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BP Podcast 054: Investing in Under $30k Real Estate, Working a Day Job, and Good Vs. Bad Neighborhoods with Lisa Phillips

by Brandon Turner on January 23, 2014 · 74 comments

  
Lisa Phillips

How much money does it really take to buy a rental property?

$200,000?  $100,000? $75,000?

On today’s show, we are going to chat with Lisa Phillips, a real estate investor who buys real estate in the under-$30,000 range and achieves some incredible cash flow from her mostly-passive investing.  Lisa shares some amazing insights into how she went from a personal foreclosure to owning several rental properties – bypassing the banks and investing creatively. If you are someone who is looking to get started investing with real estate investing without spending hundreds of thousands of dollars – this is the show for you.

Listen to The Show on iTunes

Click here to listen on iTunes.

Listen to the Podcast Here

In This Show, We Cover:

BiggerPockets Podcast _ Real Estate Investing and Wealth Building 9.42.11 AM

  • Investing in real estate while navigating the instability of day jobs
  • How going through a foreclosure changed Lisa’s financial future… for the better
  • Knowing when to call it quits
  • Tips for negotiating with creditors
  • What makes motivated sellers attracted to a certain real estate investor?
  • Tips for defining a good vs bad neighborhood
  • Finding a property manager who exceeds your expectations
  • How much does a good property manager charge?
  • Simple tips for attracting the best tenants to your rental properties
  • The positives and negatives of low-price investing
  • What crimes are acceptable?

Links from the Show

Books Mentioned in the Show:

Tweetable Topics

“Be clear & upfront with what you can do for other people. What’s in it for them?” (Click to Tweet!)
“Landlords: never sacrifice your standards just to fill a vacant unit.” (Click to Tweet!)
“When looking to invest in real estate, leverage the power of the internet.” (Click to Tweet)

Connect with Lisa

 

Email *
  



{ 74 comments… read them below or add one }

Ken January 23, 2014 at 6:30 am

Can I find your podcast on Stitcher radio?

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Joshua Dorkin January 23, 2014 at 7:57 am

Absolutely, Ken.

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Doug Merriott January 23, 2014 at 12:43 pm

Lisa,

That was a great podcast! Thanks a lot. I am not much for video, so I miss a lot of your stuff but you always seem to have a great perspective on reasonable priced properties.

Thanks again!

Doug

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Lisa Phillips January 23, 2014 at 2:20 pm

Thank you Doug! This idea has always been there, Im just bringing it out in a format and turn of phrase that easy to understand and apply! This can work, I think, If you’re sensible, unabashed, and do it with integrity. Thank you!

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Shay Campbell January 23, 2014 at 1:18 pm

Your podcast was inspirational Lisa. You have the determination and drive to succeed at whatever you choose to do. Thanks for sharing your story!

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Lisa Phillips January 23, 2014 at 2:20 pm

Thank you Shay, I hope we all can get our vision and achieve them. I appreciate your kind words!

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jen January 23, 2014 at 2:22 pm

Is a transcript of this Podcast available?

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Brandon Turner January 23, 2014 at 2:31 pm

Hey Jen,

Not yet – but we are hoping to have that available in the future!

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jen January 23, 2014 at 2:36 pm

Okay, thanks for your reply!

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Lisa Phillips January 23, 2014 at 7:17 pm

Josh and Brandon –
Thank you both so much for giving me the opportunity to be a guest on the podcast!!

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Joshua Dorkin January 23, 2014 at 8:29 pm

Happy to do it, Lisa!

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mark brogan January 23, 2014 at 7:46 pm

great podcast lisa
thanks for all the usefull info
i recently closed on a property in a lower income area i used your crime info lookup before i bought it
like you said some crime you can deal with

thanks for everything
mark

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Lisa Phillips January 24, 2014 at 9:40 am

Excellent! I have gotten the art of internet leverage down, and it makes a huge difference with this strategy. Congratulations! :-)

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jason January 23, 2014 at 8:06 pm

I’m listening to the show. I definitely picked up some up great info on spotting emerging areas.

@lisa phillips How did you find about the John Hopkins development plans? Local news paper or another resource?

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Lisa Phillips January 24, 2014 at 9:44 am

Ah, now that one. So, I had already purchased and renovated 1 property in the area. I was happy with the results, so I saw there were more. I went driving around to look for more with the under 30k, but relatively low crime stats. When I saw this home, across the street this entire block was cordoned off, so I sat there for about 10 min. after my real estate agent left, and saw a security guard drive around this area and parked. When asked, they told me the plan, and I went and looked it up and saw that they were breaking ground in 6 months.

I guess the lesson is if you’re looking at properties in this price range, you’re basically already at the bottom, and can only go up. Now, if you’re looking at a not so nice neighborhood, but its next to a REALLY NICE economic hub (university, hospital, etc) its only a matter of time before that institution puts an all out effort to revitalize. Its just going to happen. I always do prefer a property next to an “anchoring” type institution.

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Steven Haskins January 26, 2014 at 1:13 pm

Hi Lisa,
Great Podcast! I am in Missouri and is trying to do exactly what you are doing. How were you financing the properties? Did they ask for 20% down? Were you a cash buyer? Owner financing? I am having trouble getting the cash to buy and take ownership of these properties. Please tell me what strategy you use? I have a realtor working with me but I keep running into a brick wall.

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Steven Haskins January 26, 2014 at 1:31 pm

I listened to all of the podcast. Thank You. I will try to find other ways to pull money.

Lisa Phillips January 26, 2014 at 7:31 pm

Hi Steven! No problem, there are a lot of different loan products I use, since the price range is lower, so I don’t have to necessarily get a full mortgage when I purchase the properties. If you like,you can send me a colleague request and I can give you more details. That Biggerpockets Pro accounts really does open up the door to networking and sharing. Thanks for the comments!

Ryan W January 23, 2014 at 9:41 pm

350 a month? Once I called about buying a house that was 28000. They told me they wouldnt give me financing if it wasnt a minimum of 50k? What am I missing here?

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Lisa Phillips January 24, 2014 at 9:47 am

Hey! Yes, this can be the case, you have to call around. Each bank/credit union has their own missions/standards/ and experiences, which influences their risk tolerance and financial goals. You just have to call around, I have noticed that the credit unions I called, there were less mentions of minimum amounts. And, there are other loan/financial products that can be used in this price range outside of a conventional mortgage. You can PM me if you like. Thanks for the comment!

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Gerald K. January 23, 2014 at 11:12 pm

Lisa,
Amazing podcast. You have a lot of courage to keep buying properties after all you’ve been through. That $13K property you bought that rents for $900 is unbelievable. Forget the 2% rule, that’s like the 7% rule. Wow! Nothing even close to that in my area. Good luck. Hope things just keep getting better going forward.

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Lisa Phillips January 24, 2014 at 9:48 am

Thank you! I truly do appreciate your words, and yes it is a nice. Not every deal is “this good,” but I do get consistent results :-) Thanks, and good luck!

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Dawn Anastasi January 24, 2014 at 12:11 pm

Was it $13,000 rent-ready, or did you have to spend money rehabbing it?

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Lisa Phillips January 24, 2014 at 12:51 pm

Hi Dawn, thanks for tuning in! I put in ~23k For the repairs, new carpet, windows, door, painting, furnace, cleaning, and siding, etc. It was a sturdy foundation, but I wanted it to be able to withstand 20 more years of renters, so It was easier to invest in new, rather than re-harvest the old. And, the previous landlords, you can tell, hired a lot of “next door neighbors” to do repairs, so it was easier to replace rather than repair many items.

Lisa Phillips

Ronald Friesen January 24, 2014 at 10:45 am

Lisa,
Great podcast, Thanks. I have passed up even looking at a lot of these properties because of the neighborhoods that they are in. I am new in investing and was thinking that because these neighborhoods might not appreciate in value would not be a good deal. I think I need to adjust my thinking to cash flow instead. I like the way you stated to differentiate working class neighborhoods from slum areas, driving by in the daytime to look at activity and using crime websites. These areas are more in my price range, so this information has helped me a lot.

Thanks, Ron

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Lisa Phillips January 24, 2014 at 11:43 am

Thank you Ron, I love hearing that. I think even for experienced investors, its a nice thing to diversify (keep your A/B neighborhood, and then go to these neighborhoods and pick up a higher cash flow). I think they will still be within yours/theirs comfort level.

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Mike M January 24, 2014 at 11:27 am

My firm specializes in Lisa’s approach, which we switched to about 12 years into a 22-year history of property management. It does work, as she says, and it’s been a terrific, profitable way to rehabilitate troubled properties in neighborhoods that need a hand up. We don’t do debt, though, as the buy-in costs are low enough and we want — and need — to spend our money on rehab, maintenance, and upkeep.

It’s been great following Lisa and Al Williamson here on BP. Together, they pretty much epitomize our approach to real estate investing and management. Keep up the good work, you two!

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Ronald Friesen January 24, 2014 at 1:23 pm

Hi Mike, As a newbie I don’t understand what you meant by –(We don’t do debt, though, as the buy-in costs are low enough and we want — and need — to spend our money on rehab, maintenance, and upkeep.). If you have a chance could you please explain.

Thank you, Ron

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Sharon Tzib February 8, 2014 at 12:40 pm

That means he buys without a loan or mortgage of any type, Ron, for all cash.

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Brett Synicky January 24, 2014 at 11:58 am

Hi Lisa,

You mentioned that the 13k property you bought near Johns Hopkins was a HUD forclosure. I was wondering how much you put into it for repairs? Did I miss that in the podcast?

Thanks for a great show!

Brett

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Lisa Phillips January 24, 2014 at 12:48 pm

Your welcome Brent. I put in ~23k For the repairs, new carpet, windows, door, painting, furnace, cleaning, and siding. Thanks for watching!

Lisa Phillips

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Al Williamson January 24, 2014 at 3:33 pm

Lisa,
Thanks for being so open and honest with telling your story.
“Fear is the enemy of action!” I love that – and will repeat that to myself often.

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Lisa Phillips January 25, 2014 at 2:14 pm

Hi Al! Thank you, Im glad you like the quote, I’ve lived by it for so long, and its made a huge difference in what I have been willing to accomplish. Thank you!

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Shaun January 25, 2014 at 2:50 pm

Great podcast. Love your attitude and it was a great story.
I appreciate your prospective on buying these cheap properties. So many people will just crap all over them because they can’t believe things can be cheap and not horrible properties in horrible areas.
The key is identifying the inexpensive deals vs. the cheap crap that you don’t want for free.

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Lisa Phillips January 25, 2014 at 3:12 pm

Yes. Thats exactly what I have found. Takes a bit more time (although not much) to find the deals. Its not too much more work than anything else. Just maybe outside your comfort zone.

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Shaun January 25, 2014 at 2:52 pm

Josh from the intro the talk about how people not wanting to work and sending crappy resumes and others not responding to interview requests, I bet a lot of them are collecting unemployment.
You have to send in some number of resumes out a week to “prove” you are trying to find a job. If they really don’t want to get a job just send lousy resumes to jobs you aren’t qualified for!

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Lisa Phillips January 25, 2014 at 3:12 pm

Lol, so true.

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Billy Hills January 26, 2014 at 5:55 am

Cutting down on my personal expenses this year. Keep up the good work!!!

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Lisa Phillips January 26, 2014 at 7:32 pm

I hear ya! I don’t think I can accomplish my goals if there isn’t some level of sacrifice, and Im sure that goes for everyone! Thank you for the comment!

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ahmed January 26, 2014 at 8:44 am

love your podcast and the wealth on knowalge that you gave the listen to BP I am in the area have you ever looked at any of the condo were the price are in those area if so why are why di did you stay away.Thank you so much for the info

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Lisa Phillips January 26, 2014 at 7:33 pm

Thank you ahmed. I didn’t quite understand the question about condos, but go ahead and send me a message with the details, Im more than happy to discuss them! Thanks

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Ravi January 26, 2014 at 12:29 pm

Lisa,
Nice podcast. I like your insightful question: What is the basis behind expecting an appreciation 4, 5, 20 years into the future?
I get Brendon’s response about expecting an appreciation in line with inflation.

It seemed like you were trying to get beyond the inflation factor. Picking up on your clues regarding looking for crime stats and school quality, it looks like better trends over time can justify appreciation in the future (assuming trends continue to hold in future).

The websites you mentioned (spotcrime.com and crimereports.com) do not indicate historical trend information.

School quality information is available at greatschools.org

Have you come across sites that give historical trend?

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Lisa Phillips January 26, 2014 at 7:38 pm

I have not seen the historical trends, but I come at it from this perspective: I am renovating depressed housing that 20, 30, 40 years ago used to be fantastic neighborhoods. No one foresaw the lack of jobs that would make the prices become so depressed, so since I am cleaning these areas up, I see what HAS happened 20 years down the road, so I always question everyone’s assumptions. I can see myself picking up some of these same great houses now I wouldnt touch, for a bargain prices, it all depends on the jobs that will stay or leave 20-30 years down the road, from what I can see. No one saw all the manufacturing jobs going, are there other industries that today make a neighborhood sustainable, won’t be there because another industry goes away? If yes, thats when you get these depressed housing prices, If you can see where I get my perspective on this 20-30 years plus appreciation assumption that I just have to question.

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Aaron Yates January 27, 2014 at 10:31 am

Hi Lisa,

Im glad that you have finally got people to listen about our type of investing. Frankly I got tired of sharing and people telling me that basically Im full of s**t.

Thats the main reason I didnt go forward with your interview request. I get defensive when people call me a liar so its just better I leave it alone and only share with people who truly have an open mind and really want to learn.

Great job and after speaking with you on the phone I realized we are very similar with our ambissions, goals and drive to succeed in Real Estate. Its good to meet people like you!

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Dawn Anastasi February 7, 2014 at 4:34 pm

I love how you said “our type of investing” like we’re in a little club or something that no body really knows about. I’ve gotten that too — people insisting that I *must* be investing in a war zone due to the price of the properties I buy. I love buying the sub-30k houses!

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Lisa Phillips January 27, 2014 at 9:13 pm

Lol, thank you Aaron. I am sure that the skepticism is slowly, slowly receding, leaving a place for all investors to learn how to diversify their portfolio in ways they may not have looked at in the past. You have a lot of knowledge in your head, I hope I can get it all out of you in the future!

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Leo January 28, 2014 at 12:34 pm

I don’t know but one hour and nine minutes is way too long to make a point. Do you guys use an editor? I am sure that all this can be summed up in 15 minutes at the most.

Not just this podcast but most of them are just too long, I personally don’t have the time to hear it all. Sorry.

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Joshua Dorkin January 29, 2014 at 8:29 am

Leo – Our audience grows by the day because people find value in our shows. If they are too long for you and you don’t have time to consume them, then you don’t have to. Take care.

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Shaun January 29, 2014 at 10:22 am

To bad you can’t vote for comments here like in the forums.

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DL Martin May 11, 2014 at 10:01 pm

Josh, I will have to disagree with Leo on the show lengths.
1. Many times it seems like a “waste” to have guests on for less than an hour. Many sub-topics are “time hogs” that simply need several back and forth follow up questions from you and Brandon in order to convey a fuller understanding of the subject matter.
2. The podcasts can be downloaded and listened to as time allows. This is one of the marvels of “modern technology.” : )
3. Bigger Pockets is a community of people. I consider you and Brandon as friends of mine (even though we have never met). It follows, then, that any friend of Josh or Brandon (Podcast Guest), is also a friend of mine. It matters to me that Brandon relies on his cat to keep his feet warm during those blustery Pacific Northwest days. It matters to me that you are doing your best, juggling BP, a wife and three kids and RE Investing. It matters to me that Lisa Phillips is not only “living my dream” (investing in sub $30k positive cash flow properties) but also that she is a heck of a nice person whom I would love to meet someday. Same goes for you and Brandon. Same goes for almost every single guest that you have had on.
15 minute interviews are not what we (Bigger Pockets) are all about. Please don’t change a thing.
Take Care buddy.
DL Martin

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Lisa Phillips January 29, 2014 at 1:25 pm

Hi Leo, its the nature of this particular beast! You can enjoy other content in more time sensitive increments, but the reasons these podcasts have grown is because listeners really appreciate the level of detail, which does take longer to etch out. Enjoy all the other content here on BiggerPockets, though!

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Paul Cox February 10, 2014 at 9:30 am

I listen to the podcasts when snow-blowing or cutting the yard or when driving in the car. The episodes are great all the way around. So in my opinion they are worth the hour or whatever time they take!
Paul

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Lear January 28, 2014 at 11:02 pm

Great interview ! I am a new investor and also like to stick with a certain budget.

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Lisa Phillips January 29, 2014 at 1:30 pm

Yes, I am budget conscious in life, and in real estate investing. It’s been working out, especially in the investing world. Thanks for the comment!

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Silvana G. January 29, 2014 at 7:47 am

Lisa,

I really enjoyed BP Podcast 54. I am going through a similar situation myself and your podcast really confirmed for me that there is hope for recovery! Thanks for all the tips, I have watching your video casts and I am already thinking of ways of how to apply it in areas in my city.

Thanks!

Silvana

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Joshua Dorkin January 29, 2014 at 8:20 am

Thanks for listening, Silvana!

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Doug January 30, 2014 at 6:44 am

That was one of the most helpful podcasts or information sessions I’ve heard. Thank you Lisa!

My wife and I are planning our entire business plan around under 30k duplexes. It’s like you were speaking directly to us. I’ll be following all of your material from here forward.

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Lisa Phillips January 30, 2014 at 3:21 pm

Thank you Doug! I’ll make sure to reach out to you. The fact that you are both committed will make the ride go a lot smoother!

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Greg Jackson January 30, 2014 at 8:18 am

Lisa,

Your enthusiasm is infectious, and I came away w/ some great pointers, such as NARPM.

Best of luck to you going forward!

Greg

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Lisa Phillips January 30, 2014 at 3:22 pm

Thank you! It was a good time, Im glad we can share it with everyone!

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Mike M January 30, 2014 at 12:43 pm

@Ronald Friesen: You had asked:

“As a newbie I don’t understand what you meant by – (We don’t do debt, though, as the buy-in costs are low enough and we want — and need — to spend our money on rehab, maintenance, and upkeep.). If you have a chance could you please explain.”

We don’t finance any of our properties. Though the buy-in prices are low, the upkeep costs are high, particularly during the first 3-4 years, as deferred maintenance issues are resolved. Financing consumes a cash flow better spent on enhancing and improving the property.

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Blue Azul January 31, 2014 at 5:30 pm

This was an amazing podcast & I think I’ve listened to pretty much 90% of them…looking forward to the videos!

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Lisa Phillips January 31, 2014 at 7:39 pm

Thank you! It was definitely a good time.

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Scott February 8, 2014 at 4:46 pm

How do you deal with the unique challenges of owing row houses? what neighbors and insurance do you use? do you interact with your tenants face to face or do you an intermediate to talk to them? what parts of Baltimore are good places to invest right now? How is the eviction process in the city?

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Lisa Phillips February 8, 2014 at 6:17 pm

I have not had too many unique challenges with dealing with rowhouses as opposed to single family.
The insurance I use is Affinity GM, on all my properties. I have not had to make a claim yet, so if anyone has the experience with them I would love to know, but they charge 38-44 / month. As far as good parts of Baltimore, Just find a house in your price range (under 30k for me), that has good Crime Reports, Lots of Photos, and Great Rents (C.P.R. – Its what I look at as my Leveraged Analysis Technique for finding properties in this price range). The eviction process is straightforward, but you MUST have you rental registration, and your lead registration, up to date and valid. If you don’t cross the Ts and dot the I’s, they will send you away until you do. It takes about 2 months if you file on time, appropriately.

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Paul Cox February 10, 2014 at 8:26 am

Lisa,
Great interview and great motivation for this newby investor…I live in a economically depressed city in Upstate NY that has seen its fair share of jobs leave the area. I have let fear be the enemy of action, but thanks to your interview, it was a good kick in the pants to go ahead and move on some properties that I have been looking at. Our killer up here is Property Tax. I’m looking at a totally renovated 3 bdrm 1 bath for 49K, but the property taxes are running about 4k, so PITI for this place would run about 600. Crazy. But people need nice places to stay. Anyway you’ve helped to spur me on to action. We also may be moving to the DC area this upcoming summer and so I’d love to connect with you for insight into the area. Also are you a member of the Capital REI group which used to be called Capital BP? Again great interview and look forward to following you on BP and on your website.
Take Care
Paul

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Lisa Phillips February 10, 2014 at 8:39 am

Wow, that is Very High, and is such a real estate investment killer. Just make sure that your rents will offer you enough positive cashflow in that area to make it worth it! However, upstate has a lot of “micro-pockets” of potential where the rents will give you a positive return each month. Good luck, and I am also going to host monthly hiking sessions in the DMV region. If you check out my facebook page you will see the invites I will send out, and come to one. Its a good way to get in some good scenery, network, and talk real estate (weather permitting), so we should easily sync up.

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alex anderson February 19, 2014 at 2:56 pm

Regarding the modification process that Brandon was referring to, it wasn’t so much the banks that said no, they were under the direction of the Federal Government. It was the Government who required borrowers to be delinquent, trust me, it was frustrating being on other side of the coin underwriting these applications and there was nothing we could do per policy of FHLMC, FNMA, FHA, USDA, VA

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Lisa Phillips February 19, 2014 at 3:50 pm

Thanks for that bit of clarification Alex!

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Nicole February 28, 2014 at 2:08 pm

Thank you Lisa Phillips for the amazing podcast! I love your energy, positive attitude and persistence!!! Many people in your position would have given up. I learned much from this one. Excellent job!

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Lisa Phillips February 28, 2014 at 3:35 pm

Thank YOU Nicole for leaving such a gracious, and much appreciated, comment!

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Justin S March 27, 2014 at 4:51 pm

I give you credit for buying near JHU as it sounds like it worked out well. I’m not sure how much I would trust the crime sites or even Baltimore City for that matter as O’Malley I know cooked the numbers some in the past and I don’t trust people there now. You do get a few schools around there for sure. I know some people who did great buying down in Fells Point/Canton area. With all that said, it sounds like you got in on a good one and it’s working out well. Good luck!

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Lisa Phillips March 29, 2014 at 5:09 am

Hi Justin! A lack of trust and skepticism is a good way to make sure you watch your back at all moments, especially in a city like Baltimore. Thanks for the comment!

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Laurie Williamson May 12, 2014 at 9:05 am

Hi Lisa,

I really enjoyed your interview. I love listening to the BP podcasts and *almost* skipped this one because a $30k purchase price sounds scary to me, but after hearing that you have been successful with this strategy, even after living in large metro areas like Las Vegas and DC, I am very intrigued. I love the idea of investing all cash, to keep from getting over-leveraged, and at that starting point, I think I could do it. I’m still a little nervous about what I might find in the Dallas area at that price point, but as you said, fear is the enemy of action. It is definitely worth a look. Thanks for the information, and good luck in your investing journey!

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