He Made $60,000 in 2 Months with This “Failed” Real Estate Deal

Ashley Kehr:
Caleb Smith started listening to BiggerPockets at 16 years old. On his first day of college while everyone else was moving in and heading to orientation, Caleb was touring investment properties with his dad. He passed on one that felt like too much work and watching what happened to that property became an early lesson in the cost of waiting.

Tony Robinson:
But years of studying real estate didn’t protect Caleb from making rookie mistakes when he finally did buy something. And once he moved home to one of the country’s most expensive markets, the rental strategy he had planned for years just kind of stopped making sense. So today we’re breaking down how Caleb bought his first home with almost no money, what he learned when a single zoning detail derailed his next plan and how he’s building a strategy around the market he actually had.

Ashley Kehr:
This is the Real Estate Rookie Podcast. I’m Ashley Kerr.

Tony Robinson:
And I’m Tony J. Robinson. And with that, let’s give a big warm welcome to Caleb. Caleb, thanks for joining us on the podcast today, brother.

Caleb Smith:
Hey guys, excited to be here.

Ashley Kehr:
Now Caleb, 16 years old is when you discovered BiggerPockets and started listening. How did you find BiggerPockets and what made you interested in real estate investing?

Caleb Smith:
Yeah, so I was manning the grill at Jersey Mike’s, making the steak and cheeses, and my manager at the time became a good friend of mine. He was probably 20 years old and he was listening to these podcasts about how to do a pad split, how to invest out of state, and sent me a podcast on Seattle Pad Split investing with BiggerPockets. And I listened to it. It was right when I had gotten my license and was immediately hooked. I’ve always been entrepreneurial, and so it seemed like a cool way to find deals and also the idea of not having to work and getting paid. At the time, it seemed like a beautiful thing. Obviously, there’s a lot more that goes into it, but that was kind of what hooked me in.

Tony Robinson:
And then we fast-forward a few years and your first day at college, instead of doing what other college presidents are doing on day one, you are surprisingly productive and you’re touring investment properties. First, why on day one? And then second, what happened to the properties that you looked at?

Caleb Smith:
Yeah, so mostly they just don’t let you have a car at college. So it was my one day of access to a car is when my parents dropped me off. It was the fall of 2020, which was COVID, and I had just turned 18, which meant I could buy and sell stocks. So I had grown my portfolio from working at Jersey Mike’s to an amount where it could reasonably be a down payment for a house in Harrisonburg, which is a cheaper market.

Tony Robinson:
Caleb, I’m sorry, just really quick, I just want clarity on that. So we got to pause there because that’s an incredible, I think, starting point. How much capital did you start with on the stock side and what did it grow to during that timeframe?

Caleb Smith:
Yeah, so I’ve always been a saver. So I had about 8,000 saved up just from working, mowing lawns, working on a farm, working at Jersey Mike’s since I was about 12 years old. And I turned it into 20,000 bucks. I though I was Warren Buffet. Now I realize I have actually less than zero skills. I’ve managed to lose money in every other market, including the biggest bull market in American history. And I think if I put all my chips in on the Mag seven today, it might crash the global economy. So it was purely luck. I went into these two properties that I’d identified as potential student housing and actually hired an agent from the brokerage I ended up working for, which was just like a happy coincidence. And there was a house listed for $165,000 in pretty much central Harrisonburg. And I ran the numbers.
I though it was a good deal. My dad was like, “This is not going to be good.” It was built in, I think the 30s, lead-based paint, asbestos, who knows about the termite damage, everything. He was just like, “This is way too much for you to handle right now. You should pass.” So I get really excited about things, and a lot of the times it’s good when people pull me off of deals because as the people I work with say I find a deal in everything. So that was kind of the lowdown on my first day of college.

Ashley Kehr:
So with that property, what ends up happening where you actually get your first deal?

Caleb Smith:
Yeah, so I graduated college a year early, mostly because my dad said he’d pay for three years, which was a blessing, but I didn’t want to pay any student loans. And so I wanted to still live with my buddies and rent was only 400 bucks a month in Harrisonburg. And so I was working as a bartender at a Cuban restaurant and got my real estate license and joined a commercial brokerage. And one of the first things I did when I got MLS access was just look up what happened to that property that I wanted to buy. And I think it was more the fact that it was one of the highest appreciating markets in US history and not the fact that I had identified a great property, but it was bought shortly after I looked at it and then sold again from 165 to probably 270, and I didn’t see much work that had been done.
So kind of kicking myself over that one.

Ashley Kehr:
And that would’ve been three years later, right?

Caleb Smith:
Yeah. And my stock portfolio went down from 20K to 4K in those three years. So it was kind of a tale of two cities, I guess.

Ashley Kehr:
So now seeing this, okay, does this motivate you even more that you’ve got to get into real estate investing or what happens from that point on?

Caleb Smith:
Yeah, I think it was super motivating. And about around this time, so I got my real estate license in September of 2023. In August of 2023, my dad gave me a call. He said, “Hey, there’s this guy I went on a missions trip with to Honduras and he has a rental. He’s looking to sell it, doesn’t want to go through all the rigamarole of going on the market, commissions, all that.” He was like, “I think this house is worth probably around 450,000. This is in Western Loudoun County, Virginia. And I think if he offers it to you for something around 400, it’s a good deal.” And so I was like, “Okay, I think let’s just let him say a number first. Who knows what he’s going to say?” And my dad texted me back. He said he wants 329 for it.

Ashley Kehr:
And your dad had thought it was over 400,000 worth, right?

Caleb Smith:
Yeah. And I mean, this estimate probably isn’t worth the ink that it’s used, that it’s written on, but this estimate was at about 489, 500 area between the different third party sites. So I obviously get ridiculously excited. I’m like, “We’ve got to figure this out. I have $2,000 maybe to my name at this point due to some car trouble.” And so my dad’s like, “Hey, if you don’t buy this, I will, but I’ll give you a loan. You can just pay me back when you sell the property or when you refinance.” And so that was a massive help. Couldn’t have done it without it and bought that property. And then my wife, who I ended up marrying probably nine months later, moved in.

Tony Robinson:
How old were you at the time, Caleb? But you said you just graduated college.

Caleb Smith:
Yeah, so I graduated college probably a month after I turned 21 and got engaged to a girl I started dating freshman year of high school. We got engaged. She graduated a year early as well. And so at that point I was 21. I ended up getting married probably two weeks before my 22nd birthday.

Tony Robinson:
Got it. So you buy your first rental with two grand in your pocket at 21 years old. That’s a great starting point. Walk us through the actual numbers on the deal and what was the game plan? Was this supposed to be a house hack? Was it supposed to be a flip, a burr? Walk us through the strategy and the initial numbers walking in.

Caleb Smith:
I think the initial strategy was, wow, this guy’s willing to sell the house over a hundred thousand under what I think it’s worth. And then I was initially planning, hey, I’m going to keep this for a couple of years. Once we get a new house, I’ll rent it out, kind of just keep buying houses on conventional loans, rent them out. The numbers on it, he offered it for 329. I was still aghast at what the monthly payment was because my interest rate was seven and a quarter. And so I got him to bump up the sales price to 335 and write in a $6,000 seller credit. So it was the same net to him and he wasn’t paying commission, so it didn’t really affect him. And then used that 6,000 for a 2-1 rate buydown. So the rate was five and a quarter and then six and a quarter for the past two years.
And then I recently did a refinance to six and a half and it was a free refinance. I actually got paid back for it because I bought up the rate because I don’t think it’s necessarily our long-term home, but got to lower the rate to six and a half and got probably 1,500 bucks.

Ashley Kehr:
When you had it appraised, did you have to have it appraised when you refied? And how did the appraisal turn out?

Caleb Smith:
So the original appraisal, and you guys know how it is, they can see the contract price, and so it’s kind of an interesting industry. So they originally appraised it 375 when I bought it. And then I think the value, I think it was 450 or 475. I might’ve even gotten an appraisal waiver on it, to be honest with you, but the online portal shows their anticipated value and what you could get from a HELOC. And so the highest I’ve seen on that is 489. I think right now it’s probably hovering around 460.

Ashley Kehr:
The renovation, did you do a huge renovation on this? How much money did you put into any rehab on it?

Caleb Smith:
Yeah, so the carpets were terrible in it and it was very 2010s. The house was basically rebuilt in 2011. It’s a 740 square foot house, that’s kind of the market in Western Loudoun. My dad is a luxury home builder in the McLean, Vienna area, Arlington. And so he was like, “Hey, we’ve got scraps left over from another job. Do you want to just pay the guy to install it?” And so the scraps from this luxury build was big enough to put new carpet down in both bedrooms. Since then, I paid my buddies in beer and pizza to put in a floating patio, which I think was about $2,000 in supplies, but really made the outside more usable. And then I got Subway tiles on the backsplash. So I’ve probably invested a total of 10 grand into it, but nothing crazy.

Ashley Kehr:
But not over a hundred grand of how much it’s worth now compared to when you purchased it. Yeah, that’s awesome. Yeah.

Tony Robinson:
It’s the strength of buying a good deal. Ash, I’m just curious, I actually just learned this yesterday. I was talking to another investor, but just going back to the appraisal, because I agree, Caleb, I think the appraisal whole process is just kind of weird. It’s like how is it that just so often it’s the exact purchase price, right? But I just found out yesterday that you can actually move your appraisal from one lender to another. Have you ever been able to do that, Ash?

Ashley Kehr:
No. And actually there was one time, it wasn’t me, I think it was Daryl that was doing a loan and he switched the lenders, but I don’t think they did take it, but you know what? We might not even have asked to switch it. We might have just assumed.

Tony Robinson:
I definitely have because there’s been a couple loans where it’s like you talk to one and they’re like, oh, I can do it, then they can’t. And you’re like, okay, well, let me go to this new person. Hey, can you just use this old appraisal? No, we can’t. But I just found out that it’s like a lender by lender decision, and there are some lenders who don’t and they have to use their own appraisals. And I guess I just had the luck of only working with those types, but there were other lenders who were like, “Yeah, we take other appraisals all day.” So just know if you’re a rookie and you do have some appraisal issues, the first question and the biggest question to ask is, “Hey, can you use the appraisal that’s already done if you’re switching lenders for that reason?” Yeah, it is a weird industry, Caleb, in that way, that it almost always aligns to the purchase price.

Caleb Smith:
Yeah. And I even was on the listing side recently and I always call the lenders to do some due diligence and he was like, “Yeah, I’ll try to be flexible with when we’re getting this appraiser. And we have 30 appraisers we typically use, and if we get assigned one that is bad, I will move the appraisal around.” And I was like, “I mean, what is even the point of this?”

Tony Robinson:
So I mean, overall, it sounds like the first purchase went relatively well, but were there any moments, Caleb, where being a rookie first time home buyer, 21 years old, where that lack of experience came back to bite you?

Caleb Smith:
Yeah, I mean, I think I was super nervous and my fiance at the time, now wife, is super supportive, but I generally take the lead on those kind of things just because I really have been excited about real estate investing for a long time. And so to point to a couple things, I’ve never sold a house where I didn’t strongly push my buyers to do a home inspection. And the town I live in specifically is known for having massive septic issues as well as wells that are shallow. So in retrospect, I never would’ve bought the house without doing at least an informational home inspection with the right to void and doing a septic and well inspection. Now, I got lucky on it, but that whole $100,000 could have been 20 if there was a massive septic issue and I needed to put a new drain field in, all that stuff.
And then I got a recommendation for a lender, great guy. He did walk me through it, but when it came to the rate and the origination fee, I’ve never seen a higher origination fee in my life. And in talking to other lenders and now working with lenders all the time who are trying to get my business, they’re sometimes doing it for free just because they know, hey, if we have a good working relationship, he’s going to send me some options. So those were hard lessons that I learned early. And now even when I’m talking to my buyers, I have several lenders that I recommend to people and I always say, “Hey, make them compete. They’re trying to get your business.” Whereas I didn’t think I could shop the rate at all.

Tony Robinson:
Caleb, that’s a great point. And you hit on, I think, an important element that a lot of rookies don’t understand. First, talk to us about what the origination charges are and what was the number that you saw that was a red flag for you?

Caleb Smith:
Yeah, so there’s a lot of. You could get a loan sheet from two different lenders and one lender, say for easy numbers, is at six and a half percent and one’s at 7%. And the tricky thing about it is sometimes they can hide that they’re buying points, buying down the rate, and you’re not seeing that unless they give you an estimated settlement cost statement. And there’s also a lot of hidden junk fees, processing fees, higher than necessary credit fees. But the specific fee on top of a huge processing fee and several other fees was the origination fee, which is pretty standard on most sales, but I believe it was at 1.75, which generally when I see it with my buyers, it’s at 0.75 or 0.5. So it was just almost $10,000 in lending fees on a $280,000 loan without even the points that I bought as well.
So I could have shopped it and pretty easily gotten 5,000 off of it if I had just been more aware at the time of the purchase.

Ashley Kehr:
I’ve noticed that too, is going to mortgage brokers, it’s way more expensive than if I go to a small local community bank as far as what my loan fees and costs are. It’s really a big difference that I’ve noticed too. So when you returned to Northern Virginia after getting married, why did the traditional rental strategy seem to be the path that you wanted to take?

Caleb Smith:
Yeah, so honestly, it was mostly from listening to probably 600 to 700 BiggerPockets and BiggerPockets rookie shows. And I thought the model of having rentals, slowly building equity, looking up in 35 years and having seven paid off homes was really attractive. And while I’d love to go that route, and I think long-term, I might kick myself for cycling through properties at best without expenses I’m breaking even after principal interest taxes and insurance. So it’s just not realistic. I mean, I have a client right now that’s looking for multifamily in Northern Virginia and he sent me something and I was like, “Man, this looks awesome if you’re fine paying $6,000 a month to live in a 600 square foot apartment.” So things just aren’t cash flowing. Anyone that’s buying is buying all cash for appreciation. And as a 21-year-old for the rest of my life, I’m just not really interested in buying something that negatively cash flows that extremely.

Ashley Kehr:
So this made you actually decide to switch your strategy and you no longer wanted to do long-term rental. So what became the new path forward for you?

Caleb Smith:
Yeah, so it was actually a BiggerPockets episode where they talked about the live and flip strategy. I have pursued flipping houses in the past and with varying success, and that model seemed more interesting because you’re not paying short-term capital gains. If there’s a severe market downturn, you can stay in the house as long as the payment fits, and it’s a way to capitalize on the upside and also hedge against the downside. And so that became my model, at least in Northern Virginia.

Tony Robinson:
Caleb, can you define live and flip for rookies that aren’t familiar with that phrase?

Caleb Smith:
Yeah, so I think it’s just like any other flip, except you’re buying a property that you think you’re buying under market value, you are renovating it, making it worth more. And then on my timeline, it’s after two to five years selling it and rolling that profit into the next one. And not a tax professional, but if you own a primary home for more than two years, you can sell it as a single person and take the first $250,000 of profit tax-free, or as a married couple, you can sell it and take the $500,000 worth of profit tax-free. And so it’s a lot more attractive and kind of the only way to avoid paying Uncle Sam that I know of. So I think that’s what makes it attractive.

Ashley Kehr:
Now, as a real estate agent, did you have any advantages or opportunities to find these potential properties that would make great living flips?

Caleb Smith:
Yeah, I think I have the advantage that I’m looking at it all day every day, but of the properties that I’ve bought or offered on, I’ve offered on four houses in my neighborhood from just knocking on their doors or sending letters, and so anyone can do that. And then the triplex I’m currently purchasing was just a friend who’s a real estate agent, and I told him I don’t need to represent myself if you’re going to bring me this lead because I wouldn’t want to cut him out. And so I would say no.

Tony Robinson:
Caleb, one follow-up there because you mentioned just knocking on doors, and I think for a lot of rookies, even Ashley, knocking on doors is probably one of their biggest fears and nightmares. So when you knock on their door, what are you saying? I feel like that’s probably one of the highest sales resistance type moments is you just knocking on someone’s door with some sort of picture presentation. So what does that look like for you to open up that conversation?

Caleb Smith:
Yeah, I mean, as a way to get listings, I’ve knocked on expired listings, so that is something I’m a little more used to, but there was a house right behind my house that was in complete disarray, and I was like, “Wow, this would be a perfect flip.” I was talking to my buddy, Trent, who at the time was a project manager, and I was like, “Man, I think we could make some good money if we purchased it and they’re living in Squalor essentially, and so they could buy a house 30, 45 minutes away that’s really nice and restart. And I think we can make good money on this and I can actively manage it and then sell it on the back end and we can split the money.” And so I ran the comps beforehand and I knocked on her door five or six times until they were willing to answer essentially, and they let me in.
We probably talked seven different times. I was reaching out probably every week or two, and it got down to it. I initially offered 225 for the house. My final invest was 275, and she was thinking about it, and they had been in the house forever, and it was, I would say, pretty unlivable. And I was like, “I got to be honest with you, if we went on the market with this or if you shopped the price, you probably could get more, probably around 300,000.” And she ended up selling it to an investor for 300,000, and he is flipping it. And I think we had a good relationship and they appreciated my honesty. And so they were like, “Hey, the house down the road, this guy wants to sell as well. You should drop a letter off.” And so I dropped the letter off, didn’t think much of it.
It was a pretty vacant looking house. And he calls me probably a month or two later and said, “Hey, I’m open to selling. Let’s have a beer in his house on a Monday.” And so I did that and we kind of hung out. He’s a great guy, and I told him what I was willing to offer, and he though about it for a couple months, and I just would check in every few weeks. And eventually he was like, “Yeah, I’m willing to sell the house for that price.” And so yeah, even though the initial door knock didn’t work out, it did directly lead to the next one.

Tony Robinson:
And activity tends to lead to more opportunities, so I love seeing that come to fruition for you. But if we go back to the initial door knock, when you said you knocked five or so times, when they finally opened the door, what are you saying to them to even start that conversation like, “Hey, my name’s Caleb. I’d love to buy your house.” What is the opening statement? If a Ricky wants to replicate, they see a property, they just want to go knock on the door, how do they open that conversation?

Caleb Smith:
Yeah, I mean, it’s definitely an adrenaline rush, and I sometimes have a tough time getting words out, but I would just knock on their door every time I walked my dog. And I have a super cute, very feisty dog. And so I was like, “Samson, back off.” He’s like a 12-pound dachshund. And I was like, “Hey, I live next door. I’m your neighbor. If you ever think about selling, I’d love to buy your house. If you want me to bring by lunch tomorrow, I can show you what my offer would be.” So I picked them up Jersey Mike’s subs the next day. Well, it actually was Jersey Mike’s. I didn’t even make that connection.

Ashley Kehr:
Jersey Mike’s needs to sponsor this episode.

Caleb Smith:
Yeah. I mean, they sold out to private equity, so I’ve heard that the meat, it’s a little bit less meat now, but –

Ashley Kehr:
I actually just, not to go on a tangent, but I just saw a reel this morning where somebody. Actually, it was Dave Meyer, the host of the real estate podcast. He shared it onto his story and it was a guy making a sub and said, “This is my application to be hired at Jersey Mike’s.” And it was just like, I didn’t completely get it, but now I do as you saying there’s not enough meat because that was literally little tiny slices of meat and then just loads of vegetables, just thousands and pounds. And then he wrote hired that he achieved it.

Caleb Smith:
Yeah. And their thing used to be just loading it up with meat. And so anyway, yeah, I brought that by and that really greases the wheels. And so we talked for a while and I also brought five or six options that with the money they would make on the sale that they could buy in cash probably 45 minutes away. And so I thought that was a good idea at the time. Obviously they didn’t sell to me, but I think that’s a decent tip to anyone. If you’re in that exact situation, bring them a potential house that they could buy with the proceeds.

Ashley Kehr:
Now, Caleb, one thing you had mentioned was you always want your buyers that you are representing to get an inspection. So did you get an inspection on this house too?

Caleb Smith:
Yeah, so at this point I’ve been selling real estate for two and a half years, so I knew the things I needed to do as far as due diligence. And so I did a well inspection, I did a septic inspection, and I did a home inspection. So the numbers on that deal, I was under contract for 325,000, and then the chimney fell off the house. And so while I was under contract, which I have on my Instagram, I did a little AI video of that, but he gave me a 7K seller credit for that. And so we did the whole home inspection and basically found out that the kitchen was built on a finished porch. So they basically slapped a roof on the porch and finished out the porch. It was six-foot ceilings in the kitchen, and instead of being able to build out that kitchen, we were going to have to tear it off and build a new kitchen.
And so I was like, “Hey, I don’t think I can do it at 325.” And he’s like, “Okay, how many tens of thousands are we talking?” And I was like, “Okay.” So I asked the number, he thought about it for a couple days, and we ended up taking 40,000 off the sales price because we were going to have to take the kitchen off. And so it ended up being 285 with a 7K seller credit, which covered my closing costs, and they gave me a check back at closing for 1,500.

Ashley Kehr:
And what type of loan did you do on this? Did you do another conventional loan?

Caleb Smith:
Yeah, so I was planning to and talked to a few of my lenders about it, and then walked through the house with that mindset and was like, “No appraiser is going to deem this house livable.” And so I talked to four or five people and Mike Acorder, who I work with, he’s the principal on my team, he was like, “Okay, I’ll give you a loan.” And so we ended up doing a hard money loan, and that was a typical 10% hard money loan, and then jumped to 12% after a certain amount of months. But he wasn’t going to break my kneecaps, I don’t think, if I was a little late in payment.

Tony Robinson:
So did you guys actually move into it? Because the initial strategy was a live-in flip, or was this just a straight out, a regular flip?

Caleb Smith:
So good call. The live-in flip would’ve entailed getting a conventional mortgage on it. And so what the hard money loan did was allow me to not commit mortgage fraud because you have to move into a primary within 60 days of getting a conventional loan, and I knew that just wasn’t going to be possible, and my wife wouldn’t be thrilled about that. So the hard money loan, the plan was to do the renovation, which I expected to be eight to nine months because it was a large demolition addition and then full house renovation. And then in the meantime, sell our house and then refinance into a conventional mortgage. And so it was a very elongated live-in flip was the plan.

Ashley Kehr:
Now, what did you end up learning about this addition and what the plan would be moving forward?

Caleb Smith:
Yeah, so I am a deal guy, pretty big picture, and so the minutia of permits and all that is terrifying to me. I’ve let my registration be expired for six to eight months recently on my car. That’s not what I’m good at. And so that was a good learning experience. I had the addition drawn by a builder, and so he We did setbacks to the exterior lot lines to know, “Hey, how far can we build this out? And then what’s the setback from the septic so that we’re not too close?” And so I called the county. I was like, “Hey, I’m buying this.” Another thing I did, we went under contract in February. We didn’t close till June, and I had the owner sign off on me pulling permits with his permission on the property prior so that I could get the ball rolling as soon as we closed so I wasn’t paying 10% for an unnecessary amount of time.
And it wasn’t really any sweat to him. He had another house.

Tony Robinson:
Caleb, let me ask though, because there’s also, I like that strategy. And just for the Rickies that are following, basically what Caleb did is he knew that he was going to be pulling permits for, you said, what, four months, give or take. So instead of paying hard money for four months while nothing’s happening, he’s like, “Hey, let me just let the current owner stay there. And then once we get all the permits pretty much pulled, then we can close and I’ll transact.” It’s great to save money, but maybe there’s also some additional risk there as well because I don’t know, what happens if the seller, I don’t know, doesn’t play ball? Wt happens if something happens and the permits don’t move through? Do you feel that there’s maybe risk on your side as well or was it maybe a better move for you?

Caleb Smith:
Yeah, I think there’s risk if the seller doesn’t play ball. That’s a good thought. I think if there’s a holdup in the permits, my thought was, well, I would’ve been paying 10% on this anyway. And so I’m further down the road. And of course, I probably went to the permit office 10 different times and I’d go into the health department just to check. And one of the times they’re like, “Yeah, we don’t have your well info on file, so you need to do that. It’ll cost $1,000 and it’ll take a month to get the results back and we can’t give you a safe, adequate, and proper evaluation until we have that.” It’s like, wow, that would’ve been nice to know on the front end if you had just given me a checklist. And so there’s stuff like that and it always goes longer than you think.
I went under contract in February, had a two-week study period, and in that time I got all the setbacks, did my due diligence and got the setbacks for the builder. And one of my questions was, “Hey, the house is built on two lots that are both 0.19 acres and the interior lot line splits the house currently.” I was like, “Just making sure that’s not going to be an issue for the addition because I own both lots.” And they were like, “No, no, no big deal. You own both lots.” And so I got the plans drawn. You finished up around April and I submitted the permits April 27th, 28th, sometime in the end of April, which was a good learning experience. I think especially when you’re new at something like this, doing it online is super confusing. I just went into the county office and had them walk me through step by step.
And if you pretend to be an idiot and not know what you’re doing, people naturally help you is what I found. And so I closed June 2nd and then June 9th, I had submitted an alteration and addition permit. And they were on the same times, needed the same amount of things, needed the health department, which was the final thing that I got signed off for. And so on June 9th, I got the approval for the alterations permit. So I text my guy, I’m like, “Hey, let’s get the kitchen ready to demo Monday,” which I thank God that didn’t happen. And then on June 10th, I get an email from the zoning department and say, “Hey, you need to do a boundary line adjustment and combine your two lots into one and resubmit the permits because we can’t approve this.” So that threw a monkey wrench into things.
I ended up going back multiple times. I went to the boss, the boss’s boss, the boss. I got the Loudoun County supervisors involved. And after probably five or six rejections, I was sitting there in mid-July, no further along with the boundary line adjustment. And so I texted four or five flippers that I knew and two of them came through. They both offered on the property. Both were cash offers, quick close. I mean, they were getting a fairly good deal as well and ended up settling on the property July 30th.

Ashley Kehr:
What did you sell it for and how long did you hold the property?

Caleb Smith:
Yeah, so it was just under two months. I bought it for 285 with the seller credit and sold it for 355.

Ashley Kehr:
So after holding costs, after permit fees, you probably ended up making some money on the deal?

Caleb Smith:
Yeah, it was a little bit over 60 grand. And so I was under contract for two weeks and I thought about getting a QI to hold the proceeds so I could 1031 exchange. But I was like, “Hey, this amount of money at this point in my life, I’m willing to pay taxes on it. I don’t want to be one of those guys that rolls my 1031 money into an unsafe investment.”

Ashley Kehr:
Just to meet the deadlines of a 1031.

Caleb Smith:
Exactly. And there are fees associated with that, with holding the money even if you don’t move forward. And so I decided not to. And then I was at a nine-unit multifamily building that I’m currently listing and I was talking to my co-listing agent on it and I was like, “Yeah, I’ve got this money I’m going to have to pay short-term capital gains on.” I didn’t 1031, but still kind of looking. And he was like, “Oh, I’ve got a triplex near where you used to sell real estate probably an hour and a half away in a cheaper market that could be a good fit.” So I put an offer in sight unseen with a seven-day study period on it. And after some back and forth, we ended up coming to an agreement on that. The inspection went fairly well as well as you can find at that price point.
And so that’s going to close probably the beginning of September.

Tony Robinson:
It’s so interesting, Caleb, how a lot of your deals are just through relationships. It’s like you have this attempt with the first door knock of getting this property, that fails, but they’re like, “Oh, but by the way, I have this other thing.” And then you have the flip, you invest all the time and energy, doesn’t work out. Then someone else is like, “Oh, by the way, I have this other thing.” I think the lesson there for our rookie audience is that, and you’ve heard this same phrase shared many, many times, but it’s like the harder I work, the luckier I tend to get. And the more activity, the more active I am, the more opportunities tend to come my way. And Caleb, I feel like your entire story is just an example of that. You work really, really hard and sometimes the first door closes, but immediately the second door opens.

Caleb Smith:
Yeah. And I think with door knocking, sitting open houses, pretty much everything is a lottery ticket to some extent. And if you pick up a thousand lottery tickets that you’re not paying for, a few of them are going to pay off. And looking back 10 years, it’s going to be, oh, there wasn’t much effort behind that and there was a lot of luck. And I still think there’s a lot of luck with some of these things. But yeah, I mean, Craig, the guy that sent me the triplex, he’s a real estate agent that does a ton of work in the Harrisonburg, Virginia area, and he’s sending deals to his clients all the time. So it’s just who asked him that morning? And I’ve asked him 10 times and he sent me deals that weren’t a fit and this one hit me at the right time and it’s a good deal for the seller.
He’s going to make a good amount of money. So yeah, I think it’s just putting yourself in position. And especially when you’re young, I think people will go out of their way to help you and try to put you in a spot that maybe they wouldn’t give a 40, 45-year-old.

Ashley Kehr:
Now this will be your first time managing tenants. So do you have any systems and processes in place? Are you going to hire a property manager? What is your plan for becoming a landlord?

Caleb Smith:
Yeah, so landlord’s kind of a four-letter word right now it seems like, and I don’t think that’s necessarily fair. I think a lot of times the mom and pop landlords that I’ve seen treat the tenants pretty well, and what you end up seeing is that the rents don’t go with the market and it’s more like the private equity, bigger companies that give it the bad rap. I met all the tenants while I was there for the home inspection. They were all lovely people, and so I’m just trying to provide them a nice place to live. And also, it’ll work out better for me than the 30% losses I’ve seen this year in the stock market just for my picks. And so there’s a property management company that was managing it, doing a good job, and I’m going to continue with them. The property’s an hour and a half away from me, and so it’s not realistic for me to drive down there and fix a toilet when needed.
And so I think whenever you’re looking at a investment property, you should build in the 10% property management fee. If you want to manage it yourself, you’re basically taking on another job, and so you should get paid extra for that. And so I built the 10% into the expense ratio and the property still works. And so if at some point I move down there or I have a better deal on property management, great, but if not, it should run without me.

Tony Robinson:
So Caleb, I mean lots of ups and downs in your investing journey and the triplex will be that next phase, but looking forward for you, what strategy are you seeing is the one that Caleb’s going to leverage to continue building the portfolio?

Caleb Smith:
Yeah, so I think my goal is to invest probably around where I’m buying this triplex because it’s still an area where you can see cash flow and I also think there’s good opportunity for appreciation. I’m also a real estate professional, and so there’s tax benefits when it comes to commercial investing that I plan on leveraging on this one and any other property I buy. As far as the live and flip strategy, I’m sending out 20 to 25 letters every day and hitting an Excel spreadsheet of 500 properties on a seven-week increment. And we’ll see, I had our AI friend Claude scrape 50s to 80s ramblers with a tax assessed value between 400 and 700,000 in four towns in Western Loudoun that I would want to live in. And it’s all sellers that have lived in the home for at least 30 years, so more likely sellers that have high equity positions in the homes.
And so sending those letters, and it’s a two-year campaign, so I’m not viewing it as a success or a failure until the two years is in a benefit of my job. We do get 20 free stamps a day, so I’m using those and just paying for envelopes and then the print company to stamp all the envelopes. And so that’s my plan with the live and flip. Hopefully one presents itself in Western Loudoun, and then we’ll move in there and sell the current one. And then I’ll be looking for cash flowing real estate that I can depreciate against my active 1099 income in cheaper markets.

Ashley Kehr:
That’s such an interesting fringe benefit, but it totally makes sense as an agent to do mailers or marketing. Yeah.

Caleb Smith:
Yeah. Everyone has an angle, I think. Mine’s obvious, the real estate agent investing in real estate, but I think there’s always, whatever your job is, there’s someone you can find in it that gives you a leg up in real estate investing. And so it’s just finding what benefit my job or career can offer to my real estate investing career.

Ashley Kehr:
Well, Caleb, thank you so much for joining us today on Real Estate Rookie. Where can people reach out to you and find out more information about your journey?

Caleb Smith:
Yeah, so I have an overly active real estate Instagram account. That’s probably the best spot, Caleb Smith RE. I try to make it funny because I kind of cringe at myself if it’s not funny. And then if you live in Northern Virginia, DC or Maryland, I’m a real estate agent up there. If you have a rambler in Western Loudoun that you’re looking to sell, I would love to buy it. So that’s the best way.

Ashley Kehr:
Well, Caleb, thank you so much. And hopefully you’ll come back on the podcast in a couple years and tell us that you got a deal from this podcast and be able to tell us that story and your lessons learned. I’m Ashley Hughes Tony, and thank you guys so much for joining us today. If you’re not already, make sure you are subscribed to our YouTube channel at RealEstateRookie, and we’ll see you guys on the next episode.