Real Estate Rookie Podcast

Rookie Podcast 01: From 4 Years of Analysis Paralysis to 4 Cash-Flowing Properties with Lauren and Kyle Clugston

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How will YOU transition from the "getting educated" phase to taking direct action toward your real estate goals?

Start by taking cues from Lauren and Kyle!

In this premiere episode, they share how they powered through their initial hesitation to build a "small but mighty" rental portfolio in less than 3 years' time… a portfolio that has them well on their way to a life of financial freedom (and maybe even a "boat house!").

You'll love their tips for identifying the right market for you, minimizing risk by house hacking, and leveraging your local meetup group to get the scoop on real estate trends in your area.

Plus, they guide us through their first "true" BRRRR deal—sharing lessons from their experience negotiating directly with a seller, firing a contractor, and finding time to DIY a lot of the renovation, all while juggling two full-time careers.

Lauren and Kyle may seem like sophisticated investors now. But in 2017, they were right where a lot of you are today. By following their roadmap and adjusting it to your market, you too can build a mini-empire that funds the life you dream about.

Make sure to subscribe to Real Estate Rookie in your favorite podcast app, and join our Facebook group (just search “Real Estate Rookie”) to continue the conversation. See you next Wednesday!

Click here to listen on Apple Podcasts.

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Read the Transcript Here

Kevin:

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Okay, let’s bring Lauren and Kyle onto the show. Hi, guys. How are you guys doing?

Lauren:

So good. So excited to be here.

Kyle:

So good.

Felipe:

Absolutely. We are so excited to have you.

Ashley:

We are so glad to have you. Yeah.

Felipe:

Absolutely. So hey, Lauren and Kyle, I’m actually super, super excited to have you guys on, I would really like if you would tell us a little bit about who you are how you got started.

Lauren:

Yeah, sure. So Kyle and Lauren, we are a husband and wife team. We started investing about three years ago, before we were married.

Kyle:

In Jersey.

Lauren:

In New Jersey. Yeah, we focus primarily in South Jersey. We kind of consider ourselves DIY investors because we do basically everything ourselves, from finding the deals, funding the deals, doing all the renovations. I mean, that’s primarily Kyle, but I help where I can. And then I also self manage. So we try to have our hand in a little bit of everything.

Kyle:

Yeah. It’s been a process. I knew nothing about it before Lauren brought it to me as an idea, as an investment strategy, and I jumped fully on board. With every project, we end up learning a little something. It’s been a fun ride.

Lauren:

Yeah. And kind of the way we got started is I always liked real estate. I didn't really know what that meant. I was like, "Maybe I want to be an agent, maybe I want to do something else," but I also had a lot of cash, thanks to smart saving advice from my father. And so when we were in our mid 20s, I straight up just Googled, "What should you invest in when you're in your 20s?" And Brandon Turner's original blog, "Real Estate in Your 20s," popped up and I binge read that thing so quick and …

Kyle:

Printed it out …

Lauren:

Yeah, printed it out.

Kyle:

… and handed it to me one day and was just like, “Read this.”

Lauren:

Well, I printed out … He had the downloadable, “Seven Years to Seven Figures Wealth,” e-book or whatever. And I was like, “I don’t know how to explain everything I just read in the past week to you, so just read this book. Hopefully, it will convince you.” And I feel like it’s just been a really good collaboration. I’m really analytical and I like the processes and the logistics. And I lucked out and found a guy who’s so handy and can kind of figure out any sort of renovation project.

Kyle:

Yeah. So I grew up in a house where my father did everything DIY. He was a jack of all trades and I learned a little bit growing up, until right around 2013. It was when Hurricane Sandy hit and my family has a house in Seaside Park, which got completely … 20 some inches of water in it. And we renovated the whole house ourselves, me, my father, and my cousins. So it was one project where I was able to do a full-house renovation and raise confidence levels. When she brought it to me and said, “Hey, let’s look for homes,” and we started looking at homes, confidence to say, “Hey, you know what? We could definitely do this.”

Ashley:

Did you guys know right away that you wanted to house hack or that you wanted to buy a rental property?

Kyle:

I didn’t even know what house hack was. She brought it to me and I was like …

Lauren:

Definitely, we knew buy and hold was the thing. And then when I kind of learned the idea of house hacking, I was like, "Okay, this investing on training wheels." And I was like, "We either have to pay rent or pay a mortgage ourselves. So if we can house hack and buy a two family, if we make mistakes, if we don't get a tenant on time, there's some wiggle room. It's not as detrimental as if we had this complete second mortgage that we had to fund every month." And so I knew house hacking was definitely going to be the way to go to start out. I felt like it was a nice ease into investing and it's something that we kind of plan to continue to do for the foreseeable future.

Kyle:

Yeah, absolutely. And when we speak to a lot of people that are just getting into it, yeah, we highly suggest that that’s the first step because it really is. You’re going to buy a home, anyway. Why not make it an investment?

Lauren:

And there’s so many benefits. Obviously, owner occupant funding from banks. You get much better rates. You can put as little as 3.5% down, which is something we’re going to be doing.

Kyle:

You get to bid a little bit sooner than straight up investors.

Lauren:

Yeah. One of the properties we have, we bid online and we were able to bid on it a week prior to other investors. So that was a great benefit. And then also, with renting, we would never break any laws, but you don’t have to follow fair housing laws in New Jersey when it’s your primary residence. And again, I would never outright do that, but it was just a little comforting knowing that …

Kyle:

We’d never screened tenants before. So what are we looking for? What are we looking for? So it definitely put a little ease to decision making.

Lauren:

Exactly.

Felipe:

That’s awesome. I love that. Now, before we get into your portfolio and strategies and before we kind of get into … Tell our listeners a little bit about what you did before real estate. So everyone always talks about, “This is how I do real estate. This is what I do,” but what’d you do before this?

Lauren:

So what we did before is what we also do now. We still work full time. So I am in video production and digital marketing and I have done that out of college. I went to school for video production and worked my way kind of through reality television and corporate video. And that’s kind of what I still do now.

Kyle:

So I graduated college. I knew I always wanted to get into law enforcement. And anybody that’s ever been through the process knows it’s a long process. You may not get chosen and the process is a year long. So I actually didn’t end up getting hired until I was about 26 in my first police department. So I’m in law enforcement. I now have moved up and am a trooper in Jersey State Police. So I’ve been doing that the past four years. And the schedule is great because it offers me a lot of time off from my schedule. We do what’s called a Pitman schedule, but it gives me a three-day weekend every other weekend. A lot of time for renovation in my off time. So that helps us out when we have to meet with people during the week, during normal business hours, that the Monday through Friday may not be able to get out and do.

Ashley:

And you’re probably pretty good at reading people when you do your tenant screening now, too.

Lauren:

Oh, too good. I’m obviously the gullible one. “But did you hear their story? They’re going through a rough time. They said they’re better now.” And he just looks at me and says, “They’re lying straight to your face.”

Felipe:

And I pulled them over last week, so I know that.

Kyle:

No, luckily we do not invest in the area that I work. So I don’t run into anybody.

Lauren:

But it is helpful. We are complete opposites in a lot of ways and it has proven to be very beneficial and advantageous for our investing journey.

Ashley:

Yeah. Well, that’s good. It does seem like you guys complement each other very well with what your strengths and weaknesses are. But let’s move on to your portfolios. What have you guys built up now?

Kyle:

So like we mentioned before, our first project was the duplex two-family house hack. We stayed there for a year to fulfill that owner occupancy of the mortgage. And then that one was, like she had mentioned, was the HUD foreclosure. We did that one on a 30-year conventional with 20% down that Lauren luckily saved up through her …

Ashley:

A lucky guy there.

Kyle:

Yeah.

Lauren:

Again, we are complete opposites in that.

Kyle:

Yeah. I’m not good

Lauren:

We came together and, “I have all this money. How much you got?” “Debt. I just have debt.”

Kyle:

Yup.

Felipe:

Student loans.

Kyle:

Yeah.

Felipe:

That’s what I bring to the table.

Lauren:

People joke, “Oh, does your savings account have your communion money in it?” 100%. My savings account was communion money, birthday money, and just saving from jobs. My dad, very fortunately, taught me very early on, “Do not go with lifestyle creep.” So when I got a 25-cent raise at Rita’s Italian Ice, which was one of my first jobs, he’s like, “Uh-uh. Do not increase your lifestyle. Keep pretending like you’re still making what you’re making.” And that’s kind of stuck with me throughout. So I didn’t realize how valuable that was then. Then I was annoyed by it, but it has served us really well.

Kyle:

Yeah. And Lauren had spoke to me about kind of the plan for that first property and how we wanted to renovate. It was a partial BRRRR where we wanted to refinance and pay off the construction costs for the renovation. So that is what we ended up doing. We were able to pull out enough to pay off construction costs and live in it.

Lauren:

Yeah. It wasn’t a perfect BRRRR, but it allowed us to live for $50 a month, which was great and which I think really set us up well for future properties.

Felipe:

So we throw around, sometimes, these acronyms, BRRRR, HELOCs, and things like that. So would you care to explain a little bit more what the BRRRR strategy is?

Lauren:

Yeah. So BRRRR is an acronym that stands for Buy, Renovate, Rent, Refinance, Repeat. And basically, you buy a property that has some value-add opportunity. So perhaps it's rundown or you bought it way below market, due to a seller situation, and you up the value. So you renovate it, you place tenants, and you force appreciation that way. And if you bought it correctly, after renovations, you would still be below market value. And then you would rent it out, you place tenants, you receive rent checks. And then after all that is said and done, you do a refinance. And this is where you find out how well you did.

Lauren:

So for example, in our first deal, the property appraised high enough where we could pull out all of our renovation costs, but the way that the town was, our rents weren’t high enough, in which case it would have negative effect on our cashflow. So we only took out enough to recoup about half of our renovation costs, so we were still able to live for free. And then once we moved out, able to cashflow more. But we have had a super successful BRRRR deal we got on our portfolio, which we can discuss, but it’s a great way to continuously work your cash because you’re pulling it out after each and every deal and putting it towards the next one.

Felipe:

Yeah. I love that, I love that. So real quick, before we move on, how many properties do you have now and what’s your favorite strategy?

Kyle:

So we, right now, have three properties and we’re about to close on another multi-family that we, like I said, we can get into later on because that one is our most recent deal. We use a different strategy for, actually, all of our properties.

Lauren:

I mean, obviously, BRRRR is our favorite because it’s the most advantageous one.

Kyle:

[crosstalk 00:13:25]Yeah.

Lauren:

It allows you to keep moving on and moving forward. So obviously, that’s our favorite, but yeah. We close next week on our fourth property and we’re going to be BRRRRing that one, as well, probably not to the extent of the one we just finished, but what we kind of did is we invest in two different areas. And so each property kind of has its own strategy and its own purpose. So we invest in one area that’s a little more working class, blue collar and those returns are great and where BRRRRs are quite possible. And then we invest in another area that’s a little bit more upper-middle class, already developed, and we still cashflow there, but it’s kind of a more stable market and we like to balance our portfolio with those two. So we won’t have as successful BRRRRs in this nicer market, if you will, but we feel it complements our strategy and balances out our portfolio.

Kyle:

Yeah, absolutely.

Ashley:

Do you think that market is more for appreciation you’re going for? The one that’s more stable. Do you think you’ll get more appreciation out of that one or the one where your cashflowing more?

Kyle:

So the ones where we’re cashflowing more, in itself, is an up-and-coming area. So within the next 10 years, we hope that the area makes a turn. And we’ve heard some plans that the city has … A big university south of us has some plans on building public transportation through that town. So we’re hoping that that strategy actually works out.

Lauren:

Yeah. We’re doing more than hoping. I did a lot of research.

Kyle:

Yeah.

Ashley:

Good, good.

Lauren:

No. I read the entire hundred-page town redevelopment plan.

Ashley:

Wow.

Lauren:

So there’s more than hope in this strategy, but yes. The nicer area, appreciation is more or less in the books.

Kyle:

Yeah. And the other area, the nicer area, the historic area, we did rent there five years ago and we watched the cost of properties skyrocket, even from then to now. So because it’s definitely a more stable market, we know that we’re always going to have property value there.

Lauren:

And it's also tenant quality. In this town, our tenants, we hear from them never, except when we reach out to them to do inspections and renew their lease. Whereas, the other market where we cashflow better, it just takes a little bit more effort to take care of our tenants.

Kyle:

Yeah. That area, the historic one, has public transportation right to Philadelphia. So we get a lot of young professionals that don’t want the city life that look in that area. So that turnover is … I think we’ve had two or three turnovers in that duplex property?

Lauren:

No, just one.

Kyle:

One?

Lauren:

Yeah.

Kyle:

Yeah. But it rented within 24 hours.

Lauren:

Yeah. We had no vacancy.

Ashley:

Wow, great.

Lauren:

And another thing about this one is these are the houses that we house hack. And so I 100% okay to sacrifice living square footage. I am fine living in a very small one-bedroom apartment on the third floor, but I don’t want to sacrifice location. And so this town is kind of the reason why we invest there. We live there and invest there. So we enjoy it and that’s kind of our focus there.

Kyle:

Yeah.

Ashley:

That’s awesome. That’s interesting to hear. I want to know, did you print out that development report for Kyle to read, too?

Felipe:

Hundred pages.

Lauren:

He wouldn’t have read that. There’s no way.

Ashley:

Okay. So let’s go on to the deal. We want to hear the nitty gritty of the deal that you guys want to share with us today.

Lauren:

Yeah. So it’s property number three. It is actually two doors down from property number two. And it’s funny. When we first started, we definitely wanted to do small multi-families, 100%. That’s the quickest way to build your portfolio. And after we finished property number one, we actually thought that property number two was harder to find because there were so many options. When you’re house hacking, you know where you want to live. You know what condition the house is going to be in. So property number two was kind of like our first real rental and we had … Do we go out of state? Do we go in Philadelphia? Do we stay where we’re at? Do we do mobile homes? There’s so many options. And we were so focused, though, on multi-family that it was a very hot market and we couldn’t really find anything. And just on a whim, we’re like, “Let’s switch our criteria on the app to single family,” and realized that there were some really great single-family opportunities in sort of our lower-income market. So that’s where properties number two and three are.

Lauren:

And property number three, we weren’t even looking for a property.

Kyle:

No. And we had known that this place was a little rundown because, when we were renovating property number two, we looked down the backyards and it was just totally overgrown. I mean, it was what you wanted to see when you were looking for a good BRRRR property. And Lauren … I think the wholesaler contacted you. Right?

Lauren:

Mm-hmm (affirmative).

Kyle:

We got reached out to by a wholesaler and saying that day that, “We’re looking to sell the place,” but we couldn’t come up with a number that worked for both of us. So after that kind of fell through with that wholesaler, a couple weeks went by and we realized they hadn’t sold. So Lauren came up with the idea, “Let’s just reach out to the owner and let’s just see if we can talk to them and we can come up with something.” So she did.

Lauren:

Yeah. The seller and the wholesaler ended their agreement, so it’s not like we circumvented her. And we reached out to the seller directly and we listened to them for a very long time. We identified the seller as someone who loves to talk. So we spent many hours on the phone with her, listening to her pain points and understanding what she needed and what she wanted. And we were able to come up with a win-win.

Kyle:

Yeah. We learned that she actually lived down in Florida. Her daughter had lived there for about five years and she had zero idea what the place was like because, when she left, it was pristine. It was dated, but it was clean. So, yeah. She had no idea what was happening.

Lauren:

She kept telling us that she’s going to come up and do a coat of paint and list it on the open market.

Kyle:

I had the opportunity, luckily, when we were working with the wholesaler, she actually was able to get me in there and I had already done a walkthrough. So I kind of already knew what the place needed, what our renovation budget was going to be about, when we were talking with the owner. So she’s explaining to me, “I’m going to come up there and do a coat of paint,” and I’m thinking, “No, you’re not, because it needs a lot more than that.”

Ashley:

Do you guys know how the wholesaler found you guys?

Lauren:

I do. So she said that she was just looking up owners around the location of the current property and she knew we weren’t living there. She can tell that our address was not the address of the property, so she assumed we were landlords, which I thought was extremely smart. Obviously, we would be interested in wanting to own a property near ours, which was exactly true. We were not looking for a property, but when this opportunity came, how could you turn down on that’s two doors down? So you could have more control over the block. And it’s a row block, so the properties are connected. So to have as much control of that block as possible, I think, would be beneficial to us.

Kyle:

Yeah. And we didn’t refile on ours, our property number two. So there wasn’t really too many comps comparable to the unit that we had. So when we were talking refinance, we semi knew, but we didn’t have a good grasp on what it was going to appraise at at the end of that renovation.

Lauren:

Yeah. It's a town that so many people buy distressed, renovate and keep that there's not a lot of sales on the book, so it's hard to know what the true ARV is, which was a little nerve wracking for us because we didn't know.

Kyle:

Yeah. For sure, it was. Yeah, because when we’re setting a budget, we can ballpark it but, hopefully, at the end it comes in high.

Ashley:

Right. Right. So before we get to the refinance, how did you guys pay for it? What did you purchase it for?

Kyle:

Yeah. So like we said, each property has been a different strategy. So this was our first kind of foray into using a private lender. So that's what we did. We used two private lenders that gave us enough to purchase and renovate.

Felipe:

Can you define private lender?

Lauren:

You're putting us through the book here. So private lender is someone who is similar to a hard money lender, except that this person could be someone that you know, personally, and they loan you money at an agreed-upon interest rate. Perhaps there are fees, there may be draws. And you sign some sort of documentation. In our case, we did a promissory note. And they lend you the money against the terms. And then, if you were to not pay them back, depending on your contract, they could either take the property from you if they're in first position or there can be a significant amount of late fees.

Lauren:

So in our instance, we chose private lending because we just used family members. And at first, we felt like we were begging for money and I hated that. I hated going to our family and our friends and asking if we can borrow money. And it felt weird and uncomfortable and we hated it. And now we’re in a position where we are not borrowing or begging. We are providing an opportunity and, throughout this process, we’ve had so many people ask us, “Next time you do a project, can we be your private lender?” And it’s crazy how that mindset and that lens and perspective has changed.

Kyle:

Yeah.

Ashley:

Especially since you guys still have done just three deals and you already have people wanting to invest with you. That’s really great.

Lauren:

Definitely.

Felipe:

It’s crazy what proof of concept will do for you. Same thing. At first, I felt like I was just out there begging for money. And after, like you guys, two or three deals, it was like more people were, “Can I invest with you? How can I help you?” It’s like, “Oh, okay. I like that better. I like that feeling a little better.

Kyle:

Yeah. We sat in on a Matt Faircloth at one of our meetups we can discuss later. But Matt Faircloth actually discussed pitching to a private lender. You could explain to them that in the fact that they can either have the money sit in a savings account, collecting little to no interest, invest in the market that he can’t guarantee what the return is going to be, or you can invest in me where I can show you on paper comps in the area, what they go for. This is what the property is going to value at the end and we’re going to pull money out and you’ll get your initial investment, plus your percent.

Lauren:

And I am a huge believer in putting things on paper to show people because it makes a big difference showing them the numbers, even a pie chart or anything, showing it to someone, whether it’s a private money lender or even a bank to show a loan officer what you’re going to do and even with your past, what you have done with numbers showing your profit from other deals or what your cashflow is. I think that’s really valuable.

Kyle:

Yeah, I think it’s definitely comforting to somebody that’s going to be giving a large sum of money to be able to see it.

Felipe:

So you got the property. Right? You ended up purchasing. That’s awesome. So what happens next?

Kyle:

So we kind of wanted to distance ourself from the renovation on this one. So we were going to go with a contractor, which we went with for about, I don’t know, a month and a half.

Lauren:

Right.

Kyle:

And he was just working way too slow. I mean, he was working at the rate … Actually, I think me, by myself, could’ve worked faster than this guy worked.

Ashley:

How did you find him?

Kyle:

So I got friends with a builder out in another county of Jersey. And all he did was he came to the area and went to the construction office and just asked for local contractors that do work in the area there. The construction office isn’t allowed to recommend anybody, but they can give you a list of trades, contractors. And that’s what we did. So we got a list of maybe seven or eight contractors. They came to the house, gave their bids, and we picked one.

Ashley:

Wow. So you went between seven, eight bids to pick one?

Kyle:

Yeah.

Ashley:

Wow, that’s awesome.

Kyle:

We went with the cheapest. So that was a learning opportunity, for sure.

Lauren:

Definitely a learning opportunity, but I will say when we walked through with him, he was the one that gave us the best suggestions. When we would walk into the bathroom and we said, “You know, we’re thinking about keeping this, but switching that out,” he would say, “Eh, I would really recommend replacing that down the line, XYZ.” And then the things that we wanted to change, he would say, “No, don’t spend your money there. I can do this instead.” And so we felt like he …

Kyle:

He spoke the investor.

Lauren:

Yeah. He spoke our language and he knew the area really well and we thought he would be a good partner. When we spoke with him, he said, “You know, my bid’s coming in low, but it’s because I want to build a relationship with you guys.” And we thought that that was genuine. And maybe it was, but his work just didn’t match. So after a month or so, we gave him the boot. And fortunately, Kyle is super handy so he was able to pick right up. And obviously, our renovation timeline slowed down significantly, but …

Kyle:

But we weren’t paying the labor cost, like we were with him. So luckily, we were doing job by job paying him instead of the full project where we were doing down payments. So that helped us out where he was done one job and then our relationship kind of ended from there.

Lauren:

So we renovated. It took about five months.

Kyle:

Yeah, five months.

Lauren:

And we definitely went over budget.

Kyle:

Not by much.

Lauren:

Not by much.

Kyle:

Couple thousand.

Felipe:

Good for you.

Kyle:

Yeah. So the first duplex that we did, we were way over budget.

Lauren:

We had no idea what we were doing.

Kyle:

We had zero idea. We knew how to do it, but how to project manage, we weren’t to …

Lauren:

We were going to Home Depot every day. We didn’t understand bulk ordering. We didn’t understand renovating by trade instead of renovating by room.

Kyle:

Yeah. So this one was … we definitely did a lot better and you could see it tightening up. So we were pretty close. I want to say we were probably only $2500 to $3000 over budget. And I want to say that that’s only because we chose to do a basement waterproofing that we didn’t necessarily need to do because a lot of properties in that area don’t do it. They just put a sump (pump) in and that’s it.

Lauren:

But one of our kind of philosophies of landlords and investors is that we really want to front load our investments to ease management down the line. So we do all new appliances. We do new mechanicals or service them if they still have some life left in them. New plumbing, new toilets. We do not want the calls at 2 a.m. So we really try to front load as much as possible and this town has a high water table and I do not want the call that there is a flood in the basement. And so we said …

Felipe:

And grandpa’s old war relics were destroyed.

Lauren:

Right.

Ashley:

Come on, Kyle. Isn’t that how you learned how to renovate? Wasn’t there water coming in?

Lauren:

That's true. That's true. So we were like, "Let's just spend the money." I mean, it definitely hurt a little bit. So I would say renovation, holding costs, transactions costs, like the private lending fees and the closing and stuff and our lawyer, came out to be $43 thousand. So $25 purchase, $43 thousand renovation, holding, and transaction. And then through this whole process, I'm extremely conservative. So when I was running the numbers, I was like, "You know what? Let's say that it's going to be appraise for 80. I think that will just keep us in a safe space." And we had the appraiser come out and it appraised for $117 thousand.

Ashley:

Wow. Awesome.

Felipe:

Congratulations.

Lauren:

And we were mind blown. So of course, we’re like, “Yeah, let’s take all 80% out!”

Ashley:

“Give me the money!”

Lauren:

Seriously. And then we ran the numbers and I was like, “Hold on. Let’s think about our goals. Our goals are not to own 100 plus properties. Our goal is to own a small, but mighty cashflowing portfolio and if we take out 80%, it will negatively affect the cashflow.” So we ended up taking out about 74%, which came out to $87750 was the loan. So we were able to pay back our lenders, pay obviously all the transaction costs and then get some cash for ourselves afterwards, which is what we ended up using for a down payment on property number four.

Kyle:

Yeah. We knew we were going to kind of piggyback this property with a house hack. So to have that extra money was huge for us.

Lauren:

And what was so exciting was using the BiggerPockets calculator and running the calculation and seeing an infinite return on the cash on cash [inaudible 00:31:27]. “This is so exciting, this is what they talk about!”

Felipe:

“We’re actually doing it!”

Lauren:

Yeah, yeah.

Felipe:

Lauren, I do have a quick question, though. So when you had to give the boot to the subcontractor, why didn’t you stop right then and there? I feel like a lot of newbie investors, rookie investors would probably have gotten freaked out there. Right? Where things aren’t going the way you plan on it going, even in the third property, what made you keep going even after that?

Kyle:

Because I was responsible for somebody else’s money.

Lauren:

Mm-hmm (affirmative). On our first property, we had people interested in either going in on it with us or loaning us money and the fear of failing with somebody else’s money killed me inside. And so I refused to do that with our first two deals. And on this third deal, we were playing with somebody else’s money and so giving up kind of wasn’t an option.

Kyle:

For sure.

Felipe:

That’s actually a great motivator.

Lauren:

Mm-hmm (affirmative).

Ashley:

Yeah. That’s interesting because, for my first deal, I didn’t feel confident or comfortable with doing it by myself. I found a money partner for my first deal and I had zero money into it and he put up the thing. So it’s interesting to see someone else who didn’t want a partner because they didn’t want to be responsible for their money, where I wanted that shared security in my first deal. Felipe, what did you do for yours? Did you use your own money?

Felipe:

For my first property?

Ashley:

Yeah.

Felipe:

Yeah. I did it on my own and I grew up with a dad that kind of made us work more than we wanted to. So when I got my own house, it was just doing a bunch of the work by myself, just kind of figuring out little by little.

Kyle:

That’s it, but when you were in that situation, you figured it out. Right?

Felipe:

Yeah. Exactly. When you get into that situation, it’s either sink or swim. And I think, just don’t sink, man. You just keep on pushing. You look like a duck. If you ever see a duck just going over water, it’s cruising along, but underwater it’s just flapping as fast as it can and I feel like that was a lot of my properties.

Kyle:

Yeah.

Lauren:

And I think that’s one of the things I love about this property is that, because we weren’t 100% sure on the ARV, when we started going over budget, I was panicking. “It’s only going to appraise for $80 thousand. What are we going to do?” And it really kind of put us in a corner and forced us to be creative. So we were able to save and cut costs in a lot of different areas where, if our budget was a little bit more cushy, I maybe wouldn’t have taken the extra effort.

Lauren:

So we had a roofer who was amazing, but was expensive, and this forced us to look for a new roofer. So we found someone who kind of does it independently and does a great job and did it for significantly cheaper.

Kyle:

Yeah. Actually, we forgot to mention, when we bought the house, we bought it as is. So there was furniture, basement was full. We would’ve had maybe about four dumpsters worth of, like, a 30-yard dumpster. Probably about four of them worth. We actually made a contact with somebody through our real estate meetup group that owned a dumpster company.

Lauren:

Yeah. We originally got a quote from a national junk removal company it came back double what I had budgeted.

Kyle:

I mean, so expensive. Unbelievable.

Lauren:

So we reached out to a contact at a meetup and he just happened to own a dumpster and haul away company and was able to do it for significantly cheaper. So just kind of putting yourself in these types of situations really causes you to be creative and think about different solutions. Where, in our first property, I don’t want to say that I had so much savings that we could do whatever we wanted, but there’s such a learning curve that, if you heard this roofer is good, you’re just going to use him because that’s the least of your problems at this point.

Kyle:

Yeah.

Ashley:

With the dumpster removal, though, why did you guys have to get rid of all that stuff? Can you tell us about that? Usually, when you buy a house, everyone moves all their stuff out. So if you could elaborate a little more.

Kyle:

Yeah. So this house had cats.

Lauren:

I mean, take a step back. So part of the agreement and the pain point with the seller was that she lived in Florida, she was far away, all this furniture was left for her daughter. Her daughter didn’t care about the house anymore. She got up and left and went and moved in with her boyfriend. And so part of the service that we can give, that a buyer on the open market couldn’t probably give, was the fact that we were going to take the house as is. And that meant all of its entirety. So it was heavy leather couches and illegal paraphernalia and cat feces and it was disgusting. But we were willing to do it and that’s how I think we landed the deal.

Kyle:

Yeah, for sure.

Ashley:

And you had said earlier that you listened to her, that you spent a lot of time listening. And I'll guess that you knew to tell her she could leave everything and that would be helpful for her accepting your offer.

Kyle:

Yeah. We felt bad because we could tell it was painful for her, because she didn’t realize the house had come to that state. And she had a lot of personal belongings there that got destroyed that she didn’t know about. So, yeah. We felt for her that she was in pain doing that sort of thing, going through that, and that was something we could help her out with.

Felipe:

Awesome. Okay. So before we move on, is there anything else that you want to add about this property? I mean, it sounds like you guys are going to hit a home run with the refi, but is there anything else that you want to talk about about this specific property? The cats, did you keep them?

Kyle:

We did not. They were all gone. Luckily … I thought we were going to come across some dead one somewhere. [crosstalk 00:37:08]

Lauren:

Yeah, like a skeleton.

Felipe:

Okay. So let’s recap a little bit for our audience here. So let’s say that I’m just out there listening to you guys talk and I hear this show and I come across it. I’m like, “Man, I want a deal just like this one.” So for our audience, why don’t you just quickly … let’s reverse engineer it. Go back to when you first started. What are some of the few critical steps that they could follow to get the same deal? I mean, your refinance came back at 20-30 grand more than you expected. So give us those highlight and those critical steps that our follower and our listeners can follow to find something similar.

Lauren:

Yeah. So reverse engineer is a great way to put it. I think it’s so easy to get stuck in analysis paralysis. We were in it for a very long time. I actually looked back to see when I joined BiggerPockets group and my account, I think, said 2013 and we didn’t invest until 2017. So there was many years of analysis paralysis in there. And so, yeah. Reverse engineering is a great way to put it. So you really need to just break down into small, attainable steps that you can do because the massive goal is so scary and can seem overwhelming.

Lauren:

So I would say, for this deal specifically, I think the market played a great part in it.

Kyle:

That’s exactly what I was going to say, for sure.

Lauren:

Yeah. Going back to how I read the hundred-page redevelopment plan, there is another city right next door that is all the hype. People are dumping a lot of money into it and it’s been up and coming for the last 30 years. And it hasn’t really turned yet. I mean, there are very small pockets, but it wasn’t a place that we felt comfortable yet. And I read that redevelopment plan. And basically, what I did was I read the plan and then … And the plans are usually a few years old. And I looked and did my research. And just by Googling news and Googling the town hall meetings and seeing what parts of the plan have actually been implemented. And this town that had all the type and this great redevelopment plans, very few things had actually been implemented.

Lauren:

And the city next door, which is where we invest, when they were doing the plan I did the same thing. I looked to see which features were actually being implemented. And while they may be being implemented a little bit more slowly, I actually saw action being taken place. So they built the new middle school. They put new street lamps down the main street. They hosted a music festival. They have plans to do a skate park and I actually saw action being taken place. So I would say that something is solidify your market and really focus on that. And talk to people who are also in the area. I think that’s one of the big things is, in our meetup group, we have other people investing in the area. So that’s one thing, I guess, is try to find your market.

Lauren:

And then this deal, specifically, Kyle brought up a good point and everyone says this. Find the house that’s not cared for. Find the absentee owner. Find the person who has a situation that a person on market might not be able to handle. And I think that probably is really intimidating for a first-time buyer to just go for an off-market deal, but there’s less competition there. When you’re on open market, there’s so many personal buyers, people who are buying for their primary residence, and then there’s a lot of investors. So drive and be boots on the ground I think is important, especially for your first deal. So you found your market, now start driving around.

Kyle:

Yeah. And once you analyze, don’t get emotionally attached. Make the offer that makes sense and, if you get outbid, so be it. You can move onto the next one.

Ashley:

And you guys are a great example of that because, like you said, that property number three was the perfect property, right down from your second property and you guys walked away when the numbers didn’t make sense. So you’re a great example of that.

Lauren:

Yeah. Patience was definitely helpful in this deal.

Ashley:

Yeah. That’s awesome.

Felipe:

I love it. I think that’s a great example. One of the things that I picked out of there, for sure, was that you didn’t just sit around and wait for a deal to come to you. Like you said, you were boots on the ground. You went out, you knew your property, you knew the community. That’s a big thing that I tell anyone that I help with real estate, is you need to be analyzing so many deals that you’re almost disgusted when you can’t buy one because you know that it’s going to work so well, so that when you are ready to pull the trigger or a deal does come across the table, it’s a no-brainer. Even for me, when my realtor sends me deals, I can tell just by the street name if it’s going to be something that I’m going to buy or not because I’m out there every single day.

Lauren:

100%. And thee are times when maybe we’re not ready to buy for whatever reason and I still stay so in tune with the market. I have a spreadsheet. Every house that is for sale, I keep track of what it was listed for, how much it’s been reduced, how many times it’s been reduced, how many days it’s been sitting. Then so I know that, when it goes off market and goes to a foreclosure, I have all background information on it. And then when we are ready to purchase or start looking again, we actually know what’s a good deal because, if you don’t have a pulse on the market, how do you know if it’s a good deal? I mean, yeah, the numbers might work in a certain way, but maybe the deal could’ve been better three months ago.

Lauren:

So I just think having a pulse on the market at all times, even if you’re not ready to buy, is super important.

Ashley:

Yeah. That’s a really great tip. I love that. And when you talked about how the wholesaler found you guys, that’s some way someone could find a property, too, is just they pretend they’re the wholesaler and look at people with out-of-state mailing addresses and solicit those properties.

Lauren:

Oh, 100%. I love that tip, yeah.

Kyle:

Yeah, [crosstalk 00:42:57]

Lauren:

I go full investigative mode trying to find people who own houses. How many houses do they own? Where do they live? How far away do they live? Do they own houses with anybody else? I have made link trees. I’m like, “Okay. So this person owns this business and this business owns these two properties and they own this other property with somebody else.” I mean, it gets addicting.

Kyle:

Yeah, because we were driving around just counting meters on the side of houses just to pick the ones that …

Lauren:

Yeah, that’s what I have my kids do. My kids are training to detect, “Mom, there’s a house with two meters.”

Ashley:

Okay. So it’s pretty obvious you guys are the MVPs of this deal, but we want to hear more about someone else or a group or anything that you think is the MVP. This is someone or something that plays a critical role in your business. We know you guys are DIYers, so you might answer this a little differently, but we call this segment the …

Felipe:

It’s the MVP, MVP, MVP. “I love that part.”

Ashley:

And we want to know, who is your MVP in this deal?

Kyle:

So I think we kind of came to the conclusion that our meetup group is actually our MVP.

Lauren:

Yes. Shout out to South Jersey Real Estate Investing group. We found this group when we first started investing. One of the founders was local to our area, as well, and started the group himself because there weren’t any in our area. And you don’t realize how valuable those connections are until you need them. And with our most recent deals, the individual that we reached out to for the junk haul, he was a member of the meetup group. And we’ve gotten our attorney, our lender …

Kyle:

Electrician.

Lauren:

… our electrician, so many subs and so many contacts from our group that they have saved us thousands.

Kyle:

Yes.

Lauren:

Just from these contacts. And then also just being able to bounce ideas off each other. When you first start investing, for the most part, you’re doing it alone. And maybe you have a partner, but you both kind of don’t know really what you’re doing.

Kyle:

How do you know what’s right?

Lauren:

yeah. When we first started, I was the analyzer and we would get a counter offer on a property and Kyle would say to me, “Well, can we go higher?” And I’m like, “I don’t know! I mean, we’re still cashflowing, but it cuts down on the return and is that good? I don’t know. Is that bad?” There’s really not a lot of people to talk to. And obviously, there’s huge communities like BiggerPockets and everything, but you still just feel alone. And so having a group of people who invest in your area and can speak more directly to what you’re going through has been so helpful.

Lauren:

And we haven’t necessarily worked with any of the members directly on projects, but we all invest in the same area and so we all just make sure we’re all tuned in. I have one investor who texts me all the time, every time a house sells, so that we can keep track of ARVs. I have another investor who is constantly telling me which renters to stay away from. So it’s a real communal effort and it takes a village. And I think that our group has been the true MVP because it’s made the learning curve a lot easier.

Kyle:

Absolutely.

Lauren:

I mean, we always kind of say …

Felipe:

I love that.

Lauren:

Yeah. Rising tides raise all boats and so you get what you give. And we give just as much as we get. Same thing, contacts, walkthroughs, a look at our appraisal, stuff like that. So we think it’s a group effort.

Kyle:

Yeah.

Felipe:

That’s awesome. So for some of our listeners that are like, “Okay. I want to find a great meetup,” what does that look like? What does a great meetup look like for someone who’s never been to one? It’s funny, I tell this story all the time about walking into a CrossFit gym and you see these acronyms like WOD and whatever of the day and I’m like, “This is not my people.” Right? So for someone who’s brand new, what’s the tips that you would tell them, “This is what you should look for in just a great real estate meetup?”

Lauren:

So I would say start by finding the individual. So I’m very big on Instagram and there’s a community in and of itself on Instagram. That’s how we kind of met originally. And I would maybe start by finding the people and then figure out what groups they go to because, why reinvent the wheel? If this group is working for this person and they’re doing well, I think it should be good for you, too. And then also, I think that kind of gives you a good gateway or a good introduction to the meetup. I know it can be very scary to go to a meetup and know not a single soul. And so what I kind of recommend people do is find an individual who is going to the meetup and just shoot them a direct message or message them on BiggerPockets and say, “Hey, I saw you were going to this meetup. I’m going, as well. Really looking forward to seeing you.”

Lauren:

And that’s kind of it. And then it just gives you that face. It gives you something to recognize. It gives you a reason to go up to that person and say hi. And I just think it kind of eases the fear of networking and being social in a crowd where you no absolutely no one.

Kyle:

I think it also helps you avoid those sales pitchy type of meetups where you can almost just build that community [crosstalk 00:48:12]

Felipe:

I went to so many bad one of those. Oh, my gosh.

Ashley:

Yeah. Lauren, I love your tip about finding someone on Instagram or Facebook or whatever because I’ve gone to a couple meetups where it’s at a local bar and I don’t know which group of people is the meetup. Maybe there’s only five people there and it’s those five guys sitting in the corner. And one time, I actually went to this meetup and I asked the bartender, I said, “Hi, I’m here for the real estate meetup.” They’re like, “Oh, upstairs.” So I go upstairs and I’m looking around and there’s a group of dressed professionals. I’m like, “Okay, I know this isn’t them.” So I look again on my app. There was two locations of this bar and I was at the wrong one. So I almost went up to this people and, “Hi, I’m here for the real estate meeting,” but luckily I checked my phone and I got to the right meeting and I recognized the person from BiggerPockets who had posted about the meetup. So I went up to him, but about an hour later another person showed up saying she went to the wrong bar, too. So I didn’t feel as bad.

Lauren:

I’ve actually done something very similar. Fortunately, I was in the right location, but I just went up to a group of people that were standing at the bar. I was like, “Hey, you guys here for the meetup?” Nope. “Great. Well, nice talking to you.”

Felipe:

“Who is this lady walking up?”

Lauren:

I wonder if they thought that was my pickup line.

Felipe:

That would’ve been hilarious. All right. So I’ve got another question, guys. So let’s say that I’m brand new, going into a meetup. How should I act going into a meetup? What questions should I ask? What questions should I stay away from? What’s the right way to approach a meetup if you’re just brand new?

Lauren:

So I hear some people kind of give the tip that you should have a goal in mind. “I want to find a lender. I want to find an agent.” And I kind of recommend the opposite. I think you should go into the meetup as open-minded as possible because you don’t know who you’re going to meet. I would say an easy question is, “So what kind of investing are you into?” You obviously know that they’re there for real estate. And maybe they’re an agent and they don’t invest and they’ll correct you and that’s fine. So I would say that’s a good question to start.

Kyle:

Even if it’s not that person, they’re going to know other members of that meetup and they’re going to say, “Oh. You should talk to Steve over there. He ‘s buy and hold, BRRRR in that area.” So you’re going to end up meeting a good contact that you’re there to meet.

Ashley:

Now, when you guys go to a meetup, is there a standard little flow you do in the beginning? You do a little announcement or you introduce everyone? How does your meetup kind of work?

Lauren:

So the one that we go to regularly has a mix of formats. Primarily, there is a presentation in the beginning and then about a half hour of networking. And then sometimes we do just straight up social ones that are at a bar, which we’re doing next week we’re really excited about. And then sometimes we’ll also do property tours. So we hosted one at our property number three.

Ashley:

Oh, cool.

Lauren:

And we had about 30 people or maybe 40 people come into our cat-pee-smelling house and we gave them a tour and let them know the numbers and our plans and what we planned on doing. And then afterwards, we went to a bar.

Kyle:

And it was perfect because there was about three or four other people that were investing in that area. And all of the construction style is basically the same, the layout, beds, baths. So it was helpful for them, just starting their renovations, seeing ours. We were about halfway through at the time. Seeing where we were at, where our numbers were at, and where we were putting money, what was most valuable for the refinance to up that appraisal value.

Felipe:

That’s really interesting. I wanted to ask, so why, and explain to our listeners, why you would want, quote-on-quote, “competition,” in our property walking around. I mean, to someone who’s just starting, they’re like, “Well, why are they going to have other investors all up in their cookie?” Right? So how would you guys say that?

Kyle:

Yeah. As Lauren said before, rising tide raises all boats. So when they pull a comp, we want that comp to do well because that, in turn, is going to make our property appraise high. So I’ve had no problem showing other investors where we’re invested.

Lauren:

And as I said earlier, we are not trying to have a hundred-plus-unit portfolio. And so we do not have the bandwidth or the want or desire to own every property in this town.

Kyle:

Correct. What happens if that town takes a dump?

Lauren:

Right.

Kyle:

Our whole portfolio goes down. So like I said, we’re not single focused in that area. So …

Lauren:

And we’ve never had an issue. We have a lot of fellow investors in the meetup who invest blocks away and it’s never been an issue. We are kind of just somehow on opposite schedules where, when we’re buying, they’re finishing up a renovation and when we’re finishing up, they’re buying. So it’s never been an issue.

Ashley:

That’s awesome. I love that sense of community you guys have developed in your meetup. Can you tell us, how do you find out about your meetup? If someone’s from you area, how do they get to know about it?

Lauren:

There’s an Instagram page. It is just SJREIG. And also, Justin Eaton, who is the founder of the meetup, posts about it on BiggerPockets. And the meetup person there, he posts about it every month and then he also posts it on Meetup.com.

Ashley:

That’s great. Okay, you guys. That’s today’s MVP is Lauren and Kyle’s meetup. If you want to find out more information about that, you can go to BiggerPockets.com/rookieone and we’ll post it in the show notes. And you can also go to, as Lauren mentioned, to BiggerPockets.com/events and you’ll be able to see their meetup there or one in your area.

Felipe:

Awesome. Okay. So we’re going to move on. And this is probably one of my favorite parts. We’re going to be going onto what we call the rookie request line. So this is where we have a few more questions for you, but before we get to that we are going to take a question from a rookie who has called in and is going to ask you a question.

 

Question:

“What is your best advice for finding realtors who know what they’re doing with investors?”

Kyle:

So our realtor, luckily, he does invest also in units in the area. Finding one, Lauren?

Lauren:

I would say go to your meetup.

Kyle:

Yeah.

Ashley:

Great answer.

Lauren:

There are always agents at your meetup and if they understand what you’re looking for, if they understand what investors motives are, they’ll be able to better serve you. Obviously, an agent who encourages you to raise your price or to just close or waives certain things in the deal maybe might not have the best interests in mind for you, but the majority of agents, especially if they know that you’re an investor, want your future business and they want to get you the best deal possible so that you’ll stay with them. It is definitely a long-term relationship and maybe you have to explain that to them, but if they’re aware of that and if they’re a good agent, they will definitely do what’s best for you and not just do what’s best for their commission.

Ashley:

Now, did you guy sign on with this realtor? Are you exclusive to them? Did you sign an agreement? I know sometimes realtors can ask you to sign with the that, if you purchase a property, that they will get a commission, even if it’s an off-market deal. Did you guys do that?

Lauren:

We did not. No.

Ashley:

No?

Lauren:

I was going to say, I was actually a little nervous after we bought our off-market deal and then we reached back out to our agent to search for the next property. I said, “I promise we didn’t cheat on you. We didn’t use another agent. We found this property on our own.” And he’s totally understanding and we came back to him. So I feel like that’s all you could ask for.

Ashley:

Good, good. Let’s start to wrap this up. We have a few semi-random questions for you guys.

Ashley:

If you guys want to be featured on an episode coming up, please give our rookie request line a call and leave a voicemail for Felipe and I. You can call at 1-888-5ROOKIE. 1-888-5ROOKIE and leave us a voicemail and we could play your question and have our guest answer it for you.

Ashley:

Okay. So let’s wrap this up. We’ve got a few semi-random questions for you guys and we’re going to give you a chance to tell everybody where they can find you after we go over these couple questions that Felipe and I have picked.

Felipe:

Absolutely. Okay. So this is one of my favorite ones because I was kind of nerdy in high school. So I want to know, what were you like in high school and what kind of cliques were you guys involved in?

Kyle:

Oh, man. High school. So I was definitely a skater/surfer boy in high school. So I mean, looking at me now, I would kill myself on a skateboard, but that’s what I did when I was in high school.

Lauren:

I’ve seen pictures. It wasn’t pretty.

Kyle:

I had a serious bowl cut.

Felipe:

Oh, gosh.

Ashley:

We will attach that picture in our show notes.

Lauren:

Yeah. I’ll send it to you guys.

Felipe:

Love it.

Lauren:

And then for me, in high school, I don’t know. I was super active in sports and I had kind of a big mix of friends. I was friends with all of the cheerleaders, but I didn’t cheerlead. I played volleyball, but I was still friends with all the theater kids. To be honest, I felt like my high school was very inclusive. And I felt like, because we had a small graduating class, we were kind of all friends. But, yeah. I was athletic and outgoing and had a really good time in high school.

Ashley:

That’s great and that’s probably a reason that you’re so good with communicating and talking with people and why you do so well with your meetup and meeting people is because of, with your high school background, just being friends with everyone. And I’m sure that’s carried to the meetup and made you guys great connections there.

Lauren:

I think so. Yeah.

Ashley:

Okay. So the next question I have for you guys is, what’s one bucket list item that you still want to cross off?

Kyle:

I don’t know.

Lauren:

We’ve actually thought about this a lot. Bucket list items are very difficult for us, but one that we’ve been thinking about recently is taking a boat down the east coast and stopping at all the coastal towns.

Ashley:

Very cool.

Kyle:

Yeah. We are very much ocean people. So I’ve had a boat my whole life, in some capacity.

Lauren:

I did for the most part, too. Yeah.

Kyle:

Lauren did for the most part, too. So we want to make travel kind of a priority in our lives, so it kind of mends the two together.

Lauren:

Yeah. We just got scuba certified over the summer. So we’re really kind of pushing this water thing hard.

Ashley:

Very awesome. And do you kind of see maybe a long-term boat trip that your real estate investments have helped you get to? Being able to take that long-term vacation from work or maybe quitting your jobs?

Lauren:

Mm-hmm (affirmative). I mean, that’s definitely a focus. When we first started … So Kyle, being in law enforcement, has a forced retirement age of 55?

Kyle:

Yeah.

Lauren:

Of 55. So originally, our goal was I want us both to be able to retire at 55 because, normally, officers will then have to get a second career afterwards. And that goal has shifted significantly after each property. And now … I mean, it’s kind of a little bit of a moving target. We’re going to see what happens when you have children, but we would love to retire significantly sooner or just take mini-retirement vacations like the boat trip. But we do think in ways of … Going back to Rich Dad, Poor Dad, we do think in ways of, how can our houses fund our lives? So once we kind of cover our basic living expenses, I want a boathouse. I want a house that pays for the boat.

Kyle:

Yeah.

Lauren:

I used to ride horses a lot when I was younger and stopped purposely because it was really expensive and we wanted to save for investing. So I’d love to get a horse house.

Kyle:

[inaudible 01:01:02]boathouse, I think, last week. I said, “So, that boathouse. When are we doing that one?”

Lauren:

Yeah.

Felipe:

I love that. That’s hilarious. So I’ve got a question for you guys. What tool or piece of technology could you not live without when investing in real estate?

Lauren:

So I feel like this is going to sound like a really basic answer, but I have found so much value … I’m waiting for Kyle to give me a look. I’ve found so much value in Instagram.

Kyle:

No, I agree.

Lauren:

Yeah. Okay.

Kyle:

100%.

Lauren:

There is such a deep-seated community in there of people who are trying to help. Obviously, if people are putting out their work on a social media platform it’s because they love it and they want to talk about it. And there have just been so many times where I have blindly DM’d somebody to ask for advice and they’ve given me the best answer or inspiration. Or people have called us out. When we were renovating our first house, we were laying down laminate flooring and we were laying it in a tile pattern.

Kyle:

So I’ve only ever laid three-quarter-inch hardwood, where all the pieces are all different sizes. I’ve never laid manufactured, where it’s all one size. So we just started laying it down.

Felipe:

And you have to cross them, yeah.

Kyle:

Yeah. So instead of sporadically making the first board a different length to throw the seams randomly around, we were just putting boards down and then halving the first one. So it looked really manufactured. You could see the pattern in the seams. So somebody called us out. And I was like …

Lauren:

Somebody called us out on Instagram. I posted on my story.

Kyle:

… “Why didn’t I know that?”

Lauren:

Yeah. They said, “Don’t want to be pushy, but that’s not how you do it. You should really throw the seams a little more.” And so I was like, “Kyle, this guy on Instagram told us we’re doing it wrong,” and I made him rip up the … We only got halfway through, but I made him rip up the entire floor.

Kyle:

Yeah. And we did. And I remember being like, “I know that. Why didn’t we do that?” So stuff like that. Even when we were getting water in the basement, I just threw on there, “Anybody got any ideas?” People came back with all these ideas around how to tackle that water issue. So, yeah. I was going to say Instagram, as well. I mean, it’s …

Felipe:

I love that you guys went back and did it right. I want all listeners to know that that’s very important. Take positive advice and make those changes and you’re not going to run into problems later.

Ashley:

It’s probably hard for that person to reach out to you guys, too, and actually tell you that because sometimes it can feel like you don’t want to criticize that person. And for you to actually take their advice and to roll with it, like Felipe said, is great.

Lauren:

Definitely. It really is the crowdsourcing of information. There’s so much knowledge. There’s so many people on the platform.

Kyle:

And so many people doing it a lot longer than we have that have been there. So you’re not only gaining their knowledge, but all of those years of experience, as well.

Felipe:

Love that.

Ashley:

Yeah. I 100% agree. I love the Instagram community. That’s how Felipe and I met and that’s how I met you guys.

Lauren:

Exactly. Yeah. We’re in a little mastermind group together and I love it.

Ashley:

Yeah. Okay. So now we have a little bit of rookie hazing. But don’t worry, we’ll help you guys out. What song is your guilty pleasure and can you sing a little bit of it for us?

Lauren:

This is all Kyle.

Kyle:

Lauren doesn’t know song lyrics. So, yeah. Weirdly enough, my guilty pleasure song is definitely Hilary Duff, Coming Clean. If you pop that song on in the morning and get in the shower, it’s like the greatest way to wake up. I [crosstalk 01:05:09]

Felipe:

I just can’t see you getting ready, as an officer of the law, with Hilary Duff bumping in the background.

Kyle:

Oh, yeah.

Lauren:

And he wakes up at 4:30 because he has to go to work at 6 a.m. So it’s 4:30, shower going, Coming Clean is blasting and it’s every morning, over, and over, and over again.

Kyle:

Oh, yeah. It’s the best song. It’s the best song to wake up and take a shower to.

Felipe:

You’ve got to start singing it for us. You have to.

Ashley:

Yeah.

Kyle:

[Singing 01:05:31]

Ashley:

[crosstalk 01:05:33]

Kyle:

And I was a huge Laguna Beach fan back in the day. That was my jam back in high school. So that was the theme song for it.

Ashley:

Oh, okay, okay. Oh, that’s great. That was really good. Our first hazing. You did it very well.

Kyle:

And I have no professional training [inaudible 01:05:58].

Lauren:

Might be hard to tell, I know he did really good.

Ashley:

Yeah.

Felipe:

So funny all right. So guys, where can people find out more about you?

Lauren:

If you haven’t guessed, Instagram. Our handle is @rentalstowealth. We are on there very often and that is where we are most active. We post all updates about what we’re doing with our projects and I’m very good at answering every DM. So if you have any questions, that’s the best place.

Kyle:

Me too.

Lauren:

Yeah. Kyle’s good, too.

Felipe:

“Kyle’s okay. I’m better.”

Lauren:

If it’s a renovation question, I give it to him. I just want to make sure I sound like I know what I’m talking about.

Kyle:

Yeah. We have our roles. We know who’s going to answer. I don’t even attempt to answer any management questions because she’s the …

Lauren:

Yes. And then we both have accounts on BiggerPockets. We’re definitely on there pretty often, but for us Instagram is where it’s at.

Ashley:

That’s awesome. And then we’ll link all that in the show notes at BiggerPockets.com/rookie1. Okay. Well, thank you guys so much for talking with us today. This was a wealth of information.

Lauren:

Thank you so much for having us. This was so exciting. We feel honored to be the first guests and we’re very excited for you guys and very excited for all of the listeners because this podcast is going to be very beneficial for everyone and it’s awesome.

Kyle:

Yeah. It’s awesome. Thank you so much. This was a pleasure.

Ashley:

Yeah. Thank you, guys. I'm Ashley at Wealth From Rentals. He's Felipe at Felipe Mejia REI. And make sure you join our Facebook group at Real Estate Rookie, if you search that on Facebook. And don't forget to check out the show notes at BiggerPockets.com/rookie1.

Felipe:

You guys have a good one. Bye now.

 

In This Episode We Cover:

  • Lauren and Kyle’s backstory
  • How Lauren overcame 4-year analysis paralysis
  • How Lauren and Kyle balance full-time careers with real estate investing
  • How the BRRRR strategy worked for them
  • Why they let other investors (their “competition”) walk through their property
  • Why their MVP is their real estate meetup group
  • Rookie Request Line: “What is your best advice for finding real estate agents who know what they’re doing with investors?”
  • And SO much more!

Lauren and Kyle’s First “True BRRRR”: The Details

  • Purchase Price: $25,000
  • Repairs: $43,000
  • Total Project Cost: $68,000.00 
  • After Repair Value: $117,000.00 
  • Estimated Rehab Time: 5 Months 
  • Time to Refinance: 7 Months
  • Loan Amount: $83,000.00 
  • Amortized Over: 30 years 
  • Loan Interest Rate: 4.75% 
  • Monthly P&I: $432.97 
  • Cash-on-Cash Return: Infinite!
  • Lauren and Kyle’s full BiggerPockets calculator report for this deal

Pro Tip: Using Appraisal Reports Before Renovation

From Lauren: 

“When utilizing the BRRRR strategy, you want to ensure that the updates being made will add value and force appreciation. To do so, it’s important to understand how an appraiser will value the renovations. 

You can do this by reverse engineering an appraisal report (click to see Lauren and Kyle’s full appraisal report!). When looking at the report, you can see not only what features are being analyzed, but also the dollar amount assigned to each feature. Please note that this assigned value will vary greatly by market so please do your own research. 

For example, we originally assumed that an “end unit” property (at the end of a row of connecting houses) would give the property a much higher value… but according to the report, it only adds $2,000 to the appraised number. While it may make it a more attractive place to live for a tenant, it doesn’t give you much advantage in the refinance portion of the BRRRR method. 

This report also highlights that adding the feature is more important than the type of feature. For example, the line item for a fenced in yard, just says “fenced in.” It does not speak to the type of fence whether it be short chain link or six-foot vinyl. So, depending on the market of course, it may be smarter to use a lower-cost solution like chain link over a more costly one like vinyl. Your return on investment will be higher.”

Links from the Show

Tweetable Topics:

  • “House hacking is investing on training wheels.” (Tweet This!)

Connect with Lauren and Kyle

Some Before and After Photos

Ready to go take action? Every Wednesday, the Real Estate Rookie Podcast will arm you with tips, tools, and inspiration to help you launch your real estate investing career. Hosts Ashley Kehr and F...
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    Account Closed
    Replied 7 months ago
    Great story with concrete examples of how to do it. My question is, in 10-years when their first property has appreciated sufficiently, why not 1031 Exchange into a property with double the FMV. Instead of having a $200,000 rental historically appreciating at 3.9% you could have a $400,000 rental historically appreciating at 3.9%. In ten more years repeat the process and voila, one SFH has morphed into a $800,000 property. Also, because you used the equity from the first SFH your out-of-pocket expenses are zero and you paid zero taxes on any capital gains and recapture of depreciation. Smart investors know the 1031 Exchange is a Real Estate Wealth Building Tool and provider of Lifetime income, not just a temporary method to avoid taxes. The Rich know this and have used the 1031 Exchange for nearly 100-years.
    Lauren C. Rental Property Investor from Hamilton Township, NJ
    Replied 7 months ago
    Hi Thomas. That's certainly something we've been educating our selves on to take advantage of the exchange in the future. Completely agree it's a great way to make your money work smarter. Thanks for listening!
    Nicole Heasley Real Estate Consultant from Youngstown, OH
    Replied 7 months ago
    Trying to find the podcast on Castbox! Will it be available soon?
    Mindy Jensen BiggerPockets Community Manager from Longmont, CO
    Replied 7 months ago
    Nicole, it's now available on Castbox.fm
    Stephen Kappre Real Estate Agent from South Jersey
    Replied 7 months ago
    Great STUFF !!!
    Lauren C. Rental Property Investor from Hamilton Township, NJ
    Replied 7 months ago
    Thanks Stephen!
    Bryon Blake
    Replied 7 months ago
    Thanks for this podcast. Perfect timing as I plan on going to my first REI meetup on Monday. Looking forward to future episodes.
    Lauren C. Rental Property Investor from Hamilton Township, NJ
    Replied 7 months ago
    Hope you got something out of it. Good luck at your first meetup!
    Joe M. from Erie, Pennsylvania
    Replied 7 months ago
    Great first episode. Looking forward to others
    Don Taylor New to Real Estate from Raleigh, NC
    Replied 7 months ago
    Great start!! Learned a lot, looking forward to more from this podcast
    Michael Gaskill Handyman from Peninsula, OH
    Replied 7 months ago
    Anyone else having trouble finding the Facebook group? Is there a link perhaps?
    Steven Betz from New York
    Replied 7 months ago
    Glad to get on board with this one on the first episode. It's full of amazing information
    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied 7 months ago
    Congrats on the new podcast Lauren and Kyle!