BiggerPockets Real Estate Podcast

BiggerPockets Podcast 356: 30+ Rentals (in a Pricy Market) Through BRRRR and Section 8 with Joe Asamoah

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Want to build massive wealth in a top-end rental market that’s also really expensive—all while minimizing your risk? Don’t we all!

Well, you’re in luck, because today’s guest has done just that—and in a surprisingly simple way that anyone can replicate. On today’s show, Brandon and David dig deep into the strategy used by Joe Asamoah, a Washington, D.C. investor, who owns more than 30 single family homes that are currently building him massive wealth!

You will be absolutely fascinated as you hear how Joe uses HUD housing vouchers to generate big returns in high-end areas while also reducing his risk to survive tough markets. Joe also shares some amazing tips for how he keeps tenants for 15 years at a time, including how he creates a huge demand for his homes, which kinds of properties he targets, and how he gets deals brought to him before anyone else.

Joe goes on to reveal some extremely effective tips regarding how to treat your tenants so well they never leave, how to convince lenders to work with you, and why he visits potential tenants in their current homes on short notice.

This show is chock full of extremely practical advice anyone can follow, not to mention useful tips for high-level real estate investing. This is an episode you will listen to several times and walk away extremely inspired.

Download and share it today! Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

Brandon: This is the BiggerPockets Podcast, show number 356.

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Joe: You’ll find out the greatest demand for houses are four, five, and six-bedroom houses. So for those people who have the wherewithal to create those four, five, and six-bedroom, you create what… Your kind of in an environment I call the nirvana. The ultimate goal of any business holder, which is to have a product, which is high demand, low supply.

Intro: You’re listening to BiggerPockets Radio, simplifying real estate for investors, large and small. If you’re here looking to learn about real estate investing, without all the hype, you’re in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com, your home for real estate investing online.

Brandon: What’s going on everyone, this is Brandon Turner, host of the bigger pockets BiggerPockets Podcast here with the co-host of the year winner 2019, I don’t know, is there an award ceremony? David Greene.

David: Well, let’s hope I’m more than one-year. But thank you, I appreciate that. I’ll make sure I mention you in my acceptance speech.

Brandon: I would hope you would, definitely would hope would. So what’s up, buddy? What you been up to? Anything fun?

David: Well, I think I mentioned that I just got my broker’s license. So I’m kind of changing the David Greene team around, where I’m not going to be working with the clients as much. I have team members. I’ll kind of be overseeing it, making sure deals close and we find deals for people but letting other people handle kind of the day-to-day operations, I’m still speaking a lot and I just started a mortgage company. So I’m getting a little bit-

Brandon: Wow.

David: … I mean, for the last three years or so, no, really the last year and a half. I’ve done less investing and more focused on building up my real estate business. And it was great to do it but investing is more fun. So I’m just slowly moving more, now that I’ve got people around me they can do that work and we can still represent people well, getting back into flipping houses and buying apartment buildings and buying some more single family homes. I’m going to be looking for people to help me analyze deals and kind of do the work of making sure this stuff gets pushed forward. So if you live near me, and that’s something you’re interested in, definitely hit me up. And then hopefully we’ve got more stories to share on the podcast because real estate investing is freaking fun.

Brandon: It is freaking fun. Speaking of freaking fun today’s show was freaking fun. In fact, I know I’ve said this before, but this is seriously one of my favorite shows if not my favorite show we’ve done. Definitely top five, top three of the BiggerPockets Podcast, I think ever. In terms of just like stuff I’ve never thought about before, and just so good. Anyway, Our guest today is Joe Asamoah.

Brandon: Joe is in the Washington DC area. And just like he’s figured out an amazing system and process for buying expensive properties in an expensive market and still making them cash flow, keeping and having the ability for long-term appreciation. It’s really, really cool stuff. I think you guys will like it a lot. Before we get there, let’s get today’s Quick Tip.

David: Tip.

Brandon: All right, today's Quick Tip is based on something David actually just said. And you and I talked about this earlier, so I hope you don't mind me bringing this back up. But you mentioned how you are now a broker not just an agent. So you can focus more on being the big picture. And one thing you and I have talked about is how just by calling yourself the broker now, your identity has changed in how you view yourself and how other people view you.

Brandon: You’re not the guy showing every single house, you’re the managing broker of the thing, right? It’s not like anything actually necessarily had to change by having that title change. But titles do matter, in that they’re identity, right? So my Quick Tip for you guys today is ask yourself, what identity are you giving yourself in your real estate business? So are you, I’m a real estate investor, or I own a real estate investment company, I’m the CEO of a real estate investment company. Because the identity is that when the titles we give ourselves are how our subconscious then treat ourselves and then do activities or don’t do activities based upon that.

Brandon: So a Quick Tip is to evaluate your identity today and figure out what are those words that come after the phrase I am? There you go.

David: That’s deep. You went deep with that one.

Brandon: Yeah, that’s what I do. That’s what I do. All right. And now it’s time to get to today’s show. Last thing I’ll say before we get to the show though, if you’re enjoying this show, if you like the BiggerPockets Podcast, you guys do me a quick favor. If you’ve not yet left us a rating and review over on iTunes, it would be much appreciated.

Brandon: Just go over to iTunes, look for our show, you can leave a rating review there. And of course, if you haven’t subscribed, subscribe as well. That’s how iTunes knows a show is good and drives it up in the rankings. And so I would like to see the show continue to do well, I hope you do as well, and that’s how we do it. So again, thank you to everyone who has done that. And now I think we should just get into the show because it is freaking awesome.

David: No more ado.

Brandon: No more ado, let’s get to it. All right, Joe, welcome to the BiggerPockets Podcast, man. Good to have you here.

Joe: Thank you very much, Brandon. It’s a pleasure and honor to be here.

Brandon: Well, thanks. This should be a lot of fun. I know Kevin has been talking good stuff about you lately. So let’s-

Joe: Well, thank you.

Brandon: … Yeah, let’s dig into your story. So I mentioned Kevin, Kevin’s our producer of the BiggerPockets Podcast, as well as The Business Podcast and The Money Podcast. Kevin lives in DC and he actually met you at a local meetup and again, just been talking like you’re the godfather of real estate there in DC. So that’s a-

Joe: Oh boy.

Brandon: … I don’t know if it’s a good thing. You’re the king of real estate. Man, that’s better than the godfather. You don’t kill people, that’s what I hear anyway. So-

Joe: Thank you.

Brandon: … Yeah. Let’s go into your story. I mean, how did you get into real estate? Tell us your story. How’d you go from where you were on before into real estate? Let’s talk through that.

Joe: Okay, yeah, I used to live in England and came to the US about 32 years ago. When I came to the US, literally I came with two suitcases and a hundred dollars in my pocket, and knew one person, which was my boss. Anyway, he was working a really intensive job. One day I came back from a vacation and found that he’d been fired, okay? Nothing for anything he did wrong. It was just that there was a reorganization of the company, and the new guy brought his cronies and my boss was let go.

Joe: So what happened was that, a few weeks later I met him for a cup of coffee, and he told me something, which is really totally ground shaking for me. And that was, “Hey, Joe, it’s no big deal. This is America, these things happen. It’s okay for me because I have these rental properties. And so I’ve got this rental income coming in.” So he says to me, “Whatever you do, Joe, look what happened to me, this could happen to you. Make sure you have a plan B. And in my case, my plan B was real estate.” That’s what he was telling me. And this guy had 10 houses.

Joe: At that time, I couldn’t fathom how anybody could have more than one house. It’s like, how is that possible? And so he says, “No, but whatever you do, make sure you do three things. One, make sure you buy houses, if you buy them, make sure you keep them and make sure that you continue to increase your portfolio.” That’s what essentially he told me. And that was a trigger that got me intrigued into real estate about 32 years ago. Needless to say, I bought my first house after I watched an infomercial, and that was a complete and utter disaster. Complete disaster. Everything that could have gone wrong, went wrong.

Joe: I don’t want to totally bury with the details, but I could go through that. But essentially, I learned from that experience, everything what not to do. Then I bought another one, bought another one. Just kept on going until about 13, 14 years ago when my income from my properties equaled the income I was making from my job. And that’s when I was able to leave that.

Brandon: Wow, so you’re just full time real estate investor now?

Joe: Yes, yes, because I have the income coming through from my real estate investments.

Brandon: That’s awesome. Now, the problem is though, you live in an expensive market, Washington DC, I know is just crazy expensive. And you can’t invest in real estate in an expensive market. So clearly, you’re wrong. I mean, how do you manage to invest in real estate in an expensive market?

Joe: Well, my take is that the real money, after all is said and done is appreciation. And not all areas appreciate the same, and so there’s something unique about capital cities. I’ve done quite a bit of traveling around the world, and they’re all essentially the same. Usually, whenever you say a country, if I say to you, England, you’re probably going to say London. If I say to France, you’re probably going to say Paris. If I say to you, Iraq, you’re probably going to say Baghdad. I mean, it’s just the way it is.

Joe: Most capital cities, they have certain things going for them. One, is there’s only one. Two, that’s usually where the money is. It’s usually the economy, which is really tied to real estate, it tends to be a lot more resilient. So when the economy goes downhill, most capital cities usually tend to be a lot more resilient than other parts of the country. And because it’s where the money is, if you own real estate in the capital cities over the long haul, they tend to appreciate in value.

Joe: So that’s the reason why. I mean, I just happen to live here, but it’s the same dynamics throughout the world. And so the issue was, how do you get started? How do you actually start owning real estate in this expensive potential market? Now, the thing is, the reality is it’s always expensive. It’s expensive 10 years ago, it’s expensive five years ago, it’s expensive today, and I can guarantee you it’s going to be expensive five years from now. And so the issue is, how do you get started? And there are ways to do that obviously, I do the BRRRR strategy, and I can go to how I made the BRRRR strategy work for me in this-

Brandon: Sure.

Joe: … Market here.

Brandon: Yeah, and so first of all, before just in case people haven’t heard BRRRR, which I’m sure most people have, but if they’re new to this podcast, haven’t heard that term BRRRR. Can you explain what is that and then how do you incorporate that in your business?

Joe: Okay, the BRRRR strategy. Well, it’s defined by yourself.

Brandon: Wooh.

Joe: Buy, renovate, rent, refinance, repeat. So essentially, if you believe that the real money is appreciation, then obviously the first part is to buy. At least in this market here, the rents vary from area to area. I do a lot of Section 8’s, which I can describe later on. But the rents in the Section 8 program, for example, is based primarily on the neighborhood or the zip code where the house is and then secondly, the number of bedrooms and the number of bathrooms. So how do you create value such that you can have the maximum rents which can support the debt that you have, okay? So typically, I would buy a three bedroom house, I would add two bedrooms to make it into a five-bedroom house and the rents for a five-bedroom house if it’s in a certain area or certain areas, you can get higher rents.

Joe: So by adding value, by understanding how the program works, you can really cash flow. So a three-bedroom house, for example, may be negative cash flow. As a four-bedroom house, you may break even. As a five-bedroom house, you could get cash flow. That makes sense?

Brandon: It does.

Joe: So let’s say David buys this one house, and he doesn’t do anything to it, as a three-bedroom, it’ll be negative cash flow. Okay? If David decides to upgrade it to a four-bedroom house, he’ll break even. But if he’s sort of savvy and understands how he can sort of create extra bedrooms from this asset, you can now cash flow. So three different people will get three different cash flows from this one asset.

Brandon: Well, that’s genius. I’m just thinking I just bought a property here in Maui. And I could make it a giant five or a six-bedroom house or I could keep it as a triplex, that’s just what it is. And I’d never considered making it one larger… Actually just while you’re saying that, I messaged my buddy Ryan. I was like, can you find out what a five-bedroom house would rent for with Section 8? Because like, what a great idea. I don’t know, if I could get more rent out of that because I mean, there’s not a lot of them. And so, maybe the demands there.

Brandon: So you’re taking these homes, adding bedrooms. Is that the idea? Remodeling them and adding bedrooms?

Joe: Yeah, so that as part of the buyer BRRRR, the buy side is, when I go to a house, most of the time it’s spent in the basement, because that’s really where you can get the extra bedrooms, okay? So there obviously for code, there certain requirements of a bedroom. But essentially, I spend the time saying how can I or is it possible to create additional bedrooms in this one house, primarily in the basement, and if I can do that, and I meet all the requirements for the code, then it meets my criteria. If it doesn’t, I can’t make two bedrooms down there. I’m not going to buy it. That’s just one of several criteria or factors I use in deciding whether to go or no go for a house.

Brandon: Interesting.

David: Okay, that’s awesome. Now one question I have is, are there legal requirements for what makes something a bedroom? Because I know if you’re doing HUD housing, there’s government standards that you have to conform to. So can you share a little bit about what makes it a legal bedroom, so that people can follow in your path?

Joe: Yeah, the tip is there’s four requirements. Okay. So the first one is the height, the ceiling height. So if the ceiling height is not above a certain amount, usually seven, or seven foot two, then it’s not considered a bedroom height. Second thing it’s got to have natural light and ventilation. So you can’t have a room with no windows and call that a bedroom, okay? And that window is got to have what we call egress. So in the event of emergency, there’s got to be two forms of egress, one to get into that room and one to escape from that room, okay? So the window that you have has to be a certain size, such that it’ll allow somebody to escape in the event of a fire.

Joe: So you can’t have those little basement little windows. Although it’s got light and ventilation, it’s not egress. So, an inspector could fail that bedroom based on that alone. And obviously, it’s also got to have a closet, it’s also got to have electrical outlets, it also cannot have a gas meter or something in that room. So there are some hard requirements of a bedroom. And so I look at those things in deciding whether first of all what I need to do? And secondly, is it cost prohibitive to make those changes?

David: There we go. That’s perfect. I got that. So Joe, one of the things I think is brilliant about what you’re doing is you’ve really niched down and you’ve gotten out of the analysis paralysis, because you know exactly what you’re looking for. You have criteria that you’re looking for. And when you find it, you know you can jump on that house, and that’s something successful people do well. So as far as what you look for in a property that really catches your eye and says, oh, that’s what I want to look deeper into. What are some of the things that somebody can look for that you look for to let you know this is a property that my strategy would work with?

Joe: Yeah, it makes a lot of sense because I can provide criteria to the wholesalers and real estate agents and so on, exactly what I’m looking for. But here’s the beauty of all this, is that in Washington DC, and I’m pretty sure it’s most to other cities. Most houses are naturally three bedrooms, okay? They have three bedrooms upstairs primarily. On the first level, you may have a kitchen, living room, dining room, et cetera. But the basement is where you can do the most creativity. So since there are naturally three bedrooms, the opportunity exists to create the five, okay? And not everybody can create the five, like I’ve just described to you.

Joe: But therein lies the opportunity because when you speak to the housing authorities and things like that, you’ll find out the greatest demand for houses are four, five and six-bedroom houses. People with four or five and six-bedroom vouchers, they just can’t find anything because those type of houses don’t exist naturally. So for those people who have the wherewithal to create those four, five and six bedroom, your kind of in an environment where I call the nirvana. The ultimate goal of any business holder, which is to have a product, which is high demand, low supply, okay?

Joe: The people with those kind of vouchers, there’s a lot of them, and they can’t find a house, okay? So if you have that product, there’s a high demand for it, and there’s low supply, so you can always attract quality tenants.

Brandon: Dude, this show is changing my entire viewpoint on this property I just bought here in Hawaii. So Ryan, my partner Ryan, just I asked him if he could look up the rates, right? So here’s what they are. So for Section 8 in my area, and again it’s going to be higher than other areas, but maybe similar to yours, maybe lower than yours. A studio is 1200 a month roughly, a one bedroom 14, a two bedroom 17. So it goes up a little bit, add the third bedroom and you’re at 2600.

Brandon: So we’re going from it’s 1781 to $2600. So we’re adding eight, is that $800? Just by adding the third bedroom. Add a fourth bedroom, we’re up to $3200 and add a fifth bedroom, we’re up to $3600. So, I mean the jump from a two-bedroom in my market to a three-bedroom is $800 a month difference for adding a bedroom.

Joe: Yeah.

Brandon: So I’m just thinking a loud here, but I can take my triplex, which I bought, turn it instead into two duplexes and sorry, I mean, take my triplex and instead turn it into a duplex, but go three and three on each one. And I already have in my mind how I’m going to do this. And I’d actually make more money off of having fewer tenants, and if I go Section 8 with the government, that’s fascinating. It’s blowing my mind.

Joe: Yeah, I mean, there’s another side to this, which is obviously managing the relationship with the tenants, which I’ll talk about. Finding the right tenants and then managing that relationship. But once you figure that part out, it’s really I mean, I don’t understand why more people aren’t doing it.

Brandon: Yeah.

David: Yeah. So you’ve taken something that a lot of people are saying that they want to avoid, Section 8 Housing and you’ve actually found a way to make it work for you better than what it would be like to not be doing the voucher system. I think that’s awesome that there’s a stereotype that goes along with not wanting to rent a Section 8 houses and you’ve completely dismantled that.

Joe: Yeah, I mean, you’re right, David, there’s a stereotype of Section 8. If I rent a voucher holder, they’re going to trash my house, there’s going to be a bunch of kids running around and blah, blah, blah. My house can be a crack house and so forth. Now, I’m not saying that doesn’t exist, but I’m saying that there’s a core group of people in fact, probably the majority where that does not apply, okay? They are no different than you and I, okay? They don’t want to be shot at, no more than you want to be shot at, okay?

Joe: They are very protective of their family, their children just like yourself. They want to live in a nice area. They know what a slumlord is, they know a crappy area, they know that. They don’t want to go there. They don’t want to live there. They just want to be in a nice place where the kids are safe, they want to be in a pleasant environment. They’re just looking for somebody to give them the opportunity, okay? And what I found is that there’s what I call the nostrums of the voucher holders, okay? I don’t know if you have nostrums where you are.

Joe: That group of people, the nostrums of the voucher holders, I mean, they are no different than you and I. The only thing is that they don’t have the money to be able to get out of their environment. And so if you have… And one thing I know about these folks, they will not live anywhere, okay? They want to be protective of their children just like yourself, they want the same amenities that you’re looking for shops, clothes, oh sorry, shops, schools, recreation, transportation, and things like that. And they don’t want to live in a [inaudible 00:19:45]slumlord. They want a nice house in a nice area, okay?

Joe: So if you have a product that they gravitate to, because they know exactly what they want, I know exactly who they are, and what they’re looking for. If you have something that meets their needs, I’m telling you, you can set the bar for your screening so high that they will not be intimidated by that. And you can attract the crème de la crème. You’d go to houses where it’s spotless, I mean, you couldn’t believe.

Joe: I went to one Thursday. Okay, this lady, she’s living in the projects and she’s been there for 20 something years. She has installed new hardwood floors, okay? She’s repainted the house because she has private rentership. So there’s a group of people who, if you give them the chance, okay? They’re yearning for that opportunity. They will repay you back four ways. One way is, first of all, they’ll pay the rent. Two, they’ll take care of your property. Three, they’ll be pleasant to deal with and fourth, they’ll stay a long time, okay? And the absolute key to single family, which I’m sure you know, David and Brandon is if you can’t figure a way whereby you can minimize turnover, okay? You make no money.

David: Yeah, turnover kills you.

Joe: It’ll kill you. If you can’t figure a way to minimize that too next to zero you make no money, okay? Because every turnover is going to cost you two to three months lost income, after all is said and done. So-

David: Well, plus the fact you have to go in and rehab the property, we call it a turn and that costs a lot of money too.

Joe: … Exactly and all the aggravation that goes to that. So if you have a, I’m averaging, I have 10 new tenants who have five, 10, 15, my longest tenant is 22 years.

Brandon: Wow.

Joe: Okay, on a 15-year mortgage, okay? Think about that one. The idea is that they stay. They don’t leave, okay, which means that the cash flow you make every month stays in your pocket. Because it’s business 101, it’s cheaper to have an existing customer stay than it is to go out and find another one. So from a landlord it’s cheaper to have an existing customer happy and wanting to stay in your home than it is for them to leave and then you have to come find a new one as well.

David: Well, that’s a really good segue, actually. So what are some of the things that you do to keep your tenants happy and make sure that they stay there for a long time? How do you find that awesome tenant you’re talking about?

Joe: Oh, boy. It all starts with screening, okay? I have a very, very thorough, I mean, I’m trying to attract the nostrums, okay? And the kind of product I have, the houses I have, these are nice houses, I mean, they’re HGTV quality, they got granite countertops, they have hardwood floors, they have stainless steel appliances, these are nice homes.

Brandon: Wow, for Section 8?

Joe: For Section 8, yes. I mean, the current rehab within right now. We’re spending 175,000 on the rehab, and so on. So these are HGTV quality, I would have no problem leaving there myself, okay?

Brandon: Yeah.

Joe: So when you have a product like that, okay? You can attract the crème de la crème, and you can set the bar high because no matter how high you are, some people will gravitate towards that. So how do I do it? So it’s four parts. Obviously I do my… First of all I start off with a product, okay? And there are great products in a great area. So once I advertise people come to my house, I have an eight page application form, okay? It’s very intimidating.

Brandon: Wow.

Joe: It asks a lot of questions and I tell them straight up front, in bold. “This is what we’re going to do if you’re interested in this house, I got to call your current landlord, or previous landlord. I’m going to do a credit check. I’m going to check your income, but fourthly, which is more important. I’m going to go to your house. I’m going to go to the house. I’m going to go to the home to see where you live.” Okay? Because what I’ve found is that how somebody keeps their house today, is how my house will be in three months, okay?

Brandon: Yeah.

Joe: If I like what I see when I go there, I feel pretty good that my house will be in good condition.

David: So you actually go to their house?

Joe: Yes.

David: At what point, I mean, it’s when they apply or when they’re just about you’re ready to approve them? Because that’s an investment of your time to go and check out the house. I mean, obviously a good one, but…

Joe: Yeah, definitely David. I’m looking at the 15-year relationship, okay?

David: Yeah.

Joe: This is not a one-year lease, okay? Or this is a five to 10 to 15-year relationship, and I don’t mind invest in a couple of hours of my time, okay? To really make the right decision because we’re talking with a six, seven hundred thousand dollar asset, okay? And I want to know who’s going in my house, I want to make sure that this is the right person, I want to make sure that they have a history of complying with the program and also taking care of their house. So I don’t have a problem going to their home and as I said, I state that on the application form in bold, “We’re going to do this.” Okay?

Joe: So let’s say if you’re a tenant, okay? You may say, “Well, why do you want to come to my house? No other landlord has been to my house. What the hell is going on?” But I explain that and they don’t have a problem with that. They say, if you want to come to my house, you can go to my house right now. Because I keep my house exactly the same way that you have it here, exactly. You can call my landlord right now. He’ll tell you. I pay my rent on time. I’m a 10 out of 10. They’ll tell you that. I mean, that’s the caliber of people that you’re dealing with. And so yeah, so that’s the screening process. That’s before they even get into the house.

Joe: Once they’re in the house, is now managing that relationship. And things which I do every Mother’s Day, I send all my tenants bouquets of flowers.

Brandon: Really?

David: Mother’s Day you send flowers?

Joe: Yes.

David: I love that.

Joe: Every Christmas we send the Christmas presents to the families. If the kids get A’s in school and show me their report cards, I give them a $50 gift certificate.

Brandon: Oh, that’s cool.

Joe: What do you think of this one? We have a timeshare, which we could allow, we can go to not too far from a couple hours from here. We can invite guests. So we give out to all our tenants free vacations-

Brandon: No way.

Joe: … Three days, two days.

David: That’s crazy. But I love that.

Joe: All of this cost less than 100 bucks, okay? A bouquet of flowers is 30 bucks, okay?

David: Yeah.

Joe: Christmas present is what? 30 bucks as well. The vacation is free. So we’re spending 150 bucks at max, but can you imagine all the goodwill that it generates?

David: Yeah.

Joe: And that’s what I’m saying. It’s managing the relationship. At the end of the day we are renting to human beings, okay? And if you can manage that relationship, and you can set the bar high and you can sort of nurture that relationship, there’s a level of loyalty that you will never believe. They are not even considering moving, okay?

David: Yeah.

Joe: The thought of them leaving is not even coming into the equation. And so now that you have… So if you believe appreciation is where the money is, okay? Then, if you can have a tenant who’s going to take care your property, pay the rent, pleasant to deal with and stay a long time, you can now realize the true value of real estate, okay? You can have this asset, I mean, I’ve got stuff, which I bought 400,000, which is not worth seven, eight hundred thousand. So, that’s what happens to these high priced markets. But you can only get that if you have tenants who stay a long time. And that’s what you get with the voucher program.

David: Joe, that’s such a good point that it’s really real estate builds wealth over a long period of time. And it’s really about keeping your head above water for a very long period of time to build big wealth through the checks that your tenants are paying, right? Because they’re paying down your mortgage, the economy is raising the value of your house, the whole goal is to take the heavy lifting of the wealth building and take it off of yourself and put it on to the tenant. But a lot of people are afraid because markets go up and markets go down. And we can’t know when that’s going to happen.

David: It keeps a lot of people from getting in the game. However, I’m sure you can agree. It’s the people who get in the game and take action that build the most money and Brandon would testify to that as well as we would. Can you share some things because you’re one of the few people that I’ve talked to that’s actually been through several market cycles. It’s hard for us to get an investor on with your experience, who’s been through ups and downs. What are some things that you do to make money in the good markets, but protect yourself from losing money when you’re in the bad markets?

Joe: It’s recession proof. I said I’ve been through four cycles, okay? The thing about a downturn is that when a downturn occurs a lot of things happen. One of them is obviously is that people lose their jobs and it’s nothing worse and you’re renting to somebody and they lost their job, and therefore they can’t pay your rent and the relationship goes south. With a voucher holder, their portion of the rent is based on their income. So in a downturn if their portion of the rent, if their income goes down, then they go to usually to the housing authority, and their portion of the rent goes down as well. Okay?

David: Yeah.

Joe: And the housing authority’s portion goes up to kind of balance things out. So it’s truly a recession proof business model that, I mean, it passed the test of time. I mean, here is this one, I had a house about a month ago, okay? The last tenant, she was there for 10 years, and so we fixed it up, and then we got it ready for rent. In a space of 10 days, okay? I put it on for rent. We received 172 calls.

David: Oh, wow.

Joe: I received 16 applications, okay? For this one house. The demand is there, okay? High demand, low supply and as a result of that you can really be picky because when you have 16 applications you don’t need to set your standards low.

Brandon: Yeah, 100% agreed and it’s because of everything you’re doing, it’s not one thing. I see it as like look you’re providing a product that tenants really, really desire. Obviously, your service, your customer service, your engagement, your relationships is like top-notch with all things that you do. But combine all that stuff together. The number of bedrooms that you have there. Like you said earlier, you’re creating a product that’s in demand, yet there isn’t a lot of it. I like to say even low income tenants still watch, Fixer Upper and Chip and Joanna Gaines and they still like that. That is nobody’s providing it. And it doesn’t cost that much more money to provide a stainless steel fridge versus a white fridge yet most landlords are like, well, they don’t deserve it.

Brandon: It’s almost like they don’t deserve a stainless steel fridge or I don’t want them to scratch it up. They can scratch up a white fridge almost just as much of a stainless steel fridge. I mean, I’ve seen so many white fridge just dented and rusty, because I need to scratch that up too.

Joe: Exactly, yeah.

Brandon: Anyway, yeah, it’s phenomenal.

Joe: Hopefully this is making sense now.

Brandon: Yeah, and here’s what I love about this is that you’re coming at it from a standpoint of such a win-win, right? So this is not like, let’s give the tenant the lowest quality crap that we can so I can maximize my return. That’s the reputation that a lot of investors have, right? Is provide the lowest quality you possibly can to just bare minimum scrape by to make this thing pass an FHA inspection, especially in Section 8. That’s what everyone thinks about Section 8 as like, a lot of Section 8 landlords are doing that.

Brandon: So the fact that you’re saying hey, no, let’s let’s treat our tenants right, like people. Let’s honor them, respect them, help them, give them a place they can be proud of. And you said that phrase early. I’ve never heard anybody say that before, but pride of rentership. I mean, pride of ownership people talk about all the time but pride of rentership, what a noble concept. Yeah, that’s fantastic.

Joe: Let me tell you story, okay? In a downturn, I think. The last downturn, a couple of downturns beforehand, I had a house in Washington DC. And this is really what got me doing this is that I used to live there, in this house, okay? And so we moved out, and we fixed it up, and then I put it out for rent, okay? Now what happened was that, I’ll never forget this story. This lady came in she had a voucher, okay? She looked around the house and said, “Nice house. It’s okay. I don’t want to rent it.” I said, “Why?” She said, “It doesn’t have a Jacuzzi.”

Brandon: Wow.

Joe: I said, “What?” she says, “Well, where’s the stainless steel appliances? What’s going on? You don’t have hardwood floors here.” I mean, I used to live in this house, okay?

Brandon: Yeah.

Joe: I didn’t understand what was going on. I understand it now what was going on, okay? What was going on was that we’re in a downturn. And there was some flippers, obviously rehabbers who couldn’t sell their homes. And so they couldn’t obviously, their next choice was to rent it. They had the stainless steel, they had the jacuzzis, they had all that stuff. So everybody and landlord wants the good tenant. They want the tenant that pays the rent on time, they keep the place. Everybody’s looking for that person. And she was one of those people. So now my house was competing with the rehabbers house who couldn’t sell, does that makes sense?

Brandon: Yep.

Joe: And he had that jacuzzis, he had all that stuff, and mine didn’t. In a roundabout way, what she was saying was, look there’s a guy down… I mean, she obviously didn’t say that. But I think what was going on was that I was not competing with a product that under normal circumstances I would never compete with, okay? So if I had an apartment building, I’m now competing with a condo, okay? Because the condo guy couldn’t sell so now he’s putting it for rent. So if you got a condo, an apartment, they’ve got choices.

Joe: So they’re going to gravitate to the other product, especially if the rent is the same. So what I learned from that, is that I need to be able to survive in every single market, okay? By having a product, which is top-notch, which I can attract the crème de la crème and I can go toe to toe with anybody regardless, okay? That’s what got me this way is because that lady says, it didn’t have a Jacuzzi in my house.

Brandon: Yeah.

David: Yeah, that’s fantastic. Joe, one of the things I’ve really liked about the strategy you’re describing here is you’ve taken this holistic view of how to build wealth through real estate, you’re not trying to squeeze out from your tenants, every single dollar you can get, because as real estate investors, there’s two ways that we build wealth, and we can make money from increasing the revenue and we can decrease our expenses to increase our profit. The thing is, most of us focus on increasing revenue, but that’s very hard to do. There’s only so much you can do.

David: You don’t control wear heads sets, there are limits of how much they can rent a certain number of bedrooms for in a property, but you can’t control expenses. And what you’ve done is you’ve gotten so good at picking the best tenants and so good at investing in the relationship with them, that they don’t ruin your house, they don’t leave, you don’t have all your turnover costs and your vacancy, you focused on the part that actually hurts landlords the most and reduce your expenses and you don’t have to worry about increasing rent because HUD’s going to do that for you every single year.

Joe: Yeah, I think that, I mean, I’ve shared with you that story of the tenant with a jacuzzi. I mean, that was a game changer for myself. The other thing is that what I try and do is I go to the landlord tenant court, usually once every three to four months, okay? Why do I do that? I go there because I don’t have a lot of the problems that other landlords have, okay? But it’s always good to go there to get a reality check as to what other landlords are experiencing, okay? All the lessons, all the horror stories that they’re facing so that way I can incorporate some of those ideas into what I do. I don’t want to get too complacent, if that makes sense.

David: Yeah.

Joe: My lease is 20 pages. Okay, there’s a reason why it’s 20 pages is because, I mean, I remember once I rented to a lady who had a cookout inside the house, okay? I mean, so obviously in my lease now you can’t barbecue in the house and, that’s at least a violation.

Brandon: Well, I’ll go to Joe’s house this weekend. We’re going to barbecue right into his bathroom. It’s going to be great.

Joe: Exactly, all right. So to answer your question Dave, is that when the market goes down, all bets are off, okay? You’ve got to focus on minimizing turnover, okay? And this is what I do comes into play, okay? It’s because you’ve got to manage the relationship with a tenant. That’s important. Otherwise they’ll leave because they have other choices, okay? If something goes wrong, you fix it, you got to have systems in there to make sure that they’re happy in such a way that they don’t even want to leave.

Joe: So these are some of the things, which I’ve found when the market goes down, is that your competition changes, what you didn’t compete with you now competing with, you’ve got to fight hard to minimize turnover, you’ve got to really go out of the way to make sure the tenants are happy. Otherwise, the profits, the cash flow, the turnover, will kill you, okay? Because to make profits, there’s really two sides to this thing. There is one side which is to increase income, okay? And the other side is to reduce expenses, okay? And I think most investors tend to focus on the income side.

Joe: How can I increase the $25, $50 or whatever it is, okay? In order to get extra income, that way. My take is no, one turnover will cost you five, six thousand dollars, okay? So which dwarfs a $50 in rent increase. So if you don’t focus on the biggest expense which is turnover and what’s it called vacancy costs. If you don’t focus on that side of the ledger, it doesn’t matter whether you increase your rent by $50, a $100, you’ll make no money, okay?

David: Yeah.

Joe: So what I do is to focus on that side of the ledger. Making sure my tenants are happy, making sure my tenants want to be here, making sure that I stack the deck so far in my favor that the thought of them leaving doesn’t even come into their mind, okay? Now, the last house we did, I know you won’t believe this Brandon but over here for a five-bedroom is $5,462.

Brandon: Wow.

Joe: Okay. So, which is more than what? It sounds like more than where you are.

Brandon: Five-bedroom here is 3608.

Joe: Yeah, we’re at 5,400.

Brandon: Wow.

Joe: So is what it is, and so the idea is that out of that 5000, the tenants portion, maybe it’s going obviously to be a lot smaller. And that’s what I like about the program is that their portion of the rent is not the total rent. And so a market renter, if your rent is $5,000, they’re not going to stay very long. They may stay a year or two, and then they’re off to buy their own house, whereas for a voucher holder, their portion of the rent may be five, six hundred dollars. And therefore, for them as long as they can maintain that five, six hundred dollars, they’re going to stay there for a long time, okay? So, that makes sense?

Brandon: Yeah.

David: Yeah, that’s great cash flow, but I’m sure you have some taxes and insurance in there too, right?

Joe: Yeah, and the fundamental thing is, I believe in appreciation, okay? That’s where the real money is. So I need to have people in my home that stay a long time. So I can realize that wealth creation that they have. So, I mean, as I said before, I bought houses many years ago not that long ago where, three, four, five hundred dollars, which now is six, seven, eight hundred thousand. And that’s not to brag or anything, it’s just that’s the power of real estate in appreciating markets, okay? And that’s where I think that’s a real wealth vehicle. And that’s why I buy what I buy in areas, which are on the path of gentrification and areas which is likely to appreciate in value.

Brandon: So what is your portfolio look like today, then? I mean, how many units or properties? Is it all single family? Do you have multi? What’s kind of the overall view of your portfolio look like?

Joe: Yeah, they’re all single families, about 30, 31 of them.

Brandon: Wow.

Joe: So 31 in these high priced markets, and yeah.

Brandon: Every one of those is just climbing in value like their little oil wells pumping out cash flow, but then they’re also just going up in value, hopefully, which is awesome.

Joe: Yes, and I filled them up with the tenants that love the home, and they want to stay a long time.

Brandon: Yeah. And you just manage them all yourself then right now?

Joe: Well, yeah. I manage them but I haven’t… The reason why I do that is that I have an assistant-

Brandon: Sure.

Joe: … Who manages it for me. I couldn’t find a property management company that did it my way. I couldn’t find. They’re screening wasn’t acceptable. I tried it once. After a year or two, the tenants will leave. I have a vacancy, I’ll have a turnover. It just wasn’t there. And so they don’t go out to people’s houses to check how they live. They don’t buy them Mother’s Day gifts, they don’t buy them Christmas presents, they don’t do none of that stuff. And I realized that, if I’m one house in a portfolio of 1000 houses that they’re managing, it’s not a big deal if my house is vacant, because they got 999 of the house that they’re working on, so I can get lost in that shuffle.

Joe: So I just realized that I had to do it my way and then I trained my system to continue my way. So I may not be doing it every day myself, I have people who are doing it for me.

David: Yeah very smart.

Brandon: I’m curious also, last question before we move into deal deep dive, which is where we’re going to actually dive into ideal but before we get there, what is a typical price look like? Especially typically when you buy a house, the single family house, what are you paying for it? And then what are you spending on a rehab? So what do you kind of have into it? You’re burrying these, so what do you buy them for? What are you rehab them for typically?

Joe: Yeah. So in fact where we are right now, I’ll give you an example. We are in a rehab-

Brandon: Yeah, you’re in one of your projects right now, right?

Joe: … Yeah, we are in a rehab. We bought this about three and a half months ago. It’s in Washington DC. It’s on the path of gentrification, the neighborhood. So I’m making a bet that five, 10 years from now. It’s going to be hot, okay? So if this house we bought for 447,000, let’s say 450,000. On this house, we’re probably going to spend around 175,000, okay? So that’s 625, is that? And REFAI out based on their ARV is probably around 750. Three quarters of a million, and REFAI out, I’ll probably have a note. The last one we did the note was 4,100 and the rent here is 5,462.

David: Wow. All right, that’s awesome.

Joe: Well, 4100 is the PI with the TI is probably going to be around 46, okay? Yeah, and the rent is 54. So there’s still a spread there and it’s new. So you don’t have those repair costs and capital expenses that you typically have in a older house, and you have somebody who’s portion of the rent, maybe three, four, five hundred dollars. And you have somebody who wants to be here, and who’s going to take care of it. Because this is a dream come true. And let me give you a scenario. Okay, this is what happened in my other house.

Joe: In fact on Thursday, I try and help other investors do what I do. So I helped one of my students and he fixed up a house, and as part of the process. I went to the prospective tenants home. This tenant lived in a bad area, but the home is spotless, okay? And you need to be in that room, Brandon and David, when I say to that family, you’ve got this house, okay? This is going to be your new home. And the joy, the tears, the happiness. I mean, it’s a dream come true.

Joe: At last, my family can be settled. At last, we can live in a nice house, in a nice area. At last, at last, at last. Okay, and I’ve got a video of the next one, you just got to be there when that happens, because it’s such a heartwarming. I mean, you’re doing good. You’re helping other families, you’re providing opportunities to people who otherwise would never have that chance, okay?

David: That’s so cool.

Joe: And that’s why I love what I do as well, but you’re also making money as well, but you’re doing good and you’re providing opportunities to good people who otherwise would never happen. If I didn’t do this who’s going to do it?

David: Yeah, phenomenal, really, really phenomenal.

Brandon: Well, Joe, let’s begin to kind of transition to the next segment of the show. And I want to dive into a little bit deeper into how you do this. So let’s go to the deal deep deep…

Automated: Deep dive, dive.

Brandon: Hey, it’s Brandon and wanted to take a quick break from this podcast to invite you to this week’s BiggerPockets webinar, which is an online class, and this week is going to be something that’s really, really popular around BiggerPockets. How to buy small multifamily properties, because look, small multifamily properties changed my life and they can be one of the best real estate investment vehicles out there, especially those who are fairly new to real estate. There’s so many benefits to buying small multifamily properties, which is why this week, I’m going to be dedicating 90 minutes of just direct training on how to get started with this. You’re going to learn how to find them, how to analyze them, how to finance them, as well as some of the dangers. There’s like four specific dangers I call out that you should know before you even make an offer. So don’t miss this. Just go to biggerpockets.com/multiwebinar. Again, M-U-L-T-I, so biggerpockets.com/multiwebinar and I will see you there.

Brandon: All right, this is part of the show where we’re going to go in detail on one of your properties. Now you just talked about one a little bit ago, but maybe it’s the same one, maybe it’s something different. But let’s go through we’re going to ask you just kind of fire quick a bunch of questions at you starting with, what kind of property are we talking about here? You only buy single family. So I’m assuming that’s a single family that you’re thinking of, correct?

Joe: Yeah. It’s a rowhouse in Washington, DC, and a single family. So it’s a single family in the sense that it’s one family. It’s not a multifamily building. It’s a rowhouse, which is like a townhouse for other parts of the country.

Brandon: Okay. Perfect.

David: How did you find this property?

Joe: I got it through a wholesaler. I have a program whereby I teach people what I do, I give people the chance to look over my shoulders. Because I believe that the best way to learn real estate investing is not by listening to a CD or watching an MP3 list. It’s to actually do a deal, or if that’s not possible, give people the chance to see how I execute a deal. Okay, so I have a program whereby I give people the chance to see how I do a deal. So one of the entry points to the program is if you find the deal, then if I buy it, then I give you the chance to see how I execute, okay?

Joe: So normally a wholesaler, once they get paid, they’re out of the picture. So I give the chance for the wholesaler, the real estate agents to see how I execute. So that’s really in a competitive market like Washington DC where everyone’s looking for a good deal. I had to figure a way whereby, why should, let’s say, Brandon you’re the wholesaler, okay?

Brandon: Yeah.

Joe: You got a good deal, and David wants that deal, Joe wants that deal. So why should Brandon give it to Joe versus David? Okay, I had to answer that question. My response to that was, I will show you, Brandon, how I execute. So hopefully at some point, you’ll be on the other side of the table-

Brandon: Yeah, cool.

Joe: … And not just on the wholesaling side. So that way, there’s an incentive for Brandon to give me the deal versus giving to David, okay? So, that’s essentially what happened here is the wholesaler wanted to see how I executed. They brought the deal and they got it under contract for 450,000 and I purchased it from him for 475,000.

Brandon: Okay, so you made a $25,000 wholesale fee, which is great for them, and they got to follow along and see how you do.

Joe: Exactly.

Brandon: So good, which is probably worth way more honestly than the 25 grand. It’s way more valuable.

Joe: Exactly.

Brandon: I’m going to say right now, if anybody brings me a mobile home park with over 100 units, I will let you follow along every step of my process. That’s great.

Joe: That’s my trademark program.

Brandon: Yeah, that’s it. It’s now called the beauty Brandon trademarked program. Formerly, the Joe program. This is great. All right, so 475 is what you ended up buying it for. How did you negotiate? Did you negotiate that price at all? Did he did the wholesaler negotiate that price at all, any kind of stories there?

Joe: No, not really. The wholesaler got it from an owner. What happened was that the owner had a tenant in there and the tenant was giving him hell, and they were in the process of evicting the tenant, okay? So it was like a burnt out landlord, if that makes sense. That’s who the owner was. And so they negotiated the 450 price, and he then turned around, called me, I went to the house, it met my criteria in terms of location, the size and all those different things. And I knew I could make two extra bedrooms to make it to a five-bedroom. And therefore it was a go from my perspective, okay? And I was okay with paying 475 for this house.

Joe: Yeah, so that’s how I decided to, I did the due diligence, which is pretty quick. I know what I want, and he knew what I want. So I was able to make a decision within 20 minutes of going to the house.

Brandon: That’s great.

David: Okay, awesome. How did you finance the property?

Joe: Well, this is an interesting one. I normally have lines of credit with some of the local banks here. I mean, I’ve taken the time to develop relationships, nurture relationships with some of the banks. I have lines of credit. So most of my deals I use a three part financing strategy, okay? I have lines of credit from the banks, and then I have private investors and I also use some of my own personal money, okay? So the banks will fund X amounts, say 75 to 80%, the private investors may top up the difference or they may come in for another 15, 20% and then I’ll top in the difference, okay?

Joe: So in this case, what happened was that the seller realized that 450 was too low, okay? But it was under contract, okay, with the wholesaler. So the tenant was in the house. The reason why they just wanted to get rid of us was because of a tenant. Once the tenant was evicted, if that makes sense. There was three days left between the date of the eviction plus and the date where the contract expired.

Joe: So the owner says, I’m not going to extend this contract. If you don’t close in three days, the deal is off, okay? So typically my line of credit, it takes about 14 days to close. So I couldn’t get the 475,000 using my line of credit. So I contacted a HUD money lender, which I don’t normally use, but I did in this case, and were able to get the 475 plus the $150,000 rehab in three days.

Brandon: That’s awesome.

David: Very cool.

Brandon: Well, what did you then do with the project? Obviously, you’ve started rehabbing it.

Joe: Yeah, we rehabbed it. Its original estimates 150,000. We ended we spent about 175,000 on the rehab. We created… It was a three-bedroom, one bath. We turned it into a five-bedroom, three and a half bath. So we created a master suite, we had vaulted ceilings, we had hardwood floors, we had… It was a nice home. It’s a HGTV style home and I focus on the kitchen bathrooms, bedrooms, closets, open space and functionality. That’s what we do on our rehabs. It’s a beautiful home. That’s what we did there.

David: Now this was a BRRRR, right?

Joe: BRRRR, Yes.

David: Okay, cool. What was the outcome?

Joe: Okay, so once everything was all said and done, the house is appraised at 740,000, I thought it'd be 750 but it came in a little bit lower, 740 thousand. It's okay. I found a tenant. I think for that house, we had about maybe 20 applications for that house. So I selected a good family, and the rent is 5,462. The note as I said before, it's around 40… This bank, a local bank, we refinanced it, okay? So, typically it's about 75 to 80% loan to value that they will give you, but I've developed relationships with some of the banks and this particular bank, they funded just under 90%, at 4.8% I think it was the interest rate.

Joe: And therefore I was able to pay back all the expenses and essentially have very little if anything in my money in this deal after the REFAI. So the rent is 5,462, the notes is around 46 after PITI, fell a little bit.

David: That’s so cool.

Brandon: And again, now you’re paying the mortgage down every month, your property is appreciating every month, your cash flow is coming in every month, you get the tax benefit of owning the property. This is like win-win-win-win, you got a great tenant who loves their home. It just is awesome. So what lessons did you learn from the deal? Anything that you learned in this tenant that you didn’t know before? Or things that just stood out to you as important?

Joe: I think the importance is, I mean, the rehab is 175k so it’s a pretty big rehab. It’s not paste and copy job. So I think the importance of teams whether it be relationships with financial institutions, obviously, we’re able to get the money pretty quickly. I mean, one thing I missed out was that the reason why we got the money quickly was because I also cross collateralized against another asset that we own, which was free and clear, if that makes sense?

Brandon: It does, yeah.

Joe: So yeah. So that’s one of the things that we did on this one.

Brandon: You’re basically saying you put a lien on another property. So that way if you didn’t pay on the one they could take both, right?

Joe: Exactly, yeah. I mean, the importance of teamwork, the importance of taking care of your contractors, the importance of creating win-win scenarios with everybody that you deal with is what makes this thing truly a blessing in a cookie cutter operation.

Brandon: It’s really good. Really good, Joe, this has been fantastic so far, and we’re not quite done yet. Because next we’re moving over to the next segment of our show. It’s our, fire round.

Automated: The fire round. It’s time for the fire round.

Brandon: Alright, Joe, this is the part of the show where we fire a bunch of questions at you, direct out of the BiggerPockets forums.

David: Let’s see what you got to say to that.

Brandon: First one.

David: CJ from Moore county says, “I’m just getting started with real estate. I’ve saved up 10 grand. I want to hear from some experienced people what they would do if they were in my position.” They’re just getting started. They got 10 grand and they’re in North Carolina, so, I don’t know, it’s probably an IDC.

Joe: Okay, a couple of things. I would suggest that the guest from North Carolina, first of all work on themselves in terms of learning the basics, what they want to do, what their goals are, what their strengths, their weaknesses are, and make sure they get a buy-in from their family, their spouse, and so on, okay? That’s step one, I mean, you got to really work on yourself first. Otherwise, that 10,000 could go real fast. The second thing is, sort of decide on which the method of focus, which strategy you want to do. Is it wholesaling or is it, I don’t, fix and flips? Is it landlording?

Joe: I mean, what’s your strategy? What do you feel comfortable with, given where you are? Okay, and then once you decide that, it’s learn the basics of that, okay? So if it’s wholesaling, for example, learn the basics of wholesaling. If it’s the rehabbing, learn the basics of that. But the next part is to really identify somebody in the area where he is, okay? Who’s an expert, a mentor or a coach, okay? Because this person can really guide them along and tell them, okay, then this is what I would do if I was in your situation.

Joe: Okay, I would do A, B, C, D, E, and the key is finding that person and making sure that person, will help you create a win-win scenario, and incentivize the expert or the coach to help you along, okay? And then once you’ve done that, then just go out and do it. Take action. Do your first deal, and leverage that $10,000 that you have to be able to get on the right path. Otherwise, that money could go real fast, and they’ll have nothing to show for it.

David: Yeah, really, really good advice, Joe. That’s awesome. Okay, this question comes from Daniel in Colorado Springs, Colorado. “I’m looking to refinance one of my properties with a portfolio lender, I’ve got a list of local banks to call and I don’t want to come off as uneducated. Do you have any tips for how to approach these conversations?”

Joe: Okay, commercial lenders. What I encourage is to show the commercial banks or whoever you’re trying to raise money, show them what you’re doing, okay? So if you have a rehab project going on, or if you have a house that’s taking place, invite them over, they can see what you’re doing in real time, they can see the activities, they can connect you to the projects, okay? So you’re no longer just an applicant. You’re a real person who’s doing real stuff and they can see you in action, the results of what you’re doing.

Joe: So it builds a lot of credibility, which I think a lot of people aren’t doing. So what I would recommend is invest the time to nurture those relationships with this commercial lenders. Take them out, show them what you do. But also the other part would be to create some kind of a summary of who you are, okay? And it needs to address six key questions, which is, who you are, what you do, what makes you different from everybody else that’s applying for money, okay? And how much do you… What are you looking for from the potential commercial lender, how you going to protect their money and why they should do business with you?

Joe: Okay, so, I mean, it’s a six key questions, which any lender I think wants to know, because they get people asking for money all the time. And it’s everything I do. I always try to differentiate myself from the competition. I always try and differentiate myself from everybody else who’s doing this thing. And so if I’m looking for money, how do I differentiate myself from all the other people who are pitching this guy for money, okay? And I want to show them what I’m doing. I want to, in real time, in real life, and also I put together documentation, credibility, support materials to prove that I’m a worthy risk. And that if you borrow me the money, I will do what I say I’m going to do. I have a track record, I’ve proven to do that.

Brandon: That's so good. That's one of those moments, where you guys need to rewind that last two minutes and listen to that again. Anybody who wants to get a loan ever from anybody, go listen to that again, because that's the secret to getting a loan. That's it. You understand some stuff. All right, number three-

Joe: Oh, thank you.

Brandon: … You’ve been doing this a couple of years. This is good. Charlie from Washington, DC, your neck of the woods said, “I have a ton of interest in my properties, like a rental property to rent. I can only choose one tenant though. So what language do you use when you need to notify an applicant that you’ve gone with someone else?”

David: How do you turn someone down?

Joe: Oh, boy. That’s the hard one. Because when you have a house that people have set their dreams and hopes to, and you’ve only got one house. So you got to be the bearer of bad news to a lot of people. You need to be on that phone call as well. The cries, the disappointment. Why? Why? Why? That’s a tough one.

David: It is.

Joe: I’ve only got one house. And that’s why I teach other people to do this then because the demand is so great that it doesn’t matter if I teach Brandon or David or whatever, in the local market, because the demand is so great. It doesn’t matter. Anyway, so it’s actually a question of how do I do it? Unfortunately I just make a call and say, “I’m sorry, but after a careful review, and unfortunately, I had to give the house to somebody else.” That’s it.

David: Yeah, keep it simple.

Joe: Keep it simple.

Brandon: I agree with if more people were doing this, I think there’d be more wealthy people and they’d be more tenants happy and taken care of. And it’s again, a win-win. So, yeah, great, all right.

David: “So everyone’s heard nightmare stories about contractors. If you find a good one, what are some ways to keep them happy and continue that relationship?”

Joe: I’ve had contractors from hell. I’m sure we could all have a couple of beers over and talk about contractors. I’ve had the contractors who come into work drunk. I’ve had contractors who come in and they don’t know what they’re doing and so on. Okay, so when I find good ones, which is what I’ve got now, I use the same contractors for the last seven or eight years.

Joe: They’re the only ones that do my projects. I don’t consider anybody else. What do I do? It’s the relationship, okay? So one of the guys lived in a rooming house, okay? And one of the other guys before I met them lived with his family in an apartment. So one of the houses I purchased, it’s a nice house, nice area, I offered it to rent to him and his family. One of them. So they’re living in one of my houses, him and this family. The other one is living in another one of my houses, and he has roommates. He’s doing a house hack, but he’s living in a nice house in a nice area.

Joe: So the idea is that I’m looking out for them, okay? I’m trying to help them. And in return, they look out for me. These projects, which I do are very, very low maintenance, very, very low stress, I’m sorry, very low stress. I don’t come to the house very often. Because if something goes wrong, they take care of it. They go beyond the call of duty to make sure that the house is done correctly. They don’t cut corners because they’re looking out for me, if that makes sense. And that’s how I do business. I take care of my tenants so they can take care of me. Okay, I take care of my contractors, so they can take care of me. I take care of my financial banks because they can take care of me. I take care of my realtors, so they can take care of me.

Joe: So it’s a win-win scenario, and they’re loyal. I mean 175k rehab is not a paying carpet. I mean, it’s a lot of stuff going on, a lot of moving parts, but we also have weekly meetings where once a week we meet to the house, usually at my house where we have food, drink cup of coffee and eat Spanish food and just network and just kind of socialize and then talk about the business. What are the project’s doing, what are the issues we’re having, what’s the schedule for next week, what are the problems that we face, what are the solutions and things like that.

Joe: So it sort of nurturing the relationship with my contractors, that’s been the key to not having some of those issues.

David: That’s cool. That weekly meeting thing. That’s a neat idea.

Brandon: Well, very cool. Well, that was the end of the fire around. Now it’s time to go to the last segment of our show. It’s the…

Automated: Famous Four!

Brandon: All right, but before we get to the Famous Four! Let’s hear from J. Scott to see what’s going on this week over on the BiggerPockets Business Podcast.

J. Scott: Hey there, Brandon and BiggerPockets Podcast listeners. This is J. Scott, your co-host for the BiggerPockets Business Podcast. And this week on the Business Podcast, we have an absolutely awesome episode, we have author and entrepreneur Michael Michalowicz, who’s written several seminal business books, including The Pumpkin Plan and Profit First, and on this episode, he tells us all about how we can guarantee that our business generates a profit from day one. So tune in this week for the BiggerPockets Business Podcast. Now back to your Famous Four!

Brandon: All right. Thank you, J. And now let’s get to…

David: This same four questions we ask every guest every week. Joe, number one. Do you have a favorite real estate related book?

Joe: I’m going to give you two, if that’s okay?

Brandon: Unacceptable.

David: Okay, that’s good.

Joe: Unacceptable, okay.

David: You can give as many as you want, I will take a book recommendation all day long.

Joe: Well, I mean, I’m sure other people have said this one. I really liked The Millionaire Real Estate Investor by Gary Keller. That’s a really good book. It’s a really, really good book. It goes to a lot of detail about the systems, about how to do this right, how to manage properties, sorry, from a financial perspective, about the numbers, making sure that you do this thing right. It’s a very, very good book, and I highly recommend that. It opened my eyes when I read it.

Joe: The second book, which I like to, I don’t know if J. is being given a lot of credit. He’s written a really good book on the, what’s it called? It’s called Recession-Proof Real Estate Investing. That’s a pretty good book.

David: It is.

Joe: I got it from BiggerPockets. And, I mean, he goes through logically, the different types of investments, sorry, real estate cycles, what works, what doesn’t work and what the trends are, how to protect yourself and mitigate yourself through these downturns and upturns. It’s a very, very good book. So that will be my second recommendation is, so the Recession-Proof Real Estate Investing from J. Scott?

David: Perfect.

Brandon: That’s awesome. Yeah I think that’s for sale at biggerpockets.com/store. I think we still have some of that. Again, oh it’s a digital books. So I mean, I think we’re still selling it, bigger pockets.com/store, you pick it up there. And cool. All right, number two, David Greene.

David: What is your favorite business related book?

Joe: There’s a couple of books. One of them I’m trying to get more into what’s the best use of my time? Okay, managing my time and making sure that I focus on what I need to do. Okay, so there’s a couple of books, which I’m reading right now. One of them is called, The Productivity Project by Chris Bailey. I know recently you had Cal Newport talk about the Deep Work in the studio. It’s sort of a similar kind of approach to that is, how do you maximize your time? What’s the best use of your time and how do you get more done? Okay, for the limited time that you have available. I know that’s in the Chris Bailey book, at least what I’m realizing is that there’s only so many hours in a day, obviously, but he kind of focuses more on maximizing or using your energy and your attention, okay? Sort of leveraging that to get increased productivity.

Joe: So it’s a pretty good book. And that’s The Productivity Project from Chris Bailey. And the second one is also, this other one called Virtual Freedom by Chris Ducker.

Brandon: Chris Ducker, yeah, I know Chris.

Joe: Yeah, yeah, that’s a pretty good book, as well. It talks more about virtual assistance and how do you outsource and best use of your time. One thing I got from that is, I spent some time recently is to focus on what should I be doing? What don’t I like doing? What can’t I do? And what I shouldn’t be doing? Okay, once you kind of go through that painful exercise you can then start saying, okay, what’s the best use of my time? What are one of those tasks that I need to sort of outsource or find other people to do? So I can focus on the biggest bang for the return.

David: Brandon, this sounds so familiar. Did you give me this book? Was it like a white book with blue font?

Brandon: I think so. Yeah, I think I did.

David: Oh, so you had two copies?

Brandon: Yep, yep.

David: Okay, so you just sent me the one that like Rosie accidentally dropped in the toilet and you didn’t want any more? Here I am thinking that you actually cared about me and you were trying to give me a book to save my life. And really, you were just trying to get rid of your garbage because it’s so expensive in a [crosstalk 01:09:30]to get picked up.

Brandon: I mean, I spent money on two copies because I knew, I was going to give you one of them.

David: Okay, moving on. All right, what are some of your hobbies?

Joe: Oh, one thing I mean, I’m getting more into working out. I work out every day now, every day. I wake up at, between 4:30 and 5:00 and I spend an hour and a half in the gym every day at a local Planet Fitness. And I’m realizing that just that exercise, just that sort of routine every day, it really sort of gets your mind thinking. It really gets you kind of pumped up for the day and allows you to get the most done. So I’m a kind of a morning person. And so I like to work out. I like to spend time with my family. Been married 25 years.

David: Oh awesome.

Joe: I’ve got two kids and then also we like to travel. I’ve been through most of Europe, done quite a few countries in the Caribbean, and a few countries in Africa as well. So I like to spend quality time traveling.

David: Very cool. Love it.

Brandon: Last question from me. Joe, what do you think sets apart successful real estate investors from all those who give up, fail or never get started?

Joe: I think it’s overcoming your fears and taking action, okay? Because it’s not easy. It’s scary to leave the comfort zone and a lot of people obviously are scared of losing money’s, fear of failure, fear of what other people are going to say. And if you’re not careful that will paralyze you into inaction. Okay, so it’s your ability to address your fears, and then take the action necessary to move on to pull the trigger. I think that’s what really separates, at least the people who are starting out, is they’re inability to overcome their fears. But if you can do that, and then take action, I think that will separate a lot of people out.

Brandon: Yeah, really good.

David: All right, Joe, this has been fantastic. I just want to thank you for giving such a great interview. This is going to help a lot of people, for people who are more interested and want to connect with you where can they find out more about you?

Joe: Okay, they can go to my website, www.joeasamoah, that’s J-O-E, Joe, Asamoah, which is A-S-A-M-O-A-H.com. They can email me at [email protected] We’ll get more into the social media. So do we have a Facebook and Instagram. Not that hot on it, but I’m getting there.

Brandon: We’ll get you there.

Joe: I need help, yeah. So what’s it called, so they can reach out to me through those channels, but the best one is either through the website, and they can send me a message or they can contact me, email. Also, they can reach me on the BiggerPockets. I’ve written a few articles for BiggerPockets now. And I think eight article so far, so hopefully I’ll be doing more.

David: Cool.

Joe: But yeah, I really like to have network with people, especially in the Washington DC area. I like to help more people. I like to encourage people to do what I do. It’s a great business, it works. I think that it’s not easy, but I think by networking, I have these events, which are free, where we can kind of network and socialize, and sort of talk business, but I love to meet more people in Washington DC area.

David: Very cool.

Brandon: And of course, Joe on Instagram is drjoeasamoah. We’re going to go blow up his Instagram today because he has 411 followers, we’re going to get him 4,000. Yeah, we’re going to 10x you.

Joe: Oh, thank you.

Brandon: Drjoeasamoah, Alright, dude, this has been awesome. Thank you so much for being here today. Really fantastic. I learned so much. I’m going to… Seriously as soon as we get off this call, I got to go talk to my team about changing everything we’re doing on this property in Maui. So, thanks to you.

Joe: Thanks, guys. I really enjoyed it. Thanks a lot Brandon. Thanks a lot David.

David: Thank you.

Brandon: Alright, and that was our show with Joe Asamoah. David, that was incredible. That was so good, so good.

David: I had no idea that was going to be that good when we started. I mean, but yeah, the deeper we got into that, the more brilliant it seemed. He’s just so humble about what he’s doing. It’s easy to stop and miss the sheer genius of what he’s put together.

Brandon: Yes. So many good things in there. So many good things. So again, very, very cool. Thank you, Joe, for joining us today. I know before we get out of here, I want to give a quick shout out for one of our pro members on BiggerPockets Kim Talana, from Colorado Springs. So this is the pro member shout out or spotlight. So here’s the deal.

Brandon: So Kim signed up for BiggerPockets Pro nine months ago, she’s already taken action. Bought a $300,000 house for a house hacking, with a three and a half percent down payment, which is super cool. A great way to get started that house hacking technique, which of course you can read the book. The house hacking strategy, if you want to learn more about that, but really, really cool. So congratulations to Kim on that, and thanks to everyone else for sending in your deals.

Brandon: Remember if you’re a BiggerPockets Pro member and you want to be featured on this segment, the spotlight, just email us a note at podcast at biggerpockets.com and put the words, Pro deal into the subject line. And you might hear your name right here on this show. All right, that’s all I got. So David Greene, you want to take us out?

David: Yes, on Instagram. He is beardybrandon, I am davidgreene24. I’m trying to make my way through all my DMs there. So if you want to get ahold of us that’s the best way to do it. I don’t know if you’ll get ahold of Brandon. I think he’s probably buried more than me, but-

Brandon: I’m buried.

David: … Thank you guys very much for listening. We appreciate you guys and we love you. This is David for Brandon breaking next and cash and checks Turner signing off.

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In This Episode We Cover:

  • Why he targets 5-bedroom houses
  • Why the greatest HUD demand is for 4-, 5-, and 6-bedroom homes
  • HUD requirements for what qualifies as a bedroom
  • The advantages of investing in a capital city
  • Why he rehabs his properties to HGTV-grade quality
  • Why he visits potential tenants at their current homes
  • Why he sends his tenants flowers on Mother’s Day and presents for Christmas
  • Why he rewards his tenants’ children for good grades and even offers vacations for tenants
  • How his model is designed to be recession-proof
  • Why he has a 20-page lease
  • Why he focuses more on reducing expenses than he does on increasing rents
  • Why he hired an assistant to manage his properties instead of using a traditional property manager
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “You can’t have a room without windows and call that a bedroom.” (Tweet This!)
  • “If you can’t figure out a way whereby you can minimize turnover, you get no money.” (Tweet This!)
  • “How they keep their house today is how my house will be in 3 months.” (Tweet This!)
  • “At the end of the day, we’re renting to human beings, so nurture that relationship.” (Tweet This!)
  • “When you have many tenant applications, you don’t need to set your standards low.” (Tweet This!)
  • “I always differentiate myself from competition.” (Tweet This!)

Connect with Joe

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 investors and other real estate professionals, who chat about failures, successes, motivations, and lessons learned.

    Don Spafford Investor from Idaho Falls, ID
    Replied 28 days ago
    Brilliant! What a great strategy.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 24 days ago
    Thanks for the kind words Don. Glad you found the interview helpful. As mentioned in the podcast, I think many investors overlook this niche. I hope others may explore and/or reconsider because what I shared does work and has passed the test of time (over 30 years through four real estate market cycles).
    Jarred Sleeth Lender from Washington, DC
    Replied 27 days ago
    Joe! You're a top notch borrower, so great working with you and can't wait to do more!
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 24 days ago
    Thanks Jarred. I look forward to working with you and your team on other projects.
    Steve Hiltabiddle from Philadelphia and suburbs
    Replied 26 days ago
    Great interview. Joe has his system down and thrilled he shared it with the BP audience. This really changed my perspective on how to leverage vouchers with adding bedrooms and providing a great home for long term tenants. Brilliant. While my area's Section 8 payments aren't near what Joe is seeing in DC, leveraging the niche of 4, 5, 6 bedroom homes and getting paid is great. Give me something to think long about. Thanks!
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 24 days ago
    Thanks for the kind words Steve. The rents paid via the Section 8 program varies from area to area. Like several major US cities, Washington DC is experiencing a severe housing shortage that is now a crises, I can't speak to other locales but since Section 8 is a federal program, the rules are same across the US. Therefore, if the demand exists in your locale for quality 4, 5 and 6 bedroom houses, then you should be able to attract "Nordstrom" level voucher holders who will pay the rent, take care of your house, be pleasant to deal with and stay a long time. However, you must value them and establish and maintain a win-win relationship. I hope this helps. Good luck.
    Oscar Perez Investor from Houston, Texas
    Replied 26 days ago
    Love the idea of giving gifts during Mother's day and other events to establish goodwill. Does anyone know if those items can be expensed?
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 24 days ago
    Hi Oscar, Mother's day flowers, Christmas presents, $50 gift certificates etc. are all business expenses that can be expensed. Disclaimer: I'm not a CPA therefore, please consult with your tax adviser first. The bottom line however, is to establish a positive business relationship with your tenants. Since they are providing you with income, they should be viewed as customers. If you see it from this perspective, then its always cheaper to keep an existing customer happy than it is to go find a new customer. From my perspective it makes perfect sense.
    Steve W. from Bay Area, CA
    Replied 22 days ago
    Which website do you use to find rent rates? Is this the right one? https://www.huduser.gov/portal/datasets/fmr/fmrs/FY2020_code/select_Geography.odn
    Maria Katrina Lopez New to Real Estate from Los Angeles, CA
    Replied 21 days ago
    What an awesome podcast! I listened to it/watched it over and over again. For a pricy market like Los Angeles, I thought a beginner like me could only explore properties that are out of state. Listening to this is definitely a game changer for me! Thanks Joe for sharing decades of experience in this hour long podcast. I understand that not all zip codes can be rented out to voucher holders. This might be a silly question, but how do you know if a certain locale is covered by the Section 8 program? I work backwards to see which zip codes have houses for rent in the Section 8 website and then I check the listings in that area. I know that it would take years of exposure to understand every locale but for a beginner, what would be the best way to explore it?
    Ari Bachrach Rental Property Investor from Silver Spring, MD
    Replied 21 days ago
    I loved this episode. I'm also in the DC area, and after a lot of time spent analyzing, I just figured that no one cash flowed in the DC area and people either did flips, condo conversions (lots of those going around), or rented counting on appreciation. I personally started moving north getting my buy and hold opportunities in PG and Baltimore county. I'm thrilled to hear that someone has made it work, even with expensive houses. I hope to see you around!
    Jim Davis from Indian Trail, North Carolina
    Replied 20 days ago
    Love the strategy, great interview
    Leo Andre Marzo
    Replied 20 days ago
    Amazing interview! I learned a ton from this podcast. It came at just the right time for me since I'm about to list 2 single family homes for rent and the owners are willing to consider accepting section 8 tenants. I am also considering converting my 3-bedroom home into a 4-bedroom and putting it up for rent as well. Any chance we can get a look at your 8-page application and 20-page lease, Joe?
    Matt Dacey
    Replied 15 days ago
    What a smart and more importantly good natured way of investing. I'm super interested in your 6 page application. Would you be willing to share that? Thank you for the inspiration!