Real Estate Rookie Podcast

Rookie Podcast 53: Turning 9-to-5 Burnout into 24 Doors (in a Year and a Half!) with Kristie LeSage

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Kristie LeSage didn’t mind her 9-5 much before she went on a hiking trip to Yosemite. When she turned her phone off for a few days, hung out with friends, and spent time in nature, she realized that she wanted more freedom in her life. After that hiking trip, she returned home to her husband and told him it was time for her to quit. The problem? She didn’t know how she was going to make money when she left her job.

After doing some options trading and making money off of it, she made the decision to leave her job by the end of summer 2019. While she was trading, her husband was getting into the BiggerPockets community, and through some of her husband’s suggestions, Kristie found another way to make money. In August of 2019, they closed on a 4-plex in San Diego. A year and a half later, Kristie and her husband have an impressive 24 doors!

Kristie walks through the benefits and struggles of owning multifamily properties both in and out of state. She also talks about the different types of funding she used in order to get them under contract, including conventional loans, HELOCs (home equity lines of credit), and commercial loans. Even without a W2 or 2 years of 1099 income, Kristie proves it’s possible to start your real estate journey regardless of where you’re at.

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Listen to the Podcast Here

Read the Transcript Here

Ashley:
This is Real Estate Rookie, show number 53.

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Christie Lesage:
I literally think I said I was going to quit my job August 27th or 28th before we even had a house under contract, it was in my mind. And it just all fell into place.

Ashley:
My name is Ashley Kehr and I am here with my co-host, Tony Robinson. We just had to do a retake because I almost called him Tommy boy. Tony, we have had a couple of rookie reply episodes out now, and I want to know how everyone is liking them. So if you guys haven’t heard about it yet, on Saturdays, we’re releasing another episode. It’s just Tony and I, and we are answering you guys’ questions. So we’re pulling voicemail questions, we’re pulling questions from the Facebook group, we’re pulling questions from Instagram.
Then we’re also thinking of topics that we think rookies need to know and learn about. So make sure you guys check that out. They start at episode 50.

Tony:
And it’s just Ashley and I, no one else, and it’s just a really relaxed conversation between us. Sometimes it’s something that Ashley knows more about, something sometimes I know a little bit more about, and we’re educating each other as we go along as well, so it’s been a really fun and cool process. So I hope you guys are enjoying it. Let us know. You hit up Ashley, hit me up on Instagram or in the Rookie Real Estate group on Facebook, but now let us know what you guys think.

Ashley:
Today we have a great guest. We have Christie on, and she set her mind out knowing she just wanted to quit her W-2 job with really no plan in place. So what she did was she found real estate and figured out how that would work for her. And then she got her first deal and quit her job. So let's bring Christie on and learn a little bit more about her story and how her and her husband have done that. They're also doing out-of-state rentals too.

Tony:
They’re doing a little bit of everything. And I think the really cool part about her story, you’ll hear this at the end, but she was able to double her W-2 income with 18 months of real estate investing, which is insane, insane. So you guys are in for a good story for sure.
Christie Lesage, welcome to the Real Estate Rookie. Super excited to have you on today.

Christie Lesage:
Thank you for having me. Really excited to be here.

Tony:
You’ve got an amazing story, excited to dive into it. But before we get into all the meat and potatoes, just tell us a little bit about you. What’s your journey, what’s your story, and what brought you to the real estate game?

Christie Lesage:
My story started a couple of years back, but it was definitely a slow burn. Real estate was not the initial answer for me at all. I was in the 9:00 to 5:00 corporate world, working for Hilton with, I would call it a nice cushy sales job because hotel sales at least pre pandemic was pretty fun. You were always entertaining clients and doing fun stuff, going out, eating and drinking. So definitely had a very, very nice corporate world job and was pretty happy with it.
And it really, I guess started right when I went on this three-day backpacking trip with my girlfriends to Yosemite. And I just remember having like the best time of my life, being out in the wilderness and really just taking it all in, having your phone off. And I just remember thinking, wow, this is more what life is all about. It’s not all about sitting in a cubicle every day. I think that really just opened my eyes on how I wanted to take my life more in my control and be able to go and do more things like that.
And I remember coming home, and I think it was that exact night and talking to my husband. I remember telling him, “I want to quit my job.” And I was like, “Okay. Sure.” And he was like, “What are you going to do to make money?” And I was like, “Wow. I don’t know. That’s a good question.” And at the time, it wasn’t really the initial answer, real estate. It’s something he always was looking into his parents have done quite a bit of real estate investing throughout their life, but not something I was introduced to.
My father was more of a business owner and he had the 9:00 to 5:00 job, so I just had no, I guess, interest or guidance on that side. And I remember at the time my father was like, “Why don’t you learn how to trade options?” And that’s what started and geared me to wards making some extra money on the side. And so everything was going great, and I started making money, doing that while still working my full-time W-2 job, and I was like getting all cocky like, “Why am I working now? Because I’m making more money sometimes than I am on my W-2 job in a month?”
And Spencer’s like, “It’s not really. It’s a little volatile. That’s not always going to be like that. I’m like, “Yeah, you’re right.” So anyways. And then it was January 2019 and I did get a phone call, unfortunately that my mother passed away, and that triggered that whole feeling again of like life’s short, I don’t really want to be here anymore at my job. And I was really struggling internally with that and was not mentally present at work. And I just really didn’t necessarily take enough time to grieve. And it was really putting me in a hard spot.
And I just remember all those emotions from that Yosemite trip really just… I guess, came front and center again. I was like, “I just can’t do this anymore.” And it was April 2019 right before Easter and my boss pulled me in to his office at the time and he kept saying like, “Your performance is lagging.” And I thought I was doing okay. I was like, “I think it’s just the market right now, but regardless of who was right, it doesn’t matter. It was, the numbers were lacking and he was like, I just don’t think you’re over the passing of your mother and I think it’s still eating you up inside.
And I remember being so angry when he was saying that to me, because I felt like I was doing okay. But clearly I wasn’t because if it was still bothering me and rubbing me the wrong way, I clearly wasn’t over it. So I came home that night and I told my husband, “I’m quitting at the end of the summer.” He was like, “All right. I guess so. We’re going for it.” And he was like, “Yeah, you’re trading options, that’s great. You’re making money, but like I said, we still have to figure something out.”
And I was like, yeah. And we really, really wanted to at the time, or I did at least buy a nice house up on the Hill with the down payment, which we could have afforded at the time, the down payment, but we would have been tied to our W-2 jobs for 30 years indefinitely having that monthly payment. It just was not the right decision in hindsight. I’m so glad we didn’t fall into that initial trap. It was just not the right move for us. I did not want to work past the summer, let alone like the next 30 years. And he was the one like, “Why don’t we take this money and put it into an investment property here?”
I’m like, “Really?” He’s like, “Yeah, if this goes right, you’ll be pretty close to making what you were making at Hilton, but we can keep snowballing that. Eventually, it’s going to snowball and it’s a long-term retirement plan once it’s paid off.” And I’m like, “Yeah.” And he was already on the BiggerPockets train. I think he was listening to more of the podcasts and everything at the time, and I was like, “All right, let’s do it” And when I get my head wrapped around something, I’m just like, “Let’s go.”
I don’t even think I listened to one podcast was even on BiggerPockets. I remember he was telling me, I’m like, “We need to find a realtor. We need to find a realtor.” And he’s like, “Okay, that’s fine. I’ll just go look on BiggerPockets for one.” I’m like, “What?” I was like, “Okay, whatever, you go figure that out. So we kind of went and he interviewed two realtors off the BiggerPockets. I remember so vividly.
And it’s funny he was doing this now at the time, because, like I said, I still had nothing. I’m just, “Let’s do it.” I hate wasting time, I hate being inefficient. So I’m like, “You’ve been researching this for so long, your parents do it. I think we should be able to figure this out if your parents have figured this out.” And so it was like the good push he needed because he’s just learns and educates himself, and doesn’t take as quick of action and I’m kind of, “All right. Make sense in my head, let’s see what happens.”
So he interviewed two realtors on BiggerPockets and one was this investor guy, general contractor. And he was like, "Yeah, you know what? I'm not your guy. If you want to walk through 40 homes, I don't have time for that. And honestly, if it's a good deal, I'm just going to buy it myself." And we're like, "Okay. Not the right person for us." And he's like, "But I can tell you what needs to be fixed." And we're like, "My husband, he's a director of engineering at a hotel.
So he has a pretty good grasp on like maintenance and contracting, and we're like, "Okay, not the right person at all." So he called the next one and it was a girl in San Diego and she actually worked at kind of a large brokerage firm who specialized in apartments. So we were like a very, very small fish, but the cool thing was, I forgot to ask her, but I'm pretty sure we, one of her first multifamily deals.
So she was still very new and green and gave us all the attention, but we also figured out what we needed at the time. And I remember we went into the brokerage or firm and sat down and kind of talked with her and her boss. And they were like, “Okay, what are you looking for? And I think prior to that. I was looking at a couple deals in our college town in Michigan, so I knew the cash flow that we wanted and we’re in San Diego, of course. And I was like, “Yeah, we really need to be cash-flowing probably at least 2,000 net, 2,500 a month. And they’re like [inaudible 00:09:29], “Okay, we’ll see, we’ll work on that.” And we’re like, “Okay.”
I was like, “No, no, I’m sticking to my guns. It doesn’t make sense otherwise.” I’m still very new like I said, had not listened to BiggerPockets or really understood appreciation or markets at the time. And we were really lucky. She found us a couple of deals right away. She was amazing. And just sending us a bunch, and we’ll go more into this later, but she found us a deal right away that had bonus space. And we were able to honestly make the numbers work. And I still think it’s one of our best properties.
And we were kind of off to the races from there. And we got that under contract, July 2019, and we closed August 2019. And it went back to that conversation I had with my husband in April, not even thinking, I’m like, “I’m quitting my job. End of summer.” I literally think I said I was going to quit my job August 27th or 28th before we even had a house under contract. It was in my mind. And it just all fell into place like that.
I did push the lenders extremely hard to make sure we closed early because something I did not realize is, do not quit your W-2 job before you close on house, because I was about to make that terrible, terrible mistake of quitting prior to closing on the house. So I held it out a couple more days and I came in the following Monday after we closed and gave them four days notice because I had four weeks of vacation already planned. I’m like, “I can come back to work after this.” And they’re like, “No offense, you’re great, but we’re a very well-oiled machine over here. We’re going to be okay.” So kind of a crazy story that it just all fell into place like that.

Tony:
You’ve got a really interesting story. There’s so many nuggets there that I want to poke at, but I think the first thing I want to hit on is, you mentioned that you had this idea of buying a bigger home.

Christie Lesage:
Mm-hmm (affirmative).

Tony:
And you knew that you guys could afford it, but that it was going to tie you down for the next 30 years.

Christie Lesage:
Yeah.

Tony:
We talk about this a lot about people being willing to sacrifice to kickstart their real estate investing career. Have you guys played the CASHFLOW game? The Robert Kiyosaki CASHFLOW game?

Ashley:
I haven’t, but I want to so bad.

Tony:
It’s a good game. And they have like an iPad app too. That’s what my son and I usually play on, but you win the game by getting out of the rat race, and you get out of the rat when your cash flow exceeds your expenses. So there’s two pieces of that that you need to tackle. You need to dramatically increase your income, but you also need to keep your expenses in check or reduce them. And my son, it’s so funny, whenever we play this game, you’re given a profession.
And the profession that he loves to get as the janitor or the maintenance man. And this isn’t a disrespect janitors or maintenance men, but he hates getting the jobs with the big salaries like the doctors, the airline pilots, because they also have big expenses, and he’s like, “I can always get out of the rat race faster when I have lower expenses.” So even at 13 years old, he understands this. But back to my main point is like, I think it’s so cool that you guys made that decision to say, “We’re going to hold off on inflating our lifestyle to make sure we can support our real estate investing goals.”

Christie Lesage:
Right. And I think, we talk about this a lot and you guys have been really hounding on it a lot more lately on your podcast. I think my why at the time was so big in my head like I need to quit my 9:00 to 5:00 job, I need to quit it at the time. That’s not it anymore, but at the time that was my why and everything else, whatever we had to do to get there, I was like, “I know I will be genuinely just so happy if I can just quit my job and go do what I want, and live the life how I want to and not have these restrictions.”
And the sacrifices you make, they’re not that drastic in hindsight, so I think it’s worth tenfold and I think you just need to identify really what’s important to you.

Ashley:
And I think your whole story shows that you knew exactly what you wanted and you went after it. Now that we heard a little bit about your first deal, but what does your portfolio look like now? Your first closing was August 2019. What has happened since then?

Christie Lesage:
Yes. That was a four-unit, and as I mentioned, there’s a bonus, a space in the back, so we do have a fifth tenant we rent out to. It’s like a warehouse space. We have five units in San Diego and then we sat on it through until early 2020. We’re still kind of, “I don’t know.” Trying to figure out what to do next because to keep investing in San Diego, as you know, Tony, there’s quite a big barrier to entry. Especially if you’re not living in the property, you’re putting down 20, 25% down on a property out here.
So it’s quite a big barrier to entry and we’re kind of like, “I don’t know.” And so we finally decided to make a pivot to out-of-state real estate investing this summer, and we were just so happy we finally made that jump, and we started investing back in Michigan. And that is where we both went to school, in Michigan at Ferris State University. And my husband’s from Michigan, and that’s where his parents live.
And so we’re looking at these little migration patterns and we were looking at where all our friends were moving to after college because where my husband grew up in the Grand Rapids area, personally, I think it’s a little overinflated for Michigan prices, at least for rental property investing. So we were looking at the migration pattern somewhere our friends were moving, and that’s how we started to identify a market.
And then we picked up another eight units in… I guess we closed August 2020, but it was a package deal, so it was like a five-unit property and a three-unit property and you needed to buy both. So we were really excited about that. And then I think that put us, five plus eight, that’s 13 doors. And then we picked up another three-unit in December of this year, just continuing to grow it. Get more of that cash flow, we were like, “We’d like to being a little diversify because we’re getting so much appreciation out here that it was nice to really ramp up on the cash flow back in Michigan.”
And then as of tomorrow, knock on wood, we are signing and we are closing on a eight-unit property, legitimate multi-family, but on a commercial loan. So it's not like that package deal anymore. So we're really, really excited about that. And that will put us at 24 doors.

Ashley:
That is so awesome. Really most of it within a year, really.

Christie Lesage:
Yeah. 2020 was pivotal. Like I said, we did our first deal August 2019 and then yeah, we really went back to the drawing board and July. July seems to be our year, we’re like, “We can never plan any vacations in July,” because we just have these crazy pivotal moments where we’re like, “Let’s go,” and it’s crazy. So yeah, from July 2020 to February 2021, yeah, we’ve closed on 19 doors in Michigan. So yeah, very exciting.

Ashley:
How are you financing all of these deals? You had your down payment for your first one and then did you do a conventional residential loan on that? And then what about the other ones?

Christie Lesage:
Yeah. The first one was the 25% down, so quite a hefty barrier to entry, I would say, and conventional financing. And honestly, the first time going through conventional financing and like I said, not knowing much about real estate, that was like just a nightmare to me. I’m like, “What is going on? I don’t understand all these fees, these loan estimates. They don’t make sense to me. They’re trying to rip us off, this is crazy. Then we’re shopping around, and oh my God, the first time going through financing like, please, if you’re [inaudible 00:16:58], don’t worry.
I feel like everyone goes through it, it’s just like, what is this? But now it’s like, “Okay, I understand how this works. And then the second deal, the package deal was actually interesting because it was a five-unit property. So you would technically have to do like portfolio or commercial lending and then a three-unit property. And we were trying to do conventional I remember. And we only talked to like a couple of banks and we talked to our friend who was a loan officer and they’re like, “You’re not going to be able to get conventional financing right now because your DTI is too high from that other property because you haven’t owned it for a year.”
We’re like, “What?” We’re kind of looking around, and we didn’t look around too hard, but that ended up being the consensus that our DTI was too high unless we owned it for a full year, which would have been a month later. But I was a little impatient, so we just went in, jumped it and got it under contract. And I think we basically were like, “We’ll put down basically as much cash as we could.”
I think that property was around 174 for the two. We negotiated down 178. So we basically were able to come up with the 74, $75,000, but we did get a 10 year-note loan that his parents pulled from a hillock. And we ended up putting them on a 10-year note, and we are paying them like 6%, so at least they’re getting a return on their money. Because we were exploring the hard money route and we’re just, “This deal just really would not look as good if we’re paying 12%.”
So we went back to his parents and we're like, "Okay." We actually went to his grandma's estate first. And then everyone got word about what we're doing and see if we could pull a loan out of there and pay them a 6% interest rate. And his answer, "Oh, why don't we just do it this way? We have enough equity in this building that we can pull it out." And so we did a promissory note with them and we were able to pay them a small return, because I think they're paying the bank 2.75, so we're paying them a small 3% return on a 10-year note that we plan on. Actually probably starting a refi on in the next few days to get them out.

Ashley:
hat’s more than they would get in a bank though..

Christie Lesage:
Exactly. I always say this, if you’re trying to throw out an offer or offer someone a deal like that, would you accept it? And that’s where we were at like, “Yeah, I probably would accept a 6% interest rate to help my kids out, or friends. or family and they’re making a little bit of dividend. And I think his dad at the time was like, “I’m having a tough time getting 3% in the market right now. He was just like, “Yeah, why not? Let’s do it.” So it worked out.

Tony:
One question I want to clarify before we go on to the other deals. You said that your DTI was impacted because you didn’t own that first investment property for a year. For the folks that aren’t following that, can you just quickly explain why that was a negative impact and what happens after a year?

Ashley:
And what DTI is? What does it even mean?

Christie Lesage:
Yeah. Debt to income ratio was too high because we had essentially $530,000 mortgage out on this investment property, so our payment each month was around $3,400, we’ll say. And even though we’re cashflowing X number, the bank doesn’t count that until you have owned it, I guess for a year or you have one year of tax returns. It I think differs bank to bank depending on their lending requirements. So they were seeing it as negative 3,400 against us and we were seeing it as, well, we’re actually positive 16, $2,000, whatever.
And they’re like, “No, we can’t lend to you for that.” And then I also wasn’t working or I didn’t have two years of self-employment to add up, so we’re just going off of my husband’s income. So they’re looking at the ratio and they’re like, “You’re like a 50 or 70% debt to income ratio.” And we’re like, “No, we aren’t, but okay.” That’s how they look at it on paper, even though you have leases in place. Depending on the lender, they don’t necessarily count it, so you really have to shop around.

Ashley:
If anyone wants to figure out what their DTI is, you can just take, like Christie said, you’ll take your income for that month, what your monthly income is, and then you divide it by… Or is it, you take the expenses divide by the income. I never remember which way it is.

Christie Lesage:
I can’t remember the formula, but yes, you are on track and it-

Ashley:
It’s not your expenses, but it’s your monthly loan payments-

Christie Lesage:
Yes.

Ashley:
… that you have.

Tony:
Right.

Ashley:
You take that and you divide it by your income for that month to get your DTI.

Christie Lesage:
And with COVID, the lenders bumped down the acceptable ratio, so it was even lower. They’re like, “Oh no, you can’t have over this percentage.” And then after COVID, that March, April, they bumped it up to be acceptable 0.2. I think conventional standard is somewhere around like 30, 40%, but you could correct me if I’m wrong, I’m not a loan officer.

Tony:
Like you said, it’ll vary by the bank and vary by the lender. So sorry, I just wanted to clarify that for the listeners, because I’m sure not everyone kept up with that piece, but let’s talk about quickly how you finance those last two deals.

Christie Lesage:
So for the third property, we just did standard conventional financing… Or I guess that was technically the fourth property. And then the last property that we are closing on tomorrow was our first time doing a commercial loan through a bank, so that was an eight-unit. And their process for lending actually seemed a lot easier. The biggest thing they look for is a personal financial statement, so they really look at your net worth and they don't really look at DTI as much as long as you have leases in place, proper rent rolls, et cetera.

Tony:
Awesome. Okay. I think the important thing Christie, from your story is that there are so many different ways to get a deal financed. You had conventional, you had the hillock, now you were with the commercial routes, so there’s a lot of different ways to get it done. And then I think people might be listening and saying, “I don’t have tenant cash to get multiple deals done in a year, but the important thing is to think about the creativity and all the different ways to get it done. So I love that you explained that for us.
So now you’ve got this really big portfolio, what are some things that you’re doing, some systems or things you have in place to help you manage these now almost 24 units that you have?

Christie Lesage:
My husband and I, we still self manage our portfolio and we’re really trying to be able to do this remote. We have explored the idea of property management, but with me not working a full-time W-2 and I really do as of right now enjoy managing our own portfolios, just to make sure they’re up to that peak performance, and making sure everything’s in place. So the systems we have down right now is that I manage all of the financing, the realtors, I do all of our books, the paperwork, the leases.
Used to work in hotel, so kind of that contract, sales, I understand like some, I guess, verbiage that should be included in those leases. And then I also get the day-to-day tenant communication, which can always be fun. And he more so manages all of our contractors, our handyman, and then he also, I have tasked them with the city planning board. So really look to your city and what they’re doing, and that path of progress area.
Because we found out about a really cool program about this last deal that we’re investing in the city where they will replace if it’s a lead-base building, or I can’t remember all of the details, but they will come in and replace all of the windows and doors on your building if you fill out this application and apply, which is a huge advantage.
So he manages that and he, he manages all the maintenance calls and the day-to-day operation of the building. So the way we have it divided, it really allows our free time and we’ve tried to stay in our lanes, doing it that way, which has made it more of a systemized process to make it more reasonable.

Ashley:
What have you done right now to put systems in place to eventually outsource this? Or do you think maybe you would even hire someone and keep it in-house? What are your plans for the future for property management?

Christie Lesage:
I think we are trying to hire someone and keep it in-house, especially as our portfolios grow in two main markets. I just like the idea of being able to control the numbers a little better and be able to know where the money is going. So recently last week, my husband, we’ve gone through at least like three or four handymen in Michigan now. And I think we finally found one that we’re like, “Okay, you’re going to be our go-to guy from now. We’re just calling you.”
I think we finally have one now, which is great because he’s been at our properties now probably for like two or three days straight, it almost seemed like, which was really nice just to have that go-to guy. So just having a handyman in place. And then I really like the Airbnb turnover process. And I know Tony, you talked about this a lot, is having a really good cleaning person. So we haven’t had an apartment turnover yet in Michigan, knock on wood, and I’m sure that will be coming shortly.
But I really like the idea of having a really good cleaning person going in after the tenant. And even if you have the showings lined up ahead of time, have the cleaning person show it while she's there. So I think that's going to be a process or system we're going to try and implement and test out going forward, because I personally want to screen the tenants we're putting in there and I want to have the lease and go through that process, so I know who's going in there.
We just need someone who’s going to do the showings and be there to flip the apartments. So having that good handyman, Tony, like you said, and cleaning person, I think will be a good system moving forward.

Ashley:
I want to know, how are you finding these people and then vetting them, especially being remotely. Are you flying out there to meet with them? How is that happening since you’ve gone through a couple of them?

Christie Lesage:
One thing that, I can’t remember who found it, but your neighborhood Facebook groups are really good tools to use, especially when looking for contractors and stuff. So we are in a neighborhood Facebook group in area, and you’ll see contractors, handymen, plumbers posting all the time about their businesses, this and that, even roofers. We found a roofer to do a roof. And then my husband calls them, that’s them.
We are trying to interview them a little better because some of them are not necessarily as legitimate as we would like them to be like. We want to make sure they’re going to fill out a W-9, especially if they’re going to do a job over $600. So he has found a lot of the handymen, but that’s where we’ll post for a cleaning lady too, or even landscaping. I think he found a high school person on there once to help with mowing the lawns.
So, you know what I mean? You can find good work in those kind of Facebook groups. And even if you just do a little post like, “Hey, I’m looking for this, blah, blah, blah, this and that, you’ll usually get quite a few responses.

Tony:
Yeah. I love the Facebook groups. There’s like really active Facebook groups around short-term rentals in the different markets that I’m in as well. So like we found at least one handyman and one cleaner through our Facebook groups as well. So really, really awesome resource. And while we’re talking about Facebook groups, let me plug the Rookie Real Estate Facebook group as well. So if you guys aren’t in there and go join, there’s like 20,000 people in there, lots of good activity happen.
The next thing I want to hit Christie is, how are you doing your showings remotely? I know that was a big concern for me right I was in California, my long-term rentals are in Louisiana and I just thought it might’ve been too much of a pain. I think now knowing what I know now I could probably do it, but I guess, how are you managing that piece, doing the showings remotely?

Christie Lesage:
Like I said, we have been fortunate enough we haven’t had a turnover, so we haven’t had to do one remotely yet, but our plan is, like I said, we’re going to have a cleaner in there and I would ideally like the cleaner to be there and just have three people walk through while she’s there. And then if we do not find a tenant through that, I think I’ll just have a lock box set on the door with a code with the key to the house.
And then we will call them over the phone, and if they pass that initial test, have them go in and take a look around, I think, is the process or a system moving forward that we’re going to test out, so we don’t have to fly back.

Ashley:
There’s a bunch of software too, that you can get, like I think ShowMojo is one. And then even some of the more popular property management softwares incorporating different things. Are you using any kind of software to manage the rentals right now?

Christie Lesage:
We are not. We are a little bit old school, so we use all the payment apps, just your typical bank, Zelle, Venmo cash app, whatever. And then I just have the spreadsheets down right now. So we’re debating on if we’re going to go into like QuickBooks or I think you mentioned Stessa a few times, whether that’s the right system moving forward, but at this time we do not have a particular software we use.
The one I do use a lot, which I really like is the Mint Budget Tracker, and that just gives me a good overview of everything and I can see all the money going in and out and be able to piece it into each rental property from there.

Ashley:
There’s one that you want to try, Rent Ready. They’re actually a show sponsor for us pretty frequently and they have a promo going right now where it’s only a dollar for a year. Just to go around in there and to play around, they have a demo and stuff like that. And then another ones are Buildium, AppFolio. Trust me, once you get it, you will not want to come back.

Christie Lesage:
We are already, I’m dreading doing our taxes this year. It’s like now we’re starting, we’re going to have to compile everything and I’ve all the properties I have to really finalize the books on it.

Ashley:
And a lot of the softwares have onboarding specialists too, so that when you’re looking at softwares, look at the ones that do are for free, because they’ll actually just like a live person will help you get everything uploaded into there. My life changed when I got property [inaudible 00:30:14]software, so I’m a huge advocate. I worked up when I first took over the apartment complex, it was a sheet with just lines drawn across with a ruler and then they would use a red marker and put a check if the person paid rent or not.

Tony:
Geez.

Christie Lesage:
Oh my God. Yeah, it’s getting there. I’m sure probably with this next property coming online, we’re going to have to change something pretty quickly here.

Tony:
I guess one quick question. You guys have scaled really quickly to go from zero to 24 since summer, 2019. That’s pretty fast growth. What’s been the biggest challenge for you guys? What’s been the hardest part would you say?

Christie Lesage:
I think we’re learning real estate as we go. Like I said before, we bought that first property, I didn’t know much. And I feel like almost every day is something, it’s a learning curve. And one of the biggest challenges, and I’ll never, ever, ever make this mistake again, but one of the first tenants we put into that back storage industrial space I’ve been talking about, it was such a quick turnaround. Like I said, I was leaving for vacation for four weeks and we’re like, “We just want to get this filled. It’s not even worth anything, whatever.” We’ll just get this person in here.”
And it was a nightmare, we made that awful mistake of not running a background check on him or running his credit or background check. And I will never do that again, because we ran it on the first tenant we put in to the building. But for some reason, we thought the space was just flying under the radar, not a big deal. We're like, "His application looks good, his bank statements look good, he's fine." And we put him in there and he was fine for like six months.
And when his lease expired, we knew how much that space was worth, so we’re like, “Okay, you can either leave or we’re bumping the rent. That’s one or the other.” And we bumped the rent and he paid one month and then COVID happened. And of course, from there just stopped paying, stopped communicating, and it was a nightmare trying to get him out, especially with the eviction moratoriums. And I go back, to always make sure you’re surrounded by a good team, and luckily we had a good legal team in place that helped us find some loopholes and technicalities on him that we were able to eventually get him out.
But always, always, always screen your tenants. I will never ever make that mistake again.

Tony:
And that's what people say, it's not a matter of if you're going to evict a tenant, it's a matter of when. I've never gone that process myself, but I think every new real estate investor should expect that it will happen at some point. And as a quick side note, if you guys haven't seen the movie Guest House with Pauly Shore on Netflix, it's like every landlord's worst nightmare where basically this couple buys this house they inherited, Pauly Shore as a tenant. And he's just like the worst tenant ever and they can't get him out.

Ashley:
Oh, I did do watch that, yeah. They have a pool in the backyard and he’s in the pool house?

Tony:
Yeah, he’s got the pool out to the backyard. Yeah, yeah. So I Guess House

Christie Lesage:
Oh my God.

Tony:
… on Netflix if you guys haven’t seen it, sure it’ll give you a good laugh. I want to dive Christie into one of your deals specifically. So do you have one in mind that we can do a deep dive on the numbers?

Christie Lesage:
Yeah, of course. It would definitely be like that first deal, I think, especially with how quickly the market has changed in San Diego now. We look at the purchase price and the gross rents we’re getting on that property. And it was at that time, definitely a home rent deal, it’s just taken us a while to get it up to this kind of performance. So let’s go into that one.

Tony:
All right. Awesome. I want to set the table for the listeners first, so I’ll ask you just some quick hinting questions and give me your response and we’ll do a bit of a deeper dive afterwards, but what was the purchase price on this one?

Christie Lesage:
The purchase price was negotiated down to 712,000.

Tony:
All right. There’s people in Ashley’s when you say negotiated down to 720,000 and that is a registered. All right. So 720,000 was the purchase price. What was your down payment on it?

Christie Lesage:
We put 25% down because we are not living in this one.

Tony:
Got it. Okay. And what’s your monthly expenses, principal, interest, taxes, insurance?

Christie Lesage:
That is $3,470.

Tony:
Got it. And then what are you renting it for?

Christie Lesage:
Our gross rents on the property right now are $6,260.

Tony:
Got it. That’s awesome. You’re netting somewhere around like, what does that 2500-ish bucks a month?

Christie Lesage:
Yeah. And so we actually installed after a coin operated washer, dryer, and each unit has families in it. So we’re sure from the coin washer dryers probably netting additional $100 dollars safely each month too, which gives us a nice little chunk of income, which is really nice.

Tony:
Got it. That’s awesome. You’re obviously spending a lot more in the property at 720K, but you’re also netting a pretty handsome amount of $2,500 a month.

Christie Lesage:
Yes.

Tony:
Right?

Christie Lesage:
Right.

Tony:
That definitely beats $100 per door that you typically see. You talked a little bit about the financing piece already, but you just went like a conventional investment loan on this property?

Christie Lesage:
We did. So it was just your typical conventional investment loan. And then we are finishing a refinance out tomorrow or Monday. So we will get an additional $300 in cash flow, that we will be able to claim on the property.

Ashley:
Are you refinancing for the amount you owe on it or are you taking any cash out of the property too?

Christie Lesage:
We are just doing loan and term. We did try to pull some money out of the property, but the appraisal came back a little wonky, I'll say without having to go into much details, with the comps that the appraiser used and it's such a unique property. And I didn't realize that we would necessarily have this issue and what they call like C-class neighborhoods. Our realtor walked us through it, but essentially there's not enough comps in these neighborhoods to really compare, to show the true value of the property.
So it did appraise higher of course, than what we purchased at for, but way under really what I think we could sell it for just based on the numbers.

Ashley:
What made you decide not to try and fight the appraisal? We’ve had a couple people on that have actually requested another appraisal. What made you decide to keep going with this? You’re getting the extra cashflow, was that mainly the reason?

Christie Lesage:
We thought about contesting the appraisal and paying for another one, but we thought, or we realized that if the appraiser came through again, he would probably just pull the same comps and the comps are so off on the ones they’re pulling that there’s nothing else listed on the market right now where they could pull different comps. So I feel like even if we were to contest it or fight it, if they pulled those exact same comps, we’d come up with the exact same results.
So we’re happy with just the increased cashflow anyways and where we’re sitting right now in our cash position for our next deal. But yeah, we were a little disappointed, but we figured if we contested it, they would just use the same comps again, because there’s really not a lot in that direct neighborhood that to compare from.

Ashley:
What would you do different so that next time you’re more prepared to estimate what the appraisal is actually going to be? Now that you’ve been through the whole appraisal process and you’ve seen what comps they actually pulled. What would you recommend to rookies so that they don’t get into that same situation? What would you have done different?

Christie Lesage:
I think I would have tried to pull some comps ahead of time, honestly, and really get a look on the market. Regardless we were going to refinance it for that lower rate anyways, but we had our broker trying to contest them and our realtor pull additional comps and sent to that appraiser. But maybe, they talk about this all the time, like trying to send a couple of comps to them ahead of time, prompt them a little, whether they take that receptive or not. But once the report is written, I think it’s pretty hard to get it changed or thrown out, it seems.

Tony:
I want to talk a little bit about how you found the deal, Christie. Was this wholesale in the last pocket listing?

Christie Lesage:
Yeah. It was honestly an MLS through the realtor who I spoke of. She sent us quite a few investment summaries, and like I said, they weren't penciling out originally to our 2,000, $2,500 desired cashflow. I think originally when we penciled it out, it was only going to be around $1,000 cashflow, I'm like, "That's not very good for how much money we're putting down." But the kicker is you sent over this investment summary and in the MLS listing, I talked about the space. Had the space in the back that the current owner was using as his workshop.
He had quite a big portfolio in San Diego, so he was just using it as his headquarters for all his maintenance guys to go in and out. And the realtor listing it, says, “Yeah, you probably can rent it for $500 to $1,000.” But that was listed in the MLS description. And I think a lot of people looked over that and did not factor that into their numbers. And yes, you can’t use those numbers for conventional financing, but I remember my husband saw that and he’s like, “This is actually very valuable space, and for how close this is listed to downtown, even if we just get $500 a month out of it, that’s already bumping our cashflow to $1,600 a month.”
And then now we rent it for $1,500 a month and that’s bumping our cashflow to that 2,500 2,600 range, which is phenomenal. But to answer your question on the MLS, but always read the descriptions.

Tony:
Yeah. That’s a really valuable point because we’ve had other guests on the show that have also said that they found these stale listings, that the only reason they were still up is because they had been up for so long and people weren’t really paying attention to where the value was. I can’t remember where it was, but someone bought something… Anyway, it’s something that happens pretty regularly where there’s like a really cool or unique part of the property that adds additional value.
So for those of you that are listening, if you see some of those listening that have gone stale, they might’ve been up for a while, see if there’s anything unique or special about the property that maybe other investors are passing up on. And then if you’re lucky enough to get like Christie where your cashflow is 2,500 bucks a month and everything works out well. It sounds like it was a good deal for you.

Ashley:
We had the guest on, Tony that she actually bought an Airbnb and turned it into a house hack. Is that what you were thinking of maybe? Yeah, so it was a listing that had been sitting for a long time, I think over a year. We’ll link it in the show notes, I don’t remember exactly what episode it was. She had found it and it was listed on the commercial side, so like people who are actually looking to house hack weren’t looking on the commercial side for a place to live, and she turned the main house into her house. And then there was like two additional dwellings on the property and she’s renting those out, so-

Christie Lesage:
Wow.

Ashley:
Yeah, there’s definitely unique deals out there. You just have to know how to look at them.

Christie Lesage:
Creative ways to force cashflow or more cashflow.

Tony:
Cool. Christie, this is probably my favorite part of the show, but it’s where we do a deep dive into the mindset of the real estate investors that we’re talking with. A lot of times, the people who want to get started in real estate, investing all of our rookies, they know what to do, they’ve read all the books, but they’re just mentally can’t get past or get those steps that they need to, to actually get moving. So what were maybe some misconceptions you had as a would it be real estate investor that turned out to be totally not true? Something you were afraid of that just didn’t really materialize when you started investing.

Christie Lesage:
That’s a good one. Honestly, I think the horror stories that your uncle Bob say like, “Oh, that’s going to be such a headache. You don’t want to do that.” And he’s like the big guy working at a corporate world, having a nice cushy salary is like, “Well…” He’s like, “You’re going to just have all these headaches, it’s going to be a disaster. You’re going to lose money. You don’t want to do that. Why would you waste your time doing that?” It’s like, “Because I don’t necessarily want to be you and work in the corporate world.”
To put it nicely, but I guess that’s not, but I think just, don’t be afraid of those horror stories [inaudible 00:41:28]. We have enough of them, but honestly, it’s really not that bad. I think someone always says, “10% of life is the obstacles that come your way, and 90% of it is how you handle them.” And we always try and remember that like, “Okay, this is bad. This is not good right now. We’re struggling.” But there’s always a way to manage and handle those ways around those issues and those tenant issues, and it’s really, really how you manage the situation, because it’s going to be hard.
Don’t get me wrong, but I wouldn’t let that headache stop you because we always say, The good days outweigh the bad,” and we’ve definitely had our fair share of bad days, but-

Tony:
I love your comment on uncle Bob because everybody’s got an uncle Bob, and uncle Bob’s got all of the advice when it comes to real estate investing, but he owns zero properties himself.

Christie Lesage:
Right.

Tony:
And it can be so scary when you’re venturing off into this world of real estate investing because a lot of people maybe don’t know other real estate investors like in their personal circles. So they’re the only ones that are listening to the BiggerPockets Podcast, and watching YouTube videos, and reading the books, so they’re gaining all of this knowledge. And then when they go and talk to their friend or their family member about what they’re trying to do, they look at them sideways like, “What do you mean? What do you mean you’re going to go spend hundreds of thousands of dollars on this property that’s going to give you 200 bucks a month,” or something like that. It just doesn’t connect for them.
So I think that’s the importance of community, is surrounding yourself with other people who are investing, other people who have the same goals, and other people who aren’t like uncle Bob that all they want to do is break you down and give you the negativity. So I love your perspective on that.
One other comment, because you mentioned this. You said it so beautifully, I’m trying to make sure I don’t mess this up, but you said, “Life is like 90%,” say it one more time in the way I don’t mess it up and listeners can actually get it.

Christie Lesage:
And it’s not my quote, but my husband says it all the time, so it’s, “10% of life is the obstacles that come your way, and the other 90% is how you handle that.”

Tony:
That is beautiful.

Christie Lesage:
Those are, not words we live by, but it’s up there because sometimes we get these crazy tenant issues because we mostly invest in these C-class buildings or neighborhoods, and it’s really just how you handle the situations.

Ashley:
Thank you for sharing that with us. That’s really great. I’m going to take us to the rookie requests line and anybody can call in and leave us a voicemail at 8885ROOKIE. Leave us a question and we may play it here on the show and have our guests answer it for you. Here’s today’s question.

Greg:
Hey, Real Estate Rookie Podcast. My name is Greg and I’m based out of Salt Lake City, Utah. My wife and I are new real estate investors and we have our current house ready to rent, it should cashflow nicely, and we have cash saved up and ready to buy a property, move out and actually start making some money. Our realtor is also a real estate investor recommends that we buy a more expensive house as a move up house because it can be harder to buy a nicer house down the line once you get a number of properties accumulated.
We’re torn on if we should buy a more expensive house or going at a lower price point and focus on accumulating some more lower dollar rentals. I’d love to hear your feedback.

Ashley:
And Christie, I think you answered this question already in the beginning of the show, just telling us your story.

Christie Lesage:
I know. I’m try to think, I’m like, “Wait, where are we going?” Yeah. I don’t necessarily… If your realtor is an investor, that’s great, but I think you just need to look at your situation, and that’s great that your house is going to cashflow that much. And I think that’s awesome that that is your plan for that house and you’re not necessarily going to sell that. But I think just really look at that situation, and what we’re even looking at right now, which might be a great option for you is if you’re, especially in those higher expensive areas, trying to find a property that I would say a property you can house that.
Because I’m not necessarily one who wants to share walls anymore, but even if you can find a property with two houses on it and that way you get that nice living situation, and then you can rent out the other house or the other accessory dwelling unit, you want to maybe move up a little like your realtor is saying, and you don’t necessarily want to have to downgrade your lifestyle. I would definitely just look into those options. I think that’s a great way to still get a nicer house, but still not be tied to that huge mortgage payment.
Get those ways of how you can make money on buying an additional property with those extra cashflow points.

Ashley:
I like Christie’s take on it is that you can still get a nice house, but just have it as a house hack, so you’re still getting additional income.

Christie Lesage:
Right.

Ashley:
Because if you do go out and buy a really nice expensive house like we talked about earlier that’s going to hurt your debt to income when you go to try and get investment loans on your property. But if you start building those investment loans, as you’re getting that debt, you’re also getting income, which is going to offset that. Where if you just get the nice house first, that’s not going to do that. I’m sure your realtor has good intentions, but I would say the opposite.
I lived in an old farmhouse for a couple of years for free and we made the mistake and built a brand new house. And now I look back and I’m like, “My God, we should have stayed there five more years and like lived for free in a paid-off house,” but nope, I had to have my dream house. So learn from my mistakes.

Tony:
And on the house I can piece, I think it was episode 49, Ashley, where had Andress on there where he talked about house hacking the new builds. I don't know where you're at, but if you can go out and buy a new construction, you can get into that three-and-a-half percent down and you can house that and make a ton of cashflow, so different strategies.
All right. I want to take us into the next segment here, Christie, which is our random question. I think for me, the question I'm going to ask you is, why jump into the multifamily units first as opposed to cutting your teeth or getting started in the single family space? I think a lot of folks might have some fears and hesitation around starting off with five units from day one. What made you not so afraid to do that?

Christie Lesage:
I guess, first of all, the multifamily for us made the most sense. It was the best return on investment in our area and we needed at least those three or four units for it really to make sense for us in this area. I don't think that's necessarily true in other areas, but for that return we were looking for, that is what made sense. And once we got into that first one, it didn't seem as scary anymore, and we've continued and progress from there.
But to go back to your point, I think honestly I had so much confidence in my husband that we were going to figure it out no matter what. And I was like, “It really comes back down to kind of your partner,” whether it’s your significant other, your partner and just having confidence in them and trusting the process, because especially if they’ve done so much research behind it ahead of time and their intentions are good, then I think sometimes you just need to trust yourself and take that leap of faith.
And then also just remember, what's the worst that can happen? I think that a lot when we get scared about doing some of these bigger deals. It's like, "What's the worst that can happen?" I guess we sell it and we'll probably be pretty close to getting our money back if we just sell it and we get out. So if you were to buy it tomorrow and then turn around and sell it the next week, you'll probably lose some money. But other than that, it's pretty non-consequential in my mind, if your plan is to buy and hold, and you have done the research ahead of time. Do not just go and buy any property, do not force it.
I would just make sure that you are doing your research on your deals and you’re buying good solid deals, and you’re not forcing the numbers to make sense.

Ashley:
Christie, my question is to you about your W-2 income. Did you replace that yet with your cashflow from your properties? And what are the next steps for you? What’s the next goal to reach?

Christie Lesage:
If we’re just counting the property income towards me, yeah, so cool, yeah, not towards my husband, yes.

Ashley:
Yeah, just yours, yeah. That’s awesome.

Christie Lesage:
For sure, I would say we’re pretty much doubled my W-2 income by now, which is we’re in a sales job, so it blows salary with high bonus. But yeah, I would say with this eight-unit closing, pretty much if I get to take all the cashflow, then we’ve pretty much doubled the cashflow from the W-2 income, which is amazing. And we say it all the time, you don’t really realize how much your time is worth until you take that leap of faith. And make sure you have a security blanket, just please do not go ahead and quit your job tomorrow.
But I think it really shows how valuable your time is and how much that corporate world knows that and can really, not take advantage of it, but if you are to go out on your own and you are passionate about something, I think you need to realize you’re easily going to be a six-figure position on your own. Whether if you’re making under $100,000 right now, I think. As long as you’re dedicated and you have the right mindset, you can accomplish a lot.

Ashley:
I love that. And congratulations. That is really awesome in a-year-and-a-half, you were able to double what you’re getting at your W-2. That’s a really great accomplishment.
Can you tell us where everyone can find out a little bit more about you and where to reach you?

Christie Lesage:
Yeah, absolutely. I am on Instagram, it is just my name, @Christie Lasage. Is more of, I guess, a personal page for my friends, but I am looking, our goal for this year is to network more and connect with more investors. We have been a little bit heads down like, go, go, go lately, so we have not done as good of a job as I would have liked. So I am on Instagram. I do post a little bit of real estate on there when we’re going through our deals and our inspections, but would love to connect with anyone there.
I am on BiggerPockets also and I am very guilty of not updating my BiggerPockets profile page. So please go connect with me there and it’ll give me some motivation to upload all my deals and be more active on that BiggerPockets website. So that’s a great place to connect with me as well. And I’m also always available over email to connect with mentorship. And if you just reach out to me on one of those pages, I’ll shoot it over to you.

Ashley:
Awesome. Thank you so much. And we’ll link all this information to at biggerpockets.com/rookie53. Thank you guys for listening. Make sure that you join our Facebook group. Just search Real Estate Rookie. And Christie, thank you so much for sharing your story with us and providing huge motivation for anyone else that’s thinking they want to get out of their W-2 and get into real estate. So thank you very much.

Christie Lesage:
Of course, happy to be here, and it was so much fun this morning, getting to chat with you guys.

Ashley:
I’m Ashley Kehr @wealthfromrentals and he’s Tony Robinson @tonyjrobinson. And make sure you guys listen to our newest episode coming out Saturday.

 

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In This Episode We Cover:

  • The advantages of buying rentals in your state or out of state
  • Why multifamily properties made the most sense for Kristie’s situation
  • How to leverage an array of financing options to get houses under contract
  • How to avoid mistakes when vetting tenants (plus what to look out for)
  • Calculating your DTI (Debt-to-income) ratio before applying for financing
  • Self-managing multifamily properties even when they’re out of state
  • How to show a house remotely (and safely)
  • And SO much more!

Links from the Show

Rookie Deal

  • Property: San Diego, 4 Unit (Bonus Warehouse Space in the Back)
  • Found through her realtor on the MLS
  • Purchase Price: $712,000
  • Conventional Financing: 25% down payment
  • Net Monthly Cashflow (One Month After Purchase): $1,549
  • Net Monthly Cashflow (YTD): $2,890
  • Appreciation in 1 Year & 5 Months: $112,000

Connect with Kevin:

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!
    Keith Shadle from San Diego
    Replied 12 days ago
    Great episode! Did you ever think of the FHA 3% down route for a smaller down payment in SD? Thinking of similar and wondering your thoughts. Condos going up all over PB!