Real Estate Rookie Podcast

Rookie Podcast 40: Using the “AREA” System to Buy 21 Houses in Just a Few Years with Anam and Aamir

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Investor couple Anam and Aamir have been hard at work during COVID, locking down deals and BRRRR-ing more and more houses. Through years of system-building and deal mistakes/lessons, they were able to create a system that allows them to save time searching for deals and know immediately whether a property is worth the investment or not.

After pinpointing exactly what they wanted in a deal, Anam and Aamir took the time to develop systems and processes that would help them get properties rehabbed and rented faster.

So how did they finance these deals? HELOCs, credit cards, cash, hard money, and other creative financing.

This is what allowed them to build a portfolio of 21 units within a few years, all while working full time jobs that take up much of their waking hours.

With their deal criteria system (A.R.E.A), they’ve been able to turn their dreams into reality. Now at only 29 and 30, Anam and Aamir are on track to close more and more deals, securing their financial independence all while building appreciating wealth.

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Ashley: This is real estate rookie show number 40.

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Sebastian: I think we did like four or five deals in our first two years. We didn’t, we didn’t get much traction, but as soon as we started getting the processes down, I think we were able to pick up. So a lot of scale from that,

Ashley: my name is Ashley care, and I just got back from Florida about two. Hours ago. And I am here with my wonderful co-host Tony Robinson.

Tony: What’s up? Ashley. You were such a trooper, right? You, you touched down the airport and get straight to your closet so you can start recording again. I love it.

Ashley: Yeah. I woke up at 4:00 AM to catch the magical express from Disney and I’m back in cold, rainy.

Buffalo and super windy today.

Tony: How was the vacation? Was it was a beautiful, was it lovely? How’s

Ashley: how’s it, it was very nice. And so we started out in an Airbnb with a pool nice and relaxing, and then went into the chaos of, of Disney. But yeah, it was really nice. It was my husband’s first time there and to my kids their first times there.

So that was exciting. We want the group of people, but you have even more exciting news. Where are you leaving to

Tony: go? 48 hours. I’ll be off to Mexico to get married to my fiance. So super excited to have some time away, but it’s so weird. Like I feel whenever vacation comes, I feel like’s intention as I get closer to it because there’s so many things in the air.

We have one property that’s listed for sale. We have another property that’s about to close and like all these other things happen. And so I’m just trying to wrap up as much as I can before we take off.

Ashley: I love it. That you’re worried about the real estate things and not even like things you have to do for the wedding.

Tony: If, if my fiance is listening, I’m actually very worried and concerned about the wedding as well.

Ashley: All the details.

Sebastian: I’m sure she

Ashley: had all that taken care of for you that you don’t have to

Tony: worry.

Well, good, good. Well, we’ve got a good show lined up for today, right? We’ve we’ve got another actually married couple on the show and they talk about how they’ve, they’ve built their business and a little over three years from zero doors to 21, I think they picked up seven of those, like in the last like eight or nine months, they’ve been on like an absolute tear.

Ashley: Yeah, Amman and Amir, you can listen to them, just they’re dynamic. And they talk about their roles in their business, who does what? And they just play off of each other’s strengths and weaknesses, which I think we can all learn from not only if we’re doing work with our spouses, but also with our real estate.

Partners that we do have properties with and deals with. So you guys are going to take a lot of value from this, for sure. So let’s bring them on

Tony: Amir. Thank you guys so much for joining us today. We’re excited to dive into your story. How are you guys doing?

Sebastian: Doing great. How are you

Tony: doing good. Doing good.

So I’ve interviewed a nominal mirror in the past, in my old podcast. And they had this really cool story of how they were able to scale their portfolio from zero to 14 doors and about three years and in 2020 during COVID and all these crazy things they scaled up to now, I think 21 doors. So they’ve been killing it this past year, so we really want to share their story with you all, but Unama, Amir, for the folks who don’t know you, I guess just give us a little bit of background how’d you guys get started in real estate.

What led you down this path?

Anam: Yeah. So we got started in real estate about three and a half years ago. When we sat down to look at our future and what we thought we wanted to do, what we knew we didn’t want to do was go into a service-based business. Cause that’s what we grew up. Both of our families were very to service business.

I mean, service-based businesses. Our parents worked seven days a week, all the time. That’s not something we ever want to do. We wanted, whenever children have in the mix, we want to be able to, you know, be a part of their lives growing up and not just be working all the time. So. We did a little bit of research on real estate and realized that that’s the path we wanted to go down in three and a half years later.

I don’t think we’ll ever say that that was not the right path to go down and we love it. And we love what we get to do. We still, both of us still have full-time jobs. My full-time job is the marketing director at a luxury dealership group. So it’s not, has nothing to do with real estate.

Tony: Yeah. And Amir, what about for you

Sebastian: basically the same reasoning?

Uh, I grew up in a family business that we were, we’ve been growing and scaling over the last like 15 years or so. And at one point we just were kind of like just sat down and were like, we need to start something on our own. And it needs to be something that like, yeah, it has to have a lot of work, but it needs to also be something that we can take a step back.

And if we do need to take a few weeks off or whatever it is that we can actually do that as well. And

Ashley: what made you guys decide real estate? Was the tool that was going to get you down this path that was going to provide the future that you wanted.

Sebastian: I think it was a part of the ownership process that like, when you own something, it’s not like somebody can take it away from you.

Um, and it’s, it’s, you’re providing a living accommodation for somebody. So it’s not like a daily service or something that you’re providing them. It’s like something that you’re, you’re going to take care of the home. You’re going to get it ready. You’re going to get them to move in. They’re going to continue on living their lives.

They’re going to get you right. They’re going to pay the rent and you’re going to continue on from there.

Anam: Yeah. Basically a lot of that had to do with that. And the fact that it was, it was an asset based business. If that makes sense, it’s not like you’re trying to create a service and it can be gone tomorrow.

Or if it’s no longer a need in the market, it can be gone. So when you need to live somewhere at all, like you can’t, you’re gonna want a roof over your head at all times. And so that’s, I think. It’s a safe, but not safe.

Sebastian: You get to touch, feel factor. It’s not like stocks where somebody else is like controlling it for you.

This is something that you have direct connection to, but you can make it, you can improve the property or add value. However you want to see.

Tony: Now you all are balancing this with very busy lives outside of real estate. You’re up to 21 doors. And I think for a lot of our listeners, they’re, they’re in the same boat, right?

Where they’ve got full-time jobs that they’re working. How have you been able to balance scale in this portfolio with your commitments outside of real estate?

Sebastian: And it has to do with the processes and anything that cause like, if we were trying to do it, which we were in the first few and it didn’t work out well for us.

That’s why like our, I think our very first year too, we weren’t getting that much traction. I think we were doing maybe one deal, one or two deals a year for the very first, what, two years or stuff. Roughly, I think we did like four or five deals in our first two years. We didn’t, we didn’t get much traction, but as soon as we started getting the processes down and building out like some of our, our crews and vendors, and even getting a property management software, which really helped us out, I think we were able to pick up.

So a lot of scale from that and still manage our jobs.

Tony: And let let’s talk about what some of those processes are. So if you think about where you were, when you first started versus where you are today, what are some of those processes you’ve been able to build out that you felt has helped you and help you reach the scale of this?

You have. So

Anam: the first, one of the first things that we decided to put a process in place, we used to go after work, go buy the supplies, take it to the properties we would get with the contract and see what he needs maybe for the next day or two. So typically we invest about 45 and 50 minutes away from our home.

So it’s not like right around the corner, but every night we would get off at seven coach home Depot, load up our cars and drop stuff off. That was probably the biggest thing we changed going into our second property is we home Depot has the pro desk, which we utilize, uh, several times a day now, but we just let her, we trust her contractors.

Now at the beginning, we kind of looked at the receipts of what they were maybe purchasing, but. Now we just make we put into the bed. They’re responsible to go to home Depot, grab the supplies, the finishing materials we’ll do. Cause we obviously want to look a certain way, but like, I don’t need to, I don’t need to look at what drywall they’re buying or what nails they’re using in the way we work.

Our beds is we. We only do labor costs and we actually, we paid for all the supplies because we do it through home Depot, through the pro-desk. And there’s a lot of other benefits because you can use your credit card and backup points.

Sebastian: Yeah. On top of that, there’s perks for the contractors too, because usually they’re not like they can’t factor in how much materials are going to cost at the end of the project.

So when you’re giving them a direct, just labor cost, it’s much easier for them to price out and they might give you better pricing on that.

Ashley: For the properties you guys are doing, are they burrs then? Are you rehabbing them? And then renting them out?

Sebastian: Yeah, every single one is a bird. We, we, we feel like if we do the work that, that we should get paid on a monthly basis, it shouldn’t just be like a one-time deal where you’re just gonna, you know, you’re, you’re getting in there doing all the work and you’re getting everything done.

And then you just get paid one day and you’re out of there. Like, we feel like you should get paid on a monthly basis if even if you like, think about it. Like our, we went back right recently. It’s our very, very first deal. And it’s like when you hold onto these properties, sometimes like multiple flips in one, because the property value has appreciated so much.

It’s basically like we could have flipped the house like three times it was by now. And so that’s why we generally pulled all of our properties.

Ashley: You've already built up the equity three times in that plus your cashflow is what you're saying.

Sebastian: Exactly. Exactly. Yeah. Yeah. So like, I mean, we’re getting flips done while not doing anything, you know, that’s why, that’s why we like to hold.

Tony: You guys are also a married couple, right? Ashley. And I talk a lot about partnerships. She’s got a partner, I’ve got partners, so we love the concept, but you guys are partners, you know, all the time, right. You’re partners in real estate, marriage. How do you balance that, that relationship? Like how do you make sure that, that you, you kind of keep those two roles separate and then how do you kind of balance each other out as both real estate partners?

I guess like as husband and wife.

Anam: There’s probably not much of a normal balance at birth. I think we attempt sometimes drawing the line of rehab, maybe on a date night to be like, Hey, let’s just not talk about work. I think it’s the only thing we know is work. And we love it so much that it really doesn’t feel like work.

It’s just it’s as talking about our lives and our future and our properties. And. I don’t think we’ve ever not

Sebastian: talked about or we’ll, we’ll, we’ll have like a conversation for 10 minutes and then just sway right back into real estate. Like what’s going on for the day or the week or whatever.

Tony: How do you guys share the responsibilities now?

Like who does, what in the real estate business versus who does, what else?

Sebastian: Yeah, we definitely split that up. Pretty much like that. Like she has her parts and I have my parts and we don’t get into each other’s way unless we really need help. Um, she handles most don’t like everything to do with leasing and put a split in there

Anam: really saying, um, anything with the tenants.

Sebastian: Um,

Anam: other than when it comes to maintenance, maintenance, he. Jocelyn. I take it personally sometimes.

Sebastian: So yeah, like the construction and the maintenance part. I’ll take it. Uh, I’ll take that on because it’s just, I have more time and more flexibility during the day than she does. So I’ll be out there on the job sites and then get, get people to where they need to be.

One other thing that she does is she’ll be sharing like the, finding the deals together. So like me and her will both sit down and get deals together. But past that, yeah, we like, she handles most of the tenant side stuff and I handle most of the backend stuff that happens before it’s

Ashley: waste. I heard you guys mentioned before that you are using property management software.

Would you explain what software you’re using and how you are both using it to do your different roles that you have.

Anam: Yeah. So we use Buildium for our property management tool it's it was probably one of the best decisions we made because we do a yes, we self-manage, but we also lease our own properties as an I do the showings.

I list the properties, I market them. So building them allows you to list properties and allows you to then manage properties post. Like a tenant moving in. You can keep all the docs on there, the way that we both utilize it, it as it is how we both know kind of what is going on with the property. But in terms of task driven stuff, we have a project management tool that doesn’t have anything to do with real estate.

So we use a sauna for, and then we break it down by like to do and process. Pending. So then it’s like really quickly we can pop into that tool and see, okay. He said he was going to do this. Has he had a chance to do it? Or should I jump in and try to do it? That’s kind of the way that we kind of use those tool.

Two tools in tandem.

Sebastian: Yeah. As long as it’s a great thing to use because it’s live. So like, if there’s like maintenance tasks or whatever, or just stuff that we need to buy or stuff for the property, if it’s done, we can erase it. And it’s, it’s live on both of our ends. So it’s not like while I’m doing it and then she’s coming back and trying to do it herself too.

Tony: So, so those are some of the systems that you both have put in place to help you manage this large portfolio while having these responsibilities outside of real estate. Now with 21 doors, that’s a lot of work. So I guess a two-piece question. What made the two of you decide to self-manage and then two, how did you start educating yourself on how to do that effectively?

I think we

Sebastian: learned it along the way. The reason we did it was just to keep most of the margin while we were starting out. We’re bootstrapping the company. So it’s like, it was just whatever we can put into it and how fast we can grow. It’s not like we’re taking by or other than bank money, but we’re not taking like outside investor capital or needing to grow ourselves.

It's just our personal capital. So we were like, okay, if we, if we learn to self managing process, if we get into a certain amount, maybe we can bring on an employee in house, down the line, maybe around like 30, 40 units when we can actually afford an employee and we'll learn everything up until then. And then they'll take on those tasks from that.

And then one can keep everything in house.

Ashley: Now, did you guys start these processes from day one with property one? How did these processes evolve?

Sebastian: Yeah,

Anam: definitely back at our first property. First two properties were probably the biggest learning groups for us. I think, as we went from property one to two, two to three that’s when we realized, Oh, there’s a void in this, what can we do to fix this?

And I think that’s how, like, we didn’t get a property management tool in place until I think our third or fourth property. So. I didn’t even remember how he used to collect grandpa. I think it, we like gave them bank cards and like how, cause at that time you used to be able to, if you have a deposit card and you used to be able to pull up and make deposits on, on banks, any bank stopped allowing that as an option.

And I think that’s maybe why we started looking into a property management tool because we wanted to, we needed, we needed a way to collect rent. We didn’t want to do mail-in checks.

Sebastian: Yeah. The very first property, they would give us a debit card, but they wouldn’t make it copies of it. So what we would do is pre fill out deposit slips and give it to the tenants and just have them deposit straight into the bank.

And then we were aligned. This is not going to be a process. That’s going to actually work at scale. So like every time we have a pain point, we try to figure out a solution and go from there. That’s how we they’ve been figuring it out along the way.

Tony: Now part of what you guys have been able to this year, again, is grow your portfolio.

And I think you guys had mentioned that the COVID actually gave you guys some, some breathing room to kind of recalibrate and figure out how you can improve your processes and systems to continue to scale. What were some of those changes you guys made? And I guess just talk us through that break that you guys had and how it benefited your business.

Sebastian: The break definitely helped because like we said, both of us have full-time jobs. And so we’re so focused on that as well as doing this on a daily basis. Our time is like very limited. The break really helped because both of our like work slowed down significantly, especially around March and April. So we were actually like, we were coming home at normal job.

We were actually coming home like super early during the day we were coming at like two or three o’clock in the afternoon. And you’re just like, What do we do with all this time? We had like nothing to do all day. At that point, we were like, well, let’s, let’s put this time to good use it. And we figured out like what what’s stopping us from scaling.

And a lot of it had to do with the money. It’s like, you only have a limited amount of money, so it’s not like you can just keep going and going and going. At that point, we started looking into like hard money lenders and stuff and seeing how we can actually make it work. There’s some super expensive, hard money lenders.

And then there's some ones that are very reasonable. And so we started, um, just, just talking to a lot of different people. And then we were like, okay, the acquisition side is really hard for us to scale out because of the money. So we figured out a hard money side, and then we talked about like 50 banks to figure out how our backend is going to work out because we can't like not every single bank is going to just be like, yeah, you guys can just keep adding your rentals as much as you want.

And so then yeah, we fit, we call it a lot of banks. We talked to a lot of finance people and. We figured out the money part. And that was mainly our pain point. Right there.

Ashley: Can you tell us a little bit about how you did finance your properties? Like what did the first three look at it look like? And then when did you move into hard money for your

Sebastian: deals?

Yeah, we didn't move into hard money until this year. Our Berry, like our first like six, seven, maybe eight deals, something like that. It was an assort medium of a credit cards, credit line, like a personal credit lines, uh, business credit lines, home equity line. Uh, personal cash. We use a little bit of everything just to get any deals done.

Most of the credit card was basically for materials and supplies that we were getting from the house, but like all the other lines of credits were mainly to do the acquisition. And for, for the

Tony: labor. Now I want to take a quick step back because you, you guys kind of glossed over something. A lot of people, they got spooked and covert it, understandably so, but instead of using that time to, to make themselves better, you had people, you know, binge watching tiger King and like leveling up on fortnight.

But, but you guys use it as an opportunity to, to build your business. Right. And you know, I know I did the same. I think I picked up four properties when COVID was kind of at its peak. And, you know, I’m, I’m more so talking to the listeners right now is that when you have that opportunity to kind of take a breather, don’t use it for leisure time, use it to build your business because we can see it.

It pays dividends here. Now, one thing I want to talk about is the financing piece, right? You guys said for your, your initial purchases, you use like lines of credit and you know, personal cash and business lines of credit. That's a lot of different places like pool of financing from, and, and, you know, you're, you're putting your home at risk with the HELOC.

You’re putting your business business at risk with the business line of credit. I mean, you, people might be thinking that you’re crazy for doing that. Right. I guess, walk us through your thought process. How did you push through that? What were your thoughts making that decision? Well,

Sebastian: first of all, you have to like, you have to kind of know financing of how to make everything work and put it all together because all these financing structures have different like payback periods or interest rates, and you just have to keep everything organized.

But like, when we looked at we, we did so much research on it before we even started in real estate, that we were very comfortable jumping in with all this, because we knew that. The, the spread that we were buying it at. So like our purchase price compared to what the ARV was going to be after we finished, we knew that there was so much room and that there could be multiple exit strategies so that we wouldn't actually lose the base money, which was the acquisition money.

We knew that going in, that we could either, you know, if we wanted to, we could wholesale it or if we wanted to, we can flip it. Or if we can, if we want it to, we can just rent it out. You know, there’s multiple exit strategies. So it’s not like your money’s. At risk. Yeah. It’s, it’s a little weird using all these things to, to fund it, but your money’s not really.

I mean, I can’t, I guess I can say the press off, but the money wasn’t really at risk for

Ashley: us. So after you used up your lines of credits your cash and you moved on to hard money, how did you approach hard money lenders? What would be your advice to other rookies that want to use hard money lenders?

Sebastian: I think the best thing is to just get on a phone call and just talk to them, tell them what your plan is like, are you, are you somebody that’s gonna be doing one deal a year?

Or are you somebody that’s going to be doing a hundred deals a year, talk to them and see how they can help you, how you can help them. Obviously they’re there because they want your business. So they’re going to try to figure out a way that makes sense. Like, you know, like to help you out as much as they can, because they know that a lot of people coming into their systems.

Yeah. They might do one or two deals their very first year, but they might grow to do like 50 deals or a hundred deals a year. And that person is going to be very valuable to them to jump on a phone call and just literally just talk to them, just tell them what you want to do. Hi, what’s your thinking and go from there.

Ashley: Did you guys interview hard money lenders or did you just go with the first one you talked to.

Sebastian: No, we talked to him, I talked to a whole bunch. Um, there was at least probably like we talked to local, so there’s two different kinds of hard money lenders, too, local hard money lenders, which is going to be everybody in your immediate area.

And they’re going to know the market. They’re going to be able to move the very fastest because they they’re local and they know the market. So don’t know that, okay. Yeah, we can do it in this area, but we can’t do it in this area or whatever the case may be. And then there’s your national hard money lenders.

Your national hard money, lenders are going to be your cheapest options because they’re doing this at volume, like across the us. It’s not just that they’re keeping it for us. And like Texas, they’re just, they’re doing it all over the U S so if you want to be, if you want to find something for pricing, you need to hit, you need to call your, like your national hard money lenders.

But if you’re looking for somebody that can close with speed or give you insight into what’s going on in your general market, you need to be talking to your local hard money lenders.

Tony: Now, I, I love that you both have leveraged different kinds of financing to get your deals done, because I think for a lot of people that are new, their initial assumption is I need to put 20% down.

Right. And, and do it this way. But there’s so many different ways to find financing for your deals. Like I’ve used 100% financing from ideals. I’ve used lines of credit against stock. I’ve done, you know, vacation homes, you know, I’ve done like. And there are so many different options. So, you know, for the listeners, I’d encourage you all.

Don’t stop at the first bank. He talked to you don’t stop at the first financing person to talk to you like exhaust as many options as you can. And eventually we’ll find something that works.

Sebastian: Now you have to, you have to open up your mind as well, because like everybody’s so confined to the space of like, Oh, I need the 20% down to get the rest of the 80.

But even like with my friends and stuff that I talked to, like, I’m like, dude, just open your mind up and think about it backwards. If you have. If you have paid for the whole house, technically the bank will get you 80% back out. Right. And if you’re going in there with a nasty house and doing improvements, obviously that value is going to come up.

That 80% that they’re going to rent to you later is going to be worth a lot more than the 80% that are going to lend to you on the front end.

Tony: Yeah, that’s great advice. And I think it speaks to the fact that you’ve got to have, you know, be, be diligent in what your goals are, but be flexible in your approach.

Right. And be open to hearing different ways of getting the same thing done. Now, I want to touch a little bit about, again, going back to the systems you guys have put together, talk to us about the area system. What is that? How are you guys using it to scale your business?

Anam: So it’s, I mean, I, we live by the area area acronym.

High-level what it is a means. It literal area art means retail evenings education a means ARV. So what that means when we look at the first one, because to his point, I think he touched on it. We got the, we get a lot of emails a day from wholesalers. We’re probably on that three wholesalers mailing list by being on somebody’s mailing lists, you also kind of get overwhelmed.

And if you don’t understand your criteria or know exactly what you’re looking for, you can start, you start going down a rabbit hole and spending hours trying to analyze deals that hasn’t has nothing to do with maybe your market or your price point or what you would actually be willing to get into.

Right. So when we look at, by knowing our, a, our area, that’s a very good filter for us to be like, okay, somethings and like way Northern Texas. That’s not even an area that we would invest in. So knowing our neighborhoods and actually knowing like general pockets within the Dallas Fort worth metroplex has helped us understand when a deal comes in.

That’s the only way to actually tap into it and look into it. So some tidbits for areas that make us really, when we’re looking at new areas is. We try to see if there’s other investor activity up and down the streets, seeing dumpsters, all of that stuff really helps push us to be like, okay, this, this could be, if it’s a new era, this is actually a potential for us to start investing in because there’s other investors in the market.

I wouldn’t say that’s necessarily the always case. I don’t think that just because you see another investor, isn’t why you should always invest because sometimes they may be a rookie too. They’re also trying something now. But another thing to look at is lawns in Texas, at least in Dallas, Fort worth.

There’s. We, you can tell a not great neighborhood because there’s a lot of trash up front. There’s like maybe a broken down cars sitting in front of their lawn. Just looking at the general cleanliness of the neighborhood. Are there sidewalks or is it the street that you walk on? All that stuff plays into us, actually knowing our neighborhoods to the T to know isn’t it.

Do we even open up the email? Do we even invest in this area? When it comes to the retail side of things. I always, almost always, we try to make sure there’s a Starbucks and a Chick-fil-A. So we’re from Texas. So Chick-fil-A is a big deal. We’ll utilize some of these other retailers, thousands, if not millions of dollars in just research for the area there, you’re not going to see a massive Walmart go log.

If they don’t see the demand, there’s not going to be home Depot. If there’s no demand. For sure it won’t be a Starbucks or take flight if there’s no demand because they look for high volume. So utilize others, other big box retailers. When I’m looking for, is that actually a place for you to invest in

Sebastian: your personal preference?

Because getting Dallas, we spent so much time at the job sites. He’s like, I need to, I need Chick-fil-A and Starbucks

Ashley: they, you know, the, I believe in that because I once bought a property that was by my favorite pizza place. And I joked, that’s why I bought it because it was in walking distance. But every time I go there, I order from that place

Anam: and it makes a difference. And like, did that point. It’s like, if you’re, if you’re willing to be in that area, then you know, it’s an area that you’re going to find a decent tenant.

You’re going to fuck you. You’re going to have good ERDs. It’s the areas where we’re like uncomfortable, maybe getting out of our cars or at night, I don’t want that for sure is something we don’t even look at. It’s just not our strategies. It’s other, people’s just not ours after recent E education. But one of the other main things we’re looking at is we actually do look at the school districts because.

We want to be in a school district. People want to live in we’re big believers on that. So we try not to stray away from having at least an above par school district and then a plus, and I think almost about. 40% of our properties do this, but we also look different there to be a school within the neighborhood.

Within walking distance from the hall has, then you’ll get a young family. Maybe you’ll get someone to stay. Hopefully through the five years. Obviously that’s a wishful thinking case scenario, but you’ll, you know, you’ll get them to want to stay the whole time while their kids, maybe in elementary school.

By having a school within your neighborhood, it tends to be cleaner, tends to have low crime. And a lot of other things come with that because it’s a school there’s kids there. Yeah. More traffic traffic,

Sebastian: never. Whenever your properties do come up for rent, you have more traffic, more eyeballs looking at that red side.

Anam: Yeah. And then ARB for the last son for us, we. I know Arabic is like, it’s super specific to every individual based on how they do their research. Some people think there’s Zillow price is the price they live by. And then some, some people are like, Nope, I swear that’s wrong. Um, and we’ve seen it done both ways.

One of our properties, I think the value of according to some of these online places was like under five $40,000. Versus when we actually ran real comps. Based on actual sales around the area, it was $40,000 more. So if we just base our numbers on a really quick Google search, we would have probably not gone into, we would probably not done that deal.

One of the best ways to utilize or find someone to run comps is there's a lot of realtors out there that might charge you 20 bucks, 40 bucks, 50 bucks to run comps for you for a neighborhood, whether it's rental or actual purchase comps. It's so worth it for you to utilize that, to get. Hard facts figures because MLS data is, is the most accurate, right?

It's. In our opinion has been almost pretty true to what we think our ERBs are. And so by utilizing a resource and you can find people who are willing to do that, or even a property management company, if you're going to go down that route, sometimes you can even leverage your company to help you with the ARB side of it.

But that’s something that we’ve just by us having this particular process in place. That is the number one reason we’re able to filter through like a hundred emails a day because we are really occupied during like, I mean from seven to seven and our lives are just all over the place. And so if we’re not looking at it in detail to know what we would actually want to buy, we would probably miss deals that we would actually die.

Tony: I think one thing I want to point out there there’s so much good information there, but, but one thing I want to point out is there’s so much value in, uh, having a specific criteria for the properties that you look at, because like you said, a non, if you, we just kind of have this wide open kind of spectrum of properties, as you look at it, you’re going to drown.

Right, but like there’s so many deals to try and analyze and you may end up buying them, buying a deal that that’s not right for you. So I love that you guys have been able to kind of package it into this very specific framework that you can filter your deals through and you can easily toss out the ones that don’t match just really quick on the, on the comp piece.

I love your advice about working with realtors or property managers to try and try and sanity check those. But if you’re doing it yourself, I’ve also used prop stream in the past and prop stream. It’s a pretty inexpensive. Inexpensive monthly subscription, but it also pulls in all of that MLS data. And it’s really easy to kind of check and filter what those comps are.

So for those of you that are listening, if you don’t really have relationships genuine and do it yourself, or just flex that muscle, that’s a good way to do it.

Ashley: I’ve heard a lot about that. Lately is prop stream. A lot of people seem to be using it. Yeah. I

Sebastian: haven’t heard. I haven’t even heard about that one.

Yeah. Yeah. That’s cool.

Tony: Yeah, here. Yeah. The data pool is straight from the MLS. I think I’ve only been burned once where like the square footage data was off, but otherwise it works pretty well. Now I want to transition and talk about a specific deal. So do you guys have one in mind that you feel we can kind of seek our sink, our teeth into.

Sebastian: Yeah, I think we’ll, we’ll talk about a third deal that we did. I think that was a good one. The third deal that we did was probably our very first, like very, very extensive rehab and yeah, there was a lot of, uh, downsides, there was a lot of stuff that we learned from and grew from. So yeah, we can definitely talk about that one.

Tony: All right, we’ll take it away.

Ashley: How did you guys find the deal?

Sebastian: So that deal, we found through a wholesaler, a local wholesaler.

Ashley: Okay. And then how did you finance it

Sebastian: deal? We did do, we did do personal Castro on that one. Yeah. We purchased it with our personal cash. Well, with everything like the line of credits and everything combined.

So we use that to, to, to purchase it. We use the credit cards to pay for the materials. We use the lines of credits to pay for, for labor and do the whole, whole, whole thing like that.

Ashley: Do you want to go through the process of how it worked, purchasing the process or purchasing the property from the wholesaler in case someone’s not familiar with how that goes about?

I mean, do you put an offer in, are you paying exactly what they asked for or are you, did you compete for it? How did that work?

Sebastian: So some of these wholesalers you can negotiate, but like some of the ones that we do have have just a flat price and they’ll leave it out there for a couple of days, or usually it doesn’t last a couple of days, but they’ll leave it out there.

And they’ll just say, whoever can get this price with takes it basically. And that’s, that’s what it was with this one. I think this one just came through our, to our email and we probably. Underwrote it in about what like 10, 15 minutes on this one. Yeah. We didn’t take a look at this. This just came through our email.

We kind of, we knew the area because we had another one that was, I think probably like 10 minutes aware or so, so we, we knew the area pretty well. We just called up the wholesaler and we’re like, yeah, we’ll take it. We didn’t even take a look at it. We just looked through the, they send out usually a package of pictures and some other comp data and stuff.

Along with that email. So we lived through all that and everything looked pretty good to us. The numbers look really good. And so we just went ahead and pulled the trigger on it.

Ashley: Would you mind sharing the numbers with us?

Sebastian: Yeah. The purchase price on that one was 95,000. Our labor costs or our, all our rehab with labor and materials and everything was about $30,000 on that one, there was holding costs.

Okay. So we have multiple closing costs that we have to factor in because we have our wholesalers will basically bill back. So it's like a double close. Sometimes these wholesalers do a double close. So basically they're just billing you back for their front end, closing. And then our actual closing and then for us, since we're holding them all, we have another, their layer of closing costs, which is our financing cost after we're done with the project or when we're closing with the bank.

So we have like three levels of closing costs, and then we also have our holding costs and everything, which was another, which was 8,000. So we had 95,000 purchase. We had a 30,000 rehab and then we have 8,000 new closing and holding costs.

Ashley: I just want to go back to that. Yeah. Wholesaling real quick.

Before you go any further, just to break that down. When you say a double closing, you’re paying those fees. So some wholesalers will actually close on the property. They will pay it and then they will sell it to a buyer. And then other wholesalers will actually assign the contract where they never actually closed and purchase the property.

So as Amir had said, in this case, the wholesaler had closed down the property and then they purchased it from them and they paid whatever closing costs the wholesaler had incurred during that, that first closing. Exactly. Yeah. Yeah. So go ahead. Continue with your numbers. You completed?

Sebastian: Yeah, so 95 30. So that’s one 25 and then we got another 8,000 holdings.

So that puts us at one 33 on that project. It took us about, what do you think about a month and a half or so? About a month and a half to finish up that project. And right after we finished up and had the lease signed, we took it to one of our local banks who gave us great. It was like a six and a half percent rate at 80% LTV.

So that appraisal did end up coming back at one 64, which put our loan right at one 31, which only meant that we had about 2000 left into the deal after we were completely done.

Ashley: Wow. That’s awesome. Congratulations.

Sebastian: Basically the gateway, it was just like a free house almost after we were done with that.

We didn’t, yeah, we didn’t have much left into the deal. The rent on that house was 1500 and after all the expenses and leaving a little bit for reserves, we cashflow about 300 on that house. And so, I mean, if you look at it $300 a month on only 2000, the deal, that’s 150% of returns. So a year or something like that, if you look at it, okay.

Ashley: That’s a great cash on cash return.

Awesome. You guys, that’s exciting. So obviously they got you guys more hooked into real estate and doing more of these deals. Yeah.

Sebastian: Well, the numbers were flashy. The process was not

Anam: because like, like you said, the numbers were great, but this is the one where some of those processes started coming into place.

This is at first a property when we made our. Contractors go utilize the pro desk. This is a property where we learned dumpsters are a thing on a renovation site. Um, we just told him, throw everything in the backyard. It was us at the end of the project, trash trash bags, and put them outside thinking like, you know, Waste management is going to come pick him up.

We ended up having to like take a photo posted on like Facebook and be like, anyone want to come pick up trash? I think after that we learned just factor dumpsters into, um, it’s just a cost of doing business. We were, so we were trying to, we were trying to penny pinch in the beginning. Cause you’re, you’re starting something from, you want it to be successful.

So you don’t want to just start throwing money and writing checks right. And left. I think we learned that we added a bathroom in this home

Sebastian: did not need it. Yeah. This was already a three bedroom, two bath and the garage conversion too. So this was actually a four bedroom, two bath already. But since we actually made the garage into like a full on room yeah.

A real bedroom. Cause right now, I don’t know, it was just used for storage or something. We’re like, Oh, well they should have a bathroom really close to the bedroom. Instead of on the other side of the house. And so for some reason we added a third bath, which we didn’t even need drove our prices up higher.

Um, that was one rookie mistake. And then, well, I remember one of the nights, but we were doing, we were, um, cause the cabinets were a little turned or whatever. So we, he had bought screws to like take it out and put it, straighten it back up. And we were like, we had a great idea using the same woods cures to put the cabinet knobs on.

And so that does not work. You actually need like the real flat screws to put knobs on. Cause every time we would put it on slowly, it’ll just come off all the way there. Like he spent the whole night, literally trying to figure this out.

Anam: We, I mean, I think I went to home Depot three times that night to go get new screws at some point, I think, I think we were so over it, but yeah,

Sebastian: the local home Depot that was 15 miles away.

Anam: The cool part is to anyone out there that is. You know, teetering on going into real estate or not. We, because you go through some of these nights and you go through some of these things, you learn so much along the way on how to build those processes. We no longer are probably doing half the things we did on our first four properties.

I think we realized that it’s just not

Sebastian: scalable,

Anam: but I also think some of those memories and some of those pain points in the beginning is what makes you a great investor going forward because you know, You just know a lot more, you know, what it takes to do something. Um, so when someone comes to you and says, X, Y, Z, it’s going to cost this much.

You’re like, okay, well, I guess it took me 18 hours to do it. It is so weird. 200 bucks for someone else to do it. So. It, we hated it at the time, but I think it helped us be better at what we do

Sebastian: for anybody starting out. You, you definitely have to go through that because even when you were speaking with your contractors and stuff, you have to sound educated in the process.

Like you can’t just be like, you know, go there and do this when, when something like that doesn’t even make sense to them. And it, but if you can go into fine details about like, Hey, I want this done this way, this specific time, this is how long it should take you to do it. You’re just going to be more respected overall because they know that you’ve done it or that you know exactly what you’re talking about.

Tony: Yeah, so, so much good information there. And, and, you know, and I’m honestly, I think that piece, you said about using all of those mistakes to make you the investor that you are today, that’s probably the biggest takeaway from, from today’s interview so far. Um, I want to touch really, really quickly on the fact that you bought that property sight unseen.

A lot of new investors, I think might have some fear around, you know, putting their, their heat lock in their, this personal line of credit, this business line of credit up on the line for this property that they’ve never seen before. What made you both confident and doing

Sebastian: that? It’s the cops. I mean, I mean, if you’re, if you’re, if you’re focusing real estate, like specifically only on numbers and you’re not putting any emotion into it.

That’s all you really need to look at is okay. My calm state that this house is worth, you know, whatever, 160, 170,000 purchase, I’m purchasing it for 95. I have so much spread in there that I have so many I can mess up completely and still walk away for possibly break. Even like that’s a lot, that’s a lot of spreading it.

It’s like $70,000 in spread that you can completely mess up and still be able to walk away. Zero out of your pocket.

Ashley: That’s such a great point.

Anam: And then a lot of it had to do with, I will say all of a sudden I’ve seen properties you bought are not necessarily always home runs this one because the numbers worked so well.

And we knew that worst case scenario we’ve also understood that, okay. Uh, a light rehab, a moderate rehab and an extensive rehab cost is X amount of square footage. Right? So by knowing that even at like worst-case scenario, the numbers worked. That’s when we were like, okay, well this would be time for us to pass it off.

And to his point, I think it was on the market for maybe 15 minutes. And we’re like, we want this. Let’s just, let’s close now. Like we want this now.

Ashley: Yeah. That’s a great point because when you’re doing a deal, if you actually verify your numbers, like you guys look at the comps, you know, you see them, you’re not just thinking, Oh, I think a property in that area would go for this.

When you actually verify the numbers, you’re going to know those numbers are correct. And then that bottom line. Is going to be correct and you can’t go wrong if you have your numbers. Right. And just verify, verify, verify. I’m actually going to skip our MVP real quick because our rookie requests, like I peeked at the Carson and actually has something to do about this.

One of your numbers that you would want to verify when running a deal. So, first of all, if you guys want to call the rookie request sign and is one eight, eight, eight, five rookie, I can leave us a voicemail and we might play it on the show for a guest to hear. Today’s question

Sebastian: and it’s about sharing Rodriguez.

I live in Boston, Massachusetts, and I’m currently close, you know, about to close my first rental property in Philadelphia, Pennsylvania. And my question is I got two different quotes for my insurance. Should I go with the first one, which is the cheapest option? It’s about a hundred per month. The property value is 70 K or should I go with the second one, which is a little bit higher, two 60 per month that the forensics the coverage, but because it’s my first property, I want to know if you guys will go with the cheapest option in order to get more cashflow, or would you cover your first property with a highest.

Insurance in case anything happened. Thank you guys. Uh, we have a general idea just based on like the actual value of the house, where it’s going to fall into the realm. It’s usually never more than like a couple hundred dollars difference on an annual basis. I think the question for him is if he’s going to go with the cheaper option, it’s like, how much of the risk do you want to take on if something goes wrong?

Because obviously the cheaper coverage is going to cover a lot less. Which I’m pretty sure what he’s going to re what he’s referring to is an actual cash value versus replacement cost value. That’s probably what his difference is going to be. So you have to kind of be, you have to watch out definitely for that, because a lot of people will try to sell you actual cash value.

And if let’s just say, if your County has your house valued at whatever, a hundred thousand dollars, and that’s what insurance sees it at, if that house anything ever happened to it, they might only give you a hundred thousand, but that’s probably not going to be enough. To actually demo the property and then fully remake a house.

And so you need to make sure that on your insurance, you’re always getting replacement cost value, which is going to fully take care of scrapping everything, rebuilding everything and getting it to where it was. So don’t cheap out. Definitely.

Tony: And for me, like I have a partner that focuses on the insurance piece.

He actually works in insurance and his W2 jobs. So he knows it really well. I hate the details of insurance and like trying to compare a policy. So just going back to our point earlier about the power of partnerships, like he handles all that stuff. Like if you ask him what our coverage is on any of our properties, I have no idea.

Right. But, but he handles all that. So yeah. What love did you guys dig into that one? So I want to talk now about the MVP, right? This is the section of the show where you guys tell us about the most valuable person on your teams, right. And who’s helping you scale.

So if you think about that, who’s that MVP for you too?

Sebastian: I think my MVP is, um, my leasing agent bubbles. That's all he caught. Right. She gets everything leased and she brings the money in. I was chatting to them.

Tony: I was going to say a mirror if you don’t see a knob. And then like you’re, you’re, you’re sleeping on the couch tonight, man.

Anam: I will say it is. I mean, we probably are each other because there’s no way either one of us can do what we do without the opposite. And I know that’s essential answer such a lame answer, but.

We

Sebastian: were opposite people completely. That’s why it helps. Like, she literally does stuff that I would completely hate doing. And I do stuff that like, she hates numbers. She would never touch numbers and she would, I don’t think she would want to deal with contractors and stuff. So everything I do, she would completely hate everything she does.

I completely hate it. So I think that’s why it’s just easier to bounce it off each other.

Anam: Yeah.

Ashley: Cause it didn’t take a little while for you guys to like, figure that out and get into that groove as to who would be responsible for what and what you liked. And didn’t like,

Anam: So here’s the ticket on us is we’ve also been together for 14 years.

So we started dating when I was 14, he was 16. So there’s a lot that, that can come from something like that. We just growing up, knew what was each other’s strengths and weaknesses. And I’ve always, probably said, finances has never been a. Never has been a strength of mine and he’s designing he’s is creative.

He hates having to deal with people like he's just, he doesn't like dealing with people on the front end. He can deal with the contractor side of it. But if he has to deal with people on the front end of life, Try to sell something. It's just not what he is.

Sebastian: If I were showing a house, somebody would’ve walked in and I would have been like, here’s a loving, there’s a bedroom.

Let me know if you guys like it, she’ll go into like a 30 minute being. I’m like, Oh, let me show you how this works and how

Anam: bad is. And she envisioned the bed right there. Like Candice, like not see the kids running around and look at this backyard. I mean, so I think because of our history, History. I mean, we’ve figured out what our, where we draw the line in the sand on our first property.

And I know that wasn’t normal, but I think because we were too, we’ve been like each other’s best friends and with each other, for a visually in years, I think that that’s helped us know exactly what each other’s strengths are without having to go trial and an air while going into bed with, in business.

Sebastian: There’s no real one MVP. Like, I mean, every, every, every single personal on our team is so important that like our business wouldn’t be working without them, without our contractors who wouldn’t get stuff done without our insurance people, we would never have insured properties correctly with our lenders.

We wouldn’t, we wouldn’t be growing. So, I mean, everybody’s super important without bigger pockets, we wouldn’t have our first deal. We literally found our very first date on bigger pockets. It is so crazy on the forums. Yeah. The very first wholesaler that we ever worked with posted his deal on bigger pockets.

While the day I was just looking through like normal blogs or whatever. Came into contact, gave him a call and we had bought the property like the very next day.

Ashley: I feel like that’s scary. Like your first property, you’re buying it off the internet from a stranger. You know, it’s not like, uh, your realtors involved helping you or a friend or anything like that.

Sebastian: It was, it was, I completely remember that day. I was like, Uh, me and her were just talking to him like, Hey, I think we just bought a house. Hey, you need to go get a check and go get a dropped off this type of company. So we get a deposit down and

Ashley: today, if you saw it and then bought it the next day, you didn’t even really think it over that much and sleep on it.

Yeah.

Sebastian: Yeah, no, we didn’t see

Anam: the first deal we had. Yeah,

Ashley: that’s really cool. Well, let’s move on to our random questions. I’m going to take the first one. Cause I actually wrote down a note. Um, something I wanted to ask you guys, how many offers are you guys putting in a month? And how many would you say are rejected and how many have been accepted?

Like going back to the past six months? I

Sebastian: think during acquisition time, like when we’re full on trying to pick up properties, I think we’re doing at least multiple a day, like two or three offers a day. You have to like, this market is so hot right now that half your offers are not even going to be looked at.

Or, or even considered. So like, we’ll give, if we ever look at a prep property, we’ll always throw a number out there. Cause like, if you’re gonna spend like, you know, whatever, 10 minutes just looking at you and you might as well throw out a number out there, even if it’s like way under what they’re asking.

Cause you never know, they might, they might end up going back and taking it.

Ashley: I will reinforce that it does not hurt to put in an offer no matter what it is, no matter how low it is, because you never know. And some people, I mean, I was a person that was scared to put in that low ball offer because I didn’t want to insult anyone or I didn’t want to be that person putting in the low ball offer, but I guess you will never know.

And maybe a little counter it and it will still be a great deal for you. Yeah,

Sebastian: definitely.

Ashley: Awesome.

Tony: Yeah. Yeah. I guess my question for you guys is you’re, you’re building this big portfolio. Things are, things are growing. Things are expanding. Like what’s, what’s the end goal for you all? Is it, you know, you want a hundred single family homes.

Do you want to out of now get into like storage space? Do you want to become like, like what’s the, what’s the long-term long-term goal for the two of you?

Sebastian: I know we like residential. I don’t think we would go into commercial or storage spaces. We were, I mean like the residential market is not going anywhere.

Like people need a home to live in. So I think we love it so much. And I mean, the end goal was never like, we never established an end goal. It was just. We wanted it. We liked the process of the business so much, and we just wanted to grow so much that I don’t think we ever set a specific number.

Anam: I mean, I think we have a cash flow, like our ultimate goal cash flow.

Sebastian: Yeah. When we feel like we’ve made it, I think we have that number, but I don’t think we actually have like a, uh, like a hard stop at this. After we get here, we’re going to complete stuff.

Anam: I will say one of the things in the last. Like at least in the last six to eight months that we maybe start factoring in as potentially a next step or quote, at some point, a goal of ours is to bring everything in house slowly.

So yes. Hire someone to do property management under us. I don’t want to, we don’t want to pay someone necessarily outsourcing it, bringing it GC in-house under payroll, bringing insurance. In-house bringing underwriting, like doing everything under one roof and actually building a massive one-stop shop, I think would be.

What we think would be a really cool goal, not end goal, but a goal

Ashley: and opening that up to other investors. Yes. Yeah.

Sebastian: And it, it it’d be pretty cool if we, if we can get like a brokerage you’ve been under us or, and that realtor is under us where you’re not just doing what we do. It’s like it’s everything to do with real estate.

Tony: And so you, you two have really big goals and I love it. Right. And the pace you, you are moving, I’m confident you’re going to get there. So thank you both so much for taking the time to chat with us today. I know I got a ton of value. I’m sure the listeners will as well. And we look forward to hearing how your business continues to scale, but thank you guys so much for joining us today.

Ashley: Yeah, thank you guys. Both. This was a great show and definitely tons of value. So anything they mentioned that you guys might want to know more on, you can go to our bigger pockets, Facebook page, and ask questions on there. Then we’ll also have more [email protected] forward slash rookie 40.

So Amman and Amir. Thank you guys very much. I am Ashley care at wealth from rentals and he’s Tony Robinson at Tony, Jay Robinson. Thank you guys. And we’ll see you next week.

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In This Episode We Cover:

  • How you can grow your rental portfolio, even during a pandemic
  • How to get your processes and systems down so they work for you
  • Using your partner’s strengths/weaknesses to inspire growth
  • How to use different creative financing strategies to get deals faster
  • How to find a hard money lender that works with your time-frame and ARV
  • What the A.R.E.A system is, and how it can help you find high-quality deals
  • The importance of running accurate comps in a desired area
  • Using your mistakes to make yourself into an educated investor
  • And SO much more!

Links from the Show

Connect with Anam & Aamir:

Ready to go take action? Every Wednesday, the Real Estate Rookie Podcast will arm you with tips, tools, and inspiration to help you launch your real estate investing career. Hosts Ashley Kehr and Felipe Mejia welcome a wide range of guests as they tackle the newbie questions you've always wondered about, but might be afraid to ask. Listen. Learn. Then make it happen!
    Jim R. Rental Property Investor from Maryland
    Replied about 2 months ago
    Guys the transcript is really bad on this one. You have even got the F bomb in there!
    Joel Hutchinson Rental Property Investor from Glendale, CA
    Replied about 2 months ago
    Wow!! Incredible Podcast!! I do have one question. When buying sight unseen from Wholesalers, when do you find out if the property has any liens? At closing? Can you back out if a lien shows up?
    Chris A. Rental Property Investor from Dallas, TX
    Replied 8 days ago
    Great episode, look for DM question about DFW wholesalers.