Rookie Podcast 109: From Sleeping in His Car to Multi-Unit Landlord & The “Nomad” Strategy

Rookie Podcast 109: From Sleeping in His Car to Multi-Unit Landlord & The “Nomad” Strategy

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Nick Cooley was driving through Texas as part of his medical device sales job. At the time, he didn’t have much money on him. He pulled over to fill up his company car with gas, scraped every nickel and dime from the seats and cup holders, and came up with just over one dollar in change. This was Nick’s meal budget for the night. He settled on an ice cream sandwich before getting ready to spend another night in his car.

This was a position Nick never wanted to be in again. He knew what it was like to be broke and borderline starving due to financial scarcity. Nick then decided it was time to jump into real estate investing and make a change for the better.

As Nick made more money, he saved up everything he could to start buying primary residences, only to rent them out a year later using his coined “nomad strategy”. He’s done this multiple times and has been lucky to buy all of them in the growing Denver market. That being said, this wasn’t a completely smooth transition. Nick had a property that put a $50,000 hole in his pocket right after closing. If you stick around for his story, you too will be able to avoid this type of mistake in the future!

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Ashley:
This is Real Estate Rookie, episode 109-er.

Nick:
One of the things that I do is take massive action really early and then I kind of figure out how to fly once I’ve already jumped out of the airplane.

Ashley:
My name is Ashley Kehr, a huge Tommy Boy and I am here with Tony Robinson, who is also now a Tommy Boy fan, hence, the niner.

Tony:
Huge Tommy Boy fan. Yeah. Well, Ashley, what’s new with you? What’s going on? How are things?

Ashley:
I’m actually going camping this weekend, but we’re taking a couple of boats and taking some tents and we’re boating out to our campsite, so it should be fine. No cell reception, no internet, so it will be great.

Tony:
Sometimes, it’s the good thing though, right? It’s disconnecting a little bit.

Ashley:
The worst part is just packing.

Tony:
Packing? Yeah. So, are you guys are staying in tents the whole time in Toronto?

Ashley:
Yeah, yeah. We’re going Friday to Sunday, yes, up two nights.

Tony:
I’ve actually never done that before. And so, and on top of watching Tommy Boy, maybe I’ll follow you out to the campsites one of these weekends, so you can show me how it’s done.

Ashley:
Yeah. Well, when we were younger, we used to canoe out to our campsites. I don’t know how my mom did it, packing for all of us and loading it into canoes. At least we’re all taking huge Yeti coolers that we can throw into the boats, but clearly throw those into a canoe.

Tony:
Yeah. Well, I’m looking forward to seeing it. I’m sure it will be a good time.

Ashley:
What’s new with you, Tony?

Tony:
I just submitted an LOI yesterday on a nine-unit hotel here in South Cal.

Ashley:
You did?

Tony:
So, yeah.

Ashley:
Well, you talked about this a little bit. Yeah. Good.

Tony:
Yeah. And so and I actually gave them two LOIs. I gave them one with a seller financing option. There was a slightly higher purchase price and the one we’re getting traditional bank financing was a little bit lower. Haven’t heard anything back yet, so I guess we will see. But at least it’s out there. We’ll see what the-

Ashley:
An LOI is a Letter of Intent that you can give to a seller instead of writing up a whole contract with your offer, just a letter saying what the purchase price is, what the terms are, and any contingencies, too, for those that don’t know.

Tony:
Yeah, so we’ll see. It’s been radio silence since, but hopefully we’ll get them soon.

Ashley:
Well, hopefully, that’s because they’re figuring out your offer and getting ready things in place to accept it.

Tony:
Right, right. So today though, we’ve got a great guest, right? Nick Cooley, who you and I met when we were out in Denver. Really awesome story, really awesome guy, and I really want all of the Rookie listeners to pay close attention for the part of this interview where Nick talks about the ice cream sandwich. That was my favorite part of this episode, so make sure you stick around for that, because it will definitely change your perspective as a real estate investor. And really, hopefully, just change your perspective on life.

Ashley:
Yeah, I think it’s relatable. I think almost everybody will have some kind of variants of this story in their own life. Maybe not as dramatic as his, but I think everybody will be able to think of something that was that moment for them and made them want to pivot and shift and change and become the real estate investor they are today. Or it’s something that you’re going through right now and this is the motivation from Nick to become that real estate investor and you’ll be able to see how his life has changed since then. And it’s really inspiring story, but he is a real estate agent, I believe only three months now, so he talks about if you should be a real estate agent as an investor, which is a huge hot topic in the Facebook group. So, let’s get Nick on to the show.

Tony:
Nick, welcome to the Real Estate Rookie podcast. Super excited to have you on today, brother.

Nick:
Yeah, it’s an honor to be here. Thanks for having me and for letting me be a small part of the BiggerPockets community.

Tony:
Yeah, absolutely, man. And for those of you that are watching or that are not watching on YouTube, Nick has a very awesome mustache, so be sure to subscribe to the Real Estate Rookie YouTube channel, so you can see the mustache in all its glory. Nick, so before we get into your real estate journey, where you are today, because I know you’ve made a lot of progress as of late, tell us kind of the backstory. Who is Nick Cooley and what brought you into the world of real estate investing?

Nick:
So, my wife and I started our whole journey in real estate in late 2016 by buying our primary residence here in Denver, Colorado and for a while we utilized the Nomad strategy. So, it’s not a surprise to a lot of people that Denver is a relatively expensive market. We’re not quite the Bay Area. We’re closer than we were 10 years ago. But working from pretty small amount of capital, we kind of did the Nomad thing from one spot to another. And fast forward, now, I’m actually an agent here in Denver helping other investors, buyers and sellers as well.

Tony:
Talk about the Nomad strategy. What does that mean? Does that mean you’re buying houses in different places? Did you have an RV? What does that mean exactly?

Nick:
Great point. So, when I say the Nomad strategy, what I mean by that is, we would buy properties, primary residence. So we would use, not the full 20% down for a down payment and then we would quickly save up as much money as we possibly could to move again and go buy another primary residence, each time renting out the place that we left behind. And so, the very first property that we ever bought was an FHA, 3.5% down here in Denver. And I guess since you asked, not a member of the #vanlife, not yet. No plans to currently, but all of our properties are here in Colorado.

Ashley:
Real quick, before we get into more, just what is an overview of your portfolio? What does it look today?

Nick:
It’s funny, I literally had somebody ask me yesterday and since becoming a broker, I’ve been much more active in repositioning my portfolio. I used to just be strictly buy and hold. I would buy whatever I could, knowing that 20 years from now, I’m going to lift my head up and have a big portfolio, right? But I wasn’t worried about it until I got to scale. And so right now, we have an under contract, actually on 14 doors and by the end of the month, I’ll have kept four of them. And there’s a reason that range is pretty big, but I promise, it’s going to make sense.

Ashley:
Well, do you want to go into that?

Nick:
Sure. Yeah, we certainly can. So I have, we started a few small properties doing the nomad thing and actually, one of the deals that we bought pretty early on was a total dud. I would not recommend anybody buying that one, but one of the things that I do is take massive action really early and then I kind of figure out how to fly once I’ve already jumped out of the airplane. And so for a while, our ability to scale was capped, but we currently have two townhouses in Denver, one condo, one single family house, and then I’m actually the buyer for an eight-unit building here in the Denver Metro area. And that actually is going to be my very first wholesale deal, ever.

Ashley:
That’s awesome. Congratulations.

Nick:
Yeah, I figured if we’re going to do it, we might as well do it on a $2-million asset to get the learning curve out of the way.

Ashley:
So, what made you want to pivot this year?

Nick:
Well, and so that’s an important discrepancy, too, is I wouldn’t even classify myself as a wholesaler. Everything that I try to do is to make it easier for me to buy and hold long term. I’m a buy and hold guy that occasionally will wholesale if it makes sense for me to protect the rest of my portfolio, right? But a big part of why I even became an agent was, so in my past life, I was in medical device sales. I sold lasers to plastic surgeons, dermatologists, med spas, where we would treat everything from excess skin laxity to extra belly fat, whatever, right?
However, my passion was always in real estate, depending on who you ask, the numbers were either 75 to 93% of millionaires became so through real estate. And so, I’d like to say that I’m dumb enough that I don’t worry about what I don’t know, but I’m smart enough to know where to take action. And so I was like, “Well, I want to get into real estate if that’s where all the millionaires are hanging out,” right?
And so, from the medical device worlds, I was of the belief using the Pareto Principle where 20% of your work yields 80% of the results. The top 20% of those deals in the Denver market aren’t being discussed by medical device sales people, right? Those kinds of deals are going to and are being traded by people that are in the real estate industry and if it was my goal to get access to those deals, I had to ride this bike on a daily basis. And so that’s kind of a long-winded way of saying that’s why I’ve become much more active in managing my portfolio.

Tony:
Yeah, I know and you’ve got a really interesting past, right? And then you’ve done a lot of cool things that I think have helped you in the world of real estate investing. But you also mentioned your wife, right? Was she always on board with the Nomad thing when you guys first got started or what did that process look like? What did that conversation look like?

Nick:
Yeah, not even close. Honestly, not even close. It was something where, I think a lot of podcast listeners start if you’re in a relationship or if you have a partner, it’s not uncommon for there to be one person that encounters this crazy idea of real estate investing. And not long after, you’re spending every single commute listening to Real Estate Rookie podcast, the OG BiggerPockets podcast. And you’re building up this emotional tank of wanting to take massive action and then all of a sudden, it just spews out onto your partner, right?
“Hey, we’re going to start wholesaling eight units and we’re going to move every 12 months and one day, it’s going to be worth it. We’re going to be super wealthy and we can go fishing any day we want or skiing, whatever here in Colorado.” And so at first, and in a good way, she’s very much a good balance for what my default position is just to take crazy action really early. She very much balances me out in that way.
And so. when we very first started, she was focusing, all she knew was the inconvenience of having to pack up our stuff and move, right? However, now luckily, six years later, we have a little bit of a track record for success and so, it’s easier to see why we’re going through some of the sacrifices that we’re going through. It’s easier to see why it’s worth it.

Tony:
Yeah, two thoughts on that, first, your relationship with your wife, Nick, is very much like mine with my wife, where I’m the one that’s just like always pedal to the metal, right? We’re pushing, we’re going, we’re going, we’re going and she’s the one that’s like, “Can we pause for a second? Can we make sure you’re not about to drive off of a cliff?” So you get that balance a lot in relationships. And we’d love talking about how you get the spouse on board or how to get the partner on board.
And I know for me, what kind of helped was, like you said, it’s oftentimes where one person in that relationship is the one that’s doing all the education, they’re the ones listening to the podcast, going to these meetups and doing all these things, so they’re getting all juiced up inside, but then they forget that their spouse isn’t getting all that same information. So when they try and lay all this, “BRRR flip this.” it’s overwhelming at times.
So, what I’ve learned both from my own experience and then talking with a lot of other husband and wife duos is that you got to kind of move at a pace that your spouse is comfortable with, right? And try and find some parts of the real estate investing world that your spouse can kind of latch on to you, right? They have a natural excitement about and I find that that’s what kind of helps move things along.

Nick:
I’m not ashamed to admit that early on. I honestly tried to brainwash my wife. The second property that we actually bought, I think I heard it actually on the BiggerPockets podcast where this guy had mentioned, that I forget which episode it is, I’m sorry. I feel like I’m turning into Brandon where I’m just using random quotes.

Ashley:
Brandon who?

Nick:
Mr. Turner.

Tony:
Yeah, who’s Brandon? Yeah.

Nick:
Hey, beardy Brandon Instagram, how are you, man? Taking shots under my first 20 minutes.

Ashley:
That was a nice little plug.

Nick:
This is the last time anybody will see me on the BiggerPockets podcast, so goodbye, everybody. But he had mentioned that they took a trip every time they bought a property. And so, with a sales background and understanding in college, actually, I studied Medicine with a major in Psychobiology. So, I was like, “There’s got to be a way I can use this to my advantage. And I told my wife, “Okay, every property that you let me buy, we get to go on vacation.”
And so, after that second deal that we bought, we actually went to Paris and we hung out in Paris and the French Riviera. And I was like, “Every time we go, I’m just going to give her this little dose of dopamine until 10 years from now, she’ll figure out, ‘Oh, it was worth it.'” But yeah, here we are, six, 13 properties later.

Ashley:
What is that from The Office, that one factor, that one method where Jim has Dwight every time he does the ding, he gives him a mint and he puts his hand out. What is that called? It’s some kind of science experiment.

Tony:
It’s like Pavlov’s dogs, right?

Ashley:
Yeah, yeah, yeah, yeah. That’s what it is.

Tony:
Where they’ll start drooling, right? Yeah.

Ashley:
I knew it. Yeah, that’s what I was thinking of.

Tony:
So, what actually is basically saying is that all real estate investors just need to treat their spouses Pavlov’s dogs, and then you will find success.

Ashley:
And I couldn’t disagree.

Nick:
Sounds perfect.

Tony:
So, Nick, I love the approach of getting your spouse on board, but I want to drill down a little bit more into the actual Nomad portion. So, you said you did this for and I guess if you can just clarify how many properties you did that with? And kind of what the timeframe was. Was it every year? Was it sometimes longer? And then where you typically have to put a lot of money to get these rehabbed or were they kind of turnkey properties?

Nick:
Great point. So, we did that with three properties before we were kind of clipped because of that one dog deal that the banks were basically like, “There’s no way we’re going to keep lending to you because this one is losing money.” So, we did that with three properties across 12 months per. I have a great relationship with a really, really good lender here in Colorado, that’s actually somebody that I played football with in college. His name is Ryan Lendrum. And he and I worked together to make sure that we knew that this was going to be an investment strategy, but I also didn’t want to get in hot water by manipulating the primary residence portion of the loans we were qualifying for.

Tony:
That’s awesome. And I wanted to break that down because I want to give the Rookies some context of how long it took you to do this, right? They see that you’re at multiple doors right now, but it wasn’t overnight, right? There was a lot of personal sacrifice that went into making that happen and some patience around making sure that you were kind of hitting the market you needed to hit to still be able to qualify for these loans. But still a great approach, right? It’s still a great approach.

Nick:
Well, a big part of it was honestly, it was the only option we had. Prior to starting, there was a point in my life when, to be completely honest with you, I literally remember one time, this is maybe an overshare, but we’re all friends here now. When I started off in my sales role, I covered the entire State of Texas, most of the West Coast and I had been in a position financially that I was in a really bad spot, honestly. I had a company gas card that I could do this traveling for work, but I was so broke, that I would only be able to stay in a hotel about once a week, because I had to put up the cost up front and then get reimbursed on it on the back end.
And so, I’m coming through West Texas, in Fort Stockton just off of I-10 at 2:00 AM. I couldn’t stay in hotel that night and oftentimes, I was sleeping in my work car to make ends meet. And I’ve come across Fort Stockton on I-10 just to get back to Austin to get back home. And I fill up my car with gas with a company card and I scrounge up every single little piece of change that I had in this work van and I ended up coming up with $1.76. And I remember looking at it in the palm of my hand, “All right, this is what you’re eating with tonight,” honestly.
So I was walking up and down the aisles of this gas station and I still can picture it. This crazy fluorescent light against the stark contrast of the West Texas desert and I walked up and down literally every single aisle trying to figure out what was the highest amount of calories that I could get for $1.76 and it ended up being an ice cream sandwich. And so, I still have to this day a picture gifted to me by a friend of an ice cream sandwich in my office and it’s a reminder of where I came from and why I’m going where I’m going.
So, when we started off, it wasn’t like we had unlimited capital. I didn’t have any advantages from a network perspective, we literally bought our first place in, even at that time, one of the more competitive markets in the country, because we were able to scrounge up $15,000. And we did a 3.5% FHA down product. The market has certainly helped. We bought it off of the MLS. Didn’t swing a hammer, didn’t change the toilet, nothing. And the first, several deals that we bought, were off of the MLS knowing that I’m not a handyman. I can barely change a light bulb. And so that’s not an advantage that I bring to the market, either.

Ashley:
Nick, thank you for sharing that story with us. And I think it’s inspiring and motivating to see where you’ve come since then. And I want to talk about your mindset there in that moment. You remember that exact moment and you’ve shared the story that your friend gave you that picture of the ice cream sandwich. What did it take for you to, was that when you started to make that shift? “Okay, I need to do things different,” or was it gradual? And what did your finances look like? Did you have a ton of debt and you realized, “Now is the time to get rid of that?” What did all of this stuff look kind of behind the scenes?

Nick:
So, I didn’t really have a ton of debt, but I didn’t really have any cash either. I came out of college going in, I thought I was going to go to med school. And a lot of the people that I was talking with, doctors specifically, were concerned about some of the changes in the landscapes of Medicine. And I put myself through college selling motorcycles, which is cool. I’d love to tell that story in New Orleans, hopefully, I’ll see you guys there. But I was like, “Well, I did okay in sales. Let’s start there.”
And I just had really poor financial discipline. I spent more than I should have. I didn’t have enough of a safety net. And so, I had fallen victim to kind of a scam type situation where it liquidated little savings that I did have. And so, when I relocated from Nebraska, which is where I went to school, after meeting my now wife, then girlfriend, I just didn’t have anything to fall back on. And so, it wasn’t that I had a crazy amount of debt, I just was really poor with how I spent the money I did make. And then it just took that one perfect storm that knocked us out.
And so, I guess when we started from there, it was literally starting from the ground up. And now, I’m having to kind of shift my perspective a little bit to where like, “You don’t have to take all these crazy risks. I need to start shifting away into starting to protect some of what I do have.”

Tony:
I love getting into real experiences that kind of shape who people are because I do believe that’s what really separates people who are successful and those that aren’t. When you go through something that is traumatic, I think it gives you a certain level of grit that people who haven’t gone through those experience they don’t have, right? But there’s a saying, I don’t know who came up with it, but the saying is, “A smooth sea never made for a skillful sailor.” Right?
And it’s like if you never go through some tough things in life then maybe you don’t have the fight in you when things get hard. But if you can see yourself through, right? And obviously you’ve seen yourself through because I’m assuming now you’ve got more than $1.76 in your pocket, right?

Nick:
Yeah, man.

Tony:
And if you can see yourself through then the next time you hit something hard, you’re like, “Oh, man, I’ve been through way worse than this,” right? You’re like, “What’s next?” Right? “I’ve been there, done that.”
So, I love to take the experiences that are soul crushing in the moment and using those as motivation to A, never get back there again, right? Like to say, “I’m never doing that again. That is never going to happen to me again.” And then B, to give you the fight, that grit to keep going the next time you face something bad. So, I really appreciate you sharing that story, man, because it’s going to inspire a lot of people.

Nick:
Thanks, man. I think it’s important for people to know that. Yeah, life is hard at times, but it’s worth it. And even now, even going through that, I was going to say I’m big at going to the gym, but it’s like a lot of people are, right? But there’s a lot of people in Denver right now that are getting a 4:00 AM bus to go to work because they have two or three jobs and it’s like they’re doing that because they have to. It’s hard, but it’s worth it. Right? And so, that short-term struggle is worth the long term success. So, thanks for saying that to me.

Tony:
Nick, one story I got to share just before we keep moving. I was in college, right? So, a lot of you guys know, I was 16 when I had my son, right? When I became a dad. I was a junior in high school. And my son was like, I don’t know, maybe three at the time. It was the middle of summer, it was July, I’ll never forget this. And my son had gotten sick. He had a fever. He was throwing up at home. And I was like, “Okay, I got to take him to come into the doctor’s office.”
And as we’re driving, my car at that time didn’t have air conditioning, right? So, we’re in the middle of summer in California, dry heat, it’s 100 degrees outside with all the windows down. And the heat is making my son more sick. So, we’re driving and he’s like he keeps telling me that he has to throw up, so we’re pulling over every five minutes because he thinks he has to throw up.
We get to the doctor’s office, and I’m trying to check him in. And they’re like, “Okay, it’s a $15 copay for you guys to be seen by the doctor.” My account was the negative $6, so I did not have enough money to pay the copay. And I told them, I was like, “Hey, my son’s really sick. I don’t have the money. Can you guys just bill me later?” And they said, “No, we’re sorry. We have to have the $15 copay in order to check you guys in.” And so I had to call the friend to say, “Hey, can you please come over? Meet me at the doctor’s office, so I can pay for my son’s copay.”
And that moment, for me, was the most difficult thing that probably ever happened to me in my life, right? To see your child who’s sick, who’s not well, and you don’t have $15 to pay the copay? That for me, Nick, is like your ice cream sandwich story where it’s like, “I’m never, that’s never happening to me again. I’m never going to be in a position where I don’t have $15 to get my son checked in at the doctor’s office.”
So, again, when you have those moments and you have those experiences, they suck in the moment, most definitely. But if you use them the right way, they can totally change your life.

Nick:
Absolutely.

Tony:
And now, I’m done. Now, I’ll shut up. That was-

Nick:
No. I’m glad to hear you share that, man. It’s cool and it’s crazy how and I think you would probably attest to this, they’re worth it. I would never take that time from my life away because it’s made me who I am. I don’t want to do it again. I don’t want to go back. But I’m grateful, eternally grateful that it happened one time.

Ashley:
Well, thank you guys for sharing those stories. I don’t even know. I was trying to think of a good way to transition it to our next topic, but it’s really hard to try to switch off of that.

Nick:
Which is a tough spot.

Ashley:
But I would really like to know how you are finding deals, especially in a hot market like Denver.

Nick:
Totally. Yeah. A lot of it comes, I’m super active in a lot of BiggerPockets style real estate investor meetups here in Denver. Like I said, all of my first deals came straight off MLS, no renovations, no nothing. As a buy-and-hold guy that was pretty busy on the medical device side, I always kind of treated real estate as like a cookie jar. I’m just going to keep stocking them away and then when it’s time for the cookies later, I’ll be set. They have to cash flow or that was the concept. Obviously, there’s one that didn’t do very well, but they have to cash flow just as an insulation against downside risk.
But I wasn’t ever trying to live off of monthly cash flow. I was trying to build wealth, partially because of ice cream story and everything else and just where I came from. But I just wanted to build a huge snowball that once I got to scale, I can throw it around and generate a return, but it had to be truly passive. And that I guess now as a part of that how we’re sourcing deals story, I worked with Driving for Dollars. It’s actually how we found the eight-unit.

Ashley:
Can you explain your process? Maybe a working investor doesn’t know exactly what that is. How you do Driving for Dollars, exactly?

Nick:
Yeah, totally. I’m going to give away my biggest secret. It’s not a secret, everybody does it, I think. But Driving for Dollars for me is as an agent, I’m constantly in the Denver market, right? I’m helping buyers, I’m helping sellers, fellow investors. And one of my favorite targets is, especially in the current market being as hot as it is, if I see a really dilapidated or a really cheap for rent sign. That’s telling me a couple of different things.
Number one, it’s not professionally managed, right? It’s mom and pop. That’s going to be a very easy conversation to talk about. And then two, I like to, whenever it’s possible, set up a conversation that’s either-/or-based instead of yes- or no-based. A lot of people when they’re trying to source deals, they’ll say, “Hey, I’d like to buy your place. I’ll give you $100,000, is that going to work? Yes or no?” And the problem with that is when you’re having that conversation, whether it’s a seller or a partner/spouse, whatever, anytime it’s a yes or no question, you pretty much have a 50/50 shot that they’re going to tell you. The numbers are what they are, right?
And so, what I try to do instead is either/or, “Hey, Ashley, I’m calling about your property on 123 Main Street. I saw that you have one for rent. I’m actually an investor and a broker here in town, I would love to buy it. However, as an investor, I’m looking to generate a profit from that. And if my number is not good enough, I’d love to help you take it to the market, so you can get top dollar.” And I’m trying to remove the option for them to tell me no, just by giving them, “I’d say these are both win wins, A, for me and B, for you, if the number makes sense. Which one sounds like a better time for you? Then let’s do that.”

Ashley:
That’s really unique. I like that, that you’re giving them the two options. It’s almost like when you’re putting in an offer to a seller and you give them two different offers like a higher price that seller financing or a lower price that conventional or something like that. That’s really awesome. What is one of the benefits you think of becoming a real estate agent? Our Rookie investors listening, one common question we see constantly in the Real Estate Rookie Facebook group is, “Should I get my real estate license?” What do you think about that?

Nick:
Yeah. This is kind of a hot take. I know it’s controversial, especially on agents side as well. I would say that if you’re getting your license solely to save the 3% on a deal, it’s not worth it. I’m a big believer in leverage and in building teams to do stuff that are bigger than what you’re capable of, of yourself. So, if you’re buying one deal a year just to save the 3%, it’s not worth it. In Colorado, it takes 162 hours of coursework to get your license and then you’re easily going to see 250 to 300 bucks a month in other ancillary costs that come with hanging your license somewhere.
And so, I’m a bigger believer of finding an awesome agent, an awesome lender, an awesome contractor because even though you have to pay them, that’s the bike that they ride every day and they’re going to generate a return greater than what you would have saved in commissions or whatever else. I get excited anytime that I meet somebody that is a vendor that charges maybe a little bit more. I’ll gladly pay for a premium if it means that I get more value, because it’s going to allow me to scale my business to a much greater level and it’s going to let you sleep better at night. I’m not the guy to try to save 500 bucks if it means that I don’t sleep.
That’s the beauty of real estate, right? Is you get to play in a game where it’s so big that if you do it well, you can build a team and it’s a win, win, win, win, win scenario. One of the ways that I’m sourcing deals, and I should have brought this up earlier, is I work with one wholesaler here in Denver more than others wholesaling, for whatever reason. Some of them have a reputation for not necessarily knowing the business that well. It’s a really easy way to get started into real estate, right? I have a running deal right now with the one that I work the most with that if she helps me find 10 of this very specific kind of deal, the 10th one is hers. She can just keep it. And I love that we get to play in an industry that’s so big that it allows you to be so outrageously generous, and it’s still a win-win scenario for everybody involved.

Tony:
Love the idea of putting the right people around you. And the point you made, Nick, about knowing or I guess deciding on whether or not you should become an agent is very similar to what David Greene said when he was on the podcast as well. He was like, “If you’re going to do one deal a year, it’s not worth it. But if you’re going to turn this into an actual business for yourself, a full-time profession then it makes sense.”
My wife Sarah, she’s in the process of getting her agent or her license here in California, but it’s more so because A, we’re going to be doing a lot of volume ourselves, right? So for us, it kind of makes sense for her to have that. We’re building out our wholesaling and our flipping business, so it makes sense for her to kind of have it for that reason as well. So for us, it’s a good complimentary piece to our business, right? But like you said, you got to kind of weigh it whether or not it makes sense.

Nick:
But I would say it’s an awesome career. If you enjoy selling and you enjoy real estate, go be an agent and crush it, because that’s a big part of why I became one is most agents don’t understand investing, right? They’re really good retail buyers and sellers, but they don’t understand it from an investing basis. And so, if you want to do it full time and you want to do a deal a week, then awesome career. I don’t mean to sound too negative, I guess.

Tony:
Not at all, not at all. So, we talked about how you find your deals, Nick. What about your financing of these deals? Were these all traditional bank financing? Was there any creative financing involved? Just talk us through how you’ve funded all of these deals so far?

Nick:
Yeah. Luckily, I was in a space when I was first starting out that medical device is somewhat lucrative. And so, we would buy a place usually 10 to 15% down, move in, and then immediately would start saving other commission checks or whatever to save up for our next down payment. And because, partially because the Denver market appreciated and rents continued to climb, we were able to just put a majority of that earned income on the commission side down on traditional 30-year fixed rate mortgages. Now, that I’m in my first year of being an agent, I don’t have that two years of W-2.
Banks don’t love me as much as they used to and so luckily, I’ve been able to use, it’s a loan product that’s not too commonly discussed. It’s called a debt service coverage ratio. It’s more common on multifamily buildings. But I can put pretty, it’s definitely a more substantial down payment now, but the single family properties that we buy and hold, I’m able to hold those through what’s called the debt service coverage product. Where as long as the rent is X percent, usually the number is 20 to 25% above what the debt, the carrying costs would be, banks will let you continue to do that. More frequently than not, what you’ll find on those is that their interest only as well.

Ashley:
Is that on the residential side or the commercial side?

Nick:
Basically, the short version is I am using a debt service coverage ratio on the single families right now because luckily, I’ve done well. I have awesome, awesome clients here in Denver that have allowed me to take care of them and to grow the brokerage side of our business. We have a growing team here that focuses entirely on the retail side. And so, I’ve had a really good start to the real estate side of things and by utilizing those interest only debt service coverage ratio type products, I’m not making any progress on the principle. But it does allow me to continue to grow that snowball that I talked about until I can qualify for a more traditional 30-year fixed rate single family product.

Ashley:
Yeah, we can go into one of your deals right now if you want. And we’ll talk numbers and how you acquired it, things like that. I actually wanted to hear about your bad deal. Because everybody has good deals, so.

Tony:
And just as a caveat, Nick. My second deal was also a bad deal for us, so if you want another bad deal, Nick, I’m selling a property in Louisiana. So, I’ll send you all the information, just in case.

Nick:
Yeah, I mean, I get flooded with emails. “Take my bad deal, take my bad deal.” But there’s a common thread on the guys that are taking action here, big time. Occasionally, you’re going to stub your toe. Yeah, I’d be happy to.

Ashley:
Okay, so first, we’ll just go over a couple things real quick and then you can get into the story of it. What is the purchase price of it? And what is it?

Nick:
So, it’s a condo in downtown Denver that we bought in December of 2017 for 322,000 bucks.

Ashley:
And was it a buy and hold rental?

Nick:
Yeah, we actually still own it, which is a big part of it, too. It was a loser’s big time dog. Now, it’s okay but it’s been a tuition cost, if you will.

Ashley:
Did you have to rehab the property?

Nick:
No. So this was still early on enough where I didn’t really want to focus on renovations. I was pretty busy with my day job and I didn’t want to have to worry about managing contractors and ordering materials. And so, as long as it was a good enough deal in the moment when we first bought it, my idea was just like, “Let it be super passive. Hire a great property manager and 20 years from now, it will all be okay.” So, no, we didn’t.

Ashley:
And then how did you finance the property when you purchased it?

Nick:
Yep, we did a 30-year conventional loan with 10-15% down something like that.

Ashley:
Yeah. Do want to kind of go into how you found the deal? What you thought it was going to be and then why it wasn’t what you thought it would be?

Tony:
Yeah, why was it dog? What happened? Get us there.

Ashley:
Yeah.

Nick:
Yeah, totally. So, we kind of talked on how very early on in the investing side. My wife is awesome. She’s my best friend, cherish her deeply, but I was further ahead on the emotional and maybe on the real estate jargon side than she was at this time. And so, I was still wanting to push the gas, put the pedal to the metal, as Tony was saying. And this, we bought the deal primarily because in one of the areas that we want to focus on, we focused on superhot, I call them, streetcar neighborhoods. That if I was to boil it down, I’d say that I want to focus on areas that if a Google employee moves to Denver, they want to rent from us because we’re in one of the best areas.
So in LoDo, because Denver has an infatuation with naming their neighborhoods after four-letter, LoDo, Sobo, RiNo, LoHi. We bought in lower downtown, LoDo and that $322,000 condo was one of the cheapest properties in all of Denver. And so that was a good middle ground for Hannah to allow me to continue to scale our business. But there was a perception of less risk, because the purchase price was lower. However-

Tony:
I love that you said perception. Yeah, right. Let’s get to what comes next.

Nick:
Yeah, exactly. And so, we were working with an agent that was a friend of a friend, because I figured they’re all the same, whatever. They get their commission for handling the paperwork, so what else is there. And so, immediately, literally less than a week after buying it, we got a letter… because I ran through all the numbers. It’s going to rent for this. We figured at that time it was going to rent for about 2200 to 2300 bucks. Our carrying cost was going to be about $1500, $1600.
So, in Denver at the time, especially with less than 20% down, I have to turn a profit, it’s like, “Awesome. That will check out.” However, less than a week after buying it we got a little letter from the HOA that said that we owed an additional 50 grand on our HOA dues that we did not plan for.

Ashley:
My God.

Nick:
So.

Ashley:
Yeah, that can really affect your cash flow.

Nick:
Yeah, to the tune of about-

Ashley:
Okay, so what was this bill for?

Nick:
Well, so the building that it’s in was built in the mid-’60s in Denver. And so, literally there re-piping, the entire 44 floors. Every single piece of pipe, every single piece of insulation, all the drywall between set pipe and living space, all being replaced. It’s like a $35-million job that we completely were blindsided by.

Ashley:
My gosh, so everybody living there had to pay that, pretty much.

Nick:
Yeah, true. Literally, everybody.

Ashley:
What would be some things you would caution to Rookie investors who are going to look at getting into a property that’s a condo or has an HOA? What are some things they can do so they don’t get into this situation? Or is it merely just don’t invest with an HOA?

Nick:
Well, yeah, so actually, even today, even with that Battlestar, I still prefer investing in communities that have HOAs. I view it as a really cheap insurance. It doesn’t take very long scrolling through Instagram or YouTube or whatever to find that one property that the house is painted mossy Oak, camo’d out with a spray can or there’s an RV on blocks, or like something. There’s always that one neighbor, right? And so, I’ll gladly pay a negligible HOA to kind of protect my investment in the short term.
And I also don’t hate condos, especially for people that are brand new into investing. It’s a great way for you to get reps in as far as evaluating deals, evaluating rent roll versus carrying cost. Just make sure that when you do you work with somebody, A that already is an investor, especially as an agent. People that want to invest, they’re working with agents that don’t invest themselves is asinine to me. And then secondly, make sure that especially if you’re in a partner scenario, usually the super heavy go getters are partnered with the people that kind of balance them out. It’s pretty rare to have two big-time go-getters that are in cahoots, for lack of a better term.
So what I should have done in that scenario is I would get kickback from my wife, because there was perceived risk in investing in this crazy thing called real estate because we were so new at it. I should have turned her loose and let her utilize that as a superpower, “Hey, we’re a team. This is something that I want to do because you’re so much more thorough,” and for lack of a better term “cynical. Tell me if there’s anything wrong with this deal.” And I should have just let her voraciously tear through the HOA documents and we would have found it. So, do proper due diligence and work with people that are doing what you want to do.

Tony:
I think one important things to call out, Nick, is that although this deal maybe didn’t turn out great for you from a financial standpoint, there’s probably an educational component that is more valuable to you than the amount of money that you lost on the deal.

Nick:
Well, and that’s a great point. It’s like we haven’t even lost money, right? So, what we were able to do, because we were able to pivot, we immediately, as soon as we got that $50,000 bill, basically, we’re like, “Well, it’s too late to turn back now.” And so, we went to Facebook Marketplace. And so my wife is a career nurse. She’s a nurse practitioner now, but at that time, she was in the ER, and she has a lot of friends that are travel nurses or were travel nurses at one point in their career. And so, we went ham on Facebook marketplace. We’re trying to find everything, beds, couches.
And so, we ended up furnishing that condo for super cheap, like 1500 bucks to 2500 bucks. And we were able to do short term leases, specifically to travel nurses. And we didn’t cashflow significantly, but we more than broke even and we were renting to tenants that had to pass a background check in order to get the job that they were employed with. So, you mitigated our risk on the tenant side and they also get a housing stipend, a pretty significant one. If you’re a travel nurse in Hawaii or Buffalo or Southern California, they’re going to pay you, probably 25 to 30%, over market rents just to make sure that you have a safe place to live so that when you show up at the hospital, you’re ready to go.
So we were able to juice our cash flow numbers with great quality tenants and pivot out of a scenario that would have spelled doom. If we wanted to get out of real estate that was our excuse. Right? But knowing that we knew enough to know this was the vehicle that we wanted to participate in. And so it’s like, “Okay, well, we’re in it. Let’s learn and just keep growing.” So, we were able to pivot and make that happen.

Tony:
Nick, I think you might have just solved my problem. I don’t know why I never thought about doing this with my Louisiana property. Every other property that I own is an Airbnb, why have I never thought of turning this Louisiana property into a short-term rental? There are multiple hospitals. There’s an Air Force Base. There’s a casino. It’s like there are probably people that are coming in there that might want to stay for a short period of time. I’m an idiot. Thank you, Nick.

Nick:
I’ll-

Tony:
Guys, the property is no longer for sale.

Ashley:
Six months from now, Tony is going to say this is his best deal.

Nick:
Yeah, man. I’ll send you my address, so I can get my royalties from that.

Tony:
Man, I think it’s cool sometimes to break-in the deals that didn’t go quite as well, because I think it shows the Rookie Real Estate investors that are listening, that even if a deal goes wrong, it doesn’t necessarily mean the end of your investing career. So, you’re a great example of that, man.
I want to take us into our next segment, which is our mindset segment and we touched on this a little bit, but if we could quickly touch on this. When you were first starting out, what were some misconceptions you had about becoming a real estate investor that turned out not to be true?

Nick:
I think one of the big things especially right now that’s being pushed is that it’s just a bunch of people that are making tons of money and all they do is sit back and collect checks. Part of the thing that you see on my social media is the idea of passive income. I wouldn’t say that real estate is necessarily passive so much that it is an opportunity to like if you have the bug, if you’re listening to this podcast, you already enjoy it. But don’t come into it with no capital and expect that you’re going to just get these $5,000 month checks right off the bat. It’s like any other business, you’re going to have some growing pains, but the reward is that it’s worth it on the other side.

Ashley:
Okay, so I’m going to take us to our Rookie request line. Anybody can call us at 1888-5-ROOKIE and leave us a voicemail, and we might use it on the show and have our guests answer the question.

Andy:
Hi, this is Andy from San Diego, California. And I’m just wondering, so me and my wife are planning on getting our first property or a house soon, ideally a duplex. But out here in San Diego and just in general in California, I feel like the market is just too expensive. And we are in the perfect position to be able to pick up and move by the time March 2022 comes. So, we’re looking at North Carolina, Colorado and Texas. And we just wanted to hear any advice or idea you have for married couple with student loans and so used to California as far as just picking up and moving and being able to take the next step to do what it takes to become a real estate investment [inaudible 00:44:39]. Thank you.

Nick:
Wow. There’s a lot to unpack there. So, all of my portfolio thus far every deal, whether it’s a wholesale deal or single family, I buy where I live, because I think one of the biggest advantages that we have, being that we’re not BlackRock or some of these trusts that can throw around billions of dollars and have teams of analysts and lawyers. Because we’re smaller and we could be more nimble, I prefer to buy in the market that I live. I know that there’s people that make an entire living out of being an out-of-state investor, but I would tell her to begin with the end in mind and think, “Where’s the best life for you?”
If that’s in North Carolina, if you love vinegar-based barbecue or mustard, head to the Carolinas. If you want to ski in the Back Bowls of Vail on a Thursday and enjoy a patio IPA with 300 days of sunshine a year, Denver’s your spot. So, figure out where you want to live and then also realize that there are people that are successfully investing in that market, whether it’s in San Diego, whether it’s in Texas. It can be done there, but I think one of the biggest advantages that you have is understanding very subtle market nuances and using those to your advantage to help build that dream life that everybody’s working towards.

Tony:
Awesome. So, first love that advice, right? I love that you said that people are making money in any market. I guarantee there’s real estate investors in San Diego who are crushing it right now, so. And you just got to find that niche that works well with the market that you’re in.
Nick, I want to take us on to our random question segment. And Ash and I actually had the same random question, go figure. So, Ash, you want to drop the question on him.

Ashley:
Yeah. So, Nick, I mean, obviously you’re a cool guy. Your last name is Cooley. So, we just want to know, what was the best, the coolest party you have ever been to?

Nick:
Man, I should have seen that coming. I would say that it was probably a precursor for Asha Palooza 2.0 in New Orleans. Yeah.

Ashley:
So, for you guys that don’t know. The first time Tony and I actually met Nick was at a party in Denver, a whole bunch of real estate investors in the area and everybody just kept calling it Asha Palooza, I’m not sure why, but-

Tony:
We don’t know where that name came from. It couldn’t have been a text message that Ashley was sending out, saying, “Hey, meet us at Asha Palooza this evening.”

Nick:
Asha Palooza. Yeah, that was really top.

Tony:
Awesome, Nick. So, I’m going to round this out here with our Rookie Rockstar. And today’s rookie Rockstar is Kipling back from Kalamazoo, Michigan. And Kipling is 21, 21 years old and just closed on their first house hack, which is a triplex and they plan to stay there for a little while. But they’ve been learning for the last two years and saving up trying to get themselves in a position to buy this house hack.
But they bought it for 166. They used a three and a quarter percent VA loan, so the down payment was $2600 and the principal interest and taxes on this is only $1,027 per month. So, they’re going to clear looks like about $2100 a month once everything’s all rented out and they’re no longer living there. But even while they’re living there, they’re still making about $1350. So this is an awesome deal at 21 years old. Super, super happy for you Kipling.

Nick:
Yeah. Congratulations.

Ashley:
Yeah, that’s really cool. Yeah. Okay, well, Nick, where can people find out some more information about you and get in touch with you?

Nick:
The easiest way I would say is probably Instagram. I have a Facebook, but I’m certainly much more active on Insta. And my tag there is im, I-M, nickcooley.

Ashley:
Okay, great. Thank you, everybody for listening today. And Nick, thank you so much for coming on as our guest. We really appreciate it and we can’t wait to hang out with you again at the BiggerPockets Conference coming up in October. So, we can’t wait to see you guys there. Make sure you have your tickets, if they’re not already sold out by the time this podcast comes out. But we will be in New Orleans this year for October 2021.

Tony:
Asha Palooza 2.0.

Ashley:
I’m Ashley. Yeah. I didn’t pay him to plug that. I’m Ashley @wealthfromrentals and he’s Tony @TonyJRobinson on Instagram. And we will be back on Saturday for another Rookie Reply.

Tony:
[inaudible 00:49:13].

 

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