Defeating 5 Years of Analysis Paralysis to Do 4 Deals in 2020 with Jacqueline Smith

Ashley:
This is Real Estate Rookie, show number 43.

Jacqueline:
I think newer people might be like, “Oh, what if they steal this deal from me?” But I don’t think that really happens in those kind of things. I think they’re more so ready to help you.

Ashley:
My name is Ashley Kehr and I am here with Tony Robinson. But today I am coming to you from Houston, Texas. Got my little to go set up here.

Tony:
There you go. I was going to say I’m like, “Ashley, where are you? This isn’t the normal closet set up that I’m used to.”

Ashley:
I’m free, I’m let out of the closet. I opened up the shades behind me to show you the beautiful view, but I was too dark [crosstalk 00:00:52] and was just all white light. You couldn’t even see out the window, but yeah. What’s new with you, Tony?

Tony:
New with me, I just got an accepted offer, my last house for sale in Shreveport. Once that closes, I’ll be out of that market completely. And then we actually should be closing in maybe four weeks on our next short term rental in Tennessee. So lots of things happen and we’re excited. What about you, Ashley? What’s going on on your end?

Ashley:
I got my liquor store going, I have two rehabs going on right now that I hope to have them both finish up this winter and yeah, but nothing else really. I feel like all I do all day is just check reports, check in on things. And I’ve been so hands-off, which has been really nice like-

Tony:
Beautiful.

Ashley:
… putting these systems in place, the things [crosstalk 00:01:40]-

Tony:
Yeah, that’s what we want to get to.

Ashley:
I know.

Tony:
And I think that’s such a good point, like about the systems, because even though we’ve only got a few short term rentals right now, I just met with this other investor and she’s got, I think 15 short-term rentals and she was telling us, she was like, “You really want to focus on getting the systems in place now.” We’re looking at maybe getting like a VA and doing some other things that will be cool to help us scale a little bit more.

Ashley:
I’d be interested to hear about the VA.

Tony:
That way I can be like you, Ashley, just like kick back and yeah.

Ashley:
I’m getting so bored though and I was telling another investor’s like, “Wow, your life is so lame.” So yeah, I just have to find the next exciting, shiny object to chase, I guess.

Tony:
There you go.

Ashley:
Today, we have Jacqueline Smith on who is a house flipper. And the best thing about this is you guys, she is going to give you access to the Excel Spreadsheets she uses to document and track everything for doing a house flip. So make sure you guys listen for how to get those.

Tony:
I think Jacqueline’s story is really interesting because like some of the other folks we’ve interviewed, she started investing this year in 2020. And they’ve done such a great job that they’ve been able to leave their W2. So if you’re looking for some inspiration on how to make that happen, you’ve got to take a listen.

Ashley:
Yeah, it’s definitely inspiring for sure.

Tony:
Jacqueline Smith, good morning. Thanks so much for joining us today.

Jacqueline:
Thank you for having me.

Tony:
We’re excited to dive in and to hear more about your story, so I guess, share with myself, share with the listeners a little bit about you, how you got started in real estate investing.

Jacqueline:
Sure, yes. Mainly this year, we started actively investing the beginning of 2020, but before that, we did some live-in flips. My parents were stuck on us, making sure we didn’t have like super high home loans, so we bought a foreclosure as our first house. They were able to help us get it fixed up and they purchased it on their equity. And this is when we were like 19, so it was a while back. We got that on their equity, we fixed it up. Basically got it like the BRRRR strategy, but we did. Our loans were like only 55,000, and so we were able to have some good equity in it, just getting started off.
We did that twice, led the nose for about eight years all together between the two. And then we were able to take that equity, build our house that we were wanting on some land. And then we took the rest of the equity we’re using to invest.

Tony:
Wow. That’s, awesome.

Jacqueline:
Yeah.

Tony:
Most people don’t think of doing a live-in flip as their first kind of home purchase, especially, you said you were 19 years old?

Jacqueline:
Yes.

Tony:
What drew you to that at such a young age/

Jacqueline:
I don’t know. I just remember sitting there looking on the computer at houses all the time and we were… I don’t know. I’ve always liked to do the rehab type of stuff. Not at that time, I’d never done it before, but my parents are pretty handy and that helped and they were definitely for it. We got the first task for like 37,000. It was just crazy because it was on a couple acres. We ended up selling it for about 129,000, so that started us off like amazing.

Ashley:
Wow. That’s great. How much did you put into the rehab with that? And then of course your sweat equity.

Jacqueline:
We had at least 25,000 in it, but I would say my parents, they were there everyday working at that time and putting in. So I’m sure they put in some money that they just didn’t tell us about or whatever. They just were stuck on, We don’t want your loan above 55,000 starting out.”

Ashley:
That’s great. And being your first live-in flip where you are actually really tracking the costs either. You’re thinking of it as your primary residence and like, “Go, let’s just put money into it.”

Jacqueline:
They were helping us put a lot of money into it. We would put some here and there. We didn’t move in until I was about halfway done. I don’t know if you’ve heard… We’re from Henryville, Indiana and there was this big tornado that went through at one time. And that was right when we got most of our stuff rehabbed. We got all new siding on the front, new windows put in and everything, and then… This is when we were living there at that time. And then the tornado came through and then ripped out all the siding on the front, all the windows.
It wasn’t horrible damage, but we were able to make an insurance claim and that got us a free new roof on the house, which we weren’t originally going to do. So that part benefited us in some ways, but it was hectic for a little bit, but it was livable at the time we moved in. So it was just doing stuff here and there.

Tony:
You hear those kind of stories all the time about the insurance money actually being almost a benefit to investors because they’re able to do a little bit more. You have this first live-in flip when you’re 19, and you said that you did two over the course of eight years. So how long were you in that first property before you guys moved on to the second one?

Jacqueline:
We lived in that one for about five years, we had our first two children there. Got married and then moved in there. But then the second one we lived there five years and then we put an offer in on a Hubzu new property. That was another foreclosure. I think we purchased it for 170,000, so we were able to take the equity from that first house and all the profits and put into that one. We ended up with about $100,000 loan on it. That one, we did the full live-in rehab, but it wasn’t anything major. It’s just all new carpet, all new paint everywhere, and it was a great, it was a huge house, but we were able to sell that one great also.

Tony:
Just so I understood, did you say, Hubzu.

Jacqueline:
Yeah, Hubzu. They have foreclosures, like it’s another website that you can find foreclosures off of.

Tony:
Oh wow. Can we dig into that a bit? Never heard of that website before. Is it like a typical auction site? Are you able to see the property before and it just walks through the buying process on the website?

Jacqueline:
It depends. You can go online and some of them are owner… They’re occupied and so you’re not able to get into them, but this one, luckily we were able to see with our realtor and she got us in. And so we were able to put an offer in on it. And then we were also able to get a mortgage to get the house. So it wasn’t so bad that they wouldn’t lend us on a loan, so that worked out.

Tony:
Got it. That’s awesome. I think a lot of newer investors, and you weren’t haven’t using this as an investment, but a lot of your investors I think have some hesitation around going to these online auction sites because there’s usually a lot of restrictions, but it sounds like it worked out pretty well for you guys.

Jacqueline:
Yes. Yeah, the same way. Like even now looking at auction sites, I don’t want to not be able to get into the property, but that one works out great for us because we were able to see all of it and check it out first. And it was actually about a mile down the road from the other house we had, so it was a quick move.

Tony:
Okay. Now, so you guys have these two live-in flips and then you said it was earlier this year that you actually started investing with intention. So walk us through that transition and how you guys went unto that point.

Jacqueline:
Yep. Our main goal was to buy some land and build our house on it before… Also along with investing, so we were able to do that. We moved in last October into our house, and then we pulled our equity out at the beginning of this year. And then we were able to start using our equity line to invest. And that was before I knew about all the hard money lending and was afraid to jump in with all of that. I’m sure we could have started a lot sooner, but our equity is what we were going for at that point.

Ashley:
Once now that you have your primary residence, you did your two live-in flips. How did you get started into actually buying your first investment property? And what did that look like? Did you analyze deals for years? Did you say or wake up one day, we’re investing, let’s buy a house.

Jacqueline:
Oh no. I’ve been analyzing for like probably five years, at least. Us going through the flips was our steps and we were reading books every… I was reading them all the time, but I wasn’t really jumping in. I would do all the reading, but never really did action and I don’t know, I never went to any meetups or anything like that until this year, which was a huge change, so that definitely helps.

Ashley:
Talk about the meetups and you’re doing that. Most are virtual now, do you think that really helped you accelerate your investing? Talk about that and how powerful it is for people to get out there and join these meetups and network with people.

Jacqueline:
That was definitely our most important thing and I still recommend everybody do it, because I’m normally pretty shy and so I don’t want to jump in. I was so afraid to go to those meetups like I’m just picturing all these big time investors and they’re like, “Who wants to talk to somebody new?” And then I was like, “I don’t know what I’m doing or anything.” But actually, I got on Instagram and I started the Instagram beginning of this year when we started to get our first flip, which we purchased with a partner, which I can go into later too.
So then I was just document and stuff we were doing, which helped a lot. But then I was starting to connect with other investors in our area that were more my age and several of them are like my best friends now. We started go to the meetups and then people will be like, “Oh, hey.” She would introduce me to different people and then it just got really big after that. It helps so much. Now, a lot of those girls like there’s wholesalers, there’s some realtors and a few other things.
We go to like a weekly coffee in the morning and so we just go over things and it’s just awesome, so we get new recommendations all the time. I invite new people that just want to come on… that don’t connect with many people our age. And so I’ll invite them and be like, “Hey, come hang out with us.” Then we try to bring each other in, but it’s definitely so important.

Tony:
Now, Jacqueline, if I’m a new investor or an aspiring investor and I haven’t done anything yet, how do I go into these meetups? What should I be saying to introduce myself? I think that’s what holds a lot of people up, is that they’re like, like you said, “I haven’t done anything, I don’t know anything.” How do you introduce yourself? Or how do you start those conversations as a new investor?

Jacqueline:
I still feel that way sometimes, so I’ll just go up and be like, “Hi, I’m Jacqueline.” I try to find out what they do, how they got into it. And most of them are all so happy to talk, and then some people even come up to me and be like, “Hi. Who are you? What do you do?” And it just goes from there and you just go into like, “I’m looking for this kind of property,” or “This is my goal.” You never know if you’ll find like a wholesaler and be like, “Hey, I can put you on my buyers list.” And that happens all the time.
My sister-in-law and brother-in-law are wholesalers, so that’s an easy introduction for me. I can be like, “Hey, they wholesale, I’d be happy to give you their contact information.” And normally that helps a lot too.

Ashley:
I remember the first couple of meetups I went to in-person in Buffalo. One of them, I went to the wrong bar. There was like two bars and in the same.

Jacqueline:
Oh no.

Ashley:
So I’m walking around, and then finally I found the right one and someone else came like an hour after me. They had gone to the wrong bar too, so I didn’t feel as bad. But I also had to beg my one partner to go with me the one time. He’s very hands-on construction. For him going out into the city to meet up just to talk and hang out is like a waste of time for him. But afterwards he was like, “Oh my God, I have an adrenaline rush just talking about-

Jacqueline:
It is.

Ashley:
… stuff that I love to do.” And it is, it is so fun once get there. And just a recommendation, the Zoom calls are a lot easier I think. You’re not in-person to standing there, but recommendation I have is find someone online, whether Instagram, Facebook, or any kind of a group thing online that this meetup might have and connect with one person on there. Know their face so that you have someone to look for when you get there to talk with, and then before you know it, everybody will be talking with you and time will fly and you won’t even realize it.

Jacqueline:
Exactly, yes.

Ashley:
Tell us a little bit more about the first property then, the first one you got under contract this year.

Jacqueline:
Okay. Yes. We got that one in April. We went in with a partner, so it was like a pocket listing off the MLS, our realtor. Had it and we were looking for one, it just worked out we were able to secure it and everything. So we purchased that, worked on it with our partner, he ended up paying for all of it, so all the purchase costs. He’s younger, he wanted to get into investing, but didn’t really have time to do much of the other stuff around from his job and everything. So we agreed we would do all the physical work and everything.
And then we funded part of the rehab costs and stuff, which wasn’t too much. We put about 23,000 into it altogether. And then we finally got around to selling it, we closed yesterday actually.

Ashley:
Oh, it’s so exciting.

Tony:
Congratulations.

Jacqueline:
Yes. No, I can’t wait. I’m going to go to the bank after this and get everything sorted out, but I’m so excited.

Ashley:
We feel so special you’re doing this with us first before you go.

Jacqueline:
[crosstalk 00:13:21]. I know. This is awesome, but yeah. It took about 60 days in closing. The buyers were VA loan and stuff, so it got pushed out a few more times, but it finally ended up okay. And then we’re going to just split the profits 50/50. And then maybe-

Ashley:
Awesome.

Jacqueline:
… next year do another one together. So we’ll see.

Ashley:
How did you find your partner? This is your first deal ever as an investment property. How did you go about that?

Jacqueline:
It just worked out. I worked for my realtor in town as her just assistant, friend of the family, but her son was wanting to invest and so it worked out. She put it together and we’re friends, so that was no problem.

Ashley:
That’s so funny because that’s how I did my first property, was the guy that I worked for, an investor. I partnered with his son on the first deal. He put in the money.

Jacqueline:
Yes. It worked [crosstalk 00:14:11] out great.

Ashley:
Yeah. Definitely. And that’s the thing, you don’t know who is in your network and connections, unless you’re telling people what you want to do and listening to what other people are looking to do, to find that there might be people a lot closer to you than you think that you can actually partner on a deal.

Jacqueline:
Yes.

Ashley:
So can you tell us a little bit about the conversation? How can you recommend to someone they approach someone about being there partner?

Jacqueline:
We didn’t have much of one on that point because he was just ready and he trusted us just being family. So we didn’t have much of a conversation on it honestly. But I deal more so with his mom being our realtor and we go together and stuff. So I’m getting ready to try and figure part out myself because we’re wanting to partner up possibly. My husband quit his job this year, about two months ago so we could do this full-time. Because we have like four flips going right now and it was just getting to where it was too time-consuming.
So we’re looking to possibly partner for rental properties just since we’re not going to be able to get refinanced as easily now that we don’t have W2 income. But we’re trying to creatively figure that out right now.

Ashley:
I just want to say real quick, your first year flipping and you guys have already quit your W2 jobs. That’s awesome. Congratulations.

Tony:
Congratulations.

Jacqueline:
Probably or maybe not the smartest one, but we’re doing well, we’re doing okay, so it’s working out.

Tony:
I want to go back to your question, Ashley, because I think it was a good one about like, how did you build that relationship with that partner? There’s this old adage in marketing about people buy and do business with people that they know, like and trust. And you hear that a lot in the marketing space, but it’s the same for investing. When you’re looking for people to partner with, you’re looking for private money, people are going to do deals with people that they know, like and trust.
So for you, obviously you already have this preexisting relationship with that person, so it makes sense why they did it. But for the folks that are listening, if you’re looking for someone to partner with, start being more vocal about what it is that you’re doing. Ashley and I have talked about this before, but even if you haven’t done a deal yet, start talking about the deals that you’re looking at, and the deals that you’re analyzing, and the markets that you’re looking at and why you’re looking at those markets.
Because the more that you spread your knowledge about what you’re doing, the more people start gravitating towards you. Even before I was the co-host for this show, I had a lot of folks reaching out to me just because they saw all the stuff that I was doing on social media, and you’d never know who’s watching. So I’m sure, Jacqueline you’re documenting everything that you’re doing right now, and I’m sure there’s a lot of people who are like, “Man, I really want to work with Jacqueline, so hopefully she reaches out to me.” I bet people are thinking that right now.

Jacqueline:
Yeah. It really helps. And I think people could just go to their meetups, say you have a deal you’re wanting to work on or you have numbers already ran out and you just need some more help with it or anything. I would just take that sheet with you and go into that meeting and be like, “Hey, what do you think about this? Do you have anybody you think that would be interested in partnering with me?” I know that people would just pass it along. They’re so nice and helpful. At least at our meetup, it’s great.

Ashley:
Especially if you know an experienced investors, they might look at that and be like, “Wow, that is a great deal. Hey, let’s partner on that.” And that’s like an easy deal for them because they’ve been-

Jacqueline:
Exactly.

Ashley:
… in the grind for so long, let’s find those easy deals that are brought to me.

Jacqueline:
Yeah. And I think newer people might be like, “Oh, what if they steal this deal from me?” But I don’t think that really happens in those kind of things. I think they’re more so ready to help you.

Ashley:
Yeah, I agree with it too.

Tony:
How many deals did you guys do before you made the leap for your husband to walk away from his W2 job?

Jacqueline:
We did this one flip with the partner, which we were hoping to close before, obviously yesterday, but… We knew we’d be having income from that that we could put away for our security fund and our so many months savings. And then we had one property that we bought in April and we refinanced it. It was like a BRRRR property. We had that done in May, but we decided the numbers work better right now for us to sell it. So with him quitting, we decided we’re going to sell that, so that should close the end of December.
And then we have two more that we’re working on, that’ll be done in around February. So with him quitting, what we did was we got him… He’s really handy on contracting type stuff, hands-on. He’s more of the hands-on person so he doesn’t want anything to do with the numbers, any of that. So we got him an LLC started and… Because right now we’re using a hard money lender for our latest flips.
So I was like, “If we’re paying another contractor, we might be paying them three grand a month or whatever to be doing these things. Why don’t we just turn it to where we’re paying you that money to where that’s your income, and we’re also getting income from our flip at the end also?” So we were double time on it, I guess. So instead of another contractor.

Ashley:
I love that too, because if you take a partner on, I don’t know if you… Do you have a partner on that current deal you’re talking about?

Jacqueline:
No.

Ashley:
Okay. So if you take a partner on, a lot of times, people are like, “How do we split the equity? My husband, he’s going to be doing the rehab, I’m going to be doing the numbers, keeping track of the expenses. And then we have the guy that’s putting in the money.” Doing something like that where if you actually allocate a price to each of those jobs and that’s how you’re paying yourself, you can split your equity, no divide by three people, and then say, “Okay, if you’re doing the rehab, you get paid three grand a month. If you’re doing the bookkeeping, you get paid a thousand dollars a month.”
Something like that, and that’s a great way, is to pay yourself depending on what job you’re doing for the flip or even a rental property, if someone’s managing, stuff like that. So I think that’s really awesome how you guys are doing that. You’re making those multiple income streams from a property.

Jacqueline:
We’re making it work.

Ashley:
Do you want to go into a little bit about what your duties are for the flips, what you have to do?

Jacqueline:
Sure. Yeah. We’re still kind of figuring that out right now. We’re trying to transition to where… I do a lot of the hands-on stuff also. I’m good at the painting, the more basic stuff. He’s the heavy duty lifter, beams, stuff like that. But we’re starting to transition, we want to grow some more this year, and so I just need to be able to be in office a few more days a week than I’m able to right now, because with our kids, it’s also hectic because virtual learning right now. So we’re trying to figure all that out, but…
So I want to be able to do more of the hands-on, looking for deals, getting contractors set up and everything, and then he can be more so meeting the contractors out there, getting everything scheduled and working there physically during the day, doing the contracting work. We hire out electric, plumbing, stuff like that, so he doesn’t do that, but.

Tony:
Now, I want to hit a little more jack on the fact that you guys or your husband walked away from his W2, because in case you haven’t noticed, we’re in the middle of a global pandemic. A lot of people are afraid to start investing in real estate, there’s so much that’s going on right now. There’ve been a lot of people who like you have been reading and watching for years, but when this happened, a lot of people took a step back and then they wanted to take the wait and see approach. But you guys went the exact opposite route. You went verse into this, which I applaud you for.
But I guess just walk us through a little bit more about that mindset. Were you guys nervous having your husband walk away because it sounds like you did it before that first deal even finished, right? I guess just walk us through that mindset.

Jacqueline:
Yeah. It was just something that I’ve always wanted to do and I mean nothing was going to turn me away, like I’m going to do it no matter what happens in the market, somehow we’ll figure something out. Him, it really wasn’t expected the day that he quit. It was a factory type job, he’d been there eight years, steelwork. People get hurt there all the time or steps [inaudible 00:21:31]. It was a rough job and he would come home just completely exhausted every day because they work nonstop. And then he’d be going to the other houses, and we were just… He was exhausted.
It just got to the point where he had a few like rough weeks and it just wasn’t getting any better, so he was like… He just threw it out there, “What if I quit?” And I was like, “What did you do?” And he didn’t go back the next day. We’d always thought we’d have more rentals before we had him quit because we knew that would be our main issue afterwards. So right now, we’re going to work on flipping until we can get our good couple of years worth of income built up or tax history-wise.
And then also, like I said, my sister and brother-in-law flip house… They wholesale, but they’re also flipping now, so I was like, “You can always still work for them contracting-wise if we needed to, because they’re going to always be hiring people for random stuff, so if we need income. Otherwise, you can go do that type of work. And then we’re getting so much more into our local real estate meetups and everything. We have a lot of friends in there and I’m like, “I know you could easily get work, doing random stuff for them.” So we just knew we could figure something out.

Tony:
Kudos to you two for having the confidence in yourselves and betting on yourself to be able to figure it out and find a way to make it work. So I love that story. Now, I guess last question, we didn’t really talk about this. What made you guys choose flipping? There’s so many other ways to get started. It sounds like you know some folks that are wholesaling, you can always do just like the long-term BRRRR strategy. What made you say flipping is a path we want to go down?

Jacqueline:
I guess I would love to BRRRR more, so wholesaling really isn’t for us. I’m not a negotiator very well. I’ll leave that to them, but I love rehabbing stuff and doing stuff ourselves and everything. So the BRRRR strategy is our main thing I wanted to do, but now that our stuff has changed, so flipping just how I think we need to just do it for now, especially to build up with hard money lender that we’re doing.

Tony:
I just want to add because that’s a really common strategy, where people use like flipping or wholesaling to make these big chunks of cash, to be their active income. And then they take those big chunks of cash and they put it into BRRRRs, more stable long-term investments. So it sounds like that’s the path you guys are going to eventually go down.

Jacqueline:
Yeah. That’s our plan. And then once we get so many, then our money lender will be able to fund more deals. So this is our first one with them, after it goes smooth, then they’ll be able to do a couple at a time. So we’re excited about that because we’d rather use that than our own equity if we can.

Ashley:
What are your current goals with this business? Do you have like a one-year, a three-year goals set for this?

Jacqueline:
Yes. In this one and a half year, I think we have left to get our tax history started, and then I really want to build up just a single family rentals for the next year. And then we hopefully want to move into multi-family. But our goals have changed so many times this year already, just so it’s hectic. I don’t even know, it could change next month. So I like to [crosstalk 00:24:19]-

Ashley:
I can relate.

Jacqueline:
… everything. I could just-

Ashley:
It’s this shiny object syndrome, you be like, “Oh wait, you can do this-

Jacqueline:
It is.

Ashley:
… that way. Oh, let me go chase after that.”

Jacqueline:
I know. And I’m so dying to try it like an out-of-state investment just because I want to try it, so I don’t know.

Ashley:
Let’s talk about the numbers on your recent deal that you just closed on. Can you really dive into that? How you financed it, what the rehab looked like and now what it ended up being at after you sold it.

Jacqueline:
They had it on the MLS for 79,000. It had actually had a price drop. Let me start up. They had it listed, it was pending from somebody. That deal fell through. It’s a few miles down from our house, so I’d always been eyeing it. And then it got back on the market and dropped like 15,000. So then it was listed 79,000, so I was all for it. That day, I went and saw it. They had multiple stalling, so we knew everything around here has been going over asking like… So we ended up putting an offer in 92,100. They came back to us and accepted our offer.
We went with SharePoint lending out of Louisville, Kentucky. They are the hard money lender we did and they required 10% down of our purchase price, so just of what we purchase it for. So we put $10,600 down, and then when we went to close, they took care of the rest of the purchase price. So they paid like 87,000 and then they will lend up to 75% of the ARV. So our total is like 126,000 that we have available to draw from them as construction draws. But we know we’re going to go over that a little bit, so we are going to use some of our own money from these other flips that we have to put into.
I think we’re going to have like 20,000 we need to do in ourself. But the house is worth around 200,000, so we should make around 40,000, I think by the end. But it’s going to be done probably February-ish. It’s just going to be like few months rehab, but we’re just in the middle of it now.

Ashley:
And that rehab costs, that includes what you’re paying your husband too, correct?

Jacqueline:
Oh yeah. We’ve taken some draws out, which we’ve already… Right now, we’re pretty much maxed on our draws with them. We’ve used all of that money, but since we’ve closed, we were waiting on that money to come in to put into that rehab. So we would take the draw, we painted the whole exterior of the house and we paid ourselves for doing that, so we paid like 1,500. I did, but we paid at another exterior painters, so I was like, “We’ll do it this time, we’ll pay us that.” And then some other things we’ve done also like some demo work.
We paid another company at another house demo work, so we just use that for us. Now we’re just doing… We’re not going to be paying ourselves while we use our own money at this point, but yeah, it helped while we were in between.

Ashley:
That’s nice because a lot of times it’s the delayed gratification like, “Okay, we’re doing all this work now, but we’re not getting paid until the house sells.”

Jacqueline:
Exactly.

Ashley:
But now you’re at least getting, you know what? If I go and paint today, I’m going to get this money now or something like that.

Jacqueline:
Right. And it helped while that was in between. Yes.

Ashley:
Let’s talk about hiring contractors to do these jobs. Do you have a system in place for that? Do you get multiple bids? How does that work for your business?

Jacqueline:
I haven’t had to do like a full contractor that does a lot of our stuff. We do some contract out, certain things like our electric, our water, or like plumbing. We have a friend of the family that does plumbing, so he’s put us pretty good pricing. Some electricians, we’ve been through a few, had some that just don’t get back to me or, so we’re still trying to figure that out. We’ve got one that I think is going to work out, so he’s supposed to be coming soon. But I had to do some bids on the roof. Actually, this was kind of crazy.
This company had done another roof for us, but then they came to quote this one and quoted it like 22,000 for all new roof, some siding, soffit, fascia, gutters. And I was like, “That’s really high.” So I was searching around for some other quotes, got several more that were around 15,900, which is a big difference. So I ended up not getting great reviews on the ones that quoted us lower, but I told the other company, I was like, “Hey, I can’t do it for this price. We’re getting 159.” and they were like, “Oh, we might be able to come down. We can come down to that.”
And I’m like, “How are you going to come down $6,000 off of that?” So we use them, but I don’t know that we will continue in the future if we have to keep negotiating every single thing they quote us.

Tony:
That’s a good lesson. But I think what I want to get from you Jacqueline is like, if I’m a new investor and I’m trying to buy my own first flip, what’s the best way for me to estimate what these rehab costs are? If I’m a newbie and I don’t really have this background that you and your husband now have, how did you guys go about doing that when you were newer to the game?

Jacqueline:
With us doing the other houses we’ve done, I had an idea. And then personally, my dad also has flipped some houses for my brother and sister, they’ve done the same thing we did. So I followed along with theirs and got numbers and was always asking them like, “How much was your furnace install and everything.” And I could keep up with all that. I would just get, which is I still haven’t ever had contractors come out before I purchased the property to quote everything. I just do estimates.
I know there’s the book on estimating rehab costs and I’ve went through that some, so I think that would be a good start, just getting an idea. Especially if you go off of the inspection report, that would be what I would start doing is get the inspection report, figure out what needs to be done off of that. And then you can go from there.

Tony:
That’s great advice. I know what I’ve done in the past. It definitely is a lot easier once you get your first deal done, because you can use that as like reference for what future deals will cost.

Jacqueline:
Yes.

Tony:
But there’s a few ways, and this is just me sharing some things that I’ve learned along the way. If you have an investor friendly realtor, a lot of times they can give you some decent ballparks on what rehab costs might be. I know that’s how I got started initially is that I had a realtor who was also an investor himself and he was able to give me some ballpark figures. But worst case scenario, you can really just guess when you’re doing your initial offer to the seller, because you’re going to have that inspection period, like you said, to really go back and do your real due diligence.
So said that you assume rehab costs are going to be 10,000, you do your inspection report, that comes back, you have a contractor go through all during your due diligence phase. If you’re off, you’re off and you go back and you adjust your offering, the seller accepts or they don’t and you can take it from there. So I just wanted to highlight that’s what I’ve seen in the past.

Jacqueline:
Yeah, that’s a great idea. Yes.

Tony:
I want to talk to you also now, Jacqueline about actually selling this property. It sounds like you guys are having some good traction, but were you at all nervous about going into these flips knowing that there’s a lot of folks that… Unemployment’s going up, and these things are happening, and it’s scary out there. I guess, what has your thoughts been on trying to sell these properties?

Jacqueline:
I get a little nervous. This one we haven’t sold yet, so we’re still in the rehab process, which I still think we’ll be okay on that. But the first one we sold, we were a little iffy. It was in a more C class area of our little town, which is not a horrible road or anything, but we were iffy on that. It ended up selling fine, but… I just get a little nervous with everybody with unemployment, like once that ends and people are showing another income history that maybe they’re going to have a hard time getting approved for their loans. So we’ll see how it goes.

Ashley:
How long did it take to sell the first house? How long was it on market?

Jacqueline:
We actually got an offer about a week later. It didn’t take too long, which we originally hoping that we would have one within the first couple of days, but it took a week, which felt like a while, but no, it was okay. And then it was about 60 days to closing.

Ashley:
I don’t think a week is bad. Here, the market-

Jacqueline:
No.

Ashley:
… is so hot and every single listing, the realtors are putting like, “Offers are due this day, at this time,” they give a week just to view the property, sometimes even only two days to view it.

Jacqueline:
Yes.

Ashley:
Are you seeing that in your market too where there’s not enough inventory?

Jacqueline:
Oh yeah, definitely. With me working with our realtor, I help her schedule showings and stuff, and it was like a lot of them when we call they’re like, “Oh, we’ve already got multiple offers and it’s too late already,” after the first day. And we’re like, “Okay.” They extend it and be like, “We need the highest and best buy tomorrow night.” And that was just on several recently, so that’s why there’s like… Nothing lasts. They’re definitely in certain price ranges and if they’re remodeled and a decent price, they’re going to sell fast.

Ashley:
My brother is trying to buy a house hack. He’s moving to Rochester, New York, which is about an hour-and-a-half from where we live in Buffalo. So we went and looked at a property on the MLS and there was an open house. They had 27 people that had gone through the open house already and it was just an hour long open house. They had already had four offers in, and then I think they had a total of maybe seven offers the next day when the offers were due. But what we’ve learned is like, even just being an hour and a half away, the market there was very different. You had to basically have an escalation clause.
I had never even heard of this. I guess it’s been a while since I bought something off the MLS. So an escalation clause is when you put in your offer, but then you say, “I will add $500 onto your highest offer up to a certain amount.” So if I’m offering 100,000, I can put an escalation clause saying, “Whatever your highest offer is, I’ll add $500, $200, $1,000, but I won’t go over 120,000.” So if someone’s offer is 119,000, I can get that property because I can get it for 119,500.
So just all these different strategies that people are using now, and our realtor said basically, “No contingencies, no inspection.” She really wanted a cash offer, but I really want my brother to use an [inaudible 00:33:53].

Jacqueline:
Oh yeah.

Ashley:
What does it look like in your market, putting in offers like that on the properties you’re buying?

Jacqueline:
Actually I have some friends in Kentucky, so they’re a little different because I’m in Indiana, but one of my best friends is a realtor and an investor. And so she was telling me about the escalation clause and she’s like, “We use it about every other day all the time here,” and that’s how she got her house purchased. So I was talking to my realtor here, I was like, “Do we have that?” And she’s like, “Yeah, it’s just rarely used right in our area for some reason, I don’t know.”
I guess sometimes even though like you have the highest offer that maybe one offer that’s lower, maybe less contingencies and everything may still get picked, even though your escalation clause is higher. So it just depends, but most of them are going multiple offers. And that’s how that one that we just purchased was… They had so many other offers and that’s why we offered over asking to purchase it.

Tony:
Now, you mentioned earlier, Jacqueline that you guys were planning to profit about 40K on this deal. Can you walk us backwards on how you calculated that profit? Because I know flipping, there’s a lot of costs that I think new investors forget to account for.

Jacqueline:
Oh yeah.

Tony:
So just educate us a little bit on how you land on that 40K.

Jacqueline:
I just broke it down and went through literally everything that we’ve done from our other properties like how much I know paint is going to cost for me to do it or cabinets, flooring. We’ve had a few unexpected things like we have a fireplace that’s a wood burning stove and we were like, “That probably won’t be a big deal to fix.” And never had a fireplace before, never dealt with one, but we ended up spending about 5,000 on that to get that up to code and everything. So that was unexpected.
We knew half the house was older and then half the house was brand new, the sub floor underneath of that looked awesome. But when we got to the backside, it’s been crazy. There was the sub floor, which was hardwood, and then they had two layers of drywall, and then they had carpet padding and carpet. I’ve never seen drywall on a sub floor, so we’ve been ripping up drywall in those back areas because you couldn’t see that on the inspection because underneath it’s hardwood and on top it’s carpet. So we went through like 30 yard dumpsters already and we’ve been taking-

Tony:
Wow.

Jacqueline:
… stuff on our trailer loads, so it’s been kind of crazy on that, but. We just broke down every item, how much we were going to spend or what our budgets should be for it. And we’ve just been going off of that. Went through like the realtor fees, I went ahead and added those in, and I know from the sale price, what we should be expecting on that and just… A lot of people add like a 10% contingency just in case something else comes up, which I recommend doing, because it definitely will.

Ashley:
What about holding costs such as the property taxes you’re paying during that time, the insurance, any utilities you have to turned down?

Jacqueline:
Yes. We are paying for all of that, but I’m also paying $1,000 interest for having it with the hard money loan, which just started this month. It was like a delayed month out, but we’re paying the electric, the water. It hasn’t been bad so far. The water is about $20, the electric’s about less than 100, which we just had turned on a little while back. And then the insurance is like 380 somewhere in there for three months. And actually on this property, we’ve already had to make an insurance claim because a few weeks ago, right before Thanksgiving, the day before our property got broken into and they kicked the back door in.
It was like, my husband left at four o’clock at night and we live down the road. So he left some of his tools and everything, which we normally do, which we aren’t doing anymore. Yeah. They broke in apparently overnight. Took all of our tools and everything, so we had to file a claim. Luckily we had builder’s risk insurance on there. And I know a lot of times that doesn’t come on your insurance plan. So we had up to 5,000 and we made it, it was almost about 5,000 total.
So they gave us a check for about 2,500 back since our deductible was 2,500. That at least helped us replace our main tools.

Ashley:
That’s awful.

Jacqueline:
I know. About two weeks before that, we had our lawnmower stolen at our other property that was parked out back-

Tony:
Oh, men.

Jacqueline:
… and I was like, “well, it’s gone?” It’s definitely the season and so it’s like, you know what? We can’t leave anything, and I didn’t have the key in it, but I would recommend putting those up because you can buy like a $3-lawnmower key at any ACE hardware anywhere like that and it works in like most lawnmowers.

Ashley:
[inaudible 00:38:01].

Jacqueline:
I didn’t know that either until then and yeah. So I have found a good security camera. I know some people are looking for some for like rehab properties that don’t have WiFi. And so we purchased one, it’s called Real Link. I don’t know if you’ve heard of it, but it’s Real Link Go, and then you can get the seller panel that attaches to it. And you just buy like a SIM card or data card from my T-Mobile of the store and it can go straight to your phone and everything without having wifi hooked up because that was our problem, we don’t have WiFi. It was about 200 bucks to buy one, so I’d like to have a few more.

Ashley:
And then there’s no monthly cost then?

Jacqueline:
Not really. The monthly cost would just be if your data plan runs out, which is normally like 25 bucks, I think to buy a card for it. We haven’t bought it yet because we’re waiting on the camera to come in and then we’re going to go get the data card and see how it works, but definitely worth it. Especially if you only have the property for like three months then.

Ashley:
Right. And then you can keep using that for another property.

Jacqueline:
Yes.

Ashley:
You can just keep moving it.

Jacqueline:
You just move it around.

Ashley:
That’s very cool. That’s great advice. Okay. Let’s move on to our next segment here, where we want to hear about someone that has really been a valuable player to your team. Someone who has really helped you grow and accelerate your real estate business. And we call this the MVP.

Jacqueline:
Yes.

Ashley:
So who is your most valuable player?

Jacqueline:
I have a lot, but my main ones would probably be my realtor for like the professional… She just helps me so much, I can be like, “Hey, what do you think of this property? Or can we go see this? And can you meet me here?” And she’s always willing to be like, “Yeah, let’s go see it,” or “I’ll print it out. Or it’s been great,” and she’ll give me her advice and run comps anytime I need them or just double-check my comps and everything. So she’s definitely invaluable.
I have another friend that I’ve met through our local career real estate association and she’s a realtor investor. And so I call her all the time and I’m like, “Hey, what do you think of this?” Because she’s good on the rental side and everything, so she’s got lots of ideas. She does a lot of the Mike Butler courses and things like that, the videos, I don’t know if you’ve seen that. He’s got like a tenant training video that you can show your tenants when they are moving in. It’s just like a 10-minute long video.

Ashley:
Would it be like a welcome video to them as to like these are the processes of how the tenant-landlord relationship goes?

Jacqueline:
Yeah. It just overviews and be like, “Call me for this.” Or, “This is what you need to do for this.” And it’s just nice and you can buy that on his website and everything. But she’s like, “I show that to my tenants, and then while they’re watching that video, I’m going through taking pictures and doing just the general walkthrough before they move in.” So that’s a good resource and he’s got some other things I think on his site that are helpful. I’m just able to call her all the time on rentals or just any investment questions. And she’s also on our board of our real estate investor associations.

Ashley:
So how does someone find a great realtor like that?

Jacqueline:
I got lucky just because I had the friends of the family and everything, but I would go to the real estate investor, meetup groups and definitely find one using them because I could find several that I would use already if I didn’t have my realtor. That would help me be investor-friendly and everything, so that would be your main thing to do. Because a lot of people aren’t as investor knowledgeable as maybe some others, so just going there. A lot of them are realtors that are in there.

Tony:
And if you don’t have like a local meetup happening right now, BiggerPockets’ obviously a great place to go. I know that the first realtor that I ever worked with, I found him on BiggerPockets like in, I don’t know, one of the firms or something like that. And obviously we’ve got the Real Estate Rookie Facebook group, there’s a ton of folks in there, so I’m sure if you put a line out, there’s someone that you can connect with as well, so lots of different forums.
I want to take us down to the virtual request line Jacqueline, you’ve got so much good knowledge. I want to see if we can pull some more out of you. So for the listeners, if you guys want to get your question on the show, just call 18885 Rookie, leave a voicemail and we might use it on the show. So today’s question, Jacqueline.

Rick:
Hi guys. My name is Rick. I’m out in Knoxville, Tennessee. I’m having trouble convincing my wife to start investing. We do have a sizable amount of debt. I am currently a manager at a coffee shop, so our income is not very vast, I would say. I’m trying to figure out if I should get my real estate license to make a little bit more and how I can get her on board. Should I bring up hard money? Thank you.

Jacqueline:
That’s up to him on his real estate license. I don’t know what his goals are, but if I were him and I had a real estate investor group in the area, I would of course try to go to those together. I don’t know how the debt, how his money situation is on that side, but looking into maybe partnering with somebody would be a great idea because they could possibly fund the money or they could offer to do the work. And just things like that, just different alternatives to even using hard money, which is going to be harder if you have so much debt.
Depending on how his amounts are, I’m just have to know more about probably how his goals are and I want to know a little more information. But definitely start with the meetups, maybe see if his wife will go with him and just kind of hear them out.

Ashley:
Jacqueline, I think you’re a good example of this because you are working for a realtor, and I’m sure just being her assistant, you’re getting access to a ton of people in her network. You’re seeing different deals go through the desk that other investors are buying. So would that be something that you recommend to people, is getting a part-time job, working for someone who is investing or who is a realtor and maybe starting out and seeing if you would actually like to get your license?

Jacqueline:
Oh, definitely. That’s one thing I wish I did before because I was in healthcare before, a respiratory therapist in the hospital. So for several years, I wish I would have went back and started… Because that wasn’t my long-term goal was to work there. I never really loved it, but I wish I would have went and worked for a property management company or a realtor’s office sooner. I just got lucky this year, she got her office here in our town and so it worked out, we could work together.
But that’s definitely the best way I think, just learning from other people. And even if you have to float around to a few places like go to a property management company, work for them. Just get their systems down, figure out how they do it, deal with tenant relationships and inspecting their apartments and everything. And that just can benefit so much.

Tony:
There’s also the second part of that question too about like getting your spouse on board. And I think everyone’s going to have different experiences with that, but it also depends on what level of involvement you want your spouse to have. If you just want permission from your spouse, then I think what you said about like, hey, show them that you’re serious, show them that you’re going to these meetups, show them that you’re reading these books, show them that you’re networking with other people, that you’re doing these deal analysis and things like that.
But if you want your spouse to be involved, that one’s a little tricky. When I first got started, my wife wasn’t really involved. She knew what I was doing, she was supportive of it, but it wasn’t until we found a niche that excited her as well that she actually got involved in the process. So-

Jacqueline:
Exactly.

Tony:
… I guess my advice to Rick would be, if you’re looking to bring your wife, maybe see if there’s a strategy that she likes more. Maybe it’s not buy and hold, maybe it’s fix and flip like you guys, or maybe it’s wholesaling, maybe there’s something else that she likes.

Ashley:
And one thing to add onto that too is show them the numbers. If you have a deal you’re looking at, break it down and be like, “This is where I’m getting the money from.” For me to get my husband on board, I wasn’t using any of our own money. I had a partner, he was supplying the money, so it wasn’t like I was risking our life savings to do this. That definitely helped me, but then I showed, “Okay, this is how it will work. Look at the numbers. Here’s the cash flow at the end of the month. I’ll be getting this extra.”
And at that time, probably wasn’t until our third property, we actually got into Dave Ramsey and paying down debt, and I was like, “Okay, I can use this cash flow to accelerate paying off my student loans.” And I did. And then after that, it wasn’t even more exciting to him, “Let’s tackle the next loan.” Just showing the numbers and really if you or your spouse are in to DISC profiling, doing that. And you can see what would work for your partner to, are they a numbers person where they want to see those numbers? Or are they more of… I don’t even know what else you would do for it, but they want to see the plan or.
But using the DISC profile to can really help you see how you would actually pitch this, I guess if that’s the right word to your spouse. But we’ll put a link to that in the show notes too, the DISC profile.

Jacqueline:
I’ll say my husband actually wasn’t always on board, so that was just a big change too, For years, whenever I was just always wanting to know more, reading books and I was trying to get him to read books and that’s just not his thing. He’s does not want to read, he wants to be hands-on. He wants to be out there and doing stuff like even sometimes I was like, “Let’s watch YouTube videos on how to do plumbing.” And he’s like, “I don’t want to do that, I want to go and actually physically do it.”
So that was hard for a while just getting him on board. And so, yeah, I just thought… We just had to figure out what worked for us. The paperwork and that side just is not going to be his thing. It never will be. He is hands-on, he wants to know more about the contracting stuff, he wants to just do that’s his thing, and that’s just what we had to figure out that we are separate in that way, but it works out both of us together doing that.

Ashley:
And the fact that you made it so that he could quit his full-time job too, had to be a nice incentive to show him like, hey, we can make this happen. That’s another way you could pitch it.

Jacqueline:
“Do you want to quit your job? Because you can do this.” It was always thrown out there, so he probably hated hearing it. No, it felt like, oh, three more years and it was like pillar to him to hear like some many more years, but it just we took the jump.

Tony:
I love that. Now, Jacqueline, before we let you go, we want to ask you just a couple more questions to get to know you a little bit better. So I guess my first question for you is what tools or software are you guys using to help support your flips? Are you guys managing this through like Excel and text messages? Or do you have some kind of really cool website, just what tools or software you guys use it?

Jacqueline:
I have a great Excel spreadsheet my sister-in-law gave me and it’s been awesome. So I would share that with anyone if they need something to get started. Our tax person loves it, but I decided this past week, I wanted to start using QuickBooks with my tax advisor. And so I had a one-on-one meeting with them and they walked me through all of it and everything, that way next year I’ll be on track, they can see everything and sync it because we want to be able to move up a little bit from there.
That’s mainly how we do it, but yeah, I’d be glad to share the Excel one just because we… If you have multiple businesses, you don’t want to have QuickBooks for each one if you’re just starting out, it’s expensive, but yeah.

Ashley:
That would be awesome.

Jacqueline:
Yep.

Tony:
The Excel file, are you using it just to track the expenses or? I guess give us a little bit more insight on what’s in there.

Jacqueline:
I track everything on there, so expenses, income, which our income is basically like when we deposit our main amount that we’re going to transfer to purchase the house and then income whenever it comes back. But I save up all my receipts, I try to go through once a week and just enter them all in and try to reconcile with my bank. Instead of just make my bank have like a, I guess I call it a ledger, and I keep all my bank accounts in there and that way I can sync everything, make sure it syncs on there and then it syncs on to my spreadsheet.

Ashley:
If we can, we’ll find a way to link that on the show notes at biggerpockets.com/rookie43. We should be able to add that on there. Thank you very much for sharing that. I know everyone loves documents and resources that advisors could share.

Jacqueline:
I had one more thing I was going to share if it was know okay.

Ashley:
Yes.

Jacqueline:
When we went to BRRRR that property, we had searched around, I don’t know if you’ve heard of Aaron Chapman. Not the Aaron Chapman that you all had on the podcast the other day, which I got another story I wanted to tell you on that. Anyway, so this Aaron Chapman is with Security National Bank, and I have other information. They are out of Arizona, but they specialize in investors. So they are very familiar with the BRRRR method and that’s what they specialize in doing.
So if you need someone, it’s all online. I just use my app to upload all my documents and all our income and everything, and it was like the best process ever. So I could also email you his sheet that he sent over their basic information on terms and everything.
I was listening to your podcast with Aaron Chapman the other day that you had him on and I happened to be listening and I was like, “Oh, this is probably the loan officer.” And then he got to talking and he was like, “Yeah, we’re in Louisville, Kentucky,” which is like our area. He started talking about his track clicks or his duplex he got with that single family. And so the more he talked, I got on his Facebook and I saw that he’s in my area, right down the road. And so he kept talking about it and talking about it, and I was like, “This is the property. I got obsessed with this house.” Because I saw it on the market.
And I was like, “No way, it’s the same exact property.” And I was like, there’s something had to pronounce, analyzing it I was like, “Something’s got to be wrong with this place,” but I love that he explained what ended up happening with it and how he did seller financing and stuff. So it was so cool. And then we connected after that. I’m going out to eat with his wife next week.

Tony:
Man, I love that the show is connecting people like that.

Jacqueline:
Yes.

Ashley:
I know.

Tony:
It’s so cool.

Ashley:
What a small world?

Jacqueline:
I know. I was just like, I just thought it was the craziest thing ever.

Ashley:
And so after he was on the podcast, did you reach out to him?

Jacqueline:
Yes. Yeah. I reached out to him and I was like, “Hey.” Oh yeah.

Ashley:
Look, just what you explained right there, that short little bit. We spend a couple of weeks, so just in that short amount of time, how you’ve already become friends with him, his wife, sharing resources.

Jacqueline:
Oh yeah. I was like, “Hey, we go to a lot of meetups. If you’re ever interested, you all come with us or whatever.” And they’re like, “Yeah, we’re always looking for people our age because we don’t find that a lot.” So it should work out great.

Tony:
Real estate is a relationship game always, so I love that-

Jacqueline:
Yes.

Tony:
…you guys are putting that first. It’s beautiful.

Jacqueline:
Yeah, I love it.

Ashley:
My question for you is, what are some must haves that you have to do for flips in your area? Is it every flip has to have granite, is it every house needs to have air conditioning? What are some must haves that you must do?

Jacqueline:
Basically the air conditioning, everybody hasn’t been as picky on granite lately in our area, I don’t feel like. It’s definitely a nice touch, but laminate, the flippers in our area have been like we’ve had no problem with doing laminate, but also I’ve had connections that are like granite, you can find some lower prices, just write up a little bit more expensive, but definitely a better look. But no, just I think all fresh new paint, new flooring, just cleaned up. A lot of places just aren’t ready to move in.
If you can get a move in ready, [inaudible 00:52:24] they don’t have to touch anything. I think that’s just the goal around here.

Ashley:
Thank you so much for sharing everything with us. And can you tell everyone a little bit about where they can reach you and find out some more information?

Jacqueline:
Oh definitely, yeah. I’m on Instagram at jacquelinesmith.rei, and then I also started up a YouTube channel, so I’m trying to post more on there as we go just with documenting everything. So if you want to say more about the flips that we are on now that I talked about, you can get on there and check out our progress. We’ll post monthly, but those are the best two ways. You can also email me at [email protected]. I’d be happy to connect with anyone.

Ashley:
Thank you so much. We definitely had a great time listening to your story and make sure everyone checks out biggerpockets.com/rookie43. We’re going to add all of Jacqueline’s great resources onto that page. And then don’t forget to join our Facebook group. Just search Real Estate Rookie.
I’m Ashley Kehr @wealthfromrentals and he’s Tony Robinson @tonyjrobinson. We’ll see you guys next week.