Have you ever wanted to invest in real estate but aren’t ready for a full-time commitment? Today’s guest has figured out just how to do so, and she’s sharing it all with you!
On today’s show, Stephanie breaks down how she saved $100K on one deal, developed an automated direct mail system, and successfully used the often-confusing 203k loan program.
You’ll love her advice on automation/delegation and investing in single family homes. Plus, she talks about what she looks for in her market, and shares her thoughts on the next big change in real estate in the near future. You’ll also find some great tips regarding managing properties yourself and hiring and using virtual assistants to save you time.
Download this one today, and share it with a friend or family member who would benefit!
Brandon: Welcome to the Bigger Pockets podcast. Good to have you.
Stephanie: Thanks for having me. I’m so excited to be here.
Brandon: So let’s talk about your real estate. What do you do? Actually, let’s go. How’d you get into it?
Stephanie: Well, so I’m a buy and hold investor in Connecticut and I’m a lawyer by trade. And I knew pretty early, actually even before graduating, I didn’t want to stay in law. So I took a job at a firm that allowed me more flexibility than a typical entry associate would. But in exchange I wasn’t paid the same way an entry associate could be. So I couldn’t afford the house that I wanted. So in hindsight, that ended up being the best blessing because I still had to get the house that I wanted, but I had to do it in non traditional way. So I ended up buying a condemned duplex using a 203K loan and house hacked it at the beginning.
Stephanie: So, that was my first foray into real estate. But it wasn’t until. Fast forward three years later I had gotten my real estate license. I knew that I really liked real estate, but I still hadn’t gotten the awakening that that’s actually what I wanted to do. So I had built up some commissions being an agent and had some money to play with. So I decided I would buy a house, a single family house to move into cause that’s what you do eventually, right?
Stephanie: So I went and bought a single family house using the money that I had, I did the renovations myself if it needed some work. And halfway through the renovations I found bigger pockets. I was actually sitting on the floor of an unfinished bathroom, with a stack of tiles in front of me, and a book that said how to tile 101, and I learned it well. My mindset completely shifted when I heard the podcast and when I started to really dig into it.
Stephanie: And so I made the shift from not wanting to move to where my mortgage would be less expensive, but to stay where I was because my gross rent would be higher if I stayed than if I moved. And then after that I started to really understand the power of investing. So I started to use the BRRRR strategy. I was still working full time as a lawyer and as an agent and then building up a portfolio of single families and duplexes through the bar. All of my projects have been renovations and I just hit the two million mark in real estate. And a few years ago I was able to drop down out of full time work into part-time, which is great. So…
Brandon: That’s awesome.
Stephanie: So here I am.
Brandon: All right.
David: Okay. So you’re a lawyer by trade. You’re also a real estate agent. Tell us a little bit about your portfolio. Where are you at now?
Stephanie: So I’m at 12 units, single families, mostly duplexes. I really consider myself a buy and hold agent and all my, all my product is in central Connecticut. Recently I’ve switched over into a little bit more of flipping just cause that’s where my market has taken me. But they’ve all been renovations anywhere from light value add like a $15,000 project to a full gut layout, remodels, $160,000 duplex renovation. So, but I don’t have any partners, so I’m the janitor and the CEO all in one in my projects. And I do all my management, myself, my leasing and handle all of juggle a lot of hats I guess.
David: Okay. And are you still practicing law and being a real estate agent while doing all this?
Stephanie: Yes and yes. I actually just gave my notice to my law firm, so I’ll be going full time in real estate at the end of the year. Really exciting thanks. Thanks to you two. And so I’ve been a commercial real estate agent and I’m going to switch over to working really more on my stuff and then also helping other people get started, just like I did house hacking, duplexes and ties, and things like that. So I’ll switch over as well. But I’ve been juggling all the hats up until the end of the year basically.
Brandon: That’s great. All right, so let’s go back to the beginning and I want to know about, you mentioned the 203K in case we kind of burned right through that, but I love that program when it works. And so I want to know your experience. What is the 203k program and how did that work for you?
Stephanie: So it’s an owner occupant FHA loan that combines the purchase price of the house and the renovation costs into one loan. So it’s amortized over the full 30 years. So for me, not having any renovation experience, it was amazing because it allowed me to look at properties that would otherwise just not have been accessible to me as an FHA buyer. So I was able to take a property that was in a great area of town that was condemned, that really only investors were looking at. And it had no floors, it had no ceilings, walls, and all of the wrong places. The inspector said it was the easiest inspection ever because nothing worked and really quickly. And so I was given, because of the value of the renovations, I was given a HUD consultant who did the scope of work for me.
Stephanie: I’m the clients. So he actually represents me, making sure the contractor does the work really well. And ultimately I got a great deal on a house. I put three and a half percent down. That three and a half percent is on the purchase price plus the renovation cost. But still, not many people can say that they designed their house on the first shot. And I got a lot of sweat equity involved. It really helped me, I wanted to go for hard money and transfer into private lending because I had experience doing renovations. I had a track record.
Stephanie: And having the HUD consultant as your expenses because you have to pay for them to come out and inspect the work that the inspector does. But it’s sure worth it. Because otherwise I wasn’t qualified to do my own estimate, excuse me, to do my own estimating or to measure the quality of work and even understanding what materials to use.
Stephanie: I just wasn’t qualified. So, and what’s nice about it is that it’s just a onetime closed loan. So you close it at the purchase, and you can roll your, not just your construction costs, you can roll your rent or your mortgage payments and for a few months as well. So you can do mortgages.
Brandon: That’s cool. I didn’t know that.
Stephanie: It’s a cool product. It is a pain in the butt though. I think it’s an amazing product for somebody that has administrative stamina because you are going to be, every single request, you have to submit the entire package again. So my loan took three months to do and I was getting angry phone calls from the seller wanting me to close, but they stuck with me. They kept extending and I finally closed.
Brandon: I remember the same thing with the 203k’s that I have been involved with. And I haven’t actually done it 203k loan, but I was the contractor on my buddies and back when I was a contractor and it was just, it was just hell every step of it. But what’s so great about it is you can buy a property for three and a half percent down of the total, what you put into it, where you bought it for all of that. So it’s really is a fantastic loan if you’re willing to put up with the administrative hell that goes into it.
David: I liked that pretty good stamina.
Brandon: That is a good phrase. That’s good.
David: A very nice way of saying I make decisions.
Brandon: So the nice thing is also they can work duplex, triplex, fourplex. You said those are the duplex, right?
Stephanie: This was a duplex, but it goes up to a fourplex.
Brandon: Do you remember? What did you pay for that property and then what did you end up putting into it?
Stephanie: So I bought it for 133 and it was funny, it was actually on the market for 233 and I had put in an offer for 133. They said go away and a year later it was still on the market. I put in an offer again, 133 and at that point it hadn’t moved, so I got it.
Brandon: You got $100,000 off your first property?
Speaker 1: Almost 50% discount.
Brandon: That’s awesome.
Stephanie: Because that’s what I could afford. So I put in 133 offer and then I put in a 50 just about 50 so I was all in for 183 and it just appraised recently for 283.
Brandon: That’s awesome. So, now at the end of the day, you have a duplex that you’re living in a half of it. So you’re living cheaper, maybe for free, I don’t know where your numbers came to, but…
Stephanie: Almost free.
Brandon: Almost free. You’ve got a remodelled house that you, it sounded like your dream house, or at least what you want. It’s fixed up. So hopefully your repairs are a little bit less, because everything’s been fixed. You now have forced equity in it. And you did the whole thing for three and a half percent down. That’s why we love this loan. It’s annoying as it is. It’s not very comfortable, but it sure does pack a big…
Stephanie: For a new person getting started that doesn’t understand how to estimate, doesn’t understand the process really. They walk you through it, they hold your hand and the bank really kind of pushes pretty heavy on the contractor to make sure the work is done and done well. So I appreciated it so much. And then I was able to take a HELOC on it. So this house just keeps on giving. So it’s been a great, great project.
Brandon: That’s cool. Can you explain HELOC real quick? What do you mean by took a HELOC on it?
Stephanie: HELOC is a home equity line of credit and it basically means you are opening a line of credits based on the equity that you have in your home and that HELOC is secured by the home itself. So I think it’s better than a refinance because you’re not making a payment unless you’re actually deploying the money. So it’s just a great way to have extra cash available to you to deploy at your convenience.
David: Another benefit of HELOC is you don’t pay closing costs. That just doesn’t get brought up very often when people talk about the cost of real estate, but closing costs on loans and refinances, they’re not cheap. My brother’s trying to refinance a house he bought for, he’s trying to take out 70 grand and the closing costs are $10,000 which is oddly enough, about the same as if you’re taking a loan for like $500,000.
David: Because to the lender it’s the same amount of work. So they adjust the basis points you’re paying on that loan for a lower loan balances, so anytime that you can avoid having to pay that, that’s a really big expense. And a HELOC. I think most of the time you just pay an appraisal fee and maybe 100 bucks or so to the bank for some person to fill out paperwork, but it’s a lot cheaper than, like you said, Stephanie, having to pay closing costs on this thing and then make payments regardless of if you’re using the money or not.
David: Another thing I want to point out about what you said because Brandon, I get asked a lot about these 203K loans. On paper, it’s an easy way to get started. You don’t need a lot of money. It’s a great program. And in reality sometimes it doesn’t work because it’s such a headache and I know a lot of people think, well, should I do it or not? Probably a better way to look at it is it will work on a specific kind of property. So something like you with a seller that could not sell it, that needed you and valued you as a buyer was going to keep giving you extensions, was going to deal with the headache, was going to give you the time for the administrative stamina that you needed. It’s a great method to use. It’s a great tool in that situation. If you’re out where I am in the Bay area and you’re trying to buy a house that gets seven other offers and you’re trying to buy it with an FHA loan and a 203K extension, that’s an idea.
David: Sellers are going to throw it off, so try to get at for the listeners, but you don’t want to be thinking about is it good or bad? Yes or no? Right? Is this the right tool for this deal that I’m trying to take down? And Stephanie, you’re a smart person, so you figured out this is perfect for me. I really liked that you use it on that deal. You wouldn’t try to do it on a house that has seven other offers and they don’t need to put up with your loan.
Stephanie: Right. I mean, if the seller has a good agent, they’re going to be counseled away from taking an offer from a 203K borrower. But what it does have going in its favor is usually the financing terms are so much better than what investors getting if they’re not conventionally financeable anymore and they’re doing commercial lending. So the homeowner that’s going to be also an occupant can usually afford to pay a little bit more. If their priority is to house hack and just keep their costs down and they’re just trying to get in. So I think that’s why I ended up feeding out a few other investors was because I was willing to pay as much as I could max out my loan for. And somebody else I also wasn’t analyzing it using escrows and vacancy and things like that. I was just trying to figure out how much did I need to contribute at the end of the day. But no regrets about that at all.
Brandon: All right, so let’s move on your story a little bit. You said you mostly buy duplexes today. Why do you do that?
Stephanie: Well, actually single families mostly.
Brandon: And then we’ll say that’s right. Single family and your food Depot. That’s right. Okay. Why? What’s kind of your strategy over right now? Is that just accidental or are you, is that a purposeful, this is what I like.
Stephanie: That just tends to be what’s come to me. But I do find that I really like managing single families and the duplexes because I think for me the tenant base is really good. They stay longer. It tends to be families that want to make their house a home. So I’ve got good relationships with a lot of my tenants. I don’t have a long marketing period. I keep them for a long time and they really take ownership. And I also then don’t have any water bills that I have to pay or any lawn maintenance or snow removal. All of that is just passed along to the tenant. So I have a smattering. They’re also really easy to liquidate. I don’t liquidate often, but if I wanted to single family home, you can sell in the retail market, not just to an investor.
Brandon: This is true. So do you manage all your own properties?
Stephanie: I do. And so I have a virtual assistant who I use a lot. But I also have a pretty robust automated marketing system that I use to just keep in contact with my tenants, welcome them in, give them the access codes, takes their maintenance requests, informs it out to my handyman and contractor. So I started that because I didn’t want to pay property management and then it got so good that now I don’t really have to. I manage all my properties myself.
Brandon: That’s cool.
David: One thing I want to know, Stephanie, is you mentioned you buy single family houses, sometimes duplexes. And it got me thinking sometimes we talked to somebody who only buys triplexes, sometimes it’s someone who only does HUD housing. There’s all these different strategies. And what I started to think about is I wonder if the strategy that the person who ends up picking that works well is largely dependent on their environment. What houses are around you and what works for what you’re doing. Can you comment on that? Is Connecticut specifically, or the neighborhoods you buy in? Is there something that you noticed that makes that a better strategy that might not work if someone was in Kansas city or maybe Miami, Florida?
Stephanie: Sure. So I think there’s a few things. One, we tend not to have sprawling apartment communities. We certainly have them, but they’re not as common as you’d find in Kansas city or the Midwest. And there’s a stigma of Hartford. I like Hartford, but there’s definitely a stigma. Not a lot of young professionals are living there. Not a lot of families live there. And so really our suburbs are getting the most attraction. We’re spoiled. We like easy parking. We live in a place where there’s snow a lot. And so people just like their conveniences. They like their driveways. And we’re new England, we have a very private one home, the quintessential American dream life. So people love living in a house. It’s typically what they tend to go to. So we find it’s a really robust market to have single family rentals.
Brandon: That makes sense. You know, one thing we, one thing I talk about a lot, and David, you do as well, is when trying to get into real estate, some people complain. I can’t find any deals in my market. But like I said, there’s always something that works in every market. There’s always something that works everywhere. So you’ve got to figure out what works in your market because there is something in your market. Single family houses seem to work well, but if you’re in downtown San Francisco, it’s probably not that. If you’re in Hawaii, it might not be that. If you’re in Oklahoma, it might not be that. So figure out what works in a market or do a David does, and go elsewhere and then your market and go find another market to go to. You’ve never done out of market stuff yet, right Stephanie?
Stephanie: I’m actively pursuing an outright market. Because I want to get into multifamily and I don’t think that it makes sense here. And that’s the other thing about Connecticut is we don’t have natural appreciation here. So forced appreciation is fine through the renovations, but we’re not experiencing rent growth, population growth, job growth. And so I wouldn’t want to take on a multifamily.
Stephanie: That’s minimal value add in any, in any place in Connecticut.
Brandon: Okay. Very cool. So you mentioned something that I’m fascinated by it and that you have a virtual assistant that helps you with your property management. Can we talk through that? What does that person do and how’d you find them?
Speaker 1: So I actually have a few, but what she does is she helps me all over the board not just in property management, but she helps me write offers. She helps me. So she does a lot of interfacing. She does document collection. So what else does she do? So I do a lot of automation actually, and she’ll prompt the automation to go. So, if the documents are collected and then the next phase is an email to send out, she’ll indicate that the documents had been collected. She’ll update the status of the process, and then it automatically triggers the next sense. So she also will take the maintenance requests when we come in and it gets there’s an auto email that comes in and then she’ll farm it out to my contractors, something like that. But the one that I’m talking about is actually fairly new.
Stephanie: I’ve had a few of them. The other one, actually, one of my favorite things that he does is he just enters the water bills onto the invoices that get sent out every month. So this was something that was driving me crazy to every single month, go into the Waterville website and put it on their invoice. And then by the time the next month came around, I felt like I had just finished doing it. So that’s actually the first thing that I outsourced was I just wanted somebody to log in, take the numbers and put it on the invoice. So they do that. That’s how I kind of got started with the virtual assistant actually.
Brandon: I think that’s such the great tip is when you’re trying to hire a virtual assistant, which I’ve hired a few over the years and had some really good success like Dave Visaya, he’s awesome. Shout out to Dave, and then there’s others who like I’ve struggled with. But what I’ve found works the best is when I’m thinking, and I’m actually doing this right now, can we get ready to hire somebody else as well? I sit there and take a list of everything that I do that annoys me. Every little task that annoys me and I’m like, I hate that I have to do this every day or every month or every week.
Brandon: And you’re like, wait, if this is the repetitious task, is this something that I could create a manual for or a video that explains how I do this? And usually the answer is yes. So I’m that’s one thing they can do. And so you test out some VA’s and have them try it and see if you can get even if all you did it outsourced that one thing. That’s education. You’re learning how to manage a virtual assistant.
Brandon: I’ve got a question for you. Here we go. Let me just do a quick hand in the camera so the editor can see that we are changing right here. Sorry. Yeah. All right. So let’s talk a little bit more about the VA thing. Because I think this is such a fantastic thing that I think every investor should look into doing is getting a virtual assistant.
Brandon: Honestly, I don’t use virtual assistants very much for my rental business, but I need to, and so this is super timely for me right now as well. Because there’s some simple things that I do that again, I do them every week or every month or my wife does them every week or every month, that we could just create a step by step checklist. So where did you find your virtual assistant? Where have you found them? How do you know they’re going to be good? Just what kind of tips do you have on that? On acquiring one?
Stephanie: So I think that for me, I’ve always used Upwork to use my virtual assistants except for one local person who handwrites my envelopes and they live 15 minutes for me. But I use Upwork to find my assistance by posting a job and then, well, even before that, I think it’s really important to know what task are you looking for them to do. Right. So you were talking about the repetitious tasks. I think that’s absolutely the first thing that people should outsource. The things that you do all the time just really are your busy tasks that are taking you away from your success tasks. Right? So by writing down, what do you do every single month, that’s just creating some brain damage. You can start to see, okay, so these are the administrative things that I need, or maybe these are the social media things that I need.
Stephanie: You start to categorize the types of tasks that you’re doing and that helps you define the role and the personality and the character and the skillsets of who you’re looking to hire. I think the second thing that I like to outsource are the things that are the most time consuming or money intensive. And then I try to implement systems to either make them better or reduce the amount of time spent on performing them. Right? So if you only buy one house a year or two houses a year, rather than going back in and repeating and reinventing the wheel every single time, if you have your process in place, you just refer back to it and it’s that much easier, easier to repeat, because you’re defining your best practices and moving forward. So once you define your best practices, then I think it’s important to go in and say, here’s the skill sets that I’m looking for, here’s the resources that I use to perform that.
Stephanie: So I use Podio, I use Google drive, I use a lot of Adobe Acrobat and things like that. So what are the technology resources that I need? And then what happened to me a few times was I just took for granted some of the basic first-world things that I have that I just wouldn’t know to make a requirement when I’m outsourcing. For example, regular connection to internet. So even the amount of English that someone speaks is really negotiable when you’re hiring them because are you looking for them to develop a product or a system for you and coding? Or are you looking for them to interface with potential tenants? There’s an entirely different range of English that’s, that’s necessary. So I think by defining what you’re looking to outsource, and then writing that down, putting your resources and I put everything on Upwork and I also, I tend to hire more than one virtual assistant for each job as kind of a screening test.
Stephanie: So I will give three the chance to work on this one job and they get the same exact resources, the same exact instructions. And they’re instructed specifically ask me questions I want conversation, I want to hear what your sticking points are. I want to encourage dialogue and usually one or two will just weed themselves out either then they won’t put the product, they won’t finish the job or they’re just clearly not a fit and then you kind of go from there. But my last virtual assistant I found not because she was doing anything real estate related for me, she was on Upwork and I had her creating a meal plan for me and then just adding the items directly into my cart and she was from the Philippines and people on was blocked. So she’s like, I had a problem.
Stephanie: P-Pod was blocked from my account, but don’t worry, I’ve figured out a way to work around it and fix them. And so that right there, she didn’t have any real estate experience, but I loved the way she communicated, expressed a problem, already had a solution and knew her way in the digital world. And she has been a rock star ever since. So I’ve absolutely loved having her because I saw the qualities that I wanted out of the person that I’d be working with. And she was customer support in her in a background and did a lot of auditing. So she had attention to detail, really strong, friendly English demeanor. She’s been great.
Brandon: That’s great. It’s so good because you never know. I love your tip about, hiring three or four of them and giving them a small task to see what they do. Because you never know how someone’s going to be until they do something for you. This is true for all employees, whether it’s a virtual assistant or not. You’d never know until people do stuff and then usually becomes pretty clear pretty quick. And so that’s great.
Stephanie: The other thing that I’ve found is not everyone’s looking for a longterm relationship. Right? And so some people are looking for just a few extra dollars for the week or for the month. And so it’s important to have that conversation about what your needs are ahead of time. I had a great one who graduated and when he got another job right after I had spent all the time training him, you pay for that time. You might not be paying very much, but you’re putting your time into really training them into the assistant that you want and it’s hard to then have them leave…
David: You are preaching it right now. I can’t even tell you how you’re here. You’re just touching my soul. Yes. With how many times I’ve just poured into someone to teach them everything I could know and then they’re like, okay, thanks. I don’t think it’s for me. Or something’s more important and then they leave. Once you’ve been through that enough times, that’s when you start to understand why successful business people are constantly saying, you need a system, you need a checklist, you need a list of all the things that have to get done. Before you have that problem that’s just a nuisance. You’re like, why do I need to do that? In my head it’s in my head. It’s faster. I can just do it myself.
David: But once you go through training someone and taking what’s in your head and putting it in their head, which is extremely time intensive and frustrating and you see how not, I can’t think of the word, I’m trying to say how infrequently that person actually works out. You start to crave, I just want to give you this Google drive checklist and let’s see how you do. I’m not going to sit here and walk you through this thing and that becomes so important. But like you’re saying Stephanie, when you get the right one, it’s like rocket fuel. Boom. You take off and you think all the time, how did I ever do this without said person?
Stephanie: And it’s funny, I actually was just talking to Jay Martin and he mentioned randomly that if he wants them to learn a new task, he just gives them some articles to read and I was like, whoa, what do you mean? You don’t train them yourself. You actually have them just go off and do some research. And that was a real game changer too. I have checklists and a bunch of instructions, video instructions, and they can follow my work really carefully, but it is for them to be able to expand and grow. And so I think that you’ve got different levels of testing someone. So I like to test them with tasks that they follow and then once you’ve got somebody that you can really work with here and then expand them out. But the challenges is that you’re still naturally going to have turnover, right?
Stephanie: I mean, not everyone’s going to be as invested in your business as you are. So I think it’s important that we start to look at first to automate whatever we can before we start to delegate it, right? So in an ideal business, you’re delegating only what’s left over after you automate. So I recently started to implement as much automation as humanly possible into my business. So using auto tasks that are created that are easy to track in my marketing. Anything that you do repetitively, you really, if you can create a flow chart of if this happens, then this happens. And that happens, you can automate that.
Stephanie: So I have a direct mail system, for example, that auto creates a PDF, that goes to every recipient that I want. And then my virtual assistant just sends that PDF to my printer who prints them, folds them, and sends them to my local assistant who handwrites it and sends it out. But those mailings are generated every single month. Overnight. I get an email saying they’ve been generated, your assistant has the next task to move forward and have a great day. So I think that in that situation, my virtual assistant is really not the driver of the process and they’re kind of replaceable. Not that I want to replace people, but I think it’s important to protect your business and make it run in a way that even if your virtual assistants are changing over, your business is still running.
David: Yeah. What you’re describing is you want to be the person that creates the blueprint. So whatever contractor you hire can build out what you want. Right. And some contractors are better than others. Not everybody has the same skill set. You do have to go through contractors, but you don’t want to have to create a new set of blueprints every single time you hire a new person.
David: Once you’ve got the blueprints, then it’s just a matter of running different people through. And a good contractor isn’t need a lot of handholding. When you hand them the blueprints, they know what to do with it and then you can see the result and you know, that’s the person I want. And it does take work to get to that point. I don’t want anyone to think that we’re saying, this is all you got to do. Like most things in life, it is simple, but it is not easy.
David: It’s difficult, but it’s not complicated. If we’re for the people that ask, what am I supposed to do? It’s very simple. Make a checklist of everything that has to be done. That’s automation. Find a person that can do it. That’s delegation. We’re not talking about rocket science in this instance, but that’s where you earn the wealth, right? That’s where you earn the life you want the life of freedom is because you took the time to put these systems together that then do their own thing. And what’s cool about it, Stephanie, is you’ve created a world where somebody can get paid by you to help make you money. And they love it.
David: That’s a job. That’s what they need it. You’re putting food on their table for that person. And you benefit from that because they’re making you good wealth. And I mean, it’s a beautiful thing when you think about it.
Stephanie: And I mean, we’re in a place now where technology is so robust that you can use technology to push your business forward. And that’s really where automation comes in, right? So you can start a process and it can happen automatically and you can track things. And I mean, so I use Podio to track all of my processes. Google drive has standard operating procedures, but then Podio actually tracks it in live time. So I can see how it applies to each person.
Stephanie: So I think that we’re really in an incredible place where we can work remotely. We’re all connecting and from different places now. And it really gives you the opportunity, especially for those new investors who are bootstrapping, right? It gives them the opportunity to hire someone for what they need for the amount of time that they need.
Brandon: That’s good. Really good. So I know there’s a thing Tim Ferriss talks about where before you delegate, make sure you can automate, which is actually what you just said. And he said even before you automate, eliminate. So get rid of whatever just doesn’t need to happen, which is a lot of what we do. And I think all those things that are super essential. So if you could just give somebody those listening right now, they’re like, okay, I’ve decided I’m going to automate more things in my business. Where should they start? What’s the first thing you think somebody could automate? And again, I know everyone’s got different businesses and different things, but, and it just quick tips on getting started with automation?
Stephanie: Oh man. So I think with automation,
Brandon: what if you want to, I’ll just say if you want to focus on one thing in particular I’d say that plays, everybody is marketing in terms of getting deals. So because I didn’t want to go into how you’re getting deals also and you’ve mentioned direct mail a few times. So if you want to try to focus it that way I’m happy with that or wherever you want to go. But that’s definitely where I’m headed in this conversation.
Stephanie: Okay. I mean I think direct mail and marketing can absolutely be a way that you automate. Lead capture can be a way that you automate. Even like QuickBooks online is a way of automating a lot of your bookkeeping, right? And then you just have someone who kind of filters through and making sure that everything’s categorized properly. So I have a bookkeeper. That’s a delegation part, but automation is certainly a function of that.
Stephanie: But the marketing piece is definitely a big one. And then rent collection is one of my gateways to how I got into automation and delegation in particular. Because I didn’t want to be chasing rent. And I got to the point that I had to actually write down all of my properties and figure out who has paid and who hadn’t. And so I took a rent collection software and that has been tremendous. E-signatures, things like that. It’s an amazing way to automate because you can create templates, populate and things go out really quickly. So whatever. I would say start with little tasks. Don’t try to take a whole process and automate it. Start with just one of your little tasks that is taking a lot of time and you do a lot. And how can you create a financial statement and if you can create a financial statement, you can create an automation for it.
Brandon: Excellent. So how are you using an automation in your marketing? You said a little bit about the direct mail stuff. Is that how you’re getting deals today or is that how you’re looking for deals is direct mail?
Stephanie: No, I’ve been actually buying through auctions and buying through wholesalers. But I just started doing a direct mail campaign through Podio and I really recommend Podio as a great place for somebody who’s looking to build automation and end delegation because it’s an online collaboration software. They have a free version. And I love struggling investor.com. Scott Costello does a great job of putting out tutorials on how to build out campaigns, marketing campaigns. My direct mail campaign is entirely built off of the one that he put out there.
Stephanie: It took me 30 hours to put it into my Podio system. But you could hire somebody to do that too. And so that’s just the only thing that I have to do for that direct mail campaign is to upload the list into Podio and hit start. After that, once you’ve set up the campaign, you can change out the letters, you can change out your signature. But it happens automatically where the mailings are created.
Stephanie: It does info, it does actually incorporate my real signature into it. And then I’ve got that local assistant again who handwrites the envelopes. So even though I just started, I sent out 150 letters and I got two calls after my very first letter. So I think that’s a really strong response rate just from, I haven’t closed the deal yet, but it’s a strong response rate based on the fact that I didn’t have to do anything for it, which is great.
Brandon: Yeah, and the great thing about automation and delegation, all that is it’s largely scalable. So if you wanted to send 1500 letters, you could build that system out and not much more difficult than building that 150
Stephanie: Exactly. Which is why I’m leaving a job.
Brandon: There you go. All right, so let’s talk real quick about your property management. You mentioned that you’re using some rent collection tools. What do you use for that by the way, software was, how do you collect rent?
Stephanie: PayYourRent.com it’s very similar to Cozy, which a lot of people use.
Stephanie: And it’s great for the smaller investor, it tracks your properties, it assigns you, you can track multiple units in each property. It assigns late fees based on a percentage or amount based on the rules that you set up. It also allows for you to collect applications, security deposits, all online.
Stephanie: I do not recommend collecting security deposits online though I actually recommend…
Brandon: Why that?
Stephanie: Because it takes two weeks for the cheque to actually process, so it will look it’s deposited into your account. You may hypothetically have someone not named, I will not even move into the property and then the check balances after they’re in. So I recommend a certified check for security deposit only. But what’s really nice about PayYourRent that I love is it allows for the tenants to opt into credit reporting. So it builds your credit and builds their credit as they show a positive history. So it’s a good partnership between you and the tenant. And people love it as far as the relationship off, right.
Brandon: What have you found to be the most challenging part of managing your own rentals and what have you found to be easier than you thought it would be?
Stephanie: The hardest part for sure has been the maintenance requests. I think it’s one of the only things as a property owner that is entirely reactive and is not done on your schedule. And so I use electronic keys, keyless entry so that my handyman can go in. I don’t have to be a part of it, change the codes afterwards. And also it’s hard because a tenant may call you and you don’t know if it’s something that needs to be addressed. You don’t know if it’s a plumber or HVAC guy that needs to go out there.
Stephanie: So I find that to be the hardest part. So I really send my handyman out there for an initial diagnostic on almost anything and he’ll give me a true sense of, Hey, this is a tenant caused problem. There’s a fork in the garbage disposal. Okay. So that’s a tenant problem.
Stephanie: The easiest part I would say has been, has been leasing. I always thought that it would be really hard to find tenants. You’ve got to find one and hold on to them with everything you’ve got. And I’ve actually found that if you put out a good product and you put a good persona out there, naturally people want to live in a place where there’s a good environment and I’ve had no problems in properties. In my duplex, I’ve owned it for seven and I’ve had two months of vacancy over the entire seven years. And that was a really good indication. Landlording is so easy.
Brandon: I feel when I looked back I used to think that would be hard too. I thought finding good people, there’re horror stories. I mean, there’s a learning curve there and you got to learn how to find good people. But just finding I still have people to this day ask me the question all the time, but what do you do if you can’t find a tenant? And I’ve literally never had that problem. Now I’m not saying people don’t have that problem, but I have literally never had that problem because I just lower the rent and then there’s always more people interested.
Brandon: If we don’t get enough calls in the first couple of weeks or a couple of days, okay, well we’ll lower the rent or are we going to market harder and we’re going to put up more advertisements or a sign in the yard. But there’s always somebody that wants to rent.
Stephanie: Right. If don’t have somebody that wants to run your doing something wrong. That’s not the property’s fault. It’s not the tenant’s fault. That’s just you’ve done something wrong that needs correction.
Brandon: Yep. Hundred percent agreed. All right. What about…Go on…
David: I have a question for you, Stephanie, investing in Connecticut specifically. Can you tell me what it is about your market that you think somebody needs to be able to do well if they want to have success there?
Stephanie: I think they have to be able to improve the property value through renovations. Realistically. I mean, we’ve got a lot of money coming into Connecticut through New York and other first tier markets that like our cap rates when they’re tightening up. Ours are also tightening, but we’re not seeing cash flowing turnkey assets. So in order to really be successful. And like I said, we don’t see appreciation either. So you’re not going to buy for appreciation, you’re not going to buy turnkey for cashflow. So for me, what I’ve seen in talking to other investors is you’re really going to have to force appreciation and find a creative way to increase the income.
David: I like that. And that’s something I want to start asking people more often because there’s markets across the country that have things in common with each other. I heard someone say on social media the other day that Miami, Florida is starting to look a lot like Southern California and I thought that’s probably a good point. It probably draws the same kind of people. The weathers similar price points are probably similar. Florida doesn’t have a state income tax. That’s one thing they’ve got on California. But I just started to think about the fact that investing in certain Midwest, the cities is probably very similar to other Midwest cities and the strategies that work in Indiana are probably also likely to work in maybe Kansas city.
David: And if we can start getting guests to share, Hey, this is what I’m doing in my market and someone lives in a market similar or invest in a market similar, those strategies will work. So what I hear you saying is that don’t bet on appreciation because we may be topped out and you’re not going to get massive cash flow just buying a house. You’re going to be the person who has to value add, find something under market value and make it worth more. That’s how you’re going to build wealth.
Brandon: Really good. All right, well before we get out of here, good. Onto the next time of the show. I actually want to ask you one more question. Where do you see yourself headed? I know you mentioned multifamily earlier. What’s your strategy look like for that right now? What are you looking for?
Stephanie: So I’m looking for out of state in a particular market that I’m focused on. I’m looking for anywhere from six to 25 units and do, but I’ll, that’s I guess’s a dream. But really I’m going to continue focusing on what I’m doing well here in Connecticut and build that up. I mean, I have the process, I know how to buy and I’m going to renovate. I’ve got a good team of contractors, so I’m going to really ramp up my marketing efforts here locally, my buying efforts here locally, and that should help supplement with active income to help me get into the multifamily, which will encourage the passive income too.
Brandon: All right. Well with that, let’s head over the next segment of the show. It’s our Deal Deep Dive. I, this is the part of the show where we dive deep into one of your recent deals, something that’s gone really good or maybe something that I’m really bad or somewhere in between. So Stephanie, do you have a deal in mind? We can go through in depth?
Stephanie: Sure. Do you want to go through one that I’m midway through?
Brandon: Sure, that’d be great. Okay, I’ll start with that. What kind of property is it?
Stephanie: It’s a single family. This is a flip property in Southwestern Connecticut. So a lot of it just a lot of people from the New York area.
Brandon: All right. Number two. David.
David: How did you find this property?
Stephanie: This was through a wholesaler that came to me.
Brandon: How did you connect with this wholesaler?
David: Very good. That was my follow up question.
Stephanie: This guy actually came to me on LinkedIn, which was really strange. So it made me a little wary to get a blast like that. So I did a ton of conservative underwriting on it and I’ve actually lost money on a flip that I got through a wholesaler and so I’m very wary of doing it again. So yeah, I just did really conservative underwriting. And it’s an hour and a half from me, which meant I didn’t know the market as well, so I just wanted to be super conservative on all my numbers. But I met with them, looked at the property, brought a contractor through and I do mostly my own estimating but this one because it was outside of my market and I had that past experience of of a loss. I really just wanted to bring my contractor through as well. So wholesaler on LinkedIn.
Brandon: All right. How did you nego… Sorry, how much was it? How much did you pay for the property?
David: Brandon likes to ask my questions. I’m supposed to ask you, how did you negotiate that price?
Stephanie: We had actually come to a higher price, I think we’re at 220 he set the asking price and I pushed back. I didn’t agree with his ARV. I didn’t agree with his estimates on rehab, so I showed him, you know what I looked, what my underwriting looked like and what I could afford to pay. We hit 220 and then actually I came out that there was a septic tank there. I had never worked with septic tanks before. So I called in a specialist who knew the area really well and he said, based on the age of the septic system, you’re probably going to have to replace it. It’s probably faulty.
Stephanie: I asked for a price range. He said it was 15 to $25,000 to replace the septic system. So I negotiated the price down 20,000 and said I don’t know if it works. I’m not willing to take that risk. I’ve never worked with a septic tank before. Maybe some other buyer’s to be a better buyer for you, but my price just dropped 20,000 so the septic system is actually fine.
Brandon: Nice. You avoided being in deep crap. That’s funny. All right. How did you fund this deal?
Stephanie: This was a combination of hard money and private money, which is what I’ve been doing. So it’s a short term bridge loa and then a secondary loan for the down payment and advancing the renovation costs.
Brandon: Was that from a family member or friend that kind of, okay.
Stephanie: Yep. This is a friend. She’s been a repeat lender of mine. We’ve done two deals together.
Brandon: All right. David.
David: What did you do with this deal when she bought it?
Stephanie: Sorry, what’d you say?
David: What did you do with the deal? What was that? What did you burry it? Was it a flip? Was it a single family rental?
Stephanie: Oh yeah, so I’m in the middle of a flip actually. We did some cosmetic improvements on the interior. We also did a layout change roof, some structural, not structural, but a French drain in front of the garage. But it will be a flip. We just got the permits to move ahead. And actually it was interesting because it was a tax lien for closure and I ended up getting the lot next door as part of the foreclosure.
Stephanie: No one expected it, but it was on the same deed that got foreclosed, which ended up being really helpful because the house was too close to the property line, so it was in noncompliance. So got a lot of extra work because I get that extra lot next door. But yeah, it’ll be a flip. And so I wanted to go back. I told you I underwrote it really conservatively and I estimated that the resale value would be 360 I don’t know if I’m jumping ahead.
Brandon: No, go ahead. That’s fine. That’s kind of the last question here is what was the outcome and what will be the outcome? We’ll go there.
Stephanie: Okay. So hopefully my ultimate buyer is not listening to this, but, so I underwrote it assuming that the ARV would be 360 and as part of the hard money loan, I had to get an appraisal on it and they came back and said that the ARV should be 430 so I ended up getting a twenty thousand dollars price reduction on the septic and also had a massive price increase. And I don’t even think I’m going to put it on for 430 because I’m just going to want to move it and it’ll be coming on the market in mid November. But yeah, I think it ended up being a really good deal.
Brandon: And what, what did you put into it? How much money total. What you have in for repairs and holding?
Stephanie: It’ll be about a $70,000 renovation project.
Brandon: Cool. So yeah, there’ll be some good profit there.
Stephanie: That’ll be a good one.
Brandon: That’s awesome. All right, last question then of that…
David: What lessons did you learn from this deal?
Stephanie: From this deal? So I think that sticking to your guns and making sure that you know what you know. So the big comparison from the deal that I lost money on was I allowed myself to be persuaded by someone that I considered to do more seasoned than me. I’m into their conclusions, the property. And that didn’t work for me. So this time I went into this and I just had absolute final numbers. I underwrote it in a way that I just followed my systems basically. I knew exactly what I could offer and not a penny more. I came in at my offer price, which is a percentage of that. I knew what my max number was and I just didn’t deviate.
Stephanie: And because I had that system in place, I was willing to walk away. If he didn’t agree to my number. And he could’ve found another buyer, but it wouldn’t have worked for me, and so I felt comfortable going forward and I wasn’t going to second guess the relationship because I had my checks and balances in place.
David: I think that’s the way that when you’re going to flip a house, that’s the mindset you have to have, right? Assume everything will go wrong. Buy it at a price that you can still make money or break even if everything goes wrong and your profit margin is all the things that didn’t go wrong. I’ve done it enough times where I realized how lucky we got that. I’ve changed the mindset from, well, I’ll pay this, I’ll rehab for that, I’ll sell it for this. I’ll make this much. That’s not taking into factor all the things that can go wrong, right?
David: Assume the septic tank has to be replaced. Assume you’re going to sell for less than you thought. Assume it’s going to take longer than you thought. Assume all bad stuff, write it at that price. And then if things don’t go wrong, that’s the money that you make and it’ll be harder to lose money. You won’t buy as many deals, but you’ll ultimately, I think do a lot better.
Stephanie: Right, exactly. And I never want to go through that loss again. So yeah, it really changed the way that I go into deals and I’m really grateful for it.
Brandon: Yeah. So I mean, sometimes the best lessons are learned from those times where we fail or we lose money or we kick ourselves up. Good attitude to have it. You’re learning from it. Now let’s move on to the next segment of the show. That was an awesome deal. Deep dive, but now it’s time for our Fire Round. All right. World famous Fire Round. This is the part of the show where we fire questions at you some quick in fire back and forth questions from the BiggerPockets Forums. Where people have asked questions. So we’re going to see what you’ve got to say to this. But number one. Stephanie, Amanda stays in Washington state that, Hey everyone, I’m a new wholesaler out of Washington state. I would like to ask fellow investors, how do I find cash buyers? So how can Amanda find people like you who bought that property from you?
Stephanie: Man. Amanda, you’ve got an easy task ahead of you. There are so many cash buyers. Go to a meetup group, post on BiggerPockets, LinkedIn obviously works, but just I think go to meetup groups and face, there’s a lot of Facebook groups out there for local investors to just put out there that you’re actively finding deals and want to add to your buyers list. You’ll have no problem filling it up in no time.
Brandon: Awesome. All right, good answer.
David: Next question from Philip Davis in Edgerton, Wisconsin. Hey BP peeps. I’m at the conference and starting to really decompress the last couple of days, by the way. So I know this is David talking. The conference in Nashville was awesome. If you were thinking, I wish I would’ve went, you should’ve went, Stephanie, you were there. I believe that’s where I met you, Brandon. You were there. It was a great time. Had by all, I haven’t heard one negative thing. So anybody who’s thinking about going, you should keep going. And then maybe you’ll get to meet Philip here who’s asked you this question. All right. Back to the question. I am wondering what some other attendee experiences were. What were some tips that were picked up? Any thoughts on attending conferences in general?
Stephanie: I think to get the most out of conferences, you should go into it with some connections already made so you can post who’s going, you can either connect on the app. So have a few connections, have some lunches planned. There’s a lot of industry specific, or topic specific meetups that are happening. Go to those because that way you’re not walking around by yourself. You get to join a group that can mastermind with you. And then also know what you want to get out of the conference. So if you know that you’ve got one big question that you want answered or one connection that you need made, ask it. Plan ahead and ask for that every time you meet somebody.
Brandon: Very good. I love that. Yeah, that’s a really good answer. Next question. If you’re starting investing in real estate while working a day job, did invest in make you better at your career in any way? What are some unexpected benefits to invest in real estate for your career? Interesting question.
Stephanie: Actually so because I had to be really protective of my time and I started developing systems outside my work, I realized how beneficial they were and implemented them in my job as well. And so I use Podio now in the law firm to make sure that we’re running the checklist and doing the same thing that every entrepreneur should be doing, which is just making your systems and, and following them. So absolutely made me, because I was improving outside so I could improve inside.
David: And I just see that with so many things. When someone starts to do better in one area of life, they start to do better in the other areas of life. And then that bleeds over into others people tend to be spiraling up or spiraling down. I love that question because we talk about finding wealth through real estate on the podcast, but some of the unexpected benefits like this person said, is that the rest of your life starts to get better as well.
David: So you answered that very well. Thank you. Okay. Last question from James Santana in Bay Shore, New York, short term rentals have been a big development over the last few years. What’s another big trend in real estate that you think is going to develop over the next five to 10 years that we should start paying attention to now so we can take advantage of it?
Stephanie: Well, so I think that coworking spaces like live, work, play places are going to become much more common. So as more people are self employed, they are not working in an office environment, they’re are a little bit more isolated and they want to have more collaboration. I think that we’re going to start to see that multi-families are decreasing the amount of exclusive space and starting to increase the percentage of collaborative space that’s in their common areas. So I think there’s going to be a trend for more collaborative common spaces both in office and multifamily.
Brandon: I agree. David Green, what do you think about that question? What do you see as the developing? What’s coming?
David: I think virtual assistants or assistants in general are going to become a bigger thing. I think if somebody can figure out a CRM that actually works, it doesn’t make you do a ton of work to figure it out, but that would just spread like wildfire. I think that’s going to be a big thing. I think how’s hacking when people actually start to realize how efficient it is, and like I’ve said, it’s not just efficient for the person that owns the house though that is, it’s better for the person who’s renting the room or renting the unit as well and when people start actually incorporating these principles, a lot more people will be homeowners then how it’s traditionally been where it’s just the wealthy people can buy property and people who don’t understand real estate can.
David: House hacking is such a natural transition into learning how to be a landlord. It’s really hard to take that step to I’m going to buy a rental property, and go through all this stuff, and make all these mistakes, and possibly lose all this capital, and go through all this emotional fear. Not a lot of people can make that jump. Those of us that do. It’s amazing, right? We go completely all in. But house hacking? Just it’s like training wheels. It’s an easy way to move from your big wheel to a bike without having to worry about falling over really easily.
David: And I think as more and more people start to recognize that I can learn how to be a real estate investor with very little risk and very little capital as a house hacker, then that’s going to become a bigger thing. And I hope it does because I’m sick of these huge hedge funds buying all the houses and you know, the regular everyday person, it’s harder to do it. What about you, Brandon?
Brandon: I don’t know. I mean I think the biggest trend happening in the, one of the biggest trends in the world happening is the whole automation of car thing. So I think that is going to impact every other industry, including real estate. And so a couple things. I would not buy a parking lot downtown in any city right now because I think that in a few years everyone was a good dropped off by their car and their car will go out and park somewhere outside the city.
Brandon: So I think that’s going to impact a lot of things. And I don’t know what that does for people’s houses necessarily, but I think that’s going to affect a lot.
David: I bet it changes the areas where houses are valued higher. Like right now everybody wants to be in the downtown area, but if you can sit in a car that will drive you to work and for an hour…
Brandon: And do your work in the car while you’re driving.
David: But the commute doesn’t really bother you. And I think the traffic jams will get cleared up because the cars will communicate with each other and you won’t have these logjams as easier. So yeah, I think long distance investing or not being in the hot part won’t be as important in real estate as you know, moving further out of town, but getting a bigger house and a bigger lot and all those kinds of things. Do you agree?
Brandon: Agreed. Do you agree, Stephanie?
Stephanie: I agree.
Brandon: +All right, we’re on agreement. All right, we can get out of here. All right, next segment of the show and it’s time for our Famous Four. These are the same four questions we ask every guest every week. Number one of the famous for Stephanie, favorite real estate related book.
Stephanie: I mean, I’m still going to go Rich Dad, Poor Dad. It’s real estateish.
Brandon: It is real estateish. I agree.
David: What is your favorite business book?
Stephanie: TheE-Myth, by Michael Gerber. By far.
Brandon: So good.
David: We’re going right down the middle number. How about some hobbies?
Stephanie: I played volleyball. I work with an animal rescue that brings animals, dogs from high kill shelters down South up North, to camp and hike. Spend time with my family.Play
Brandon: Number four. What do you believe sets apart successful real estate investors from all of those who give up, fail or never get started?
Stephanie: The willingness to get a little uncomfortable. So you got to get out there in the field. You’re going to have to figure things that you might not know what the end result is. You got to put yourself in a position to know that you’re going to be okay at the end of the day.
Brandon: That’s good. Good. That’s really good. Really good buds deep. Maya’s been Instagram video quote card right there.
David: That is going to happen. Yeah, and you should tweet that when we get done here. Stephanie, we’re going to tweet it because if you don’t, Brandon will take credit for that quote when you better copyright it and right now.
Brandon: I don’t see a clone.
David: Okay. My last question for you, where can people find out more about you?
Speaker 1: Well, you can find me on estate ish.com you can find me on Facebook, Instagram, Stephanie Sunrise. I’m happy to answer emails and things like that, but Bigger Pockets as well. I’ve got a profile on there and I’m happy to connect with people. Send me a message.
Brandon: We’ll do right now. Yes, I will offset. It’s definitely, I’ve got a really good quote for you. It’s really good. I just made it up.
David: You know what you should’ve said on the podcast.
Brandon: All right David. Thank you so much. It’s been fantastic. We really, really appreciate it having you here and it was awesome getting to see you in Nashville this year and hopefully we’ll connect with the next BP con if not sooner.
Stephanie: Absolutely. Thanks for having me guys.
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