Couple Leaves Their W2s (During COVID!) To Go Full Time in Real Estate

Ashley:
This is Real Estate Rookie, episode number 87.

Sam:
The moment we started and I started truly listening to BiggerPockets. Other people that were on the same path as me, the fear just diminished. Truly. Because all I needed was a few people to say, “Hey, this works.”

Ashley:
My name is Ashley, and I am here with Tony. And we’re the co host of The Real Estate Rookie podcast. What’s going on, Tony?

Tony:
What’s up Ashley? We’re back with another beautiful episode, with some beautiful people. I really enjoyed this podcast. We have a husband and wife duo. And they shared some really cool, I think strategies they’re using to build some value in their properties but more importantly, and the cool part was that they shared how they both left their W-2 jobs during COVID, to go full time in real estate.

Ashley:
Yeah. So today we have Nick and Sam on. They were actually guests of Tony’s first podcast before he came on to the Real Estate Rookie. But even he was amazed at how much just in the past year they have transitioned and changed their lives from leaving their W-2, they both started to new real estate specific kind of careers to help build their real estate empire. But now they’re kind of branching out and helping other people and taking on clients too. So it’s really interesting to find out what those niches are that they decided to pursue once they left their W-2 jobs.

Tony:
Yeah. And Sam, I think at one point does a really good job of breaking down five things they look forward to add value in a property when they’re shopping around. So, just make sure you guys listen the whole way through because they drop a lot of golden nuggets throughout the entire interview.

Ashley:
Yeah. They also live in high cost of living area too and that’s where they are investing. So if you have been stuck in your own market and you want to invest locally, but you feel like it’s too expensive. This is a great podcast to listen to because they’re making it happen, and they are getting really really great cash flow. I mean, Tony was taken aback, “How are you doing this?” So yeah, make sure you guys listen all the way through.

Tony:
And if you guys are watching this on our YouTube channel, please make sure to like, subscribe, hit that little bell notification. That way you are notified as soon as we release a new YouTube video. Sam and Nick welcome to the BiggerPockets Real Estate Rookie podcast. Super excited to have you both on here today.

Sam:
Thank you. We’re excited to be here.

Nick:
Yeah. Thanks for having us.

Tony:
Little backstory, Sam and Nick were actually guest on my old podcast. The Your First Real Estate Investing podcast. I don’t remember what number but I think it was one of my top performing podcast. I was super glad to have you guys back on, to the Real Estate Rookie show to kind of share your story. So before we get into the deal details and all that good stuff, just tell us a little bit about the two of you.

Sam:
Okay, yeah. So we have been investing for about three or four years now. We’ve been together since we were 14 or 15 years old and are now married. So Nick was the catalyst of real estate investing and decided when he was like 17, that he was going to start planting the seed. Takes a long time for me so that was really good. And once we graduated college, we moved into our parents basement, started saving money and kind of took off our real estate investing career from there.

Ashley:
That’s great. Nick, I want to hear from you as to, okay why? When you were 17, did you think that you wanted to be in real estate investing? I mean, most 17 year olds don’t think that way.

Nick:
Yeah. It’s an awesome question. I wish I had a great answer for it. I think I came from, my dad was self employed. So I sort of came from that environment, but never had anyone in my family that was into real estate. We knew nothing about it. I think if I recall, probably all of us. I started Googling and then we found BiggerPockets. And so that was kind of what got me hooked at that point. But yeah, no family connections or anything. I think I just always had the desire to want to do more than a W-2. I didn’t want to be tied to a career. Again, I don’t know why I was thinking that at a young age, but I was and then it kind of drew me in.

Tony:
Can you guys give us an overview of your current business? Where it stands today? How many deals have you done? How many units do you guys manage, operate, own?

Nick:
Yeah. So our core investing business, we have done three deals and it’s six doors total.

Sam:
We’re in Boston, Massachusetts.

Ashley:
Okay. I want to know, do you guys built this over? Was there any analysis paralysis? So you wanted to… You start thinking about this when you were 17. How long until you actually bought that first property?

Nick:
Yeah. So it was a while. Again, we were young, we went to college. But what we did was, post-college we moved in with my parents, lived in their basement to save up. So I don’t think we had a ton of your textbook analysis paralysis. I think it was a combination of, we couldn’t afford to get started right away so we went through the savings sort of portion, first. It took us probably two years to get our first deal. But from the time we were ready, until the time we were able to get under contract on something, it wasn’t super long.

Tony:
Yeah. And that’s like a pretty common timeframe. Somewhere around like, 18 months to two years. I think for me, it was almost two years spot on for me. From the day that I said I want to be an investment to closing that first property, it was about two years as well. So you see that a lot. Now, what makes you both unique is that you’re also a husband and wife. So you’re husband and wife, you’re business partners. I guess just give us kind of the breakdown of how you separate duties and responsibilities. Who does what? Who focuses on what aspects of the business?

Sam:
Yeah. So I mean, I wish I had a picture perfect answer. We work on it every day. But as of right now, kind of the breakdown is, is what we found out through investing is that Nick isn’t the numbers guy. He loves analyzing the deals, communicating, making relationships with realtors, the loan process and that portion of it. And he’s actually transitioned careers, which I’m sure we’ll chat about to being a loan officer. And then I fell in love with the construction piece. So, everything to do with construction and design on these homes, figuring out kind of layout, talking with architect. And then I recently in 2020, transition to be an actual general contractor. So we both found what we really liked, and then just dove headfirst into it. But now working together, it’s somedays poses challenges, because I’m very type A, and I’m very over communicative and things like that.
So the one thing we found that really works well for us in our business, is we have one shared email contact at Eagle Hill Homes, which is our business name. That a lot of the common things that, if we’re talking to subs, if we’re reaching out to a cleaning service to come in to clean our unit when we have tenant turnover. That’s the type of stuff that I love to be able to have eyes on, even if I’m not handling and the same thing with Nick. So that’s something that’s been really helpful I think, has probably helped more than we know. When we just had our own emails, things kind of got lost in translation. We still have separate emails, but we do have that shared one.

Tony:
One follow up Sam, because I think your role in the business is a little unique. There’s not as many women general contractors that you see. I guess, first kudos to you for being kick ass and then taking on that role. But I guess what is your experience been, kind of being a woman in kind of a more male dominated role?

Sam:
Well, first of all, thank you. Second of all, it is like 80% imposter syndrome, and then 20% Nick being like, “You can do it.” And then there’s me. I think initially it was, I knew I really took to the construction portion. The design portion, I enjoy communicating with the subcontractors and building relationships and kind of being there, as a point person and it took me a while to actually say, “Yeah. This is what I want to do.” Because I think I was so weary to be a woman in this man’s dominated industry and hope to be taken seriously. So that was tough for me and then doing it now, I’m so glad I did. I’ve never felt I’m more in where I’m supposed to be in life.

Ashley:
How do you become a GC? What did you have to do? For anybody out there who has been thinking about getting this. What are the steps they should take?

Sam:
Yeah. So that’s a great question. And in Massachusetts, I can speak to that process. You need to be able to in Mass, basically prove three years plus experience of design, renovation, contracting. So during those renovations that Nick and I did. Those three deals, we did extensive renovation. So I kind of was the point person for those by default, because we didn’t have money really to hire out many people. So we hired some trades, plumbing and electric. And I think that’s it. We did everything. Tiling, drywall painting, framing. We just learned through Nick’s dad, and through YouTube. And from there, I was able to kind of gain all that experience.

Ashley:
How do you prove that, Sam? How would you prove that you have that experience? Did you have to show contracts? Or what kind of documentation should people be?

Sam:
Yeah. So in Mass, you do need to prove either a W-2 saying, “Hey, I worked under this contractor, and this is proof of employment.” Or they do know that there’s a lot of people like myself that are in unique situations where I was working a W-2 job in marketing, clearly not construction. But you can get another licensed general contractor to sign off on your behalf. Saying, “I know this person. I know they’re doing this work.” And I did have kind of a friend in the industry that we’ve been going back and forth. And she was like, “I see what you’re doing. I’ve seen in person your work and I know that and I’m going to vouch for you.” So you essentially write a letter of attestation, they sign it, you notarize it, you fill out a whole application, notarize that. Mail it in and then from there, once everything’s approved and they kind of fast track everything you get a letter in the mail, very archaic. Saying, “Hey, you can schedule your test date.” And then from there, you take an exam.
So you can do two different kinds of tests. And I did the unrestricted meaning I can do kind of any building, not just one and two families, take the exam. And then once you pass the exam, you’re basically good to go.

Tony:
Sam, what… I’m kind of curious. Nick, I want to get to you because I know you transition into being a loan officer also. But I’m like, really into the whole GC thing right now. So what kind of questions are there on this GC exam? Is it like how to hang drywall? Give me steps one, two, three and four. Or is it more of a general thing? What kind of questions are you typically asked?

Sam:
So it’s a pretty intense exam. Going into it, I heard that there were a lot of contractors that have been in the trade for 20 years, and they failed it four times. So I was petrified. When I say petrified, I’m not kidding. The questions are, I mean they range. It’s about 1800 pages of building code that you study. And it’s everything from masonry work to foundations to interior. Some of them are pretty basic like, “What’s the width of a residential staircase to code? How high do a ceilings have to be in a basement or a kitchen area?” Basic electric like code and plumbing code of, where you venting fans, things like that. And then some of them are very specific like, “This is how big your house is, this is how big the foundation is, what size are your joist?” And you kind of need to be able to kind of problem solve on the spot there.

Ashley:
Tony looks like he’s getting a little dizzy thinking of having to know all of the things.

Tony:
Oh wait, oh my God. Have you guys seen the meme of Zach Galifianakis, the guy from the hangover? He’s doing the math, and he’s got all the numbers spinning around and so anyway.

Sam:
Yes.

Tony:
Sam, I’m curious. What was your motivation for getting your license? It’s not a prerequisite to be an investor, to be a flipper, to be anything to have license. What was it that made you want to go down that path?

Sam:
Yeah. So initially, it started as we’re investing in this expensive Boston Market. And the units that, or the buildings that were looking at were typically two, three, four unit buildings. And anything over three units in the Boston area, you need to have a licensed general contractor. So the thought was, “I enjoy this, why don’t I do it?” Again, it was back and forth for a little bit. It started definitely as, “Let’s use this as a tool. This seems to be a problem and a roadblock in our business, how can we overcome it? Instead of just paying the piper, I will become that person for us.” So that’s how it started. And then from there, it’s kind of snowballed. And I accidentally, essentially I’m now taking on clients. Like the first client kind of fell into my lap, I say it accidentally. Because Nick was like, “Do it.” And I was like, “I can’t. Imposter syndrome.”
And then once I did it, I’m realizing this again, on top of investing and doing it for us, I’m really enjoying kind of the client aspect of it. So definitely another leg of our business and avenue for us to be able to generate income, to put into rental properties.

Ashley:
One last question on this before we go to Nick. But what are the fees? So a lot of people say, “Oh, should I be a realtor?” And people say, “Well not, unless you’re going to take on clients because you have to pay for your credit every month, your education credits every year, not month and you have to pay to be a realtor.” What does that look like as a general contractor? If you were just going to do your own properties, is it still worth it for someone to go out and be a general contractor?

Sam:
Yeah. So it definitely depends. For fees, I mean to get up and running, you’re looking at a couple $100 to take the exam. It was probably about five plus $100 to purchase the material. So about a say $1,000 to actually obtain the license, and then you’re paying for your liability insurance, workman’s comp and I think that’s pretty much it. And then registering with the city as kind of being able to be a contractor licensed. So I would say from there yearly, couple $1,000 five plus, in order to do that. So again, if you’re doing one property a year, it could be something that might not work out in your favor. But I mean, the percentage that you typically pay a general contractor, depending on the area, depending on scope of work is anywhere from like 10, 12 to 20 plus percent of your project costs. So here in Boston, where our projects, the last one we did our renovation budget was 150,000. So 15% of that makes sense. But in different markets, it definitely is something people might have to evaluate.

Ashley:
Okay. So Nick, let’s make sure you were paying attention. Can you please answer all of those questions that [crosstalk 00:14:23]. Okay. So Nick, why did you transition to becoming a loan officer?

Nick:
Yeah. So I think similar to Sam, it was we were kind of trying to follow our passion. That was why we got into real estate and I think probably, I can speak for a lot of us that’s the reason was we wanted to be able to follow our passions, create our own future, things like that. And for me it was, I was really interested in the the finance and the mortgage piece. But sort of more than that was like, I found that it was an avenue I could help people do similar things to what we were trying to do. And it was a career that I could do it. So, now I get to spend a lot of time with people that are looking to house hack, or obviously people that are just looking to get primary residences. But the really fun part is people looking to do what we’re doing, and now I get to help them and coach them. And I get paid to do it, which is great.

Ashley:
So what did you have to do to become a loan officer? I mean, take a test, a license. Do you work for a bank credit union? How does that all that work?

Nick:
Yeah. Yeah. So I work for, it’s called a correspondent lender so not actually a bank, but lend directly through Fannie Mae, Freddie Mac. And yeah, it’s you have to get licensed so you need to do, I think in at least in Massachusetts but I think it may be universal. You need to do 40 hours of training, pass the test. What was unique for us was our loan officer, who we started with on our first property who saved our first deal, became this mentor to us. And then that’s essentially who took me in and now I’m working with him. So it kind of came full circle.

Tony:
So you both have kind of an interesting path. So Sam, you said you’re working in marketing before. Nick, what were you doing prior to the loan officer?

Nick:
Yeah. I was in corporate insurance sales.

Tony:
Got it. So neither of you were doing anything related to real estate investing. And Ashley and I’ve talked about this in the podcast before, but changing your day-to-day job or changing your day-to-day hustle, your day-to-day grind to be real estate focused, has so many benefits, right? Like Ashley always says that she was a property manager and that’s how she kind of cut her teeth. You being the GC, Sam. Nick, you being the loan guy. Those are all the tools and the skills that you guys need to be able to continue to build your real estate portfolio. So for the real estate rookies that are listening, if you’re maybe unhappy in your current W-2 job, you’re maybe feeling a little unfulfilled. It’s not necessarily quit your job, but it’s like, “Okay. How do I transition my career into something that’s more closely aligned with my goals of being a real estate investor?”
So I guess the question for you both. Nick, if you want to go first and Sam, you can take second. Was it scary at all, kind of leaving your old jobs that you knew and jumping into this whole new world that you didn’t know anything about? And if so, how did you break past that fear?

Ashley:
And you guys did this around the same time too, right?

Nick:
I’ll try to find a way to keep this short. But the learning lesson was, honestly and I think this is probably good for everyone listening. It wasn’t that scary for me, we felt like we had taken all the right steps, we were very calculated. We happen to do this at the beginning of a global pandemic, we did it together. And we were still funding a six figure renovation. So at the time, we felt very confident, we were not very nervous. It did become incredibly challenging. So I would say to your point Tony, you want to make sure everything is very calculated. But ultimately, it was an incredible learning lesson. And now at this point that we’re through it, and we’re on the other side of those struggles, we wouldn’t change it. But it was definitely incredibly challenging.

Ashley:
What’s a recommendation to rookies who want to quit their job? I mean, we hear people that say, “I want to get into real estate, so I’m going to quit my job so I can focus on real estate.” But what would your guys’ advice be? What did you look for in your lives to know this is the time to quit our jobs?

Nick:
Yeah. So I think the biggest thing for us was, we got to a point where our, and again it was only three properties but we were able to cover our living expenses. So we told ourselves, we didn’t want to take the huge leap of faith until we got to that point. Because ultimately now we at least still have that to protect us. It was just a huge change from incomes from salaries that we were used to, to now being not direct salaried employees. So it was just a major change, major mind shift change. I think there’s always the school of thought of dive in headfirst. At least for us, it was nice, very nice to at least have the security blanket that we did knowing our life expenses were covered. So that definitely made it a little bit easier for us to do.

Tony:
There’s so many different schools of thoughts on taking the lead to leave your W-2. But I think the point that you made that the rookies needs to hear is that your real estate business was already covering your basic living expenses. It’s not like you had no income coming in, or you had no safety net there. You knew that even if all else went poorly, you at least had your basic living expenses covered. Now I’m curious, right? So how many deals do you guys have at the time when you’re actually left? Was it the three that you currently have? Were those three operating rentals? And if so, what strategy are you guys using to kind of maximize the revenue? Because most people aren’t able to kind of walk away from their W-2 jobs. It’s only three traditional long term rentals so I’m curious what strategies you guys are using.

Sam:
Yeah. So out of the three, we had a… So three deals, one’s a condo, one’s a three family and one is an owner-occupied two family. The condo to be honest with you was kind of our introduction into real estate investing. It was kind of, “We’ll live here for a minute and then wait and get them a multifamily.” So it really was not… It does not still to this day profit, maybe $50 if we’re lucky. But it’s one of the things that’s been a really appreciating area and equity is on our side. So it was basically two properties that we had that were able to allow us to leave our jobs, which is also something to note for rookies out there. If you’re in an expensive market, it’s scary and it’s hard. But you can do it with a small amount of properties. And it’s definitely doable. You just got to find ways to add value in your properties and put your mind to it.
But to answer the question more along the lines of kind of financially and how it worked out with the numbers. We were profiting about $2800 a month from our three family. And we were living in our two family profiting about $1,000 a month. So that’s kind of what that looked like and how we were able to say, “Okay. We don’t have a mortgage, and we have this money coming in to pare expenses and things like that.” We also paid off our car, we did things where we didn’t have a ton of monthly payments going out, which allowed us to feel better about that. So yeah, that’s kind of what that looks like at the time.

Tony:
I mean, that’s pretty good. You said $2800 per month on a three family that’s over 900 bucks a month, right? That’s per unit, right?

Sam:
Yeah.

Tony:
Were you able to generate that much value because you guys got it at such a steep discount? Or is it… I don’t know. I guess how did you guys get to such good numbers on a per unit basis?

Nick:
Yeah. So I think the biggest thing was we did, we bought it as a two family and then did major renovations and converted it to a three family. I think when we were analyzing the property, we were looking at it like, “Okay. Do we keep it as a two family?” The gentleman that owned it had it as he was owner-occupied, he had a large family so he was using two levels for him. So what we did was basically separate it into three. And it became the numbers from there were obviously a lot. Well, not obviously, but they were a lot better. And then we did extensive rehabs. We took one of the rents, which was really below market but just an example. We took one of the rents from 900 a month to 1950 per month. And that was worth a $25,000 renovation budget. So the return on that was huge.

Tony:
You guys had one investment. You had this condo, and then you find this two unit. I think most rookie investors wouldn’t have the foresight I guess to think, “Okay. This investment doesn’t make sense. It’s a two family but it makes sense as a three family.” What kind of tipped you both off to making that decision? And were you not afraid of taking on this really big rehab project of converting this unit into a three unit?

Sam:
Great question. We were apprehensive. But I can say that because we had been looking for so long for a multifamily property and it wasn’t working out for us. And we kind of landed in this condo, we felt like, “Okay. This is our time.” So that’s the fear aspect of it. The interesting and funny story about this whole thing was that it was actually… So the condo we purchased was on the bottom floor of three condos, and they were recently converted to condos. It used to be a three family building. We purchased the bottom floor, and I became friendly with the neighbor on the next building over. It was connected. So from the outside it looks like six big units but they’re individual, in the middle. Became friends with her. She one day like six or eight months I think, after we purchased and moved into our condo texted me being like, “My landlord is selling and I’m going to have to move.” And she had lived there like 10 years. And I was like, “Can I have his number?” So to her she was like, “Why? You weirdo.”
I had never even really said out loud to people that I wanted to invest, which is another tidbit of tell everyone you know, because that’s a great example of it coming to you instead of you kind of having to work for it. But I got his number and I said, “Hey, I’m the one that lives downstairs. I heard you’re selling. I’m really interested.” Nick was away on a business trip. And I texted him and I was like, “I think I just got us our first multifamily deal.” So we walked the property, and it was set up really similarly to kind of our condo and the ones upstairs. So knowing that it was a really similar footprint, I had that moment where I was like, “This could work.” It definitely looked very small because they are one bed, one bath units in Boston. It’s a tighter space. But I think that was the first time that I had that click of like, “I see it, it can happen.” So we negotiated the property with him via text a little bit and then kind of went into an off market deal from there.

Ashley:
Let’s talk about that an off market deal. So approaching a seller and then the negotiation. So you negotiated through text. So did you put out the offer first or did he tell you a price first? How did that work? And then I’m interested, okay, you guys agreed on a price. How did it go from there? Because if you’re buying off the MLS your realtor takes care of it, it gets your contract done everything like that. So who handles the paperwork?

Sam:
Yeah. Great question. Because I was asking Nick the same thing. Because he’s the one that really like I said, just kind of gravitated to toward that. But I’ll kind of take kind of this process, then I’ll let him speak to paperwork too. But process for me was I kind of said, “Hey, I heard you’re selling or looking to sell.” It was a quick situation. He needed too, his wife had gotten a job in California and he needed to move like ASAP. So I think for him, it was exciting that there was somebody interested that could get the deal done quickly. So I basically said, “What are you looking to sell for?” And kind of put it back on him. I didn’t want to over… At this point, I was so eager, I was afraid to over offer. So I kind of asked him, he came back with saying, “I’m looking for 650,000. And I’m really looking to close quickly.” We went back and forth. And a fun fact is that we went back and forth negotiating via text while Nick and I were overseas in Italy. We were leaving for a vacation the next day.
And I’m like, “All right. Whatever, we’ll do this.” Good thing for technology. We ended up going back and forth and then submitted a formal offer paper was, I think we honestly found templated. Just to kind of get the offer in on the internet, at 630. And he took a couple of days, and then accepted our offer the day we were leaving. But the day before we left the country, Nick decided to propose and not tell me that we were going to have a massive wedding when we got home. So we came home to planning and paying for our dream wedding that we’ve been planning for the past 10 years, and moving all of our belongings, getting our unit that we lived in rented and then fully renovating this unit. But Nick, you can definitely speak to if there’s anything I missed there on the process.

Ashley:
Geez. And Nick, how dare you propose to her. What bad time?

Sam:
I was like you didn’t tell me.

Ashley:
Yeah, Nick. I want to hear about the paperwork side of it. So, you obviously you want to get a signature, it’s way better to have something written in place rather than a handshake deal. So did you get a letter of intent? That’s what I’ve used and I pulled off a template off of Google really for that.

Nick:
Yeah. So funny enough. I mean, again, we were only present for really the first walkthrough and then we had left. So it was all done at the beginning via text. And again, we kind of didn’t know any better. We were just kind of on the fly figuring it out. And so we started that way, and then we’re like, “Okay. Now that he’s at least interested, now we need to get this thing locked up.” So yeah, we did a Google, I think our local realtor association had the template forms that we could download. So we did that, our loan officer helped us a ton who connected us with a good attorney, and they kind of acted as the agent for us. But yeah, I mean it was a huge learning curve, trying to go from texting internationally, then get the document signed, get our first property. It was a whirlwind, for sure.

Ashley:
And I want the listeners to know that that’s not a bad thing to negotiate before there’s any paper. I recently just did this with an off market deal, for a guy that wants to do seller financing. I spent probably five plus hours with him at his house, sitting at his kitchen table with his wife over a course of two days, to going there two separate times and just negotiating with them and figure out what he really wants and listening. And I think you guys showed that, that you talked to him first and that was great Sam that you ask… You put it unto him as to, “Okay. What are you looking for out of this deal?” And you knew his motivation that he was ready to move and wanted to get rid of it, wanted a quick and easy closing. So that’s awesome.

Tony:
Can we touch a little bit, Ash before we move on about the financing? I’m curious how you guys finance this three unit, and both the purchase and the construction of it.

Nick:
Now finance, we did FHA financing so we did 5% down. The renovation or, we didn’t wrap it into the loan so we kind of self funded it. So it was a lot of sleepless nights trying to figure out like, are we’re going to pay the band? Are we’re going to pay the plumber? But we ended up working it out. And the budget itself, we’re a little nervous on that too, because that was something we were really learning for the first time. We ended up going a little bit over the expected budget, but the all end budget ended up being like 80,000 on that.

Tony:
Got it. And then did you guys refinance after all of the construction was completed? Was this a burr? Or was it more of just a traditional long term?

Nick:
Yeah. So we actually pulled a home equity line of credit on it, which helped us fund our next deal. And then we did a refinance to pay off that full home equity line of credit. So we kind of double dipped on it, really.

Tony:
But it works right? I mean, and that it’s leveraging what you have. And that’s one of the beauties about real estate investing is there’s so many different ways to fund your deals. So you guys use the resources that you had at hand, to make sure that it worked. Now, I guess one more question on the rehab portion, because I think this is where we see a lot of questions from the rookies as well is, how are you guys going about creating your scope of work? Knowing what work should be done, knowing what’s going to add value, knowing what you guys shouldn’t do. How does that whole process come together?

Sam:
Yeah. So I mean, and then I can speak to it much better now. At the time, it was more so kind of like, “I think this is what we should do. And I think this is what it will cost.” Nick’s dad, my father-in-law had been in the business for a while. And he definitely was a resource for us for sure. Kind of saying like, “This is kind of what we’re thinking.” And he would give us the like, “Hey Sam, that’s going to be expensive.” Or, “That seems like you could potentially pull it off.” But for just kind of a general rule of thumb, our kitchens were kind of small so that was working in our favor. We weren’t moving a ton of, well a little bit, but we weren’t moving a ton of plumbing. So that was working in our favor. So we were able to keep the costs a little bit low on that. But Nick, do you remember kind of how we even went about that? I think I was blacked out from planning a wedding and renovating.

Nick:
No. I think the biggest thing that helped us and I think would help a lot of people was we had missed out on so many deals prior to that one, that we understood what sort of constituted a good unit in our area. Like what was important, what wasn’t important. So we kind of catered to that. We got to see what some other homes had and what they were renting for. So a lot of just local market analysis. The construction piece, like the technical side of it. I mean, as we all know, I mean, you just need to learn or rely on someone who does know it. But the actual deciding what to do was really just trying to compare it to what the market had.

Tony:
So now that you both have been around the block a couple of times, what are some things you look for when you’re analyzing new properties or considering new potential purchases, to add value in those units?

Sam:
Yeah. So I think we definitely have five core things that we look for. Number one is, I think the best play in the world and we actually did it on our next property that we’ve yet to kind of speak to but I’m sure we will is, is the basement. Some of these basements in these homes have very high ceiling height, and there’s so much potential to add either a unit, more living space, put some bedrooms and bathrooms down there, and your appraisal is skyrocketing. So that’s kind of the number one thing. And then any ability in the Boston area, these are like city homes that we’re renting usually to groups of friends who are three plus groups of friends. A lot of times there’s dining rooms, so can you take that dining room and turn it into a bedroom? You don’t need a formal dining room. You add a peninsula, some bar seating and suffice for what you’re looking to do. So adding kind of basement unit, adding a bedroom in that dining space or anywhere else.
Any place you can add a bathroom, even if it’s a half bath, that value add is definitely there. If you can do it off the kitchen or back to back on another bathroom where there’s already plumbing, that’s even better. So that’s definitely something. And then kind of what we did with that last deal. There was a buyer level unit and that’s pretty common, especially in this area that we see a lot. So being able to analyze, “Hey, is this going to make us more money being a buyer level with three bedrooms upstairs and your kitchen living downstairs? Or is this going to make us more money being two separate units?” So splitting the units obviously, there’s some permitting and zoning that you have to deal with there. But if it’s going to work out in your favor, and usually it does, especially in a market that has pretty high rents. That’s something to always look for. And then the last thing I would probably say is there’s options to add an ADU unit. So an additional dwelling unit. Boston actually has a program that you can do.
Say you have even if this is a single family house or a two family and there’s a lot out back with a garage. Are using the garage? Do you want to turn the garage into a single, of one bed one bath rental? What if you’re owner-occupied in Boston, it can be an Airbnb if you’re owner-occupied. If you’re not owner-occupied, you could rent it out. So there’s definitely areas to add value in. That’s kind of our biggest thing that we preach to any investor that’s looking to get started because it helped us so dramatically. Is if you can find a way to add it, aim for that and kind of look for those things when you’re looking for your properties because a lot of people don’t see them as positives.

Ashley:
When you’re looking for deals, how’re you finding these deals with these kinds of value add? Is it just MLS? Are you guys doing direct mail? How are you sourcing your deals right now?

Nick:
So we’ve done a little bit of everything. We’ve done MLS, we’ve done direct mail, a lot of Facebook groups and things like that, where deals get passed around. But quite honestly, a lot of decent and good deals, at least here. It’s not a huge wholesale presence, but a lot of agents sort of source deals like that. So we’ve just tried to build up our agent network. And that’s been, we have more deals that come our way than we can act on. So that’s been one good sort of avenue that we’ve taken.

Ashley:
It’s almost like pocket listings where they’re not actually listing on the MLS, they’re bringing them to you guys instead of [crosstalk 00:34:49]-

Nick:
Yeah, exactly.

Ashley:
Yeah. That’s awesome. And that’s a great strategy to get in the know with a real estate agent and have the deals brought to you. So let’s go back to, you guys are house hackers. That is such a great strategy to get started in real estate. So what are some things that how… People who want to start house hacking, what are some things they should know? Maybe about the financing or, and you kind of looked at value add. So what are some things people need to know if they want to get into house hacking?

Nick:
Yeah. So I think the biggest thing with house hacking is it’s going to be a low down payment, therefore you’re going to have PMI or private mortgage insurance. And I hear it all the time that people look at it as a reason not to act or such a negative. And I would just say, to have the ability to be able to finance 97% of a property in areas, I mean up to like a million dollars. I mean, who gets that opportunity to leverage that much? And yeah, you’re going to pay monthly mortgage insurance but that’s an incredible opportunity. So I think that’s the biggest thing. Realize the opportunity you have, because I think we’ve noticed now looking outside and to commercial loans, and all that. I mean, it’s kind of my next point is the terms are never going to be as good as they are owner-occupied. So, at least when you’re starting out, if you can start owner-occupied the advantages to doing so, from a mortgage standpoint is again, incredible.
You’re going to get 30 year amortized loans when your owner-occupied, commercial side 20 to 25 years. You can have 30 year fixed, whereas commercial you’re only looking for shorter arms. So I think there’s a, those would probably be the biggest things that I think make house hacking so advantageous.

Tony:
I have one follow up on the house hacking, how has it been being so close to your tenants? Do they just come knocking on your door saying, “Hey, my light bulb’s out?” How do you guys manage that relationship?

Nick:
I think we’ve done a pretty good job or as good of a job as we can. Because they know where we are. But we’ve really tried to implement protocols. So service requests are not, knock on my door and let me know. They’re not text me and let me know. You have to email the email address, submit what your issue is, and we do everything sort of that way. We’ve really tried our best to still treat it as a business, try to just almost look at us as we’re just other people in the building. But then we’ll deal with them either on the phone or email. But we try to do as little of direct human interaction as possible and try to create that barrier. And the other thing, the biggest thing I can say that’s worked for us is really you have to have, that’s of course a different relationship when you’re living in the same building versus not. So we just tried to be really respectful and make sure that they respect us.
And it’s worked really well I think. With our tenants that we live with, it’s a little bit more interactive at times than we would like. But we’ve definitely created the respect and they understand that we’re the landlord. So I think just setting that precedent is huge.

Tony:
I want to take us to our mindset segment. But before we do just one last question on the property management. How much time would you say you all put in between your units actively managing those properties? Is it an hour a week? Five hours a week? What does that look like?

Nick:
Yeah. I would say when there’s no renovations or anything going on, I mean, we also really an hour to two hours, maybe a week. Even renewals, we use an agent to handle that. And then they just get paid a broker fee from the tenant. So we try to sort of manage what we can and delegate what we can. So it’s really not a lot hours wise per week.

Ashley:
Are you guys using any software at all?

Sam:
Yeah. I was actually just going to mention that. So we use an online rent software called Cozy. But it’s actually now transitioning, I believe in a couple days to apartments.com. They’re under each other. But we have our tenants pay their rent online via the app. They can go online and either do direct deposit or just kind of monthly go in and do that. So that’s been a game changer for us. I think after the first tenant, we were like, “We’re doing this. This is how it’s going to be done.” And the platform updates us kind of every, on the first and then third and fifth, “Hey, this is what your payment looks like.” Then goes right in to kind of our account. So we found it very helpful, for sure. When we do list on our own, which lately we’ve been using our agent connections to kind of list the units for us. But in the past we’d use that to kind of like blast out listings, and it’s been very effective as well.

Tony:
Now you both have grown a lot I think it seems since your first condo that you guys got. So I want to talk a little bit about the mindset. If you think about Sam and Nick, before you got that first investment. What were some of the misconceptions you had about real estate investing? Whether about how hard it was, what skills you needed to develop, who you needed to become? What were some of the misconceptions you had that you found to not be true as you actually journeyed down this road?

Sam:
I definitely had probably more than Nick, for kind of fear and misconception. So I’ll take a little of it and then I’m sure he had some too. But my first kind of apprehension was, which now funny enough being a general contractor, but is you have to be handy. Turned into being handy but was not handy before. So that was like, “What are we going to… I mean, my question to Nick, when we have these conversations. “What are we going to do when the toilet breaks at 2 AM?” And I’m sure that’s the same quoted sentence everyone’s heard in this investing market. Or the questions your mom and dad ask you or the people that are better close to you. “What are you going to do when this?” And I let that scare me a lot. To be honest, I’m that type of person that it got deep into me and I was like, “This…” People are telling me to be apprehensive which means I should be. And I think I would even tell myself going back years, from years ago to stop listening to advice from people that haven’t been on the same path that you have. Most of the people I was taking this heartfelt advice from that was keeping me up at night were people who were doing nothing similar to what we were aspiring to do.
So the moment we started, and I started truly listening to BiggerPockets. Other people that were on the same path as me, the fear just diminished. Truly. Because all I needed was a few people to say, “Hey, this works. Your boyfriend at the time, he’s not crazy. And this is something that could really change your life.” And I’m glad that I did.

Tony:
That’s beautiful advice. I love what you just said, because you said that on the podcast so many times that your Uncle Jim, who’s never bought an investment property is not the person you should be taking real estate investing advice from. You should be taking real estate investing advice from the guy or the girl who has a deal or five deals or 10 deals. Someone that knows the market, someone that’s been through a cycle or two, someone that’s been doing this for a while, and can really show you the ins and outs.

Ashley:
We had someone I think it was Tim, he was maybe on episode two or three of the podcast. And his dad actually lost a lot of money in real estate. But instead of saying, “I’m not going to do that.” He said, “I’m going to learn from what my dad did and do things different.” And I mean, he started investing about its first couple properties and so yeah, it’s all about having that mindset to look at things differently. Nick, what about you?

Nick:
I think the biggest thing is sort of along those lines but it’s perspective. So I think for us, we lived in our own little bubble for so long. Just Sam and I, and things seemed like they were really hard and really challenging. And we didn’t know how to figure things out like a lot of Google, BiggerPockets. But we never really engaged with people. And I think the biggest thing, and it’s sort of along the lines of what Sam is saying. But being open to networking, and even as simple as being on social media. We’ve seen, now you just see other people doing what you want to do, and then it just all of a sudden clicks in your mind. Like, “Oh, that actually isn’t that hard. So and so is normal, I’ve met them. They’re just like us and they’re doing these deals.” So I think just sort of surrounding yourself with those types of people whether your friends or not, but seeing it makes everything just a little bit more easy to digest.

Ashley:
Let’s go to our repeat request line, next. You guys can call in at any time to 1-888-5-ROOKIE. Leave us a voicemail, and we may play your question on the show.

Zach:
Hey guys, this is Zach from Connecticut. I’m looking at house hacking a small multifamily, within this next year. My limits right now are the fund so when I’m looking for a partner to help me fund this project, how do I kind of make it so that we’re both on the same page, and we have a good idea of how each of us is going to benefit? My idea is that most likely I’ll be benefiting by living in this house rent free, maybe a little bit of cash flow on the side. Now for the partner, I’m not sure is it just going to be, “Okay. You’re going to get paid this much?” Or is it going to be a thing of, “No, you’re going to get the cash flow.” Any ideas would help. Thank you.

Nick:
What I would say is not probably a terrific answer for Zach, or maybe what he wants to hear. But I think getting started house hacking, I would say take a step back and learn a little bit more or save a little bit more. And I think there’s a ton of value in learning to save your money, to leverage your own money and to get your feet wet that way. I think there’s a ton of time to leverage partnerships and grow that way. But I also think there’s a ton of value in learning financial principles that it takes to get into a property. So I think that would probably help build an even stronger foundation for him going forward. And, I also we don’t do a lot of partnerships so maybe that’s why that’s my answer, but I just think there’s good things in learning sort of those financial principles that’ll help carry people forward.

Ashley:
And Nick maybe you can kind of help me with this response here. But if he was going to partner with someone and he’s doing a house hack. If you were to go the FHA route, he wouldn’t be able to have a money partner. That would have to be his own funds, or would have to be a gift from someone. Correct? Do you want to talk about that a little bit?

Nick:
Yeah, exactly. So that’s why when looking to owner-occupied, it’s really hard. It’s really difficult to bring in “partners.” That’s why I recommend it’s a house hack situation, to build your own foundation there financially, you can take on gifts that’s FHA it does need to be family member, so I don’t recall if that was a family partner or not. Also with gifts, I mean the expectation is it’s not going to be paid back so that wouldn’t really be a partner situation. So yeah, when it’s an owner-occupied primary residence, I just think it doesn’t bode well with the finance partner like it would in a true investment opportunity.

Ashley:
Yeah. I do have an example of my sister. She house hacked her first property, a duplex. And I helped her with that, she didn’t have the funds for a down payment. So how we structured it was that I gifted her the down payment, and she does not have to ever pay me back for that. We are both on the deed of the house so we own the house 50/50. But she’s the only one on the mortgage. So that mortgage doesn’t affect my debt to income at all, as I continue to invest. But I have an ownership percentage in that house so I can show that equity. And so how we structured it is she’s living in one unit, renting out the other. The one unit pays for the mortgage. So I’m not getting anything right now. I’m getting some appreciation. But when she moves out of that property, there’s the opportunity for me to get some cash flow out of it. So it can be a long term play.
And for me to purchase a property in this area, I would have had to do an all cash offer or do 20% down. Where this gave me the opportunity to get into a property as an owner at only, I think she did 5% down. So if you do have a family member that’s willing to invest, that’s one way you can do it too.

Nick:
That’s actually fascinating. So she qualified on our own though, and then you were just the gift sort of the donor there.

Tony:
All right. So I want to take it to our next segment here, which is our random questions that we’re getting to in the podcast here. So I guess my question is for you, Nick. We get a lot of husbands or wives who have kind of gotten bitten by the real estate investing bug, and they want to get their spouse on board. What was beneficial about your approach that helped get Sam on board? Right. Was it something that you like give her a diamond ring with it? Or how do you make it happen?

Nick:
I tried coming in tidbits and dropping sort of nuggets that was not well received. What ended up working really well was, I read Rich Dad, Poor Dad. I recommended it strongly that she should read it. And she took me up on it. And really, that’s was all it took. So I think just, if you can guide someone and sort of just even explain why it’s important to you, rather than trying to just force it on them.

Tony:
And Sam I guess one follow up question for you. What was it about that book that kind of changed your perspective?

Sam:
I think it was, this sounds insane. But somebody other than my significant other telling me that this is a proven method. We’re just… It’s so easy to look at your significant other or business partner, there’s always one that it’s always going to work out kind of person and that’s Nick. And then there’s always one a little more risk averse person, which is me. So throughout our relationship even at a young age, he was the guy that was like, “Let’s sell t-shirts and do fun different things,” that to me I was like, “You’re crazy.” So it took me a minute to be like, “This isn’t one of those ideas and this is serious.” And I think that book really helped open my mindset. I never envisioned being this type of person in my life.
I’m so happy with who I’ve become in my mindset, but I never envisioned that I was the girl that really just wanted to get a job out of college and work really, really hard for someone else and probably not make enough money, and do that whole game that my family had done and I’ve watched. So that book really did, it did change my life I will say. And I do read it every year now just to remind myself, “Okay. This is why you’re doing this.”

Ashley:
Sam, my random question for you is what’s next? I mean, just in the past year you’ve had a lot of changes. So what are your goals, your dreams and your action plan for the next upcoming years?

Sam:
Yeah. Oh my gosh, I think about it all the time. I mean, I think from a personal investing standpoint for Nick and I in our business. We are ready to go to purchase kind of our next investment that’s going to be our first non-house hack. So we are working on refinancing the current house hack we’re in, and we did a great amount of renovations and forced about $500,000 in equity into this thing. So we-

Ashley:
Wow. Awesome.

Sam:
… Yeah. We are ready to pull that out and move forward. Due to the job changes that we both kind of took a leap from, we had to wait a little while to refinance and get some of this money back. So, kind of in that awkward waiting period where I’ve been G seeing, Nick’s been building up income from the loan business, and we’ve just been waiting to pounce. So the time is basically now we’re in the process of starting that refinance and we we’re ready to go. So we’re hoping to take a good chunk of that money and start purchasing some… Continue to do buy and hold to kind of build out long term wealth. So purchasing some investment properties in the area. And also, we’ve been exploring kind of some flip opportunities [inaudible 00:50:41]. Since now I have the license, it feels a little bit more attainable to be able to do that. So we’re looking into that and really excited about the future there.

Tony:
Wow. I’ve got no doubt in my mind that you both are going to get there. You both seem like action takers, you both seem just like pure real estate rockstar. So, I love it. Now, on the note of real estate rock stars, Ashley and I want to highlight one of the rookie rock stars from our Facebook group. So for the listeners, if you guys aren’t active in the Facebook group yet, you guys got to get in there. There’s almost 30,000 active members in that group. And when I say active, they’re active. There’s posts in there all day every day. I try and go in there myself sometimes, add value to some of the conversations but there’s already so many people that have commented and given all the good stuff. I can’t even add anything. So, just make sure if you guys aren’t in there, search it through Real Estate Rookie on Facebook.
Now, today’s real estate rockstar is Zach McDona… [McDonahue 00:51:31], I think his last name is. But Zach is 22 years old and he just closed on his second unit or finished his second unit. So basically his dad helped him with the renovations. His girlfriend actually found the deal for him. But it was a short sale that took five months to close, which is absolutely crazy but really normal for a short sale. They spent about eight weeks in the renovations. Him and his dad spent nights and weekends working on it. But it’s all done now, but they purchased it for $123,000. They spent $15,000 on the renovations and it’s going to appraise for about $170,000. And they’re renting it for 14.50. So sounds like an all in all great deal, Zack. So congratulations to you, brother.

Ashley:
Yeah. I need to add into that Zach’s girlfriend asked for a referral fee too since she found the deal.

Sam:
I love that.

Ashley:
That’s awesome.

Sam:
What a girl.

Ashley:
Yeah. Well, thank you guys so much for joining us. Can you tell everyone where they can find some more information about you guys and possibly reach out to you?

Sam:
Yeah, absolutely. So we are on Instagram. It’s @EagleHillHomes and then also our website as well. Some of our properties and we’re going to be posting some of our current client projects and that is eaglehillhomes.com And then Nick has an Instagram that sometimes he remembers the name. Go.

Nick:
It’s Nick_Riccio, R-I-C-C–I-O_.

Ashley:
Are you reading that off of a post or something?

Sam:
Didn’t it look… He forgets the last under-

Nick:
I screw it up every time.

Sam:
He forgets the underscore. He’s all confused. But that was good.

Ashley:
Okay. Well, thank you guys so much. We really loved having you both on the show. I’m Ashley at Welcome Rentals. He’s Tony at Tony J. Robinson. And we’ll be back on Saturday with another Rookie Reply.