Rookie Podcast 65: Multifamily, Mobile Home Parks, and Commercial Deals: All in 2 Years! with Tommy Polise

Rookie Podcast 65: Multifamily, Mobile Home Parks, and Commercial Deals: All in 2 Years! with Tommy Polise

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Real estate investing works differently for different people. Some people like to gradually buy small properties, then start looking for larger deals, and then go into commercial financing for big deals. Tommy Polise always knew he wanted to buy real estate and had spent five years analyzing markets and educating himself, but never bought any properties.  In 2019, that changed.

Tommy had been looking into single family homes but found that he’d only be walking away with a small amount of pure cash flow each month. While he now feels that single family homes are a great investment, at the time, he didn’t think the cash flow was worth the effort. So he and a partner went in on a multifamily deal together. It worked out well and he gained some experience and connections, so he decided to go bigger and better.

Now, two years later, Tommy and his partners are sitting on 30 units. This includes single family homes, multifamily properties, and a land deal that includes 10 mobile home lots, 8 storage units, 3 single family homes, and a 5 unit apartment complex. He even has a laundromat with a residential property attached to it as well!

So how does a real estate rookie like Tommy go from 0 units to 30 units in the span of 2 years? Tommy says you need to develop good relationships, get great partners, understand your financing, and continuously take risks!

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Listen to the Podcast Here

Read the Transcript Here

Ashley:
This is Real Estate Rookie show number 65.

Tommy:
We did everything just so that we felt comfortable, or as comfortable as we could be. So that’s why I feel like you need to get about 80% comfortable with something and then you can move on and you just make it happen because no matter what you do in your life, you’re never going to be 100% comfortable with it.

Ashley:
My name is Ashley Kehr and if you’re watching this on YouTube, it probably looks like I’m crying. I’m here with Tony Robinson, my cohost and at the end of this podcast, we just heard a crazy, crazy story that I started laughing and started crying. So it’s not because it’s sad. I was just laughing so hard and now my eye won’t stop watering.

Tony:
That’s how good the story was. So today we have Tommy Polise on the podcast and he shared so many golden nuggets. I love his story Ash, because he went down such a unique path, like instead of just doing the typical turnkey or BRRRR what we usually hear in the podcast, he’s got a laundromat, he’s got mobile home, he’s got storage, he’s got 23 acres. He’s got this, he’s got that and he’s going after the commercial route, as opposed to the traditional single family investment we see.

Ashley:
If you want to learn about commercial lending, this is the episode to listen to. He really goes in detail as to how to get a commercial loan. How does it work, and then just like his portfolio, how he manages it and he actually moved. Because of COVID, his job went remote and he moved, him and his girlfriend to upstate New York and somewhere he had never lived before. They bought this 23 acre property with probably what, four or five different kinds of revenue streams on this property.
We’ll let you guys tell you about it, but this was a great episode. We had many laughs during it. Tommy, welcome to the show. Thank you so much for joining us today.

Tommy:
Thank you very much. I’m happy to be here.

Ashley:
First of all, before we get into your backstory, your portfolio, let’s tell how you even got on the show. Let’s tell that story here.

Tommy:
So I was in Clubhouse. Ashley was in Clubhouse talking, and I jumped in. She was talking about buying land and I actually just closed on a large land purchase in upstate New York, which has 18 units on it. A mobile home park, some single families in our small apartment building and 23 acres. So I said, “Hey, I own some land. I also live on the land that I own, which is in a mobile home park. It’s pretty crazy.” From there, she was like, “What are you talking about?”

Ashley:
It was so interesting. So then I was like Tommy, it was Felipe and I talking about land deals and what we have going on. So Tommy jumped on and then it was like, just Tommy talked the whole time about this really cool deal that he found. So I’m like, we have to get him on the show but if you guys haven’t heard of Clubhouse yet, it’s just another cool social media app just talking, and Tony’s on there too. So you guys have to check us all out if you are on Clubhouse, but Tommy let’s get to you. Let’s hear a little bit about yourself and how you got started in real estate investing.

Tommy:
Yeah, of course. So I bought my first deal in July, of 2019. I had been looking at real estate for a long time, like four or five years, maybe trying to buy it and I just could not get started. I’d been working in real estate professionally as a finance professional analyzing real estate companies. So I knew that it would be a good investment. It was very hard to get started. It was hard to pull the trigger. So in the beginning of 2019, I got pretty serious about it.
I ended up interviewing 20 plus brokers all over the country. I didn’t know where I was going to invest. I was in New Jersey. I was in Tennessee. I was in Florida. I was talking to people everywhere and I just could not get it going, but I ended up connecting with a broker in Philadelphia, Steven Kennedy, who’s been awesome. He’s probably the reason I got started. People asked me, why did you invest in Philly and I used to say like, “Oh, the cashflow,” but now I’m just like, in hindsight it’s because he pushed me into my first deal very successfully. Just very helpful.

Ashley:
What market was that first deal in again?

Tommy:
Philadelphia.

Ashley:
Where were you living at this time?

Tommy:
I was living in New York city. Good point.

Ashley:
Is your first investment is out-of-state?

Tommy:
Out-of-state but still pretty close. It was two hours away. I didn’t feel comfortable going out of state for my first one. I just didn’t want to be getting on a plane in case something went wrong. Now that I own real estate, I don’t think it’d be very hard to do that, but at the time it was a little scary buying something far away.

Ashley:
What does your portfolio look like right now before we get too much into-

Tommy:
So it’s 30 units. It’s one, three unit in Philly, one, six unit in Philly, a mixed use property in Newark, New Jersey, which has a laundry mat on the ground floor, which we also own and operate, which is pretty crazy for many reasons. I can probably get into that later, and then there’s this property upstate, which is 18 units, 10 mobile home lots of five unit apartment building, and three single family homes on 23 acres of land with some storage. So pretty diverse portfolio.

Ashley:
That’s the deal that I loved hearing about and I can’t wait until we really go into that more, but just real quick, even the laundromat, how are you managing that business remotely?

Tommy:
So I’m not managing it remotely. That would be almost impossible, I think. I have a partner in all of these deals. My main partner is Mitch and he’s on every deal with me and he’s kind of the person that’s taking charge of the laundromat and I’m kind of taking charge of this stuff upstate.

Ashley:
Let’s talk about partnerships.

Tommy:
Of course.

Ashley:
How did you find this partner?

Tommy:
He was a friend from growing up. Our parents are good friends. Our grandparents are good friends. I’ve known him my whole life and I was looking at real estate for a long time by myself. Then I found this deal. I was going to partner with someone else on this first deal in Philadelphia and then we wanted a third partner. So I called Mitch out of the blue and I was like, “Hey Mitch, I’m buying this real estate deal.” He said, “Great. I’m in, where is it?” I was like, this is the kind of guy I need. So from there, he was just all in and we’ve been kind of together on this stuff ever since.

Tony:
That’s how my partner and I got connected as well. I found a deal and I knew I wanted to partner with someone. I sent him an email at like 11:30 at night. He replied the next morning at like six o’clock in the morning and all he said was, “I’m in.” I was like, that’s it? It’s that easy? So there’s definitely some value in having a partner that’s kind of easygoing, but I want to back it up a little bit. You said that you’re at 30 units and you started in 2019. Is that accurate?
So what is that like? Maybe two years give or take, a year and a half somewhere around there? That’s really, really fast, but it sounds like your portfolio consists more of commercial as opposed to typical single family, duplex, triplex. So as a new investor, Tommy, what made you lean more towards the bigger commercial, mixed used laundromat type real estate assets, as opposed to the usual BRRRR, fix and flip things like that?

Tommy:
It was when I was analyzing my first deal down in Philadelphia, I was almost going to put an offer in by myself on the single family in Philly. When I looked at the numbers, after everything was said and done, I was going to be cashing something like 50 bucks a month and I just said, “This can’t be worth it.” I think in hindsight it actually would be worth it because you get the appreciation and now that I know more about real estate investing and real estate, it would be worth it but at the time I just thought this isn’t worth it. I just kind of skipped and I said, okay, I need to get on to something bigger and better. So I started looking at 10 unit properties and then talking to some friends and they were like, “I want in on this.” Everyone just wanted it and I didn’t know how to do any of that stuff but I just figured it out along the way. So that’s kind of how it happened.

Tony:
So can we talk about the financing a bit and it sounds like you’re working with other people and that’s how you’re making it work, but if I want to go out and buy a big mixed use property or a 10 unit apartment complex, what are some of the financing options that I have or maybe you can share how you structured your deals.

Tommy:
We’ve used commercial investment financing. This was something that I was confused about at first too. That was the other thing. I tried to get a residential mortgage and an LLC and they were like, “No, you can’t do that. We don’t do that kind of stuff. If it’s a residential mortgage, it’s in your own name.”
So then I got thrown for another loop and I just started calling more people and being like, “Is this right? I can’t do this.” They said, “No, you’ve got to get commercial financing.” Back to the brokers, I just kept making as many phone calls as I could. I think I had a list of like 25 banks in the Philadelphia region and I just went down the list and called every one of them.
They all said also the same thing, actually. Usually it’s like, one of them will say, yes, you can do it but this time it was just straight up no across the board. So then I said, okay, I have to revisit how I think about this kind of stuff. Though the rates aren’t as good, but it’s still … You’re getting leveraged at 75% at a 5% interest rate. That’s a very good deal.

Ashley:
So when you’re making these calls, who are you calling? Are you calling friends that are investors, are you calling loan officers? So you have a problem. How did you know who to call to get the solution?

Tommy:
Just kind of Googling and calling people that … I call loan officers. There were a few people that I knew that were doing deals and I would call them, but I didn’t want to bother them too much. In hindsight, I could have bothered them more, but I just wanted to figure it out on my own and not bother anyone too much. So I just would call as many people as I could on the same topic until I got someone who would tell me I do it that way.

Tony:
What about the actual structure with your partners? Are you guys creating an LLC and then you guys are all managing members and each one has his own stake and then the LLC is buying them properties or is there some other structure in place?

Tommy:
We have an LLC for the properties down in Philly. So it’s me and two friends on the properties in Philly and we have one LLC that buys the properties down there and it’s separate LLCs at this point for each city. So we have two LLCs for our Newark property. One is the laundromat and one is the real estate and then we have an LLC for upstate New York, but it’s different partners on each deal.

Ashley:
That’s how I structure my deals too, is for each partner, I have a separate LLC with that partner. Then for my liquor store, we have a separate entity for the liquor store and then the building, the real estate is its own LLC. That’s something I learned from the investor that I worked for is that gives you separate protection and makes those … So if you’re laundromat is sued, they can go after laundromat, but they can’t go after the building because that’s a separate entity.
So it’s just a way to protect yourself and to separate your actual business from the real estate of the property. So I love that you guys did that. Now for your ownership of the partnerships, is it like, okay, you each are putting in a third of the money, you each own a third of the LLC, or how does that work?

Tommy:
Yeah, just we’re all equal partners. On this upstate deal, we brought in my friend’s dad just invested like a second note, almost a promissory note in the property just to help us close it with some more money. We were running out of money at that point on our fourth deal. So we needed a little extra help.

Ashley:
So at first, you guys are each putting in your own money for the down payment and then doing commercial mortgages on it?

Tommy:
Yeah, correct.

Ashley:
When rookies are talking to lenders on the commercial side, what advice do you have? What should they look for in a lender? Is it just who gives you the best rates, the best terms and what other questions should they be asking commercial lenders?

Tommy:
The most important part for me was insurance of closings and just easy to work with. I didn’t want to be caught at the closing cable without a mortgage. So I was looking for someone who I knew would be able to close, and part of it is just talking to them about their experience doing these kinds of deals. Do you finance people like me? Do you finance people that do small deals because it was commercial financing, but it was still a three unit property and most commercial lenders don’t want to do that, that I’ve talked to. It’s just too small for them. So I’d be like, “Have you done a three unit? Have you done a six unit? Have you done these small types of deals before?” Because I don’t want to have you go to credit committee and say, “This is not worth our time.” So just asking their experience with deals that you’ve done.

Tony:
I want to dig in a bit more on how the commercial financing works, because we don’t have very many folks that come on to show that that use it. So you create your LLC, and there’s an LLC agreement that says, you own this percentage, you own that percentage, but when you’re actually getting approved for their loan, are they underwriting the property by itself? Or are they also looking at you as the owners and saying, “You guys need to have some sort of liquidity between you or you guys need certain credit scores.” How does the actual approval process work on a commercial loan?

Tommy:
It’s a little bit of both, I think. On the smaller deals, they’re definitely looking at your personal credit, but they’re also looking at the building. For example, the mortgages in my LLC don’t show up on my credit report but you still need to have good credit score and they ask for your personal financial statements, they ask for your background and they want to know if you’ve done something like this before.
So they do focus on both and that’s lender across the board, even the big lenders. They want to know what you’ve done and your personal financial situation. It’s no matter what they’re going to want to know what’s going on there. Because with these smaller loans, typically under a million dollars, it’s called a recourse. So that means that you’re personally liable for the loan.
On larger loans, a million plus, you could get non-recourse financing, which means you’re not entirely responsible if the building goes completely wrong. You can almost hand back the keys if it goes too wrong on a $10 million property, but you can’t do that on a $500,000 property, which is frustrating for me, but I’m going to get there one day.

Ashley:
I like that you pointed out how it doesn’t show up on your credit report, these commercial loans, because if you go to get a residential loan, your debt to income isn’t going to be hurting at all because you have all of these commercial mortgages. So when you actually go to buy an investment property or buy a primary residence and get that nice 30 year fixed loan interest rate, they’re not even going to see those mortgages that are in the LLCs.
So that really helps your debt to income ratio, which is a huge benefit. Was there anything else that you wanted to add as to what rookie should look out for when selecting commercial mortgage? What about the income? So you’re buying a property, maybe the income isn’t that great, or there’s no income at all. What do commercial lenders look for on the income side of it? Because they’re appraising the property, but they’re also looking to make sure that there’s going to be revenue.

Tommy:
What a great transition into my laundromat, which doesn’t make any money. For that one, we had to get a private money loan, which is just a very high interest rate loan with very high fees upfront, but there was only one tenant in a two unit building. It was just so below market, like the market rents are probably 3,000, $3500 and they were getting $800 a month for this property. So obviously a commercial bank is not going to want to do that financing and we couldn’t even get commercial financing if we tried. So we had to go to a private money lender to get that kind of money.

Ashley:
Then is your goal after you show a couple of years of income on your tax returns for this property is to go and refinance that with a commercial mortgage?

Tommy:
Yeah. So I’d like to do it as soon as humanly possible. I hope that after we renovate it, we can show that the new rent roll and just go to a bank and talk to them about like, “Look, this is what we’re making now. So can we get a loan that justifies this income?”
We’ve talked to some banks already before we finished. Some of them say you need five years of income, some of them that you need three years of income. So back to my previous method, I’m just going to keep calling until I find one that says you’re good.

Ashley:
Yes. You’re really doing a BRRRR on a commercial property is basically what it sounds like. Very cool. Do you want to dive into this … Tony, unless you have anything to follow up on his portfolio before we go into his deal?

Tony:
Before we get into the deal, just a couple of things, because you’ve got a few different asset types in your portfolio. It sounds like you’ve got this cool land deal that I’m sure we’ll talk about. You’ve got this laundromat. How are you selecting what types of assets to add into your portfolio? Are you going to add like a storage unit? Are you going to do like, I don’t know, you’re going to buy a farm in upstate New York? What else is next on the buying list for you?

Tommy:
I was struggling with that in the beginning when I was doing all these crazy deals, because I was like, I wonder if I have shiny object syndrome? Am I just doing all these deals that don’t make any sense, but I think the way it’s working is I’m just being a bit more opportunistic and creative with some of the deals that I’m looking for. So the only deal that was really straightforward was the first deal we ever did, a three unit down in Philly.
The next deal I did, I found on Craigslist and it was six units, which was crazy and I actually found that deal while I was listening to a BiggerPockets podcast. Gabe Hamill, I think was his name was talking about how he used to find deals on Craigslist. I said, there’s no way in this day and age you could find a deal on Craigslist.
I go on Craigslist and I go to my right where my first property was and within three blocks of that property was this killer six unit deal and I just was like, I can’t believe this. This can’t be real. This is a fake listing. I called and it ended up being real and we closed 60 days later.

Tony:
So you were really just looking for the opportunities and trying to capitalize on those, but each one of those has to be analyzed in such a different way. So how are you educating yourself on how to analyze a land deal versus a laundromat, because those are two totally different asset classes.

Tommy:
I think it’s a lot of research. I am obsessive. I do so much research when I don’t need to probably, but I just am constantly listening to podcasts, reading books. I feel like I’ve read every real estate book. I’ve listened to every podcast. It’s just crazy, but on top of that, going into the deal, I also feel like I do maybe too much due diligence, if that’s even possible. For the laundromat, we had people look through the sewer lines just to make sure that there were no issues with the water lines and stuff like that.
I just go over overkill on the due diligence to make sure there’s nothing wrong. In this property upstate, we had someone come out and separately inspect every house on the property, every septic tank, every water line, everything. We did everything just so that we felt comfortable or as comfortable as we could be. I feel like you’re never going to get 100% comfortable with anything.
So that’s why I feel like you need to get like 80% comfortable with something and then you can move on and just make it happen because no matter what you do in your life, you’re never going to be 100% comfortable with it.

Ashley:
My agent and I see this all over is that the market is so hot right now. You can’t even ask for an inspection, they’ll never accept your offer. So with you buying these off-market deals, do you think you have an advantage asking for these full inspections and really getting into the properties?

Tommy:
I just think it’s so unique that there’s not many other people looking at them. Exactly. So it’s like, who wants to buy … And this is part of the issue too, is who wants to buy this property? It’s such a unique property. I’m a little concerned about liquidity if I ever wanted to sell, but at the same time, no one else is buying it. So I had some leeway, I guess, with that kind of stuff and we can get into that deal more later, but just these weird deals, I feel like you can get a little more leeway. It’s not like I’m asking for a price reduction. I’m just asking to do my due diligence. So I think they’re reasonable, it’s a reasonable request.

Ashley:
You mentioned Craigslist a little bit, but how else are you looking for these deals? Is it more, you’re just scanning any kind of property deal in general because you have the laundromat building the mixed use. You have the three unit, you have this land and these mobile homes. Is it just you’re scanning and anything that catches your eye, you will analyze it and be open to it?

Tommy:
Yes, literally. That is what I do. As I’m driving around, that’s what I’m doing. I have LoopNet open. I have Zillow open. I have everything open, just being like, oh my God, that’s for sale. I didn’t know that was for sale. Let’s check it out.

Tony:
So one last question from me before we move on to the rookie deal, because again, I think what’s really unique about your story, Tommy is that you didn’t just do the single family BRRRR strategy, which is what we see a lot. What do you feel you’ve done that’s made you successful in the commercial space that if I, as a newbie investor, or someone who hasn’t done any deals, if I wanted to go and do what Tommy did, what were the things that you did that made you successful? Was it your team? Was it your market selection? What were the critical pieces that made you successful as a commercial real estate investor?

Tommy:
I think it was definitely my team. My partner was huge on all this stuff. I think I was maybe iffy on some of the deals, probably all the deals after these last two, the laundromat and the upstate deal. I was like a little iffy on and he’s just a bit more … If you think I’m a little aggressive, like he is just like, “Let’s do it. I want it on this deal.” He said, “We’ll figure it out. We’ll just figure it out.”
So he just kept pushing it even when I was like, “I don’t know, man. I don’t know if I want to do this one.” He was like, “I got it. If you don’t want to do this part, I will do this part.” For the laundromat, we had to go collect the cash and I said, “I’m not going to Newark, New Jersey on a weekly basis to pull $1,000 out of the machines. That’s not something I’m doing,” and he’s like, “I’ll do it. Don’t worry.” I said, “Okay, if you want to do that, that’s fine with me.” So I feel like a lot of it was just the mindset and the partner that I had, which was luckily more aggressive than me.

Tony:
I think you see that a lot more on the commercial side of real estate than you do on the residential side. You can be a one man, a one woman show and go flip a house or do a BRRRR deal, or buy a turnkey investment but as you get into bigger and larger deals, you don’t see a one person show that’s taken down 100 unit apartment complex. It’s a team of people that do different parts. You have one person that’s like doing the due diligence. You have one person that’s working on the financing. You have one person that’s raising the funds from investors. So if you want to scale to be super successful in the bigger arena of real estate, it definitely comes down to being able to build the team. So I love that your experience has echoed that as well.

Ashley:
When you build your team, you’re looking for people that compliment you and aren’t the same. Tony and I were actually talking about this when we were just on another Zoom call is how we would not work well together wholesaling, because we both want to be the people behind the computer sending out the direct mailers, but we’re not the people that are going to go and actually talk to the sellers and get them to sell to us, the closers. So it’s finding those key people. Like you didn’t want to go collect the money, but your partner was fine going to collect the money from the laundromat.

Tommy:
He actually ended up buying a place like a mile away. He read the first chapter of Brandon’s buying real estate with no money down. I called him after he read it. He’s like, “I read the first chapter of this No Money Down book.” He went to buy a house, literally a mile away from the laundromat. That was a dentist office on the ground floor and five bedrooms in the top floor and it’s a student housing. So he lives with currently four undergrads and he’s a 30 year old man. So it’s pretty weird

Ashley:
Reliving his college days again.

Tony:
That’s crazy. That’s crazy.

Ashley:
I’m going to have to reread that book. I don’t remember that part.

Tony:
I didn’t get that far from the first chapter in the book either. I must’ve been reading the wrong way.

Tommy:
He was just so inspired.

Tony:
Well, let’s talk about a specific deal, Tommy. So it sounds like you want to talk about this land deal. All right. So let’s dive-

Ashley:
No, that’s what I want him to talk about.

Tony:
That was a mandatory part of you coming on the show was talking about the land deal. So I just want to give an overview first Tommy, for the listener. So I’ll ask you some quick questions. Give me a quick one word or two word answer back, and then we’ll do a little bit more of a deep dive after that, but what market was this property in?

Tommy:
Upstate New York, like a half hour South of Albany.

Tony:
Got it, and you said this was a land deal, correct? So just straight land, no structures or anything like that?

Tommy:
No, it has 18 units on it. 18 rentable units.

Tony:
Oh God. Oh wow. So this is deal is even more interesting than I thought initially. All right. So you’ve got 18 units on this.

Ashley:
Break down what those 18 units out real quick.

Tommy:
10 mobile home lots, three single family homes, one five unit apartment building, eight storage units on 23 acres. There were plans to previously develop and much more developments up here. They had like 33 unit mobile home development plans that didn’t go through.

Tony:
What’s your strategy on this property? Is this like a long-term buy and hold or you just kind of … I don’t even know what you do with all those different types of homes. What’s the strategy here?

Tommy:
Well, it works as it is, which is the reason we bought it. We figured the downside was very low. Worst case scenario, cashflow is 10%. That’s like, okay, if that’s my baseline scenario, 5% vacancy, 10% cap X, 5% management, very conservative assumptions on landscaping. If that’s the worst case scenario, we should do this deal, and then there’s tons of upside because we have all this land that had plans to previously develop and so much space. So we’re really in the process of figuring out what we can put on a land.
We’ve been going back and forth. Like, should we do Airbnb? Should we do more mobile homes? I think the mobile homes could be tough because of just the town. Apparently in 2008, when they tried to get this passed, it was a long story that I just heard yesterday from the local salvage guy, but they were people picketing at the town hall when they were passing this through the town hall. So I don’t know if that’s possible, but we’re going to see if we can do something else.

Tony:
You got some options, which is good. So you said 23 acres. What was the purchase price on this?

Tommy:
740,000.

Tony:
Wow. That is an awesome deal for 740,000. So I guess give us the backstory. So how did you find this property? What made you think that this was a good deal? Lead us to how you got this one under contract.

Tommy:
So again, my partner, he was going upstate for the weekend, back in April or may when COVID hit and he said, “Let me know if you see any properties on the way up you want me to look at.” So I said, “All right, sounds good.” Then I started looking at properties upstate, and I was thinking, oh, if we’re all working from home, I should house sack a duplex or triplex up by one of these ski mountains. That might be a cool thing to do. I’ll probably be working from home for a few months. I could probably swing it.
I’m still working for home a year later, but that’s another story. So I was thinking, okay, let’s look at some of that kind of stuff. Then again, driving up on Zillow, I was like, oh, this is a weird deal.
$740,000. This is not a normal property. This is very weird. So we swung by and we looked at it, we talked to the seller and this was like the height of COVID when the realtors weren’t even showing properties in New York state. So we had to meet directly with the seller, keep our distance. It was a really weird experience but after it, I was like, “Yeah, I’d love to do that deal. It’s too bad we don’t have the money to do it.”
My partner Mitch was like, “We’ll figure it out. Let’s do it. We can figure this out.” I said, “All right, I guess let’s try and do it.” That was how we found it and that’s how we put it under contract. At the time, everything up to here was flying off the market, 10, 20% of our ask because everyone wanted to get out of the city and this property we were able to get at ask. So part of the reason it was so, kind of the earlier point, unique.

Tony:
Was this just listed on the MLS or was it on some other platform?

Tommy:
It was on Zillow, which I thought was weird because it seems like more of a commercial deal and I think maybe that’s why it wasn’t getting the attention. I still think even if it was on a commercial database, it wouldn’t have gotten that much attention because it was … If you’re looking for a mobile home park, you’re looking for a 50 unit mobile home park. If you’re looking for an apartment building, you’re looking for apartment building. It’s just, who wants this? Me, I guess. Most people probably don’t.

Ashley:
So how did you end up finding the money for this? How did you fund it?

Tommy:
I was able to, in my friends’ group chat, talk about how cool this deal was and wait for someone to be like, “I want it on this deal.” Some sucker, he said, “Yeah, I’ll join you guys.” So he was the one who put us over the edge to where we could fund it.

Ashley:
So you were also house hacking this property, but did you do a commercial mortgage because you probably weren’t able to get a residential mortgage on this?

Tommy:
Yes. It’s a commercial mortgage, which I’m renting this personally from the LLC, and for cheaper rates, since I’m managing it as well, and I’m hoping my tenant doesn’t knock on the window while I’m doing this podcast because they all live next door. I have 17 neighbors that are also tenants.

Ashley:
Do they know that you’re one of the owners?

Tommy:
Yes. That was a mistake.

Ashley:
Yeah.

Tommy:
I didn’t know how else to do it. The previous guy had owned it for 40 years and it would have been weird, I think if were like, “I’m the manager,” coming in and doing all these things my way. These people have been living this for 40 years and the previous owner, it was his dad’s and he just knew everyone here. At the end of his life, he passed away a few years ago, but the reason they knock on the windows and knock on every door in the house literally is because he couldn’t move around that well towards the end. So he would just have people knock everywhere until he’d hear and until he could let them in. So I need to maybe put some restrictions on where they can knock.

Tony:
I want to talk just really briefly about the analyzing portion of it, because there’s so many different pieces of property on there. How did you know that this was a good deal? Did they give you like a rent roll or like, “Hey, here’s our income and expenses for the last 12 months?” What did you look at to say, yes, this makes sense?

Tommy:
They gave us the rent roll. The rent roll was around 130,000 for the year. So around 12,000 monthly rent roll and I was able to just look at different mobile home parks that sold in the area and what those went for. I was able to look at apartment buildings. What did those sell for the area? What did single family houses sell for? What did storage sell for and just kind of put them all together. When I put it all together, I was like, this is a million dollar property. Just no one wants to buy it because it’s so weird.

Tony:
Got it. So you looked at like comps in the area. You said, okay, this is what we think that this can do in the marketplace and you used that to justify your decision. What about the storage? You said there’s storage units on there as well, right?

Tommy:
Yes. Very, very below market storage containers, which I can see from my window.

Tony:
All right. Interesting.

Ashley:
Did you have any vacancy when you acquired this property or have to do any major repairs or was it pretty much turnkey and you kept everything as is?

Tommy:
That’s a very simple question with a lot of detail for my answer, but there were three vacancies. One of them was the seller’s house, which I convinced my girlfriend to move into with me, somehow. The other one was a single-wide trailer mobile home, which was previously occupied by the sellers stepsons. We recently sold that with seller financing and the other, it was kind of vacant, but it was a double-wide on the property, which is a very, very nice.
It’s like, this is nicer than any house I wanted to live in for a while. It’s a super nice house. It was built in 2005. Really, really nice, and it was an estate sale and we were able to buy it out of an estate sale for $27,000. We actually went under contract last week to sell it for 72,000, putting like $500 of work into it, which was just like fixing a leak in the sink. So that’s the beauty of the property is that there’s so many different ways to leverage the pull to add value and to make money, to make it worthwhile.

Ashley:
That’s what I like about this property is that you have so many different revenue streams coming in, and this is something that really attracts me. Like, okay, you have residential rental income, you have commercial rental income with the storage units, you have the single family income, you have … The potential with the vacant land, you can sell off a parcel, you can develop on there. There’s just so much you can do with this and maybe storage units, they somehow become obsolete. Well, you still have other revenue streams to get you through that. So that’s what I really like about this property.

Tommy:
I was also always looking for a mobile home park. I’d been looking for mobile home parks since like 2016 when I first was like, I want to buy real estate, but I never was able to pull the trigger. I was so into mobile home parks in like 2015, 2016, because for my job, I would analyze them. I would analyze the big ones, like Equity LifeStyle, Sun Community and I was like, I have to buy a mobile home park one day. This is so smart. This is a good idea.
Then I guess maybe Brandon buying a mobile home park inspired to really get going. He bought a mobile home park, lives in Hawaii and I bought a mobile home park and live in upstate New York. So I think I took a wrong turn somewhere, but hopefully he will get there one day.

Ashley:
Tell us what your experience has been like. Well, first of all, who manages your other properties? Is that you or a partner? You outsource that?

Tommy:
That’s Mitch again, my partner.

Ashley:
So now how has that transition of your whole lifestyle changed since you moved and you are now an onsite manager? That had to be a huge lifestyle change and transition.

Tommy:
The funny part is that when we bought the first property, within the first week, I was the one managing the property and I was like, “I can’t do this.” It’s like, I’m going to hire a property manager. I hate this. I really hate this. I want to sell this thing, this is terrible. Then Mitch again stepped up and he said, “I’ll do it.” I said, “Okay, I’m good with that then.”
So then this property, I got used to it over the year of being like, okay, I guess managing a property isn’t that bad, and then this property, it’s been a crazy experience. Mostly fine. Everyone is very nice. I feel like I got very lucky, but it was also because we talked to the seller, we developed a relationship with a seller and we kind of felt comfortable that he had put good people in the property.
He was a good person. We’re still friends today. He comes by every so often, picks up mail that gets delivered here and we chat for a while. I went to his new house that he bought, which is much nicer than the house that he left me, but that’s okay. I’ll get there one day. So it’s also just kind of like a gut feeling of this guy probably wouldn’t put criminals in these units, I don’t think. That was very comforting to me

Ashley:
Have you had any like, we call them the toilet bowl stories after Brandon Turner shared his. Have you had like that knock on your bedroom window at 3 AM like, “Hey, come fix my toilet,” and are you doing the maintenance even yourself or do you have someone come take care of that?

Tommy:
We have someone come take care of it. I’ve been trying to do some of it. I’m trying to get more handy. My dad built houses growing up and I can’t do anything. So I’ve been working through it. He’s just slowly becoming very proud of me as I’ve developed a workshop here now. He’s coming up this weekend to see it and admire it and talk about my tools. So it’s pretty funny, but within my first week of owning the property and living here, I had someone call me and say, “Hi, my toilet isn’t working.” I was like, oh my God, already? I was like, “What’s wrong? Is it clogged?” She’s like, “I think I just need a plunger.” I was like, “Okay, well you can probably go get one of those at the store.”
She said she didn’t have a car. I said, “Okay, I don’t know what to say here. I guess I’ll go pick up a plunger for you next time I’m out. I don’t know what to do. I have a full-time job. I’m on phone calls right now.” She said, “Okay, I’ll see if I can do anything.” So she was able to get her neighbor in the property to give her a plunger, but that is the beauty of the mobile homes is that most half the units, we don’t have any maintenance on. It’s just the apartments really where there’s maintenance and there seems to be a lot of it, but that’s okay.

Ashley:
So that’s because the people living in the mobile homes own the mobile homes and they’re renting the lot from you.

Tommy:
Correct.

Ashley:
Then that’s all of the mobile homes you said that are like that?

Tommy:
Now that’s the case. Yes.

Ashley:
So I think that’s great and heard Brandon Turner talk about this too, is like you just rent out the land and then you don’t have to worry about the maintenance and stuff like that. Then the people own the trailer. So then it’s a lot harder for them to want to leave because I’ve heard that it’s very expensive to actually move a mobile home.

Tommy:
But it’s also so affordable. Living up here, I heard the benefits of how affordable it is to live in a mobile home and living up here, I’ve really seeing it firsthand, how affordable it is. One of the tenants we just moved in, we did seller financing with him. He’s paying 800 bucks a month. His previous living situation was with roommates and a family. He has three kids and a wife and he was living with roommates in a very small apartment. Now for the same price, he’s living in a mobile home that he owns.
If you’re handy and you can fix things, it’s such a great deal. It’s like a no brainer for a lot of people and also he has a whole house and space. It’s a great thing.

Ashley:
I need a button here on my soundboard that just goes like, boom, another revenue stream. You’re doing seller financing. You’re collecting that income.

Tony:
I want to talk a little bit about the systems and processes you have in place to manage all the units that are on this piece of land. Are you guys just using Excel files? How are you managing this property?

Tommy:
Great question. I actually just … As you asked that question, I realize that I use Buildium, which I heard about on Ashley’s first podcast on the BiggerPockets podcast. That’s where I heard about it. That’s why I said I should get that software. That sounds like a good software. So yes, we use Buildium as the rental management software, which is really helpful for all of our properties because they accept cash payments at CVSs.
So some of our tenants down in Philly like to pay in cash and instead of them sending us money orders where you’re going to pick up cash, they can just go drop it off at the CVS and it comes right to our bank account and it just makes it so much more … I hesitate to use the word passive because it feels like nothing is passive, but a lot easier to manage. So yes, Buildium is the one thing that we use for rent collection.
Eventually I would like to hire some virtual assistant and get the tenants using Buildium, using the inspection aspect of building them and making them submit stuff on the app so that it comes to me through a first kind of screen of some sort.

Ashley:
Right, exactly. So right now, did most of those residents on this property come and pay cash, hand in their checks? How has it been transitioning them to using software?

Tommy:
This is pretty unbelievable. I told my partners I want to use Buildium for this reason. I said, “We should have to use Buildium so that we can,” because yes, there was a lockbox where people used to drop off checks and cash. It was a lot of older tenants and I figured there was no way … I was hopeful. My partners were like, “There’s no way people want to do this online.” Then I went around to introduce myself in the beginning, I gave a bunch of people. I was like, “We can collect rent online.”
Half of them were pretty like, “Oh, that’s great. I like paying things online.” A couple of them were like, “My Facebook just got hacked. I don’t wanna use that internet.” I was like, “Okay, well, we’ll see.” Then that same tenant later that month was like, “What’s the website to pay on?” I was like, “Oh, it’s this.” It’s just like really weird how some people … I don’t know how it happened, but most people pay online now, which is great.

Tony:
Have there been any big challenges that made you maybe second guests getting into such a big deal, especially as a house hack? You talked a little bit about managing the tenants, but anything else that … Because I think that managing tenants comes with any house hack, but yours because it’s like a mixed use property with all these different structures on here, have there been any unique challenges because of that?

Tommy:
Yeah. Upfront, there was so much CapEx. Within the first week of buying the property, it’s private water, private sewer. Within the first week, we had water lines go to half the mobile home park. They were leaking and the maintenance guy comes up and says, “Hey, you have a leak somewhere.” I said, “Okay, fix it. Do whatever you got to do. I don’t know how to do this. Let me know what the deal is.” Then he’s like, “All right, it’s going to cost like $7,000.”
I was like, “Wait, wait, wait, what’s going on here?” I’m like, I guess we have to do it. I don’t know how else to … So I just paid him out of my own pocket. I was like, “Here you go. I guess the rental is going to cover it eventually.”
So I gave the LLC an interest free loan while we kind of collected rent over the next few months, but for now I just have a loan out to the company for this water repair, which is frustrating, but you had to do it. Then the next week I see them down there in a backhoe, digging up the entire left side of the park and I was just like, “What is going on? What did I do? Why am I here?”
Then like a week later, we have all these trees on their property, which I’ve been trying to … We got to cut some of these trees down there. They seem a little hazardous. There was one in particular, I thought, if that one falls, it’s going to fall on a power line and we’re going to lose power, which won’t be good.
Then a week later, the power goes out and I’m like, oh, that stinks. Let me drive around and see what’s going on, and that tree that I was just talking about, fell on the power line and then the water stops. The heat stops. It’s very cold. It was just like, I have to go set up a generator for the water pumps that pumps water. The whole thing is like, I want to start a reality TV show up here.
It’s just like, I feel every day, it’s like a problem. That’s kind of what I realized with real estate. Maybe this is more of a mindset thing, but it’s like every day is a … I almost expect problems to happen. It’s mostly just solving problems and then one day something good happens and you’re like, “Oh, that was good. [inaudible 00:38:40] I made a bunch of money,” but most of the days it’s just like, all right, now I have a problem and I have to fix it.
So you just expect them to happen and then eventually something good happens. It’s kind of like compounding growth. You don’t see anything happening. Then one day something big happens and something big still needs to happen for me, but I’m waiting patiently.

Tony:
You’re getting there. You’re on your way, but I think that’s like the important lesson here though, is that people make a lot of money in real estate investing because real estate investing isn’t easy. It has its days where it’s really hard, and it’s the people who can push past those difficult moments and continue to invest in real estate that see the real long-term benefits of doing so.
Had you decided, when you saw the $7,000 bill that you were just going to sell the place, you lose out on all the potential long-term gains that you’re going to see you. So for the folks that are listening, for the rookies that haven’t done that first deal yet just know that bad things are going to happen. Point blank, period. I’ve had stuff stolen from my properties.
We’ve had guests whose homes have caught on fire. We had a show recently, Ashley remember, where a guest had to chase someone off of his property with a gun because they broke into his house. Crazy things happen as a real estate investor, but you deal with those things and you see the longterm benefit.

Tommy:
That’s something that I kind of realized when I wanted to get into real estate back a few years ago. So my background is in finance. I wanted to be in the stock market for a long time. In school, I was studying stocks and I was like, “I want to be working at an investment management firm and picking stocks because that sounds fun and I want to do that kind of research.” Now I’m realizing, okay, if you’re the best stock picker out there, you’re making 9% on your money when the benchmark is making 7%.
So if you’re killing it, if you’re the best of the best, you’re making 9% when everyone else is making 7%. That doesn’t get me excited anymore. It took me a while to realize that, and in real estate, there’s a reason that you get those bigger out-sized returns because it’s work, it’s risk. Even if you have a property manager company, somebody to find the deal, you have to take that out in your own name, but often personally guarantee it.
There’s liquidity risk. You can’t sell it. I mean, you can sell it, but there’s closing costs. So there’s just all these different things that lead to real estate generating out-sized returns, and if you’re comfortable with those risks, you should absolutely take them but there are risks, obviously.

Ashley:
I think the fact that you had reserves in place that you could front that $7,000 is a great example of why it’s very important to have reserves too, so that when something big does happen, you can … A lot of times, a risk, something bad happen, that can be solved with money. Unfortunately, that is oftentimes the simple solution. So that’s why it is wonderful to have reserves in place.

Tony:
Dan Sullivan, he was just recently on the RG podcast and he’s got a book out called Who Not How, and in that book, he says, “If you have the money to solve a problem, then you don’t have a problem.” When I heard that, it was like, man, that’s so true. If the money’s there and the money can fix a problem, then what is there to stress about? You pay the money, you move on to the next problem. So it just tied in so well, I wanted to throw that in as well.

Ashley:
Just real quick. This is something personal for me, nothing to do with the show but on that note is that we went to Walt Disney World a couple months ago and we decided to go down early, me and the kids. So I changed our flights. Well, somehow I did not change our flights correctly so that our actual flight and our return flight got canceled and I didn’t realize it until the day I went to go check in and we don’t have any return flights home. We had to book the day before and it ended up being $1,000 and was like, oh my God. I booked it so far ahead that it was like $300 or something, a lot cheaper, but it was like, it just showed that we’ve paid off that. We’ve saved our money.
We’re investing in properties and it didn’t matter. It was okay. We would just pay that. It wasn’t like we would have to put it on a credit card or anything that, and I think to get to a point in your life where you can have those reserves in place, that you can throw money at something to make it not a problem. That was our last day at Disney and we still enjoyed ourselves, where take me back two, three years ago, it would have ruined the whole trip for us, like having to pull that $1,000 from somewhere. So I’m going to have to read that book for sure. I like that quote a lot. Back to Tommy.

Tommy:
[inaudible 00:43:05] what we talked about in our Clubhouse was that you were saying we were both, I guess, talking about how we don’t take money out of any of our properties, any of our LLCs. The accounts where we had a stabilized property, we just have a bunch of money in there now just in case something happens because we don’t want to be scrambling for it when we need to replace a roof for something. At some point, we’re going to take money out but when we have a very, very comfortable reserve.
So we’ve just been letting the money pile up as we collect rent checks and my girlfriend jokes with me that I’m never going to take money out of my properties. I’m just going to keep reinvesting it and we’re never going to see any money, but one day I think we will. I promise.

Ashley:
I tell my partner, I’m like, “You know what? Let’s not buy something for a little bit and just see all that money collect.” Because all of our money is go to pay for the rehab. So we don’t have to use hard money lenders or private money or anything. Then we’ll be like, “Oh, but there’s this property here. Let’s go get that. How can you pass that up?

Tommy:
It’s an addiction. It’s a problem.

Ashley:
Yeah, it is. So to just finally wrap up this deal for you, you bought it for, what was it? 740. So what do you think that now, did you increase the rents at all? What would this property actually appraise for and then going forward, what do you actually see? What is your goal for this property? Are you going to hold it long-term? Are you guys going to sell it? I know you said you have a couple of development ideas for it.

Tommy:
I think we want to develop it as much as we possibly can, because that’s where we can get some real value add.

Ashley:
How are you guys going to fund that? Is that something you guys are saving for, or are you guys going to do commercial lending on that? Just like the plan overall in general for this property. Long-term hold, you’re going to sell off parcels.

Tommy:
Yes. I would say long-term hold. Definitely long-term hold. I can’t see myself selling any real estate. I just think it makes sense to keep refinancing as we kind of generate value, generate income, just kind of keep refinancing. It’s the most tax efficient, probably smartest way to own real estate. I realize that at some point I probably will want to sell, but I’m not planning to over the next 10 years.
So it’s just going to be adding value and then refinancing when we’ve added value. We do have some reserves in the bank. So there’s two things we’re going to pull on. One is the mobile home sale that we’re doing, hopefully closing on in the near future, which will be $72,000. The next one is that when we bought the property, the bank … Oh, this is actually an … I’m going off on tangents, but when we bought the property, the bank said, “We don’t know you. So you have to put down $37,000 in a reserve account.”
So we got 75% loan to value financing, but we had to put down another 5%, which we can draw on in two years. So we essentially have around $100,000 in the account and we’re not going to develop probably for the next year anyway. So it’s not going to be like a long wait time until we can access that money. Back to that point about the financing, this is something that people like to hear is that we didn’t know how to finance this property. We thought who’s going to finance something as crazy as this. Who’s going to buy something as crazy as this and on top of that, what bank is going to finance something as crazy as this.
So that was my next, like, how are we going to do this? All I did was just ask the seller. I said, “Hey, who do you use for financing?” He said, “Oh, we use this bank.” I said, “Okay, can you connect me?” He said, “Sure,” and talk to the bank for five minutes and they were like, “Yeah, no problem. We’ll give you 75% loan to value.” I was like, “Oh, that was pretty easy. That sounds good. Thank you.”

Ashley:
See, that’s a really cool story and Tony and I always talk about those small local banks. I think you would even mention that when we talked about this on Clubhouse is how they said, “Oh yeah, we know that property. No problem.” Because it’s a small town and they know the area and they know that that property has potential and that it’s generating income. So if you did pull out cashflow from this property, what would that cashflow be?

Tommy:
Probably generating around 2,000 a month in cashflow, after everything. So we did put a lot down. It maybe sounds like a lot, but we put a lot of money down and we split it three ways. So it’s not like I’m not retiring off that money anytime soon. It’s really like a long-term value add play.

Tony:
You’re not doing the Scrooge McDuck dive through all the money. Like you’re not diving into-

Tommy:
Not yet. It feels like I’m doing the opposite. It’s diving into an empty pool.

Tony:
That’s the other piece too, is like as you’re building, as you’re in acquisition mode, you’re not really seeing a lot of the money, and it’s the same thing in our business right now as well. We’re scaling pretty aggressively in the short-term rental space, but we’re literally taking all of our money and then some, and putting it back into acquiring new properties. We’ve got six properties under contract right now, and that’s a lot of capital outlay for our team, but we’re doing it because we know that two years from now, five years from now when all the portfolio is stabilized, that’s when the cashflow is really going to come in and that’s when we’re really going to feel like we can relax and take a bit of a breather.
All right. So Tommy, you’ve got, I think, a really unique story and I’ve hinted at this before. You went the commercial route when most investors want to go the single family, kind of BRRRR route. What do you feel was the, and you touched on it a little bit earlier, but what do you feel was the … How did you break through the fear of going after something so big, so early? Because investors, I think they’re afraid to buy one property, a single family home, but you went just head first into buying these bigger deals. Why weren’t you afraid of doing that?

Tommy:
I was afraid. There’s no way around it. I was pretty terrified, but you just like fight through it. My favorite book is The Obstacle is the Way by Ryan Holiday and that book is just all about the things that are hard are good for you. That’s another thing that I think about here is like, there are a lot of hard things.
Buying in New York state, a lot of regulations and stuff, but that’s also generates more value. It’s like, people don’t want to deal with it. I want to deal with it. So it creates greater returns. Everyone’s buying down in Florida, down in Georgia, everyone’s buying in those hot markets and the returns are compressed but up here, I think you’re probably getting at least higher cash flow from doing that kind of stuff and taking a more contrarian viewpoint on some of these things.
So that is what also gave me comfort. It’s just like, no one else is doing this. Maybe I’m just a contrarian by heart because people would probably have the opposite thought process now that I’m saying it out loud. No one else is doing this. There must be some value or there’s probably some something good here that we can probably getting a good deal because no one else wants to do this is my thought process, which I think most people would be like, “That’s ridiculous,” and I think they might be right too.

Tony:
I think that that’s a good point, because if you’re doing things that other people aren’t doing, I think that the perceived risk is higher. It’s more risky because no one else is doing it. Whereas if you go do a BRRRR … Like, everyone’s doing it. It’s a proven process. So how did you mitigate that risk in your mind? Like how did you see that risk? I guess just, what are your thoughts on risk in general? How do you manage risk in your life and push past those?

Tommy:
It just doesn’t feel that risky. I understand it’s risky, but after doing the first one and seeing how it went, it’s kind of to Ashley’s point where it is just money. It’s like, okay, what is the absolute worst case scenario here? It is just money. My partner, he said that exact same thing to me a few months ago when we were having a very bad day, something very wrong happened. It was partially my fault.
I was like, “I am so sorry. I will never do this again. I messed up pretty bad.” He’s like, “It’s just money.” I was like, hey, that’s a great idea. That’s a good point. It is just money. So it’s just like, at the end of the day, it’s thinking about what is the worst possible case scenario and usually it’s honestly not that bad. If you need to think of a medium downside scenario, it’s also just like, I’ll probably sell it for a slight loss. Real estate is just very forgiving.

Ashley:
I think the fact that you’re thinking of what is the worst case scenario, that it makes you prepare for that. So you know what you would do in that situation, you know that you could put money up, you could call this person to get advice. Or that’s a big thing is like, what is that worst case scenario for you? Then solve that problem before the worst case scenario happens.

Tommy:
I still have a full-time job. My partner still has a full-time job. So it’s not like if this goes wrong, we would lose money, but we have a job that I’m going to have for a long time probably. It’s not like, when I think about my lifetime of earnings potential, it seems expensive right now, but in the grand scheme of things, hopefully it’s not going to completely destroy me or sink me. It’s just, it’s going to suck for a few months, maybe a year.

Ashley:
Let’s move on to our next segment. So this is the Rookie Request Line. Anybody can give us a call at 1-888-5-Rookie and leave us a voicemail with your question and we might play it on our show to have our guests to answer. So are you ready, Tommy?

Tommy:
I’m ready.

James Buck:
Hi, my name is James Buck. I’m located in Hamilton, Ohio, just North of Cincinnati. I’ve been listening to the show for a long time since you guys started it. So my question is, I have two properties now that are investment properties, single family homes. I’ve been cold calling. I’m just doing skip tracing to find potential sellers and I’ve been cold calling and I have a gentleman who has a four unit that I gave him an offer on. He never really told me he was interested or not. He wants to sit down and have coffee. This being my first experience cold calling and actually meeting up, what should I expect from this cup of coffee? I mean, should I take a contract with me, offer him money, get it signed or is this just more of like a meet and greet? How would you guys handle this

Tommy:
For me, that sounds like an ideal way to start a relationship, start a conversation, just like network with them. Talk to him. I think if that deal doesn’t work out, another one very well might work out. You have to treat everything like it’s not the end of the world if you don’t find the deal this time. It’s just part of the process and you’re going to have a lot of steps along the way until you finally land that first deal.
You just have to be chipping away until you do eventually get that first deal. So I think just using almost like a networking kind of thing and asking him how he got the four unit in the first place, just talking to him about his story. Let him talk. I think letting people talk is a powerful thing in starting a relationship

Ashley:
That is such a great point. Just go there and listen. The biggest thing you could figure out from listening to him is what is his motivation for selling and what can you do to, to be that person, to help him to get out of why ever he potentially needs to sell this property. That could be a great reason that he accepts your offer because you listened to him and figured out what he really needs. Maybe he doesn’t even need money. He just needs to get rid of this property and maybe you can help him find a new property or something like that, but I love that answer is really to listen and take that opportunity to listen to them and make sure you pay for his cup of coffee too.

Tommy:
Also follow up too. I think that’s one of the biggest things that I’ve been telling people is that like I have so many people trying to break into the industry or break into real estate and they call me and they talk to me one time for a half an hour and then I never hear from them again. I’m just like, and I’m saying, listen, let me know what happens. I want to know if you’ve got a job. I want to know if you bought a deal. I want to know what’s going on. I just invested a half hour to an hour of my life into your life.
So can you please follow up with me and no one follows up. I’m just like, I want to be friends with you. I want to help you. This is a crazy thing. Just let me know what’s going on in your life. It’s not hard. Text me. Ask me about the NBA. Ask me about the Knicks. I don’t care. Just talk to me.

Ashley:
A little glimpse into Tommy’s life, living in some desolate town and I’m seeing you, “Please, I need friends.”

Tommy:
It’s too real.

Tony:
I want to add one more thing to James’ question here. So he asked at the end, should I take a contract with me? Should I offer money? Should I try and get it signed? My thought process on all those things is yes. If you’ve had that conversation and you feel that there’s a motivated seller you’re able to solve that problem, like Ashley said, heck yeah. Get the contracts signed, and sign it right there if you can. Don’t be afraid to make the offer, even if it’s what you feel is a low ball offer, the worst that they’re going to say is no.
You can always walk them through how you came up to your offer. Say that that seller is asking for 200K. You think the offer only makes sense of 100K. You can say, “Hey, I’m going to make an offer and it’s probably going to sound really low, but let me walk you through why this is my number.” You say, “The property is only going to be worth this much. Repairs is going to be this much. I assume to make a profit of this much,” and you can be honest with them and walk them through that. But yes, absolutely make an offer, get the contract signed if you can.

Ashley:
I think you can, instead of even a contract, if you don’t feel comfortable going straight forward with an actual contract, you could do a letter of intent. If you just Google that online, you can look up sample documents and you just fill that out. It’s a little more informal, but I feel like if you’re just meeting this person for a general conversation, they might be more comfortable with that than you just immediately pushing a contract on them where it’s just like, “Hey, this is a letter. If you wanted to just sign this, this is what I’d be interested in.”
You just put the property address in, what your terms are, how you want to purchase it, what your purchase price is and it just really simple applies a document. New York state, a real estate contract is how many pages long where this just puts everything on to basically one page as to what the key terms are of this purchase and just a little simpler for someone to review. Then after they do sign that letter of intent, then you can go to your attorney, whoever you use to draw up your real estate contract and then meet up with him to actually get that signed again.

Tony:
Ashley dropping knowledge. All right, Tommy, you ready for the next segment here, brother? We’re going to ask you a few random questions as we round this thing up.

Tommy:
Please.

Tony:
I’m curious, what asset classes are you looking at in the future? Just really quickly. So for myself, I have long-term rentals, short-term rentals, but I know that one of the asset classes I eventually want to get into is storage. I love the idea of storage. It’s something that I think works well in California as well. So with some of your experience so far, what do you feel is on the horizon in terms of additional asset classes?

Tommy:
I like the idea of staying in the mobile home park space and also the storage space. I just want to get into … I know I need to pick a niche at some point and just run with it, but I just want to find deals that don’t make sense for anyone else, but makes sense for me because I’m a little bit out there. Just something like, just be a little bit more unique, be a little more contrarian with how I think about some real estate deals.
There’s a specific asset classes. I do like mobile home parks. I do like storage. I like mobile home parks because a lot of people have a box of like, I need to buy a mobile home park that’s this, this, this, this like a city water, city sewer, blah, blah, blah, blah, blah. I’m like, well, what if I get my water certification and I can have had a private well and what if I’m just really good at private water?
What if I’m just really good at private sewer? What if start a septic company? I don’t know. Stuff like that and just develop some really unique way to, I guess, see value where other people don’t see value just because it’s easier to get deals done in a space where there’s not as much competition. Competition doesn’t freak me out, but I prefer to stay away from competition if I can.

Ashley:
That’s like my market too, is the very rural areas, there’s not a ton of competition, especially for rental properties doing that. So it’s a lot easier to get into, I would say, but you also have to know the market a lot more. I think that’s a huge benefit to me is that I live in the rural area. So I know everything in this area, where an out-of-state investor coming into that market might be a lot more difficult to know like, okay, this little tiny town, what’s the good area in this, where it’s a lot easier as an out-of-state investor to actually analyze like a bigger city.
So I just love how you basically just found this little tiny town and moved there. I want to hear a story … So we kind of heard your toilet bowl story before. What is like a mindset shift story that you had? It could be related to real estate or not, or something that prepared you to get into real estate and to hold your own as a real estate investor.

Tommy:
So it’s not about real estate, but it is a story that everyone I know and has told this to really enjoys it. It’s pretty crazy.

Ashley:
Well, perfect. We love crazy stories on here.

Tommy:
All right. Well, here we go. A few years ago, I was in Denver for work on a Thursday and Friday and I was going to go skiing for the weekend with some friends that I knew in the area, but at the last minute they were like, “I don’t want to go. I can’t go this weekend.” So I was like, “Oh, that sucks. I guess I’ll just go by myself.” So I rented a pickup truck and just started driving to this ski mountain by myself, early on a Saturday morning.
I pulled over into a Starbucks to pick up some sandwiches before I went skiing, and there was this woman in the Starbucks that she came over and she said, “Hey, can you just give me a ride right down the street?” I was kind of like, “I don’t know.” She’s like, “Oh, it’s just right down the road. Don’t worry. It’s not going to be long.” I was like, okay. She seemed like she needed a ride and I was like, “Yeah, I will help you.” She seemed helpless.

Ashley:
Is this your first time picking up a hitchhiker?

Tommy:
First and only time.

Tony:
This is how every scary movie starts. Like young, unassuming, handsome guy stops at a roadside. So I’m curious where this goes.

Tommy:
Yes, it’s crazy. So we get in the car and it’s her and her daughter who I had not seen that at first, but they both got in the car with their stuff and they’re like, “So we’re going to Aspen,” which is like three hours away and I was like a half hour away from my destination. So I was like right there, I was ready to go skiing and they were like, “Yeah, we’re going to Aspen. Do you want to come with us?” I was like, “I don’t know.” I turned to her daughter because she was the one asking me.
I was like, “Do you mind if I come with you on your family vacation?” She was just like, “I guess.” So we started driving and we were in the car … There was so much traffic. We were in the car for like six hours. I was like bonding with these people. It was so funny. It’s a very long story, but to make it much shorter, I spent the whole weekend with them. It was very fun. They were super nice. I stayed with them in Aspen. It ended up being her and her three daughters that I was with.
We went out and it was a lot of fun. I went skiing with them the next day and they were also super impressive too. I was like, man, these people know what’s going on. The mother had written a book, the kids were like Ivy League schools going, really big plans. I was like, man, when I was in school, this is not what I was doing. I was very much not in this path. I had a great time.
They were from New York. I was from New York. I was like, “Let’s hang out in the city when I’m back. This is going to be great. We’re like new good friends.” So then I get in the car and I start driving home and I’m like, “Mom, I had the craziest weekend.” I started calling my mom obviously and I was like, “The mom wrote a book and the girls were really impressive.”
She was like, “Oh, well what was the book’s name?” I was like, “I don’t know.” So she Googled her and she was like, “Oh Tommy, this is like a Kennedy.” I said, “What do you mean? I don’t even know what you’re talking about.” It was like a daughter of Robert Kennedy Jr and I was just like, huh, that is pretty wild.

Ashley:
I have so many questions. How did they get stranded at Starbucks, first of all? Who left them there?

Tommy:
That’s the first question.

Ashley:
So how does this tie into mindset? The first thing that comes to mind for me is like, okay, this probably was out of your comfort zone. Maybe not for them, but for you, I mean, picking up people and then end up spending the whole weekend with them.

Tommy:
It is crazy. It is completely crazy, and at the time I was like, this is insane. This is something my mom would do. My mom’s like crazy. She would do the same thing and it’s just like saying yes and getting out of your comfort zone and just kind of feeling like when you get out of your comfort zone, you either get killed by hitchhikers or have a really cool story. I got lucky. It was the second part of that. So I don’t recommend doing that. Even after, this is kind of funny, after that happened and we became friends, the next day they were like, “It’s cool that you did this, but you shouldn’t do this again. Don’t pick strangers up.”

Tony:
That’s got to be one of the best stories that we’ve heard on this podcast and we’ve heard some crazy things so far. So that’s up there, man.

Tommy:
It’s just like, I had no idea the whole time and then back in New York and they’re like, “Hey, come over for this.” I’m like, okay, this is the most insane thing ever … And I didn’t even think it was that crazy at first but then I started telling people. I was like, “Yeah, I had this crazy story,” and they could not believe the story. I was like, I guess it is pretty crazy, because I just spent the weekend with them. I thought they were normal people, just like a nice family. I was like, this is hilarious. I have new friends and then everyone was going crazy. That’s the craziest story I’ve ever heard. Kind of a funny … But yeah, just being open to things.

Ashley:
Tommy, you need to share with us where people can find out more information about you or if they’re ever stranded at a Starbucks and need a ride or need someone to ski with, please tell us where they can find more information about you.

Tommy:
They can definitely email me at [email protected] So just TA and my last name at Gmail. I also have been getting a little more active on social media. My sister, Julie has been crushing it on my social media, investing that adventure. So we’re trying to kind of just like, as you can tell, we have ridiculous properties. It’s like, it doesn’t make any sense what we’re doing. So we just kind thought … We do things on a daily basis where we’re like, “This is crazy.”
We need to have a camera following us around, because we get into these crazy situations at the laundromat where these people are like, I can’t even begin to describe what happens there and I just feel like we need to document some of this stuff.

Ashley:
I think we need to get you on the business podcast and you can talk about the whole laundromat venture on there.

Tommy:
Oh my God. That needs more than a podcast. That needs like a book at this point. So @investing.adventure is our Instagram handle.

Ashley:
Well, thank you so much for all the information and the laughs that you shared with us today?

Tommy:
I had so much fun. This was awesome. Thank you very much for having me.

Ashley:
Make sure you guys join The Real Estate Rookie Facebook group, and then also leave us a review. We’d appreciate five stars because you guys loved Tony and I and Tommy. So I am Ashley Kehr, @wealthfromrentals and he’s Tony Robinson @tonyjrobinson on Instagram and thank you guys so much for listening. We will see you next time.

 

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In This Episode We Cover

  • How to get commercial financing if you’re just starting out in real estate
  • Finding a great partner that will work with you, even when you make mistakes
  • Why single family homes may work for some investors more than others
  • The appeal of doing large commercially financed deals 
  • How to do a thorough inspection when you’re closing on a large property
  • Calculating your “worst case scenario” and knowing your risks
  • Developing the confidence to pursue bigger and more complicated deals
  • And So Much More!

Links from the Show

Books Mentioned in this Show:

Rookie Deal

  • Land Deal in Upstate New York
  • 10 mobile home lots, 3 single family, 1 5-unit Apartment Building, 8 storage units in 23 Acres
  • Purchase price: $740k
  • Rent roll: $11,065
  • NOI: $5,746
  • Cash flow: $1,592 (after accounting for 5% vacancy and 10% reserve)

Connect with Tommy: