started.

For more information and tips on what to look for in a professional real estate agent, click here.

* Source: Real Trends 2018 Consumer Study: Relationships Still Matter Most With Housing Consumers)

At some point, every property owner or landlord will consider the question: “Should I rent to pet owners?”

There are both advantages and disadvantages to allowing pets in a rental unit. Many landlords who allow pets find that the pet owners are generally responsible and are willing to pay more to rent a pet-friendly property. However, letting your tenant’s furry, four-legged friend in the apartment can result in foul odors, excessive noise, and property damage—so it’s wise to know what you’re getting into beforehand. 

There are several reasons you may want to consider renting your apartment or property to pet owners. For example, there are millions of renters who own a pet. According to statistics, 63.4% of families in the US own a dog and 42.7% own a cat. As such, pet owners clearly make up a large proportion of your prospective tenants. 

The Fair Housing Act also makes it illegal to discriminate against renting to people who require a service animal. If your apartment is already “pet-friendly,” you will have no trouble accommodating someone with an emotional support animal.

But what are the pros and cons of renting to pet owners? What questions should a pet application include? And, if you decide to have a pet clause in the rental agreement, how can you ensure that the pet is a good fit for your pet-friendly rental unit? Read on to find the answers to these questions—and more. 

Pros of renting to pet owners

1. You can charge pet owners higher monthly rent.

Most pet owners realize they must pay more for rent compared to tenants without pets. That’s because owning a pet means there are extra expenses to contend with—including things like food, vet bills, and other accessories. And paying a higher rent is one added expense. Plus, there are fewer rental units that allow pets, meaning pet-friendly landlords can charge more and boost their rental income. 

You can also offset pet damage and inconvenience by charging pet rent, a pet deposit, or higher monthly rent. That said, it’s important to check your local state laws about rent control and security deposit limits before doing so.

2. You can secure longer tenancies by allowing pets.

Pet owners tend to rent their units longer because there aren’t as many landlords who allow pets. Therefore, tenants with pets tend to move less often because they have fewer options to consider when looking for a new place to live. that means less turnover in your units—which is almost always a good thing.

3. You can fill vacancies faster.

When you offer pet-friendly units, you will typically find that you get more rental applications because you have a larger pool of potential renters. This means that pet-friendly landlords typically enjoy better cash flow because they have lower vacancy rates. You will also typically have less rental competition in your area because not all property owners will allow pets.

4. Pet owners tend to be responsible tenants.

Pet owners have taken on a big responsibility when looking after an animal. You will generally find that a tenant who takes good care of a pet will also look after your apartment. For example, Michigan State University recently published an article that touches on how owning a pet teaches responsibility, trust, and compassion, and also improves social skills.

There are always exceptions, of course—but, in general, pet owners are excellent tenants and can be trusted to respect your place. Plus, renters with pets tend to be happier because pets are viewed as family members.

5. You may have fewer lease violations when renting to pet owners.

Having a pet clause in the rental agreement removes the temptation for your tenant to break the lease agreement and sneak in a pet. Some landlords won’t even realize that a tenant had an unauthorized pet until the tenant has moved out.

And, if you discover your tenant is keeping a pet despite having a “no-pet” policy, you’ll still have to go through a time-consuming and costly eviction process if they don’t want to move out of the unit.

Related: Why many landlords allow pets in rental properties.

Cons of renting to pet owners

On the other hand, the disadvantages of allowing pets in a rental property are pretty obvious to most landlords. Here are three reasons why many landlords don’t want pet-owning tenants. 

1. Pets may cause damage to the property. 

One of the most common reasons cited for having a no-pet policy is the potential for property damage. Dogs and cats can scratch furniture and wooden floors, tear soft furnishings, and rip up carpets. Of course, you can get well-behaved pets just like you can get responsible tenants. However, the wear and tear in an apartment tends to be more significant when a pet lives there.

2. You may get complaints from neighbors about noise.

According to the American Kennel Club, “barking is the most common complaint about dogs.” And, issues with a noisy dog or excessive barking can become severe nuisances to other residents. In some cases, neighbors could even cite a breach in their right to quiet enjoyment.

3. Pet odor, fleas, and allergy issues

Animal-related odors are another reason some landlords do not allow tenants to bring their furry friends with them. It can be challenging to get rid of offensive pet odors after a tenant has vacated the property.

And, other issues, like fleas, can stay behind in soft furnishing and carpets. Plus, allergens get trapped in air ducts, making clean-up more costly and time-consuming. 

Related: Pet horror stories

Why pet screening is vital before renting to pet owners

If you’re offering a pet-friendly unit, a thorough pet screening will be just as necessary during the application process as a tenant screening. Screening a pet is the best way to prevent leasing to an owner with a noisy, aggressive, or disruptive pet that will damage your property. Plus, the screening process will also check for any issues with the animal’s past and confirm the owner’s information on their pets.

You can use a professional service to carry out a thorough pet screening procedure. Doing so will also help you validate assistance animals and check if an ESA letter is genuine. It’s also helpful to carry out the interview with the tenant and have the pet dog present. 

Related: Your guide to pet screening

A pet screening checklist for landlords

Similar to checking a potential tenant’s credentials, it’s vital to ensure you thoroughly screen a pet before renting to the tenant. Pet screening usually applies to dog breeds and some cat breeds.

You also have the right as a landlord to refuse to rent to tenants with certain types or breeds of animals—even if your apartment or unit is a pet-friendly rental property. The Fair Housing Act even prohibits certain animals from being classed as service animals. 

To help get you started, here is a checklist to use when screening tenants with pets:

• What type of pet do you have?
• How long have you owned your pet?
• Can a veterinarian confirm in writing the animal’s health and vaccination record?
• Can you provide a reference from your current landlord? 
• Does your pet have underlying medical issues or behavioral problems?
• Is your pet housetrained?
• Does your pet (cat or dog) wear an identification tag? 
• Who cares for the pet in an emergency or if you are on vacation?
• Are you able to pay the pet deposit or pet rent? (Only if applicable in your state)
• Will you take out renters insurance to cover any damage the pet may cause?

Asking these questions in the interview or on the pet application can help ensure the pet is the right fit for your rental unit. Having a detailed pet policy as part of the lease agreement can also help prevent any problems with pets.

Final thoughts on renting to pet owners

Each property owner or landlord must make an informed decision on renting to pet owners. After all, there are pros and cons to allowing pets in your rental unit. 

If you decide to rent to tenants who have pet dogs, cats, or other animals, you should always ensure that you collect the appropriate pet deposit and charge more for rent—if that’s allowed in your state. However, it’s vital to remember that you cannot charge more rent or take a security deposit for a service animal, as these animals are covered under the Fair Housing Act.

Like many other places across the country, local businesses in Hamilton have taken some of the hardest hits from pandemic closures and restrictions. One side effect of this is that the downtowns that were once vibrant and attractive destinations have diminished in importance when it comes to our housing decisions.

However, with the end of the pandemic on the horizon, many are now taking a more serious look at the role these businesses will play in local economic recovery as well as attracting new residents.

We spoke to Sandy MacKay, a top local realtor from the Hamilton area, about the role local businesses play in real estate in the city and why investors should pay attention.

Hamilton has seen a lot of interest in recent years both from migrants out of the GTA and those from smaller towns looking to move urban. According to MacKay, Hamilton has a lot to offer its new residents, including “affordability and a lower cost of living, yet still within reach of all the GTA has to offer. Hamilton is the closest city to Toronto, which is not part of the GTA, so it’s very attractive to those who want to live a city life, at an affordable cost.”

The challenge now for the city is to offer the same attractive amenities that have made the GTA region so appealing. Though Toronto is a city known for it’s good eats and variety of dining establishments, MacKay highlights how Hamilton has a burgeoning hospitality industry of its own.

In particular, Mackay cites the downtown area of the city both for its businesses and for its real estate opportunities. The area is the heart of local business in the city with a wide selection of businesses to explore. This also has the effect of making it a hot spot for real estate as inhabitants come to live and work in the surrounding neighbourhoods.

“Hamilton has become a hot spot for restaurant owners and chefs in recent times,” said MacKay. “The cost of running a business like this in Hamilton is far less than in Toronto, largely due to the lower cost of space. With the pandemic hitting, and restaurants changing their business models, this has only increased the movement of business out of the GTA and into cities like Hamilton.”

There is also a wide variety of available properties in the area.

“There are plenty of mixed-use and live-work opportunities in these areas,” said MacKay. “Opportunities also exist to convert some commercial units into residential units, where the commercial units are no longer needed. Many of the side streets just off the main streets could work well for this. There are also many multi-family residential units available around these locations, which are still great investments as well”

The hope is that as a local business is reinvigorated by easing restrictions, many more will be drawn to the area to live and work, allowing for businesses to grow and presenting a great opportunity for investors. For now, however, we should support our local businesses where we can as they work through the hard times.

“Hamilton has a thriving young entrepreneurial population. With a diverse economy and proximity to the GTA, there is opportunity in Hamilton for practically every type of career focussed individual.”

The city of Hamilton has already shown huge growth potential in recent years and a look at recent market statistics out of Hamilton proves this fact. In December of 2021, the average sale price for a home in Hamilton rose to $861,695, around a 30% increase from December of 2020. Detached homes averaged at $924803, while semi-detached and apartment properties went for $761,318 and $605,958 respectively. High demand for homes in Hamilton has made housing supply drop in recent years and it currently sits at its lowest level on record.

In terms of affordability, the city is still doing much better than nearby cities in the GTA. For comparison, detached homes in the GTA averaged at over $1.5 million for the same period, with prices for residential properties costing almost 40% more on average than in Hamilton.

For investors looking at Hamilton as a potential spot to put down some money, MacKay says now is as good a time as any.

“Waiting for prices to go down or cash flow to increase is simply not realistic and you most likely will be disappointed in that approach,” says MacKay. “In Q1 we should see more price increases and activity. More and more migration from the GTA into Hamilton should also increase rental and housing demand. We are projecting another strong Q1 and spring market for practically all types of Hamilton real estate.”

David:
This is the BiggerPockets Podcast show 559.

Stephanie:
I really felt I was at a place in my business where I was doing a lot of things but didn’t understand truly what was working. It was all kind of gut instinct stuff and less facts. So when I started leveraging technology to help me fact find and make good decisions, that’s when everything changed.

David:
What’s going on everyone? It’s David Greene, your host of the BiggerPockets Podcast, the show where we teach you how to achieve financial freedom through real estate. We do that by bringing out different guests that have achieved success of their own and sharing how they did it, as well as the mistakes they made and the insight that they may have on how you can do the same. Look, real estate is the best way to build wealth for the average person that I’ve ever seen. You just got to make sure you take consistent action every day. Here to support me today in this endeavor is my co-host Craig Curelop, author of The House Hacking Book by BiggerPockets. Craig, what’s going on my man?

Craig:
David, so great to be here again with you. As you can see, my voice, still not quite better but-

David:
Do you want to share what happened? You’re a trooper for hanging in with us today with your voice.

Craig:
Yeah. It’s been like a multitude of things. So actually I’m going to blame BP Con because I think I was there talking and talking and talking and obviously talking loud and that caused a cyst to form on my vocal chord. And it’s super common among singers and people that talk a lot.
So basically half of my vocal chord is covered by the cyst, which is causing… It’s harder for me to talk obviously. And then on top of that, I got COVID over Christmas with like half of the country, all the coughing and all that, it’s probably just perpetuated it even more. So David, did you survive Christmas without getting COVID?

David:
I did. I don’t know how I’ve managed to not get COVID unless I had it and I didn’t know it because I’ve been sick a few times but I just was sick. So I’m super blessed in that sense. Now that I’ve said that maybe it’ll-

Craig:
It’s coming.

David:
But today’s show is fantastic. So we are here with Stephanie Betters and she is going to explain to us how to use technology to help improve your real estate game and success in it throughout different stages of real estate. So as we talk with Stephanie, she explains what technology is appropriate for beginners, what the next step looks like as you jump into entry level stuff and then finally, what bigger investors who do this full time and run big companies can do with technology to help them support their system. And Craig, I got to say you asked some very relevant and insightful questions.

Craig:
Well, thanks David. Yeah, I feel like I’m kind of in the middle to end stage of that technology and just hearing her story and hearing like kind of an example person story of how technology allows you to advance your business, I just think it’s incredible how Stephanie has kind of figured all that out. David, what’s like one piece of technology that you’ve implemented in your business in the past year that you think has made the biggest difference in your business?

David:
So in the past year, what we started doing actually probably only a couple months ago is we started tracking when a lead comes in, who it gets assigned to and then how it gets converted. So if you’ve read the book Sold that I wrote for BiggerPockets, it talks about the sales funnel, which is basically for real estate agents, so five steps that you go through to turn a person into a paycheck.
So everyone starts off as a person and then they become a lead and then they become a client and then they go into contract and then they become a closing. So we are actually using that system and tracking at every level how many people are in your database, how many of them were turned into leads, how many of those leads were converted to clients, how many clients went into contract and how many of those contracts closed.
And by looking at that, I can see which agents are more efficient at actually putting people in contract, which ones are doing a better job lead generating, who I’m giving leads to and who are converting those leads and who are not. And you basically are trying to figure out who your better people are so you can shift more resources to them. And that’s kind of on par with what Stephanie talked about today, but we’re able to do that all just with Google Sheets and then the CRM that I use for my real estate team.

Craig:
Amazing.

David:
It’s a good question.

Craig:
That’s great.

David:
How about you?

Craig:
So this year in 2021 really scaled the real estate team and we went from like three to about 20 agents. And the biggest thing that we implemented was just a new CRM that basically we can set up for every single agent so we know that when a lead gets assigned to them, an automatic email is getting sent to the client, a text is getting sent to the client. So that speed to lead is like within an hour.
And I’ve got an admin helping me set that up with all my agents and they’re setting up a phone call with them within 24 hours. Because like Stephanie mentioned, speed to lead is just so important. And the smaller you can make that right because to you, there’s so many realtors out there, right? How do you distinguish yourself? If they’re not going to go to you, they’re going to go to the guy down the street. So getting there quickly is the most effective way to make sure your lead closes.

David:
Very true. And if you’re listening to this, if you are in the Denver area, any other areas that you work in Craig?

Craig:
Yeah, we’re in Denver and Colorado Springs right now. So pretty much all on the front range of Colorado.

David:
There you go. If you’re in those areas which is actually BP headquarters, you’re in the stomping grounds of the hallowed ground of BP itself. Go to Craig about buying a house. If you’re in California, hit me up because we’d both love to help you. And a lot of what we talked about on the show today is things we learned the hard way from trying to actually grow a business that can make a hard thing happen.
Turning of people into a closing check is a very difficult thing. Having someone who wants to buy a house or sell their house and accomplish it smoothly is very hard. And so we’ve both learned technology helps us make up for flaws in our own humanity. And we’re just sort of humble enough to accept that that’s the case. And for real estate investing, it’s the same thing.
You need technology to help you track what tenants are paying, who’s not paying. Are you actually posting the vacancy in the relevant job sources? Are you analyzing deals correctly? At every stage of real estate investing, technology is playing some form of assistance in that and so embracing it can definitely help your business. Is there any secret tip you want to give Craig on tech that you use when you’re helping investors particularly?

Craig:
That’s a good one. Any specific tip as it relates to technology? I would just say humans are extremely forgetful and technology has made us even more forgetful. And so if you use technology, make sure that you use it consistently, right? Like if you’re going to use a calendar, use it for everything. Because I know like if I don’t use my calendar for everything and there’s something about my calendar, I’m not going to do it. David, I’m sure you’re the same way. I know a lot of people that are the same way. So I would just say when you’re going to use technology, use it consistently. Otherwise, it will go awry.

David:
Very, very good. I like that. You got to rely now all the way. Okay. Before or any more delay, let’s get to today’s show sponsors. All right. Thanks to our show sponsors as always. Before we bring in Stephanie, any last words from you, Craig?

Craig:
No, I think let’s get it rolling.

David:
All right. All right, Stephanie Betters, welcome to the BiggerPockets real estate podcast.

Stephanie:
Hey, thanks for having me.

David:
Yeah. Thank you so much for being here. Now, for those of you that don’t listen to the BP, Business Podcast, Stephanie was actually featured on their episode 80, so you can get some more background into her story there. But we wanted to bring you on today, Stephanie, to talk about how your experience in real estate investing as well as your expertise in technology can help investors to succeed in their goals. Would you mind starting off by giving us sort of a brief overview of what your portfolio and your experience looks like?

Stephanie:
Yeah. So started off my journey looking to build a rental portfolio, took a nice detour around there with trying to flip and wholesale to get enough money to buy more rentals, right? So I took down this beautiful pathway, built a really wonderful company that does wholesaling and new build construction, spec home construction. That business is still fully operational.
We do about 200 deals a year there and continuing to grow. That business essentially funds the acquisition of single family rentals and multi-family syndications. Right now I own about a thousand doors in my passive portfolio and then we have an active portfolio of wholesaling and building about 200 deals a year.

David:
Okay. So you’ve got a wholesale business that I’m sure technology helped you to get started and then you take the profits from that and you invest it into single family homes that you own yourself and then you also have a syndication that you’re managing that owns doors as well?

Stephanie:
Yes. Well I’m part of syndications that own doors, yeah.

David:
Craig, you look like you’re itching to jump in here.

Craig:
I want to ask, I remember from your previous episode, Stephanie, that you were still working as a nurse at the time. Are you still working as a nurse?

Stephanie:
Yes. I’m a nurse practitioner in heart surgery. I work part-time.

Craig:
Wow, okay. And so I was curious, like where does that income go, the income you make from being a nurse?

Stephanie:
To the government in taxes? Like almost a hundred percent of it. Yeah, essentially that and passive income and it goes into our passive income resources and building that portfolio.

Craig:
Okay, awesome. I just know nurses usually nurses make a decent money and so I was curious as to why you built that wholesale and flipping business to fund when maybe you could have just done it with your W-2.

Stephanie:
Yeah, great question. So my husband and I both… So I’m a nurse practitioner, he’s a physician assistant. By the time we graduated with our degrees, we were extremely in debt, right? We had like 200k in debt with student loans. We have actually paid off our student loans via real estate long before we would’ve in our medical careers. I think one of the things about being a high income earner, getting that W-2, it was very clear to me that I would continue to have to do that until retirement age 65 before I would ever be really free, right?
It became really important that even though the immediate goal for me was not to leave the job, because like you said, I make good money, I felt very safe, right? I could buy maybe one deal a year. And as a rental, what the goal was initially was to have 15 homes. We have three children, we wanted a couple houses per kid and a couple houses to retire. If we would’ve just used our W-2 income to do that, we never would’ve gotten there in time for the kids to go to school, we just really couldn’t have saved enough.

Craig:
I think most people when they graduate school, a lot of people end up with student loans. Their first thing they want to do is pay those student loans back. They don’t even think about house hacking, they don’t about real estate investing, but they don’t realize that you can literally expedite your… I paid off my student loans, I had like 90,000, I paid them off in 15 months, almost entirely because of real estate investing and house hacking. If I were still just working a W-2 job and making chunk payments, I probably still wouldn’t have paid them off. And it’s been two and a half years since I paid them.

Stephanie:
Exactly.

Craig:
It’s just nuts. David, do you have anything to say on that?

David:
I actually saved up my money when I was in college and paid for it at the time, I didn’t take out any student loans. But what I did do is I saved the money that other people would have been putting towards loans was kind of the same. So when I graduated college, I actually had $90,000 in the bank. I had my car paid for and I had college paid for. And it was perfect for me because I stepped into the huge crash. It was like 2008.
I graduated in 2005, saved up a little bit more money. 2009 came that all the housing prices crashed, that’s when I started buying. So then that money that I made from real estate would have paid for it. I guess what we’re getting at here is that people should pay attention to what is the interest rate on your debt? Not just do you have debt and should it just be paid off?
There was a time when playing the game conservatively and just paying off all your debt probably was the best bet for most people. But as the fed is tinkering with the money supply and keeping rates artificially low, and we’re having all this inflation and assets, any sort of asset or income backed assets are just appreciating in value so fast, you can just bet relatively safely compared to other investments in real estate and then use that money to pay off your student debt.
And so I think that’s the point you are making, is sometimes a good offense in the environment like this is better than just a solid defense. Stephanie, what I’m curious about is where your love affair with tech started when it comes to the world of real estate investing.

Stephanie:
I’ve almost been a little techy. So that’s always been a little bit part of my life growing up in the ’90s and early 2000s. That was just the thing, right? But really where I started falling in love with it was when I saw the path for it to help me scale my business, that was really where I was like, “Whoa, I really overlooked how important something like this is.”
It really hit me when we were trying to exit out of this hustle mode of the business and I’m crushing overhead and trying to figure out how we can scale and being really in that in between where we can’t do it alone like you can’t really stay small and continue to do what we need to do to get out of the business, et cetera and we need to really get to that next level. I had a really hard time with data clarity, just things like analyzing marketing, like analyzing productivity of employees, et cetera.
I really felt I was at the place in my business where I was doing a lot of things but didn’t understand truly what was working. It was all kind of gut instinct stuff and less facts. So when I started leveraging technology to help me fact find and make good decisions, that’s when everything changed. Because then it was no longer, “Oh, I think, oh, I hope.” It was measurable and I could start getting to this predictable stage.

Craig:
Right. Stephanie, so I guess where were you in your investing or in your business when you started to feel that pain and you felt like you needed some technology to move forward?

Stephanie:
When I was in this hustle stage, this perseverance/hustle five employees.

Craig:
But how many units did you have or where… Yeah, what did your business look like?

Stephanie:
I was doing 20ish deals a year. I was in that phase probably from like 20 to 50 deals a year. It wasn’t until I implemented this that I was able to go from 50 to 200 without wanting to die. Because I was in that phase where I’m either going to quit or I’m going to do this, right? I was in this like there is no turning back now. It was a lot.

Craig:
Yeah. I find it interesting. I always heard, I think it was from Tim Ferris, and he said that basically every time your business triples, you need to change. So you go from one person, you’re a one man show, you act a certain way. Then you go from three, you probably have to start putting in some systems, 9, 30, then 100, right? Every time your business triples. And I think it feels like you kind of felt that pain as well. Would you agree with that?

Stephanie:
Dead on. Yes. Complexity just got out of control. The more people you have on your team, the more you’re trying to do, the more complex it is, the more you need help to keep organized.

Craig:
Right. You start maybe needing like mid-level management and all that kind of stuff, it’s not just you managing 30 employees.

David:
So what was the first implementation of technology like for you and how did it change what you were doing?

Stephanie:
I think looking back, really the first thing that I leveraged technology for was in that house hack startup phase, right? Where I just felt the most important thing to do was to find data to learn and dig into really what real estate investing is. These are things like listening to podcasts, being on biggerpockets.com, reading those forums, listening to audio books, looking at Zillow and MLS and just trying to fact find and understand where I am and what my market is, and is this a good market, should I think about other markets, et cetera.
Like for example, I started my journey with my husband in upstate New York after we graduated college in 2007. That was our first purchase then in that market and now we’re in Charlotte. So we’ve had a lot of learning. And I think that we underestimate how much is available to us via technology in just that realm alone. There are so many resources out there.

David:
What forums of technology did you start off using?

Stephanie:
Exactly that. Like the biggerpockets.com, podcast, audio books, Zillow, listening to little courses here and there online. Basically just information super highway for leveraging technology in that way, really basic, really just basic fact finding.

David:
So you looked at the educational component of it first.

Stephanie:
Exactly, yeah.

David:
Now when you got really busy, I’m sure that there had to be some things that were implemented so that you weren’t the ones doing all the work. Can you share a little bit about how that transition happened?

Stephanie:
I kind of consider that like the next level, like the hustle level, right? Like after you fact find it and you did the house hack and now you’re trying to basically implement anybody else in your system other than you, right? That to me is a lot about now taking the education that you’ve learned and the pieces of data that are everywhere. Because I mean, I started off by writing on a piece of paper like printing out something and like, I don’t know what this is, what this comp is, right?
Literally writing stuff down, using technologies for education. So the next step for me was really migrating all the different data pieces that I had from lots of different sources into one place. That’s really where the CRM came into play, right? Like I need a central location that I can put all of my data and try to get it like apples to apples. I want everything to feel like it’s cohesive.
So that’s things like, what are all the phone calls I’m making? Right? What are all the tasks that I need to do? What are all the properties that I’m interested in? Where am I even spending money? Right? Just getting that all in one location so I can see it all at one time. What I felt in this stage, what was really dangerous was how fragmented everything was because I was just literally just trying to get everything organized. Does that make sense?

Craig:
Yeah. And so what caused you to start this… Or sorry, I know you do a lot with Salesforce, right? And so is this the system that you built through Salesforce that you’re talking about or is there another CRM that you did prior to that?

Stephanie:
Oh, I used a ton of things before that. Oh yeah, I tried all kinds of stuff. Starting with like Google Docs spreadsheets to Podio to other softwares like Asana, et cetera just trying to get stuff in one place. I actually got a significant distance there. I was doing probably like 20 deals a year plus before I realized that wasn’t enough still, because then other things were still missing like the task component, like the phone component, like the money component, right? The marketing stuff. It was all in these different places.
So that’s when I essentially just like, I think I talk about it a little bit in the last episode, but I snapped and lost my mind because I was working so hard and I had all kinds of stuff all over the place. So I got to this point where I was like, what’s the number one place in the world to build a CRM? What is it? Salesforce? Okay, fine. I’m going to try to do that.
And I couldn’t find a turnkey Salesforce product that was affordable. You’re talking hundreds of thousands of dollars for this next level thing via Salesforce because you have to pay all these developers to do it. So I just decided I would code it myself and build it myself for my company.

Craig:
I know Salesforce is used for like billion dollar companies use Salesforce, right? That’s probably their big clientele. And you tried Google Sheets, you tried Podio, you tried all of these, for a better word, free and you get what you pay for when you use free services, right? And so it sounds like you’re like, “You know what? Screw all that. We’re going to go to Salesforce.” And you’re going to put in the time, put in the effort, put in the energy to build your own CRM. And is that kind of the story of your-

Stephanie:
And how unfair is that?

Craig:
What’s that?

Stephanie:
A hundred percent. That’s exactly my story. And I remember, I felt like it was so unfair that there was such this gap between what is available for our industry for CRMs and what is gold standard? There was no way to climb that. It’s like you either suffer with all this stuff and like pull your hair out or you have to spend hundreds of thousands of dollars and get yourself to this billion dollar company level on Salesforce. Obviously that’s not for our industry period let alone who ever you are, right? But you fill the gap essentially by me building it myself.

Craig:
And you got something more out of that, right? Obviously you got a fantastic CRM that your company gets to use, but you got more out of that as far as I know.

Stephanie:
Yeah. And that was actually… It’s kind of funny and almost embarrassing to say, but I was never anticipating it to be any more than that, right? I was just trying to solve the problem right in front of my face. And that was like, hey, I’ve got this growing company. My husband and I are hustling. We had a third partner at that time trying to hustle. We had handful of employees and we were just dying trying to figure out how we can scale and get out of the weeds. So this thing was built.
It really wasn’t until Salesforce approached me and was like, “Hey, this is really cool. Do you think anybody else would want this in your industry?” I was like, “Well, maybe, yeah.” Would you consider partnering and selling this on the AppExchange? Basically like an Apple iPhone, right? Like you can have an app on their store and things like that. And I was like, “Oh, is this a thing?” And I had to ask my husband, ask my partner, Jeff like, “Is this a thing?” And they’re like, “It’s a thing. It’s definitely a thing.” And I was like, “Okay, well maybe it is a thing. Maybe we should try this.”

Craig:
That’s so crazy. David, this reminds me of something that you always talk about the book So Good They Can’t Ignore You, right? You solved a problem and it was so good that the biggest people could not ignore you, they reached out to you. And did you come to a deal? Did they buy or partner with you? Was there any sort of monetary compensation to be willing to share with everybody on this?

Stephanie:
So they have a partnership program and then basically what you do is you negotiate a contract. I think I can say all this, but you basically negotiate a contract with Salesforce for what you can sell your product for. And so they have their sticker prices essentially, right? Like you go on their website, you want to buy Salesforce out of the box, you’re going to pay $150 a user and then you are going to get hooked up with a developer who’s going to help you.
They fully acknowledge like this is not… This is basically useless out of the box. You’ve got to have a developer. So that’s the typical pathway. So when you come in and say partnership, you basically present the solution that you’ve developed and pitch how this could help Salesforce bring more people on its platform. That’s what in the end what they care about, right? They want to grow their platform, they want to grow the verticals that they serve.
So you pitch that to them and then you negotiate what price you can sell that for. So we negotiated selling the enterprise edition license like the one that cost $150 sticker price to 50 bucks. So that for me, was a huge win because now we’re talking about it being accessible, right? And that’s how much you were going to pay per user, but then have a turnkey solution that’s already been pre-developed for real estate investing.
So that was my pitch to them, was that, “Hey, listen, you are missing an entire industry. That’s why I’m here talking to you guys.” They fully admitted. They’re like, “We don’t have real estate at all. We don’t service that branch and we don’t really do any justice to that industry because so many people are priced out of it. They tend to be small business and et cetera.” So they were excited to collaborate and negotiate with us so that we could make something affordable for real estate investors, real estate agents, project managers, et cetera. So that’s how that little partnership works and then you launch.

Craig:
Awesome. And so how would a low to mid-level real estate investor take a technology like this, they’re not spending hundreds of hours programming, how would they use Salesforce? Or is there something else that you may recommend at this point?

Stephanie:
So basically what we’ve developed was an overlay on top of Salesforce, it’s called Left Main. And what that does is it’s essentially a pre-configured and pre-built out platform on top of Salesforce so that the real estate investor does not have to get any development out of the gate, right? It’s already done. So they can come in and they have a really, really nice framework to start with.
Now with that being said, what it does, which is really, really exciting for me is once you get in there really kind of the journey of how technology can continue to be a part of your business as you grow begins. Because what I have found… Another thing I severely underestimated was how important and how the escalating importance of technology is as you move through these different business phases, right?
So it really depends a little bit on where you’re at when you start, like when you first come to this juncture where you’re like I need an integrated CRM and where are you? Are you doing a thousand and deals a year? Are you doing five deals a year and just trying to get out of the marketing phase and understand what’s working from a marketing standpoint? Right? It really depends on where you start with what the next step is, but it is very much a journey. Does that make sense?

Craig:
Awesome. Yeah, totally.

Stephanie:
It’s hard to articulate I think a little bit.

Craig:
Yeah, no for sure. I think one thing we want to kind of get to is let’s say someone is a house hacker, right? Maybe they’ve got a deal, maybe they’ve got a two dozen, maybe they’re looking to get a deal. What is the one piece of technology you would recommend they get today if there was nothing else they could do?

Stephanie:
For the house hacker, the one piece of technology that I would recommend for a house hacker to do if their intention is to continue doing that, right? Is anything related to market knowledge that you can get your hands on. And I think that’ll change a little bit with the tides but like data. I want you to know your market and know how to analyze a deal.
So if that’s MLS, if that’s looking at Zillow comps, if that’s using the calculators on BiggerPockets, if that’s listening to audiobook to fill knowledge gaps and what kind of deals you want to do, the first thing and the most important piece of technology you use when you’re first getting in there is anything related to knowledge and your market.

David:
So what if somebody is running a wholesale business and they’re trying to track leads that are coming in, how many pieces of mail were sent, who’s doing the follow-up, set reminders to call back, is there something you can recommend for that?

Stephanie:
Yeah, I mean, so that’s essentially what we’ve built with the CRM, right? Like getting all those things into one place. But the big metrics that are important in that phase of your business are going to be centered around the lead and the lag metrics, right? So the number of leads that some in. So we can start at the beginning, the number of mail pieces you need to send to the number of phone calls you need to have inbound to the number of leads that creates and then to the number of opportunities you have, right?
How many of those were qualified leads? How many appointments are you going on? How many offers did you make on those appointments? And then how many of those offers turned into a signed contract? It’s starting to put to together the conveyor belt of metrics that tie in all of the things that you’re doing in your business and making that linear, if this, then that, and getting it all in a place where you could measure what happened and then what worked.

David:
So can you explain to us sort of how the CRM that you’ve talked about, what the process looks like for someone who hasn’t seen it before, isn’t using it, maybe more of a detailed step by step of like, hey, this is what it would do in this… More specific than the general information.

Stephanie:
Sure. So like what it looks like for somebody to come on board?

David:
Yeah. Like let’s say that I got your CRM and I wanted to use it to start a wholesaling company, what would it actually be doing and how would I be using it?

Stephanie:
So the very, very first step is to migrate data. You usually have data somewhere else. You have a list of people that you’ve mailed, you have a list of leads that you’ve called, et cetera. So step number one is migrating all of that onboard and getting that organized into the different stages of those leads. So these are new, these are uncontacted, these are qualified, these we’ve had appointments on, these we are negotiating with, these are contracts signed, et cetera.
We’re going to organize the whole business so that it’s in the proper stages. And then the next part comes into lead management and sales management. There are two major initiatives. So for lead management, what we do is we train you on the key concept of leads, which is speed to lead contact and speed to qualification. So everything about the system is built to help you do that in an efficient way.
So lead management looks like doing bulk tasks. Having tasks of course remind you when to do something next, catching leads that have gone longer than 30 days without any activity like call, text message, email task, right? Anything that has gone longer than 30 days is flagged on the certain list view. And we’re doing these bulk actions where we can select a bunch of leads, send them a text, send them an email, make you super efficient, power dial through those things and try to get ahold of those people as soon as possible.
So we’re measuring, how long does it take you to make the first activity on that lead, how long did it take you to actually get ahold of that lead? How long did it take you to return that missed phone call? What is your live answer rate, et cetera, all in one place. And what that does is it allows you not to lie to yourself because the data is fragmented. You’re like, “Oh no, I thought I did that. No, I answered the phone live,” or no one got to them right away, contacted them or your team, right? Like you just don’t even realize sometimes how efficient a process will be.
This is meant to make that extremely obvious so that you, as an operator, you’re like, “Wait a minute. What is that? We answered the phone live 70% of the time. Hey, it took us on average three hours to call back a missed call. Hey, we haven’t contacted 70% of our leads. We’ve never had a conversation with or 30% of our leads,” right? Like what does that mean? And what if I change that? Right? Then you can make an incremental decision.
That’s kind of like this concept of like, what am I doing and what is working? And if you can measure all of the activities that you do with leads, you can start tweaking things and figure out what worked and what didn’t and how maybe we can make things more efficient. So that’s that lead management part. After leads are qualified, they go to a stage called opportunity.
And in the opportunity, here it’s speed to offer and then offer conversion, right? So what can we do to make as many offers that we can to people that are the most relevant to the deal, right? We don’t want to just blow out offers that I’ll give you 100k and it’s like a $400,000 house, right? We want to obviously get a good deal, but we want to make meaningful offers as quickly as possible and get contracts in front of people as quickly as possible.
So in this stage, we have some tools to help you analyze what a renovation cost would be based on the square footage of the property and the level of renovation that needs to get done. And we try to make that super simple, like level one is a cosmetic rehab. What would this cost for this square footage if we have to do all new floors, all new paint, all new landscaping, light fixtures, right? That’s a level one.
We’re not going to nitpick here, we’re just going to try to get to a number of like about how much that would cost. And then level two is all that plus kitchen cabinets and kitchen countertops. Level three is like bathrooms and maybe the roof, right? Like system, two major systems or the bathrooms. Level four is gut job, changing a wall.
So I want to have a quick calculator, how much is it going to cost to renovate the property and then I want to have integrations with other softwares here to help me come up with a value of the property, basically like a comping automation, right? The hardest part of making an offer is trying to figure out what you can offer. And we get completely debilitated by that, right?
And if you ask five different people, they’ll give you five different answers and everyone’s like 10, $20,000 apart and then we get this analysis paralysis. So how do we get that speed to offer? So we use a tool like that which is really, really accurate. And same thing, people can argue $10,000 on any deal if you get enough people in the room. So what we want to get is accurate as we can and then make an offer to that homeowner and we want to make an offer in a way that’s very convenient.
Now this is the tech, welcome to 2022, if you’re not using tech, you’re losing. So we want to send them a contract, DocuSign, right? If we are in person, beautiful, but what if we’re not? That person’s hot to sign, let’s send them a DocuSign agreement. Heck I mean, I can’t even remember the last time I went to a lawyer’s office to sign a HUD now. I sign HUDs all the time DocuSign, right? So that speed to offer.

Craig:
Yeah. So Stephanie, it sounds like you basically just took us through this massive funnel of a wholesaler, right? Your system or a good quality wholesaling CRM system, you will be able to track every single metric from calls, text, whatever. So you have, hey, do calls work better or do text work better? Is my guy from the Philippines a better caller than my guys here locally? Right?
So you have all of that data so you can make good business decisions that can obviously increase those numbers, right?And then you mentioned, okay, talk about the percentages, 30% conversion, 70% conversion. Well, where are you going to invest your money? You’re going to invest your money where the 70% commercial is, right?

Stephanie:
Exactly.

Craig:
So I think having a… There’s no question that having a high quality CRM system is something that wholesalers, real estate agents, pretty much anyone in any business ever needs a good quality CRM system. But at what point do you think like does Joe who’s listening to this podcast right now, he’s a one man team looking to start wholesaling, do you recommend he get this system starting tomorrow or who is using this system?

Stephanie:
Anybody who’s marketing, essentially. If you are spending money on marketing and you aren’t measuring your data, you are losing. So if you are marketing off market to off market homes and you are trying to get off market deals via anything other than essentially like MLS, right? You are spending money, you have an overhead.
And if you don’t have a good way of measuring what happens when you spend that money, you’re in trouble, right? You’re going to get crushed by that overhead. So you really have to be kind of at that like you’re not quite house hacking, you’re one step above that where you’re trying to grow, right? You’re ready to make a business out of this and market essentially.

Craig:
I know a lot of wholesalers and almost all of them use VAs in some capacity. Do you use VAs at all?

Stephanie:
Yeah. I love VAs.

Craig:
So I’m just curious, how easy is it to teach someone that maybe English isn’t their first language to operate a CRM? And so almost run a lot of them are doing the calls and doing the text and all that out of the CRM.

Stephanie:
I think, well, just like anything, there’s a learning curve, right? They’ve got to be introduced to a software and instructed on how to use it. We offer a lot of training that as far as like Left Main goes, we’ll train your team for you and we have a lot of resources from that standpoint. But in general, every employee needs to have a training plan and an onboarding plan and understand what their job roles are and how to use the technology to help them do those job rules.
And the beautiful thing about a system honestly, even if it’s Google Sheets, when you’re first starting out, right? You’ve got to find a way to collaborate on a single object where… You’ve got to have like this cloud basis and you’ve got to get out of your office, right? You’ve got to have something that everyone can access from wherever they are in the world and start documenting on what they’re doing with homeowners and the calls that they’re making and the results and things like that, right? So having a cloud based system is incredibly important so that you can collaborate.

David:
And would you say in general that’s sort of like the medium size investor they’re spending some money in their business, whether that’s staff or that’s leads that they’re trying to bring in? All right. So what questions do you think someone should be asking to measure in their business? What are the most important KPIs that in general a real estate business needs to be measuring?

Stephanie:
Yeah, I mean, so I want everyone to measure what they’re doing and then what they’re doing, what it results in, right? So that can range a little bit on what your business model is, but just count the things that you do during a day, right? For me, one of the most important indicators for me that I really feel can predict the end game of what happens in our wholesaling company and our bill company is what percentage of our leads we got a hold of.
For me, that is the most important leading metric that we have in our entire company. Because we can dump a hundred leads in there a day from our website from people filling out the form or whatever off Google, right? And if we never get a hold of those people, nothing else matters, right? That’s the first rock in the stream. So we count not only the number of leads. The number of leads is almost irrelevant to the number of actually contacted conversations with leads.
From that, the next step is really how many appointments did we set and how many offers did we make? I care the most about offers. And appointments can be phone appointments, right? Just the sales process. What is the cycle next? It’s the sales process where you’re talking to somebody trying to understand their pain and trying to solve their problem, right? And in doing that, our offer hopefully helps them solve that pain.
So the percentage of leads contacted, the number of offers made, and then the number of deals signed and monetized, right? We’ve also got to keep an eye on the number of deals that fall out or get canceled, because we want to know why they got canceled. Did we not find a buyer or are we off on our numbers? Did we not get financing? That’s another big rock in the ocean there, was like, why didn’t that go all the way to monetization? So if I had to pick just like three metrics, it would be that, number of leads contacted, or what percentage of leads contacted, number of offers made and the number of deals closed, monetized.

David:
Awesome.

Stephanie:
If we’re going to get super simple, right?

Craig:
For the lead indicator there is kind of just the first one, right?

Stephanie:
Yeah.

David:
All right. What about when you get to a bigger investment? So you’re running a syndication. Now you’ve got bookkeeping, you have to think about you’ve got distributions that have to be made, you have investors that are going to be asking a lot of questions about every deal, you have to generate PPMs and operating agreements. What advice do you have for people that get to that level?

Stephanie:
Yeah. And honestly, that level comes too without syndications. That comes in a scaled wholesaling business or a scaled flipping business, right? We still get to that level outside of this initial stage where you’re getting organized and getting KPIs together, the next step is really for both. But truly to get to that next level, to get to that scaled level where you are completely out of the weeds and you’re just sitting in your CEO or owner’s box, you need to be able to have massive automation and integrations. That becomes the biggest piece of technology next.
To get to that level, you’ve got to be able to interpret and manipulate your data. And Craig, you mentioned it before, you got to like 80, 20, what has been working to get super efficient. So you have employees who are very productive and you have a team that’s very efficient. You’re avoiding any crushing overhead. Because you’re really efficient, you don’t need to have a ton of people doing things that one person can do or two people can do with some technology, right?
And then to get to that next phase, you’re implementing automation, right? So an email gets triggered off at these certain times, a task gets automatically triggered at certain times, text messages get sent at certain times, I’m integrating with my DocuSign software or my Slack channel for my entire team, et cetera, right?
You’re basically spider webbing out with all of the different softwares and all of the different things that need to get done in a day related to that homeowner, that syndication and having it happen automatically and in a process based way, right? You’re letting technology come into your process so that everything isn’t sitting in someone’s head anymore. It’s just directly integrated into the process. When this happens, these emails get sent to notify people automatically, these tasks get triggered, I’m not going to forget to do something extremely important. And I want to communicate without ever communicating or with communicating as little as possible, right? Like that one-to-one phase.

Craig:
Yeah. Stephanie, in the transition of going from a medium to a large business, and you talk about integrations and automations and all that, obviously there has to be set up, like how does someone go about setting all that up?

Stephanie:
Yeah. And incrementally there’s things that you can do that will really give you a leg up with softwares like mine that have been developed with our industry in mind. You don’t have to reinvent the wheel every time, but you do it one step at a time just like everything else.

Craig:
What would you say is like the first step?

Stephanie:
To getting to that next level and to integrating tech? What specifically?

Craig:
Yeah. What’s the first thing you would automate going from medium to high level?

Stephanie:
Emails. Email sequences because it’s very easy to do that. So what I would do is make sure that email triggers and really tasks and tasks and text messages are pretty close to the same time. But as soon as a lead hits your system, if you can trigger an email and a text message to that homeowner acknowledging that they’ve done something to interact with your business and greet them, that goes a very, very long way in increasing the percentage chance that you’re going to have a conversation with them. That’s speed to lead. That would be the first step.

Craig:
And David, did your real estate team do this in terms of with your agents?

David:
It’s very similar to what Stephanie’s describing. So we basically have, let me see if I can describe what the funnel looks like in more practical steps. Lead comes in from an outside source. It could come from my website, it could be a place that we bought a lead, it could be a person who found me, whatever. You put your information in somewhere saying, “I want some agent to talk to me.” That automatically dumps into my CRM and we use an app called Zapier that basically makes those two kinds of programs talk to each other.
When it goes in the CRM, it triggers what’s called an auto plan. So it’s this like predetermined list of commands that it says, “Oh, a lead came in. I have to follow this auto plan.” So the first step would be that the client gets a text message automatically that says, “Hey, thank you so much for reaching out. We appreciate it. Someone’s going to be reaching out soon. Tell me, have you ever bought real estate before?” And then at the same time, an email goes to the client with a similar message.
So right off the bat, they’re getting that instant gratification of, okay, I’m being talked to. There’s nothing worse than when you put in your information and you don’t know when the person’s going to get back to you. You always find that the employee says, “Oh my God, I got back to them within 24 hours. Why are they so upset?” But it didn’t feel like 24 hours to the lead. Every hour was, did you even see this at all? Are you acknowledging that I exist? Do I-

Stephanie:
Or did it work or did I mess it up? Right? Like, did I submit it?

David:
And if you’re someone like me, if I wait a little bit of time and I don’t get any kind of reply, I’m just going to go somewhere else and go find the person that’s going to answer. So at the same time that those messages go out to the client, they also go to the agent who’s responsible for reaching out. So the agent gets a text message, the inside sales agent, which is different than the agent also gets a message and an email goes out to each of them.
Now the inside sales agent’s job is to make sure that the agent saw the message on their phone and actually contacted the client and if they don’t, then they contact the client. But that’s very important, that speed to lead that is being talked about. Once the agent contacts the actual client, now they check a box saying, “Okay, it’s done,” and the auto plan can go to rest. But what I found the most expensive thing that was costing me money in my business had nothing to do with an expense, it was lead bleed is what I call it. It was how many people were coming in.

Stephanie:
Oh my gosh, you preach, yes.

David:
And we had no idea how… And no, I didn’t think that would be a thing. Because David, the business owner that wants to be good would never, ever, ever ignore a lead. You’re like a starving junkyard dog on a ham sandwich when that thing comes in, right? But you’ve got these employees that get paid either way or they only want the easy leads or they’re in the middle of eating lunch or whatever’s going on. And so the lead comes in and they don’t get to it and then there’s no accountability so they forget. And all that happens is the client ends up thinking the David Greene team didn’t even care, right?
And they’re confused because they listen to the podcast and they’re like, “David’s a good guy. I don’t know why that he wouldn’t have answered me.” They get their feelings hurt. So what I’ve found is that there has to be like multiple levels of automated process that tell someone, and then you also usually need someone that oversees that process to make sure that even though the computer’s doing its job, that the human element, which is always where the mistake, not always, but often where the mistake comes from is taking care of their part.

Craig:
David, I got a question for you actually. On your system, do you have any, and maybe Stephanie for you too, is there any sort of built-in accountability with your CRM programs? So let’s say a lead gets transferred to an agent or a lead gets transferred to a wholesaling representative and they don’t reach out in like let’s say 10 minutes. It gets bumped to the next person so they’re going to lose out on that commission.

Stephanie:
Yeah. Certainly. So I love what you’re saying too, I could not agree more. That’s why the percentage of leads contacted is so much more important to me than the number of leads generated, right? Like I want it to have had a contact with this person from my team, but the accountability comes in how long it takes to make that first contact, right? And how many activities did it take for you to make that first contact?
So the clock really starts ticking the moment something drops in the CRM. So what was the time to the first activity, what was the time… And then that could be an email, a text message. What was the time until someone on my team physically tried to make a first outbound call to this person? And this is above and beyond automation, right? This is my person taking action.
And then we can measure that. So we can say, hey, Sally, it takes her on average two minutes for time of first activity. Jordan, over here, it takes him 30 minutes to have that first activity. Who do you think is going to qualify more leads? Who do you think is going to be more productive and more effective? Right? It’s the person who’s the fastest who gets ahold of that person and starts that process and solves the problem, right? Before that homeowner fills out 17 other forms.
So there is that built-in accountability for that. You can make it. So like if the time limit goes by that like it’s been 15 minutes, it goes to somebody else. But the way I have mine built out and with the way we deliver it, which can also be customized is it’s a free for all, like all leads are available to everybody, whoever gets it first wins, right? Like if you try, but you don’t get it, I’m going to get it.
Because I’m incentivized to be fast and to convert leads and have conversations with people so I’m going to attack that lead and I’m going to notify everybody on my team. The phone is going to ring for everybody all at once and whoever answers it first wins. Because I want the highest percentage chance that we live answer if somebody inbound calls and that every lead is attacked the second that it comes in.
So I actually don’t do a round-robin. You can, you certainly can. And I think that there are teams that that’s more appropriate for, but when I have a bunch of people sitting in front of a computer or in and out of my office at any given time, I just want to make that percentage chance that they pick up the phone as high as possible. It’s a dog eat dog world out there with the competition.

Craig:
David, what do you do? Do you do the round-robin approach or the shotgun approach?

David:
I would rather do it the way Stephanie does it. The reason I can’t, like she said some systems don’t work as well, is we cover a lot of geographic area and different agents on my team specialize and work in different areas, as well as they have different sources of knowledge and skills. So if Stephanie came to me and said, “Hey David, my mom needs to sell her house, can you help?”
That’s a different agent than if someone came and said, “Hey David, I want to buy an eightplex in this area. We had to do a little bit of screening before we can assign it to the right person, which is why I need the role of an inside sales agent because that’s what they do, is they contact that person right away, get some information and figure out where to connect them to.
But the technology helps make sure that that baton is not being dropped with all these handoffs. That’s the tricky part, is every time there’s a different person that has to get involved in this thing, you exponentially increase the odds that it can get screwed up. And so technology sort of serves to… I mean really, if you think about most technology, it’s just trying to make up for human weakness.
And when we don’t use technology, it’s because we’re too arrogant to admit that we’re weak and we need help. I would say this is the number one problem on my real estate team. This sounds so silly. It is programming human beings to remember to create a task in the CRM when someone asks them to do something. Everybody assumes that when I say, can you do this or can you do that, that they’re just going to remember and they mean in the moment to remember and 99% of the time they forget.
And then I forget that I gave it to them because if I said, can you do this, I just assumed it would be done. And then five days later I need that thing and I’m like, “Where is that?” And they’re like, “Oh, oh yeah, I’ll do it right now.” Or, “Oh, I sent an email three days ago, I haven’t heard back.” I’m like, “Well, why didn’t you send an email every day after that or why didn’t you pick up the phone to call?”
Technology is really there to sort of like shore up the holes in our own performance. And I think that’s why Stephanie, what you’re saying is when you get bigger, those holes start to get exposed more and more and more and you have more at stake, right? My overhead for just my real estate team is a little over $90,000 a month.
It’s terrifying how much money we have to spend in salaries and rent and software and programs and paying for leads and closing gifts and everything that we have to do. So if we’re dropping those leads, you can start to lose massive amounts of money when the risk is that high, and that’s why you really want to incorporate technology to kind of cover your own butt.

Stephanie:
Right. And what’s so exciting about it too, is how much a little tweak and just plugging one hole, what that does to your river, right? You just plug that hole with a little automation, a little cadence, right? All of a sudden, you have this process where a lead comes in and it can’t help but go through the steps because it’s been pre-programmed to help you put it through the steps and not forget, right?
So little holes here and there like reminder emails and follow up sequences to the homeowners, all of a sudden, one will bounce back in for you, right? You may not have thought to contact that person because it’s been a month, well guess what? They just replied to an email you sent them and they pop right back up on your radar you’re like, “Oh thanks. Great. Yeah. I’ll call you right now,” right?
All that stuff happened in the background while you’re really busy doing the very highest value activity for whatever role you have in that company, right? Like the lead manager, it’s that active conversation. If I’m on an active conversation with a homeowner, I can’t also pick up this other phone call or respond to that email. I need to be on this call. So stuff needs to happen for me while I’m doing this.
And same thing with sales, right? Once that baton gets past the appropriate salesperson, that person needs to be talking numbers and analyzing and doing that, not necessarily following up with a hundred old leads. That doesn’t mean that those old leads aren’t important, that’s where you plug automation in, right? So that then it generates that activity.

David:
I also find that so many human beings will say, “I don’t have enough time,” or, “I got too busy.” But if I sat there and watched them work all day, I can find so many times in the day when they were doing nothing, right? When I worked as a waiter-

Stephanie:
They’re on TikTok.

David:
Yeah, or maybe like what’ll happen is when I asked you to do it, you were in the middle of something else. But that does not mean you were too busy to get it done, it means you were not organized enough to get it done. When I worked as a waiter, if I had a table come in and then five or six minutes later, another table, five or six minutes, another table, I could get up to 10 tables and I could be fine.
If I got three at one time, it just jammed up the system, it clogged it and that’s when you would make mistakes, because you can’t be in every place at the same time. So some of this technology, what it does is it creates a cue like you’re saying Stephanie, that is a reminder for me to do the thing so that I can finish up my active call.
Maybe an email was sent out when I was in the middle of the call so the person was acknowledged and they’re like, “Oh, okay, they’re there.” And then 40 minutes later when I get off of that call, I’m reminded, “Hey, jump in and make this call.” As well as reminded of maybe six other tasks and I can determine what’s the priority, where should I go in? Versus when it’s in your head, all that you experience is anxiety. You’re like, “I got all these balls in air. I can’t do everything,” and you don’t know what needs to be done.
You just know it feels overwhelming and it’s only a period of time before you tap out and you say I’m too busy. I’m overwhelmed. I hear it all the time. This is just too much. No, it’s just that you got two tables at one time so you feel stressed out. But if you could kind of like space out that workflow, it wouldn’t be that hard. And I think that’s another thing that technology does at a higher level, is it takes all this that’s coming in and it creates some order out of it so that you can prioritize and then tackle it in the right order it needs to be

Stephanie:
Exactly. I always talk about it as like a conveyor belt. It creates a conveyor belt of tasks and a conveyor belt for that person to follow.

Craig:
So I think let’s do like a quick recap on kind of beginner, intermediate and advanced investor in like what systems and what technology each one should use. So for like okay, rookie, four to five deals, who is like the less than one year experience person using for technology?

Stephanie:
In that phase, in that like level one phase, house hack, startup, you’re using tech essentially to learn and to educate yourself, all centered around your market, right? Like what is it that you want from a business? Where are you in the US or in the world that where are you about to do business and like what is that information around you?
So much of that technology has to do with education and essentially comping resources like Zillow and Redfin and realtor.com, free stuff or MLS if you’re an agent or have access to agents, podcasts, books, BiggerPockets, all these things, right? This is where you’re using technology. I love technology in that sense-

Craig:
So free and really cheap stuff. Is that right?

Stephanie:
Yeah. And what I love, and this is what I did on the road, on my way to my W-2 job, I’m listening to an audio book. How cool is that? Like download that book, I’m going to listen to it. Or Blinkist was another really cool piece of technology. I could read a book basically in like 15 minutes, just give me the highlights, right? Like use that technology to help me learn faster and understand what I’m trying to do, right? And put together my plan.
The next phase like phase two is really using tech for efficiencies and to start measuring stuff, right? We’re going to organize data. This is where the CRM comes into play. We’re going to try to get your data in a point where you’re looking at apples to apples and then drawing some sort of conclusion about what you’re doing and what is working, right?
And that to me was like the heart of the CRM, like getting all that stuff in one place and starting to understand what that means and what the relationship was between different handoff points in the business, right? And so CRM is a big one. This is like stacking lists too, to try to aggregate data. It can be things like putting a phone reminder or using your cell phone to remind yourself to call somebody, right?
This can be QuickBooks to getting your step off of a spreadsheet onto a place where does the math for you, right? There’s more than just a CRM in this level, but essentially it’s all about the fundamental metrics and fundamental measurement in that stage, using technology for that. The next phase is really kind of what we’re chatting here with David’s company too, is this is where we’re using tech for viability, right?
Like we’re going to avoid crushing overhead now because we’re using tech to be more productive, more efficient, starting these automation sequences, right? Manipulating data, understanding what works and making those decisions now, 80, 20 rules, right? Like this marketing channel did the best here, this sales rep did the best in this area or with this type of person, this lead manager is the fastest, or I need more lead managers because we’re getting slow, right?
This is like those changes you start making, you’re interpreting that data that your technology’s providing you. So things that also help you here in this stage is those early automations, right? Like using DocuSign to send contracts, using automatic calculators to come up with offers and rehab estimate and values of the property, basically taking technology into that process. And then the next phase is really where you’re going and scaling. And 200 plus deals a year is heavy automation, right? Like integration with multiple technology tools and people outside your business, your company.

Craig:
Yeah. You know what this kind of reminds me of is basically when you first start something out, you’re basically starting it out as a hobby, right? You don’t really know your systems, you don’t know that stuff, right? You implement that first piece of technology which is all the free stuff. And that is your bridge from taking your endeavor from a hobby to a business.
And it’s all the free stuff, it’s all the cheap stuff. And then once you’re got at that business level, you start adding the bigger and more advanced stuff, the automation, the integration, all the serious CRM stuff. That takes it from medium size business to empire, right? And then once you’ve got your empire, you’re using the technologies, the automations, the integrations to just scale up and build your dynasty.

Stephanie:
Exactly. And if you’re looking to do something like that, like if you’re looking to dominate your market, you’ve got to dominate your own data.

Craig:
I love that.

Stephanie:
There’s no other way to do it.

David:
Well, that’s fantastic.

Stephanie:
Nerds unite, nerds unite.

Craig:
We’re going to push up our glasses.

Stephanie:
I know.

David:
All right. As you two push up your glasses, we’re going to be moving on to the next segment of our show. It is our world famous…

Speaker 4:
Famous four.

David:
In this segment of the show, we are going to ask you the same four questions we ask every guest of the podcast and fire them at you. I will start. What is your favorite real estate related book?

Stephanie:
Good to Great, Jim Collins.

Craig:
Okay. Cool. Favorite business book, Stephanie.

Stephanie:
Ooh, Competitive Analysis by Michael Porter.

Craig:
Ooh, I haven’t heard of that one. Have you heard of that one?

David:
No. What’s it about?

Stephanie:
It’s kind of a textbook type business book. So again, nerd alert, but it’s basically how to analyze an industry and analyze players in the industry and how you can compete against them, what your secret sauce is and how to analyze the whole industry essentially and your place in it.

David:
Right. Kind of like how one sports team might analyze the team they’re going to play against and figure out a strategy that would work against that team.

Stephanie:
A hundred percent, yeah.

David:
I couldn’t resist the urge to bring in a sports analogy into a real estate conversation.

Stephanie:
Moneyball.

David:
Sorry everybody. Yeah, moneyball, there you go.

Craig:
All right, Stephanie, what do you do for fun?

Stephanie:
Oh, medicine.

David:
Save lives.

Craig:
Okay, save lives? That’s your hobby?

Stephanie:
And you know what? I think maybe that’s the way it’s supposed to be, but I go and I work at the hospital because I truly love it and it’s my passion. It is not what I do for a living anymore, I do it because I choose to and I love it.

David:
Well to all of those frontline workers that are out there that have been fighting COVID for years now and exposing themselves to some of the biggest risk of everybody, we really appreciate you. And those are the true superheroes right now. So thank you for doing that, Stephanie.

Stephanie:
You’re welcome.

David:
Next question. What sets apart successful investors from those who give up, fail or never get started?

Stephanie:
The refusal to stop. When I first started, so this was my husband’s idea and I like to tell him he created a monster. But when I first started this, I can’t remember who it was that said it, I think it was Justin Williams, but he basically said if you’re about to embark on something hard and something that is outside of even your generational trends and your family or outside your comfort zone truly, you are not allowed to quit until you want to quit a hundred times.
So I started counting how many… I printed out this thing of a hundred boxes and I was like, “I am not going to quit until I wanted to quit a hundred times.” And I don’t mean quit like I don’t want to go. I mean, quit like I am done. I don’t want to do this, this is too much, right? And I got to like in the 60s. At that point, I was like, “You know what?” I kept going and I kept coming to be a solution. So long way to answer that question but just literally the refusal to stop the ultimate commitment to the path that you’re on.

Craig:
Awesome. Stephanie, where can people find out more about you?

Stephanie:
I’m on socials. You can follow me on Facebook or Instagram, at Stephbetters, or you can email me [email protected]

Craig:
Awesome. And Steph, I actually got one more bonus question for you that I just kind of thought of. So through you mentioned that you do the nurse stuff as a hobby but you do the real estate stuff to make a lot of money. When are you going to stop doing one of those things? Right? Because usually it’s the other way around, right? Usually people love doing real estate and hate their job.

Stephanie:
I know, right?

Craig:
So where are you headed?

Stephanie:
I’m scared to say this out loud because who’s going to watch this video? But I have made a commitment to myself that I will not be working at the hospital by the end of this year. So I am leaving. It’s been an incredible journey for me to come to that decision primarily because I think practicing medicine and what I’m doing and with my job and heart surgery and the colleagues I have, and I love it so much and it’s become part of my identity.
So leaving and closing a chapter is really hard. It’s really hard to separate and kind of come to terms with that. I’m not sure if you guys have children, but for me it feels like acknowledging the time in your life where you’re stopping to have kids, right? I have three kids and it… Like my husband and I had this talk like, “Okay, no more kids. We have three, our family’s complete.”
You close that book and there’s this joy but also it’s sad, right? You’re like, “Oh, but I’ve been growing babies for 10 years.” Right? Like, “Can I stop or what’s next? So what’s that going to feel like?” So anyway, it’s been a big identity journey on deciding where I want to put all of my time and energy. And a big part of who I am is a servant and I’ve been able to really fulfill that service part of my heart this way.
So now I’m transitioning to fulfill that service need in other ways, and primarily with real estate, which was the goal, right? The goal was freedom and to make every choice for myself and for my family. And I think I’m finally there on my emotional journey to arrive.

Craig:
Yay. Well, congratulations for all of your success Stephanie.

Stephanie:
Thank you.

Craig:
Obviously you’ve built many incredible businesses, it sounds.

David:
Well, thank you, Stephanie. This was really good. We don’t get to talk about this kind of stuff very often. So I’m glad we got to kind of pull back the curtain and show people what it looks like when you get deeper and deeper into real estate investing at bigger levels. I know there’s a lot of people that listen and say, “My dream is to be a full-time investor.” And if that’s really the case, that’s cool.
But know that as you become a full-time investor and you grow, it just sort of takes a place of another job and there’s all new skills that need to come into place with that job and technology and harnessing it is a very big piece of how to make that happen. I also like that we got to kind of reveal that technology itself is not a magic pill.
It is not like, “Hey, if I pay for this system, all of a sudden, everything goes great.” In fact, I don’t know that I found a magic pill in anything, right? Hiring a bookkeeper, never a magic pill. You got to take time to work with your bookkeeper and hiring a person to do the job is another job. Now you got to teach that person how. There is work associated with all of this, but that’s what’s so great because then other people don’t want to do it, which is what creates the opportunity for all of us. Anything you want to leave us with before we get out of here?

Stephanie:
No, I love it. Thank you so much for having me. I think that everybody should be prepared for a journey. And one step at a time and you’d be shocked to where you’d find yourself in 5 years, 10 years. Just one little thing at a time.

David:
Craig?

Craig:
Nothing for me to add. Stephanie, it was great having you on. I love hearing your story, super inspiring and excited to see where you are a year from now.

Stephanie:
Thank you guys so much.

David:
All right. Go check out Stephanie’s other BiggerPockets Podcast on the Business Podcast, episode 80. This is David Greene for Craig the house hacking guru Curelop signing off.

 

A recent RE/MAX Canada report has highlighted shifting consumer trends in Canadian real estate, driven primarily by challenging market conditions and Covid-19. The 2021 Renovation Investment Report found more than half of Canadians renovated their home for personal enjoyment, not the perceived return on investment (ROI) that was the driver behind many renovation decisions in the past. Tightening market conditions from coast to coast and the “lockdown effect” of Covid-19 were factors in the shift.

Renovation Trends in Canadian Real Estate

• Three in 10 Canadians (29 per cent) renovated for non-essential “lifestyle” reasons, such as recreation/entertainment projects.
• More than half of Canadians renovated their home in 2020 for personal enjoyment. Of them, 29 per cent renovated to enhance lifestyle and 29 per cent renovated for essential reasons, such as safety and maintenance.
• Only 16 per cent of Canadians said they renovated to increase the market value of their home in order to sell within in the next one to three years 

According to a Leger survey conducted on behalf of RE/MAX Canada in 2021, Canadians were increasingly looking for ways to improve their quality of life at home a year into Covid-19. “Lifestyle” had eclipsed financial gain as the top reason for renovating during the course of the pandemic. However, despite the trend of home renovations done for personal use and enjoyment, 59 per cent of Canadians said they always consider the return on investment that a renovation will have on their home’s overall market value. While there is a current renovation trend based on lifestyle aspirations, practicality is never far from the surface.

“The notion of the home as an investment continues to be an important consideration for Canadian homeowners; however, they clearly value the home for what it is meant to be: a place to live and enjoy spending time,” says Elton Ash, Executive Vice President RE/MAX Canada. “The pandemic has influenced virtually every aspect of our lives, including what Canadians want and need in a home. The uncertainty also compelled many sellers to move to the sidelines or renovate their home to accommodate current quality-of-life needs, which has further tightened conditions across many Canadian real estate markets.”

This lack of inventory remained a continuing factor across Canada through 2021 and is expected to continue in 2022. In its Canadian residential real estate outlook for 2021, RE/MAX identified seller’s market conditions in 82 per cent of regions, with a noted spike in demand for single-family dwellings putting additional pressure on already limited supply. In its 2022 Canadian housing market outlook, that number increased to 97 per cent of regions.

“Canadian real estate has continued to perform above and beyond expectations, with an increased opportunity for sellers to see a strong return on their investment given current demand,” says Christopher Alexander, President of RE/MAX Canada. “Strong seller’s markets continue to dominate many regions across Canada, with homes selling in record time and at record prices. While the impact that specific renovations have on ROI will vary by regional conditions, the Canadian housing market has generally shown us that you can’t go wrong with anything that improves your home in any way.”

More than half of survey respondents (55 per cent) stated that they have already done or would like to do a home renovation within the next year. Of this group, 35 per cent said they would opt for minor renovations, such as fresh paint.

RE/MAX brokers across Canada were also surveyed, and identified fresh paint and landscaping as two upgrades that yield a high ROI, despite being low-budget and minor in nature. This is in alignment with and good news for the nearly half of Canadians (47 per cent) who said they would want to keep their home improvement budget below $10,000, even if the guaranteed ROI was at least 10 per cent. Three in 10 Canadians (31 per cent) would bump up their spending from $10,000 to just under $50,000, and only four per cent would consider spending more than $50,000.

.

Sixty-five per cent of RE/MAX brokers surveyed also claim that kitchen upgrades, including cabinets, countertops and appliances, yield the highest ROI for sellers, with 87 per cent of brokers naming the kitchen renovation as the top home improvement resonating with buyers in the Canadian real estate market.

Renovations and Canadian Real Estate: Regional Market Insights

In Western Canada, Calgary, Edmonton and Victoria, homebuyers want the move-in-ready experience, with homes that are already entirely renovated being most in demand. Given this, sellers in these regions have the potential to see a large return on their renovation investment. In Greater Vancouver, outdoor improvements are one of the optimal ways for homeowners to get the best ROI, with landscaping among the top five renovations to undertake. It’s also one of the most common renovations that homeowners in this region are taking on themselves, versus hiring a professional to do the work.

Throughout Ontario, RE/MAX brokers are reporting that listings are selling quickly, regardless of their condition or renovation status. Regions including Toronto, Ottawa, Hamilton-Burlington, Niagara, London and Kingston/Napanee saw a strong shift toward outdoor upgrades and amenities in 2020, specifically the addition of a pool or larger exterior living area. Much of this demand was prompted by COVID-19 and the desire for more recreational space within the home – a trend that is not anticipated to be a permanent one. Bathroom renovations and new flooring are highly regarded as yielding the best return on investment. Across markets such as Mississauga, Thunder Bay, London, Barrie and Ottawa, painting is noted by RE/MAX brokers as the top renovation that homeowners are doing themselves, as well as one of the best ways to also see an improvement on ROI.

In Atlantic Canada provinces, RE/MAX brokers also placed importance on upgraded kitchens, but noted flooring upgrades as one of the best renovations for homeowners to get optimal ROI in regions including Fredericton, Saint John and St. John’s. Meanwhile in Charlottetown, roofing upgrades and landscaping are two of the top renovations that can be done relatively quickly to improve ROI, along with painting, as echoed across nearly all regions surveyed. In Saint John, the finished basement is one of the most sought-after renovations by buyers and creating more open-concept spaces is noted as one of the top three ways for sellers to get the best return on their investment.

Consumers’ Understanding of ROI

Only 51 per cent of Canadians claimed to have a thorough grasp of the renovation process and nearly half either don’t know or disagree that they have the understanding needed to make ROI-enhancing renovation decisions. Furthermore, 50 per cent of Canadians surveyed said they expect their REALTOR® to advise them on the right renovations to take on if they expressed interest in doing so when purchasing a home. This reliance on external professionals to guide home-buying decisions is anticipated to continue.

Additional highlights from the 2021 RE/MAX Renovation Investment Report

• When it comes to the renovations that yield the best return on investment, Canadians see these as the best renovations to undertake:
  • 70% of Canadians state redesigning larger spaces, such as kitchens or washrooms
  • 56% of Canadians state minor updates, such as refreshing paint
  • 55% of Canadians state landscaping the outdoor space
  • 50% of Canadians state changing the home layout, including adding rooms or knocking down walls
  • 32% of Canadians state updating décor and furniture
• 49% of Canadians prefer to contract out most or all of the renovation work
• 33% of Canadians consider themselves to be very capable when it comes to home renovations, and don’t need professional help

About the 2021 RE/MAX Renovation Investment Report
The 2021 RE/MAX Renovation Investment Report includes data from RE/MAX brokerages. RE/MAX brokers and agents are surveyed on insights and local developments. Regional summaries with additional broker insights can be found at remax.ca.

About Leger
Leger is the largest Canadian-owned full-service market research firm. An online survey of 1,540 Canadians was completed between February 4-7, 2021, using Leger’s online panel. Leger’s online panel has approximately 400,000 members nationally and has a retention rate of 90 per cent. A probability sample of the same size would yield a margin of error of +/- 2.5 per cent, 19 times out of 20.

Brenda Tushaus of RE/MAX Results in Minnesota, and Sandra Sanders of RE/MAX Estate Properties in California, have also earned recognition on the 2022 Top 40 Women Executives list, a subset of the SP200.

According to the Real Estate Almanac, leaders chosen for inclusion on the SP200 “are evaluated based on the office they hold, the decision-making power associated with the office, the financial resources at their disposal, their organization’s industry significance and geographical reach, public announcements about imminent changes, their tenure and their personal influence in the industry.”

From a single office that opened in 1973 in Denver, Colorado, RE/MAX has grown into a global real estate network with more than 140,000 sales associates in over 8,600 offices across more than 110 countries and territories.

For more information about RE/MAX, LLC, a business that builds businesses, visit joinremax.ca

Mindy:
Welcome to the BiggerPockets Money podcast show number 267.

Robert:
You know, having some kind of system for yourself will help you immensely navigating this so that you’re on your right repayment plan. You know that you’re making your payments like you’re supposed to. You know if you’re on a forgiveness program, you’re on track and you’re not going to be one of these people that falls through the cracks. So get organized. It’s crazy, but it’s the easiest way to make sure you’re on the right track.

Mindy:
Hello, hello, hello. My name is Mindy Jensen. And today, I am talking to Robert Farrington from The College Investor about the end of the student loan repayment, moratorium, and exactly what that means for you.
Well, okay. We were going to talk about how to prepare for the end of the student loan repayment moratorium, which was going to be happening on February 1st. But after we recorded this episode, the moratorium was extended for another 90 days. Rather than scrap the whole episode, which is absolutely still valid except for the date that the repayment starts, Robert Farrington is coming back to record a new introduction to the show to help us with these new updates. So Robert, what is the latest information about the student loan repayment moratorium?

Robert:
Yeah. So just like you mentioned, it was originally set to expire on January 31st, 2022. And President Biden extended it another 90 days. So payments are now set to resume on May 1st, 2022. So what does that mean for you? Well, we are still in a state of limbo for your student loans. Everything is still paused. There’s 0% interest. There’s no payments due until May. But as Mindy said, everything we talked about in the show is still valid. You still need to contact your loan servicer. You still need to get ready to resume making payments. It’s just that date has given you a little bit more time, especially with all the craziness that is going to be the start of the year with tax season and everything else. So take the time, get organized. But now you have until May 1st.

Mindy:
Okay. And let’s say that somebody was all set to resume on February 1st. In my opinion, now is the best time to be making payments. Because during the moratorium, if you had the ability to continue make payments, paying no interest is better than paying interest, right? I mean, if you were about to start repaying your loans, I would suggest continuing with your plan. Every dollar of payment that you’re making now with this zero interest means that every dollar goes directly to your principal instead of being spread out between principal and interest.

Robert:
You know, I don’t necessarily agree with that. I think that people that haven’t been paying their loans should not necessarily start paying their loans early.

Mindy:
Oh. Wow. Okay. Why?

Robert:
Well here we go, because here’s the thing. It could get extended again. So we weren’t expecting this extension. The Department of Education made it very clear that January 31st was the final extension. And yet here we are, and it got extended until May. And the president does not have the ability to cancel student loans by executive order. But one interesting thing that he could do is continue to extend this repayment pause out over and over again, as long as there is still a state of emergency for the COVID-19 pandemic. So that’s what he’s doing. And I’m not here to prophesize that he could do it again or not do it again, but it’s a potential thing that could happen. Right? So I don’t see a reason why you should make a loan payment that you don’t have to make. I think you should be taking that money and putting it towards other loans that aren’t paused. Maybe you have credit card debt. Maybe you have an auto loan. Maybe you have other things that you can better your financial situation. And I think that’s a much more valuable use for your extra dollars than going towards your student loans early. Or invest it, shoot. Put it towards something that could start making you money in the future. Right?
So use that with your extra student loan dollars. I don’t think you should pay down your student loan debts any earlier than you have to. Remember, it’s also 0% interest. So by not making these payments, it’s not hurting you in any way either. So I’m the kind of guy that wants to say hold off, let’s see what happens April. I don’t think it would be extended again. But we live in a really kind of crazy world right now and it definitely could be. So yeah.

Mindy:
Okay. I think that is a fair argument that you have made. So I will say that once again, personal finance is personal. And if you agree with me, yay. And if you agree with Robert, yay. And just choose your own adventure that allows you to sleep at night.

Robert:
Yeah. Whatever your adventure is, just realize that at some point in time, the payment pause will. And and please be ready. Just be ready.

Mindy:
Yeah. And when it does finally end, in the next few minutes, Robert will tell you exactly how to prepare so that it is a smooth process. Okay. So without further ado, let’s jump back into the episode that we had recorded before they pushed back the moratorium and screwed us all up. So, okay. Robert, thank you so much again.

Robert:
Thank you.

Mindy:
Robert, welcome to the BiggerPockets Money podcast. I am so excited to talk to you today.

Robert:
Hey, thanks so much for having me. I am excited to be here.

Mindy:
Robert, let’s jump into this with both feet, because we have a ton of stuff to cover. In March 2020, all federally held student loan payments were put on halt. What did that actually mean?

Robert:
Yeah. So this is an unprecedented program where all federally held loans, so this is direct student loans and a small amount of Perkins and FFEL loans had 0% interest, no payments required, and no collection activity. So if you were in default, all that stuff was paused so that people did not have to make their payments for almost two years at this point in time. It’s crazy.

Mindy:
Wait. Even if you were in default, you didn’t have to make payments?

Robert:
No. So all collection activity during this time was paused. So that means people that had not paid their student loans were not getting their wages garnished, were not getting their tax refunds garnished. So it’s been an unprecedented 22 months now of this where nobody had to make payments on their federally held student loans. There were a small amount of private student loan borrowers that still had to make payments. There were a small amount of FFEL loan borrowers that still had to make payments. But for almost 40 million Americans with student loans, no payments were needed for the last two years.

Mindy:
Okay. Well sorry, but that’s ending. Now we’re in January of 2022, and the student loan payment moratorium is the end. At the end of this month, well I guess at the beginning of next month, you are going to have to start making your payments again. What does this actually mean for borrowers?

Robert:
Yeah. So for the first time in 20 months, borrowers are going to have to start making their student loan payments again. Right? It sounds pretty simple, but there’s a lot of changes that have taken place. I mean, just think of all of our lives over the last 20 months, right? Things are different. Incomes are different. We have the great resignation. People are changing jobs. The world is in a very different place. We have pre-COVID, post-COVID. I don’t know how you want to describe it. But for student loan borrowers, it means a lot of change, right?
So they’re going to have to resume their student loan payments. For some borrowers too, this might be their first student loan payment. Imagine if you graduated college in the last two years, right? So you’ve never even had to make a student loan payment.
So these borrowers need to get with their loan servicers, start planning out what February of 2022 is going to look like. It means that you need to log in, see what your loan servicer has, what your payments are. If you had an auto debit, let’s say you were paying your student loans before the pandemic. Well guess what? All those payments, they’ve been stopped. The government doesn’t know if they should still draw from that account. So you need to log in, reset up your payments, know what your payments are, and be ready come February 2022. Sometime in that month, you’re going to have to make your first student loan payment for the first time in a long time.

Mindy:
Now there was talk of student loan forgiveness, something like up to $50,000. What actually happened with that program?

Robert:
So it’s important to know that this was a campaign promise from President Biden, right? He said that he supports Congress for giving up to $10,000 in student loan debt. And members of Congress have thrown out all kinds of numbers. $50,000 was a number. $10,000 was a number. Some of them are like, “Hey, forgive it all.” But all these were campaign promises. And in all of the legislative packages that have happened over the last year, none of them have included any type of student loan forgiveness.
And what you’ll see right now is members of Congress and other people are saying, “Well, he could do it by executive order. He could just wave a pen and forgive student loan debt.” And honestly, that’s not the case. There is really no executive power that Biden has to forgive student loans en masse, or blanket forgive, or just wipe everyone’s debt away.
He does have certain powers though, that he can do. And you might have seen some of these headlines lately where he’s automating certain repayment programs, right? And the rule that Congress has set out is that says that the president has the power to forgive student loans for any program that’s already been by Congress. So what you’re seeing right now is Biden is streamlining the bureaucracy, which I think is a good thing. So he’s forgiving payments for people that have total and permanent disability. Well, think about it. These people might not even be able to fill out paperwork because they are disabled. But the Social Security Administration and the VA already know they’re disabled. So why are we making them do this crazy bureaucracy of filling out forms and all this stuff when it’s like we know they’re disabled. Let’s just forgive their student loans.
And the same is true with Public Service Loan Forgiveness, right? The IRS knows where you work. They know if you have a nonprofit job, right? The Department of Education knows if you’ve made payments. It’s not hard. We have the greatest data scientists in the country that work here. You can put two and two together and see if people qualify for these programs without having crazy government bureaucracy.
So when you’re seeing these headlines of Biden forgiving student loans, that’s what you’re actually seeing. He’s actually taking existing programs that are already are in effect, and he’s just streamlining the bureaucracy so that people that have already qualified are getting the forgiveness they deserve.
But, we’re not going to see any blanket student loan forgiveness. I’m sorry. I don’t want to be the bearer of bad news on this show. But you shouldn’t plan on it. You should plan on resuming your student loan payments in February when the student loan payment moratorium ends.

Mindy:
Okay. So it sounds like I’ve been reading some click bait headlines, and I need to actually click onto those articles and read the actual content instead of just saying, “They’re going to forgive up to $50,000 of my student loans.” It also sounds like if I’m getting a student loan forgiven, I would know about it.

Robert:
You would because you would already qualify for a program. So like I said, total and permanent disability was one of the big ones. Another one was borrower defense to repayment. So these are people that were defrauded by their schools. So these are the ones that went to for-profit schools. The schools misled them, made them take out a bunch of crazy student loan debt, and now they are now not able to repay these loans. And Public Service Loan Forgiveness. This is one of the most popular programs that the media likes to criticize. Because frankly, the government really screwed up the execution of this program. So what you’re seeing today is ‘fixing’ what should have already taken place over the last few years of getting people the forgiveness that they rightfully deserve, under the law that exists today. These aren’t new laws, these aren’t new programs. These are existing programs that have been around since 2007. It’s just they’re 10 year programs, and they were mismanaged for a decade.

Mindy:
Okay. So bottom line on that sounds like there’s nothing new.

Robert:
There’s nothing new except the fact that people are actually getting what they deserve and they should have gotten for years and years now. And they’re making the system and bureaucracy a little better, which is a win. Because honestly, for Public Service Loan Forgiveness specifically, millions of Americans qualify for this program. If you have student loans and you work in public service for 10 years, you are legally entitled to get your student loans forgiven, 100% of them, right? All you have to do is make 120 payments, which is 10 years of payments, right? And work in public service. It’s a really easy program to qualify for, but you just have to follow the rules, certify that you work in public service, and send in your forms. And that’s why I love this program. But on the flip side, it’s been very mismanaged. And a lot of people that are entitled to loan forgiveness, teachers, firefighters, government employees, people that work in hospitals. We’re not talking doctors, anyone that for nonprofits or public service entities. From the accounting team, to the office team, to the actual teachers that are in the classroom. All these people are entitled to these programs. And we just need our government to actually process the paperwork like they’re supposed to.

Mindy:
Yeah. These programs have been fraught with problems. It sounds like things are changing. I know personally, now I’m trying to think who do I know that applied for the program or applied for the repayment and was turned down? What do you do in that situation?

Robert:
Well, that’s what this thing of Biden’s waiver has come into effect. So if you’ve been denied Public Service Loan Forgiveness, what you need to do is you need to reapply for Public Service Loan Forgiveness, send in your employment certification form. You could upload it on fed loans website or the department studentaid.gov, or you can mail it in the old fashion way. But you need to get that form in by October of next year. And the Biden administration is manually reviewing every single application for it to make sure that people that are legally allowed to qualify for it are getting the loan forgiveness that they deserve.

Mindy:
Do you have anything on your website that talks more about this student loan forgiveness? Because that seems like a very important topic. But also, kind of going to go off on a tangent. And I have a lot more question for you about the student loan repayment, which is more timely.

Robert:
Absolutely. So you can go to thecollegeinvestor.com/studentloanforgiveness. I have the complete list of every student loan repayment plan there. And we can go down this rabbit hole. There’s over 80 of them. And I know some of these big ones that make all the headlines are what people like to talk about, but there might be one for you too. You got to see if you qualify. So check that out, and let’s continue with the student loan repayment pause ending. And we can talk about that.

Mindy:
Yeah. So if you’re a public employee, thecollegeinvestor.com/studentloanforgiveness. And I’ll have that link and all the other links that we’re going to talk about at biggerpockets.com/moneyshow267 which is the show notes for this episode.
Okay. So let’s get back to student loan repayment moratorium lifting. You recently survey 1,200 student loan borrowers. 71% of them said that they are financially ready to resume payments. But that still leaves 29% of people who aren’t ready. What do you do if you don’t have a job or you’re not financially ready to continue your payments again, and the student loan repayment moratorium ends?

Robert:
Definitely. So the first thing to do is actually even know what your student loan repayment is. Log into your loan servicer, track down your student loans, and see what you owe. Because honestly, it’s been two years. A lot of people’s financial situations have changed. Your own situation might have changed. So that’s where it starts.
Part two is there’s multiple different student loan repayment plans. And some of them are income-based. So let’s say something didn’t work out, you don’t have a job right now, or your income is lower than it was pre-pandemic. Well, you can re-certify your income right now in January, February. And your payments will reflect your income. And they could be as low as $0 per month legally, assuming that you have a very low or no income.
You could also apply for an unemployment deferment. This isn’t as good as re-certifying your income, but it’s an option. If you think it’s only going to be a short term that you’re unemployed, you can opt to defer your student loans for another six months. But remember, interest is going to start accruing other things. So it’s usually better to get on a payment plan, even if it’s only a few bucks a month, than it is to defer. But you can also defer your student loans because of your unemployment.

Mindy:
And I’m sorry. How long can you defer your student loans?

Robert:
Well you can do it for up to three years, but it gives you in six month increments. So you can defer for unemployment in six month increments. And if you’re still unemployed, you can say that you’re still unemployed and push it down the road a little bit. But again, if that’s really the case, it’s better to be on an income based repayment plan where your payment could be $0 a month if you’re actually unemployed and have no income. So that’s a better thing because you’re in repayment at $0 versus having your interest and stuff accrue. And you’re not really in repayment, you’re in deferment.

Mindy:
Okay. Since we’re talking about repayment and this is a big deal, this is going to be in the news, are there any repayment scams that people are going to need to be on the lookout for when the repayment plan opens back up again?

Robert:
Oh my gosh. I’m sure if anyone out here has student loans, they’ve received that robo call that says, “We can lower your monthly payment,” or, “We can offer you student loan forgiveness.” So all these things are scams. What they’re trying to do is they’re trying to get you to pay them money sometimes up to $1,200 for them to potentially enroll you in one of these repayment plans that we just talked about. So I think it’s important for people to realize what a legitimate student loan help looks like. So everyone with federal student loans can do everything with their student loans for free with no cost by going to studentaid.gov. Government website, that’s actually a really good government website. And you can go in, log in, and see all your student loans right there.
A second option that’s free is you simply call your loan servicer. Now I know a lot of us hate our own servicers, and you see the headlines. We like to rag on how they’re not competent. But honestly, for a lot of these basic questions, they’re really good. And you can call fed loan, or Navient, or Sallie Mae. Call your loan servicer and be like, “Hey, I want to change my repayment plan. What are my options?” And they will help you again for free.
Any of these companies that are promising you loan forgiveness or a lower payment, if they’re charging you money for it, it’s a big red flag. You should probably not do it. Because what I see happen too many times is people pay these companies money. And guess what? They don’t do anything for you. And you might think your student loans are being handled. Well, guess what? They’re not. And now you’re not making payments and other things. So not only did you pay $1,200 to a company. But your student loans might go delinquent or in default, hurt your credit, yada, yada, yada, right? Or part two is you pay $1,200. And this company filled out the same form that you could have filled out in about five minutes and sent in, or done on their website and sent in. And maybe they did the right thing for you, but you paid $1,200 for something that would’ve taken you about five, seven minutes to do for free on studentaid.gov. So don’t need to pay for help.
There is a difference though if you’re working with a certified financial planner or something like at. Because this person is going to look at your student loans as a whole financial picture. And this is for more advanced cases. Maybe you have a whole need for a financial planner and want to talk to a financial planner. Well, a real good financial planner should look at your student loans as well as your whole entire financial picture. So that’s different. They also have a fiduciary duty to you. But if you’re responding to a website advertisement, or a text message, or a voicemail if someone that says they’re going to lower your student loan payments, don’t fall for it. They’re not going to help you. You’re just going to pay money for something that you don’t need.

Mindy:
Okay. So on the flip side, I know that there are legitimate companies out there like SoFi is a legitimate refinancing company. What does a legitimate offer look like?

Robert:
Yeah. So what you just mentioned is student loan refinancing. So first off, let’s talk about student loan refinancing. When you refinance your student loans, you are taking out a new at student loan to replace your existing loans. That could be existing private loans or your existing federal loans. And the reason why you might want to refinance your student loans is simple. You save on interest, right? So you might see an offer from SoFi, or Earnest, or LendKey, or any of these companies. And they say, “You can get 2% on your student loans.” And you might be looking at that and being like, “Wow, that’s like half of my rate.” Right? But the problem is, is when you refinance into a private loan, you lose a lot of benefits, right?
So when you have a federal student loan, you got to have your payments paused for 22 months. When you have a federal student loan, you qualify for the loan forgiveness programs that we were just talking about. When you have a federal student loan, you get unemployment deferments, you get other hardship options. You get these income-based payment plans. You don’t get any of that with a private loan.
So it does make sense for some people that are going to pay off their student loans in maybe three years, and are high income, and aren’t going to qualify for any these programs. But it’s our estimation that about 90 to 95% of federal student loan borrowers should not refinance, even if you can save on interest.

Mindy:
Okay. So this leads me to another question. How do I know that it’s a good idea for me to refinance my student loan out of the federal into … because it sounds like if I have a private student loan, there’s not really any benefits to staying with the higher rate. I should refinance that into a lower rate whenever I can. Strictly talking about federal student loans, when is it a good idea to refinance my federal student loan?

Robert:
Definitely. So I have a few criteria of when it makes sense to refinance your federal student loans into a private one. First off is you are going to pay off the loan in less than five years. Okay? Pay it off. We’re not talking about loan forgiveness or anything. Second off, you are never going to leverage any type of student loan forgiveness program. You don’t qualify, yada yada yada. And number three is you’re not going to need any hardship options, or deferment options, or things like that.
So the reason I say that is because the lowest interest rates that you’re going to see on your student loan refinancing offer are going to be on five year or less variable rate student loans. Some of those loans are down to 0.89%. They’re super low. But once you start getting past the five year mark and going to the 10 year mark, you’re still looking at a four, five, 6% loan. Which is very close, if not the same as a federal student loan. So why are you going to give up maybe half a percent interest, but lose all of these benefits that you get with your federal student loan? Plus the longer you’re paying on a loan, the longer you could end up wanting a hardship option, or needing to change your repayment plan, or potentially qualifying for loan forgiveness. So again, there’s risks here. The shorter, more concrete loans could totally make sense to save on interest. But beyond that, the benefits that you get that aren’t interest rate, right? But the benefits are huge on federal student loans.

Mindy:
Okay. You used the term variable rate. Are all student loans variable rates, or are there fixed rates as well?

Robert:
So all federal student loans are fixed rates. All right? And as if you took out a student loan two or three years ago, your fixed rate is like 2.78%, super low. If you took out a student loan when I did about 20 years ago, we were about 6.8%. And this was in the early 2000s, which honestly is still not that bad. But the rates have continued to de increase. So honestly, most borrowers over the last 10 years or so are going to see student loan rates in the 4%, 5%, maybe even as low as 2% range. And that’s why when you refinance, you’re not going to see much of a difference.
Variable rate student loans are what you see in the private sector. So most private lenders offer variable and fixed rate loans. The variable rate ones are the ones with the really good looking interest rates that you see, because they’re offering you an introductory rate at 1.5%. But it’s a variable rate five year loan. So this is a loan that the rate can change every single month throughout the duration of your loan.
Now, we are in low interest rate times. So that could work in your favor, but honestly, we’re also in inflationary times. So interest rates could be rising. So you are taking a little bit of a gamble when you take a variable rate loan that your loan interest rate could rise over the next few years. But it’s a math question, right? Do you think the savings you’re going to get up front is going to you money? And that’s why the longer you go with these loans, the better the federal loans just are looking. Fixed rate, lots of benefits, things like that.

Mindy:
Yeah. I keep waiting for rates to go up. Rates have been so low for so long. I keep waiting for them to go up. And I didn’t realize that they were variable. My oldest daughter’s a freshman in high school. So I’m not quite into the learning about student loans yet, but we will be bringing you back to talk about how to pay for college in a few months, because that’s going to be something that I’m going to have to start learning about. So thanks Robert.

Robert:
Yeah.

Mindy:
Let’s go back to your survey. You said 65% of borrowers know what their payment is going to be. That leaves 35% of borrowers who don’t know what their payment is going to be. So first of all, why would you not know what your payment is going to be? Is that because your interest rate has changed or because … why would you not know what your payment is going to be coming up?

Robert:
Well yeah. I mean first off, it’s been almost two years. So you have a good chunk of borrowers, probably about two to 3 million borrowers that this is their first student loan payment. So they’ve never even had to make a student loan payment before because they graduated college right now during the pause. And then the second group of people are people that are on income driven repayment plans. So we touched on this a little bit earlier, but about 30 to 40% of all federal student loan borrowers are on income driven repayment plans. And these are repayment plans where your monthly payment is set every single month based on your income. So these borrowers need to re-certify their income every year based on their tax return, or you can do alternative methods like giving them a pay stub, or even writing a letter that says I’m unemployed. And that will set your payment up for next 12 months.
Well since it’s been almost two years, these borrowers haven’t recertified their payments in a long time, and the data is out of date. So right now before the student loan payments resume, this cohort of borrowers need to give the government or give their loan servicer their most recent income so that their payments can be calculated based on their current income. And they’ll know exactly what they’re going to pay. It’s a little complex and confusing. But on one hand, these payments are hugely beneficial because income driven repayment’s based on your income. You can always afford your student loans. But on the other hand, going into this repayment restart, there’s lot of gray area because people don’t necessarily know what their payment is going to be exactly. And that can give a lot of fear and doubt in student loan borrowers’ minds.

Mindy:
How long does it take to process this information?

Robert:
So it usually takes about 30 days. But, I like to put this asterisk out there. Since we are restarting loan pay payments for 43 million Americans, I could see timelines taking a little bit longer. And the Department of Education says if you’re on an income based repayment, they’re probably going to give you a grace period of up to six months for both you to re-certify your income, but also for them to process everything. Because this is a lot of people all at once. Usually you had everyone re-certifying all throughout the year at different times. It wasn’t a big deal. Now you’re going to have every single borrower trying to do it all at once. I think it’s going to cause a little bit of a paperwork log jam at these loan servicers. And that’s why I recommend you do it online. You can go to your loan servicer’s website, or you can go to studentaid.gov. You can find the little link on studentaid.gov that says certify my income, and you can do it on there. And that will help expedite everything on the backend so that your stuff gets re-certified so your first payments are accurately reflective of your income. But I would encourage everyone do it sooner rather than later. Don’t wait until right before the deadline so that you get good payment data.

Mindy:
Okay. In your survey you also ask, “Do you know what repayment plan options you qualify for?” What are the different repayment plan options?

Robert:
Yeah. So when you get your student loan for the first time, you default what’s called the standard 10 year plan. And this is a standard 10 year fixed plan where every payment for 10 years is fixed at the same dollar amount. And typically for most borrowers, this is also the highest monthly payment because it’s amortized over 10 years. It’s fixed. So that’s what you default into. Beyond that, there are the graduated repayment plan and the extended repayment plan. And the extended repayment plan is very similar to the standard 10 year, except they extend it out to 25 years. So you have a fixed payment for 25 years.
The graduated plan is like it sounds, it graduates and starts low. And then every year, it re-certifies a little higher, a little higher, a little higher for up to 10 years. So you’re still paying off your loan in about 10 years. But it’s low upfront, higher on the back end.
And then, you get into this bucket of income driven repayment plans. And there’s four of them. Three of them are the main ones. You have income based repayment, pay as you earn, revised pay as you earn, and income contingent repayment. And I knew I just threw a ton of variables out at you. So you can find this in the show notes, link to my site as well. But all four of these plans will set your monthly payment as a percentage of your income each month.
And these are great options if you have low income, uncertain income, and it changes every month. But also, almost every student loan forgiveness plan requires you to be on an income driven repayment plan. So if you want to qualify for loan forgiveness, you also want to take advantage of the income driven repayment plans, which could also set your payment at $0 a month if your income is low at enough.
So there’s a lot of benefits to these plans, even though it sounds scary that you might not be paying enough to amortize your loan, don’t. Pick the monthly repayment plan that you can afford every month, because that is going to be the savviest way, you’re going to pay off your student loans over time.

Mindy:
Did you just say there’s a 25 year repayment option?

Robert:
Yes I did. There’s actually a couple 25 year repayment options. Here’s a scarier stat though. The average time it takes for someone to repay their student loan in America these days is 18 to 21 years, depending on your loan type, graduate school, things like that. So that’s average. So you see that there’s these 25 year repayment plans. A lot of them are actually 20 year repayment plans. Yeah. That’s why we’re here today.

Mindy:
But we don’t need to work on changing college and how much it costs. There’s no problem there.

Robert:
Right.

Mindy:
That’s a story for another time. Okay. This has been super helpful. Let’s say we have a listener who has taken advantage of the moratorium. What steps do they need to take right now before the program ends to make sure that they don’t miss a payment, they don’t negatively impact their finances, etc.? Let’s make a bullet point list that we’ll include in our show notes.

Robert:
Definitely. I think the key here is to get organized, right? So it’s been two years. Log into your loan servicer’s website. Well first off, let’s back it up. If you don’t even know who your loan servicer is, let’s find your student loans. Go to studentaid.gov and log in, or you can pull your credit report if you have private student loans, and you can see all your loans listed there. You can go to free annualcreditreport.com. Right? You can get your credit report once a year from all three bureaus. So get your credit report or log to studentaid.gov. Find your loans.
Step two is to get organized. Make sure your name, address, email address are all up to date so you don’t miss your first statement. Because let’s be honest. A lot of us took out our student loans when we’re in college. Maybe you used your college email address that doesn’t even work anymore, right? It got deactivated. Maybe you put your address of your parents when you took out your student loans, and you don’t live there anymore, and you need to have your address updated.
So the key is don’t miss a statement, a letter, a correspondence from your loan servicer. Update your information. Name, address, phone number, email, all those contact forms, right?
Step three is to make sure that your auto debits and anything that you want automatically done are updated. So like we touched on before, the government turned off everyone’s auto debit when it comes to student loan repayment. So if you had automatic payments set up before the pause, you’re going to need to log into your loan servicer’s website and put in all your banking information again so that your payments automatically get pulled out on time. You don’t miss a payment. There’s a lot of reasons why they did this, but we’ll keep it simple. They did it. This is what you got to do.
Step four is update your income. If you’re on an income driven repayment plan, you need to re-certify your income. And the sooner you do that, the better so that your payments reflect your current income sooner. And then step five is if you qualify for any loan forgiveness programs like Public Service Loan Forgiveness, you certify your employment for the last two years. Because all of your paused payments for the last two years do count for student loan forgiveness programs, but you still got to make sure you fill out the paperwork to show, “Hey, I was employed in public service. I had a job, yada, yada, yada.”

Mindy:
Awesome. That is going to be super helpful for people who have taken advantage of this program. Now at the same time that they paused student loans, they also offered a mortgage moratorium. If you took advantage of the student loan moratorium, did this negatively affect your credit?

Robert:
So it wasn’t supposed to.

Mindy:
That sounds like there’s more to that story.

Robert:
There’s a lot to this story. So it wasn’t supposed to. And honestly, everything should be fixed by now. But when they paused payments that very first month, the loan servicers did not change their programming in their system. So they did report a lot of borrowers delinquent to the credit bureaus for that very first month back in March and April of 2020, however your payments lined up. Because this was unprecedented. They’ve never turned off everyone’s payments. So I think they’re on the back end. There’s a lot of technical stuff you got to do. It’s not just like pause payments, right?
So they worked hard. They should have corrected this all. But if you are seeing any negative marks on your pay out your credit report from the payment pause still, you can dispute it with the credit bureaus. And I know that’s annoying. And you got to send these letters and certify it, but it should not negatively impact your credit at all.
This is actually even a benefit. If you were in default on your student loans before the forbearance or the payment pause started in March 2020, all collection activity for the last 22 months has been ceased. So this actually is a real benefit. And hopefully people took advantage of it, because you can get your loans out of default, back on track. And you actually have a 22 month history of non-collections on your student loans, which hopefully would actually benefit some people’s credit if that was your situation.

Mindy:
Okay. So I get a copy of my credit report. I look, and I see that this has been reported as non-payment. So then I dispute it. Hopefully you are getting a copy of your credit report every single year. But if you haven’t, do that now. Like you said, annualcreditreport.com is the free credit reporting service that the three major credit reporting companies are required to provide you a copy of your report every single year. Make sure that you don’t have a negative report. If you do, file a dispute. There’s a really easy way to file the dispute with them. I believe it’s on their website. If you see something that’s incorrect, file a dispute here, click here and file it. And get that taken off of your credit report because they should not have done that. That’s very interesting. I didn’t realize that that wasn’t smooth as silk, although it shouldn’t come as any surprise since this is actually a government program. And while I would like to hope for the best, it doesn’t always actually work so smooth. Enough about that. Enough about that. We’re not getting political. Okay Robert, is there anything else that I should be asking you about student loans, student loan repayments, and all of the stuff that we’ve talked about today?

Robert:
I think the big thing to just remember for everybody out there is the key to navigating these, whether you’re talking about student loans at normal times or student loans right now when the payment pause is ending is to get organized with your student loans and your money. The average student loan borrower actually has five student loans, right? You took one for every year of school. Freshman year, sophomore year, junior year, senior year, plus fifth year, summer semester, right? So you might have five different student loans. Now granted, they all might be in the same place on the same monthly statement and you don’t think about it, but some people are unlucky and have them in two spots or different things. So the key to navigating this is to get organized. We had the step-by-step list we just talked about. But whether it’s using a tool, or writing down where your loans are and all your income and expenses, and having some kind of system for yourself will help you immensely navigating this so that you know you’re on your right repayment plan. You know that you’re making your payments like you’re supposed to. You know if you’re on a forgiveness program, you’re on track, and you’re not going to be one of these people that falls through the cracks. So get organized. It’s crazy, but it’s the easiest way to make sure you’re on the right track.

Mindy:
I love that advice. And I’m going to throw in a little bit of my own. Just because you don’t know where your student loan is, doesn’t mean it’s not there. So if you’re not paying attention to it, you’re doing that ostrich thing where you’re hiding your head in the sand, it’s still there. It’s still accruing interest starting February 1, right?

Robert:
Yeah. February 1, interest kicks back on right?

Mindy:
Figure out where your student loans are and start repaying them. Robert, this has been so much fun and so informational. I really appreciate your time today, but we are not finished. I have my famous four questions. Are you ready?

Robert:
I’m ready. Let’s do it.

Mindy:
Okay. Robert, what is your favorite finance book?

Robert:
I really love I Will Teach You to Be Rich by Ramit Sethi. Honestly, great book. I actually give it to a lot of the college graduates and things I know when they’re happening in their life events. It’s a solid book. Yes. We talked about clickbait headlines. It’s a clickbait headline. But it’s a solid, solid personal finance book.

Mindy:
See? No, I don’t agree with you that it’s a clickbait headline. Because if you follow the steps in the book, he is teaching you how to be rich.

Robert:
You’re right. You’re right. 100% correct in that one. But to sell it to somebody that doesn’t know the contents of the book, you’re kind of relying on him on that headline, right?

Mindy:
Well yes, it’s an eye catching headline. But it isn’t untrue.

Robert:
True. I agree.

Mindy:
What was your biggest money mistake?

Robert:
I think my biggest money mistake was when I graduated college, I felt like I deserved my brand new car. So I went out and bought a $40,000, financed that bad boy. It was an Acura TL. I mean, it looks sweet. I loved it. Great car, so dumb. But you know what? You live and learn. I did drive that thing for like 11 years and whatnot. But anyways, I should not have done that.

Mindy:
Yes, I think that’s one of the top answers to that question is I bought a brand new car because I deserved it.

Robert:
Because I deserved it.

Mindy:
No, you don’t deserve it if you can’t afford it.

Robert:
I mean, I could afford it. But I honestly think of all the other things I could have afforded in lieu of it. And that’s really what grinds my gears.

Mindy:
Okay. What is your best piece of advice for people who are just starting out?

Robert:
I think we just talked a little bit about it, but it’s get organized. Honestly in a decade of helping people, most people that need financial help, just start with getting organized. Most people aren’t organized. What’s coming in? What’s going out? What do you own? What do you owe? And I think part two of that though is do it in your own style.
So I’m a tech guy. I like my apps. So I will choose to do an app, but that’s not everyone’s style. There’s spreadsheet people. My sister loves to put on an actual book, and has a journal and literally draws the lines on paper. So the only way getting organized will work for you is if you do it in a style that works for you as well. So I think there’s two parts to that. You’ve got to get organized, but you also got to do it in the style that works for you that you’re going to stick to.

Mindy:
Yes. I don’t want to do an app. I’m old. I want it old school. I want it on a piece of paper. But the reason I went on a piece of paper is because then it’s in my face. It is super easy to put the phone down, to put the app down, to put the tech down, and walk away from it. But when that book is in front of my face in the kitchen where I always am, it’s so hard to ignore it. And I don’t ignore it. I don’t clean up the kitchen that frequently. It’s always there. Okay. What is your favorite joke to tell at parties?

Robert:
Oh man. Okay. Well, we should do a college themed joke since we’re here. So I’ll tell you, I don’t always study. But when I do, I just make sure my parents notice.

Mindy:
That’s awesome.

Robert:
I know, it’s a corny one. It’s a corny one, but it works.

Mindy:
C’s get degrees.

Robert:
Honestly they do.

Mindy:
Ask me how I know. Okay. Robert, where can people find out more about you?

Robert:
Yeah. So you can find me at thecollegeinvestor.com. If you’re a listener, because I think you are, you’re listening to this show. You can find The College Investor audio show on your favorite podcasting platforms. And if you like to watch content, we’re on TikTok, we’re on YouTube. You can find us at The College Investor on those platforms as well.

Mindy:
Are you doing little dances on The College Investor TikTok?

Robert:
No, we’re dropping great educational content that’s fun and entertaining in 30 seconds or less for sure.

Mindy:
Oh, that’s even better. Do you do a little dance while you do it? Maybe you should.

Robert:
I should. Right?

Mindy:
Okay, awesome-

Robert:
That would get us negative views probably.

Mindy:
I know. I told my daughter I was going to start doing TikTok videos. She’s like ew. Thanks sweetheart.

Robert:
Right?

Mindy:
So hey, if you are feeling good about yourself, have a teenager. And then that’ll just knock you right down. Okay Robert, this was so much fun. I can’t believe I waited so long to have you on the show. I’m so happy that you had time to come talk to us today. This is really important stuff. I think that a lot of people kind of know that the repayment moratorium is ending. But this solid advice is going to be so helpful for people to get their payments on track, so that they don’t miss a payment, so that negatively affect their credit. And so they can get those student loans repaid and start building their life towards financial independence. So thank you so much for your time today.

Robert:
Thanks for having me. This has been a blast, and I hope people take action. You got a couple weeks left. Let’s do it.

Mindy:
Get organized and get it going. Okay. From episode 267 of the BiggerPockets Money podcast, he is Robert Farrington from thecollegeinvestor.com. And I am Mindy Jensen, and we’ve got to scoot little newt.