Rookie Podcast 117: From 0 to 12 Units Overnight and House Hacking a…Farm?

Rookie Podcast 117: From 0 to 12 Units Overnight and House Hacking a…Farm?

37 min read
Real Estate Rookie Podcast

As a Guest you have free article(s) left

Join BiggerPockets (for free!) and get access to real estate investing tips, market updates, and exclusive email content.

Sign in Already a member?

Amanda Bolan, like many of us, had a “pressure cooker” moment where she realized that becoming a real estate tycoon was part of her future. At the time, she was working in the oil and gas industry without real estate investing experience. She took a leap of faith and decided to flip her first house in 2018, then flip another in 2019, then buy a 12-unit apartment in 2020, and another in 2021. Did we mention she was buying a 61-acre land development deal in between these time periods?

While Amanda was searching for rentals she saw more and more expensive multifamily deals come up. At first, she had “sticker shock”, but ran the numbers and realized that a good deal in real estate is a good deal for her, no matter the price. She got to work underwriting, financing, and partnering to close on this seven-figure property. Even with some hiccups along the way (financing falling through, environmental flags going off), she was able to close on the deal and became a commercial real estate owner.

Part of her fearlessness in taking on these big, and often unconventional deals is looking at what could go right, not just what could go wrong. Instead of being stuck in analysis paralysis, Amanda made moves to secure properties that would scare rookie investors and made them her own.

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Ashley:
This is Real Estate Rookie, episode 117.

Amanda:
… and that was one of things I learned throughout this whole process, was don’t take no for an answer, but just see what angle you can come in at to see if they’ll say yes eventually.

Ashley:
My name is Ashley Kehr, and I’m here with my co-host Tony Robinson. Tony, what are we going to talk about today?

Tony:
We have got probably one of the coolest episodes you’ve done in a while, just because of the variety and the speed at which this guest moved with. Today, we’ve got Amanda Bolan on the podcast. Amanda talks about how she went from running a business in the oil and gas industry to flipping her first house, to buying a farm, to buying not one, but two 12-unit apartment complexes, and just so many golden nuggets as she breaks down her story.

Ashley:
And she really describes too the reasoning as to why they made these pivots, these transitions. And the best part though of the whole episode is how she financed these deals after hearing multiple times, “No, you can’t do this.” Going out and even while she’s purchasing a property, the financing rules changed on her and she has to scramble and change. Just a lot of great key points and a lot of value she’ll add to you, guys. So if you guys are getting your first deal or even your next deal, how do you overcome that obstacle, especially when you keep buying properties and you don’t have any money left, what do you do and how do you acquire the next one?

Tony:
And I think her mindset segment was also one of my favorites as of late. She just does a really, really good job of breaking down a lot of the fears that I think hold the rookie investors back. So make sure you listen for that piece as well.

Ashley:
Let’s bring Amanda onto the show. Amanda, let’s start with that first flip there. What advice can you give to a rookie investor who wants to get started and possibly do their first flip because a rehab, that’s a very common, scary thing that might hold people back from getting started?

Amanda:
I would say to really know the market that you want to get into, get to know it as best as you can. And if you don’t know it per se, find somebody on your team or somebody that you can tap into their understanding. Have a really clear idea of what the sale price is going to be at the end and a very clear budget, and very thorough. And with that budget, always round everything up. I know that’s what we did on our first one, I think that was a large part of it, with the success of it, was making sure that our numbers were slightly inflated, and it really helped us in terms of being able to be successful with that first one.

Ashley:
That’s great. And then after you decided to transition into multifamily, what were some of the things that were different from flipping that maybe those were some obstacles you had to overcome to make that transition into a different real estate strategy?

Amanda:
Getting our heads around the bigger numbers. By the time we were successful with our first deal, I had dismissed a lot of the larger number deals because they seemed too big or too much or something like I wasn’t special enough, we’ll say, to approach. And once I realized it’s just a number and you figure out the rest, that was a big hurdle to get over, and realizing that even though it’s a much larger number, it’s not so scary once you look at the business side of it and once you realized that in the commercial space, there’s a lot of ways to get really creative that is perfectly acceptable and isn’t frowned upon by the banks.

Tony:
Can we dig into some of those?

Amanda:
For sure. Which part of that? The creative side, or which?

Tony:
Yeah. I guess a couple of things, because you mentioned that the bigger number scared you earlier on, which I think is a very common fear for newer investors. They see the extra zeros and it can scare people away. So how did you break past that fear? And then we can talk about the creative financing afterwards.

Amanda:
Yeah. I think originally, we played it safe, looking at deals that were price tagged at maximum house purchase price that we could buy. And so we figured we could do a six or eightplex. And so I’ve been running the numbers on a lot of that, I use the same spreadsheet on repeat, so you see things apples to apples as best as you can, deal to deal. And so I’d analyzed a lot of deals leading up to this one, and I started analyzing some of those deals in the seven-figure range and that was kind of like, “Ooh, this is a lot different.” And I started to realize they just worked better. They had better returns, better stability, vacancies didn’t harm them as much in terms of the cashflow.
And that’s when it I guess started making it more achievable and more safer seeming with the larger numbers. So I think that was the big one. And then when we finally landed on that first deal where the numbers just made so much sense, it snapped something in me and I thought to myself, “We just need to make this happen. We can’t let this one go.” And so that was what gave us the confidence to pursue it or be even okay with it, was just knowing how good the deal was that we just couldn’t let it go.

Tony:
Let’s talk about the financing portion of it. You’re going from six-figure purchases into seven-figure purchases. Did you guys just have all these funds available or did you have to partner with somebody? How did you make the financing work?

Amanda:
That was part of moving into the multifamily space, is we had ad someone who was on our power team, per se, who is a professional, who was seeing the numbers from the flips, and we got together to talk. And one of the things they had indicated was they would be interested in partnering with us. And so that gave us some of the confidence to move forward, was knowing that we would have the capital, whether us or alongside of someone else to pursue a multifamily deal together. I guess that’s where it began, but as the deal progressed and we were new to it, it wound up being something we needed to pursue solo as partners weren’t necessarily ready to take that step forward with us as well. And that’s okay with us.
So we didn’t technically have the full amount of capital available. We had means, we were going to figure out putting a HELOC on our house and selling some grain that was in the bin, and that was part of it, was pursuing this deal to begin with. When I went to the mortgage broker with this idea, I didn’t realize that I needed to have my capital available to start the funding process, I thought I would just need it at the end for the closing date, so I was like, “I’ll figure it out by then.” And that quickly changed to being like, “No, no, you need to be liquid now to be able to move ahead,” which we weren’t at the time.

Tony:
Talk us through how you guys overcame that challenge. What’d you guys do?

Amanda:
First, it was defeat, it was pure defeat. It was, “This deal’s going to go dead. I can’t even start the funding process. I only have so much time to get through due diligence, including getting my financing online. I can’t even start the financing line,” which was the longest time period, especially with the type of funding I was going for until I could show the liquidity, so either having a partner on board. And very early on in the conversation with the sellers, I talked to them about vendor financing and broached the idea. I didn’t ask them for it, I just asked them their familiarity of it and indicated like, “Would you be open to it in the future should we decide to pursue that?”
And they said, “Yeah, we could potentially be open.” So I left it at that. And when I came into the hurdle with the lender, I hung up the phone and I was really defeated for probably the day. And later in the day, a thought came to mind, was, if they accept investor partner capital as down payment, would they accept a vendor take back, which is seller financing?” And so I called my mortgage broker all excited, and I was like, “So, would you guys accept a VTB as the down payment?” And he was just like, “Yeah, but you’re going to have to get them to sign off on it.”
And I was like, “How about a commitment letter? Because the actual VTB or the seller financing is a document drafted by the lawyer at the closing table, so it’s not something I’m going to have upfront,” but you need to give your lawyer something to go off of. And so yeah, the commitment letter would work, he let me know. So I went back to the sellers and reached out to them and just said, “Hey, we are talking about it. Would you be open to a set amount?” And I’d put it quite a bit higher than we needed and a set interest rate, and I kept it very simple. I asked for a five-year term, the same length as our financing.
And they told me, they think about it and call me back. And they called me back and agreed to a slightly lower, which was still more than I was thinking we would get, and an interest rate that was agreeable for the both of us. And I said, “Great, I’ll get the paperwork over to you.” And I popped into the city the next day and got everything signed off and fired it off to my mortgage broker. And I was like, “It’s go time. Let’s get this rolling.” I think he was partly surprised that we had pulled it off, I sure was. And I was just excited to be back in the game and a chance to move forward to head to the closing table, because for 24 hours, I felt like we had lost it all and it wasn’t going to go anywhere.

Ashley:
What did the lender look at? So those terms, did he take that and look at, “Okay, so this is what your payment will be for this, and then look at it and make sure that you could still afford that with the property value, the cashflow from the value and everything like that?” If someone wants to do it this way, what are some things they have to know when they’re creating these terms and as far as what their payment will be?

Amanda:
I think in the commercial space, they largely look at, does the deal still cashflow? And can you service the debt? So there’s a debt servicing multiplier they use. And so if you’re adding in seller financing, we put it as a second position behind the first mortgage, so it’s basically a second mortgage. So when I run it in my calculator, I throw in there, so I have the interest only payment. It’s really important to set up those types of financing as interest only to keep your debt service ratios down. And so that really helps. And that will really help with your cashflow too.
So it’s essentially a balloon payment at closing. And so you want to plan out a couple of things. One is, how you’re going to pay that back. But more so, the lender really wants to see that the deal is still going to cashflow and be a stable purchase that the business, which is the multifamily property itself, can afford, not you as a personal paying for that payment

Ashley:
Was this your first time doing a commercial loan or had you done a commercial loan previous to this on the multifamily?

Amanda:
Yeah, this was our first commercial loan.

Ashley:
Besides that, was there any other big differences for someone that’s maybe going to make the transition from doing residential loans to commercial loans? What are some things they should know before they even approach a lender?

Amanda:
For the commercial side, it’s very different. I always say everything you know about residential, you can practically throw it out. They want to see that your deal’s going to cash-flow, that the business, not yourself personally, but your business is going to pay, so that building is going to pay for itself. It’s going to handle the debt, it’s going to handle whatever plans you have for it. Maybe you’re going to put some initial cash injection into it, but overall, they want to see that the asset is stable or that you’re going to stabilize the asset, and what’s your business plan behind that?
The other thing they want to see is a net worth qualifier. And so rather than it being our personal income, they want to see a set net worth. And the fun thing I think about commercial, and I’m sure it is this way on residential, I haven’t gotten a pile into the creative side on residential at all, but the funny thing about commercial is that if you’re missing a key to anything, whether it is the down payment, net worth, skill, anything, you can bring somebody onto your team that fills that spot and the commercial lender is fine with that.
They don’t expect you to know everything or be everything, they just want to know that you’re able to handle it or somebody on your team or somebody involved is able to handle it

Ashley:
That’s such a great point, Amanda, because if you go to residential, a lot of times, they want to see that that money is your money, the capital you’re bringing to the table and it’s not anybody else’s unless they gifted it to you. So it’s a lot easier to have a money partner when you’re going for a commercial loan than the residential loan. So what has happened next with this property?

Amanda:
We closed. No, I’m just kidding. Eventually. We had just a whirlwind with that property. So we got through that, and now we were moving ahead and we started on the due diligence component. We ticked into a new year, and the next big thing we had was an environmental issue. I kind of see that the environmental issue was a blessing in disguise because it wasn’t a major, it was a potential, and we did some background research to see. With a commercial deal you have to do phase one environmental, and ours triggered a phase two environmental, which usually you want to either run away or really weigh out, is it worth pursuing whatever’s going to come? because it’s a pretty big capital outlay to do it.
They can run 12 to $15,000, I guess maybe higher if it’s a bigger property. So it’s not a small thing. But what that actually did for us was it bought us some time on the lending because we had been delayed at the beginning, so we didn’t have our full lending approvals. And so we were able to get an extension with the sellers because quite frankly, if our phase one triggered a phase two, it’s going to do it for everybody else now who comes in after us. So sellers are really understanding of that in the commercial space. And so we did some due diligence behind the scenes to make sure that there was a high probability of the flag, which was a dry cleaner, actually, like 40 years ago or 50 years ago in a strip mall across the back alley.
What they used to do is dump chemical out the back door and then that goes into the soils and it doesn’t go away. And so that can wreck properties all around it. I always say, don’t mess around with your environmental because I don’t see that becoming something less in the future. Environmental stuff is very important these days and in terms of your future saleability. And so we had done some research to realize that it was very low probability that it was an actual dry cleaner across the back alley, that it was a high probability it was just a drop-off point based on the sheer square footage of the unit that they occupied, some data that they had on file.
And so, because we were able to get our hands on that data, we were like, “There’s no way somebody operated a dry cleaner out of 100 square feet. There’s just no way, a 10 by 10 room.” And so we went ahead with it, we still had to go ahead and drill and go with the phase two, but that came back clean, so we know that it’s good for the future in terms of when we sell it, but that also bought us some time because the next curve ball that came at us besides the phase two environmental was the lending rules had changed. When we had set out our net worth more than qualified, they were confident that we were good to go, but the lender changed the rules with the new year.
And with commercial lending, I’m not sure on residential, but on commercial lending, it doesn’t matter when you started your financing process, it’s, what are the rules today? And those apply. So even though it was partway through our process and we were good before, we were now no longer qualifying because they weren’t including anything on a net worth except for cash and real estate holdings and that was it. And at that time, we didn’t have the land subdivided so it didn’t count as some inflated amount, it was just what the land was. And then the second part to that was just, it didn’t count anywhere.
Retirement counts, it didn’t account for grain or equipment or anything like that. And we were like, “We have all this stuff paid off, or we had some assets that we’re ready to sell.” And they were like, “We don’t care.” But it was kind of one of those things where you’re stuck and it’s a curve ball, but once again, you figure it out.

Ashley:
So how did you figure it out?

Amanda:
First, I was like, “Really?” At first, I tried to justify it and not argue, but bring our points and try to angle it. And that was one of the things I learned throughout this whole process, was don’t take no for an answer, but just see what angle you can come in at to see if they’ll say yes eventually. And so we pushed and we pushed and we pushed. And then we basically came back with like, “That’s no.” And I think part of that had to do with the fact that this was our first multifamily, this was her first commercial deal. And then on top of it, instead of bringing money partners in the end, at this point, we were now going to pursue it by ourselves. So then they were like, “Well, shoot, you guys.”
So I think it was just a lot of layers where on the lender’s side, they weren’t really comfortable bending the rules for us in our position. And so that’s where I was like, “Okay, we’ll bring in a net worth qualifier and that will wash it all away.” I’d gotten to know quite a few people in the multifamily space who were either entering in or were established. I basically put out a post saying that we were offering equity with no money into our deal, which obviously attracted a lot of people. And I put it like a side note that you have to have a minimum net worth in it.
So I was getting all kinds of messages like, “You’re giving away part of a deal and I don’t have to put out any money?” And people were excited about it, it was a good deal. And so we narrowed it down to three candidates who I thought were strong candidates. And ultimately, we chose one person to come alongside of us into the deal. And our thought process on it was really hard because it was like, “We’ve done all this work, we’ve structured this deal, this deal is going to be a home run. And now we have to give away equity on it?” As we we’d set out to partner on this deal in the first place, it was now looking like we were going to go on our own.
So to bring somebody in, it felt like, “Ooh.” But at the same time, I remember having this conversation with my husband and being like, “Our choice right now is 0% of a seven-figure deal or 95% of a seven-figure deal. Suck it up. It’s a very small price to pay.” And that’s where we wound up bringing in someone. And the candidate we brought in had a strong track record in multifamily himself. He was both an active and a passive partner in multiple deals. He had a professional career that’s very strong as well. So personally, he was good, but also, he had a lot of knowledge that should something come up, we were rookies, that I felt like this should actually be a really strong partner to bring alongside of us.
And I actually did not know this person, a few months prior. I’d vetted him, but I knew him through people, but I didn’t actually know him prior to all this. So you don’t have to know everybody personally to be able to do these types of things.

Tony:
So many good nuggets there, man. I want to talk about how you guys are managing this, but before we do, Ash and I were talking earlier this morning about, as you start to scale your business, sometimes you have to make the decision of, “Do I want,” like you said, “100% ownership in a smaller business or do I want 50% ownership of a much, much, much bigger business?” And the answer is going to be different for everybody. Some people, they want to stay small and lean and just them and that works for them. And other people, they want 12 units at once, 50 units at once, 500 units at once.
And as you tend to go that big, unless you’re your last name is Hilton or Gates or something, you’re probably going to need to work with other people to take down those bigger deals. The way you went through that thought process, I think is really instructive for the listeners. Can we talk a bit about the property management side. Because prior to this deal, and correct me if I’m wrong here, Amanda, you and your husband had never been landlords, right? You had done some flips before this, but you dived head first into this 12-unit apartment complex, which is a big shift.
So how do you all, once you closed, and kudos to you on actually closing, because you guys had a lot of good work to make that happen, once you actually closed, what happens on day one? You get the keys to this 12-unit apartment complex, how the heck do you know what to do next?

Amanda:
I think that was a big one. A lot of people thought we were completely nuts. You didn’t just buy a house with one person you’re dealing as a tenant, you bought 12 tenants right off the bat. We actually had property management in place, and part of that was the lender’s criteria, which honestly is kind of smart. And so we did have property management in place right out of the gate. There’s definitely a learning curve. I read a ton on property management because I was like, “How do you know how to vet a property manager if you’ve never managed a property?” And that’s a big thing for me, is just making sure that what to look for, what to ask, what to expect, managing your own expectations, that you’re not expecting them to be super heroes.
I actually read several books leading up to closing, just ramming time in and I’m reading like, “What do we need to know? What do we need to know next? We’re actually buying this thing.” So we did close on day one, and get all the keys, and then hand it over to our property manager. It was still very weird because having never had a rental property, I’d read a bunch of the rules and read how things work, but now you’re here. So I guess for us day one, that wasn’t a huge hurdle. We sent out notices, we did what the books told us to do. And we worked alongside our property managers handing it off to them initially.
So I guess initially, we did property management. That has changed since, but initially, we did hire property managers.

Tony:
Yeah. I want to talk about this change, but before we do, even if there’s a property manager in place, you still have to manage the property manager. And in the world of apartment syndications, this is called asset management, where you’re not the property manager, but you’re still managing the overall asset. What did your relationship look like with the property manager and how did you make sure that you were holding them accountable to doing a good job for you?

Amanda:
I knew there was some initial pain points in our market with management as a whole, just talking to a lot of other multi owners in the area, “Who do you use for management? Why? What were your pain and your experiences?” And so with that, we established stuff right out of the gate in terms of spending limits or expectations, I guess. And we set up a hybrid situation where we weren’t 100% hands off. We were hands-off on the tenant interaction side and maintenance, like general maintenance, we were hands off on, but we took care of the renovation side.
So we had a system where they would give us a heads up if we had a vacancy coming and then we could get things in line to prepare for the renovation and push it through and get it ready back and hand it back to them so it’s ready to tenants again. So I guess a large part of that, I think, is having some communication, and also talk to other owners, “What is a reasonable expectation for property management for your market?” And then be sure to leverage other resources. Like I mentioned, I read some books on property management. Brandon Turner’s was a really good resource. I also know someone who manages around 1,000 units herself in our market privately. I wish she was available publicly. I’d probably tap into her.
So I think just, I guess, the communication side, I guess leveraging the resources and the books that you’ve learned to know what your expectation is and what each person’s role should be and how it should go, and then to follow up and be okay with saying, “Hey, this isn’t meeting my expectation.”

Ashley:
Amanda, I heard you mention a couple of times people in your network or local investors in your area, how were you finding these people, meeting them, and connecting with them?

Amanda:
I’m a complete nerd? I do a lot on social media, and not only have I done a bunch on social media, but if people reach out to me and they want to learn or they want to connect who are locally, I’ve done some Zooms too, but I prefer person to person. I’ve connected with a lot of people that way. And so as such, I’ve just come across some really cool people who have reached out and want to learn what I’m doing. And then as a result, I find out that they’re doing amazing things and get connected to others through them.
So I guess it’s actually being social on social media where I’m not just consuming and being open to new connections. I have a girlfriend who says it’s the making of a murder mystery where I’m meeting people on Instagram, but then actually meeting them in real life. And she’s like, “Really? Oh my God, what are you doing?” But it’s made some really cool connections, and being open to that to say, “How can I bring you value?” And then the return has been some really amazing people who have said like, “Hey, let me know if I can help you in any way, shape or form.” And so I’ve made some cool connections from social media.

Ashley:
That’s great. And that’s how Tony and I really [inaudible 00:25:58] online. Did we do this podcast for probably four months together I think before we actually met in person? But I think that’s great advice is to reach out to people. One of the first mastermind groups I ever was in was from Instagram. Another investor had messaged, I think, eight of us and just started a group chat and said, “Hey, would you guys be interested in doing a monthly call together and talking real estate and seeing how we can help each other?”
We did that for quite a while, and that was great. That never would have happened if she wouldn’t have approached me and done that, but that was eye opening to me is build your Instagram and to not work and meet all these different, cool, exciting people and then you get the opportunity to meet them in real life. And it becomes even more valuable to you, and you get to meet people all across the country. So for sure, social media is a great tool. And I think a lot of people hop on it and say, “Well, it’s a time-waster,” but just like you said, don’t just be a consumer, actually use it to your advantage, to network with people and to share and to inspire people and help them grow. And then they may even reach out to you too.

Amanda:
Yeah, absolutely. And on the mastermind front too, we did a multifamily mastermind and that was instrumental for meeting a lot of people in our very specific space that we wanted to head into. And once again, that just keeps multiplying those connections.

Ashley:
Amanda, I want to ask about, go into a little bit more of your property management. So how did you find your property manager?

Amanda:
Social media? No. Well, actually other investors in social media that I knew were in our market that I had gotten to know a bit that were in the multifamily space, specifically in our market. And so I just literally called each of them and had a chat about their managers, their systems, what they love, what could be improved and went from there. And so we don’t have a ton of options in our markets. We wouldn’t meet some other bigger investors’ criteria with having 10 plus property. I think we have 10 here. That’s basically how I found ours was through the best possible option from who I was talking to.

Tony:
Now, you mentioned that you started off with a property manager, are you still using that same company or have you transitioned into self-management? What’s been the change?

Amanda:
We have pivoted into self-management, and it’s really an interesting move. And that is, we look at where we want ahead in the multifamily space and we look at those larger players in our market in let’s say, in Western Canada as a whole or Canada as a whole, and how are they operating. And a lot of them do in-house management. They build all their systems in-house and as they add buildings, it just falls into the systems. And I’ve really looked into their companies and their books, the publicly traded ones and to see, what are they doing? And so that was where we decided to breed in-house.
We were having some vacancy issues that were well beyond what should be normal with no real good reason. We have a great location for the property. And so we decided that as we’re bringing on our second building that we would pivot both of them into self-management. And with that, we got a lot of crazy. People thought we were crazy to begin with to take on 12 doors to begin with. And then the second part was like, “Okay, great, you guys, aren’t going to have a life now that you’re going to be managing 24 units.” It’s like, “See you.”
Now, good property management, I think is something that if we could tap into somebody who we felt really was great and efficient in our market, we probably would still hire it out. But we were able to leverage systems and using online tools and really set up infrastructure, I’ll call it, digital infrastructure to streamline a lot of stuff. So we aren’t handling tenants and toilets at all hours of the night or those kinds of things. So we’re about six months in now, seven months in to self-managing, and it’s pretty great. I have my evenings, my family still sees me, my kids enjoy life. It’s actually working out really well.

Ashley:
A key point was that you built the infrastructure and you built the systems in place so that it can run smoothly. And of course, things will still come up, but you put in the work when you started the management company so that it wasn’t just chaos, and you’re trying to handle a ton of different things. You have these systems and all the structure put in place. So what kind of software are you using to manage these units?

Amanda:
We are using Buildium. We find it really fantastic in terms of we’ve automated a lot of payments. We use largely PAD agreements, pre-authorized debits. So their rents come automatically out on the first. I think we’re about 80% uptake on that, which is really awesome. The rest are all digital payments. So we aren’t running door to door to collect rent on the first, I’m not spending hours of my life on the first of every month like, “Oh my gosh, we can’t go anywhere.” So that’s pretty great. And then in terms of the tenant portal, I love that it allows us to operate like a big player even though we’re still small. People wouldn’t know it necessarily.
We have a maintenance requests line. So instead of them calling the phone number besides emergency calls, they can just put in maintenance requests on the portal. We can update them like, “This is the timeline it’ll get fixed.” It’ll get tagged onto our monthly maintenance, those kinds of things. And then the other parts that you can implement, and this is part that we’re growing with is as we have more and more team members that are more consistent, we have casual team members right now, but we can plug it in so that general stuff we won’t have to approve, we’ll have set parameters with our trades that it will automatically shoot off to them. So we won’t even see it.
So the beautiful thing about this is as we’re bringing people in, like our bookkeeper is probably our biggest one right now that we use, but she can handle a lot of the stuff too in terms of admin stuff as we bring her into more of an admin role handling some of those things. So a lot of it is just cutting down on the unnecessary communication. It’s not like we never want to see our tenants, but at the same time, I don’t feel like they want us in their lives all the time. So the more we can step out and not have to like constantly be running after all these little things, and it could just be handled in a very automated system, the better it is for everyone.

Tony:
One follow-up question for me, Amanda, and this is going back to the acquisition piece because we didn’t really touch on this, but are you buying these as value add multifamily where you’re going in, you’re doing some renovation and you’re raising the rents, or are these more turnkey ready on day one, you’re just operating an already running business?

Amanda:
They’re both. We buy for cashflow. I want to see cashflow out of the gate, and a strong cashflow, a healthy cashflow for the buy, but I also want to value-add components. So we want two folds, we want the cake and the icing, we want both. So we call it a slow BRRRR. And we’re in that two to five-year, five-year would be our absolute max for a full refinance. Then that would be a pretty plain Jane, nothing crazy happened or rents barely moved and everything went really slow. That’s our five-year target.
But two years is right now on… The one property we actually hit our two-year targets, I guess, in about a month’s time, we’ll actually have hit our two-year targets in just seven months. So we’re super stoked on that one. So we’re a slow BRRRR cash flowing machine hybrid.

Tony:
Yeah. But that’s what it isn’t in the multifamily space, is that it’s a BRRRR, but like you said, it’s over 12 to 18 to sometimes 24 months to get all of those units renovated, to show that the increase in ROI is there and then you can go back and get your money back out that way. So it’s BRRRRing but on a much bigger scale with more zeros, which in this case is working in your favor, not so much the scare, easy rose.

Amanda:
I think that’s the fun part is just seeing how boosting the net operating income, not the value of what your neighbor’s house sold for, but as you boost that net operating income, and now you bring efficiencies in, just little items like switching out the toilets, or changing your lighting, whatever you’re doing. All those little items, and then the actual renovations of course as well can really make a big difference on the ROI at the end of the day.

Ashley:
We talked about your flipping, Amanda, and then we talked about your multifamily. What about your latest deal, the land development? Let’s hear about that and how you found that deal and you acquired it and what’s happening on it now.

Amanda:
This one is fun because I wasn’t looking for it necessarily when we bought it. I had had this kind of dream and I joked around with friends with it years ago and I called it the cul de sac. And what it was we were going to all build acreages, all of us friends together and our kids were going to come out and play and they’re going to all be together, it will be like our own little cult. And so it’s been this ongoing joke for years. So when we had decided to move out to an acreage, I pulled into this development and there was a development board up and there was a bunch of lots listed and I didn’t know what was available and what wasn’t.
And so I just sent a message to the owners, it was private saying, “I’m interested in.” And I listed off like seven lots that would fit this house plan that we had in mind one day. And just the way the sun is. And they responded back thinking I was a developer wanting to buy seven lots when I was really just at the time, a house buyer wanting to build a house. And so they said that things had changed and they decided not to move ahead with the development, the road wasn’t built yet in the back section.
And they basically decided with where they were at in life and their kids had already moved away to the coast, quite a ways away from us that rather than staying and building and doing up the whole thing that they would just rather sell it and move on. They had done some other deals and stuff. So it wasn’t something that they needed to stay to finish. So they asked us if we’d be interested in buying the whole thing, plus their actual residents that was off in a corner. And I was excited because when I pulled up to this board, the way it was drawn with this little green space in the center of the one area, I joked around with my friends and this dream that I had years ago.
So it was this whole like, I don’t even care, I was just wanting to be a part of it, I didn’t care about owning it. So for them to come around and be like, “Do you want to buy it?” I’m like, “Oh, yo.” Not to be a little nerdy here, but I was expecting it to be a crazy price just because there’s a potential for development, it was farmland at the time. And so we basically looked at it and realized that there was some issues in terms of moving ahead with the second part of it, big question marks whether the development could ever go ahead. And so we approached it to them as we were going to buy this as if we could never develop it.
There was the farmland in the back so we knew that we could farm it and still come away okay on it and do okay on the property, no matter what. And so we basically wound up buying this thing as maybe we’ll be able to develop it, but we don’t know if we’ll be able to get past these hurdles with some of the restrictions that were on it with the development committee or the planning committee. And so that was one of the things that we pursued it knowing that it was going to at least bring us some income from the farmland maybe it would become a home run if we could get through some of those hurdles and get people to start saying yes to us.

Tony:
I think that’s just another great example, Amanda, of you being tenacious and creative with your ability to put some of these deals together. Love, love, love the story. I guess one last question here, and maybe I missed it as you were going through it, but how did you guys end up financing because it was what, 60, how many acres?

Amanda:
61.

Tony:
61 acres or something around there. How did you guys financed that purchase? Was it just money you guys had saved up? Was it more creative financing? What did that look like?

Amanda:
We actually bought it as our personal residence? So we sold our property. We actually put a sizable down payment on it. This is before the time when we believed in ever touching your home equity, we’ve had said never, ever, ever, ever touch your home equity. And then we were like, “Well, maybe for real estate, we’ll do that.” So we basically bought it as normal owner occupied property, which took a little bit because they were like, “It’s a farm.” At the time we weren’t farmers yet. So I was like, “But we’re not farmers.” They’re like, “It’s a farm so you got to go farm lending.” I’m like, “But we’re not farmers.” And then today we’re farmers.
So we were able to get residential lending, normal house lending. We found a bank. We got a lot of nos first because they said it was too much land, they would max out at 10 acres and that was it. And then we found two banks that we had relationship with that were willing to say yes and lend on it as a normal owner occupied. So it actually wounded being probably one of our easiest things to finance.

Tony:
Beautiful. And then you said you also ended up subdividing your 61 acres. What was the benefit to you all as the owners to subdivide that land? Why not just leave it as one big 61 acre parcel?

Amanda:
I guess we hummed and hawed about it. And if it was a larger parcel, we probably would have kept it farmland because there is good returns on that, but since the process had already started and it was down to 61 acres, the benefit to it was we got to farm it for a few years here prior to subdividing. So it actually paid for our mortgage and property taxes. It’s our house hack or farm hack as you called it earlier, I laughed. So it’s unorthodox house hack, and that really helped us too during all this period of having different odds and ends and just lots of craziness happening.
If you can delete your house expense, it just makes a huge in terms of being more comfortable. And then the upside to splitting off 15, we kept 10 acres for ourselves. The 15 lots, there’s lots of return, there’s a fair bit of demand for acreage type properties. It’s 15 minutes, it’s right off a main highway. So it makes a lot of sense. It’s future residential corridors, how it’s all zoned. So for the future plan in our area, that was the end game or the target down the road was that this whole corridor would become residential to line with the community’s future vision, according to their official community plan.
So I guess for us in the end, turning those 15 lots out too would also give us the capital to pursue some larger multifamily, some more larger developments as well. So we will be doing a combination of bare land sales. We’ve already had a couple of land sales here go through, and then we are also going to be developing some of the lots. And we’ve been having a conversation lately like, how many lots do we sell before we just decide to build all the houses and build the community. And for us, that kind of pivots into where we’re heading in the future. I know this sounds like, “Oh my gosh, you guys are doing everything,” but there is purpose in the madness and why we’re doing all of it.

Tony:
You guys are, think are a great example of not letting not knowing how to do something, stop you from doing something. You just put your foot on the gas and you poke your head out the window and you hope you’re going in the right direction. And if you’re off course, you make a correction and you get there, but you guys are a great example of being creative and being focused and being tenacious. I love it. On that note, let’s talk about mindset. We’ve skimmed over this a little bit throughout the episode and you dropped some nuggets here and there.
But I really want to drill down into how you and your husband approached this from a mindset standpoint, because what holds a lot of investors back, Amanda, isn’t that they don’t know what to do, is that they’re too afraid, too scared, don’t have the confidence to actually do it. So if you think about, Amanda, before that very first flip, what were some of the misconceptions you had about real estate investing that turned out to not be true? Some fears that you had, some obstacles that you imagined that turned out to just not be there.

Amanda:
I think the big one is before you get started, a lot of the times the focus is on what could go wrong rather than what could go right. And I firmly believe that you should look at both sides, but I’ve become a person who’s more focused on the what is, the good. And often when we think of the absolute worst case scenario, the worst possible thing that could happen, we took possession of our first multi, April 1st, 2020, the world had gone nuts. We pulled conditions before the world went nuts, at the beginning of March.
One of the things that was terrifying at that point was we were taking this huge property, but here, the politician basically said, “Don’t worry about paying your rent.” This was another thing. Before Amanda would have went, “You guys are out of your mind.” But really, there’s nothing you can do at that point. But being in the situation, I would say, we sat down and we looked at it, we were like, “Worst case scenario, 12 people don’t pay rent on the first, and then they don’t pay rent the next month. And we have two months with zero people paying rent.” And once we looked at it that way, I was like, “We count that as an acquisition cost, we’ll pretend this was an extra bit that came out of our slush fund and then we’ll move along.”
And then we also looked at it is what are the odds that zero out of 12 don’t pay their rent? Is pretty low. And so I think that’s the big one is that I think we are programmed to think worst case scenario all the time, and that’s being wise and using wisdom to look at the worst case and oh, this could be risky, but I think there’s also wisdom in going, “But what could go right, and what is the probability of everything hitting the fan at once? What is the probability and how can you mitigate that risk?” And then focus on what could go right. And so I’m not saying just to stay in the clouds, but acknowledge the risk and then consider what is the probability of all of that perfect storm happening and what can you do to mitigate some of that to improve your chances. And then focus on what the positive outcome could be.

Ashley:
That is such a great point, Amanda. As you were talking, I was writing notes. I want you Rookie listeners to hear how you were talking about worst case scenario, you have to cover those two months of rent and that’s part of your acquisition costs. Have your reserves in place and be okay with spending those reserves, be prepared to spend those reserves. That is what it’s there for. That shouldn’t be your life savings, that should be money that you can put towards your property if a worst case scenario happens.
And just like Amanda said that what is the worst case scenario? What is that fear you have? And then figure out how to overcome it, plan that out ahead of time, what is stopping you, what is making you scared, and build out a plan like, “Okay, worst case scenario, there’s a hurricane, the roof blows off. Well, can I get insurance that would cover that? How much would a new roof cost to put back on? And throw that money into reserves. So I think that was great, that was one of the best mindset answers we’ve had in awhile. So thank you.
I’m going to take us to our Rookie Request Line. The Rookie Request Line is for anyone to call in at 1-8885-ROOKIE. And you guys can leave us a voicemail and ask a question and we may play it on our show for one of our guests to answer.

Speaker 4:
Hey, my name is [Genty Fidelis 00:45:57], and I’m calling here from Fort Mill, South Carolina. And my question is, just recently, about two weeks ago, me and my wife just purchased our first property. I plan to move out in about a year or two and turn that into a rental, but what would you guys suggest would be my next step? How should I have to proceed to get, I guess, my first investment property, my next property? What do you guys think should be my next step? Thank you.

Amanda:
I guess narrowing down what you want and not just what you think you can do, but actually looking at the big picture is where you’re headed. And then start making decisions now that will align with that. And I guess that’s really digging down with your partner or if it’s just yourself and just saying like, what do you truly want in life? What do you want for your future? And what’s the next step to get there? And then start pursuing that, rather than looking for a specific property or what’s the next best deal, what’s the next best deal for where you are headed and how do you need to prepare yourself in order to take that next step?

Ashley:
That’s such a great point, build your investing business around what you want your lifestyle to look at. So you need to know what you want your lifestyle to be before you can actually build the business around it. That’s a great point. Tony, do you want to highlight who our Rookie Rockstar is this week?

Tony:
I do. And if you want to be featured as a Rookie Rockstar, get active in the Real Estate Rookie Facebook group. We’re at 30,000 plus strong in that group. But today’s Rookie Rockstar is [Meine 00:47:30] I’m going to read Meine’s full post because it’s a really cool story. But Meine said, “I’m so grateful for BiggerPockets. BiggerPockets changed my life for the better. I always knew I wanted to do real estate investing, but wasn’t able to find the courage until a wise friend introduced me to the BP Podcast.”
“After listening, breathing, eating, drinking anything related to BiggerPockets, I felt confident enough to pull the trigger and close on my first rental property, a beautiful duplex in May, and then a fourplex in July this year.” And on that duplex, Meine bought it for $45,000. It was turnkey with no rehab, and it appraised at purchase for $60,000. And then the fourplex, Meine bought for 60,000, put another 30 into the rehab and it appraised for 130,000. So love hearing stories like that, Meine. Big congratulations to you.

Ashley:
Yeah. That’s so awesome. Congratulations. And I feel like Meine is describing me and Tony too with the listening, breathing, eating, drinking BiggerPockets. It’s awesome. Well, Amanda, thank you so much for joining us today. Can you tell everyone where they can reach out to you and find some more information on you?

Amanda:
Yes. I’m active on social media, so you can find me @multifamilyamanda. And I share all the nerdy details on multifamilies to give other people the tools to move ahead as well.

Ashley:
Well, thank you so much. We’ve really enjoyed having you on the show today. I am Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson on Instagram. Make you guys have joined the Real Estate Rookie Facebook group. And don’t forget to subscribe to our YouTube channel, just search Real Estate Rookie. And we will see you guys on Saturday for our Rookie Reply.

 

Watch the Podcast Here

In This Episode We Cover

  • Buying a large multifamily property as your first rental
  • What to do when financing falls through at the last moment
  • Running the numbers before you run away from a potential deal
  • Learning to self-manage at scale without any experience
  • Buying farmland and holding land for future development
  • Pushing past fear and making large deals work in your favor
  • And So Much More!

Links from the show

Books Mentioned in this Show:

Connect with Amanda: