Brandon: This is the BiggerPockets podcast Show…I don’t even know what number this is.
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Mindy: Every time! Every time. You don’t even know how to read. Show 267.
“I always had in my mind, okay you have to buy a house with 20% down. You have to go to a bank. You have to check all these boxes. That’s the only way to do it. And then I started meeting people who had been doing it differently and the next thing you know, I’m able to do deals a bit more creatively. That’s where things really just started to click for me in real estate”.
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Brandon: What is going on, everyone? This is Brandon, today’s host of the BiggerPockets podcast and I am a lucky man today because here with me as my amazing co-host is Mindy L. Jensen.
Mindy: Thank you, Brandon. I am not Mindy L. Jensen. I am Mindy S. Jensen.
Brandon: We did that once before and I thought I remembered it would be an L but maybe that’s because my mom’s middle name is L.
Mindy: You remembered it wrong.
Brandon: Not that I think of you as my mom.
Mindy: Isn’t Rosie’s middle name L?
Brandon: It is. Rosie Louise. You know.
Mindy: Yeah. I could almost be your mom.
Brandon: You could almost.
Mindy: You’re 12.
Brandon: I am 16, thank you very much. How’s it going? How’s life?
Mindy: Life is going really well. I am having a great time. Our new show, BiggerPockets Money, is really taking off.
Brandon: You’ve even got Guy on Fire there on Monday.
Mindy: Guy on Fire is on there on Monday, talking about real estate. It is actually a real estate related show this time. He tells us how he is using real estate to further his financial independence goals. So it was a great episode and you should listen. You should listen, Brandon. And anybody listening here who likes real estate should also listen, too.
Brandon: Maybe I will.
Mindy: But today is not the Guy on Fire episode. Today, we have Nat “The Beard” Borchers.
Brandon: Did you make that nickname up just now?
Mindy: No, that’s his—if you look up Nat “The Beard” Borchers, it’s all over the place.
Brandon: Oh, I didn’t know that.
Mindy: He’s Nat the Beard. You remember what he looks like. He’s got this huge beard. It’s an impressive beard, unlike some.
Brandon: I hope you’re referring to your own beard that you wore for the first five minutes of the show, that if you watch it on YouTube, you’ll see it.
Mindy: It gets itchy. Here we go, I’ll give you a sneak peek.
Brandon: Okay thanks. Oh, there you go. Fantastic.
Mindy: Do you remember why I bought this beard in the first place?
Brandon: Because you dressed up like me for Halloween?
Mindy: I dressed up like you for Halloween.
Brandon: Yeah, that’s awesome. All right, so other than that, today’s show is fantastic. Man, I love his story. Nat was a professional soccer player. Football, if you’re over in other parts of the country—or world.
Mindy: Other parts of the world.
Brandon: Other parts of the world. And he’s got just a cool story of buying rental properties, having somebody else manage them, scaling his business from one property and then something more, something more. Super cool. So anyway. Stay tuned for that.
But before we get to the interview with Nat, let’s hear a quick word from today’s sponsor.
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All right, thanks to our sponsor. Let’s move right along to today’s Quick Tip.
Mindy: Quick Tip. Sorry, I didn’t know you were going there.
Brandon: That was really delayed. I’m going there. Today’s Quick Tip is going to be very, very quick. Very quick. We talked about on the show, about connecting with people in your local area in Meetups. So do me a favor this week and go BiggerPockets.com/events, which I screwed up in the recording later. I say the wrong URL. You’ll hear that, Mindy yelling at me. But it is BiggerPockets.com/events. And find a local event in your area and attend it this month.
That’s what I want to challenge you guys to do, especially if you’re an introvert and you don’t like doing that. I’m going to challenge you. Go do it. You’ll find an event. In fact, I’m going to be hosting just a few events here while I’m in Hawaii for the next few months. So if you’re Hawaii, Oahu, come hang out with me at Starbucks and check BiggerPockets.com/events and find out when and where.
Mindy: Oh, I am going to host an event. I just discovered this about five minutes ago when you brought it up. I’m going to host an event in Portland at the end of March. I’m gonna be there for, my husband is running the Hop-Hop Half Marathon. So if you’re looking for a run, come out and join us. If you want to meet up and talk real estate—to be determined, or to be announced?
Brandon: To be announced.
Mindy: To be announced, but yeah, that sounds like a lot of fun. I don’t get out to Portland all that often so that’ll be a lot of fun to meet some Portlandians.
Brandon: I think that’s how you would say it. I would tell you—
Brandon: I would tell you to go to Voodoo Donuts but now you have one of those in Denver so it’s not as cool.
Mindy: I do, but I still have to go to the original.
Brandon: Yeah, it’s pretty sweet.
Mindy: I would like to further challenge your listeners. Our listeners. Not only do I want you to go to an event, I want you to talk to somebody. Walk up to them and say, what kind of real estate—well, you don’t just walk up to them. What kind of real estate do you do?
Brandon: What do you do?
Mindy: Walk up to them. Hi, my name is—what kind of real estate do you do?
Mindy: Oh, I do this. Oh, that’s great. That’s what I want to do, too. And then you just made a best new friend.
Brandon: Besties. BFFFF.
Mindy: Forever and ever and ever.
Brandon: BFFEEEs. All right. Moving on. We’ve got to do this show. Are you ready?
Mindy: We have to do this show. We should bring Nat in because really, it’s his show, not ours.
Brandon: Yeah, there you go. All right.
Mindy: Okay, so—
Brandon: Nat, welcome to the BiggerPockets podcast. Good to have you here.
Nat: Thank you so much for having me, guys. Excited to be here.
Mindy: I’m excited to have you.
Brandon: So Mindy telling me you’re a sportsy guy or something. You’re some kind of sportsy guy, is that correct?
Mindy: He’s a sports fan.
Nat: Yeah, I used to play professional soccer. I had a professional soccer career for about 14 years and just hung up my boots about a year ago.
Brandon: Wow, what’s that transition—I know we’re going to talk about real estate investing, but what’s that transition like? I’ve always wondered that from somebody who plays for a career, they play a sport and then they stop. What was that like?
Nat: I mean, it was tough, for sure. A lot of sleepless nights trying to figure out, okay, what do I want to do next and what does life look like when you go and do this job for 14 years and I mean, it’s really, I looked at it as kind of part-time job because it wasn’t—you’re not going in and clocking in at 9:00, leaving at 5:00. You’re really clocking in at 9:00 and leaving at 11:00 most days. So I had plenty of time to figure it out though. That’s really where real estate came in for me.
Brandon: Well, let’s talk about that. So, very first deal. Was that pre leaving soccer or was that post?
Nat: So first deal was in 2005, so I was living in Denver, Colorado. I’m sure you guys, Mindy, you know where that is.
Brandon: I’ve heard of it.
Nat: I had heard a lot about real estate investing and I pulled Rich Dad, Poor Dad off the shelf, and read that cover to cover and really was thinking, wow, what the heck do I do after I’m done playing professional soccer. Because it’s an industry where you literally have to retire when you’re in your mid-30s. If you’re lucky to play that long. So I was like, I’ve got to figure something out for this next step.
So I went and bought a house with a friend of mine. We partnered on a deal. I've got to go back and say my first professional contract was $11,000 a year. So it wasn't like I was making a ton of money but I got a $5,000 bonus my rookie season and I used that as a down payment on my first property in Denver. And it was an estate sale. We went in there. It was really the height of the market back in 2005. And we got in with an institutional investor, somebody who was trying to buy it all cash. And my real estate agent convinced the sellers to sell it to two guys who had never done a deal before. So we were pretty excited.
Brandon: That’s awesome. So this was back in 2005. So you bought it at the height of the market. What happened to that deal? Do you still have it? Are you holding onto it?
Nat: So what we ended up doing, the house was in a real estate of disrepair and every day after practice, I’d come home and we’d do a little bit of work. I’d be like laying subfloor with my buddy, laying tile. I mean, it was a hodgepodge of repairs we had to make. I remember thinking, I can’t do this for a living. Because I’d come home from practice and be tired and then I’d go and I’d try to rehab a house and it was like, what am I doing with my life? I feel awful. I’m like tired all the time. So we ended up getting the house ready to rent out. We lived in it for a period of time. I moved on to go play soccer in Europe and I rented out my room and I kept the house until I think 2013 and then sold it.
Mindy: So you did all the work yourself or you did most of the work yourself?
Nat: I would say we did the majority of the work. We had to bring in our skilled labor guys for the electrical and you know, we had some plumbing stuff. But we did most of the stuff ourselves, the tile work. That was actually pretty fun. We did all the painting work ourselves and we refinished the hardwood floors ourselves. We got down and dirty. It was a good time.
Mindy: The electrical really isn’t all that hard. You could just do it. That’s a beginner project.
Nat: I don’t trust myself. These fingers aren’t very nimble.
Brandon: That’s funny. Electrical’s funny because I feel like electrical and plumbing in my mind—electrical is like it either works or doesn’t work, and if it doesn’t work, it just burns down your house. So you know pretty clearly, I feel like, if it works or not. It’s just a little bit more dangerous, you know.
Mindy: It just burns down your house. Whatever.
Brandon: It just burns down your house.
Nat: Minor thing. You have insurance. That’s what your insurance is for, right?
Brandon: I’m kidding to everybody, by the way. Don’t do your own electrical. I’ve actually done a lot of my own electrical back when it was okay to do it. They’ve actually changed the law to make it not okay for landlords to do their own electrical.
Mindy: I know. Such a bummer.
Brandon: I still replace a light here and there. I can call an electrician to come over for $250 and replace a light or I can do it in like eight minutes. I didn’t say that out loud but I may still do a little electrical.
Mindy: We’ll have Dave cut that.
Nat: Good for you, man. I don’t do that stuff anymore.
Brandon: Yeah, I haven’t done a bit of labor in actually a while and I wanted to go there with you. When did you get out of actually doing your own work or did you ever?
Nat: No, that was the first and last time I think I really ever did it. After moving on from that deal, I just started doing more deals and like I said, I went to play soccer in Europe for a couple of years and I own property over there, believe it or not. And then came back to the states into Salt Lake City, which is where I really started. I joined up with a REIA and I started learning about more creative ways to buy properties.
I always had in my mind, okay you have to buy a house with 20% down. You have to go to a bank. You have to check all these boxes. That’s the only way to do it. And then I started meeting people who had been doing it differently and the next thing you know, I’m able to do deals a bit more creatively. And that’s where things just really started to click for me in real estate.
Brandon: So I want to touch on this for a minute because you brought up a really good point. A lot of people just assume there’s like this box that you have to check and that’s what a bank wants you to believe. I hear that from new people all the time. Oh, I can’t do real estate because my debt to income is too high. Or I can’t do real estate because of this or whatever, because some bank told them that they couldn’t do it.
But I love the fact that you said, you got around other people who were doing it and all of a sudden you realize, there was another way. I think that’s such a key part in trying to succeed in anything but especially real estate investing, is find those people. Go to those real estate clubs. Meet people.
To throw in a plug here, go to BiggerPockets.com/meet, everybody. Not meet everybody. Just /meet. I was there the other day, actually. It’s like a free page in BiggerPockets where people just post their Meetups and there’s like at least a hundred Meetups around the country like right now that are coming up in the next few weeks. So there’s probably one in your area and if not, start one. That’s such a good way to network with people.
Mindy: Okay, I’m going to jump in here and correct you because /meet is not for—
Brandon: Oh, you’re right. Events. Biggerpockets.com/events.
Mindy: Yes. BiggerPockets.com/events.
Brandon: Same thing.
Mindy: Wow, Brandon. Maybe you should spend more time on the site.
Brandon: Yeah, maybe.
Mindy: Luckily, you have me.
Brandon: Too much sun, apparently. All right, BiggerPockets.com/events. You can go there and you can learn some good stuff about Meetups. All right, so I want to fast forward to the end of your career and then go backwards, just so people get an idea of what you’ve done so far. So can you give us a layout of your investments as a whole. Like how many units do you have now? What type of investing do you do mostly today? What does your business currently look like, and then we’ll go back to the beginning.
Nat: Sure, sure. Well, I used to look at real estate a lot differently than I do today. I used to look at it as, okay, I’ve got to get a certain number of units and a certain amount of cash flow. I looked at it as more of a revenue from a revenue standpoint. There was a certain amount of revenue I want to achieve. But currently, I’ve got 24 units and I think I’ve got about, comprised of about 16 or so properties.
So there’s some duplexes, some sevenplexes in there. And I’m on a contract for 28 more houses that I’m going to close on, on March 1st. So I’m kind of at this stage in the game where I’m like, okay, I’m going from here to here and just really experiencing a lot of growth. And a lot of that is 1031. A lot of that is just seeing appreciation in the Salt Lake market and the current market in Salem. And that’s where I’m doing most of my deals.
Mindy: Okay, so you said 1031. Can you quickly tell us what a 1031 exchange is for those of us who don’t know, like Brandon?
Nat: Yeah. I’ve heard Brandon has never done a 1031 before.
Brandon: I have never done one.
Mindy: Brandon’s never done anything. He’s a big faker.
Nat: Yeah, I can tell. He seems that way. He’s not beardy Brandon, I know that.
Brandon: I am very less beardy Brandon today.
Mindy: You should feel way worse, Brandon.
Brandon: I know. Normally, I’ve got the longest beard in the room. Today, I am coming up short.
Nat: Can we say something real quick? We’ve got to get this out of the way. So before I got on BP, before I talked to Mindy, I had this idea in my head, Brandon, that you were like 5’2”. That you were like this little short guy who was out there like, a little pipsqueak doing deals, like a chihuahua in a purse. And then Mindy’s like, did you know Brandon’s like 6’5”? He’s like really tall. And I was like?
Brandon: And a half. 6’5” and a half.
Nat: Really? It just doesn’t go with like your voice, man. So it’s funny.
Brandon: Apparently I need to talk like this. Hi, my name is Brandon and I’m 6’5” and a half.
Nat: You’ll scare sellers off. You can’t do that.
Brandon: I’ve got to be a friend. I sound angelic. Angelic is the word you’re looking for.
Nat: You’re like Justin Timberlake at the Super Bowl. Everyone wants to talk to you and be around you because you have that voice.
Brandon: I’m not going to lie, that’s not the first time somebody said I’m just like Justin Timberlake. I mean, I get that a lot. I don’t know if it’s the way I look or just the way I sing. The way I dance. I don’t know.
Mindy: I’m guessing it’s none of that.
Brandon: Okay, so we’re going to go back to 1031s and talk about that, right?
Mindy: Yeah, that’s what we were talking about.
Brandon: Because I just did one and it was hell, but it was fun. So what is a 1031?
Nat: Yeah, so a 1031 exchange, I think is one of the greatest wealth generators ever made in the history of the Tax Code, whatever you want to call it. So a 1031 exchange, basically, is a way to defer a gain from the sale of one property into the purchase of another property. And so, for example, you can sell one property. Let’s just say you bought it for $100K and you sold it for $200K. You can take $100,000 of that gain, not pay any taxes on it, and buy let’s say a 10-unit building for $500,000 with $100,000 down.
Mindy: And not pay any taxes.
Nat: And not pay any taxes. I didn’t understand it until I did it and for me, it was more about income stream. It was about taking this small little income stream that I have from this property that was single-family and multiplying it by like four or five. And it was a great way to leverage. It was a great way to tap that equity and I just see so many benefits in doing that. I think a lot of people, they get to a certain point in real estate investing and they don’t want to go any further because they’re comfortable. But I think if you want to get to that next level, I think the 1031 exchange is a great way to go.
Brandon: Yeah, that makes sense. You know what killed me with a 1031 exchange was the 45 days. They give you 45 days to identify a property, to pick a property. People listening in who have been listening to the BiggerPockets for the last year probably know—because every week, I would report how it’s going. I actually got my—I ended up selling one property and bought two and I got it under contract there, I identified it or whatever on day 45 at like 7:00PM. It was like my last day and I did not know if I was going to get it. I could not find a day. I could not find anything to even identify. You don’t technically have to have it under contract to identify it but I wanted to know what I was buying because you can only identify three unless you get some other random rules. If you guys want to know more about that, we’re going to put a link in the Show Notes of this page to a couple of articles about 1031 exchanges. So go to BiggerPockets.com/Show—what are we at, Mindy?
Brandon: 267. /Show267. You can learn a lot more about 1031s but yeah they are a fantastic way to scale wealth, to grow up, to kind of—I like to say you’re partnering with the government. The government’s like, here, I know you owe us a bunch of money but you’ve been pretty good with that money so why don’t you take it and put it into your next deal? I’ll partner with you.
And then they’re like, we’ll get our money later. And the next time, they’re like, hey, you did a good job again. Why don’t you take it again? But they just give you that stupid 45-day identification and six months to close. Anyway, weird.
Mindy: So I want to make a correction. I said you pay no taxes. You kick the tax can down the road. Eventually, you’re going to have to pay taxes unless you die.
Brandon: Unless you die.
Mindy: Unless you die, which is actually kind of the best choice because then your kids get the property, not at what you paid for it value, but at what its current value is, so then they’re only paying capital—it resets the tax basis. Or the cost basis. What basis does it reset? One of those bases.
Brandon: However that is. As long as that Tax Code doesn’t change. My plan is, and maybe it’s your plan, too, Nat—my plan is to keep buying properties and 1031ing into more and more passive properties. So like eventually, I’ll just 1031 into a shopping mall or something that’s just like, or an Amazon warehouse or whatever that’s popular 20 or 30 years from now and like, just ride out a 4% return or whatever until I die. And then my kids will just get the full amount with no tax due. That’s what I’m thinking.
Nat: And why not? I mean, you can do it in perpetuity, right? You can just keep doing it as long as you want to do it and as long as you have the energy to go out and chase the deal and put it all together. It’s fun, sure. And all you have to do is die, like you said, Mindy. And everything is good.
Mindy: Yeah, just plan on dying. That’s how you end your 1031 exchange saga. So you said, chase a deal. How are you finding these deals? You told me before we started the recording that you just closed yesterday on a seven-unit property? How’d you find that deal?
Nat: Right. Well, I’d have to go back to Salt Lake City and mention that I took a boot camp back in the day from a good—he was a mentor and now he’s a friend of mine. Matt Atkinson, and he’s this mortgage broker. He does a lot of the financing side but he’s a real estate investor as well. And he did this six-week course.
We went in every Monday for a couple of hours and we just cold-called people. And we did it to “For Sale by Owners” but we did it also, and we called people, landlords who were like tired landlords who were renting their houses on Craigslist or Mozilla and it was just a great way to find people to say, hey, you’re renting your house. That’s awesome. What would you think about not having the headaches of managing said property and maybe put together a deal? And it was an amazing way to find properties.
There were—obviously, we got hung up on plenty but we also got a lot of deals. That’s when the creative side kind of kicked in. It was like, do some lease optioning. Do some contracts for deeds. Use some seller financing subject to things. Always to buy properties with little or no money down.
Brandon: That’s awesome. I tell people this all the time, that strategy. And I love hearing that it worked for you. Especially if you have no money, you can’t go out and send out thousands of dollars of direct-mail. You’re just getting started, let’s say, and you go, how do I go find a deal? It’s a competitive market. I always tell people just go on Craigslist every single week. Pull a list of every mom and pop landlord who’s listing their properties for rent. You can tell who’s the landlords and who’s the property managers. Because usually much crappier ads.
And then like, they give you their phone number right in the ad. It doesn’t get any easier. Like here. I’m a property owner and most landlords suck and they hate being landlords. Most people are bad at being landlords. So like yeah, you might get hung up on nine times out of ten, but like that one out of ten, they’d be like yeah, I might be interested. And then like out of ten of those people, maybe one of them will sell you their house. It’s just a giant funnel so yeah, I love that that worked for you.
Nat: And you know, I’m not a big fan of cold-calling. I can’t just sit down and just like bang out cold calls all day long but there’s just a ton of value in calling somebody, introducing yourself, and say hey, are you interested in this opportunity? You know, you don’t have to give them a hard sell. You don’t have to be shady about it. You just go in and say hey, this is what I’m presenting to you and what do you think about it? If they say no, at least you asked. That’s the biggest thing. You have to have the courage to ask.
Mindy: And what’s the worst thing they can say? It’s no. They’re not going to come over and shoot you. They’re not going to kidnap your child. They’re just going to say no. Maybe they hang up on you. Maybe they say a bad word. You’re going to hear a lot. As landlords, you’re going to hear a lot, so toughen up your ears. And just getting comfortable calling people and talking to people because there are a lot of people that are just introverts and they don’t feel comfortable just calling a random person. What’s the worst that could happen?
Nat: Mhm. I’m actually reading a great book right now. I don’t know if you guys have read it. It’s called How to Work a Room by Susan RoAne. It is a really good book. It talks about how, I think there’s a lot of people out there who consider themselves introverts and they really, you walk into a room, right? And you’re nervous. You’re like what do I say? What do I do? I think everybody gets that feeling because a lot of times we walk into rooms as real estate investors.
We go to these Meetups or REIAs and it’s like, everybody’s a stranger. Okay, what do I say? How do I talk? How do I conduct myself? And it’s just a great way to get out of your comfort zone and go smile and just meet somebody and have a good conversation and just practice networking and practice talking to people. It’s just an important skill as a real estate investor.
Mindy: Yes, absolutely.
Brandon: Can you share any tangible tips that you’ve learned over the years about doing that? Like somebody, let’s say, who’s in that exact position right now. They want to go to a real estate club. They’re nervous. They’re an introvert or they just don’t like big groups. Like, what do they say? What do they do to break the ice?
Nat: You know, I think How to Win Friends and Influence People is one of the best books that I’ve ever read and it’s just about asking questions and everybody wants to talk about themselves, right? Everybody wants to say, hey, this is me. This is what I do. When you find somebody’s passion, you just talk about it. If somebody’s at a real estate investors’ association meeting, they’re there to talk about real estate and they’re probably proud of the fact that they’ve done a deal or they’ve structured it this way or that.
And just ask them, okay, how did you do it? What motivates you? Where are you from? You just kind of get on that road and then all of a sudden, you’ve made a connection. You’ve made a relationship. And you’re not doing anything other than asking somebody questions and just trying to pick their brain a little bit about what they did to be successful.
Brandon: I love that. The question thing is like my go-to. Because I’m kind of an introvert in big groups. Josh always makes fun of me for that.
Brandon: You’ve seen me at parties. Come on.
Mindy: You just stand in the corner and be tall so everybody can see you.
Brandon: That’s exactly what I do. I stand in the corner.
Mindy: You do that because you’re introverted?
Brandon: Of course I’m introverted.
Mindy: Oh my, God. No, you’re not. You keep using that word. I do not think it means what you think it means.
Nat: I think in the books, Susan says something about 80% of us think we’re introverted. When you look at most people you think, oh, that person is not actually introverted but they think they’re introverted. They have in their mind, oh, I’m introverted. I don’t really like to talk to people that much and it’s hard to talk to people sometimes. But you know, when you get out there and you get that positive vibe going, I think it’s a lot of fun.
Brandon: Man, I just put this on my Instagram or Twitter the other day. Like I said, when I go to Wal-Mart—I try not to, but when I go to Wal-Mart, I will wait in line longer than I have to in the self-checkout just so I don’t have to talk to anybody. If I can just go through my entire life not talking to people—see, that’s why I say, deep down, I have to force myself. Now, Skype calls, great because I can talk all I want and you can’t do anything about it and there’s only three of us. Forget about the hundreds of thousands of people listening.
Mindy: Don’t forget about the hundreds of thousands of people listening. I appreciate you, listeners. Send hate mail to Brandon at—
Brandon: They appreciate you, too. All right, so I want to un-derail this a little bit. No, this is actually really good. But I want to mention one more thing about the Craigslist thing. Is that, like when you’re calling somebody, a landlord, whether or not it’s Craigslist or you just meet them at a real estate club or whatever, people love new investors if they’re not annoying.
What I mean by that, let’s say you’re an experienced investor and somebody calls you and says, hey, I’m brand new to this thing, real estate. And I’m really looking to get my first deal and Bob said talk to you or I saw your information on Craigslist and you look like you know what you’re doing—can I talk to you about that for a minute? Very few people are going to be like, no, sleazeball. And hang up the phone.
People like helping people when you’re earnest about it. So like use that. That’s such an amazing skill you have, is being a newbie. If you’re a newbie. Yeah, use that. I’ll even use that when I’m not a newbie, when I get around people who are more experienced. I’m never like, here’s what I’ve done and whatever. I’m just like, you’re awesome. You’ve done amazing stuff. Teach me. And then they love that because like you said, everyone likes talking about themselves.
Nat: Absolutely. And I go back to that, 2008 was when I started going to that REIA. I was sitting in the front row. I didn’t know anybody there because of course, I’m playing professional soccer. I’ve got this bubble that I live in. And then like I’m going to a new place where there’s all these new people.
I have no idea what the language is like. I have no idea what the deals—great term financing. I have no idea what these terms are that these people are talking about. And then I just started learning and I started slowly networking. I try not to be too annoying with my questions like you said, and I’ve got some friends in the game and they’re helping me. Somebody’s helping me find a deal over here and somebody’s helping me finance it over it. It’s just a relationship type of a thing.
Mindy: Yeah, so you touched on a couple of things that I really want to point out. You said, I have no idea what the language is like. I have no idea what the terms mean. That’s really big. Okay, first of all, it’s a huge clue that you’re a newbie, is when you don’t know the language.
The first time you go, maybe you don’t talk to a lot of people. Maybe you just sit there and listen and come to BiggerPockets afterwards and look up all of these terms and figure out what they mean so you know what you’re talking about. But also, just listening to what other people have to say when you don’t have a lot to say.
My favorite question when I go to a Meetup is, what kind of real estate investing do you do? Again, because people like to talk about themselves and it’s a nice icebreaker. In real life, nobody gives a frog’s fat backside about real estate. How many people do you know? Like, nobody does.
Brandon: Is that a phrase?
Mindy: It is. Trademarked by me. Well, I actually use a different word sometimes. A toad’s fat backside. But I mean, nobody cares. I’m driving down the road and I’m like, oh, look at that house and look at this and my kids in the back, I don’t care, mom. All my friends are like, yeah, that’s great. And you can tell that they totally don’t care.
So going to one of these places, finding an experienced investor who also has all these people in their life that don’t care about real estate, it’s nice to be able to talk to somebody. That’s one of the reasons why so many experienced investors are on BiggerPockets, because they found their tribe. So if you really like real estate, go to these places and talk to these people. They want to talk to you.
Nat: I mean, I’ve never turned down an opportunity to help somebody who’s new to the game, especially there’s a lot of young investors out there who are like trying to figure out, okay, what do I do with this money I have, or how do I position myself to retire early in life. How do I do this? And I’m like, I’m all about helping you do that because that’s what I’m doing right now and that’s been my dream for so long. It’s like, nobody’s going to turn you down who wants to see—I want to see more people in real estate. I want to see people understand it more. I want to see people invest in it more because I think it’s just a great way to achieve financial freedom.
Mindy: I totally agree.
Brandon: All right, so let’s go into some specifics. You mentioned you just closed on a property. I think that was before we said we were recording. But can you talk about that? What did you just buy?
Nat: So I just bought a seven-plex here in lovely Salem, Oregon. This is where I do my investing now. I live up in Portland, but it’s about a thirty minute drive from here to Salem.
Brandon: Can we talk about that for just a second before we go into the deal? What’s the average purchase price around, in Portland? Because I hear people complaining about Portland all the time.
Nat: Yeah, so a purchase price for a three or four bedroom house is around $400,000.
Brandon: Now, what is it in Salem, for a similar house?
Brandon: So by driving a half hour, it drops that price dramatically. Where people say, I can’t invest in Portland. I live in an expensive city. I can’t invest there. I better sit on the couch and watch TV every day. You figure out a solution.
Nat: Yeah, and I’ve heard you guys talk all the time about you know investing in markets outside of the area you live in because a lot of people do live in these markets where you just can’t find cash flow in properties. And literally, I looked. I spent a long time looking in markets around here. I looked in Portland and I was like, this is crazy. I’m not going to be able to do business in Portland. I looked at north in Vancouver. I looked in some other areas and I found Salem and I found a great team down here and it is just a great place to do business and very much speaks to the cash flow business I like to build.
Brandon: Awesome. So tell us about the property. Where’d you find it? How’d you find it? What’d you pay for it?
Nat: Yeah, so it's a seven-plex. Every single unit is a two-bedroom, one bath. We've got about 1000 square feet in each unit and each unit has a one-car detached garage. Purchase price was $815,000. I found the property from my real estate agent. He went and found it for me. And I've actually found a lot of my deals recently just through him because he's a stud. He finds great value for me and I don't have to crank on the phones all day long.
Mindy: So was this one listed on the MLS?
Nat: Yes, it was listed. Yep.
Nat: It was.
Brandon: Okay, and what do the units rent for each?
Nat: So currently, my play has always been value-add. So I always find these—I think most people do—they find these properties that have been not taken care of. They’ve been beaten down. It’s mom and pop owners. People who don’t really know what market rents are. The biggest value I always see in knowing your market is knowing your rents. Like, if you know your rents, you really can drill down and okay, what’s going to be my return on investment in this property? In this instance, I think all the units are renting for somewhere around $700 a month. And market is between $1000-$1200.
So you know, obviously, one of the units is already rented for $1150. So we know that there is a market for it. And then a couple of units, one unit is vacant. Another unit, I think we’re going to have to deal with a problem in terms of maybe an eviction, which isn’t always going to be fun but the rest of them are currently rented so we have to give notices and try to increase the rent.
Brandon: Are you going to increase the rent—because this is something I always question when I buy a property that’s under rented. Do you jack it up on everyone to get it to market rate right away assuming you might lose some or do you leave it in place and when they leave, you raise the rent, or do you do it gradually? How do you view that?
Nat: Yeah, that’s a great question and I will say, the conservative me back in the day would just increase gradually. But now I’m at a point in time where I’ve already factored in, okay, I’m going to have a significant amount of vacancies and I’d rather deal with the vacancies initially and raise those rents to market versus gradually deal with lower rents for the next six months to a year.
So my focus for the next month or so is to get these notices out to the tenants, let them know that we’re going to increase these rents. A lot of the units are not in great shape so we’re going to have to go in and get the paint and the carpet and get them fixed up to rent out to market.
Brandon: You know, I think the answer to that question also depends a lot on where you are in life. Like you said, earlier well maybe it would have been different. When I started out, yeah. I didn’t have the money to just have everyone leave suddenly and go and remodel seven or eight units. Today, my investments are a little bit different so I could.
Interesting to note about that, I sold my 27-unit apartment building. That was the 1031. I sold it like six months ago now. Anyway, my average rents were like $530 on average. And we’re pretty good about raising rent. I don’t know, I let people who are there, I just slowly raised the rent by 10-15%. I didn’t want people to move. I just maintained a good investment.
Anyways, the guy who bought it, they day we closed, he went over with notices and jacked the rent up to $595. Nobody moved. So like, he just immediately like day one, increased his cash flow by whatever that is. 24 times $50. Crazy. And I’m like, dangit. I should have totally done that.
Nat: And here’s what’s awesome about that is I look at real estate and there’s so many different ways to make money in real estate. It’s like, a lot of times, you’re not taking from somebody to pay yourself. You obviously wanted to get out so you 1031 exchange, right? So you were able to take your gain and get into something else. He was able to take an asset that he thought wasn’t performing where it should be and he was able to make it better immediately. So it’s almost like a win-win, I think. If you’re really looking at it from the numbers side of things. And I think that’s what’s great about that story.
Brandon: And what’s cool, people oftentimes they think that real estate is a win-lose situation or whatever. But like, I was tired of that property. Exactly like you said. And it worked out to where he got exactly what he wanted. I got exactly what I wanted. He had the infrastructure in town because he had his own management and his own maintenance people. He had like three employees under him, owned a bunch of other apartments. So he could run it way more efficiently than I could.
I would say, he even overpaid. Like, I would not have paid what he paid because I have a different infrastructure. So again, like there are ways to—and that’s why I have to go back to wrap up the conversation we had earlier—when you talk to people on the phone, you’re not necessarily taking advantage of them. You’re not trying to take advantage of them. You’re trying to figure out like, is there a win-win that we can come up with? And most real estate investors get that. So don’t be afraid to have those conversations. Maybe what is a great deal to you isn’t to somebody else or vice versa.
Mindy: So I want to talk about these rents and the leases themselves. You have seven units and how many are vacant currently?
Nat: I believe we’ve got one vacancy but we’ve got one tenant who hasn’t been paying rent for the last, I believe, month and a half. So we’ve got to—and then the leases, a lot of these tenants have been in this building for years and years and years. Some of them even paid non-refundable security deposits, which I don’t think is even legal. So that’s one of those situations. Their lease, I just don’t think, are airtight like they should be. So we’re going to have to go in and we have to really tiptoe around this and do things right.
Brandon: Hey Mindy, if there is a landlord out there who wants to have an airtight lease, a good lawyer-reviewed lease that’s state-specific, how would they go about doing that, Mindy?
Mindy: Wow, Brandon, that’s a really good question. I think they should go to BiggerPockets.com/LLForms to get a state-specific lease for their particular state. And we sell them in 15 states right now but we’re ramping up to do all 50 plus Washington, D.C., which conveniently enough, has different laws.
Nat: Are you in Oregon?
Mindy: Are we in Oregon? I don’t know. Let’s go over here to BiggerPockets.com/LLForms. Oops, I don’t know how to spell.
Brandon: LL is spelled LL. There’s actually two Ls. LL.
Mindy: Brandon, I don’t know what I would do without you. We’re not currently in Oregon yet.
Brandon: But you will be. We will be.
Mindy: I’ll send you a letter when we are.
Brandon: Okay, so anyway. You’ve got your seven units currently and—
Mindy: We have five more to discuss. So you said, are they on month-to-month leases or are they on annual leases? Can you raise the rent right now, because I would like to point out to people who may not be aware, once you buy the property, you have to honor the lease until it ends.
Nat: Yeah, so they’re all month-to-month leases right now.
Mindy: Oh, perfect. So you can, with 30 or 60 days’ notice, depending on your state’s landlord-tenant laws, you can raise the rent.
Nat: 60. Yeah.
Mindy: 60. Oh, that stinks.
Brandon: It’s only 30 here.
Nat: Yeah, so Oregon is very tenant-friendly. So this is something I learned as I’ve invested more here in Oregon versus Utah, which is much more landlord-friendly, is that the tenants have a lot more in terms of I guess, rights, and it’s just more difficult to move rents up. And you’re seeing, even in Portland, it’s crazy. Some landlords are having to pay tenants’ moving expenses when they take over some of these properties just based on some of the laws that have been moved through the legislature. So it can be kind of scary as a landlord. Definitely, you have to know your laws.
Mindy: You definitely have to know your laws. Okay, so you bought this property for $815,000. And you put zero down? Did you do this with no money?
Nat: No, so in this particular instance, I used my own money for the down payment. It was about $170,000 with the finance fees and everything like that and I have—what I’ve built up in the past year or so is a relationship with a portfolio lender. And so this is a commercial lender and this is something I’m not really familiar with because before, I was always buying these properties either doing solo financing or doing conventional loans with a mortgage broker. Like Fannie, Freddie Mae type of loans.
And so, going into the commercial loan area is so much different because they underwrite their own loans. They're able to keep the loans in-house and they don't have to be inside the box that some of these Fannie or Freddie brokered loans have to be in. It's like, they can just do so much more. So I'm like getting 80% loan to purchase, which is great and it just reallyâthere's so many fewer documents to sign when you're going to close and it's just so much easier to do.
Mindy: So why did you get a commercial loan on this seven-plex, Nat?
Nat: Why did I get a commercial loan on a seven-plex? Because it is five units or more. Any property that is considered commercial multi-family is five units or more. And anything one to four units is residential. And so once you get outside of that four unit area, you have to move up into a different kind of a loan.
Mindy: Okay, so a traditional loan just wasn't even an option.
Mindy: Okay, I knew that.
Brandon: That was a very softball pitch right there. Nice job.
Mindy: Not everybody knows that, Brandon.
Brandon: I know. It’s good.
Mindy: I mean, you don’t know anything.
Brandon: You're educating people. I've learned that multi-family, over five units or greater, now requires a commercial loan. You learn something new every day.
Mindy: Okay, so you have a mortgage. What is your payment? Oh, I wanted to say, I don’t know if I’ve told you this, Brandon. I told Nat before we started recording. I got a letter recently from a fairly frustrated listener who said you never go over the numbers. And I want you to go over the numbers. I want to hear these numbers so that we can start learning. So that’s why we’re doing this. Did I already say that?
Brandon: If we were talking to every angry letter, I would not be on the show anymore. Sorry.
Mindy: Brandon’s home address is 123 Cool Street.
Brandon: Brandon sucks, get him off the show. He sounds like a 5’2”, I don’t know. Whatever you said.
Nat: Chihuahua in a purse.
Brandon: Chihuahua in a purse. Get that guy off the show.
Mindy: Nat Borcher is my new favorite guest.
Brandon: Okay, so let’s talk numbers. Your payment is how much, roughly? And where do the numbers break down on this?
Nat: Yeah, so I have a loan for 5.5% and my loan payment is principal and interest is about $3700 a month. If you throw in my insurance and you throw in my taxes, I'm all in about $4500 a year. I'm sorry, a month.
Brandon: A year? That’d be great.
Nat: It would be.
Brandon: I’m assuming you pay sewage, water, garbage there? Is it separated? Can you separate it?
Nat: Yeah, so I pay water, sewer. Tenants are responsible for garbage.
Brandon: Okay. Have you considered sub-metering or trying to somehow outsource that to the tenants?
Nat: Yeah, so in the unit that is rented, that tenant is actually paying the utilities bill. I think it’s an extra $50 a month. They’re actually paying that in their lease. They’re paying $1150 plus $50 a month. But we have separately metered units. That’s a good suggestion, though.
Brandon: There are companies that will sub-meter your individual units, obviously.
Nat: What’s that cost?
Brandon: It’s not that much. I wish I could give them a plug but I can’t remember what their exact name is. I think it’s something like True Meter or something like that. They hit me up on Instagram actually, kind of randomly. I’ll get a link to it and put it on the Show Notes.
But anyways, they’ve got this cool device that actually attaches directly to like the toilet, the sink, the shower. They’ve got these little like Wi-Fi enabled sub-metering things. So you don’t actually have to do any plumbing. You just unscrew the line. Anyway, that was kind of cool. But yeah, I can’t remember their name exactly so I’ll just put a link on the Show Notes. It was a very interesting model.
But otherwise, some people do it just on the hot water heater. If the water lines aren’t separated like in a lot of multi-families, they’re not separated so everybody shares, you can just put it on the hot water heater or like you said, like you’re doing, you just charge a surcharge like $50 a month. I’ve actually found a lot of success with that because I don’t have to do any work at all, plumbing-wise and you still get to advertise the lower price.
Mindy: Do you get anybody complaining, oh, I don’t use $50 of water?
Nat: No, never.
Brandon: I never have either.
Mindy: Okay. We had a really interesting episode, BiggerPockets podcast number 131. You can get there at BiggerPockets.com/Show131 with Serge Shoecott. He talks about sub-metering a property and he’s got some really great tips in that episode. I really liked that episode a lot.
Brandon: Yeah, I do, too. That was legit. And sometimes, I find that like, so I bought a fourplex for my daughter a few years ago, like 18 months ago when she was born. It was her college education, right? I’ve told that story a million times here. But what makes that property so good and cash flowing, like cash flow was like $1,000 a month. The reason it’s so good though is because every unit is separately metered and they all pay their own water, sewer, garbage, electricity. So like my expenses on that property are so low.
On the properties where I have to pay water, sewer, garbage. That’s sometimes more than the mortgage payment in my area. So yeah, that can turn a deal from like, you go find a deal on the MLS and you’re like, well, that’s not a very good deal. But then just thinking, but what if, could I sub-meter those and transfer them over? All of a sudden, the mediocre, not such a good deal, could become a homerun deal just by creatively thinking how do I do things like that?
Nat: That’s such a good point. If you come in, you could see the opportunity, obviously, to add value just in terms of rents. If rents are low, you can already immediately increase rents. You can add paint, carpet, increase rents. And obviously, there’s another value-add. Hey, I’m going to tack on another $50 a month for this utility charge and obviously increase my income for this property and that’s something that the owner hadn’t even thought about before.
Brandon: Yep. Sometimes like today, I always say this—back eight years ago in like 2007, 2008, 2009 when the market was really, really horrible, you could find good deals that were just lying around. You could just find them and go, oh, there’s a good deal. There’s a good deal. Today, you don’t find good deals. You make good deals. So you have to think, how do I make this a good deal? Do you like that quote, Mindy?
Mindy: I do. I like that a lot. I’ve got to tweet that later.
Nat: You better write that down.
Brandon: Yeah, so you don’t find good deals anymore. You make them. So you make them by thinking, how can I add a bedroom to this? How can I add a water charge? How can I increase the rent? Like you said, remodel, add paint and carpet. What I find is that, especially in today’s economy, tenants seem to be willing to pay more for nicer stuff.
Now, that won’t always be true, I’m sure, when everybody gets scared that the sky is falling, then people tend to be a little more conservative. But right now, I mean, tenants are paying crazy amounts just because it has nicer floors. Because everyone’s feeling confident. So cool, all right. So after you’re done remodeling this property and all the units are up to par, you’ve got it all managed, streamlined, everything’s working. What do you expect it to cash flow?
Nat: Yeah, so I’m hoping to cash flow somewhere between $2000-$3000 dollars a month on this thing. If we’re getting $7000-$8000 a month in rent, we should be doing pretty well there. But I obviously committed a decent amount of capital to it, $170,000 and expecting to get a decent return there.
Brandon: Did you have a number that you looked for in a return, like you say, hey I need to get at least this much per unit or this much percentage?
Nat: Yeah, you know I like to get double digits in my returns. I mean, I look in real estate as a form of arbitrage, right? I’m always looking to say, okay, I’m borrowing from the bank at 5% when I’m expecting to get at least 10%. And that 5% I’m making in between the five and the ten, that’s mine.
And you know, that’s one of the things where I think a lot of people, they don’t really think about that side of things before they do a deal. They’re just looking at the basic, your rents minus your desk service. You think you have that cash flow. No, there’s a bunch more to it and you have to make sure you really know those numbers so you can figure out what your profit margin’s going to be.
Brandon: Perfect. Love it. All right, so let’s go over to the 20 units that you’re thinking about buying. 20 houses—is that what you said?
Nat: 28. Yeah.
Brandon: Oh, you got something first, Mindy?
Mindy: I do. I want to know, do you manage this property yourself or do you hire it out to a property management company?
Nat: Yeah, so I learned a long time ago that property management wasn’t for me. I’ve got a story to tell about that. I was playing professional soccer in Salt Lake City and it was the night before a game. And I’m always really adamant about my preparation before a game. So I had my pregame dinner. I watched my TV show. I go to bed. And it’s like, 11:30, my phone rings. And I like look at it expecting not to answer it, but of course, it’s a tenant and it was from this triplex that I had just purchased. A Hispanic tenant. And I speak passable Spanish and this tenant spoke no English. So they called me and they just were beside themselves, like blah blah blah. I heard something like fuego which means fire. And I’m like, what? Fire? And I’m like, they did something about electricity and I was like, oh my, God. I’ve got to get down there. So like, I didn’t even think, hey, call 911 or anything. I’m coming down there. So I just like get out of bed, I put on my clothes and I just raced down to this triplex and I show up there and I don’t see any smoke. There’s no fire, nothing there.
I go to the unit and I’m like, what’s going on, guys? What’s the problem? They’re like, my electricity doesn’t work, is what they were trying to tell me. I’m like, really? Your electricity doesn’t work? Well, where’s the electrical panel? So we go, we try to find the electrical panel and it’s nowhere to be found. Like, it’s just like, an additional unit that was added to this property and there’s no electrical panel. Can’t find it.
So then I have to go to the unit next door, knock on the door and say hey, wakes him up. Of course, it’s a Friday night. Hey, can you guys let us in? And we go into the unit and sure enough, their panel actually works for that other unit’s electricity. And they had just tripped a circuit breaker. So we just had to flip the circuit breaker on and that was that.
After that experience, I was like, I’m done with this property management thing. I’m taking calls at 11:30 at night. I’m ruining my preparation for a game. And it’s time for me to move on from this thing.
Brandon: The most important question though is did you win the next day?
Nat: You know, I played like crap but we won.
Brandon: Okay, good.
Nat: That was all that matters.
Brandon: Yeah, I have a similar story. I had a tenant call me. It was the only middle of the night call that I’ve had. It was like 1:00 in the morning, a tenant called me and said there’s water leaking all over the place. I ran over there. It was only a block from my house. This is my first year ever as a landlord. And I ran over there and she was just doing dishes and like, at 1:00 in the morning, and the pipe underneath, the drain line underneath just came disconnected. So if we would have just stopped doing dishes, then there wouldn’t be water everywhere. But of course, she didn’t know that so like, I go over there, I just shut the water off. And I turned around and just walked back out and was like, I’ll be back tomorrow.
Nat: Mic drop. It’s like, it’s so funny though. I look at property managers now and they’re kind of like the middle man between you and tenants. They manage all that information, right? They manage all those calls. You just get to see like the report. You get to hear the big stuff that happens and it’s like such a refreshing thing when you can scale up and not have to manage your own properties. It was so refreshing for me. So now I’ve got a really good property management company here in Salem that takes care of my properties and it’s just such a relief not to have to worry about it.
Brandon: Awesome. I love it. All right, so now let’s move over to these houses. Do you have them under contract or are you looking to? How’s that working? Are they actually all houses and how did you do that?
Nat: Yes, so it’s a portfolio deal, 28 two bedroom, one bathroom houses. It’s been a rollercoaster of a deal. I got these things under contract last June, went through months and months of due diligence so I’ve got a really good property inspector and we went through these units just with a fine-tooth comb. There were a lot of issues with them and we ended up having to get some concessions on the seller’s side.
I ended up, in order to take this thing down, I had to sell four of my properties in Salt Lake. I did a 1031 exchange to make sure this whole thing would work. So I was under the guy with that 45-days and the 180 days to close. So basically, where we’re at now is the seller, he needs to fix up the properties to what we think are good enough for us and then we’re going to close on those properties in March. On March 1st.
Brandon: Awesome. Well, congratulations. I mean, who sells 28 houses in one shot and why did they do that and where’d you find it?
Nat: Well, that’s a great question. It’s a unique deal for sure. It’s not a 28-units under one roof. It’s actually 28 different bungalow houses which is kind of weird but it’s a six-plex here, a six-plex there, and then a 16-plex over here. So they’re all on three different tax lots and it’s just the way they were built. But it was a guy who, he had owned these properties for a long time in his family.
So he kind of had them passed on from generation to generation. He got to a point in time where he was like, you know what? I’m done with this. He’s got some partners in on this, like family, and he’s like I’m ready to move on from and I just want to get this thing done.
He has the capacity, believe it or not, to fix these properties up for me before I buy them. So the roofs will all be brand new. New hot water heaters. New sewer lines. So like the bones will be really, really good so I’m not going to have to go in and do those major expenses when I take them over.
Brandon: So then let’s talk water, sewer, garbage again. They’re separate houses so are the tenants currently paying water, sewer, garbage or can you shift that to them?
Nat: So that is where this deal is a lot better than the seven-plex in terms of expenses. They each pay for their individual water, sewage, garbage and all of that stuff.
Brandon: One of my favorite types of properties to buy are like these grouping of bungalows, these little like smaller houses that are usually in a group. I’ve got a few of those houses now and I love those things. Typically, tenants expect to pay their own water, sewer, garbage. That’s not weird. They’re usually sub-metered for that reason. And it’s like a next step up from an apartment but not quite like a standalone house. I usually get better quality tenants in those as well.
Nat: Absolutely. I think there’s something to be said about having your space, not sharing a wall. And these are really recession proof types of products. You’re talking about a two bedroom, one bathroom house that’s going to rent between $900 to $1100 dollars a month, maybe more. And you know, there’s a big segment of the renting population who can afford that.
And so if you’re looking forward to hey, you know, we’ve got this big thing coming. We don’t know what’s going to happen or what it’s going to look like, the slow-down, I think this is a great place to be because it’s really affordable. You’re not in this luxury housing where you’re trying to rent for $2000-$3000 a month.
Brandon: Awesome. Awesome. I guess my last question before we move onto the Fire Round, unless Mindy, you’ve got anything else. I just want to know where you’re headed next. Like what’s your future look like?
Nat: Yeah, you know, so I’m a big fan of goals. I just posted an article about big, hairy, audacious goals. BHAGs. I got that from Jim Collins’ book, Built to Last. And when I started out in real estate investing, I was like, okay, I’m going to buy—I want to get ten doors, ten houses and I’m good, right? And so I got there and I was like, okay. I want to get 25. And I’m going to be good, right? And so, I’m almost there. I’m one door away with this next property deal.
I’m going to be obviously head and shoulders above that. So I just want to—I like real estate investing. I like being a part of the game. I like the relationships. I like the cash flow. I like just being able to have that financial freedom, right? Being able to say hey, I can do whatever I want with the time I have. I have young kids and I’m not trying to go out and work 80-hour weeks so I can miss this time right now. I really want to be with them and real estate can provide that for anybody. It’s definitely given me that luxury.
Brandon: Damn. That’s awesome. I love that. Mindy, anything to add before we move on?
Mindy: No, I just want to reiterate what he just said. Real estate can provide that for anybody. That is so true. Real estate is accessible. There’s all these people that say, oh, I can’t do this. Like you said earlier, I can’t invest in real estate because of this, this, and this. Yeah, you can. Maybe not in New York City or Manhattan or you know, downtown San Francisco. I don’t know any of those places. But it’s accessible. You start with one. How many did you start with? What was your first purchase? A single property?
Nat: A single-family property in Denver, Colorado and you know, moved on up. It’s amazing. It’s like running a marathon, right? You gotta get going. Get your body moving. Get out there, get out of your bed and get started. It’s a long race, for sure, but you get there eventually. We’ve all seen this appreciation in the last ten years that we’ve been in this game. It was scary, in 2008, 2009, 2010 when we saw this downturn. But you stay with it and you just make sure that you’re buying with a game plan and you see the results, for sure.
Mindy: Are you going to be running the Hop-Hop Half Marathon in Portland at the end of March?
Nat: Hop-Hop Half Marathon? I’ve never even heard of that.
Mindy: Well, maybe you should look in the paper. There’s a Hop-Hop Half Marathon happening in Portland at the end of March and I know this because my husband is running it.
Nat: Oh, he is? All right. I’m going to have to see what’s up.
Nat: So, Mr. Jensen.
Mindy: Yes, Carl will be there. J.D. Roth will be there. Brandon, you should come down and visit. You could show Nat just how long your legs can run.
Brandon: That’s true. I think I could run faster than Nat. I’m an athlete unlike the guy who sits on the couch all day over here.
Nat: Yeah, I heard you’ve been trying to get the heart pumping a little bit, Brandon.
Brandon: I’m attempting. I’m attempting to get some work done in my life.
Mindy: Are you going to be anywhere near Portland on March 31st, slacker?
Brandon: Probably not. We’ll see.
Mindy: Okay, nevermind. I am going to be in town then.
Brandon: Oh, you should hang out.
Mindy: Yeah, we should have dinner.
Nat: I’ll take you to a cool place that has really nice views.
Mindy: Oh, I like really nice views.
Nat: In Portland and the food is tremendous.
Mindy: I like it.
Brandon: Mindy, maybe there should be a BiggerPockets Meetup while you’re in town as well and people could find out about that at BiggerPockets.com/events.
Mindy: They could. That’s a great idea. Maybe I will. That would be an awesome idea, maybe Nat could attend.
Brandon: Maybe he could.
Nat: As long as I don’t have anything going on, I am there.
Mindy: Awesome, well we’ll talk offline. Okay.
Brandon: All right, let’s move on and head to the world famous Fire Round.
It’s time for the Fire Round.
These questions come direct out of the BiggerPockets forums, which of course, people can get to and ask questions free of charge any time, day or night, at BiggerPockets.com/forums. Number one, what type of software do you use in your company to manage your business? I’m keeping that kind of an open-ended question because you know, it was a little more specific than that but we’ll say in general. What softwares do you use?
Nat: Well, my property management company uses Adfolio, which is great for rents. I mean, I’m really not too software, I don’t know, oriented. I like Microsoft Excel. I’m a spreadsheet kind of guy. I’ve got a degree in accounting so I’m all about that.
Mindy: Oh, that’s interesting. A degree in accounting. I didn’t even think to ask, I’m sorry. A degree in accounting, that’s interesting that you would apply that to your numbers and become a real estate investor. Do you have any interest in being an accountant or doing any sort of accounting stuff? No?
Nat: I did an internship for Price Waterhouse Cooper when I was in college. It was right before I started playing professionally. It was not something I enjoyed. We were on an audit team and it was like, clock in at 7:00AM, clock out at 7:00PM during tax season. It was just miserable. I was like, I don’t want to do that.
Brandon: So you don’t want to do my taxes this year? Are you sure?
Nat: How much will you pay me, Brandon?
Brandon: $100 flat fee.
Nat: There’s going to be a lot of forms and a lot of dots to connect, man.
Brandon: There are a few things. I feel bad—
Nat: You may owe some money. I might mess up your depreciations.
Brandon: You very well might. Well, I’m glad when you had that really hard decision between playing professional soccer and being an accountant, I’m glad you went with soccer. That’s very noble. So moving on, question number two, Mindy.
Mindy: I want to go back to what Nat just said. He said, I might mess up your depreciation schedule. I want to give a public service announcement to all of our landlords out there. If you are not currently depreciating your properties, you need to start. I don’t know how to do that. I rely on my accountant. I would not try to give you advice. We have a delightful book called Real Estate Investing for the Tax Savvy Investor.
Brandon: The book on tax—The Tax Savvy Real Estate Investor. Come on.
Mindy: Thank you. I’m a terrible person.
Brandon: I made up that title. Come on.
Mindy: This was written by an accountant, Amanda Hahn. So yeah, if you don’t know that you’re supposed to take depreciation, the government doesn’t care. They’re going to assume you did anyway. So make sure you’re depreciating your properties. Okay, next question. My husband and I are thinking about investing in our first multiplex and plan on hiring a property management company. When doing our research, what would be some key things to look for, questions to ask, etc.? I’d like to ask my friends and mentors at BiggerPockets, what are good questions to ask when choosing a property management company?
Nat: Hmm. I think for me, when I look at a property management company, I’m looking for experience, number one. I’m trying to figure out how long have you been in the game. Number two, do you own properties as well? Are you aware of all the issues that can go on with being an owner? I think that’s very, very important. And then, number three, how savvy are they in terms of understanding market rents and how much work they do to figure out what market rents actually are because that’s the number that, it can vary from neighborhood to neighborhood, place to place. One side of the tracks can be $500 a month. One side of the tracks can be $700. So the more experience, the better. And a better understanding of the market, the better.
Mindy: Good answer.
Brandon: All right, kind of related question here. How often do you call your property manager and check in?
Nat: Well, since we just took over our seven-plex, we’ll probably have a lot of conversations this week but I would say, in general, every couple of weeks where it wound from. And at the bare minimum once a month.
Mindy: Oh, you know what. That’s a great question, Brandon. Good job.
Brandon: Thank you. I’m good at reading.
Mindy: I think that it’s—thanks, whoever asked that question to the forums. No, that is a really important question to ask because how often do you call them? Do you just wait for them to call you at least once a month? That’s great. Okay, you heard it here from Nat Borchers. Let’s see, do we want to talk about inspections or metrics? Let’s talk about metrics.
In California, my local market, I’m having trouble deciding which metric to use for buy-and-hold investments and what I consider a good percentage for metrics like IRR or cash on cash return. I’d like your input on what metrics to use and what percent or number to look for in your investments.
Nat: That’s a great question. I think that varies from investor to investor. I used to care a lot about a lot of different numbers and I really come to terms with a few key indicators for me. That price to rent ratio is one of the biggest for me. I think just the amount of rent somebody gets per month in relationship to the purchase price is huge. And I typically want to get that somewhere around 1% if I possibly can.
So if I’m buying a $100,000 single-family property, I’d like to get at least $1000 a month in rent. I think that’s a big one for me. Cash on cash return is also a big one, just trying to figure out, okay. If I’m buying this property and I’m putting all this money into a down payment and to the rehab, what am I going to get back in year one with my rents? And I think that’s another big one for me. But I try not to get too lost in the weeds there.
I think we overcomplicate things. Even having my accountant background, it’s like, I could just fill out a spreadsheet and have all kinds of different numbers on it and make myself look smart but honestly, those are the two numbers I look for. You have to manage the income and the expenses and those are the two biggest thing that you can lose or win.
Brandon: Perfect. Mine is cash on cash return and cash flow—I look for both of those because sometimes you can get a really good cash on cash return when you put like $1 into a deal. Like, if you’re creative about it, it’s like, wow, I’m making a 200% return. $2 bucks a year! It’s like, on a multifamily, I look for $100 per month per unit and that’s like a 12% return. That’s my numbers, right? And somebody, like you said earlier, you like double digit cash on cash. Exactly. But somebody else might be fine with 7%. That might be fantastic because they’re earning 1% right now. Or you might want 20% because you’re buying a bunch of crappy properties in Detroit. You might like, 18% might be too low for that kind of risk.
Nat: I mean, to that point, Brandon, I think you know when you go to meet with other investors and you hear about deals getting done, I don’t think you should ever get intimidated by people who say they’re getting better deals than you. Because I think that I did early on. I was like, man, like how did you get that deal? Or man, it doesn’t matter. Like, that’s great for him. I’m happy for him. I don’t want to count his money. I want to do things the other way I do things, right? It’s more important that I get the returns I’m looking for and I find the deals I want to find.
Because he could be buying in a neighborhood that’s like blocked and he gets this great cash on cash return but he’s also dealing with five evictions and a shooting, whereas you’re over here in this other neighborhood and your cash on cash return may not be as good but you can account for your rents a little bit better. They come in every month.
Brandon: That’s such a good point. People should like rewind the last 30 seconds to that little back button and listen to that again because that was solid. Solid.
Mindy: Yes. That was great advice. Don’t compare yourself to somebody else.
Brandon: Exactly. And let’s all remember, too, like people talk about their good stuff a lot more than they talk about their bad stuff. I talk about like, the fourplex I bought for Rosie is fantastic. That’s such a great deal. I talk about it all the time. But I don’t really talk that often about the flip last year that I made $7,000 on because I’m like yeah, it was just kind of a lame flip. I’m like, I just don’t talk about it that much because I’m not proud of it.
Mindy: You know what, I think you should talk about that because people have this idea that you’re some brilliant investor who never makes a mistake ever and they need to know the truth, that that’s just some façade.
Brandon: It’s a total façade.
Mindy: Brandon has no idea what he’s doing.
Brandon: No, okay, so I’ll tell the story real quickly. I made like $7,000 on a flip. I didn’t have to do any work so it’s still $7,000. I don’t want to scoff at that. But it was a ton of work. But two things happened. One, I bought the deal in a massive rush because we were filming for that TV show pilot thing that I filmed for that never actually worked out. I’ll put a link to that if you guys want to see the trailer or the pilot or whatever you want to call it. The Sizzle Reel, I guess that’s what they call it. I’ll put it in the Show Notes. But anyway, it was kind of fun.
I filmed for a couple of days but I needed a house to work on and I had a week to find something. So I bought it from another investor I knew. And it wasn’t a great deal. So anyway, first reason was, I had a horrible motivation for buying it. The wrong motivation for buying it. But secondly, once we got into the deal, our entire plan was to remodel this back area and turn it into an additional two bedroom, one bath, so it’d be a four-bedroom house instead of the two.
Anyway, we went to the county because it was in the county area to go get permits and they were like uh uh, that wasn’t permitted when it was built. That back section was never permitted. You have to tear it down to the ground and rebuild it if you want to do anything in there. So like all of a sudden my plan to turn this two-bedroom one bath into a four-bedroom, two bath, was just completely cut off so they were like no. So I turned it into a two-bedroom, one bath with a garage.
And the only thing that saved me was the fact that the market has been insane. And so lesson learned, always check if there’s weird additions on a property and you’re thinking you’re going to do something and get permits for it, check before you buy it and make sure that the thing that you’re buying is permitted. That was a blow.
Mindy: That same thing happened to me, my current house. Yeah, I bought this house with this weird addition and I said, oh, I want to put something on top of that addition. They said that addition doesn’t exist. Au contraire. I’m standing in it right now.
Nat: The roof’s over my head.
Brandon: Anyway, so there’s one of my not so awesome deals but you know what? I don’t know. Anyway, moving on. Let’s get to the Famous Four. All right, hey everyone, we need to take a quick break here. You notice the little microphone sound change, because now I’m back on my good microphone and we had a lot of tech problems with this show, actually. So we actually lost about three minutes of recording right here. For whatever reason, the sound just cut out and we lost the first three answers to the Famous Four.
Mindy: Famous Four. We’ve got to sing it, Brandon.
Brandon: We do have to sing it. That was really good, Mindy. So here we are, the night before the show comes out, editing and putting together this show so we found out that we don’t have it. So Mindy here, Mindy and I. Is it Mindy and me? I don’t know.
Mindy: Mindy and I. You’re always second.
Brandon: I am. Luckily, Mindy wrote down the answers for the first three. Book, business book, and so Mindy, tell me what was Nat’s favorite real estate book?
Mindy: Nat’s favorite real estate book was Defensive Real Estate Investing by Bill Bronchick.
Brandon: All right. Well, I have not read that one. I’ll have to look it up.
Mindy: I have not either but we’re going to link to all of these in the Show Notes at BiggerPockets.com/Show267. So if anybody wants to go check it out, we’ll have a link to it.
Brandon: That, we will. All right, second question of the Famous Four. By the way, again, we will bring Nat back in on question four. We got question four, just not the first three. All right, question two, what was Nat’s favorite business book?
Mindy: Compound Effect by Darren Hardy. I don’t know, maybe you’ve heard this before?
Brandon: I have. It is a fantastic book. I read it like five times. And as I said, when we recorded it, I told Nat like this is one of my favorite personal development books, if you can call it that. It’s really, it’s unbelievably good. I recommend every single person on earth buy it. In fact, that’s probably the #1 most gifted book that I give. That one and Life in Heir. Good book.
Mindy: Oh, wow. That’s good to know. That’s a ringing endorsement from Mr. Brandon Turner.
Brandon: Ringing. Is that good?
Mindy: That means good, Brandon.
Brandon: Okay. Good. It’s ringing. I’m ringing. All right, number three. What is Nat’s hobbies?
Mindy: Nat’s hobbies are running and playing with his kids. I know. I’m not a big fan of running, but when we originally recorded this with Nat, I told him hey, I’m going to be out in your area in Portland. The Portland area.
Brandon: Portland, Oregon, not Maine.
Mindy: Portland, Oregon. Not Maine. Although if you’re going to Portland, Maine you can say hi to the Mainers up there. Portland, Oregon, at the end of March, there is a Hop-Hop Half Marathon that my husband is going to be running. I am going to be cheering him on from the sidelines. But on March 29th, I am going to have a Meetup in Portland.
This was your suggestion. You were like, hey, you should totally do this. And I was like, oh, I guess I’m going to do this. And then it turns out that all of that was lost. But I’m very excited to have a Meetup at Bunk Bar in Portland from 6-8PM on March 29th. So if anybody wants to come out and say hi, I would love to meet you.
Brandon: And that is 2018, in case you’re watching this show or listening to it like five years into the future.
Mindy: That is 2018. So I’m sorry that I missed you. We can blame Brandon.
Brandon: Sorry, future self. We’re talking to people in the future. That’s the coolest thing. All right, let’s get to actually Nat’s answer to number four because you don’t want to hear me and Mindy talking about Nat. Let’s hear it from Nat directly. All right, let’s jump back to the recording.
Brandon: Anyway, last question from me of the day—what do you believe sets apart successful real estate investors from those who give up, fail, or never get started?
Nat: I think it’s just like Richard Branson says, “Nothing ventured, nothing gained”. You have to go out and just do it. And I think it’s scary when you haven’t done it before but you know, once you get a deal under your belt and you realize that it’s not that hard and you just kind of keep going. And I think that’s the mentality you have to have, is just every single day, you check that box. Did I do something to progress in this real estate investing thing? Am I still making offers? Am I still learning? I think those are two key things that you always keep in mind if you want to keep progressing in this game.
Brandon: I love that.
Mindy: That’s great. Where can people find out more about you?
Nat: I have a website. NatBorchersRealEstate.com. You can find me there and I’m all over social media as well. My handle is NatBorchers for I think everything Instagram, Twitter. /NatBorchers for Facebook page as well, Mindy. So you can find me. I didn’t say Beardy Nat or Beardy Borchers at all. I should have said that. That should be my new hashtag, right?
Brandon: Actually, it’s a great idea. Beardy Borchers. How do you spell your last name?
Brandon: Just like it sounds. All right.
Mindy: Beardy Borchers. That works if you’ve got a real beard. Throw in Beardy in there.
Brandon: So Beardy Brandon doesn’t work? Come on.
Mindy: You said it.
Nat: Little Beardy Brandon. Kind of Mustachy Beardy Brandon.
Brandon: All right, I’m closing this show out. Nat, this has been fantastic. I loved all this stuff so thank you so much for joining us today and maybe we’ll get you back on the show when you get to those million units you’re going to someday get, I know.
Nat: Thanks, guys. It’s been a pleasure.
Mindy: Okay, bye, Nat.
Brandon: Thank you. Bye.
All right, big thanks to Nat Borchers. Am I saying that right, Mindy?
Mindy: Nat “The Beard” Borchers.
Brandon: Nat “The Beard” Borchers. Fantastic show. Super cool guy, super cool beard. Puts mine to shame. He’s like the true beardy Borchers. Anyway, I think that was super cool. So thank you. Mindy was the one that petitioned and fought for getting Nat on the show and she did all the hard work of tracking him down on Twitter and all that. So good job.
Mindy: Yes. So back to the beginning of the show, we gave you a Quick Tip to go out and meet somebody at a local event. I want you to tweet or—how do you say it on Instagram?
Brandon: I don’t even know, gram? You can gram.
Mindy: Gram it. Obviously that’s not my favorite. Tweet or gram it that you have gone to an event and that you have met somebody. Do you do hashtags on Instagram?
Brandon: You do.
Mindy: #eventchallenge. Now, Brandon is @BrandonatBP on Twitter. I am @MindyatBP on Twitter. And I am also MindyatBP on Instagram. Brandon, what is your Instagram?
Brandon: It’s BeardyBrandon because that’s easy to say. That’s why.
Brandon: BeardyBrandon. I just feel weird now that Nat is so much more beardy than I am. So I’m like less beardy brandon. But anyway, BeardyBrandon. Check it out. Follow us on Instagram, too, because I am such an Instagram, like 15-year-old girl. It’s great. I love it. I spend a lot of time on there. It’s a social network.
Mindy: Yeah, we want to hear about your event.
Brandon: Yeah, let us know. All right. I’m getting out of here because you know why?
Mindy: You’re in Hawaii and it’s surf o’clock.
Brandon: Yeah, it’s surf o’clock. I have actually been here for two weeks now and have not surfed yet. I was going to go with Doug yesterday but it was like thunderstorm and lightning and I was like, I’m going to go Thursday now.
Mindy: Thunderstorms and lightning are very, very frightening.
Brandon: Mama Mia, Mama Mia. Anyway, all right. Thank you guys for being a part of the show and listening and if you enjoy it, make sure you leave us a rating and review over in iTunes. It helps us a ton. Make sure you share it on your Facebook if you want as well. You can find the YouTube video on YouTube and that’s all I got for you. So for BiggerPockets.com, my name is Brandon and this is—
Mindy: Mindy Jensen.
Brandon: Signing off.
Mindy: S. Bye.
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