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

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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

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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

 

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About Author

Brandon Turner (G+) is the BiggerPockets.com Senior Editor and Community Director. He is also an Active Real Estate Investor (Flips, Apartments, and Buy-and-Hold), Entrepreneur, World Traveler, Third-Person Speaker, and Husband. Come hang out with him on Twitter!

78 Comments

  1. 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

    • 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!

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

  3. 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

  4. 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?

    • 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.

      • Steven Haskins on

        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.

        • Steven Haskins on

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

        • 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!

  5. 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?

    • 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!

  6. 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.

        • 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

  7. Ronald Friesen on

    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

    • 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.

  8. 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!

    • Ronald Friesen on

      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

  9. 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

  10. 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.

  11. 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.

    • 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.

  12. 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!

  13. 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

  14. 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?

    • 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.

  15. 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!

    • 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!

  16. 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!

  17. 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.

    • Joshua Dorkin

      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.

      • 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

    • 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!

      • 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

  18. 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

  19. 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.

  20. @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.

  21. 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?

    • 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.

  22. 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

    • 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.

  23. 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

  24. 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!

  25. 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!

  26. 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!

    • Hi Laurie! I agree 100%. For some investors, bite sized investments entered into with logic and strategy is an excellent antidote to the fear of going into lower priced investment properties. I think you will do fine, regardless, and good luck!

  27. Lisa,

    Excellent podcast. I really appreciate your honesty and integrity. If you want to partner on some deals let me know!

    Anil

    • Thank you Anil! I will be responding to your colleague request as soon as possible. I’ve taken a bit of break since i have been moving to my new home, but its coming, and I will definitely keep this in mind.

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