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BiggerPockets Podcast 519: 5 Keys to Becoming a Millionaire on Less Than $100k Per Year

BiggerPockets Podcast 519: 5 Keys to Becoming a Millionaire on Less Than $100k Per Year

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You may know Ashley Kehr from the Real Estate Rookie Podcast, but you may not know that only a short time ago she was a rookie herself. Ashley started as a property manager for a local investor and slowly made her way from owning one property to owning thirty-three long-term rentals, a short-term arbitrage property, two commercial units, and one mobile home park. Quite a diverse portfolio!

What makes this even more impressive is that Ashley wasn’t coming into real estate with boatloads of cash. In fact, she and her husband have never collectively made more than six figures from their W2 jobs. So how does someone with a median income generate such a massive amount of cash flow, appreciation, and time freedom?

Ashley discusses the five fundamentals of real estate investing that led her to seven-figure net worth. These fundamentals can be used by anyone, at any stage in real estate investing, no matter their experience level. If you’re ready to supercharge your investing and go from rookie to rockstar, commit to the game plan Ashley has laid out!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Ashley:
This is the BiggerPockets Podcast, episode 519. So I thought today we could go into how someone else can attain that and reach that. My husband and I combined made over $100,000 with my W2 and his farm income. We were able to reach that net worth with real state.

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 million of others who have benefited from biggerpockets.com, your home for real estate investing online. What’s going on everybody? This is David Greene, your host of the BiggerPockets Real Estate Podcast here today with my co-host the one, the only, the lovely Ashley Kehr of the Real Estate Rookie Podcast. Ashley, how are you today?

Ashley:
Good. Are you surprised to see me today?

David:
Well, yes. So I tuned in and I’m expecting to see the bearded wonder himself. And instead I’m getting a much nicer, better looking and frankly, smarter version of him. And as I’m trying to figure out has Brandon been going to a salon? Is he getting some self-care? What’s going on? I realize it’s not Brandon. So what happened?

Ashley:
Yes, he did not shave his beard off. Brandon and I are actually at a Self Storage Convention in Coeur d’Alene, Idaho right now. And Brandon is just downstairs right now, enjoying the lunch hour and sent me up here to take over for him.

David:
Well, it’s our gain that you’re here. So thank you very much for doing this today. Ashley and I are going to get into her story. So we’re going to be about the five keys that Ashley brings that help you become a millionaire making less than $100,000 a year at your W2 job. This episode is full of knowledge bombs. I said that over and over and over really good practical content. This isn’t just one of those feel good stories, although you will feel good. It’s very practical and will make you money if you take what we’re talking about and apply it. So make sure you listen all the way to the end because I had a great time with you, Ashley. Before we get into the show, I’m going to have Ashley introduce our quick tip for today.

Ashley:
Yeah, so if anybody is a rookie investor or wants to get their first property, BiggerPockets is actually hosting a bootcamp where you can learn in 90 days, over three months, you can learn how to get started in real estate and basically taking you through the steps, how to analyze a market, how to analyze a deal, how to build your team, everything you need to know. There’s going to be videos provided by me going over this content. And then we have weekly live sessions where we just do Q&A, and then there’s a slack channel where you can network with anyone and ask me questions. So if anybody is interested, we’re going to link in the show notes where you can sign up to get to the on the wait list for the next bootcamp.

David:
So make sure that you check that out, The Rookie Bootcamp. What do you think, Ashley, should we get into the thing and start our conversation?

Ashley:
Yes, let’s do it.

David:
Mrs. Ashley Kehr is so nice to have you with me today.

Ashley:
Yes. Thanks so much, David. It’s very exciting going from being a guest on the podcast to co-hosting with you today.

David:
Yeah, so which number was the first episode where you were interviewed on BiggerPockets?

Ashley:
It was number 348. And we talked about just my investing journey and how to get started as a new investor.

David:
So this is really cool because I think everyone listening should go back and listen to 348 and hear about how Ashley got started. And now we have some pretty cool news to share, some congratulations are in order. You recently hit a net worth of $1 million. Congratulations on that.

Ashley:
Thank you so much. Yeah, I hit that almost a year and a half ago, now maybe almost two years actually. So I thought today we could go into how someone else can attain that and reach that. My husband and I combined made over $100,000 with my W2 and his farm income. We were able to reach that net worth with real estate.

David:
So I’m a little late to the party apparently, this has gone on for a while, but I do think that it’s cool that people can hear from when someone started out to where you are right now and see the evolution that you’ve taken because a lot of people look for that path that they want to follow. I think most of us take inspiration from a certain person we heard on the podcast or on YouTube and we say, “Hey, I could do what they did,” or “That person resonates with me.” So I know you have a very big appeal. There’s a lot of people that you resonate with. I think this should be really fun. And then for those of you who don’t know, Ashley is also the host of the Real Estate Rookie Podcast along with Tony. Do you want to share a little bit about what your show is like and what people can expect if they hear that?

Ashley:
Well, it is the best real estate podcast out there. I would say the number one. So if you guys haven’t listened to it, go check it out. But we primarily focus on rookie investors. So if you want to get it started or you’re just beginning, we really break down the fundamentals and we bring rookie investors on who have done less than 10 deals. So it’s really fresh in their minds as to how they got started and then they share that with you. And then we do have experts on to to share with rookies. We recently had on an asset management and planning attorney. And that has been an awesome episode. So if you guys want to go check those ones out, but just learning how to have that asset protection now as a beginner and a rookie. So we do special episodes like that too.

David:
Where do people get the most value out of listening to your show? Like who’s the guy ideal person that should be listening to that?

Ashley:
So it would be somebody who is just getting started in real estate. They don’t know anything about it yet. Start from episode one and just listen to all of the episodes. Also somebody who’s maybe has one or two to five deals and they don’t know what that next step is. They don’t know if they should pivot. They should stay on the same track. Usually we say like under 10 deals, you’re still considered a rookie or within your first year to two of investing. But there’s definitely stuff to learn, even if you’re an advanced investor too.

David:
I think when I look at my own investing career, there was many different times where I would pivot or start a new phase and I became a rookie all over again.

Ashley:
Yeah.

David:
So it could be one market. Now you go to a new market, you’re starting all over. You’re in single family, you get into small multifamily or multi-family, you want to start flipping houses, there’s all these cool things that we’re all interest sit in, but you’re always a rookie when you start the new thing. So that mindset is very important to get and just maintaining that humility that, oh, you never know everything and you’re always making mistakes and you have to be comfortable with the fact that you’re doing that, but continuing to take progress. So I like you guys’ show. I think you do a good job.

Ashley:
Thank you.

David:
And you’ve actually had me on there as a guest. That a lot of fun. I hope we can do that again.

Ashley:
Yeah, we’ll see. Maybe.

David:
I’ll put my application in and I’ll keep bugging you and I’ll see if I can get my [crosstalk 00:07:05].

Ashley:
It’s actually up to my producer. I really don’t have a say.

David:
Those producers are really the ones running the show. Aren’t they?

Ashley:
Yeah. One more thing, though, I wanted to add about people listening to the show is, and the same with this show too is, even if you’re looking for motivation and inspiration, not even advice or anything that you just need, real estate is a rollercoaster. So sometimes hearing these rookies that are starting from zero and then get their first, their second deal can really jumpstart you and motivate you. And I think that’s one of the best parts of me getting to be a co-host of the rookie show is that I get to experience that firsthand almost every single week and it definitely keeps me on track and keeps me moving too.

David:
That’s awesome. Okay. Tell me a little bit about where your portfolio is at this stage in your investing career?

Ashley:
So I have 33 long-term rentals buy and hold. I have one Airbnb arbitrage. It’s an apartment that I actually rent and then Airbnb it out. And then I have two commercial units and then I have a mobile home park under contract.

David:
That’s a lot. How much of that has happened in the last couple years?

Ashley:
So I think I probably added maybe 15 units maybe. I also did my first accidental flip. I got the mobile home park, learned about Phase I and Phase II Environmental Studies. I had a self storage facility under contract that just recently fell out of contract because of the environmental issues and then running a liquor store, starting that out.

David:
That’s cool. So now you’ve got the business component to real estate to add that in there too. So now Ashley, are these all in one geographical area or are they scattered around?

Ashley:
Yeah, they’re actually all within 45 minutes of my house. And I didn’t even intend for it to be that way, but it just happens that that’s where the deals have been for me. And I’ve looked outside of New York, into Texas, California and different places. And then as I’m maybe about to purchase something there, something comes up close to home and it’s just easier for me because I know the market so well and it’s easy for me to make cash offers and to move on it. And I have my team there. So really it’s been a good opportunity so far. So I’m just sticking with it. What about you? Have you done any new markets or anything different?

David:
I spent the last three, four years not buying a whole lot of property because I was building up the businesses that I’m running so that the David Greene Team Real Estate Team, the mortgage company, I just started the One Brokerage. So I was learning how to be a businessman. And now I’m actually making some pretty big moves and I don’t get a chance to talk about it very much because we’re usually interviewing the guests. And so I appreciate you asking that. So far this year I bought two short-term rentals in Maui. Those are both doing way better than I was expecting. And I got really lucky. I bought those during the pandemic when nobody else was buying. And just in the time they were in escrow, they each appreciated over six figures.

Ashley:
Wow.

David:
It was pretty incredible how fast that turned around.

Ashley:
Did you have to build a business to run those short-term rentals or did you already roll it into the management of your long-term rentals?

David:
That’s funny that you ask. It was a very rough start getting going because I was trying to use people that are on my other businesses to run those and they just didn’t do very well. So like most things that happen, it’s like one key hire or the right person, whether it’s a contractor or property manager. For me, it was a hire named Karen who stepped in and just took over. She got everything going and we got him up on Airbnb pretty quickly. And when you get the right person in there, it’s like, this is not hard. When you get the wrong person in there, everything is hard. So there was a little bit of a struggle going on with that. And I just wasn’t paying a lot of attention to them because I was looking at other things.

David:
So now, like that that systemized, I can take that. There’s not very much to it. I thought there’d be a lot more to short-term rentals than there are and I can buy in other areas. So I am selling 25 or 26 properties in Florida and I’m going to 1031 that money into more properties and more debt. So I basically am looking at what’s going on with the Fed and the market in general. I don’t think a crash is coming. I think the opposite. I think we’re going to see an even bigger increase in prices. I think that with the money that’s being put into circulation, with the squeeze on like hedge funds and institutional investors that they need a return that they’re moving into certain markets and just buying a ton of property. There’s a shortage of inventory.

David:
So what I’m looking to do is sell a house safe for $200,000. Take maybe $100,000 of that gain and then put that down on a $500,000 property. That’s a very general understanding, but I basically want to take on more debt and owe more money and pay it back with cheaper dollars as inflation comes and move into better areas, just markets where I think we’re going to see more appreciation. I can get a higher quality tenant. And more of the short-term rentals. And just have a backup plan that if something happens and I can’t rent as a short-term rental that there’s a corporate housing back for, or I could rent it out as a long term rental and I could make it make sense. So I’m gearing up. If people have deals out there that they think would work for that, please send them my way because I’m going to be going on a buying spree here pretty soon.

Ashley:
Do you have any markets in mind that you’re looking at where you do want to buy in?

David:
Yes. I’m looking at Tennessee, Florida, Texas. Those are really big areas in Arizona. So basically just so you guys understand my strategy, I want to go buy places I think Californians are going to move to because every time Californians move somewhere, we drive the prices up way high and it forces appreciation everywhere. So I’m looking in the Tampa, Orlando area, some of the vacation areas in Florida. So like the Space Coast, that little area. The Smoky Mountains in Tennessee. Avery Carl, we’ve had her on the show a few times. I’m working with her team and looking for some properties as well as some other areas like around Nashville and then the Scottsdale, Mesa, Gilbert area in Arizona and then in Texas like the Dallas area. And then I’m sure more stuff is going to pop up as they go.

Ashley:
Yeah, we just had Avery Carl on the other rookie show too. And she has her new short-term rental book. So if anyone does want to learn more about doing short-term rentals, you can check that out at the BiggerPockets bookstore too. David, what else? Is there anything else you have going on besides working on that 1031 exchange?

David:
I bought a commercial property my first triple net in Minnesota. And that one’s pretty solid. I bought it outside of Minneapolis. My thoughts were, there’s a lot of political unrest right now in Minneapolis. And certain people are moving in, certain people are moving out, but a lot of the businesses that have been going through, the riots that are going on there, the people don’t feel comfortable working in that area. So they’re moving into the suburbs. Then I bought a big commercial property where people would go put their business. And so that’s been filling up with tenants. And that was the biggest deal I ever bought. I’ve talked about it briefly. I don’t know if I ever have on the podcast, but it was a $16 million property and I’ve sold people before.

David:
I’m back to being a rookie buying that deal. You get that same like this is triple net. Can it really just be that simple? What do you have to make sure you get right with these deals? I mentioned before that the mortgage is $80,000 on that. So you can’t get that thought out of your head. You’re just like, “$80,000.” It’s like a butt pucker number that you just constantly get nervous by, even me who’s been investing for a long time. So I had to go through all those same rookie emotions and reminding myself that the numbers make sense and needing a lot of reassurance that I was making the right decision. So that was definitely a unique experience that I went through this year.

Ashley:
Yeah, that’s definitely a mindset shift of going from larger scale properties that cost more. I had that recent too. The most expensive property I bought was a six unit for $150,000. And then all of a sudden, this summer I had two properties for over $750,000 under contract and the self storage one fell out, but I’m moving forward with the mobile home park. But that was just a huge thing for me. I had never even come close to that amount.

Ashley:
And really it came down to, like you said, do the numbers work, but also the ratio of what you’re paying compared to what the rental income to what that mortgage payment actually is. So like you said, the mortgage payment is $80,000. Well, maybe your rental income on that is $160,000. So it’s looking at that ratio too of what are the chances that that whole unit is a vacant and you’re not going to have any rental income at all to that.

David:
That was the key.

Ashley:
Yeah.

David:
What are the odds that every one of these is going to go vacant? And really what helped me get over it just emotionally was knowing that the bank was providing 80% of the money. They were taking a bigger risk than me and they felt good about that deal. And I think we forget that sometimes when you’re getting into commercial property that your bank is your partner in this case because they were the lender. They had smarter people that had done this a lot longer than I have done that, looking at that deal and saying, “It looked good and it’s verified or validated? Okay. Like my gut told me the right thing. Now I just need to get over the fear.

David:
And then I forgot to mention, I have a property getting ready to close in a couple days here in the Bay Area of California. And you reminded me of it because I’m buying it for a little under $1.9 million. And that would normally just be a, “Oh my God, how could you spend that much money on one house moment?” But because our clients are constantly buying houses in that price range and I’m seeing it all the time, that number did not scare me when it was in the Bay Area in a market I’m used to. There’s no objective reason why $1.9 million would be good or bad. It’s just an emotional hit that you get when you see like you said, but I’ve never bought a house over $150,000. $1.9 million would feel like this real big scary thing.

David:
But it didn’t feel that way for me just because I’m used to it. I see people paying those prices and I see them going up in value. And really there’s less risk in this deal. This is actually a deal as crazy as this sounds that I’m buying as like a safe play. There’s so much rental demand in that area. I’m preparing for that property when I first buy it to just break-even. I don’t think it’s going to cash flow very much. It’s got two, four car garages that are on the property that could be converted and then it will cash flow. But I know there’s going to be so much demand in that area because so many people want to live there that I’ll never have to worry about a vacancy.

David:
So something that I’ve learned as I’ve gone in my career is that bigger prices feel scary, but in many situations they’re actually more stable. Buying that $50,000 house that feels safe in a terrible area that leads you to massive vacancy and big turnover and stuff that becomes really expensive, there’s this Catch-22 or maybe not that’s not the right word, but there’s this irony to what the price feeling being smaller, feeling safer actually works the other way. And oftentimes the more expensive properties, you end up with more solid tenants that have better financial backgrounds and they’re less risky.

Ashley:
I have a great example of that. I bought a portfolio from an investor and if I wanted the golden goose property as he called it, I had to take this little duplex and buy it for $17,500. It was tilted. You could tell that it was crooked. There’s so many structural issues. Well, it had a tenant in the downstairs that it was hoarder, but she paid every single month on rent. She didn’t want anybody to come in and touch the unit, nothing done to it. She was content.

Ashley:
So I kept it for almost two years. And then in the upstairs, tons of turnover, tons of damage and just a lot of upkeep and repairs. And it was a cash cow. I mean it cash flowed I think almost was $600 a month and it was only cost me $17,000 to get into it, but it was just a headache, a headache property. And so I ended up selling it and it sold for $60,000 in three days with four competitive cash offers. And it’s just like now is the time to get rid of those headache properties if you do have them.

David:
That’s good point. Yeah, I think that’s really smart. When the market is hot and there’s demand for properties, that’s where you unload the stuff that’s not as good. And that’s one of the reasons I’m selling those Florida properties. I have a couple dogs in there, the majority of them are pretty solid, but this is the easiest time ever to sell a dog. When the market is down, it’s very difficult to unload those. You’d almost have to pay people to take them off your hands. And so every market has a play to be made. Just like in sports, there’s always, depending what the defense gives you, there’s a good play that you could run against that. So right now I’m looking to buy in areas where I think we’ll see appreciation. I’m looking to get rid of the stuff that isn’t appreciating as much. I’m looking to take on more debt and I’m looking to be a little bit more aggressive with what I’m doing.

David:
And then the other thing that’s new is, I started the One Brokerage and we’re now doing a lot of loans for investors that can’t get traditional financing. So we also do traditional stuff, but I would say where I put more of my focus was if like, Ashley, if you wanted to buy a property and you have too many to get a conventional loan, or your debt to income ratio won’t support it because you have too many properties and you can’t show the income, that’s the case a lot of the time when you get into this. We have loans that the lender will look at the income the property’s going to generate and use that instead of the income of the borrower.

David:
So I’ve been putting a lot of time into getting that word out there, making connections with people that are buying properties like we are funding their stuff so that more people can buy properties because I just have this gut feeling that we’re going to see such a run up in prices that if you’re not wealthy, you won’t be able to buy real estate at all. And that’s heartbreaking because real estate has always been the one way that the little guy or little girl, little gal can make their way to the top. You can become a millionaire through real estate investing where you couldn’t do it in the corporate world nearly as easy. So that’s probably a really good transition for us to get into just exactly what your five keys are to becoming a millionaire while working at W2 where you make under six figures.

Ashley:
Yeah, so I started as a property manager, working for another investor and just learning off him and seeing what he was doing and that’s what got me my start. And I started off, first of all, paying off all my debt. So we paid off all our farm equipment, all my student loans, everything like that. I would just dump my W2, my little bit of cash flow to all of those payments. So just setting those foundations, those fundamentals in your own bit, in your own money like managing your own finances before you jump into real estate can be a great start too, or doing that as you’re investing in real estate.

Ashley:
But the first thing I want to talk about for this for the fundamentals is being a woman in real estate investing. And you hear a lot of times about the glass ceiling and how there’s so many men that are investors and not a lot of women and it’s a disadvantage, but I really see it as an opportunity. And I’m sure that there’s people that have encountered situations or scenarios where it has felt like it hurt them being a woman and not a man as a real estate investor. But for me personally, I try to flip it and I try to use it as an opportunity.

Ashley:
So the first thing I look at is being the co-host of the Real Estate Rookie Podcast. If I was a man, I probably would not be the host of the podcast because I would be competing with tens of thousands of other men to be on there, but since I don’t know this for sure, but I’m sure they were probably looking for a woman and a male to co-host together. So there was a lot less women that applied for that position because there’s less women that are in real estate investing.

Ashley:
So then I look at the networking side of things too that I think that there’s this little bit of interest because I am a woman real estate investor where people might be more interested in talking to me because I am a woman and I started investing in real estate. So I’ve built a really awesome network of people. I got to go to Brandon and Charles’s Maui Mastermind before. And I feel like if I was a male, I wasn’t doing anything exciting or different than anyone else.

Ashley:
So yeah, I think that if you are a woman and you are investor, you’re starting out, look at it as an opportunity that you are one of very little people that are doing this industry. And that is awesome. That’s cool. That’s a thing to be super proud of. And I had seen Codie Sanchez had put out this article about how some women play a victim card, have the victim mentality. And I completely related with that. I think that as a woman, you should take it as an opportunity and an advantage being in an industry where you have so much potential because you are. And in the corporate world, it may be different because you have bosses, you have restrictions, but in real estate, you don’t have those limitations at all.

David:
That’s such a beautiful perspective that you’re taking with that because what I hear you saying is, you’re a novel in a sense. There’s something that will catch people’s attention and make them want to know more about what’s going on. And I’ve heard a lot of women say, “well, it’s hard to be taken serious as a woman when you’re talking to other investors.” And I do believe that that is how they are experiencing the interaction. So some women who’s new to real estate investing goes to a conference. They try to go talk to the big dog of the thing and they get dismissed and they say, “Oh, if I was a guy, they’d take me more serious.”

David:
But it also could be a lot of men feel in that way because they’ve never bought a house and they’re being dismissed just the same because they’re a rookie. And so if you’re looking to see it as this person doesn’t take me serious because of fill in the blank, that will become your truth. And then you’ll behave as if I don’t belong here. I shouldn’t do this. This isn’t going to work. Versus if you look at it like, “Well, every other new person here is getting treated the same way. I’m not any different.” You might have even got that person’s attention because you stood out from all the other guys that were there that all look exactly the same, right?

Ashley:
Yeah.

David:
You see a room full of bunch of white dudes in nice suits wearing a shirt like I’m wearing right now and you’re just one out of a million versus there’s something different about you. You can get more attention. So I love that you’re taking that perspective. Is there any advice you can share on how to use that uniqueness about being a woman in real estate, but really this works no matter where you are. If you’re not the norm, if you look a little bit different or appear a little bit different, how you can use that to make better connections or work to your advantage?

Ashley:
Yeah, one thing you just said there was, if you are a woman and you’re at a conference or something and you go up and you talk to the big dog, the big shot, and if they do make you feel that way, that they’re not taking you serious, then you’re talking to the wrong person because there are a ton of big shot male investors out there who will give anyone the time of day no matter what they look like. So if you really do think that that person is making you feel that way, there’s definitely some mindset to it, but you’re probably talking to the wrong person then.

Ashley:
And that’s another thing. If you are working with contractors and you feel like they’re not taking you serious, I think that’s a huge advantage right there being a woman because you’re going to know upfront that that person’s going to try to scam you or try to take advantage of you and then you not to hire them. Where say David goes hires a contractor and they give him the quote and stuff and everything seems good, they might not try and do something shady until David’s not around. But if they’re already trying to take advantage of as a woman, well, then you know you don’t work with them. You have an advantage right there that you new upfront.

David:
Yeah, they showed their cards right off the bat.

Ashley:
Yeah. Yeah.

David:
That’s a great point.

Ashley:
I think just using things like that are an advantage. One thing I have done before is if I am like having a discussion with somebody and I feel like I’m being pressured to make a decision, I will use the excuse, “Well, let me talk to my business partner. He wants to be involved,” or “Let me talk to my husband or something.” And it’s amazing how acceptable that excuse is to delay giving a decision because it’s oftentimes thought that I’m not the decision maker anyways. So I think that’s an opportunity where if a guy was to say, “Well, let me talk to my wife,” it’ll almost be like laughed at like, “Oh, you have to go ask your wife. Okay.”

David:
Yeah. Yes. It’s as if you don’t know what you’re doing here, you need your wife to tell you. That’s a great point. I love that.

Ashley:
Yeah.

David:
One thing I’ve noticed when you’re selling houses, there’s typically more female realtors than men. And in least in the world I’m in, they usually do better. And as you were talking, it dawned on me the part of that is guys are less likely to share our vulnerability. We don’t want to tell our buddies, “I’m going bankrupt. I can’t make my payment.” I’m screwing up or something happened. Whereas in general, not everyone’s the same, but I think in general, women are more likely to talk about what they’re feeling and share what they’re going through with their friends.

David:
And so if you are a woman investor and you have that dynamic in your sphere of influence, people are way more you to say so-and-so’s going through a divorce, or so-and-so’s husband just lost her job or she just lost her job and they don’t know what they’re going to do with the house. They’re trying to keep their kids in the same school. They’ll share this information, which is smart. Like guys should do this more and we don’t. And it gives the woman who’s in that position the inside track. They know about that deal before everyone else do. And I think that’s why realtors that are women and not just any woman, but there’s a dynamic, like a personality that they have and they give you that feeling like you Ashley, where I feel like I can trust you right there.

David:
There’s definitely like a warmness that totally gives you an advantage because you’re going to hear it. That’s probably one of the reasons that you get so many deals near where you live because ever one that knows you likes you and they’re more likely to say, “Hey, did you know that so-and-so’s farm is going to be going up on the auction block or something,” and you get there first. Would you agree that that’s one of the reasons you think you get deals close to home?

Ashley:
Yeah, and really word of mouth referrals has been the best lead source for me is generating deals. And my mobile home park that I have on a contract, that was actually a friend from high school. We’ve stayed in touch. He has a business and he heard that somebody wanted to sell their mobile home park. And he called me, he was like, “Hey, would you be interested?” And just that he thought of me first was awesome. And I didn’t even have to compete with anyone. It was never listed. There was no other buyers. It was just, I got the first chance at that. So yeah, that was pretty cool.

David:
Yeah, and in my experience, sellers don’t see blue or pink, they see green. So if you’re bringing the best deal to them and you have the best of solution, then they’re probably going to go with you.

Ashley:
And one more thing too, if you are a woman and there are men out there that maybe do think that like you can’t do as great because you are a woman or whatever that belief is that you have, then use that as an advantage and ask them for help. Let them use their big ego to help poor little you to become good into this great investor and make them feel good that they’re helping somebody that has no idea what they’re doing. Take advantage of that as an opportunity too.

David:
You’re giving some gold nuggets here. Because as I’m thinking, not only am I a man, but I’m expected to be the real estate expert in everything.

Ashley:
Yeah.

David:
So I often end up in that rookie situation like we’re talking about, and I don’t want to admit, I don’t know how this thing works. I’m hoping you will teach me. Or there’s some embarrassment if I have to say to the person who looks up to me, “Hey, can you tell me how this market works, or what type of properties would make sense here?” All this stuff I write in a book and I tell someone else to go do when I got to go do it, it’s embarrassing. So sometimes I don’t. But like you said, you can just play that oh, I don’t know how this whole. Can you tell me what I should look for in this house? That is really good.

Ashley:
And one thing too is there’s so many women, community, landlord, groups and investing groups too out there where there are some groups that are just for men, but there are so many free groups that are just for women investors that you can take advantage of too if you want to network more with other women.

David:
Yeah, BiggerPockets actually has a podcast specifically geared towards women, The InvestHER, not Investor podcasts. So that’s definitely like when you to those two talk, they don’t sound like they don’t know what they’re doing.

Ashley:
Right.

David:
It doesn’t bother them that they’re women. Those are confident, knowledgeable, mature. I would listen to advice from either of those two. So if you’re a woman listening to this and you would like that perspective, you want more about what Ashley has, definitely check out The InvestHER Podcast. All right. So seeing being a woman as an opportunity, it was the one of the first keys to becoming a millionaire, making less than $100,000 a year. What would key number two be?

Ashley:
It would be using creative financing. So when I started, I think we had like maybe $8,000 in savings. And we ended up using about maybe $5,000 of that for the rehab on the first property, but I found a partner and the partner brought the cash. So using a partner is definitely a way to get creative with financing if they are going to fund the deal. Then I’ve also structured a seller financing deals. And that has been beneficial because sometimes you don’t even have to bring any money to the closing table.

Ashley:
I also love to, when I get a property before I even make an offer, I like to send out emails to four or five different lenders that I work with and tell them about property, what I want to do with it and ask them what do they have to offer me? So a lot of times these small local community banks, they can come up with different ways to finance deals and what they can give you.

Ashley:
So I always ask, I don’t say I want this type of loan. I try and find out what they can offer me. And then I wait and see what they get back. And then I run my numbers based off of whatever financing route I want to go with. And sometimes there’ll be nothing unique, but this one time I had a property that I was actually signing for a line of credit and I was telling the lender about this property and he’s like, “Well, how are you going to buy it?” And I said, “Well, maybe with this line of credit.” And he said, “Ashley, if you want it, I can give you a 90-day unsecured loan to the property. And then after you close, we’ll just refinance it into long term financing with that bank.” And I never would’ve known that was even an option to do, but he just threw that out. So there’s definitely ways to get creative. David, what about you? Do you do a lot of creative financing?

David:
I haven’t yet, but that’s one of the things that is sort of in the next phase is I’m looking… Because really if you want to do creative financing, you usually have to have an off-market opportunity. If it’s on the MLS that the sellers who go to an agent just aren’t as comfortable with that as an option or the house has to sit there for long enough that they’d be open to considering it. So what I’m looking for is more of the BiggerPockets community to be bringing me those and then putting together the seller financing because that is something I want for the rest of my career to get deeper into.

David:
What I do do that you mentioned that I don’t want to let us pass over without highlighting it because it’s brilliant is just that concept that instead of putting pressure on yourself to go to the bank or go to your agent or go your contractor and say, “Here is what I want,” to ask them what would you do? How would you solve this problem? That is one of the things that I’ve learned in business that has been so monumentally important. And people pass this up all the time. There’s this belief that a lot of the BiggerPockets community has is, I have to learn every thing about this and then I can go do it. And I don’t even do that.

David:
I was just talking to one of my brand new employees, his name’s David Gold. And it’s funny because I’m David Greene. Put us together, we’re the Oakland A’s Green and Gold. And we’re looking to buy properties and he’s going to be helping me to sift through the inventory. And he said, “Hey, the agent wants criteria. This is a criteria I gave him and here’s what he gave me back. Which one do you want to buy?” I was like, “David, how could I possibly decide which house I want to buy based on this?” He goes, “Well, I just thought you were David Greene. So you would just know.” And I was like, “You’re doing what every person does in the beginning. And it’s the same mistake that they all make, is the agent is just going to tell you how many bedrooms, how many bathrooms, how many square footage. Okay. That’s what I want. I’ll go find it.”

David:
I want you, before you give the agent any criteria to get information from them. You should be asking them, which part of this city do we want to buy in? Would this strategy work? What are other people doing that are making money? What’s something no one’s doing that they should be doing? You should be using these people that we typically are just only seeing as a resource to get from A to B as a way to learn and grow and improve our own knowledge and education. So that’s what he did with this bank is, he said, “Well, I want to buy this property and get a loan.” And he came up with the idea of get a line of credit, pay cash. You can get a smoother transaction. Then we can switch it over. You didn’t have to know that.

David:
And I wondered sometimes at the end of our lives when we’re standing in front of God, we’re going to look back and say, “Oh, I could have just asked this question,” instead of I spent three years trying to learn it all on my own and then go do it. So if you have any other examples of that, I would love to hear them. If not, we could move on to the third example.

Ashley:
Yeah. Well, even just asking questions. So I like to ask sellers two questions. If they’re interested in doing seller financing and also if they have any other properties for sale. And I’ve gotten a couple deals because the investors do have other properties that maybe they’re going to sell a couple months from now after this sale, but hey, they’ll give me a package deal. Or this one guy when I was actually sitting down with him going over the contract for one property, he actually pulled a survey out of his file cabinet and he was like, “I do have this parcel of land too.” And I didn’t even get the chance to ask. He just already was like, “Do you want to buy this too?” And I got a great deal on that just because I was taking both off. So that’s the two questions to the seller financing and if they have any other properties for sale that I like to ask.

David:
So good.

Ashley:
Yeah.

David:
So smart. And there’s no reason not to ask that question.

Ashley:
Yeah.

David:
In fact, this is one of the ways that I know if this is a person I want to work with is if I can say to them, well, what else could you do? Or how could you solve this? And they come up with the answer. That’s how I picked my partner for the One Brokerage, Christian is, I would say, “Hey, here’s the problem. I have too many of these properties, money is coming in through these corporations, but it’s not claimed in my name, but I want to buy the property in this way.” And it’s tricky. And he would say, “Well, we could do this. We could structure it this way.”

David:
And when you get a person who is taking the initiative and the responsibility to solve your problem for you, that’s where you have a really good person. And that’s why I like him because now he’s doing that for all of our clients who run into those same situations. So I can’t highlight this enough. If you’re talking to people, do what Ashley said, ask them, do you have other properties to sell? Do you have other problems that I could solve? That’s really good.

Ashley:
Yeah, I do have two examples I can give quick about creative financing. So for one property, the person was going to be moving out and building their own home. So they needed a large down payment, but also they were going to do seller financing for the rest, but they wanted a larger amount of money coming in than what I wanted to do for the seller financing. So what we did to structure it was, we decreased the down payment and then we did seller financing over 15 years at 3.5%. And then what we did in year three and year four was they’ll get a lump sum payment of $25,000 at those two years. Just to break it out.

Ashley:
And that’s a great thing with seller financing is there’s no rules that you can create it however it works for you guys. And I sat down with this couple three or four times and every single time we completely scratched out my letter of intent and reorganized it and made it so that it worked for both of us too. But just like asking the question. So him telling me how much he wanted monthly, I was able to… He didn’t care about the interest rate at all. And that’s why I was able to get 3.5% because all I did was tailor his mortgage payment to what he wanted and then put a low interest rate with it.

Ashley:
And then another example is, we’re actually buying another farm and it was going into foreclosure. So we are doing a subject too on that property where we’re actually taking over the mortgage payments for the seller. And we are going to quitclaim deed the property into our name. And then we have gotten the mortgage payments caught up. There was back taxes on the property. So the seller did agree to pay the back taxes and then we’re just paying to get the mortgage caught up. So it will be about $35,000 out-of-pocket. But if we would have went to a bank and we would have gotten conventional financing, we would have had closing costs. We would have had to put 20% down and it would have been about $100,000. We would’ve had to come up with to purchase this property, just getting that conventional loan. So the subject two is hopefully going to work out great for us.

David:
So this was a farm that had fallen behind on their payments and they had fallen behind on paying their property taxes. They were headed to foreclosure. So it was a lose for them no matter what. You stepped in and you basically said, “We will take over your payments instead of getting a new loan to buy the property. And we will pay the money that you owe the current lender so that they don’t foreclose on the property. You pay your own back taxes. You can avoid foreclosure. We can avoid closing costs and having to get a new loan on the property.” You probably got it at a better price as well because they were under some duress

Ashley:
And their property had them as the primary residence. So there you have a low interest rate. It’s a low mortgage payment or amortize over a long time. It’s a USDA loan. So great terms better than we would get buying it as an investment property. And then we actually got a great purchase price because what we’re actually buying it for is basically what the balance was on the mortgage. We’re not paying them any more money than what was owed on that. So it’s a great deal.

Ashley:
But also we tried to go the short sell route too, but the bank would not work with us on that. And part of if we did that, they would not allow the current owner to stay in the property with it being a short sale. So this way, with doing the subject two, we’re actually renting the property to the seller, and he’s going to continue to live there and pay us rent. And then there’s two other houses on the property too.

David:
That’s a win-win.

Ashley:
So it really is a win-win. He gets to stay in the property and he doesn’t have to worry about having it go up to tax auction or being foreclosed on.

David:
So that takes us to key number three we’ve hinted. When you formed a form of a partnership with the seller in that case to make it work for both people, what is your third key?

Ashley:
So this one is leveraging partnerships. So I like working with people on a project. So making someone your partner, they are definitely a lot more interested and motivated when they have ownership in that property as to working with you on it. So my first partnership, he was very passive. It was just money. And so basically whenever I have a project I know I can do it myself, I don’t need help, I go to him and he’s the money guy and I just take care of everything. But that’s a great way to leverage someone. If they are busy, they don’t have time to invest, but they want to invest, be that person’s opportunity. Take the money from them, invest it for them and work out that partnership.

Ashley:
My second partner, he was already had a couple properties on his own and we were both stuck as to where to go next. So we pooled our money together and our resources together. So I took over the property management leasing and he handled the maintenance and any repairs, remodels on the couple of properties we bought. But really my biggest use of a partner was when I bought my mixed use building. So this was two commercial units and two residential units. And it basically three of the units needed to be completely gutted and rehabbed. And at this point I had never done a full blown rehab.

Ashley:
So I wanted to put a wine and liquor store in this building. And what I did was, I took on a partner who could do a rehab, and our agreement was that he would do the rehab. I would help. I would learn from him and he got 40% equity of the building, and then also a 40% equity of the liquor store. And another advantage of using him as a partner is that he already owned a bunch of restaurant franchises and he had a supervisor who managed all of those who could help us implement running a business and managing a business and what systems to put in place. And even just things like doing payroll and sales tax, things like that. So those were the two things, using him to help with rehab and then with having his supervisor help us actually get the store running.

David:
I think that’s something that is often overlooked when people are considering partnerships is, I always hear it frayed and that, well, this person does the money and this person finds the deal and you’re leaving out all the work of managing that asset. So if it’s a flip, well, who’s going to find the contractor who’s going to manage that person.” Or if it’s a liquor store, there’s more moving pieces than just buying a property and renting it out.

David:
You’ve got people that have to track the inventory. People that have to manage the crew, who’s going to work and when and the payroll and the taxes and making sure that the books are kept well. And who’s going to make sure that it’s actually running profitably, who makes sure no one’s stealing money out of the till, that off the bat would stop me from buying a business like a liquor store because I know the work I’d have to then go put in because I’m the rookie in that space now, right?

Ashley:
Yeah.

David:
And I got to learn how to do it. But if I’m doing it with the person who already has the infrastructure that can make that work, that’s a massive advantage. And so it’s more than just who brings the money. There’s these elements that you’re seeing angles that other people are missing.

Ashley:
Yeah, so the deal was I purchased the property. I use my cash for that. And I did the startup costs for the liquor store such as the liquor license. We’ve actually paid a broker who actually did the whole application for us for the liquor license and made it super easy. Having this partner, though, the one thing that we both wanted was, we didn’t want to get that phone call, “Oh, so-and-so’s not coming into work.” We need you to go in and run the store today.

David:
Yes.

Ashley:
We did not want to be involved with the store at all. We didn’t even want to know if somebody didn’t want to show up for work. We wanted that taken care of by a manager. And that’s how we built it in it. We really relied on that supervisor from the restaurant franchises. She set up our POS system. She did our first inventory order. She hired our full-time manager for the store. And then our manager pretty much runs all the day-to-day operations and we have some part-time employees and then the supervisor just oversees her. And then we have a bookkeeper that does payroll and sales tax for the liquor store. But really I have a dashboard that I log into. I can look at sales, things like that, but it’s pretty hands-off for me and that’s really what we wanted. So it was a great partnership being able to take advantage of using my partner as a supervisor because it would not have been cost-effective to hire somebody in that role to just run the liquor store.

David:
That’s exactly right. The volume of the scale that you get into where it would maybe breakeven or lose money to hire a person just to do that. You’d have to have several of these things before it would make sense. So I love your point about leveraging partnerships because it’s deeper than just finding the money or finding the deal. There’s the operational component that you have to consider. And I think that that ties in really nicely with the next key that we’re going to get into because in order to have this next key, you have to be able to leverage partnerships and you have everything going on. So that’s my little tease. Why don’t you let everybody know what the fourth key is going to be?

Ashley:
So the next one is a multiple income streams. So looking at a property and seeing how many different ways it can make you money, what are those revenue streams? And also I like the diversification of a property looking at it and seeing different revenue streams. And it makes it feel more safe to me, but also presents other exit strategies because maybe you will have a variety of buyers because you have those different revenue streams coming out of that property.

Ashley:
So with the liquor store building, it has a two-commercial downstairs and it has two residential upstairs, but in the one commercial unit, we put the liquor store in there. So there’s business income, commercial income, and residential income. So there’s those three revenue streams coming out of that property. So say for some reason that everybody moves out of that town, nobody wants to rent apartments anymore in that unit. Well then I still have the businesses. I still have the liquor store. Another great thing too about purchasing the property that you’re putting a business in is the tax advantages of that too just that we pay rent to the building so that offset some of our business income and we’re taxed as rental income on that property too.

David:
And rental income is taxed softer than the business income would be.

Ashley:
Yeah.

David:
So you’ve got depreciation they can shelter that money when it’s going into the building. Because I know a lot of people hear that and they say, “Well, what is the difference?” It’s six, one half a dozen the other. You’re going to pay three grand to the building or you’re going to keep three grand in the business. It’s all the same. But when you’re taking money out of your business, it doesn’t have as many tax advantages and you’re paying yourself rent. Now that rent money is softened and what’s the word I’m looking for here? Like shielded, I guess you could say by the tax code that helps landlord. So that’s another really smart point that you’re hiring.

David:
And I think that’s one of the reasons why when we interviewed Robert Kiyosaki on episode 500, he said, “The purpose of business is to buy and own real estate and take on debt.” And he talked about how McDonald’s is doing so well because of the real estate they own, not just the hamburgers that they’re selling. So you have made a great case here for how you work all these pieces together synergistically and make them work to your advantage.

Ashley:
Yeah, and just looking at properties, when you look at it, think of different ways that you can generate revenue off it. So there’s the mobile home park. There’s sheds scattered around the property. You can rent those out to the tenants for say $50 a month. There’s 16 of them on this property. That’s a nice little chunk of change putting in laundry coin-operated washer and dryer. If there’s just like a vacant lot, throw some gravel down and do boat and RV storage. That’s huge in our area because everybody has to store their boat and RV in the winter months.

Ashley:
So just looking at properties and seeing different ways, or maybe there’s a garage that even you can rent out additional. So when you’re purchasing a property, try and find those unique ways that you can generate more income. And a lot of times other buyers aren’t going to be looking for that. They’re just going to look at, oh, this property brings in this much rental income and they’re not thinking, “Well, I could charge an additional $100 a month for that garage to rent that out too.”

David:
Yeah, that’s an amazing point. Again, with this episode full of these really good nuggets that I want to highlight. I see a lot of investors stuck in the mindset that worked in 2010. At that time, there was deals everywhere. You would just look for the best of the really good deals and then try to offer as low of a price as you could on that best deal. And there was so much opportunity that you could make that strategy work. The problem is, it established a baseline in our minds of that’s how buying real estate should work, is I just go in there and I look for the one that’s been on the market the longest, I give the lowest price, I walk into a bunch of equity and I just wait and it goes up in value.

David:
Today’s market, we’re in a much healthier economy. You have much more competition for these assets. There are bigger companies and more money chasing them. There’s 10 or 15 years of price appreciation leading to 1030s of people who need to put that money into the same deal that you’re trying to buy. A lot of people don’t realize, they’re like, “What? That’s only a 6% return. I would never buy a 6% return.” Well, you might, if you were shielding $500,000 of gains that you are going to have to pay taxes. And now that makes sense and that’s your competition.

David:
So if you’re going to thrive in this environment, which I think people need to more than ever because like I said earlier, we’re getting to a point that real estate might just not be attainable for some people, you have to see angles other people aren’t seeing. And that’s what I hear you saying a lot, Ashley, is, you’re actively looking for, how could I make this better than it is rather than just relying on some algorithm that says, “Well, this is what they’re saying you can make. This is what it would cost. That’s your analysis and that’s it.”

Ashley:
Yeah, and one thing that I’ve been looking actively too making offers on is a campground. So there’s so many different ways you can pull revenue off of a campground like having a little store that sells some more stuff, having golf carts for rent, and then just even having seasonal or daily rentals, having kids crafts, having a pool, different things like that that you can pull, having glamping sites set up. So going into these kinds of specialty properties has been something that is interested me too, or turning properties into specialty properties because there’s that opportunity there to pull those different revenue streams.

David:
Before we get into the fifth key, I want to just ask you selfishly, with all these different types of assets that you’re buying, I know you’re sort of, I don’t want to say spread thin, but they’re not all concentrated into one place, right?

Ashley:
Yeah.

David:
You’ve got the liquor store, a campground, a mobile home park, single families, a short-term the arbitrage. If you don’t have a big portfolio, you might not understand how much we’re complicated that it’s like if you’re, this is the best analogy I could think, if you’re a waiter or waitress working in a restaurant, if my three or four tables are all next to each other, it’s way easier than if I got to run to the back of the restaurant for this table and all the way to the front for this one and then outside on the patio because way less efficient to move around. What are you doing to manage these assets? Do you have people that you’ve hired that look at them, or are you all self-managing right now?

Ashley:
So with my buy and hold rental portfolio, I outsource to a property management company in February 2020. So I got that off my plate. It was like a huge relief, not self-managing anymore. So that freed up a lot of my time. And then for the Airbnb, the supervisor that runs the liquor store, she takes care of all that. I don’t even touch that at all. I just get the little notification that money is being deposited from Airbnb. But as far as doing these deals, I suffer so bad from shiny object syndrome and [inaudible 00:55:03] after. Right now, I’m sitting at a self storage convention. I’m looking at self storage now.

Ashley:
I think for me is with buying the single family duplexes, the smaller multifamily, it’s so easy for me to do, which that’s a great thing, but I like to have something that challenges me. I’m not going to stop buying the small multifamily. I do that so well in my market. I’m going to keep doing that too, but I just have the systems in place where that’s very easy. And I recently, took on an acquisitions manager who’s going to be starting within the next couple of months to really focus on those. And that will free up even more time for me to go after these larger commercial properties.

Ashley:
I actually had this realization moment. I went to Seattle and spent some time job shadowing James Dainard who had a episode on. And if you just search Red Robin Waiter, I think you’ll find his episode, but he just talked about having the multiple stacks of properties. So just putting that small amount of cash into a small single family duplex, holding onto it for a couple of years for that appreciation, maybe you’re cash flowing very small or breaking even. And then 1031 exchanging into those bigger properties. He said, people get so focused on, oh, I’m a big investor. I need to go and buy these huge commercial properties now and forgetting about where they started and what helped them build their wealth. So I think that was like a big mindset shift for me is, continuing what I’m doing and not forgetting about what I’m good at and keeping that going. And then maybe seeing what’s the next best thing for me too.

David:
That’s really good. And if you want to hear the James Dainard story, which was an excellent podcast, by the way, that was episode 338. What James does that I 100% agree with and I do as well, I notice a lot of people, let’s say that most people’s goal I would say in this businesses cashflow. That’s what people are ultimately looking for. The problem is I see it is cashflow is incredibly difficult to build. Like these small multi-families you’re buying, multi-families are meant for cashflow.

David:
So it’s even easier than single-family. But even then, you’re talking about a couple 100 bucks a month and you got to get a lot of them before you can get that much cashflow. However, how much they appreciate when you buy a property undervalue, and then you fix it up to make it worth even more, I guess what I’m getting at is, it’s easier to add equity than it is to build cashflow. You have more control over the process when you’re building equity versus cashflow. You just have to wait for rents to rise. There’s not a lot you can do with small residential properties.

David:
What James did well was he focused on getting a great deal, buying it right, making it worth more, keeping it afloat with the cash flow, but then 1030 winning that equity into a bigger deal with more cashflow. So if he was to save the money he needed to buy the bigger deal, it would have taken forever versus you get the smaller properties that boost and amplify how quickly you can build equity, and then you convert it into cashflow. And that’s really what my strategy looks like because I buy… I’ve got, say 40 or 50 single family homes that I use the BRRRR method on that are all building the equity. Now I start taking chunks of those and selling them off and converting that into higher cash flowing properties. And then you wait and see, did I get more appreciation? If so, I might sell those and go into something bigger versus I’m going to start with multifamily and I’m going to wait until I can save $700,000 of a down payment, right?

Ashley:
Right.

David:
And 15 years later when you finally have that money, the property is worth three times as much as if you bought it at the beginning.

Ashley:
Well, and I think a lot of people get into real estate for wealth building. There are the people that are like, “I want cashflow so I can quit my W2 job ASAP.” So yeah, maybe then you’re really focused on getting a large amount of cashflow, but it’s harder to find a property that’s going to cashflow. It’s easier to find a property that will breakeven, or just a little bit of cashflow and then you hold onto it for a year or two years and then 1031 exchange it. So I think look at what your goal is. Are you still going to be working your W2s in the next couple of years? Then maybe that is the right path for you to take is to focus more on appreciation than cashflow for these properties and build wealth that way.

Ashley:
I’ve talked to a couple of investors now since that first conversation with James. And since they’re already set or have other revenue streams where they’re not reliant on that rental income, it seems like a lot of investors have been doing that now, but focusing more on that appreciation to build that wealth. David, but what about if the market were to crash? Do you think a lot of investors are using appreciation right now and using that strategy because of what we’ve seen the last couple of years and how much appreciation they’ve actually gained on their properties that it has been a huge opportunity?

David:
I think confidence is up because we’ve seen a running prices. So people are more comfortable doing this. Cashflow feels like the safer route and appreciation feels like a riskier route. So yeah, I do think that that plays a role. I also think there’s actually some wisdom to it that with the way the market is working, you will be more successful taking advantage of appreciation instead of just depending on cashflow. And I say that because of the way the Fed has handled the country’s money is, every time we hit what would be a recession, they just throw stimulus into this thing and throw more money. And then all of a sudden, the price of everything’s going up because we have massive inflation that no, it’s like this carbon monoxide no one’s talking about it until it hits. And then you’re in big trouble, but you didn’t see it coming. Right?

Ashley:
Yeah.

David:
So I do think that’s a component of it. I also think cashflow itself is becoming so much harder to find because you’re competing with so many people who want it. Hedge funds need it, syndicators need it. If you understand the model of the big players, they are borrowing money from other people, investing it and then selling the property to pay people back. And most of those people that are putting their money into these organizations want some form of continuing revenue. They want a 6% preferred return or an 8% preferred return. So that asset that is being bought has to generate enough cash flow to pay the investors of the people who bought it. They just the model works that way.

David:
So now they’re like locusts that are just going over the field of the USA, looking for cashflow and ascending on that thing and eating up as much of it as they can. And the little person who’s listening to a podcast like this just feels like they got it before I could get to it or there’s not enough left. And so I think that’s another reason why we’re seeing more of that appreciation becoming the strategy of choices because the competition for that cashflow spheres.

Ashley:
Yeah, there’s definitely ways to protect yourself if you do feel that it is a risk going for appreciation, what are your exit strategies? Worst case scenario, you will hold onto the property longer and you breakeven, but at least everything is paid. So are you in a great rental market where you don’t see having a problem with vacancy? Or can you turn it into an Airbnb and maybe cashflow a little bit more if you need to? Or is it a property that would sell maybe for a different model or something like that? But having those extra strategies in place can definitely help you feel more comfortable.

David:
Those are huge. I think there’s that phrase Warren Buffet said or maybe someone else said it before him, but it was “when the tide goes down, you see who’s swimming naked.” There’s a lot of people that are buying properties that they maybe shouldn’t be or they’re paying too much or whatever because they’re getting away with it. It’s like musical chairs works when the music’s on. And then when the music stops, you see who’s close to the chair.

David:
So I do think whenever that happens, who knows when it’ll be because of the way we keep printing stimulus every time we hit a rough patch, that there’s a lot of syndicators that bought properties on margins that were way too thin and did overpay or bought in areas that didn’t make sense, but they get skated by. And then when we have a recession, if rents drop a little bit, or tenants have more opportunity to go to nicer places, they totally will. And then those people who are on those areas they shouldn’t have bought in because they thought the deal made sense on a spreadsheet will be exposed.

David:
And what you said is the recipe to avoid that is you have multiple exit strategies. That’s everything that I look to buy, okay, the goal is, let’s say it’s short-term rental, do I have a backup of corporate housing? Do I have another backup that I could make this thing into two or three units and I could rent it out as separate apartments almost in the home? Does it have a basement? Does it have an ADU? That’s my third backup plan.

David:
So I don’t just go, let’s say, “Oh, this is the return. Let’s buy it.” It’s got to be in the right area, the right city, the right neighborhood, attracting the right tenant base, all those things have to be in place. And then when I find it, I rush after it. But that’s why I sleep well at night because I’m not gambling on this is my one way. And if something changes, I’m going to be in trouble.

Ashley:
Yeah. Well, should we move on to the fifth fundamental?

David:
Yes. Number five, what is your fifth key?

Ashley:
So it is owning a business. So taking the shift from just real estate investor to entrepreneur of owning a business. I’m running one. So I think that this can definitely help. So my husband has owned a dairy farm and that’s been his business that he’s run forever and all he’s ever known. So my dad was an entrepreneur, ran his own business. So just watching both of them, I had an idea of how a business was run. Both of them have very small businesses, not a lot of employees at all, but it’s a huge change going from real estate investor where you can do that on your own.

Ashley:
You can go acquire properties and you can do a lot of that just from sitting on your computer screen, but actually running a business where employees depend on you and you are their livelihood. They depend on you for your paycheck, but also learning how to manage, how to lead, being available for answering questions, these were all things I was uncomfortable with and I really had to learn to deal with because my whole goal eventually down the road is to not be bothered. My cousin is a recruiter and she actually had somebody that she interviewed that said, this guy’s just looking for a remote job where he doesn’t have to talk to anybody.

Ashley:
So I was like, “You know what? That actually sounds really nice that does that job actually exists.” But I think me and Tony we’ll keep talking on a podcast and having our guests. I love that. But as far as learning how to have people come with me for problems and dealing with that, I really had to change because it wasn’t I was an employee of somebody where I could say, “Oh,” to the boss like, “I don’t know what to do. Can you help me or can you take care of this?” I am the boss. I have to find that solution. I have to make that decision.

Ashley:
So just learning how to overcome those things have made me uncomfortable and especially confrontation. I don’t like confrontation at all and having to learn how to deal with that. But I think a big thing, if someone is looking to start a business and get into a business is, know how you want your business to run. If you want to be like me and you don’t want to be involved day-to-day, don’t put yourself in the position where maybe you’re just going to start out working the cash register at the liquor store because it’s going to be a lot harder to get out of that position. So from day one, figure out who are the people that you need and get those people first before you even open the doors. And I think that’s really beneficial.

David:
Yeah, and when you consider the revenue you can make owning a business as opposed to just working that W2 job, it’s incredible when you do it right what you can make for yourself. That’s why a lot of millionaires are entrepreneurs because they were able to scale. That’s a whole new show we could get into what it takes to be successful. I know to me, the biggest mistake that business owners make is they do what they know and what they’re comfortable with, which is having a W2 job. And they bring that mindset into their business. So they do exactly what you said.

David:
I go buy a 7-Eleven and I immediately make myself the manager and the clerk of the register because that’s what I’m used to doing. And you don’t think about marketing, expanding, tax strategies, bookkeeping, all the things that are going to help your business be profitable because you’re rigging up the sprite or trying to figure out, should I put the Slurpee machine on this side versus that side?

David:
And that’s what every… And when you’re working a W2 job, that’s all you have. And like you said earlier, conflict is rarely ever the employee’s problem to deal with. Somebody comes in and they’re ticked off and you escalate it to someone else, which is just a way of passing the buck and we all get used to that, but when you’re the business owner, there is no one to pass it to. You end up being forced to eat that frog of conflict, which is why I think you found out when you started running a business. Well, I don’t like this because it just keeps coming and there is no one else to give it to.

David:
What I love about what you’re saying as far as this is the fifth key to becoming a millionaire while you’re working is, there many businesses you can start as a side hustle. That’s what I did. I was a cop and I started selling houses. That was a form of having a business. Selling houses was easier for me than the average job because I already owned houses. I was already buying rental property. So I understood that asset class. Most people here are passionate about real estate. That’s why they’re listening to this podcast. There is some business that they can start that they can do in addition to their job or sometimes at their job. Not every job requires constant attention 100% of the time.

David:
So there may be people that own rental property and they have six properties they manage it themselves and they’ve loved managing it. God bless those people that are out there, but they don’t like analyzing it or something else. They don’t like talking about it. You could start a property management business and just take the systems you have a plate to other people and boom, you’ve helped them. That’s literally what I’ve done in the last four years was I said, “All right, I buy rental property. Let me start a real estate team that serves our clients the way that I want my agents serving me.” So when I buy a house, this is what I do. All my agents are trained to do that for the clients.

Ashley:
Well, even with your mortgage company, [crosstalk 01:09:18] too.

David:
It’s the same thing.

Ashley:
Yeah.

David:
Yeah.

Ashley:
And that’s a great point is to what are things that can align with your real estate business? You’ll see some investors that have like a plumbing company, or they do turnkey or things like that because it aligns with their business and it benefits them and it’s making them money by having a customer source too.

David:
It’s a massive advantage you have over the other people in that space that you already understand it and you’ve been doing it. So I know when I try to buy houses, financing is just the hardest part. It is so frustrating for someone in my position to get loans. And I don’t like the time it takes to have to go to every single market I invest in and find some credit union that will let me borrow there.

David:
So instead, I just started a company and said, “Your job is to go find a nationwide lender that will let us borrow under these terms.” And lo and behold, they come back and all of a sudden I’m buying houses again because they found me financing. And because I was the trailblazer to figure that out, all these other investors that are in the same position as me get to benefit from that because we can get really good loans like in the fours for people that don’t qualify for conventional rates. And now, that should grow to other things like a CPA business. That’s something I want to start in the future because I’m learning all these strategies of saving money in real estate. I want to be able to help the BiggerPockets community with that. And you, Ashley, you’re doing the same thing in many ways where you’re like this liquor.

Ashley:
Except with liquor.

David:
Yes, that’s exactly right.

Ashley:
When you are stressed about your rental property, your rehab is not going well. Makes you stop at the North Collins Liquor Store. [crosstalk 01:10:47] all your needs.

David:
That’s so funny. That’s where you meet your sellers to negotiate your deals as you sit down with a couple of bottles of a Colt 45 and you get them nice and soft before you start the numbers.

Ashley:
Yeah. But one thing with owning a business too is the sale of it. You have the potential to build a business for the liquor store. We started that from scratch. We didn’t buy it, started it from scratch. And potentially down the road, we would have the option to sell it to. So that’s also can be a great opportunity is selling a business too.

David:
Absolutely. Especially when you’ve establish it to run on its own. That’s why you don’t want to be the clerk that works in the store because it’s very hard to sell it if it depends on you. When it’s self-sustaining, there’s especially like these companies that are going and chasing after real estate and throwing money in it, they would chase after businesses and throw money into that too because what they really need is a revenue stream. So if you can create a revenue stream right now, you can absolutely exit. This is a great time to do that because the economy is going so well. So before we get out of here, Ashley, I do want to ask you what is one thing that our accumulative audience here can do to help you with your investing career?

Ashley:
Well, if anybody knows of any campgrounds for sale, I am definitely interested in that. So you guys can send me your campground or your self storage deals. But also if you guys are rookie investors and you are motivational, you’re inspirational, you have less than 10 deals and you want to help other people get started just like you did, and it’s fresh in your memory because you’re a rookie, but I want you to be able to tell me how you did something, not just what you did. If you think that describes you, please apply to be on the BiggerPockets Rookie Podcast. You can send me a DM at Wealth From Rentals on Instagram and I will send you a link to the application. We’re always looking for to have new guests on the show. We usually record once or twice a week and it’s my favorite thing have her because I get to use it to my advantage. All my curiosity comes out and I get to ask [inaudible 01:12:59] everything I know and it keeps me motivated. So if you think you fit that profile, please send me a message on Instagram.

David:
That’s awesome. And I highly recommend everyone go listen to that podcast. As you can see, Ashley was just dropping knowledge bomb after knowledge bomb this entire time and who wouldn’t want more of that several times a week?

Ashley:
Well, thank you so much, David. And thank you for letting me co-host with you.

David:
Yeah, I wish we could do this more often. I love hearing your perspective on things. I love talking to somebody who’s still in the trenches looking at deals. Ashley’s recording this. It looks like from her hotel room at a conference right now where she is learning about self storage. Like you said, you’re just like be immersed in all things real estate and sharing that knowledge. So we all get to benefit from the work that you’re doing.

Ashley:
Well, David, maybe one time you can co-host with me on the Rookie episode. We can do one together. But before we do that just so everybody knows, actually the next episode, I am kicking David off of the show and I am bringing my co-host Tony Robinson on and we are going to do a takeover.

David:
That is right. So Ashley has officially forced me out of this place and I’m locked me in the side room while her and Tony are going to take over the real estate podcast here. They’re going to do a great job. So make sure you tune in to listen to that. BiggerPockets really has a lot of stuff going on as far as different podcasts that they’re starting, they’re catered to different audiences. And so I would love if you the listener would leave a comment on YouTube for us. Let us know what you like about today’s show, what you wish we would have covered, what we could have went deeper into that you would have liked, and what shows you like listening to because there’s other people that are reading that and it really helps give them direction as to which direction that they should get started in.

Ashley:
Yeah, and if you guys leave the comments, we can go into. We have a Rookie YouTube channel too. So I can definitely go on there and go more in-depth into anything you wanted to hear more about.

David:
All right, I’m going to get us out of here. Ashley, any last words that you want to impart on our audience?

Ashley:
No, just everybody take action. That’d be the only thing. Take whatever you learned from this episode and from every episode that David and Brandon put out and make sure you’re taking action and just get that first start. It doesn’t have to be perfect.

David:
Yeah, I am looking to buy or build a property management company that can work anywhere in the country because I’m looking to expand very similar to what you’re doing, Ashley. So if anybody knows of somebody who wants to start one or already has one that they’re considering selling, I’d love to talk to them so I could just buy more properties and have a little bit more control over how things go. As you’ve seen, Ashley, as you grow, it gets very hard to keep your hand in all the various pieces there. So let me know if that’s the case. Ashley, great job today. Thank you very much for joining me. I’ll let you get back to your conference that we’ve pulled you away from.

Ashley:
Thank you for having me.

David:
My pleasure. Thank you very much for being here. And make sure you catch Ashley and Tony on the next BiggerPockets Real Estate Podcast. This is David Greene for Ashley, the knowledge bomb, Kehr, signing off.

Outro: 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. Be sure to join the millions of others who have benefited from biggerpockets.com, your home for real estate investing online.

 

 

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In This Episode We Cover:

  • How to invest in real estate while making a median income 
  • Diversifying your portfolio so you have multiple exit strategies and streams of income
  • Why every investor needs to “become a rookie all over again
  • Using creative financing to structure deals that benefit the buyer and seller
  • Leveraging partnerships to find cash, divvy up responsibilities, and purchase more real estate
  • Owning a business and learning the skills that every leader needs to succeed
  • And So Much More!

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