BiggerPockets Real Estate Podcast

BiggerPockets Podcast 145: Creative Investing in an Expensive Market, Seller Financing, and Buying Foreclosures with Grammy-Nominated Jeremy Jones

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On this episode of The BiggerPockets Podcast, we sit down with an investor who’s also a Grammy-nominated musician! Jeremy Jones has been acquiring rental properties in the Seattle metro area for several years, focusing primarily on multifamily investments and supplying him with a stream of passive income. You’ll love both his tactics and mindset and will walk away from this interview with numerous actionable ideas to help take your business to new heights. Enjoy!

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We just waRealtySharesnted to give a shout out to our podcast sponsor on today’s show: RealtyShares. RealtyShares is a crowdfunding platform that allows you to invest in professionally managed properties without leaving your living room!

Learn more by visiting RealtyShares.com/biggerpockets!

Fire Round Sponsor

mileiq-logoA huge thanks as well to our Fire Round sponsor MileIQ.
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In This Episode We Cover:

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  • A little bit about Jeremy and how he started
  • How he got into real estate by chance through his music career
  • How to maximize your income by renting by the room
  • His first non owner-occupied rental
  • What you should know about buying foreclosures
  • The BRRRR Strategy and how to use it
  • Advice on having a “long term flip
  • A discussion about hard money
  • The importance of having exit strategies in mind ahead of time
  • The topic of refinancing
  • How to develop a criteria for purchasing houses
  • How exactly banks and loans work
  • REO vs. foreclosure auctions
  • How Jeremy uses seller financing
  • Where he buys properties and why he keeps them close to home
  • How he manages his property and finds great contractors
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “If you have comps in mind, you can increase your confidence.” (Tweet This!)

Connect with Jeremy

Jeremy’s Harmonium Performance:

Real strategies that work for real people seeking to build wealth through real estate investments. Co-hosted by Brandon Turner and David Greene, this podcast provides actionable advice from investo...
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    Jarred Sleeth Lender from Washington, DC
    Replied over 4 years ago
    Seems like there might be a bad edit or something happening here at around 19 minutes.
    Dave Visaya Audio Engineer and Investor from Cebu City, Cebu
    Replied over 4 years ago
    Hey Jarred, Thanks for the heads up, yeah there was a bit of glitch working on it. It should be up in running fine in 30 minutes.
    Drew MacDermott Investor from Lebanon, NH
    Replied over 4 years ago
    Another blip at 32:49
    Dave Visaya Audio Engineer and Investor from Cebu City, Cebu
    Replied over 4 years ago
    for that one, it was during the original recording.. But I believe the flow of the conversation was not cut off.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    I had a great time discussing some of my real estate experiences with Josh & Brandon. If anyone has questions about anything discussed on the podcast, or anything else, please feel free to ask here and I will make a point to respond to all the comments.
    Jarred Sleeth Lender from Washington, DC
    Replied over 4 years ago
    Hey Jeremy, really great show. As everyone said, this is full of great advice for new and experienced investors alike. My question is in regards to your refinances. You mentioned you were doing your refis through a few aforementioned banks with less than 12 month seasoning. Are you seeing any seasoning at all once they are rehabbed and rented? The quickest options I have found are 3 and 6 months. Is zero seasoning just a pipe dream or are these lenders actually out there? This has a dampening effect on scalability otherwise. Thanks!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hi Jarred, I’m happy to know you liked the show. I’ve used Caliber Home Loans and Guild Mortgage in the Seattle area, they are able to refinance rental properties out of hard money loans right away after acquisition, no particular “seasoning” length required. Usually I take point on acquiring the property and overseeing the rehab/rental, and then my brother takes point on working with the bank to achieve the refi. Caliber, Guild, and commercial lenders like Pacific Crest Savings and Coastal Community have been able to refi quickly as well. Traditional banks like Wells Fargo and BECU want to see the property reflected on two tax years’ tax returns before acknowledging that it is actually producing income.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    One other option for you could be “bridge loans” which, as I understand, can function as 1-3 year loans between the hard money loan and the long-term financing. I put an ad on the BP Marketplace and had some responses for interest rates in the 7-9% range which is better than 12% and can allow you to carry it for a couple years for “seasoning” if you need to, based on the lenders in your area.
    Jarred Sleeth Lender from Washington, DC
    Replied over 4 years ago
    Hey Jeremy, thanks for the information. I have heard of bridge loans before, but never knew exactly what it was used for. That could always be an option. Have your commercial lenders been able to hold in LLC with no issues? We have had every single traditional mortgage servicer turn us down to a request to transfer our deeds into LLCs, so currently we are only work with banks willing to do that. It seems that the smaller portfolio lenders will have no issues with that. I am assuming a commercial bank would not either. Thanks again!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Yeah Jarred, the commercial lenders will allow you to have your property in an LLC, they don’t mind either way.
    Baron Medenwald Investor from Chicago, Illinois
    Replied over 4 years ago
    Hi Jeremy, I had a similar question – we have property that we purchased with cash and have rehabbed and are looking to get a mortgage on it. Do you know if the refinance only works to pay off existing loans? I called Caliber and Guild and was told that 12 months of seasoning was required, which seemed strange. When you get the mortgage does the lender directly pay off your hard money loan or do you get cash which you then use to pay off the loan? (Wondering if it’s a “cash out” vs “refinance” issue that I’m running into, or just uninformed call-center folks). Thank you!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hi Baron – Yes, the “within 1 year” refinances we’ve done with Caliber and Guild were to pay off the acquisition loan. They could not do cash out refinances. So you’d have a title/escrow service perform the transaction just like purchasing a new property, but instead it would be refinancing out of the short-term HML (hard money loan) into a long-term loan. Even if there is built-in equity beyond the LTV, you can’t get it out as cash. You may have to bring in cash-to-close if the new loan won’t cover the full balance of the HML.
    Baron Medenwald Investor from Chicago, Illinois
    Replied over 4 years ago
    Thanks Jeremy, that’s helpful.
    William Walker Airline Pilot from Las Vegas, Nevada
    Replied over 4 years ago
    Jeremy, Thank you so much for taking the time to record your experiences. As a new investor, I am trying to wrap my head around the Seller Financing example you mentioned at around 37:50 in the show. Can you expand on the numbers in your reference going from the amount agreed; $875,000 seller financed + 3 yr term = $955,000. How much are you really paying for the property? I’m missing that “aha moment” that Brandon had after you said it.
    Jarred Sleeth Lender from Washington, DC
    Replied over 4 years ago
    William, I’d like to chime in if you don’t mind. What they are essentially saying to the seller is that they are going to buy their property for 875k, but if the seller is willing to hold that note for 875k (or maybe less depending on if they also give the seller cash as a downpayment which could sweeten the deal) then with the interest paid over the term, they will effectively be netting a higher profit than 875k on the property because they also made money from the interest on loaning the money.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Yes, Jarred’s explanation is correct. If the Seller Financing is for $700k at 5% for 3 yrs (30 year amortization) we’d use a mortgage calculator to determine how much *interest* we will have paid the seller during the first 3 years of that 30 year amortization schedule. We’d add that total interest to the purchase price and that becomes their gross proceeds.
    Jim Manson Investor from Durham, North Carolina
    Replied over 4 years ago
    Jeremy, Really enjoyed the show. In the purchase contract, are there any terms that would impose a penalty for paying off the loan before the end of the term? BTW, shoutout from Durham. I live 100 feet from East Campus!! Mad farm here if you want to come back and invest!!
    William Walker Airline Pilot from Las Vegas, Nevada
    Replied over 4 years ago
    Thank you Jarred and Jeremy, for your replies. I was making it too complicated. I will be prepared with a mortgage calculator from now on.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hey Jim, yes Pre-Payment penalties can be negotiated as another element of the deal. Generally we don’t do it with our Seller Financing (only one person wanted it, and that deal didn’t consummate) but it can be negotiated. When we do loans with private parties (individuals) we usually borrow for 1 year and offer a minimum 3 month interest payment. So even if we pay off the loan 60 days later, we’ll give them the equivalent of 3 months interest for the privilege of using their money. That’s awesome you live near Duke’s East Campus! I was just there playing a concert at Baldwin Auditorium end-of-Aug.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    You’re welcome, William!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    I bet BP could offer a cool “Seller Financing Calculator” that can quickly compute “total interest paid to seller” during a particular period of a 30-year amortization schedule, given an interest rate and principal amount.
    Kathleen Bassett from Cleveland, OH
    Replied over 4 years ago
    I didn’t have any issues with the soundcloud file. Great Podcast!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    I’m glad you enjoyed it, Kathleen!
    Fred Roth Real Estate Agent from Minneapolis, MN
    Replied over 4 years ago
    Great Podcast. Very gracious attitude towards people you work with. Your comment about working with contractors: “I don’t think investors should be flourishing and not anybody else.” should be a Tweetable Topic.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Thanks, Fred. Maybe Hilary can add that Tweetable Topic to the show page 🙂
    Kevin Entner Investor from Mukilteo, Washington
    Replied over 4 years ago
    Another great podcast! Very insightful Jeremy, thanks for sharing your information.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Thanks Kevin, much appreciated. Got your message too and will reply.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Thanks Kevin, I appreciate it. I got your message too and I’ll reply.
    Elizabeth Blazina Investor from Seattle, Washington
    Replied over 4 years ago
    Great Podcast. I agree with Fred regarding” investors flourishing and not anybody else”. I firmly believe that there is plenty to go around. Jeremy, I have never done the auction circuit, and my biggest reservation has always been in the inabililty to run the numbers due to all the unknowns of the property. How have you specifically hedged this risk when buying auction properties. And lastly, regarding the seller finance scenario , where you are showing the seller the benefits to them in using this type of financing, how do you lay this out to them? On a personal note, I too live in Seattle. And am looking to add to my portfolio of rentals. Go Hawks! Best, Liz Blazina
    Elizabeth Blazina Investor from Seattle, Washington
    Replied over 4 years ago
    Great Podcast. I agree with Fred regarding” investors flourishing and not anybody else”. I firmly believe that there is plenty to go around. Jeremy, I have never done the auction circuit, and my biggest reservation has always been in the inabililty to run the numbers due to all the unknowns of the property. How have you specifically hedged this risk when buying auction properties. And lastly, regarding the seller finance scenario , where you are showing the seller the benefits to them in using this type of financing, how do you lay this out to them? On a personal note, I too live in Seattle. And am looking to add to my portfolio of rentals. Go Hawks! Best, Liz Blazina
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hi Liz, I’m glad you enjoyed the podcast. Regarding the auctions, generally I would start with the opinion of the agents from Vestus (a foreclosure group based in Kirkland), and then invite their repair estimate to account for unknowns. On Friday morning before the auction, I’d try to drive by and get a feel for what shape it’s in, and if it’s vacant I’ll look in the windows. Checking the history of sales also helps (you know if it sold at a high price a year ago, it may still be in reasonable shape, things like that). Once you know the square footage of the property, you can figure there is a basic cost for flooring, paint, appliances, kitchen/bathroom, so you can come up with a basic idea of what it would cost to go through the house and “do everything”. Also you know whatever you have to renovate is also adding value to the house, so for example if you pay for new appliances, that’s not only a “ding” against your cash reserves, but it’s also a “plus” for the property (in other words it’s not throw-away money). With Seller Financed offers, I would attach a letter explaining the gross proceeds they’d receive over the life of their loan (adding the total interest to the original purchase price) and remind them of the tax benefits of spreading out the income.
    Elizabeth Blazina Investor from Seattle, Washington
    Replied over 4 years ago
    Thanks Jeremy, I like the insightful detective work you use beforehand on Auction properties. I would have never thought to look at the last sale as an indicator of condition. Have you ever bought a seller financed home through a Realtor, and if yes , how do they get compensated? Much Appreciation, Liz
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hi Liz, yes, we’ve bought Seller Financed properties through a realtor in every case, and the real estate agent was paid via the same commission structure as any other deal (often 3% or sometimes different if negotiated specifically).
    Elizabeth Blazina Investor from Seattle, Washington
    Replied over 4 years ago
    So is this paid by you at closing ? Thanks again. Liz
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    HI Liz, nothing different than any other real estate transaction (seller generally pays both the listing and buyer’s agents’ fees). There are no additional fees triggered by the Seller Financing. It it actually much cleaner because the usual loan original fees and appraisal aren’t necessary.
    James Yang from Milpitas, California
    Replied over 4 years ago
    @davevisaya Doesn’t seem to be on iTunes, when will it go up?
    Joshua Dorkin BiggerPockets Founder from Denver, CO
    Replied over 4 years ago
    Hey James – It should be there, but I just looked and didn’t see it either. We’re looking into it now.
    Adrian Smude Rental Property Investor from Plant City, FL
    Replied over 4 years ago
    It was up on my iTunes yesterday with no issues.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Fyi, when I follow the “Click here to listen on iTunes”, episode 145 doesn’t appear in the list. But it does show up on the Podcast app on my iPhone.
    Linnea Minnema Rental Property Investor from Birmingham, AL
    Replied over 4 years ago
    Hi Josh – Did this issue have a resolution? Episode 145 is still not showing up when I go to download it in iTunes. Thanks!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    I see it in iTunes now Linnea, so I think it is fixed 🙂
    Adrian Smude Rental Property Investor from Plant City, FL
    Replied over 4 years ago
    Great episode! I started out the same way by renting rooms in my house, but I never stopped renting the rooms. I on;y moved out because my wife to be didn’t like sharing a house with others. I’m actually looking into continuing this with other properties. I also love your AirBnB strategy. Like Josh said we can always pick up some new info to help our business and I definitely did in this episode!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hi Adrian, I’m glad you enjoyed the podcast! Renting an Airbnb space is a lot of fun :). All the best, – Jeremy
    James Kempsell
    Replied over 4 years ago
    Thank you Jeremy for the informative interview both here, and in person. As Jeremy’s cousin, I’ve been blessed by both his group meditation and investment opportunity. I’ve even enjoyed the harmonium playing! My questions come from an outsider’s point of view. I’ve only invested in real estate as a hard money lender, so I don’t know most the basics or any details. Here are some of my outstanding questions: 1. Could you explain briefly how 5+ units are only a five year period loan? That seems incredibly short term. Is the interest just adjusted every 5 years? 2. Would a company like Vestus allow someone to pay to attend once, just to see how a meeting goes? It sounds like the information you gather here is invaluable, and worth the time and price. 3. With seller financing, how would you “find out” they don’t have outstanding debt? 4. How could I find my local county’s equivalent for the property information you found about Snohomish county?
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hey cousin James Kempsell! Thank for posting your questions here even though we could use private message, in case anyone else has the same questions. Here are answers: 1) 30-year fixed residential loans are typically backed by Freddie Mac or Fannie Mae (government banks) and only apply to residential properties (1-4 units). For buildings with 5+ units, the loan is referred to as a “commercial loan” and in my experience the standard offering is a 30-year amortization schedule, but only the first 5 years is a fixed interest rate. After 5 years, the loan is still in effect but the interest rate varies with prime. So, when rates are low, you can lock in a quadplex for 30 years and know that you are protected from interest rates going up in the future. But with a 5-plex you’d need to know that 6 years hence if prime goes up, you’re monthly payment will go up too. 2) Vestus has free education meetings on Tuesdays and their investor preview meetings are on Thursday. Attendance at the Thursday meetings is conditioned on signing their agreement which specifies that you’d give a 3% commission on the estimated FMV (Fair Market Value) or Tax Assessed Value. Another local company called Capture Realty charges 3% commission on the actual purchase price (which is generally less than the FMV after fixup). That is also known as ARV (after repair value). To answer your question: yes! 3) The MLS shows debts taken out on a property so your agent can get some clues from that (they’d know when a mortgage was commenced but wouldn’t necessarily know if it was paid off). A title search shows what liens exist against a property. But in my case, I would ask my agent to call the seller’s agent and ask “Does your client own the property free and clear? Would they consider offering Seller Financing to a qualified buyer if the offer is competitive?” Usually the answer is no, but sometimes it is yes :). 4) If you type in Google: ” property search” that will probably take you where you need to go. Or ” tax assessor search”.
    Justin Kling Investor from Franklin, Wisconsin
    Replied over 4 years ago
    Jeremy, Great podcast, especially the info on seller financing. I’ve never done that so how do you choose the interest rate? Also, how is the paperwork done for the seller financing loan? Thanks!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hi Justin, I’m glad you liked the podcast. When we submit an offer for a property and request Seller Financing, we generally offer a rate which is a bit more than we’d get at a bank (knowing that we’ll save on appraisal, loan origination fees, and time/effort to secure the loan). Like the other aspects of a real estate negotiation, you can offer whatever you want and the Seller can counter-offer the same way they would on price. Once the terms of Seller Financing are defined in the Purchase & Sale (which is the document defining the agreed-upon offer) and it is signed-around, that document is provided to the Escrow company. They will draft up a Promissory Note reflecting those terms as well as other “standard” verbiage which can also be reviewed and negotiated. For example, it can be helpful to define what happens if you are late refinancing by a few days (does the same interest rate stay what it was, does it jump up, is there a per-day cost, etc). We also hire a Note Servicing company (Evergreen Note Servicing) to receive our payments and distribute them to the Seller once the purchase is completed. That way there is a third party keeping track of the payments, and providing “payoff statement” at the time that we refinance our sell the property.
    Donald Cooley Railroad Conductor / Future investor from New Baltimore, MI
    Replied over 4 years ago
    Great podcast, I’m really interested in the seller financing aspect of your deals. I’m new to investing in real estate and would love to have as many financing ideas under my belt. Basically, how do you “sell” the seller on financing for you. I remember you saying you explain to them how you would be giving them more money in interest. How do you put that in a presentation? Do you use excel or powerpoint? I thank you in advance for your time and insight.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hi Don, thanks for the questions on Seller Financing. Here are some of the ways we’d “sell” the idea of Seller Financing when placing an offer: – We’d point out that the transaction will be a quick-close because no bank appraisals or approvals are needed. Since they become our bank, we can quickly get the property off their hands. If they have been on the market a long time, they may like that. – If the property needs improvements or has vacant units, we can point out that we need about 6 months – 1 year to improve the property so we can get the best appraisal possible and then we’ll be able to refinance (that would be the case where we want short-term Seller Financing). – We, and our agent, share about our track record and number of owned properties, and give our Property Manager as a reference so they can see that we know how to successfully manage investment properties. – We give a PDF document demonstrating their Gross Proceeds (broken down by offer price, interest they’d earn in Year 1, interest they’d in earn in Year 2, etc…) – We may also throw in something like “we will do the inspection for our information purposes only, but we intend to take the property as-is”. I’m not recommending this for everyone, but it’s something we do if we are confident that we can do repairs ourselves within our budget plan for the project. I hope this helps!
    Donald Cooley Railroad Conductor / Future investor from New Baltimore, MI
    Replied over 4 years ago
    Thank you… Yes this helps a lot in getting started.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    My pleasure Don!
    Tek Chai from Podunk, Washington
    Replied over 4 years ago
    Thanks Jeremy for the podcast. It’s nice to listen to someone closeby. Love to visit your Airbnb someday. Do a little yoga, meditation while listening the passing train.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    I’m glad you enjoyed it, Tek. I look forward to hosting you at my Airbnb and meeting you.
    Andy A. Lender from Pleasanton, California
    Replied over 4 years ago
    Great podcast Jeremy. I enjoyed listening to it!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Thank you Andy!
    Loren Thomas Electrician from Bothell, Wa
    Replied over 4 years ago
    Hi Jeremy, What sort of cash flow fits your criteria? Do you do a per door thing or? I’ve been sending hand written letters to 100% equity owners but haven’t gotten any leads yet. How do you find 100% equity owners where seller financing is an option?
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hi Loren, 1) For cashflow we try for 20% cash-on-cash return for any investment. The caveat there is if you are able to *fully finance* an acquisition, it would only have to earn $1/month cashflow and the cash-on-cash return would be considered infinite. So we apply some extra common sense and make sure there is a large enough cashflow-per-building to justify the project. For a duplex we’d likely want at least $500/mo cashflow minimum and for a 5-plex closer to $1000/mo. That said every property is different and all factors are considered. For example, we might get a 5-plex with Seller Financing and only cashflow $300/mo for the first year, but we know in the 2nd year we can increase the cashflow through rent increases and other improvements, so we buy it knowing the cashflow is “ok” initially, then “good”, and eventually “great”. 2) We usually calculate cashflow “per property” and not “per door”. 3) Mostly we’ve gotten Seller Financing by finding properties on the MLS and inquiring through our agent to find out that they are willing to do some (or all) Seller Financing. Most sellers don’t want to do it, but some do. I’ve also gotten leads through word-of-mouth, and that just comes with time as more agents and investors know what you’re looking for, a deal might come your way through unexpected means (my best purchases have come this way, and there isn’t a specific one thing you can do to stimulate that, besides being consistent in your every day approach and sharing with others what you’re looking for).
    Jennifer Jesse from Midlothian, Virginia
    Replied over 4 years ago
    Awesome podcast Jeremy! I had a quick question about the refinancing, Was wondering how many one is allowed to have? Have you run into any roadblocks by having too many, or not being able to obtain one? Thanks again, I’ve enjoyed reading your responses here as well and have gotten excited and energized about your strategy!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hi Jennifer, I’m glad you enjoyed the podcast! Yes, I have run into the issue of increased restrictions as the number of mortgages increases. In my experience so far, the best terms (LTV, debt-to-income requirements, and interest rates) for 30-year fixed residential mortgages exist for your 1st – 4th properties. For your 5th-10th mortgages you can still get 30 year fixed Fannie Mae / Freddie Mac mortgages, but not as lenient terms. Once you have 10 mortgages, you have to move on to commercial lenders who don’t have the “10 mortgage limit”. In my case, we bought a 5-plex before we had reached 10 residential mortgages, so for 5-units and up, you have to get a commercial loan anyway (30 year fixed are not available). Commercial loans are generally more asset-based (evaluating the subject property vs evaluated your financial picture) and will offer 30-year amortization with 5 year fixed interest and varied after that.
    Todd G. Investor from West Richland, Washington
    Replied over 4 years ago
    Jeremy, Your brother sounds like the analytical person in your business – how did he educate himself on the subject(s) of RE finance, et al? I’d be interested in hearing about how you two learned about / came up with your creative finance techniques: book suggestions, etc. Thank you, Todd
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hi Todd, My brother (Nicholas Jones, also on BP occasionally) is an aerospace engineer so he developed project management skills through that job role, and he took particular interest in learning Microsoft Excel (including computations) for financial tracking and producing nice looking reports. I think he really developed his understanding of investing by spending years developing a stock options trading program in MatLab. He was getting ready to test it and was planning to earn steady 10%+ returns. About that time we started buying properties and getting 20%+ returns so he shifted his seed money toward our real estate investing instead. He also bought a property using Tax Liens in Pima County, AZ. Tax Lien investing is a cool method and we both read several books on the topic. With regard to books, the Robert Kiyosaki books were the most influential for us, particularly the idea of *cashflow* investing. Many people emphasize flipping (period bursts of cash, but no passive income) or equity investing (getting a property and slowly paying down the principal and waiting for appreciation), but we clearly set our goals completely around learning to acquire cashflow positive assets. I also enjoyed a property called “Equity Happens” which gave a road map on how to buy small properties and then “trade up” using 1031 rollovers to bigger rental properties. Please feel free to ask any further questions! Best Regards, – Jeremy
    Nicholas Jones Real Estate Investor from Denver, Tucson, Seattle, Colorado, Arizona, Washington
    Replied over 4 years ago
    Hello Todd, I am Jeremy’s brother and business partner. Building on what Jeremy said, through my engineering education and work in the Aerospace industry one could say I have developed a ‘analytical mindset’. I was able to hone in a proficient skill set of using excel and Matlab to create tools for analysis. As Jeremy mentioned I started off by developing an automated stock options trading platform, which bought and sold options based on a predetermined set of market indicators trigged by auto-analyzing daily stock data. In comparison to the automated trading program, the way Jeremy and I settled in on analyzing potential properties is much more simplistic. We look at cash on cash return, and monthly cash flow. We set a threshold as to what we wanted as a minimum, and established a consistent way of comparing one property to the next (standardizing). The ‘analysis’ is a fairly simple income vs expenses analysis with conservatism added in. We figured if we can get good cash on cash return, good cashflow, and feel like we are getting a good purchase price compared to the market, we should try and own the property. Of course the analysis could grow significantly in complexity including things like models for appreciation, principle pay down, rental rate increases, tax benefits etc etc, but we felt those would simply strengthen our position in wanting to get the property, so I purposefully left them out. The books Jeremy mentioned are great and have helped me as well. From the standpoint of fostering an analytical mindset, being introduced to the idea of creating a system, developing a rule set and sticking to it, and embracing/managing risk instead of falling stagnant due to being too ‘risk adverse’, one book I thoroughly enjoyed is “The Way of the Turtle” by Curtis M Faith. It’s not a book about real estate specifically, but nonetheless the ideas and discussions in the book can be transformative when applied to Real Estate. Best of luck
    Nicholas Jones Real Estate Investor from Denver, Tucson, Seattle, Colorado, Arizona, Washington
    Replied over 4 years ago
    Great Interview Jeremy! As with everything you produce, it was A+. I am humbled to be your brother, and grateful to be in business with you. Onward !
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    I appreciate the kind words, brother!
    Hersh M. Engineer from Carlsbad/San Diego
    Replied over 4 years ago
    hey Jeremy, just listened to the podcast. What happened to Josh’s request about the harmonium video? Would love to see and hear it too. 🙂
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hi Hersh, after telling Josh I would provide a video, I realized the only ones I had were single-shot videos of the keys (for demonstrating the fingerings on the harmonium) so I took the opportunity to film videos of a few new chants. I’ll be ready to post them up on YouTube after this weekend and will ask Josh to add them to the show page. Thanks for asking!
    Hersh M. Engineer from Carlsbad/San Diego
    Replied over 4 years ago
    Awesome! Thanks!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Here’s one for you Hersh! https://youtu.be/6E2ZIYgE8N0
    Hersh M. Engineer from Carlsbad/San Diego
    Replied over 4 years ago
    Beautiful. Peaceful. I like the ambience you setup too with incense sticks and all. Thanks Jeremy for making and sharing this video.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Thank you Hersch, I enjoyed making the video, thanks for the positive response
    Dave Visaya Audio Engineer and Investor from Cebu City, Cebu
    Replied over 4 years ago
    Hey everyone, added the video to the shownotes. Awesome Jeremy! 🙂
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Cool, I see it there, thanks Dave 🙂
    Tek Chai from Podunk, Washington
    Replied over 4 years ago
    Jeremy, love that harmonium chant performance. Is that a photo of Paramhansa Yogananda at Ananda in Bothell? (in the video top left). At 3:46/9:29 you were chanting “Chai Guru Chai”? What does that mean?
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hey Tek! I’m glad you like the chanting video :). The photo in the top left of the video I bought at Self-Realization Fellowship meditation center in Shoreline. Fyi, I reuploaded the video because there was an error in the audio mixing in the first version, here’s the updated one: https://youtu.be/5NImZQCCebo It includes a description of all the words to the chant. At the 3:46 mark, the words are “Jai Guru” which means “victory to the spiritual preceptor” or could be taken as “may I successfully attune myself to the spiritual blessings flowing from within in silence”.
    Grant Fosheim Rental Property Investor from Everett, WA
    Replied over 4 years ago
    Jeremy, Thanks for the great podcast! By far my favorite to date. I knew about 75% of the properties you were talking about and hearing your insight into your creative financing was priceless. Good luck with the flip on Harrison…I saw that listed on the MLS last week. Way to think outside of the box on that deal! Kudos to improving the local housing market. Keep up the hard work.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hey Grant, I’m pleased to know you enjoyed the podcast so much :). That’s pretty cool you’re familiar with the actual properties involved. Thanks for the well-wishes and let’s continue to keep in touch. Let me know if you have any questions about lenders. Currently I’m in the midst of getting a bridge loan on the duplex that came as part of the Harrison purchase, if that underwrites successfully and we have a good experience, I’ll recommend that lender.
    Mikael Winkler Rental Property Investor from Columbus, OH
    Replied over 4 years ago
    Thanks for the awesome podcast. I’m as new as one can be – looking for my first house hack investment property. I actually love the idea of going to foreclosure auctions to practice. I’m quickly realizing that before profits, financial education is the most important thing you can do for yourself, and your insights were both educational and inspirational, so thank you for contributing!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hey Mikael, I’m happy to hear that you benefitted from listening to the podcast. Best wishes to you as you begin your financial / real estate education and dive in. When it comes to buying rentals, real estate investing is forgiving, because even if the fix-up costs more than expected, or the rents aren’t quite as high at first, things will often fall into balance after the first or second year and the investment will turn positive with time. In the meantime you get a nice education on the “front lines of the battlefield”.
    Adam Spencer from Ypsilanti, MI
    Replied over 4 years ago
    Just listened to your podcast and loved it! I am going to be doing the live in with roommates in a few months once I close my first house with and FHA. I will be doing a big rehab so have to wait for that. What tips do you have for renting out rooms? Would you recommend per month or a yearly lease?
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hey Adam, Glad you liked the podcast! When I first started renting rooms I didn’t have leases or agreements, just a handshake or an email. I rented rooms for about 7 years before I ever did a lease. I don’t recommend that, but it’s what I did. I never had a problem until after I moved out and became an absentee landlord. Then little issues would come up where tenants would complain about each other or have disputes over wasting utilities, messes in the kitchen/laundry, etc. Leases also helped when I needed to keep some security deposit on move-out (for cleaning/painting/etc). I’d recommend seeking annual leases while being willing to accept month-to-month if they are willing to pay a bit higher (say $25/mo higher for the flexibility of month-to-month). Often people want the flexibility but if they like the place, they stay longer than expected. Sometimes people want to leave early and then you have to go through the process of getting a new tenant sooner than desired. Good luck and feel free to ask if you have other questions. Warmest Regards, – Jeremy
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hey Adam, Glad you liked the podcast! When I first started renting rooms I didn’t have leases or agreements, just a handshake or an email. I rented rooms for about 7 years before I ever did a lease. I don’t recommend that, but it’s what I did. I never had a problem until after I moved out and became an absentee landlord. Then little issues would come up where tenants would complain about each other or have disputes over wasting utilities, messes in the kitchen/laundry, etc. Leases also helped when I needed to keep some security deposit on move-out (for cleaning/painting/etc). I’d recommend seeking annual leases while being willing to accept month-to-month if they are willing to pay a bit higher (say $25/mo higher for the flexibility of month-to-month). Often people want the flexibility but if they like the place, they stay longer than expected. Sometimes people want to leave early and then you have to go through the process of getting a new tenant sooner than desired. Good luck and feel free to ask if you have other questions. Warmest Regards, – Jeremy
    Adam Spencer from Ypsilanti, MI
    Replied over 4 years ago
    Thanks @jeremy for the info. I haven’t consider charging a premium for month to month. That’s a great idea since I’m close to a college and expect students. I am also wondering how you handle little things like dishes and keeping common areas clean? I was thinking about having a hour rules sheet included in the lease.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Hi Adam, yes I’d write up a “house guidelines” that includes “do your dishes after eating, before leaving the kitchen” etc which could be included as an addendum to the lease.
    Nicholas Jones Real Estate Investor from Denver, Tucson, Seattle, Colorado, Arizona, Washington
    Replied over 4 years ago
    Adam, In addition to the ‘house guidelines’ Jeremy mentioned, I also found it to be EXTREMELY effective to cut out cable TV as one of my household expenses, and and instead, use the money I would have allocated towards cable to hire a house cleaning service. I would then charge each room ~$40 per month. If you have three rooms to rent at a $40 surcharge, that is $120(surcharge) + ~$80(cable) = $200(monthly total) for housecleaning. For me that got me about 6 hours every two weeks of thorough cleaning. I was able to pitch it to the perspective tenants as “If you want cable you can stream it using one of the various online services yourself, and for $40 each per month the house remains spotless, folks just have to do their dishes and laundry”. I am pretty sure some folks chose my place primarily because of the house cleaning offering. I loved it as it evened the playing field and I didn’t have to balance various views on what the definition of ‘clean’ was. I found that almost always frustrated one person (naturally the cleanest of the bunch) Its also a good stepping stone in practicing hiring out time consuming tasks to free up your time to strategically invest 🙂 Just another option to consider…..
    Adam Spencer from Ypsilanti, MI
    Replied over 4 years ago
    Nicholas, That is a really good idea. I have always thought about having a cleaning lady haha but never consider including it into rent. So I am assuming that in this scenario you are splitting all utilities? As the clean person I love the idea and will try it out once I get my place…
    Nicholas Jones Real Estate Investor from Denver, Tucson, Seattle, Colorado, Arizona, Washington
    Replied over 4 years ago
    Adam, When I was renting a house out, rent-by-the-room (RBTR), I would charge a fixed monthly utility surcharge. (example: Rent = $500, Utilities charge $110, then total monthly payment would be $610). I preferred this method over trying to split all the utility bills and communicating the outcome to each of the tenants. I figured that would be time consuming, and not a good used of time for the benefit provided. With my fixed utility charge approach some months I came up short, but I always tried to ‘course correct’ as I got new tenants or renewed a lease. I also used a landscaping service, and a pool cleaner at my RBTR house 🙂 I LOVED having the house cleaner and continue to use one today in my own place.
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied over 4 years ago
    Nick’s got skills in the “rent by the room” business 🙂
    Lear R. Investor from El Paso, TX
    Replied about 4 years ago
    Hi I loved this podcast found it very useful, however can you recommend a service similar to vestus.com, that is nationwide? it seems to be specific only to the Washington area. Also I loved the information that I found on http://www.redfin.com but my regions were not available is there any national sites that pull from the MLS like these do?
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied about 4 years ago
    Hi Lear, I’m glad you found the podcast useful! I think foreclosure investing is very much regional-specific. I don’t know of other companies like Vestus that are nationwide. But, you can likely track down a similar company by visiting your county’s courthouse to learn where the foreclosure auctions are held. If you attend the auction you will likely meet other investors and see which “foreclosure groups” or real estate agents are active there, and learn whether a company like Vestus is operating in your area. Each county conducts the auction in different ways and I think some are more conducive than others for companies like Vestus. I’ve mostly used Redfin, but I’ve also found Zillow to be helpful, as well as my county’s property tax website. I’d recommend taking it on as a “project” to research online, ask other investors, and real estate agents, to piece together your own pipeline of information that works for your specific area. Best Regards! – Jeremy
    Sam S. Investor from Dearborn Heights, Michigan
    Replied about 4 years ago
    Hey Jeremy, I just listened to your podcast which I thought was very inspirational. I have been a REI in Michigan for the past 8 years. Most recently I have been studying the Sheriff Sales to gain experience and knowledge in purchasing RE at wholesale prices. In Michigan there is a 6 month redemption period for occupied properties and 1 month for vacant properties. My target goal is to acquire vacant properties since I do not have the capital to wait 6 months for redemption. My biggest concern in acquiring these properties in the winter season is busted pipes in the house. 1). What are some tips or rules we can follow to avoid purchasing a property which is vacant that may have busted pipes? 2). Do you factor that in your bidding? I can only imagine what a disaster that would be to see busted pipes and water all over the house. 3). Have you ever ran into this issue? If not, what was the biggest disaster you encountered on a purchase from the Sheriff Sale? 4). What are some pointers you could recommend for purchasing auction properties other than researching title?
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied about 4 years ago
    Hi Sam! I’m glad you enjoyed the podcast and thanks for posting your questions. Here are some answers and feel free to ask any follow-up you may have. I haven’t done a Sheriff Sale and don’t know exactly, my foreclosure experience is at the county auction based on banks foreclosing for defaulted mortgages. Interestingly the first Sheriff Sale I looked at was last week but I didn’t end up bidding. So my answers here are based on my experiences at the normal county foreclosure auctions. 1) The company that I used for researching foreclosures (Vestus, and later Capture Realty) would drive by the property to figure out if it is vacant or occupied. One clue would be, are lights on at night? Are the drapes closed all day long? Newspapers piling up on the porch? Etc. I wouldn’t know if a property had busted pipes, but I’d expect for vacant properties the water company would shutoff the water based on nonpayment and therefore the pipes may be burst but water wouldn’t be openly flowing. I dealt with two different vacant properties where the pipes burst within the first couple days after purchasing at auction, and it added about $10k of cost for dealing with it but overall the deals had enough room to absorb that fixup cost and still work out well. 2) Yes, I leave room for “X-factors” when bidding. *EVERY* deal I have done had surprises that cost money to handle. If you overbid for a property, your buffer gets eaten up very quickly during the renovation phase after a few surprises are unveiled. 3) I haven’t done a Sheriff Sale but the biggest disaster I experienced was an extremely low appraisal because I was flipping a high-end home with a lake view. The buyer’s loan didn’t go through because the appraiser comped to other houses in the area, none of which had a lake view, and he interpreted the bottom floor as “basement” even though it was above ground (the home was on a slope). By the time we found another borrower we had burned lots of money in holding costs and ate up the profits. As mentioned, EVERY property has had unknown issues that cost money to fix, but nothing that caused the deal to be completely sour. 4) Develop a method for determining your bid price and hone it in as you buy more properties. For your first deal or few deals, even if you lose a bit of money you can consider that “tuition” for learning how to do real estate, so it’s not the worst thing to take a few knocks. Take advantage of every research angle you can find (county website, redfin/zillow, Google search, driving by, foreclosure research companies, Google street view) to get a mental picture of what you’re bidding on. I also like to drive or walk around the area a little bit to get a feel for the neighborhood. If you buy a junker in an attractive area, once you fix it up you have a great property in a great neighborhood! Warmest Regards, – Jeremy
    Sam S. Investor from Dearborn Heights, Michigan
    Replied about 4 years ago
    Jeremy Thanks for your detailed answers. Can you elaborate on the water damages in both situations that led to $10k worth of rehabbing? Can you explain one of the most costly surprises during your rehab process? To me it is worth the investment even if I break even or lose money as long as I learned something in the process. Regards Sam
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied about 4 years ago
    Hi Sam, here are a few examples of water damage we’ve had: – refrigerator in an upstairs condo was installed incorrectly and the ice maker gradually leaked over a 3-day weekend, saturating the floor, insulation, and into the unit below – bottom floor of a duplex was flooded when the sump pumps tripped the breaker in the middle of the night – pipes burst in a vacant unit shortly after we purchased it at foreclosure, saturating the carpet, pad, and drywall – upstairs unit shower had small crack in shower pan which caused the ceiling to gradually saturate with water and tenant was slow to report the issue Sometimes the costly surprises are also opportunities. For example, one 4-plex we bought, we had initially evaluated that the exterior paint was fine. The building was quite large and included a huge RV-size garage unit. After examining the building in more detail there were many places that the exterior and paint was damaged and it really warranted painting. With all the pressure washing, scraping, caulking, repairing plywood/siding, priming, and painting, it cost us close to $15k to paint the whole building. We had budgeted $0 for painting because we planned to wait several years before doing that task. So it was a large expense, but it also built value and attractiveness into the building so it’s not throwaway cash, it’s cash that we convert to equity. We’ve had similar situation with roofs where we thought it looked like it may have 5 years left in it, but then upon further inspection we have to do a roof and spend $15k that wasn’t planned. Another example of a surprise would be $5k spent in landscaping on a property due to have several large trees that needed major trimming, and we hadn’t built that into our cost spreadsheet explicitly.
    Julie Marquez Investor from Seattle, WA
    Replied about 4 years ago
    Hi Jeremy: I just listened to your podcast and thought it was so cool that you are in Snohomish County and Seattle/Bellevue area, so when you name out things, I could relate. Then at the end, I finally could your name, and realized that I have taken your yoga classes back in the day at Bikram Bellevue or Redmond, or somewhere, I can’t remember exactly. Your real estate story is awesome. I am hoping to do some flips in Sno Co, and keep buying rentals in Skagit (where my dad is based). Thanks for sharing your experiences with BP!
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied about 4 years ago
    Wow Julie, I’m glad you enjoyed the podcast and so cool that we know each from yoga already. Thanks for reaching out with your comment here. I wish you big success with your real estate projects. Real estate investing is a great way to handle one’s financial needs while achieving time flexibility for other pursuits… like yoga!
    Nick He Property Manager from Bothell, WA
    Replied about 4 years ago
    Hey Jeremy! Thank you so much for sharing such a great Podcast! Your story is very inspirational! I also realize that we have lots of similarity – although I am really bad with music 🙂 I was graduated from Duke MBA in 2009 and moved to Seattle. I have been working in Microsoft since. My partner and I team up just like how you and your brother work together. I live in Kenmore. I noticed that you live in Edmonds. We bought a duplex in Edmonds last year. We plan to buy more in Snohomish county this year, especially Everett. Hope to see you around! 🙂
    Jeremy Jones Musician & Real Estate Investor from Edmonds, Washington
    Replied about 4 years ago
    Hey Nick, I’m glad you liked the podcast! Wow we have followed a similar path, congrats on your duplex purchase in Edmonds. I just moved to Edmonds in August and I love it here. Sounds like we will be looking for properties in the same area so indeed we might run into each other. Keep up the good work at Microsoft and in Snohomish County!