Real Estate Rookie Podcast

Rookie Podcast 48: 4 Ways Newbies Can Finance Deals with Richard Kelly

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After Richard Kelly shadowed a veterinarian for the day, he realized that his passion wasn’t performing surgery on animals, it was actually money. This led him to become a banker and after he was given the book Rich Dad Poor Dad, his interest in real estate investing was sparked.

After deciding he wanted to become a landlord, Richard found BiggerPockets and started listening to every episode of the podcast he could. After feeling confident enough in the real estate investing education space, he made his first jump into flipping, buying a short-sale home with some creative financing via hard money loans.

After some very heavy hard money fees paired with long nights working to get his flip finished, he walked away with a solid profit, and knew that he wanted to park it in buy-and-hold investing. Currently, Richard has completed 2 flips and owns 2 rentals (a single family and a duplex), and knows exactly what (and what not) to look for when using hard money and creative financing. Now, he’s here to share the knowledge with all of us.

Richard has done 4 deals, with 4 completely different ways of financing. From private money, to 401(k) loans, and using a fan favorite, the 203(k) construction loan. He also talks through how to find deals, who to partner up with, and why you need a great real estate agent especially when you’re just starting out.

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Listen to the Podcast Here

Read the Transcript Here

Ashley:
This is Real Estate Rookie, show number 48.
My name is Ashley Kehr. Today I am here with Tony Robinson. If you are watching on YouTube, you can see he has his nice honeymoon glow back from Mexico.

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Tony:
Yeah, I’m tanned, I’m relaxed, just everything feels great. It was so cool. We spent a week down in Playa del Carmen and it was the most beautiful resort I’d ever been through in my life. There was a huge river that flowed through the hotel, and there was kayaking and the … It was the best way to spend the first eight days of the year by far. My wife and I said every year, moving forward, we’re going to vacation on January 1st just to start the year off the right way. It was good.

Ashley:
That’s a great idea. He shared a little bit of his honeymoon on Instagram. You guys have to go watch his one post where it shows him driving a side by side and then the next, you slide over and there’s another video of his wife driving the side by side, and then a caption. You guys have to go look at that @tonyjrobinson, and you will definitely laugh.

Tony:
Yeah. I got a lot of people reaching out to me about that one. It was good.

Ashley:
Yeah, it was awesome. But today-

Tony:
Yeah, what’s …

Ashley:
Go ahead.

Tony:
Go ahead. No, well, what’s new with you, Ashley. What’s happening in the business world. I know last time we chatted, you guys were out shopping for stuff. I know you found a war zone bunker or something like that. The-

Ashley:
Yeah. I actually put my offer on Saturday on that. It’s 17 acres, there’s a pond, a field that a farmer rents. Then there’s three storage buildings, 7,000 square foot each. One is used for seasonal storage for RVs and boats. Then another one, a farmer stores equipment in there. There’s land that’s leased. There’s the farm storage equipment income. Then there’s the storage income for the RVs and boats. Then there’s a lot more room to actually build more storage barns or individual storage units. Then there’s also these three bays that are bunkers there. It’s a huge concrete building with these huge heavy insulated doors on each side. Those just have nothing in it right now. But we joke that when the world goes even crazier, that’s where we’ll live. We’ll each live … My partner will live in one, I’ll live in one with my family, and then we’ll sell the other one to the highest bidder until [crosstalk 00:02:37]-

Tony:
There you go. Just carve a little space out for your co-host. That way I know I’m coming to Buffalo.

Ashley:
We’ll start a little commune.

Tony:
That’s awesome. Well, congratulations. Hopefully that deal gets closed for you.

Ashley:
Yeah. Well, I’m waiting. The offer hasn’t even been accepted, countered or anything yet. We’re waiting.

Tony:
We’re in the waiting phase.

Ashley:
Yeah.

Tony:
Cool. I’m actually closing on another property in four hours. This will be our second short-term rental in Pigeon Forge. We’re super excited about this one. But we’re actually going to try and take this one live without going out there to see the property. When we bought our first one, we flew out there, we did the whole thing. But we’ve done three of these now, so we feel pretty good with knowing what needs to be ordered and what needs to be done. We’re going to try and do this one remotely. Fingers crossed that we don’t miss something or-

Ashley:
You have a great person out there, your cleaner. She takes care of so much for you, and finding that has been key I’m sure.

Tony:
Right. That’s the only reason why we feel comfortable doing it remotely, is because we’ve got her and we’ve got a really good handyman that we’ve kind of developed that relationship with. They’re both going out there tomorrow or the day after we close to kind of do your walk through and let us know what needs to be done. We’ll see how that one goes. Then we’ve got another property closing here in Joshua Tree in a few weeks. That’s our first one with a partner. All of our other deals have just been me and my wife and her cousin, but this is our first one with someone else. We’re excited to see how that one goes too.

Ashley:
Awesome. We’re going to have to do a deal.

Tony:
Yeah, there you go. Come on. We can do Buffalo, we can do Joshua Tree, wherever you want.

Ashley:
Yeah, okay. Sounds good. Today, we can learn all about how to finance that deal with today's guest, Rich Kelly. Rich just blew my mind. He's done four deals and each deal is just non-conventional, just different ways of using financing, the different financing that is out there and available. It's not even borrowing money from his dad or borrowing private money. It is basically all going to the bank or an actual lender, like a hard money lender.

Tony:
Yeah. He really talks about his experience with that first hard money lender and a lot of the lessons that he learned by really not vetting that company upfront. He learned those lessons the hard way. Really pay close attention as he’s talking about that experience because he lists all the questions you should be asking a hard money lender before you get into a relationship with them. You guys are going to love this one, for sure.

Ashley:
Yeah. You’ll be able to take those same questions and ask them if you’re trying to vet a hard money lender.

Tony:
Rich, what is up, man? Good morning. Welcome to the show. Excited to have you on.

Rich:
Thank you. So excited to be here. This is honestly a dream come true, believe it or not, man. I’ve been listening to BiggerPockets for so long, and to be a guest is really amazing. I appreciate the time.

Tony:
No, absolutely, man. We’re excited to share your story with the listeners, and I’m sure they’re going to get a lot of value out of hearing it. Before we dive in, Rich, just tell us a little bit about you, man. When you’re not doing your real estate stuff, what are you doing? Who are you?

Rich:
Yeah, sure. Well, I’m a full-time banker. I work for one of the major banks. I’ve been in banking now close to 11 years. I’ve been through a few different banking positions or banker positions, but I really, really love my job. I love what I do. I love interacting with people. It’s almost like a good marriage. I feel like I’m a people person, and then I love learning about money, how it works, how it flows. It was really a great marriage when I actually started. That’s pretty much what I do full time. I live in New Orleans, Louisiana, born and raised. I love this city. I tried to move away a few times, but actually have been brought back many times because of just the city man. There’s just something about it that it grabs you. I’ve heard that from many, many clients. They’ve moved here maybe due to their contracts, ending in one city and then moving here and then he never left. That’s pretty much it.

Tony:
Beautiful, man. You’ve got this W-2 job that you’re balancing with your real estate portfolio. Give us an overview, Rich, of where your portfolio is today. How many units do you have? What cities are you investing in?

Rich:
Yeah. Solely investing in New Orleans right now. Well, I say New Orleans, but there’s sub cities like Metairie, Harvey, Louisiana. But I have two rental properties right now. One is a duplex and one is a single family unit. I have completed two flips and actually signing a contract for another flip purchase actually later today.

Ashley:
That’s awesome. Congratulations.

Rich:
Thank you.

Ashley:
Rich, what did you start out with? Did you start with the flips first? Did you start with the buy and holds?

Rich:
Good question. The first was actually a buy and hold property and it was actually through a short sale. I started my real estate journey, probably about 2004. I was going to school for veterinary medicine. I wanted to be a veterinarian. I love animals. I had the ability to actually shadow a vet for about two weeks. After that experience, I just realized that this wasn't for me. I don't know if you guys ever saw Yes Man with Jim Carrey. But there was a scene in there when he was in this chicken factory kind of showing how they process it, and he was literally about to pass out. That was me in the surgery room. I was able to witness a few surgeries and I was like, "Man …" I almost passed out in the room. I was like, "You know what? This just isn't for me." Anyway, that kind of dimmed my hopes of what I wanted to do. I really didn't know where to start. My only plan A is what I was focusing on doing.
Just through talking to my family, my stepdad told me, “Hey, my best friend is a real estate broker. Why don’t you talk to him and maybe see if real estate is something of interest to you.” Through my conversation with him, that kind of intrigued me and I said, “Yeah, I guess I’ll do that.” Simultaneously, my stepdad gave me the book Rich Dad Poor Dad, Robert Kiyosaki. I’ll tell any parent, listen, if your kid is on the verge of not wanting to go to school or finish it, do not give them that book. Because it’s definitely not going to want to make them finish college, believe me. But for me it was perfect because I didn’t really know what I was going to do. It kind of tied the two together, me doing real estate and now actually having this mindset now of, yeah, this is what I’m going to do. That was actually my first entry into it. In 2005, I actually passed my licensing exam. I first tried … Everybody that knows me, if I’m into something, I’m going head first.
I'm buying the books, I'm buying the audio, everything to learn and just understanding, just go in. I did that. I got my real estate license in beginning of 2005. Of course through that process, you have to kind of build your book. You'll kind of let people know that you are an agent before you start generating any type of income. Unfortunately, in August of 2005, Hurricane Katrina hit. At that point, everything just was kind of out of whack. I moved to Atlanta for a year and I actually let my real estate license lapse. I got it and never actually used it. But that was my introduction to the industry and what I … I knew at that point I want to do something in real estate, initially on sales, but then eventually into investing. Fast forward, 2014, my friend introduced me to BiggerPockets and I started listening and just grasping a lot of concepts from the podcast and the forums and just the write-ups. I realized that I needed to just kind of decrease my debt. Also, being in banking, I just know I needed to be more bankable.
I actually got a second job in addition to working full-time at the bank, part-time in a gym. Which was … That was a grind, man, because I was pretty much almost 9:00 to 5:00 going at work and then 10:00 to 4:00 in the morning at the gym. Then just to redo it again. It was five days at the bank and then about probably three to four days at the gym. But it allowed me to get debts down. During that time I was kind of just also just talking about situations on how I’m going to get into the industry, what I’m going to do. After that point, I said, “You know what, let me just start working with realtors and see if they could just find me a property.” That’s exactly what I did. A realtor actually bought me the first deal, which was a short sale. From there, that’s how I bought into my first buy and hold.

Tony:
Yeah. Congratulations. What a cool story. But I want to point out one thing, Rich, because I don’t want the listeners to gloss over this. You said that you got a second job to help with your real estate investing career. A lot of people reach out and they say, “How do I afford that first deal?” Or, “How can I make the finances work?” Or, “I don’t make enough money.” But it’s not a super complicated thing. If you don’t make enough money, you got to find a way to make more money. A second job, although it isn’t pretty and it isn’t exciting and it’s hard, it’s what you need to do. People see real estate investors post that picture of their first deal or talk about how they got that first deal done, but they don’t always see the work that goes on behind the scenes. I love that you highlighted that because it’s a good story for folks that haven’t started yet on what sacrifices you need to make to be able to actually get that deal done.

Rich:
So true. There’s only two things you can really do, decrease your expenses or increase your income or both. That’s pretty much what I was really trying to do. I was just so focused. I didn’t really even care about working at two jobs or maybe being tired. It was just, I just had that goal in my mind that, listen, if I don’t do this, what’s the alternative? I know if I don’t do this, then it’s just going to be working at the bank. Yeah, eventually, can I save enough to buy my first property? But I was just kind of ready to go at that point.

Ashley:
Were you renting at this time, living at home?

Rich:
No. Actually, I purchased my primary residence in 2000 and … Well, I purchased my primary residence in 2007, actually, the condo I’m in now. I’ve owned it since then. It’s a small six unit. Also after kind of reading that book, I reached that point that I realized also that I didn’t want to rent anything. I left my parents’ house at 23 and then I just ran straight into the condo, straight into owning. I’ve never rented a day in my life.

Ashley:
After you’ve lived in your condo, you’ve paid off debt and you decide you’re going to buy the short sale property, what made you go with getting a duplex?

Rich:
That was much later on. I actually did a flip before the duplex. But it was kind of just came about, because I knew that I wanted to do a flip to allow me to help me buy an actual buy and hold. I needed to get more income. I definitely didn’t want … At this point, I had stopped the second job. After I got the actual initial single family property, the buy and hold, I was like, “Okay …” I worked maybe another year and a half at the gym. Because honestly, although it was a lot of not as much hours of asleep, it was actually a pretty cool laid back job. I met a lot of people. It wasn’t really that bad. It was kind of a fun gig. Again, I was just making additional income, so I was okay with that. Again, it’s just me, I’m single. I didn’t really have many responsibilities that it was taking me away from, just my time. It wasn’t really too bad, so I continued to do that. I actually purchased a flip in between getting the duplex.

Ashley:
Let’s talk about that transition going from buying your first rental property and then purchasing a flip. You talked about how you wanted more capital to buy your next property. Let’s walk through that flip. Have you had any experience in construction doing a rehab before?

Rich:
Never. Not thoroughly. My dad is a pretty handy guy. He's not a licensed contractor, but my dad could literally build a house from ground up. I mean, he has the knowledge to do pretty much everything. For me, which maybe I differ from maybe a few other rookies, is that I did have that kind of shoulder to lean on with my father. Because I knew that if I ran into a bind, I mean he could kind of guide me through it and just really help me and say, "Hey, Rich, look, we need to do this." He was really with me throughout that entire first deal. But I knew … To kind of back up, what I did was, I just kind of started getting a team together. I found a real estate agent that was really investor friendly. I started off with one agent and I thank her so much because she did kind of start me on the process of looking. But when you're starting with a rookie investor first purchase, it can be a little tough to find a real estate agent.
Because when I first started, I was just kind of like, “Hey, I want to go see this property. Let’s look at this one. Hey, I found this one.” She’s like, “Okay. Yeah, we can look at it. No problem, but we can’t go to every property.” Then I wanted to offer them a deal, maybe it fell through. It was just a lot. The guy that I’m with now, John, I mean, I really, really thank him so much because, man, I can’t even think about or remember really how many deals we looked at and how many deals we put an offer on before we got one. It probably took me, from the initial start, about a year before I really found that one property that I actually wanted to put an offer on. I bought that single family buy and hold in 2016 and I didn’t buy my first flip until 2018.

Tony:
Did you find your flip on the MLS as well or how did you find that property?

Rich:
Yes, I did. Although I was on these automatic mail-outs for my agent … It was not just from my primary agent, but other agents as well. I just got on those lists saying, “Hey, this is my criteria. I’m really looking for mainly a three, two. I want to buy it at this price. I’m looking at this area. I got on those automatic feeds.” But what I found, is sometimes those automatic feeds can have delays. I mean, literally at work, every hour, even before that, I’m on Trulia, Zillow, Redfin, Realtor, on those apps on my phone just constantly looking at the feed to just see what came up. I was doing this. A matter of fact, everyone knows I’m a New Orleans Saints fan. This was actually during a Saints game where just kind of during a commercial break, I started looking at the feed again and I saw this property had just come onto market.
I immediately texted my agent and said, "Look, John, let's put an offer on is property now." Because at that time, things were just kind of moving really fast. A property would be on the MLS, I will wait because of being a rookie. I want to go and see it first before I make an offer. I don't want to move too fast and then I'm getting into a bad deal. Not really at that time really thinking, listen, you do have a contingency inspection period, so don't really worry about that too much. Just kind of get the thing under contract. That's what I did on this one and it worked out for me.

Tony:
Let’s pause on that really quickly because I think that’s a really good point. A lot of new investors, they feel like they have to go see that property in person. They want to run the numbers a billion times before they submit the offer. But you saw it, you immediately reached out and you said, “Let’s do it.” What was it that gave you the confidence looking at that listing to say, “Okay, this one makes sense.” Was it the purchase price? Was it the ability to add additional unit? What did you see that made you feel comfortable to do that?

Rich:
Yeah, great question. Really it was the price for sure, the area. I had been looking in the area for quite a while. So I knew at that price point, I knew exactly what it could sell for. Then the square footage. It was listed as a three, two, and I knew that with the square footage, if I could potentially add a fourth bedroom that I can get that higher list price. That initially is what gave me the confidence to go ahead and just call my agent and say, “Hey, look, let’s actually get this thing under contract.”

Tony:
You get that when you look at the same kind of area, your target market for a year. You really start to know what the prices are that makes sense for you and how you can kind of make that deal make sense. For those of you that are listening, pick a market and just know that market intimately and it’s going to help you get that next deal done.

Rich:
100%.

Ashley:
Just like Rich said, he goes on Zillow almost every single day and checks that. If you keep doing that, you’ll get to know and look at what has sold, pull up the comps in your area. You can do that on your own. There’s software out there too that you can look. I just started … I signed up for the free trial of PropStream. I think you-

Tony:
PropStream?

Ashley:
Do you use that, Tony?

Tony:
Yeah.

Ashley:
I just did it the other day and I was looking into the sales comps on there. But there’s so many different ways to get to know your market. I’ll even go on Craigslist or Facebook Marketplace and look at what the rents are going for too. Then I’ll look back and see like, well, this one’s not listed anymore. It must have rented. You can kind of track. I mean, I kind of go off memory, but you could actually start an Excel spreadsheet and track those as to, okay, this is went off in two days. It was already rented at this price. You can do the same for the sales and the rent prices. Let’s talk about financing these deals. With your short sale, how did you go about financing that one?

Rich:
For anyone listening, rookies, what I did was, I just started putting it out there that, "Listen, I'm looking for a deal." Talking to everybody. I'm a big believer in what you focus on expands and kind of law of attraction, The Secret type of stuff. I actually just started doing that. I had a vision board, I had it written down, like, look, I'm going to get this deal by this date. It's so crazy. I know it sound kind of hokey-pokey, but I mean, literally it was probably within a month of me actually deciding and being intentional on it, that an ex co-worker that worked at the bank that I currently work at … He actually left that institution and went to another. He just came into the bank one day and I just happened to see him. I got to talking to him about what we were doing and kind of what he was up to, where he was working. He actually told me that he became a commercial loan officer. So, "Whenever, look, you do find a deal, just come and see me. I can help with financing."
I was like, "Man, of course, that's for sure. I definitely will be calling." I actually did that. When the agent brought me the short sale deal, he was a commercial agent. I don't know why I just wanted to buy this deal in an LLC. There was no real reason for it. I don't know if it just sounded sexy that I had a property in an LLC, but that's what I did. I told them that, "Listen, I want to buy it in an LLC." He said, "Yeah, I'm a commercial lender, so I can potentially help you with that." But the problem was, I hadn't created the LLC at that point. There was no revenue for it. In my mind, I didn't really know the how, I just know this is what I wanted to do. I think that's the biggest thing, just have the why. Just, this is what you want to do. The how sometimes will work itself out. Even if it's not exactly the way you planned it to be, you eventually get to that point. What ended up happening was …
I don't know if this is something that any bank can do, but I actually created the LLC. Let's say it was a Monday. He did the loan for me on a Friday. Because the property was a short sale, they appraised it for 160 and I actually got the property for 130. I actually got it with 30,000 of equity. I didn't have to put a down payment, I guess, because of how much equity was there. I only had to come to the table with closing costs, which was about maybe $5,000. He was able to use … Now, those tenants that was in that property were in there probably at that point maybe about eight years. I kept up the same tenants. That bank was able to use the long-term rental income and history of those current tenants to apply to my LLC. Although the LLC was newly created, they were able to use the rents as income in additional to my W-2 income to qualify me for the loan.

Ashley:
That’s a really great point, because the bank will actually go and look at the property and what the value of the property is. If there’s rents coming in, there’s going to be rents, what the value of the property is. It actually doesn’t matter if you don’t have anything in your LLC, because they’re just putting the mortgage on that property and they want to make sure that that property is going to appraise well or generate revenue for you. I want to go into a short sale. I have never done one. I’ve kind of touched into that a little bit with a property I’ve had under contract for a year and still is going nowhere. But can you explain to everyone exactly what this is and what does that process look like?

Rich:
Yeah. For this buyer or the home homeowner, they had a primary mortgage on their property, but they also had a home equity line of credit. Unfortunately, I guess they just didn't really understand the details of the home equity line of credit. Now, to me, the bank was just, this is just really silly. Because it's through knowing the agent and talking through the situation with the actual homeowner at the time, it wasn't that they couldn't afford the mortgage or the mortgage and the secondary mortgage which at this point was the home equity line of credit. It wasn't that they couldn't afford it. It was just that there was a balloon payment at the end. They had so many years of the draw payment on it and then this large lump sum. I think at the time they probably had about 50,000 balance on the line of credit. Well, the bank was unwilling to refinance it. Knowing what I know now in real estate, I could have probably recommended something else for them.
But now at that point, they just kind of like, "Well, we're stuck. We have to actually sell." The bank was going to foreclose on it. Instead of going through the complete foreclosure, a bank can also do a short sale where they will actually take less than what the actual debt is just to get it off of their books without it being a foreclosure showing on the actual homeowner's record. That's what I was able to do. But the short sale, you have to be patient because it can take very long. It probably took us close to 90 days to close on that property. Which I wasn't in a rush at all. If you're looking to maybe buy a short sale for flipping, and you're trying to reach your goal to get it bought and then sold by a certain time, maybe it's not the best option. But if you're looking to just buy and hold and acquire property, and you can kind of wait that time, it's great. Because you can come in with almost initial equity just right off the bat without even having to do any type of repairs if not necessary.

Ashley:
Who walked you through this process? How did you learn how to do the short sale process? Was it your realtor?

Rich:
Yes. Because that was the first time I actually had any experience with it also. I was kind of just going with the flow, just kind of going with his lead pretty much.

Ashley:
Then once you purchased that property, you have your commercial loan on it, and then you’re going next to your first flip. How did you finance that deal?

Rich:
The flip was financed through hard money. Man, hard money. I’m [crosstalk 00:24:20]-

Ashley:
Please expand.

Rich:
Again, now I have experience with three different hard money lenders now. Because going from that buy and hold, initially, I knew that I wanted to do more flips, I wanted to acquire more active income to buy more buy and holds. At the end of the day, for me, that’s my game. I want to definitely have more rentals just to get that cashflow. Eventually, it going to set me up to … If I wanted to leave the bank at some point, I could match my income there and be comfortable with leaving. But I love my job. I’ll keep doing it as long as I want to. But to have that option is really what I’m searching for. The first hard money lender that I went with, I’m thankful because I got it. They actually helped me finance the deal. But man, I would never go back with that company. I should’ve done more research. But I was just … The first thing I did was, I went on BiggerPockets and said hard money lenders, for this area, for Louisiana pretty much. They gave me a listing of hard money lenders.
I just chose one that after reading a few of the websites that I thought would have been the best competent to go with, and I did. But this company has so many upfront fees. Some people are going to cringe if you’ve dealt with hard money before. Although it can be expensive, this was kind of to me, a little extreme. My rate was 15%. That’s my first deal. My rate was 15%. The points of five and a half percent. To get into the program, outside of those rates and points, there was initial $3,000 program to get into this 100% financing program. One of the things that I liked about it was initially you didn’t have any monthly payments. You just kind of paid it on the back end once you sold the property. That was intriguing to me. But the process, they wanted to do a single entity LLC. They charged me $1,600 to set that up. I already had an LLC, but I couldn’t use it. They had to create one for me. They charged me $1,600 to do that.

Ashley:
When you did yours yourself, how much did that cost compared to the 1,600?

Rich:
$105 to do the LLC myself, at least for Louisiana. Every state is different, but in Louisiana it’s [crosstalk 00:26:29]-

Ashley:
Right. In New York, everything’s expensive here and that you can even do it for $225. I figured it would be a big difference from 1,600.

Rich:
Yeah. Man, in hindsight, not the best deal. But I mean, look, it got me through it and it worked out. But there was some other things that just … Not really understanding the draw process was another thing. For anyone that’s … When you’re doing hard money, one thing for sure is you want to make sure that you have reserves. Although the hard money lender will give you rehab costs, what I didn’t know is that … Again, just not asking enough questions. What I didn’t know is that going in, I was going to have to actually front the initial rehab. You have to start to do certain work and you have to invoice it to say, “Hey, I did demolition. I filed for permits. I’ve done the sheetrock work or whatever needed to be done on the property.” You’re actually fronting that money. If you’re putting your down payment down … Which I think on that deal, I had to come to the table with about $30,000 to make the deal work.
In addition to that $30,000, you’re going to need the initial rehab to at least get the first draw. That’s one of the things. Thankfully, I had some reserves and my sister went in on the deal with me. We tapped into some of her capital, and then also unfortunately credit cards to start off. But that’s definitely something I would say, every newbie needs to really ask a ton of questions before going into a deal with a hard money lender. Just understanding the process from beginning to end. Not so much when you close, but also after the fact. What’s the draw process? How much is it for each draw? How many draws can you do? How fast does it take for the money to get into your account after you actually make the draw submission? All those things can make a huge difference in your big deal.
A quick point on that is also knowing, with the hard money lender do they allow you to do the work yourself or do they require you to have a contractor? On this deal, I didn’t find out until after I had closed on the deal that they actually required you to have a contractor. Me and my dad were actually doing the work ourselves. We had to get a friend of ours who was a licensed contractor to actually do the invoices, submit to the hard money lender as the actual contractor in a sense. Which I didn’t really feel comfortable doing it, but it was the only way I could actually get the draw. But had I asked those questions upfront, it would have definitely helped me decide, one, if I wanted to go with them or how I was going to maybe work it.

Ashley:
After you’ve paid out all of this hard money, what was your profit on this flip?

Rich:
On that deal, it was about $16,000 net after I paid everything back. Which I was just happy really to get a profit. Man, after … Oh my gosh, this deal, it probably wouldn’t have been the best first deal for a newbie. Because the property itself I mean it had mold damage, termite damage. I was adding a bedroom. It was raised, so there was standing water under the property. I had to change just kind of the floor plan and open up the kitchen. I did a ton on this property. I actually took it on because again, my dad was with me. I was confident. He was like, “Rich, I can do anything to a house, so just get it.” He gave me confidence to actually buy the property. But if I was working with just a contractor, man, the cost would have been through the roof. I mean, my profit … I probably would’ve lost money on that deal.

Tony:
How long did it take to do the whole rehab, Rich?

Rich:
Great question because it ties into hard money again. This hard money lender only gave me five months to complete the deal. It took me six months to actually complete the deal. With a hard money lender, most of them now after research, at least give you 12 months. I definitely wouldn’t go with a hard money lender that gives you such a short timeframe. Especially if it’s your first deal, it’s very, very difficult because you’re just learning on the fly in a sense.

Ashley:
You can always pay it off early, correct? It’s not like you have to keep the hard money for those 12 months.

Rich:
That’s correct. Again, unless that hard money lender says there’s a prepayment penalty. That’s again, another question to ask. I haven’t come across one that had a prepayment penalty, but you just never know. You just have to ask those questions. Thankfully, no, this one they didn’t and most of them don’t, but yeah, you can pay it off anytime. I did not finish within that five months. Part of this program was that if you did finish, you purchase, you close and you paid them back before the five months, the initial $3,000 that I told you about, you get back. Well, needless to say, I lost it because I went over the six months. Then in addition to that other month, I was awarded with another penalty because I went beyond the fifth month. It was maybe an additional 1% that I had to pay them.

Tony:
I just want to make one more comment before we jump onto how you financed your other deals. But some people might look at this and say, “Man, six months worth of work, $16,000, it’s not even worth it.” But I can tell just from how you explained that deal, that you learned so much about flipping a house, about dealing with hard money lenders. That even if you came out negative on that deal, even if you lost a little bit of money, it probably still would have been worth your time because I’m sure on your second flip, you knew all the things not to do to make sure that it went smoothly and really set you up for success.

Rich:
Absolutely. Honestly, my broker had to kind of bring me back because at the end of the timeframe, after work, I was going to the house. On weekends, I was going to the house. There was no free time for myself. Me and my dad was really grinding this thing out. We had some laborers and we did some work, like flooring and cabinetry. But a lot of the small stuff that we could do on our own and save money we were doing. It was really just, man, real sweat equity we were putting into the property. At the end of it, I was kind of like, I told my agent, “Look, if I break even on this property, I’m fine.” This was at the beginning of the project. At the end it was like, “No, man, listen, I put so much work into this thing, man. I got to make some money on this deal.”
He was like, “Rich, remember what you told me in the beginning? Man, this is your first one. You’re just trying to get your feet wet.” One of the things too, before we move forward, was just kind of thinking through how you can save money. The buyer of the property … Actually, I didn’t have to list it on MLS thankfully. One of the contractors I hired to do … We were removing a popcorn ceiling and just gone all flat. He actually wanted to purchase a house and he was like, “Man, once you’re done, just let me see it and I may be interested.” Actually he was. He bought the property, and because I actually brought the deal to him or we kind of decided on it together, my agent also represented him and he only took 1% commission. I didn’t have to pay an agent for him at 3%. That also helped me kind of save a little bit on that. Just kind of be creative when you’re really kind of trying to maximize profit. There’s many different ways you can kind of squeeze it out.

Tony:
I’ve met other investors who have had similar situations where as the house was getting built, either someone that was working on the house or someone that was in the neighborhood kind of saw it and said, “Hey, when you’re done, let me know.” That’s a really good way to sell it. Beautiful, man. You have your single family house, you have your flip. But then you do the duplex and another flip. How did you finance those two?

Rich:
Yeah. The duplex and the flip, I almost bought in a sense simultaneously. I put offers on them at the same time. The duplex, I bought in November. I’m sorry, the flip I bought in November of 2019 and the duplex I bought in December of 2019. The duplex was one that was on Hubzu. It was actually an auction website that I found it on and it definitely needed some work. I actually bought that one using a 203(k) loan. My condo that I’m in now, it was a conventional loan at the time and so I didn’t have a FHA. Then a friend of mine, a really good friend of mine, we grew up together, he never bought his first home. I was kind of talking to him because we had had conversations about him wanting to buy something.
W was like, “Hey man, listen, I’m looking to buy another property. Would you want to go into buying a home with me? If so, I’m thinking we could buy a duplex and then you can live on one side. We could rent out the other side. Either you’ll be living rent free or very, very low rent.” He was like, “Yeah, man. Listen, I trust you. I’m with it. I’m ready to do it.” That’s actually how we got into that duplex deal.

Ashley:
How did you guys structure that?

Rich:
Yeah. We actually just split all the costs. We did the loan together. He was going to be living in the property. We bought it for 161. It needed about $15,000 of work to kind of just bring it up to speed. We found a 203(k) construction lender that was kind of familiar with the process because it was so time sensitive that you had to get it done within a certain period of time. Also in conjunction with dealing with Hubzu because they have very strict rules of closing on a certain time or you lose your earnest money deposit. It was kind of real intense just to make sure we were working with someone who understood the process, in regards to a contractor, to get all the invoices in and documents in on time. Once we closed on the deal, we really just … I think we had to come to the table with about $14,000, and we just split that 50-50. Now, he lives in the property. The other side is a Section 8 tenant. We get 1350. The mortgage, we actually just refinanced from a 4.7 to a 2.7.

Ashley:
Wow.

Tony:
Congratulations.

Rich:
Thank you. Cashflow is there. We haven’t done homestead exemption yet. Once we do that on the property, that’s also going to increase the cashflow there because our taxes won’t be as high. For him, he probably will be paying about $200 a month to live. He has about … Once we did the rehab, it appraised for about 202. We have a good bit of equity in that property already as well.

Ashley:
If you were to rent out his apartment, what would you say it would rent for?

Rich:
His side probably could get about 950.

Ashley:
Yeah. Paying 200 bucks to live in a $950 apartment, that’s great.

Rich:
Yeah. [crosstalk 00:36:04]-

Ashley:
Are you guys both … You said you’re both on the mortgage. Is that the same from when you refinanced and then are you guys both on the deed, and is that just your personal names then?

Rich:
Yes, it is. Both of us are on the mortgage and both of us are on the deed. Yes.

Ashley:
That's something similar my sister and I did. When she bought her first duplex, she put the mortgage in her name, she got the FHA loan. Then we're both on the deed for the property, and I put up the down payment for the property. Then she pays, I think, $50 a month towards her mortgage. That's great.

Rich:
[inaudible 00:36:35]-

Ashley:
For me, there’s really no benefit. Until she actually moves out, then I’ll get some cashflow. But just the long-term play. She’s in a great area where if I went to go buy this property, I’d have to put 20% down or pay cash for it. It didn’t really need a ton of rehab, but it’s already appreciating. I got to get into this property 50% owner and only had to put three and a half percent down. I think that was great. I’m sure with you too, getting that financing having your partner being a resident of the property too.

Rich:
Yeah, it was … I mean to that point, you’re right, I’m not getting any cashflow from the deal, but just having the equity there. In that area, there’s new construction going on, so eventually … I mean that property is just going to get … It’s in a great path of progression type of area. Down the line, it’s going to be a great buy.

Tony:
Can you talk a little bit more about the 203(k) loans? Or for folks that aren’t familiar with that, what is it and why did you guys use that type of financing?

Rich:
Yeah. Man, I love the 203(k) process because 203(k) loan, pretty much what it is is, it’s an FHA loan. Three and a half percent down is all you have to come into the deal with. What they do is, they actually combine the purchase price of the property and also the rehab costs into one loan, and then you’re paying just one monthly payment. You have to go through a 203(k) loan lender, but … There’s not many of them. When we were trying to find a few in the city, there weren’t really too many. But there was one that my broker recommended to me that he’s worked with before. The process, it is like I mentioned earlier a little bit time sensitive, depending on what you’re buying. You have to make sure that you work with someone, at least I would recommend that you work with a contractor that has done 203(k) lending before. Because the criteria is so specific. They have to be on point with what they submit.
Everything just has to be all t’s crossed and i’s dotted when you’re submitting them. But I think they’re a great option for someone who’s going to live in the property because it has to be owner occupied. You can literally, like Ashley said, live either rent free or very, very low. I think in hindsight, I would have done that. Had I really known about the 203(k), I probably would have done that on my first property. In hindsight, I wouldn’t have purchased this condo. I would have done that for sure.

Ashley:
What advice would you give a rookie investor who’s maybe in your partner’s position or my sister’s position? Where they actually want to live in a house hack and they want to find a partner like you that will help them bring some of the money to the table. What should they look for in a partner? How should they approach a partner? Can you give some advice on that?

Rich:
Absolutely. I would approach a partner who's kind of looking for, one, to get another property under their belt, to have another door. Who maybe has additional money that they can put towards it. One who's okay with maybe not having any cashflow coming in from their property, but they do understand the long-term benefit of one, getting tax … Because not only do I have the equity, but the tax deductions. We're writing off everything. We have a property manager for the property, so it's not like I have to actually manage it myself. Just let them know that there'll be hands-off. I think just networking and finding anyone that really wants to buy another deal and who's okay with not getting any cashflow, but understands the whole equity play.

Ashley:
One thing I just want to add to this too, is because I don’t have an LLC with my sister, you don’t have an LLC with your partner. I’m sure some people are thinking, “Well, where’s the protection on that?” You can put an umbrella policy that lists you and your partner and that property to give you some protection if you don’t have the LLC too.

Rich:
Yes.

Ashley:
Let’s talk about your last property, the last flip. How did you finance that one?

Rich:
That one was also through hard money. Obviously after what I said, I went through a different hard money lender this time. But the process was definitely much smoother. Believe it or not, I used a broker to find this hard money lender. Pretty much a broker is, they’ll just find lenders across the nation that you’re looking to do a certain type. You tell them what type of deal you’re looking for and they find the deal. Actually, this broker found this hard money lender for me and it actually worked out. Would I go through a broker again now that I have experienced? No, because I found the third one that I’m going to do the new deal that I mentioned with another hard money lender now because I can get more favorable terms. It’s worth it. Just to kind of go back a little bit, I recommend everyone again, just kind of get started because the more deals you do, the better terms you’re going to get with these hard money lenders.
Even if you’re dealing with a different one, they’ll ask your experience and they’ll ask you to kind of give a property rundown. Even if it’s rentals, they ask what rentals you have or own, how many flips have you done? It actually allowed me to get favorable terms on the third lender that I’m working with. I did go to the second one on this property. This one I purchased in Gretna, Louisiana. It’s not that far from New Orleans. It’s probably about 15 minutes outside of New Orleans. But Gretna is a great area that’s coming up. I found this one on the MLS. Again, I was just searching. It’s funny because nothing came through my broker. I’ve always found everything online. It’s just because I’m beating them to the punch and I’m just constantly looking. I just found this one and I saw the pictures.
Again, I didn’t go look at the property. I just said immediately … I knew the area. I knew what homes are going for. I just kind of do a … If I don’t know the area as well that much, I’ll just go in and kind of go to … I love Redfin and probably the best is Zillow because you can see what homes have sold for, sometimes the square footage depending on if it’s listed. Then you can kind of just get a ballpark idea, at least to make you feel confident about making an offer on sight unseen. Then just put the contingency in there. That’s what I did.

Tony:
How was your experience with this hard money lender? I’m sure it was better than the first one. Did you learn a lot of those lessons or take a lot of those lessons you learned and applied it to this new hard money lender?

Rich:
This one, I asked more questions up front for sure. Because I had purchased this duplex and also I had done the flip, although I got money back, some of my cash reserves was used to actually close on the duplex property. What I had to do, there was actually tapping into my 401(k). So I did a 401(k) loan. I learned about that just through BiggerPockets forums and things. I went into a 401(k) and I took, I think about $20,000 out of my 401(k) as a loan and [crosstalk 00:42:55]-

Ashley:
Rich, have you done every kind of financing there is for a property?

Tony:
He’s got everything.

Rich:
It’s [crosstalk 00:43:02]-

Tony:
401(k), 203(k), hard money. You’ve seen it all, man. This is the financing episode.

Rich:
But listen, I credit that all to, honestly, BiggerPockets. BiggerPockets really gave me the stepping stone to really just the confidence, honestly, to just move forward even on that first deal. Because before it was just really a fearful thing. You’re buying this property, you’re borrowing this money, I don’t know if it’s going to work. But I just had to kind of go for it. But I didn’t get that confidence on my own. It was through listening to other people and kind of hearing their experiences and just saying, “Listen, you just got to take action. You got to take action.” The chips are going to fall. If you just kind of go in with the real calculated decisions, and not just off the cuffs, but just calculated decisions, you’ll be fine.

Tony:
Yeah. I love that approach because for a lot of folks that are listening, they haven’t done that first deal yet. What’s holding them back isn’t so much that they haven’t listened enough or they haven’t read enough, it’s just that they’re afraid. They have this fear inside that’s kind of holding them back. I love your story about, your first couple of deals were maybe a little shaky. You had the experience with the short sale, and then the first flip went kind of haywire. But you learned so much with those processes that now you’re a more seasoned, a more confident, a more capable investor. That’s the purpose of the show. Is to get people to get that first deal done so they can feel like how you feel now, Rich. I really appreciate you sharing that part of your story with us.

Rich:
Absolutely.

Tony:
I’m-

Ashley:
Can you just explain real quick just what the 401(k) loan is?

Rich:
Yeah.

Ashley:
Just break that down as to how … The process if someone was interested in doing that. Because I mean, the 401(k), that’s a retirement you have through your work. How did you get a loan from it?

Rich:
If you have other means of financing, I would say maybe go through that. Because when you do a 401(k) loan, I mean, you are actually taking assets that are invested in mutual funds, whatever you’re invested in, in your 401(k). If you don’t know, you need to just really look into that side note really. Just kind of know what you’re investing in. But anyway, when you’re in a 401(k), you are invested and you’re taking that money out ,and that money is really just kind of sitting in cash in a sense and the bank is the lender. Your bank is actually giving you the loan, or the broker is just giving you the loan on it. But it’s no longer invested where it’s going to grow at whatever rate the investments were earning. You got to be conscious of that. Then now also you do … Pretty much on my end, I did the application through the website. I said how much I wanted to do. You choose your term. I chose the 60 month term. I wanted the longest term to have the lower monthly payments.
Because those monthly payments are going to start coming out of your paycheck. They’ll do an automatic deduction out of your paycheck. That money was then just wired into the bank account that I listed on the application. It probably took about maybe a week to close. The great thing about it is, it doesn’t show on your credit report. It’s not shown on debt to income. If maybe you’re looking for another deal in the midst of doing a flip or while you have that loan outstanding, it won’t affect that as far as debt to income ratio. Which was good. The rates are really typically low. I think at the time it was probably about maybe three and a half percent on the [crosstalk 00:45:55]-

Ashley:
You’re paying that interest to yourself too.

Rich:
In a sense, yeah. You’re right. Yeah, you are. Really it’s going back to you. [crosstalk 00:46:00]-

Ashley:
Yeah, it’s going back into your 401(k).

Rich:
… amount is going back into the 401(k), reinvesting into it. It was a great option for me at the time because I didn’t want to go outside and get partners on my second deal. I just felt a little uneasy about bringing in someone that I didn’t know. I wanted to maybe … Look, if it’s on me, if I lost my own money, I’m fine. I can kind of recoup and be okay with that. But on the second flip that I’ve done kind of going into a partner, I wasn’t as confident when I knew I had this ace I could use, ace up my sleeve. I kind of went through that process and it worked out for me.

Tony:
Yeah. You shared a lot of different unique ways to get the financing portion done, Rich. I appreciate that. I guess just one of the things I’ll call out to you and I’ve shared this on previous episodes. But even if you have stocks that are not in a 401(k) account, you can also use those as collateral to get a loan. You can get a line of credit against stocks that you hold. The kind of key differentiator is that, like you said, if you get a 401(k) loan, that money is no longer active in the market, so it’s not growing. But if you take a loan against your stocks, they’re still in the market, they’re still growing. If the interest rate is really low but the stocks you have are doing really well, you can still make a pretty good spread there. Thanks for sharing that. I want to take us to the MVP section. But really quickly before we do that, I want to talk just really briefly about how you’re finding your deals as well. Have all of your deals come off of the MLS?

Rich:
All of them have, yeah. Again, it’s just through rigorous searching and just constantly looking. But now it’s gotten a little bit harder. Now, I have been kind of looking into dealing with wholesalers a little bit more and off-market deals. I was listening to a previous podcast, I can’t remember which one it was, but one of the guests was just stating that they always … Anytime they see a we buy houses sign, they always just kind of call that number. I’ve kind of picked up that technique. Whenever I see one, I always just either call in or text in and say, “Hey, I’m a local buyer in the area. Please add me to your buyers list. I’m looking to find another deal.” Although I haven’t purchased any property from wholesalers now, I’m getting a lot of leads sent my way just doing that. Two other things that I do, is I actually go in … I went into the all real estate Facebook forums that are for Louisiana or the area that I want to invest in. I went into all of those forums, became a member of those Pages and groups.
I actually just put my information there and just let them know, hey, I'm a buyer in the area. Add me to your buyers list. The goal now has just been kind of getting on a ton of wholesalers buyer's lists and also just driving for dollars. There's a recent property that I'm going to sign a contract with later today. I was just driving by … Well, a friend of mine actually … Again, just kind of talking it up and letting people know what you want to do. They were driving by, saw a for sale by owner. Sent me the number. I called it. The guy actually purchased it from almost a wholesale deal in a sense. He was going to rehab it. He unfortunately contracted COVID and just didn't want to kind of go through the process. He just wanted to kind of offload it. That's how I found that deal. They come in many different ways. You just kind of have to put it all out there. One other thing I would say is also definitely become a part of your local REIA.
I am a member of my local REIA group, and they also share a property leads there as well. There’s a ton of resources on the local REIA group that you can take advantage of, from calculators, to just forums and just again, weekly webinars that they do. I mean, amazing asset to have also.

Ashley:
One piece of advice to kind of go along the lines with that is, if you see a property for sale that you know is held by an investor, maybe it’s a mixed-use building, or it is a duplex or something like that, or it has tenants in the property. Even if that’s not a property that’s for you, call the seller, call the listing agent and ask if they have other properties for sale. This has happened to me a couple of times where I’ve seen one building and the seller is just trying to sell the one property in his portfolio before he sells any other ones. Just you asking, they might be interested in selling those other ones and it can open up a huge amount of opportunity. It just happened to me a couple of weeks ago. I called on one property and they have three brand new duplexes, they had eight vacant lots, another older duplex. I highly recommend doing that too.
If you see a property that is owned by an investor, call and ask, because it doesn’t hurt anything and it doesn’t cost anything. If they have other properties, they would be willing to sell. Because think about all of us, once we buy that first property, we all become addicted and buy more and more and more.

Rich:
So true.

Tony:
So many good ninja tricks in this episode. I feel like we’re dropping a lot of good knowledge here. It’s awesome, man. Rich, it’s time for the part of the show where we learned about that kind of key person on your team. I feel like you’ve kind of alluded to this a little bit, but we’re looking for that person that played a really critical role in your business. We call the segment, the MVP. Tell us, who is the MVP on your team, Rich?

Rich:
I got to say MVP has to be my dad because all the flips we’ve done, we’ve done ourselves really. I haven’t gone through a contractor. I’ll say my dad has to be my MVP because we’re in there, man, grinding it out, sweat equity, we’re putting the work in. Long hours, listening to the radio in the house, just kind of staying late nights and doing everything. He’s there, also helps me sometimes if I need someone to check out the property before I can and say, “Hey, does it look okay? Is this one that I may be interested in?” Even after I’ve put an offer on it, he does that for me. My father, for sure. I know this … He’s primarily, but also I definitely have to say my broker, John, with Face to Face Realty.
He was a big help because if I didn’t have him kind of going with me along early on, putting offers on all these properties when he wasn’t making any money and really just doing time. He kind of believed in my vision and the type of person I was. He allowed me to kind of … To help me submit those deals with … Never complained. I got to shout out both of those gentlemen, for sure.

Tony:
For all the rookies that are listening, go grab your adoption papers, that way Rich’s dad can adopt you and he can also be your MVP.

Ashley:
We will add his-

Tony:
But for-

Ashley:
… information to the show notes at biggerpockets.com/rookie48.

Tony:
Rich, you’re about to get a lot of new siblings after today’s show, man. But before your broker, John, I guess you mentioned that you had a different agent when you first started and you kind of cycled through some different people. How did you find John? Was this a referral? If I’m a rookie and I want to find another John, how do I do that?

Rich:
Yeah. Mine is a little unique because in the timeframe of when I actually was first initially introduced to being a real estate agent to the years and years before I actually invested, I was in network marketing. For network marketing, if you’re not familiar with it, it’s pretty much where you’re marketing a property through networking through people and things like that and online sales. But also one of the bigger things about that experience that I love, is I was introduced to personal development. I got introduced to a ton of books, mindset change. That really also set me up for investing later in life, and also even becoming a banker. But within networking at a certain company, I actually met John and his mom, and that’s how I actually met him.
Then when I was looking for another agent, I just put it on Facebook, I said, “Listen, anyone know any real estate investment friendly agent?” Multiple people recommended John. I was like, “Man, I didn’t even realize John was in real estate and all.” We kind of connected again.

Tony:
I think that just goes to show that the more you kind of put out there what it is that you’re working on and what you’re working towards. I feel like we talk about this a lot on the show, is just talk about real estate investing even if you haven’t gotten that first deal done yet because you never know how the dots will start to connect for you. Beautiful, man. I love that. Cool. I guess, Ashley, you want to take us to the last segment here.

Ashley:
Let’s go to our rookie request line. You can reach us anytime at 1-888-5-ROOKIE. This is where we have rookies call in, leave us a voicemail with their question. Today, we are going to have Rich answer a question. Let’s hear today’s question from John in Dallas.

John Castio:
Hi, my name is John Castio from Dallas, Fort Worth area. I’m buying my grandmother’s house or 150 give or take. It probably appraises for maybe 200 to 250. I’m just trying to figure out the best case lending scenario for me. Thank you.

Rich:
Great question, John. I think it really depends on what you want to do with the property. One, I would say if your mom owns it outright, then maybe seller financing may be a great idea to actually acquire the property. If you're going to flip it, based on the ARV and what you think you can get it for, hard money is always … Although given the experiences I had, once you find the right one, hard money is a great option to actually purchase a property if you wanted to flip it. Even if you wanted to hold it, I think depending on kind of your income and credit and things like that, you probably could even still go through traditional financing. I think the true question is going to be kind of what's your end game for the property. Which would kind of determine which thought I would say you would go as far as financing.

Tony:
Or he can use their 401(k) loan, or he can use a 203(k) loan. Yeah.

Rich:
That’s so true. I mean, that’s the thing, and there’s so many different ways to finance a property. It’s always just choosing which is the best option. Because you want to kind of lay out everything and say, “Okay, this is my best course of action.” If not, you know you got plan B and C.

Tony:
There’s so many different ways to kind of make it all happen.

Rich:
100%.

Ashley:
I think this whole episode answered his question and he can kind of listen through and see which would actually fit him best.

Rich:
Absolutely. I’ve never done seller financing before. I would hopefully maybe like to do a seller finance deal. But just from other podcasts I listen to, it’s definitely a viable way if the person you’re purchasing for owns the property outright.

Ashley:
We’re going to go next to our random questions. This is where Tony and I either pick off a list or something comes up that we think of throughout the show that we want to ask you. I’ll go first, today. I want to know, what is your special X factor? What has made you a great real estate investor? What do you bring to the table?

Rich:
I would say relentless. I am constantly looking for deals. I’m constantly listening … I’ve given up music for when I drive. I don’t listen to music when I drive. I only listen to podcasts, real estate, money. It’s just I want to keep my mind in that space of where I’m attracting that stuff to me. On the weekends, I’ll take a break. Maybe I’ll go back to music that I like. Even sometimes on the weekends, I’m listening to just podcasts and just things that are kind of real estate intentional, because I want my mind to always be working in that space. Again, I really do believe in what you focus on expands. I just try to keep that mindset all the time so I can kind of have deals come to me, I guess telepathically.
But that, and I think again, just always looking for deals, always just trying to find a way to get the next deal, letting people know what I do. I want to get more heavily on social media, just using that a little bit more, just saying, “Hey, this is the deal.” When I do this next flip, I’ll probably maybe diary that in the sense of kind of outlining what I’m doing on my social media.

Ashley:
One thing I want to add too, saying you listen to the podcast and reading books or going to meet ups, it keeps you inspired and keeps you motivated. It keeps you going because there can be highs and lows in real estate investing, and you can get too comfortable. Listening to how someone is doing something different, and, “Wow, I need to grind to do that.” I think you’re right, it does keep you focused and it keeps the wheels spinning as to how you can continue to grow and create the life that you want from real estate investing.

Rich:
Absolutely. Just the last thing to piggyback off that, just keep in mind guys, it took me literally a year to find the first deal that I offered on and got. I mean, that’s constantly looking. Go and look at property. Now, I’m not saying it would take you that long, but it took me quite a while to actually find my first deal. Part of that was because I still was a little bit fearful about just putting an offer on a property. I wanted to go and see every property before I actually put an offer on it. It just took me a while longer when I first started out. Don’t be discouraged about the time that it’s taking to get your first deal, because it does kind of start to snowball from there.

Tony:
I guess one thing to add on to that too, and I’ve called this out in the past, is that, if you get to the point where you haven’t done your first deal yet, but every podcast you listen to, every book you read, you’re kind of hearing the same things over and over again, then that’s when you know you’re at the point to start taking action. If you’re not getting a lot of new information from all the different podcasts, and you’re like, “I know that. I know that too. I know that too.” Then that’s a sign that you’re probably ready to move forward. We probably all know someone in our personal life that has four or five different degrees, but they still don’t have a job. It’s almost the same thing. School can only do so much. At some point you got to get out there. I love that, man.

Rich:
Great point.

Tony:
My question for you, Rich, is, what are some tools or software that you use that you feel have really helped your real estate investing career?

Rich:
Well, for sure, all the apps, the Redfins, the Realtors, the Zillows. It just helps you move a little bit quicker in searching for a deal. Also, I use Genius Scan, which for me it scans documents and creates PDFs. Which works well for me when I’m sending a proof of funds letter to my broker to submit a deal. Or if I’m submitting a contract to someone, I can just through the PDF, scan it, send it to … Even when I’m doing taxes, I’ll scan all of my tax documents. I can just Genius Scan it and then email it directly to my tax person. Genius Scan for me is huge because it keeps all my documents in one place securely. Again, they can convert them into PDFs. Even if I’m taking most recently a picture of a escrow check, if I haven’t deposited yet, I can Genius Scan that and then send it. That, for sure. Also, Stessa. Man, I love Stessa.
I use it for my rental properties, but also … I’ve submitted this to Stessa, it … Listen, guys, developers, if you’re listening to this, please add a flipping aspect to it, please. But I still use it. I kind of just mimic it a little bit to work for my flips to kind of keep all my expenses, what I’m spending money on and kind of keep that all in one space. But Stessa, I love. Those two apps are probably my top two probably.

Tony:
Also Stessa owners and developers, if you’re listening, if you can add something for short-term rentals, I would appreciate that. Put me and Rich in the development team so we can-

Rich:
Please.

Tony:
… give you guys [inaudible 01:00:33]. I love it. But I love Stessa too. Ashley, I think you were actually the person that introduced me to Stessa. You posted about it on your Instagram a while ago. It’s [crosstalk 01:00:42]-

Rich:
Yep. Shout out to Ashley, man, because Stessa is where I got it from too.

Ashley:
They need to add me to their promotion team, their marketing team.

Rich:
But when they go public, you should get some free shares.

Tony:
There you go. Awesome. Well, Rich, man, you dropped so much knowledge today, man. I absolutely loved hearing your story and all the creative ways you’re getting deals done. If folks want to get in touch with you, where’s the best place for them to go?

Rich:
Probably Instagram and Facebook. Facebook is just Richard Kelly, my name. But Instagram is richleron, L-E-R-O-N. You can find me there and feel free to shoot me a message, a DM. I’m more than happy to answer any questions or just connect.

Ashley:
Great. Thank you so much for coming on today.

Rich:
Thanks for having me. This is so surreal honestly.

Ashley:
It was really fun and I loved all of your financing. That was really great. We haven’t had anyone on that has done that much in depth and for four different deals too. Thank you.

Rich:
Thank you so much.

Ashley:
I am Ashley Kehr, @wealthfromrentals and he’s Tony Robinson, @tonyjrobinson. We’ll see you guys next week.

 

Watch the Podcast Here

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In This Episode We Cover:

  • Why short sale properties may be a great buy for new investors 
  • The importance of having reserves when going through hard money lending
  • How to get comfortable with making offers (before you see the place)
  • Financing through hard money, 401(k) loans, and 203(k) loans 
  • Finding quality partners that make deals easier
  • How to find off-market deals, wherever you are
  • Richard’s favorite tools for finding and managing properties
  • And SO much more!

Links from the Show

Rookie Deal

  • His First Flip
  • 2 storey house, 3 bed rooms, and 2 and a half baths
  • Financing: Hard Money Lenders through BiggerPockets
  • Purchase Price: $74.5k
  • Acquisition Cost: $25k
  • Holding Cost: $9k
  • Rehab Cost: $55k
  • Selling Cost: $10k
  • Sale Price: $190k
  • Profit : $16.5k

Rich’s MVPs

Books Mentioned in this Show:

Connect with Rich:

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!
    Matthew Porcaro Rental Property Investor from Long Island City, NY
    Replied about 1 month ago
    Using the live-in flip strategy with a 203k loan is an excellent way to build a ton of equity on your very first deal. It's exactly how I got started, and was the foundation for all of my flips that came after! As I always say, the 203k is like a fix and flip on training wheels.
    Jodie H. from Bowie, Maryland
    Replied 23 days ago
    This was one of the best Real Estate Rookie podcasts to date. Not only was it informational, it was inspiring. Just do it!