BiggerPockets Podcast 103 with Elizabeth Colegrove Transcript

Link to show: BP Podcast 103: Building a Long Distance Real Estate Empire One House at a Time with Elizabeth Colegrove

Josh: This is the BiggerPockets podcast, show 103.

You’re listening to BiggerPockets Radio. Simplifying real estate for investors large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place.

Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online.

Josh: What's going on everybody? This is Josh Dorkin, host of the BiggerPockets podcast watching my cohost have some kind of seizure in the background. Hey Brandon?

Brandon: I was dancing to the music. Come on.

Josh: Oh the music in your mind.

Brandon: I’m a dancer that’s what I do.

Josh: For anybody listening now, wait until this comes out on Youtube and watch and enjoy because.

Brandon: I’ll have—this is a true thing. I was in a swing dance group in high school and you know, I was pretty awesome. I could flip people and you know.

Josh: Yes.

Brandon: Yes.

Josh: Yes, you’re—you’re awesome, Brandon.

Brandon: I am awesome. I am awesome, alright.

Josh: Keep thinking that Captain Awesome. Well, guys what’s going on this is Josh. We’ve got another show for you today. Show 103 with our guest, Elizabeth Colgrove and we’ll get to that in a few minutes. Things are good, Brandon. How are you doing? The holidays, you know all is pretty well, huh?

Brandon: All is pretty well, yes, we are. Is this point, I know we’re recording this before the New Year, but I think this comes out right after the New Year, so happy New Year.

Josh: Somewhere in around on Christmas, New Year, Hanukkah.

Brandon: Yes, we’ll.

Josh: You know the whole thing. Yes, Happy Holidays.

Brandon: Oh.

Josh: Happy New Year, happy, happy.

Brandon: Today is January first, happy New Year everyone!

Josh: Happy New Year everybody, whoa! Yes!

Brandon: We recorded this a few weeks, but anyway, Happy New Year everyone.

Josh: There you go.

Brandon: Yes, 2015, right, what’s you big plans for the year Josh?

Josh: Wow.

Brandon: What are your goals?

Josh: Now that it’s 2015 I was thinking, actually it’s not yet, but my plan, I, like everybody else I want to you know, live a better life, but I’m hoping that at some point in the coming weeks, I get a FitBit or some other type of.

Brandon: Nice.

Josh: Exercise type electronic restraining device like a felon.

Brandon: Nice.

Josh: I want one because it will tell me that I am you know, fat and lazy and I want to know everyday that I’m fat and lazy and I need to get off my butt and do more. That’s why I want one of those.

Brandon: I have a cheaper way for that to happen.

Josh: Oh yes.

Brandon: Everyday, hey Josh.

Josh: Yes, what’s up?

Brandon: You’re fat and lazy.

Josh: You tell me that anyway.

Brandon: I know okay, well I’ll may keep that on point.

Josh: That doesn’t help.

Brandon: Good, I’ll keep—I’m going to keep—I’ll just intensify it.

Josh: Yes.

Brandon: Alright, show, Quick Tip. We should probably do our Quick Tip.

Josh: Quick Tip.

Brandon: Alright.

Josh: Alright, today’s Quick Tip is, let’s see how quick you are at coming up with one.

Brandon: I do have one, 2015, today is day one and if you’re listening to this later, write down your goals for the year. Do not keep them in your head.

Josh: Great tip.

Brandon: Write them down on a piece of paper, stick them to your wife’s forehead and okay, maybe not.

Josh: What if, yes okay.

Brandon: Or if you’re the wife, stick them to your husband’s forehead and you know, just follow up with them throughout the year. Don’t just stick them in the drawer like I did last year, dad idea. My wife reminded me that like two weeks ago.

Josh: Nice. Nice.

Brandon: She’s like, yes, “Hey, remember this goal thing we worked on?” “Oh yeah.”

Josh: That’s nice.

Brandon: We actually did actually pretty good on a lot of them.

Josh: Did you? Nice.

Brandon: Yes, but I should have had it like on my wall so anyway, this year, I’m putting them on my wall and that’s our Quick Tip for they day.

Josh: Yes, if you’ve got goals write them down, make sure that they are reasonable, attainable, but you know, potentially can push you a little bit based upon what you’re looking to do so that’s great and with that, I’m going to give today’s Pro Tip of the Day and today’s Pro Tip of the Day is this. As a BiggerPockets Pro member, you have the ability to see who looked at your profile. If you’re checking that statistic, if you’re looking at that information to see who looked at your profile, you should be reaching out to those people who are looking at your profile. Send them a private message, “Hey John, thanks for looking at my profile. Is there anything that interested you in my profile?” That is a phenomenal technique that some of our most active and successful users, by successful I mean those people who get the most value out of BiggerPockets, are using and it works phenomenally so with a Pro account, you, again, you can see who’s looking at that profile. I definitely recommend and know you are not soliciting or selling them, but literally just asking them, “Hey, what interested you in checking me out?”

Brandon: What’s up.

Josh: That is today’s tip.

Brandon: Alright cool.

Josh: Otherwise, let’s start kind of moving forward man.

Brandon: Alright cool, before we do the sponsor for today, I do just want to give one more shout out and request if you’ve not yet left us a rating or review. Please do so we did reach a thousand reviews and ratings on the BiggerPockets podcast.

Josh: My fingers are crossed.

Brandon: Okay, it hasn’t happened yet.

Josh: Not yet.

Brandon: It’s going to happen. We’re very very close.

Josh: We’re getting close. We’re getting close.

Brandon: We did—I’m just going to say right now, we did it.

Josh: That’s a bet man, that’s a gamble, but I think—I think it’s going to work out.

Brandon: I will have all of my family and friends on January—or December 31st doing this if not, but yes, please continue, I want to get two thousand by next year.

Josh: Yes.

Brandon: That’s one of my goals, I’m going to write down.

Josh: If you don’t know how to do that, we’ll have a link to leave us a rating and review. Otherwise, let’s bring on today’s sponsor.

Brandon: Alright, this episode is brought to you by RealtyShares.com. Realty Shares is a real estate crowd-funding platform that allows accredited investors to invest in pre-vetted real estate deals online so investors can browse and invest in both residential and commercial properties that yield returns of 8% to 16% annually. As a Realty Shares member, you can also passively invest in professionally managed real estate investments in a variety of asset types and geographies for as little as $5,000. All from the convenience of your living room so to learn more and to get started with a free account, visit RealtyShares.com/BiggerPockets. That’s RealtyShares.com/BiggerPockets. Alright, alright, good deal, good deal. Thank you sponsor and with that, why don’t you, Josh, introduce Elizabeth.

Josh: Alright, today’s guest is a active real estate investor whose spouse is in the military. She’s done a bit of moving around the country as her husband has to move for work for his act of duty and you know she’s got a unique strategy for what she’s looking for in properties. You know, check it out. There’s definitely some decent tidbits in here.

Brandon: Josh and her get into a nice little.

Josh: We get into a little.

Brandon: Debate.

Josh: Debate, brawl.

Brandon: A little bit. It’s fun.

Josh: You know, I stand by everything I say, but I still think, you know, well worth listening to because you know what I think it’s a strategy that may work for some folks so.

Brandon: Yes.

Josh: Pay attention, listen up and Elizabeth, welcome to the show it’s good to have you here.

Elizabeth: Thank you. It’s good to be here.

Brandon: Cool, well, today we’re going to talk about your story, how you got started and you have a sort of military background, correct?

Elizabeth: Yes, my husband is active duty navy.

Brandon: Okay, good so we’re going to talk about kind of from that—a little bit of that perspective and we’re going to talk about just in general, getting started, buying your first few properties, managing those properties, all that good stuff so.

Josh: Were you in the military as well or just your husband?

Elizabeth: Just the spouse.

Josh: Okay, got you. Fair enough. That’s just as important I’d say.

Brandon: I agree.

Elizabeth: Well and we started it from the beginning so we got married a year after so we kind of got the whole fun of starting out poor and then getting to where we are so yes.

Josh: Nice.

Elizabeth: It’s just him, but kind of got the whole experience.

Josh: Oh that’s awesome. That’s awesome. Cool, well, tell us about it. I mean what, who are you, what do you, you know, what—how’d you guys get into this game of real estate?

Elizabeth: I’ve always loved it. I think from I and many other podcasters, prior to me have said that they loved this since they we’re young. I remember it 13, my parents, 1031 and I got the MLS code from our realtor and I was helpful and I’m sure we all know how helpful a 13 or 11-year. You know, young person was, but I mean there’s pictures of my parents having their unit and us painting for years. You know, they just—the one and it was good for us and so.

Josh: You were slave labor?

Elizabeth: Yes, if that’s what we’re calling it, you know, mom please, please don’t take offense, but yes.

Josh: Okay, I’m just you know, just checking, just making sure and really quickly you mentioned 1031. I—since I’ve interrupted you already it—explain that for folks if you don’t mind really quick.

Elizabeth: Sure, the 1031 is this amazing thing. I love it. We’ve done it a couple of times and it’s actually an integral part of our strategy and so a 1031 let’s you exchange one like property for another like property in real estate so, you know, obviously the caveat before I begin this discussion is if you’re going to do it, please speak to a coordinator. This is just me.

Josh: She’s not a lawyer.

Elizabeth: Yes.

Josh: Not an attorney.

Elizabeth: Exactly, just disclaimer, but that being said, what’s awesome is you can sell one house and turn it into one house, two houses, or up to three houses. There is more, but it’s a lot more complicated we’ve done a couple of them and for us, our goal is to turn one house into multiple houses without paying tax. You get to carry the tax burden over from house to house and you continue to use that money to put 20% down to the next one, your bases actually grows. You’re bases again, not an accountant, but your basis is that tax liability that you have so when you reduce it from the—so say your bases is $20,000 from your first house and you buy a $100,000 house, now you have $80,000 to depreciate.

Josh: You’re trading up and you’re.

Elizabeth: Yes.

Josh: You’re deferring the taxes on it. Yes, no it’s a great strategy and I know you’re not an expert and anyone who’s interested, you know should not turn to Elizabeth as an expert, but do your research on BiggerPockets or else where. We’ve got tons of content on what a 1031 is, how it works and frankly, you know, you should talk to your professionals that you work with to help you out with those because they are good strategy, but let’s get back to your story. Thank you for filling us in though.

Elizabeth: No worries so always love it and when we were looking at universities, my mom wasn’t sure if I was looking at the university more for the potential to rent out rooms to fellow students or because I actually liked university.

Josh: Nice.

Elizabeth: Yes so you know I’ve always loved it. Ended up being an RA on campus so didn’t do anything and we continued to like it, but we got married and I’m sure everybody totally agrees with tip number one, you’re all poor when you graduate and get married at 22 so we rented for awhile. I’m I know there’s this thing called house hacking that everyone’s discussed. We did that as a rental so we rented a property, rented out to another couple, and our monthly payments were $500 bucks right out of college so we’re looking.

Brandon: You’re saying like, you lived in one bedroom.

Josh: Rent hacked.

Brandon: You rented an another—like the other bedroom.

Elizabeth: We—we—yes, so we rented an 1,800 square feet for two couples.

Brandon: Okay, cool so yes, you rent hacked because.

Josh: Rent hacking, yes.

Brandon: We’re going to make that a new phrase now.

Josh: We haven’t labeled it.

Brandon: Rent hacking.

Josh: Right here.

Brandon: Yes, right here on the BiggerPockets podcast. You hear it here first folks, anyways.

Josh: On show 103 with Elizabeth Colegrove.

Brandon: Whoa.

Josh: At BiggerPockets.com/Show103. Alright so you rent hacked and then what?

Elizabeth: We rent hacked and then that allowed us to come up with our first down payment so tip number one, VA loans. Go zero percent in, but have a side amount of cash. That’s what we did so then I’m sure everybody knows VA loans, just this huge discussion on how damaged they can be. Well, let me just tell you. Ours was exceedingly cosmetically damaged so you can buy a fixer upper with a VA loan. That’s key number. The key though is to find someone that will tell you what you can and can’t buy with a fixer upper with a VA loan so what we did was we bought one that inside looked the druggie home I called it. It just needed paint, carpet, all the stuff that my husband and I could do, new bathrooms, so forth, but it had a brand new roof, brand new siding, everything else was new, but C system so it was ugly, but great exterior and honestly, that is the tip for our entire house buying strategy. Number one is you want a ugly, but sound home.

Brandon: I like it.

Josh: Nice.

Brandon: I like it, ugly, but sound. I kind of follow that same strategy right like everything I buy is pretty dilapidated, pretty run down so yes.

Josh: Ugly.

Brandon: That’s smart. Yes, you know, I—you shouldn’t call me names, but let me ho back to the VA thing and.

Elizabeth: Okay.

Brandon: Talk a little bit more about the—what is a VA loan, who can get that? What does it mean?

Elizabeth: A VA loan is a Veteran’s.

Josh: Veteran’s Affair.

Elizabeth: I honestly don’t know what it stands for.

Josh: The US Department if Veteran’s Affairs is.

Brandon: Oh.

Josh: The VA. There you go.

Brandon: There you go. Alright, so what does that mean? Like what’s special about a VA loan?

Elizabeth: It just means it’s a zero percent down loan for people that are affiliated to the military so if you were prior in, don’t quote me because I think three years, but I really don’t know. All I know is my husband, coming out of an ROTC program was eligible.

Brandon: Oh.

Elizabeth: Great program, if you’re ever prior military, see if you’re eligible I guess is the comment.

Brandon: Cool.

Josh: You guys managed to get zero percent down is that—is it always zero percent down?

Elizabeth: A VA is always zero percent down, but there is a funding fee.

Brandon: Interesting. How much is the funding fee? Do you know off the top of your head?

Elizabeth: Approximately so it depends and I found this out the hard way. The first time you buy it, it’s about 2.2% again, don’t quote me because it keeps changing and then the second one is 3.3% approximately.

Brandon: Percent, you’re talking right?

Elizabeth: Yes, percent so the other thing that we found out is make sure you look into your type of loans because conventional at 5% has no funding fee so depending on your means you should see if the VA loan is the best loan for you, just because you’re eligible, doesn’t mean you should use it.

Brandon: I like that.

Josh: Makes sense.

Elizabeth: In my opinion.

Brandon: Yes.

Josh: That makes sense, yes for sure.

Brandon: Well, one thing I like about that VA loan, again, I’m not military so I can’t get it, but I mean there are a lot a lot of active you know, active, past, whatever military members in the US that can take advantage of that and the VA does you know, and I believe again, yes maybe you don’t want quote me on it because I’m not the guy, but I think you can do one, two, three or four units.

Josh: Yes.

Brandon: As long as you’re living one with a VA loan. Do you know if that’s true?

Elizabeth: Yes so a VA loan, same rules as—it’s similar to FHA minus the funding fee I’ve been told so the thing with the VA is you must live in it, absolutely must. There’s a one year residency requirement. Again, there is always ways to get out of it, but take this as the rule then you can always look into loopholes later. That being said, you’re supposed to live for a year because it’s supposed to pay for you—or it’s supposed to allow you to buy at your duty station so for us, you buy it every duty station, which is what we do. When you’re transferred, if you’re transferred in less than a year, that is one of the big loopholes, they let you out of it.

Josh: Oh, very interesting. Yes, that’s kind of cool so I mean you can use that as a—as somebody or a spouse of you know, an active or vet or a spouse of a active or vet to house hack and you know, kind of get out of the residency requirement, you know, of course, if you petition for a transfer or if you are transferred for whatever purpose, which makes sense I mean you know, you can’t force people to live somewhere if they’re forced to move so.

Elizabeth: Right, just as an FYI, they do check orders so.

Josh: Yes.

Elizabeth: It’s part of thing is you have to provide your orders a week and a half ahead of time to them.

Josh: Yes.

Elizabeth: The other cool thing that, again, you know, our tip number two and the biggest thing that we’ve done very well are we as in I is I know the—rule—I’ve learned the rules. I can’t tell—like don’t quote on any of them, the biggest thing that’s done really well for us is to figure out the rules and all of this.

Josh: Yes.

Elizabeth: If you’re new investor and you’re trying to make sure that you get your footing, make sure you look at all the rules and by reading all of the rules and going in and sitting in with my broker. My broker will tell you that usually when I walk in, I know the answer so if we don’t agree, she goes and triples checks because I’m usually right. Not always, but make sure you know the rules so the other big thing with the VA loan and we found this out when we were beginning so again my husband is a pilot so we move a lot. When we were in our beginning stages, we knew we were moving, but we didn’t have orders so we wanted to buy a house.

We didn’t want to get stuck without a home or we want to be forced to rent and you know, we’re all planners if not we wouldn’t be real estate investors so we put an offer on a house without ever knowing we had orders and so the VA loan is amazing in the fact that if you don’t have orders a week and a half before you close your financing falls through. If your financing falls through, you get everything back minus your inspections and your appraisal so you can go through the whole part of this of this loan without having orders so you can guarantee you have house, but if you don’t get orders and it falls through, you get your earnest money and everything back so it’s awful for a seller, but as a buyer it’s amazing.

Brandon: Alright, so you’re saying if I sold a house right now to a person in the military who is moving to my area and then their plans changed, that they get their earnest money back no matter what because their plans changed?

Elizabeth: In your SOL, yes.

Brandon: Ooh, that’s good to know. I didn’t not know that. Look at that, you learn something new everyday.

Josh: Absolutely, fascinating, wow.

Elizabeth: For us, it never happened. I mean like we got orders, but it was that amazing protection to allow us to begin the process.

Brandon: Okay.

Josh: Yes.

Brandon: Maybe can you tell me kind of what you’re—you’re let’s step back a minute what is your big picture strategy, I mean you kind of mentioned it a couple of times that you have kind of a strategy. What are you hoping to do with all of your investments. Are you? I mean, is it buy one move, buy one move, buy one move forever and what are you doing?

Elizabeth: Our end goal is that when we’re done with the military, we are done working so our end goal is to retire when my husband decides that blowing stuff up is no longer for him so or.

Josh: That may never happen because you know.

Brandon: It gives the guy.

Josh: Blowing stuff up is a lot of fun for guys so yes, you know.

Elizabeth: Great so who knows, but as the last—you know, you know what the saying, “See the world, join the navy.” Well, join flight the corp, see small town America. I would say the biggest thing that started all of this is we moved to a really small town in Texas that was not my favorite location so while now five years later, being married, it wouldn’t be so bad coming from DC, it was pretty bad.

Josh: I can imagine.

Elizabeth: The goal is that when we’re done this lifestyle, we can choose where we want to live and we want to have the funding to do so.

Josh: Yes, okay so the goal is to end towards retirement, you’re getting there by using you know, buying these properties. Basically living in them and then renting them out at the next point. Are you always buying to live in or are you also buying rentals above and beyond that?

Elizabeth: We buy rentals too so we got—so the biggest that I say and I hope that they take this as tip number three is your plans change. The only thing that our end goal that stays the same is we want cash flow when we retire. Beyond that, you know, when we were in Virginia Beach, we’re like, we want everything within six hours of driving distance. We want to hire a property manager. We had skies the limit and now I self manage across the country—across the country. We can’t drive to anything and we buy every—like all kinds of different stuff so the only thing that has stayed the same is that cash flow long term.

Josh: Got you.

Elizabeth: For us, this is a lifestyle. We live off one salary. We save the other salary so yes, we got started using our VA loans, but we all know buying personals quickly is used up. I mean it’s—it’s supposed to be for your final residence and they really don’t like you using it as investor. It’s really not a long term strategy, I mean yes, military, you might collect five to seven, but I have five in three years and I really want ten and five more in 18 months so that’s not—that’s not a strategy.

Josh: Yes.

Elizabeth: Our second strategy has been using short sales to buy under market properties using that second income as the down the payment source.

Josh: You—what do you mean using—you’re buying short sales is what you’re saying.

Elizabeth: Yes, we’re buying short sales.

Josh: Okay.

Elizabeth: Well, we like short sales as my favorite mode because you can put an offer on a house eight to ten months out. It’s a very slow process, but you also do not have a buyer that typically isn’t emotionally involved. I mean yes, they do care about the price, at least we are out.

Josh: You’re talking about the seller?

Elizabeth: Did I say buyer?

Josh: You said buyer, yes.

Elizabeth: I’m so sorry.

Josh: No that’s okay. Yes, you’re the buyer, right? Just making sure.

Elizabeth: We’re the buyer.

Josh: Well, I’m listening.

Elizabeth: No, sorry.

Josh: Yes.

Elizabeth: The seller doesn’t care.

Josh: Okay.

Elizabeth: As much.

Josh: Yes.

Elizabeth: They just want to walk away.

Josh: Yes.

Elizabeth: We built a reputation in our areas. We have a fantastic realtor who has a even better reputation and so they will tend to go with us because the thing with short sales is they need continuity because they don’t want to go through this process and then have you walk.

Josh: Yes. Well, so let’s talk about short sales a little bit. Dive into that.

Elizabeth: Okay.

Josh: First of all, very very basic question. What is a short sale?

Elizabeth: It’s not short.

Brandon: Okay.

Elizabeth: I’ll tell you that.

Brandon: Okay.

Josh: Yes. Drum roll please.

Elizabeth: Exactly, so the thing about a short sale is technically, they’re shorting the loan so say they owe $300,000 and you pay $180 that’s shorting the loan so they are houses that are worth way more than they can ever sell for so they’re trying to get the bank to take a discount on them.

Brandon: Okay.

Josh: They’re worth less than they can sell for.

Elizabeth: Yes, I’m sorry, I’m very.

Josh: It’s okay. I know it’s okay, it’s okay. I just want to make sure to clarify—don’t be nervous. It’s fine, not a big deal. Yes, so a short sale is a house that sits underwater, right? I mean it’s the ability to sell a house that’s worth less than the value mortgage on the property. There’s no equity left in the property so they have to go to the bank and basically, the bank has to what? They have to approve?

Elizabeth: They have to approve it, which is—with the.

Josh: Selling for less than the mortgage worth?

Elizabeth: They absorb the difference.

Josh: Yes.

Elizabeth: Sort of so when we started this people really didn’t care the price because there was some awesome tax favors involved that they forgave the tax forgiveness so say they—the bank forgave $40,000. It was not considered income.

Josh: Right.

Elizabeth: Those have now expired so that is now all income so you find a lot more people negotiating on that price because they don’t want to pay the 33%, don’t quote me, percent on that income.

Brandon: That’s a really.

Josh: Yes.

Brandon: Good point. Yes, I didn’t realize that it expired. I knew that that—the government had that forgiveness.

Elizabeth: Oh yes.

Brandon: You’re the first one to ever tell me that that expires so that’s interesting so before—so just to clarify make sure I’m getting this exactly what you mean. Let’s just say that I was going to short sale my house because I owed $200,000. It’s only worth $150.

Elizabeth: Right.

Brandon: I sell it to Josh for a $150 instead of the $200 that I owed on it so.

Elizabeth: Yes.

Brandon: The bank was like okay, fine we’re going to write off that $50,000. The bank writes it off. I don’t have to pay the $50,000, but I have to pay taxes on that $50,000 because they count that as income.

Josh: Yes.

Elizabeth: Right.

Brandon: That right right? Okay.

Elizabeth: Yes.

Brandon: Just making sure. Yes.

Elizabeth: That’s a chunk of change for a lot of people.

Brandon: Yes.

Elizabeth: I mean we’ll go at 25% because with your numbers it’s easy, but.

Brandon: Sure.

Elizabeth: I mean that’s a lot of money.

Brandon: Yes. Yes.

Josh: Toward now, you got $12—tax debt for $12,500, how are you going to pay that?

Elizabeth: Right and.

Brandon: Yes.

Elizabeth: That’s at the end of the year so thankfully as the buyer, not my problem, but you get people really negotiating now.

Brandon: Yes,

Elizabeth: Because they care.

Josh: How do you work that out then? I mean if I—let’s take that example, right? We’ve got the property, I forget, Brandon’s sold it to me. I’m—Brandon’s trying to dump it I buy it from him so he’s now got this tax burden on this hypothetical for $12,500. How would you make it better for him? I don’t understand.

Elizabeth: It’s not better. It’s that so let me give you an example. When we started out, we bought tiny little houses in Charleston. They were HOA townhouses. It was in a planned community and the community didn’t happen and investors after four years, they were done.

Josh: Yes.

Elizabeth: Well, as incoming investors, we’re like dude, this place is just starting, like it was 2012. They were bowing, had just started coming back. It was coming. I mean we were on the upside. They were on the downside, you know.

Josh: Yes.

Elizabeth: Well, we just started throwing offers out, $90,000, eight-$9,000 because it was all forgave. There was—they didn’t care because if the bank approved—they were done.

Josh: Right.

Brandon: Yes.

Elizabeth: Now let’s fast forward to 2014, almost 2015, they care because they will fight you for every $2,000 because that’s you know, $300 and if at $1,000, it’s $330 that they don’t have to pay so they care about every penny so as investor, you got to be like, do I really want to lose this house for $2,000 and cause they’re—they’re doing open markets, they’re making sure they get what they can get for it.

Josh: Okay.

Brandon: Fascinating, fascinating, yes.

Elizabeth: On the swinging is the market has also come up so short sales, banks are no longer allowing the lowest price so short sales aren’t as friendly for the average person because they’re waiting ten months only to have the bank come up and raise the price $10,000 so the consumer aren’t fighting over these short sales as much so people are also dealing with there’s not as much demand for their supply.

Brandon: Do you feel the short sale game is over. I mean like if it’s getting more difficult with the banks, why is more, you know, why is it still okay to do it yourself.

Josh: Well, why are you still targeting short sales?

Brandon: Yes, why are you still targeting?

Josh: Yes.

Elizabeth: Because you’re still dealing with a—unattached third party.

Brandon: Good.

Elizabeth: As an investor, I don’t care, I mean, honestly, I’m totally guilty of not even walking houses until my short sale approval from the bank comes.

Brandon: Yes.

Elizabeth: Because they’re all cookie cutter. They’re brand new houses that’s—I don’t care. I have a house I’m living in. Sweet.

Josh: Yes.

Elizabeth: Because they are turning off the average homeowner, all that’s left is investors.

Brandon: Okay.

Elizabeth: Now, you’re just competing with yourselves and they’re still easier because they can buy them off the MLS. I’m an MLS buyer. I use a real estate agent. I don’t work with wholesalers or anybody else because in my area, all these houses are underwater. There’s no equity in them so I do short sales because it’s the only way to not pay market.

Brandon: Sure, that makes sense. I mean I like the idea of a short sale. I’ve never actually done my own short sale, like actually purchased on yet, but I like the idea that it’s kind of a cross between a foreclosure and the em—you know the everyday retail buyer so you don’t have to deal with the glut of people that are going with the you know, typical retail. You’re not dealing with the, you know, the flippers that are trying to capitalize or all the investors that look at the foreclosures. It’s kind of that nice middle range that has a lot less competition; therefore, you can sometimes get a better deal as long as you do all of your numbers so, yes, short sales. Definitely people can check them out and they’re—there’s a lot of content on BiggerPockets about short sales too so if people want to know more, there’s a ton of articles and stuff on short sales and I’ll try to dig some up and put them in the show notes, which.

Josh: Yes, we’ve got a really good one on the short sale.

Brandon: Yes.

Josh: Process.

Brandon: Yes.

Josh: Things like that we’ll.

Elizabeth: I even wrote one for you guys a couple of weeks ago.

Brandon: Oh nice, okay, we’ll link that.

Elizabeth: About everything that I look at, the positives, the negatives, what I do, why I like them, probably in better words than I can ever talk about the like—I thought about it for a couple of hours so.

Brandon: Perfect.

Josh: Nice.

Brandon: I will link to that in the show notes at BiggerPockets.com/Show103, but let’s shift gears a little bit here and talk about something you mentioned earlier.

Josh: Did you just move your hand?

Brandon: I did, I shifted gears, come on.

Josh: That was really funny.

Brandon: Fake Ford F150, I’m shifting gears. Alright, I want to talk about self managing at a distance because you’ve got, you’re managing yourself. I mean like how many different locations do you have properties at today? Just a couple?

Elizabeth: We own in three states right now.

Brandon: Okay, okay so three different areas, you got properties at a distance.

Elizabeth: Three different states.

Brandon: Most—oh three different states.

Elizabeth: Not only areas, we got states. We own in four different areas.

Brandon: Okay, okay so most people would say, don’t do that. I mean I hear that advice all of the time on the forums. Don’t do this, start in your backyard. Josh is one of them. He said it last week, “Start in your backyard.” Do you advice that? Do you—have you found that different, I mean kind of what—what’s your recommendation to people listening about investing at a distance and trying to manage it yourself.

Elizabeth: Let me go back to the very beginning. Don’t not start so you know.

Josh: That was a double negative. I’m going to add that up. Don’t not start so start.

Elizabeth: No, but—you see so many and I’m in the act of four of them and I’m also very quote on quote abrasive so sorry. Apologize ahead of time on the forums, but I see so many people say how do you start? I can’t start. Well, you can always start. We got into self-managing not because we wanted to because we had no option. We bought our primary in Virginia Beach. We had money because we—you know, rent hacked and saved up this money and then I got an amazing job out of grad school and we we’re ready to buy and I spent weekends looking in Virginia Beach and we couldn’t find anything that made sense. We went to Charleston for a wedding, instead of going to bed early, we started talking with a good friend of ours and before you knew it, the next weekend, we were up trampsing Somerville and we had two offers on houses so for us, we got started in self-managing because there was no option close and we wanted to get started and we wanted to have options and we wanted to start growing and at 23, we were too stupid to not know better.

Josh: Yes.

Elizabeth: Sometimes—sometimes too much knowledge is not good and then I tried, you know, I was working 60 plus hours and I was like, yes, I totally work for a property management who manages over 1,600 units and I know how to read a lease, but I don’t want to deal with these people. I’ll hire a manager and then I remember spending all weekend, figuring out four that I like—doing my research, this was all before I found BiggerPockets and finally getting a copy, one of their contracts sitting at my desk after a long day reading and throwing the contract across the room on my floor and going are you serious? I can do this for this amount of money.

Josh: Yes.

Elizabeth: I mean, I totally agree with you Josh, if you can find something local and you can do it local, go for it.

Josh: Right.

Elizabeth: Don’t not get involved because local doesn’t work, that being said, you know, for any military members or anybody that’s transient or anything that you move a lot, guess what, local is all relative and we’re been local in four different states so that’s been kind of our thing. You know, we got started in Charleston where my husband went to school, but never left campus. Since then, we’ve established our network and then we’ve left so and Google is a fantastic thing as we’re having this Comcast in three different states. You know, so I just Google. I meet a vendor, I Google. Yes, I’ve totally paid $250 an hour for a handyman because I got stuck, but that was still cheaper than hiring someone to do it for me. Like my mistake so far have not added up to needing someone to go and we have a huge—we do a no shoot account and that account, you know, the most we’ve used from it was $650 bucks for a lawyer, which I probably could have done, but didn’t want it do it.

Josh: Did Paul agree? What?

Elizabeth: We used a lawyer.

Josh: Oh you used, oh oh okay, no, no, no, but you said you could have—was it?

Elizabeth: I could have done it myself, but I didn’t want to deal with it so I hired a lawyer to send out a letter.

Josh: I got you. I was trying to understand what the.

Elizabeth: No, I don’t have a law degree. Just an MBA, which means I’m too knowledgeable in all subjects and get myself in trouble in everything so I was just going to say.

Brandon: Let me ask you about, you know, the property types because this makes a big difference and managing it a difference—that a distance right?

Elizabeth: Yes.

Brandon: Because if you’ve got a house in Detroit or in you know, wherever other state that Josh wants to pick on today. Josh?

Josh: Sure. First off, Detroit is not a state so.

Brandon: A city, fine, whatever, you know.

Josh: I’m just.

Brandon: Any—okay, we’re going to leave it at Detroit so if you got a house in Detroit that you bought for $12,000 and you’re trying to manage that at a distance. That’s probably different that managing a million dollar house in Beverly Hills so I mean what kind of properties do you have and how does that play into your managing at a distance?

Elizabeth: We buy the ugliest house, the nicest neighborhood.

Brandon: Okay.

Josh: Okay so A class neighborhoods and D class property in the A class neighborhood.

Elizabeth: Pretty much, I like to call them B for buying tenants who are listening.

Josh: Yes.

Elizabeth: The key that you need to go from buying and I’m sorry if I’m all over here is you need to know what it’s going to rent and what you’re purchase price is so there are so many homes that there’s no way in class A neighborhood they would ever rent, but it’s just looking so we tend to buy three bedroom, two bath homes because they’re the lower end of the neighborhood. About 16,000 square feet, but they rent the most so you maximize your rent per cost.

Josh: Your cookie cutter—cookie cutter properties and.

Elizabeth: They’re newer.

Josh: You’re looking for newer what? I mean how old?

Elizabeth: They’re usually less than ten.

Josh: Okay, okay, got you.

Elizabeth: That’s also our neighborhood so you need to un—to everybody out listening and the biggest thing is real estate is all local. You need to understand your area. We—living in small town America, which I told you has become our quote on quote specialty, this area, they migrate so instead of renovating the home or building over or whatever, they leave so people migrate. The older, I would not want to walk into at night. That’s the thing to understand, that’s why short sales for us work because people have no equity in these houses because these neighborhoods were built in 2006 and 2007. That’s why you have to look at your market to what you do. If we go back to DC where my parents—you better believe we’ll buying a 1910 home. It’s just—it’s local.

Josh: Yes makes sense, makes sense.

Brandon: I agree, I agree wholeheartedly. Alright, so maybe we can dig into the numbers a little bit, Josh.

Josh: Yes.

Elizabeth: Okay.

Brandon: Doing it. Doing it.

Josh: Yes, no no I think that’s great, yes so I mean, what—give us kind of the typical, you’re talking a typical is a three two, ten year old house, you know, purchase price, rent price, what are we looking at?

Elizabeth: Okay, so again, we own in four different areas, three different states.

Josh: Just generic, yes.

Elizabeth: Our—well—so Charleston, South Carolina.

Josh: You can’t be generic?

Elizabeth: I can’t do generic, sorry.

Josh: Fair enough.

Elizabeth: Charleston, South Carolina.

Josh: Work with me a little bit. You’re come one, come on.

Elizabeth: You’re talking to a finance, numbers girls like I’m trying.

Josh: Alright, alright.

Elizabeth: Charleston was $90K, California is $200 K.

Josh: Yes.

Elizabeth: That’s why I can’t go general.

Josh: Okay, so Charleston, you’re paying $90K for a property that rents out for?

Elizabeth: $1,250

Josh: Okay.

Elizabeth: My property tax and my insurance about 4% of that. California, I’m paying about $160 to $215 depending on when it was bought, but I pay 1.3% so you also have to look at escrow cost.

Josh: You’re talking about your taxes. What are the rents on those $200,000 houses in California?

Elizabeth: Between—how about $1,600.

Josh: Okay.

Elizabeth: They’re new with no expenses.

Josh: Okay so you’re under 1% on those. Are those like where are those in California? Southern California?

Elizabeth: Central.

Josh: Like Fresno mid mid.

Elizabeth: Hanford Lemoore. NAS Lemoore.

Josh: Then. Is that like Podunk, Washington?

Brandon: I know.

Josh: Is that kind of what we’re talking.

Elizabeth: Bremerton and it’s that equivalent.

Brandon: Okay, I got you.

Josh: Got you. Got you.

Brandon: Yes, it’s a working class maybe area a little bit.

Josh: Got you, got you.

Brandon: I guess in general.

Elizabeth: I mean class A is $200,000 I mean.

Brandon: Yes.

Elizabeth: If you go to DC, class A is not $200,000.

Josh: Not even close.

Elizabeth: That’s—I mean we’re able to buy class A because of the price of class A.

Josh: Yes, yes, yes, no that makes sense.

Brandon: You don’t—I would—I would guess you probably don’t get a ton of cash flow to those California properties at least. Am I right there? Or do you guys feel like you still get pretty good cash flow?

Elizabeth: Here’s the thing that I—that our entire business model is on and as an MBA, anybody else who has a background in finance accounting understand where I’m coming from and probably everybody understands where I’m coming from is we control our costs so we don’t have a property manager so we don’t add that cost in. We—because these are in very nice neighborhoods in a high, transient areas because we’re either military government or other groups that are constantly moving in, there’s a lot of demand for these houses in these neighborhoods and people don’t buy a lot so we have no vacancy cost. Now, we’re just coming down to repair costs. Again, these are ten-year-old homes. There’s no huge repairs yet and a lot of—if they’re older homes again, great systems, ugly homes so we’ve already done the rental. Our repairs per house, less than $1,000 a year.

Josh: Yes.

Brandon: Okay, yes.

Elizabeth: Yes, we only clear $350 to $400 on the average house, but that’s all going into the “Oh shoot” account.

Brandon: Yes.

Josh: You know and now I get that that works for you and I think that’s great. That said let me be the voice of Josh. Who I am, but and warn anybody listening that this is a very risky way to go about doing things, not counting for management fees, well, 8% to 10%-12%. You know and some of these other costs, which you guys are you know, having a ten-year-old property absolutely is going to reduce your cap x and other maintenance expenses, but you know, when looking for properties, particularly and I’m talking particular to new people. I mean, you know, all folks who’ve been doing this for awhile know what their talking here. You know, don’t ever look at a property and say, “Hey,” because Brandon, we’ve talked about this many times in the show. You’ve bought properties consider—that had been so tight with no management, you’re and you’ve been self managing and now it’s time to get a manager.

Brandon: Yes.

Josh: Now, you get the manager on board and you know, whoops, I’m now upside down every month so it’s and I’m not lecturing you.

Elizabeth: No, no, no there’s one piece that I didn’t mention in this and I do apologize.

Josh: That’s okay.

Elizabeth: We also heavily leverage, which means all—we’re not. Yes, that’s bad before you say anything, but that also means.

Josh: I’m not here to pick on you. What I’m here to do is make sure that anybody listening is you know, this is a strategy. It works for you and that’s awesome and I’m not here to critique. What I’m here to say is you know, I want people listening to keep in mind what you’re doing and understand that, you know, there is absolutely risk involved in it.

Elizabeth: Oh, tons of risk.

Josh: Then that particularly for new people, I highly recommend keeping all the other costs that you’re saying, you know, we’re not going to count this because we don’t do it. You got to consider those in your evaluation of a property and I know you’re doing it, but I’m saying new people.

Elizabeth: Wait, you need to consider it, but when you’re considering a $50,000 house that you buy in Michigan that’s making you three five times per—you know, times, meeting all of the rules, you got to also make sure that you’re going to have clients in there. That you’re not going to charge yourself a $1,000 every time they, like they turn over. They turn over every three months and.

Josh: Right.

Elizabeth: You know, for us, we try to meet the 2% rule without knowing, hold on, about knowing.

Josh: I’m not even talking about a 2% rule.

Elizabeth: No no no, but no no no.

Josh: There is not, this is not.

Elizabeth: I’m sorry.

Josh: I’m not here to debate with—this is not a debate at all.

Elizabeth: No no no.

Josh: I think you’ve take it like—wait hold on, hold on, you’ve taken this—this is very contentious, I don’t know why.

Elizabeth: It’s not contentious.

Josh: You’re taking this like it’s a debate. It’s not a debate. I agree. I’m not critiquing you. What I’m saying straight up is folks, when you evaluate a deal, like don’t assume zero vacancy. That’s a bad idea. Even if you get zero vacancy that’s great.

Elizabeth: Great.

Josh: Don’t assume zero vacancy. You’re going to get yourself in trouble. Not you, you might, but like anyone else listening, don’t assume zero vac—50% vacancy. Bad idea, don’t assume zero percent cap x, don’t assume all of this other stuff so that’s what I’m talking about.

Elizabeth: No and I—I think that’s where we misspoke and if I misspoke, I’m Chief Misspoker over here. I don’t assume that this doesn’t happen. We have found at this level, it happens less so we’re able to do these margins because of what we buy. Now, do not use what—do not use anything in podcast 103 on a class D property.

Brandon: Yes.

Elizabeth: Because guess what it won’t work. This works because we buy a class A property.

Brandon: Yes.

Elizabeth: Everything that we do is so tightly in a bunch. Do not copy 93% of what I say because you won’t work out. If everything leads to everything and that is why we’re successful.

Brandon: Sure and I would actually love to get more and then because I’ve seen first hand what it’s like when I have the lower end properties, the class C property. I mean, I’m not like complete ghetto, but I got class C, in B minus neighborhoods and properties. We have a lot of repairs, a lot of vacanc—well a lot of turn over. A lot—I mean our average tenant stays for at most a year. I think we’re probably averaging eight months to a year. We have—every time there’s a turnover, it’s a major project because it’s expensive to manage lower ends so when I think like, you know, 50% rule or all those rules that we have right, I know that that’s true in my properties because I know that it’s going to cost me two grand to fix it up. Then I talk guys like, we had Philip Taylor on this web—podcast back two-three or four weeks ago, whatever it was and he was on the newbie podcast we did and he does kind of—I mean he kind of has what you do right. He’s—I looked at his numbers—he showed me his last two years of his financial on that property and he’s making way more cash flow on his property than I am even though his numbers are terrible.

Josh: Yes.

Brandon: I mean like compared to what I have right, like it’s like.

Elizabeth: Great.

Brandon: He just doesn’t have any vacancy, doesn’t have any maintenance, doesn’t have any repairs, right? I get what you’re saying completely but.

Elizabeth: Just look at that because you know, we looked. Okay so small town America, what caught—started all of this—we looked at buying back there because the numbers make sense.

Brandon: Yes.

Elizabeth: You’re buying $80,000 property, rent it for $1,600 like fantastic, but when I started looking at my taxes and my insurance and the cost down there and that they’re older homes and I did a whole spreadsheet—my houses that are 0.8 looks so much better when you look at the end so just look at all of the costs. Like every cost associated with buying local or out of state because honestly, this out of state manager would invest only local if she could get away with it.

Josh: Yes.

Elizabeth: Because there’s so many hidden costs that you don’t know about.

Josh: Can I throw something at you really quick on this.

Elizabeth: Sure.

Josh: Okay so right now, you’ve got these rental properties that are doing really well at eight per—at 0.8% and it makes sense. I get it. You’ve also said that you’re—you’re kind of goal here—you talked about 1031s and rolling over to new properties, but you hold on to your property for 30 years, you’re going to have those expenses. You’re going to have the maintenance expenses. You’re going to have all of that other stuff so you know, in the short term, it’s—it’s great, but what about the long term? Are you looking out 30 years? Or are you looking out, “Hey, we’re going to own this for five or seven and move on to the next one.” I’m just curious about that.

Elizabeth: Five or seven.

Josh: Okay.

Elizabeth: Ten-ish. I mean again, 1031, so we don’t live off our—homes and you know at the different summit, I think Brandon, we had all of these conversations because we don’t care about cash flow because we care about long-term growth so every $350 that goes in my pocket, another $250 goes into paying the house off. For us, I look at that final number so when you look at our numbers, we make 25%-45% on the cash we put into the property and that’s all I care about at the end of the day. That’s what I look at.

Josh: Yes.

Brandon: I got one more thing to add to that just on that note. What you said, you don’t live off the cash flow.

Elizabeth: No.

Brandon: You’re not—so this where there’s a major difference in your strategy versus what I’ve done up to this point.

Elizabeth: Right.

Brandon: Right so I live for my first six years, I lived off of my cash flow until I got to the point that I could quit my job and that worked for me because of that, I had to buy properties that would cash flow like crazy because I had no other choice. I had no income in my life. I mean my wife was working at Starbucks and I was doing nothing. I mean I was flipping houses that didn’t really work out very well and so I guess—the market is like crashing right? Like, I want to get into the game that you’re playing because I want to see the potential for appreciation. I don’t need the cash flow today. I need the appreciation that’s going to make me a mutli-millionaire more than I need to you know, quit my job of whatever. Just—kind of a back to you know, where you are in life. Can you afford to handle? It’s—it gives—I mean really go back to that appreciation versus cash flow thing and that.

Josh: There’s no one right strategy.

Brandon: There’s no one right strategy. Yes, it’s just different.

Elizabeth: Also, by the way, I am the absolute liberal of this team. My husband is very opposite so unfortunately you don’t have the two sides of this discussion. He will tell you we only buy for cash flow so there’s that side. What we both have agreed that we will call it is we buy in areas that appreciation and rents are higher than inflation so that our cash flow is always preserved and that—that is our long-term goal. Even if we are stuck, Josh, in this house for 30 years, that it continues to go up so we aren’t doing a peer appreciation play like southern California might be, but we have seen significant appreciation in our rent over time so we’re okay getting in at $350 because guess what, it went up to $500 in two years because we’ve bought in an area that we saw depression and that we knew would go back so it’s kind of understanding your area too.

Josh: Yes and my last question on this line is you had mentioned appreciation and talking about kind of focusing on that somewhat. How does somebody find an area that’s predictably going to appreciate? I mean is it, you know, are you—is your assumption that because it’s A type property, that you’re going that appreciation or is there due—are you doing something specifically in terms of research to find areas that meet certain criteria and what are those criteria. I’m just curious what that is.

Elizabeth: The thing that I’ve noticed is I have an MBA and my undergrad is in finance accounting so my husband will tell you I think in numbers so I wall into an area and the first thing I do subconsciously is figure out how awesome are you for investing or do I just blow you off and go drink my coffee. I look at what kind of—cause I look at rentals, not flips so let me just back up so I look at who is the employer in town. What type of employers are employees are these employers employing? Are they transient, which means there’s going to be a need for rentals or are they not transient? Is these employers growing? Is this considered a little—not so awesome town that people aren’t going to want to ever buy in so they’re only going to rent or is this going to be a town where people are going to fall in love and everybody wants to buy? Because you really have to look at so much more than just the town and the reason I say that is because I invest in Hanford Lemoore.

If you look at a map, you have to go really close in to find the town. People—most people know a Fresno and you see a lot of debate from the forum of investing in Fresno. I personally won’t step foot there and I have looked to quote on quote diversify and the reason why is because Fresno doesn’t employ a transient group and I’m not just saying to buy in a town that only has military. I’m saying to buy in an area that has transient workers. We have a lot of federal for the prisons around here. People don’t want to live out here forever. I don’t know why. No, yes, I do, but—but they so there’s a lot of movement so we have as much civilian as we do military, but they don’t want to stay here long term so they buy—but they want their kids in really nice neighborhoods. These areas are growing, but people don’t want to put long term foot holds in it. Does that answer your question?

Brandon: Sure yes, I like it.

Josh: Yes, yes.

Brandon: I think it makes sense. Anyway, I want to move on.

Elizabeth: You look at lot of stuff.

Brandon: Yes, yes, I got you. I got you. You mentioned the transient thing so when I think of that, my first thought is, well, I don’t want to rent to an area that has transient people. I want stable that—that are going to stay for 30 years. Why do you look at that differently? Maybe you can kind of dive into a little bit.

Elizabeth: Actually, my long-term tenants, okay, tenants, don’t listen to this—scare me because, sorry it’s the truth. Because my one-year tenant, you talk about hot—large costs to turn a house over. A house turn over, I think the most I’ve spent is like $400 bucks.

Brandon: Okay.

Elizabeth: Turnover costs don’t cost me a thing because after a year, you shouldn’t be ruining my house and this population doesn’t ruin homes. They aren’t hard on homes, long term when you rent it for three years then you get too comfy and then so there’s your issue. The second thing is they don’t bother me because they’re willing to rent higher income homes. They—they’re here for as purpose. They’re going to do their purpose and then they’re going to move on and because we own in an area that there’s lots of these people filling their shoes, there’s not issues with that, but again you need to know your area because every area has a natural transient population. People get new jobs, they move out. There’s a natural so if you are trying to be a rent—a landlord in a town, you need to have more demand than supply and so that’s the thing with some of these areas. The rent values are very depressed considering the purchase price. For example, I’ve looked in Fresno and they—they get their $1,600 a month. You’re looking at $320 versus my $210 because there’s enough people that already have to move to cover their mortgage that they bought 12 years ago that they will rent it for a much lower price.

Brandon: Okay, that makes, I mean that makes perfect sense. I guess I never thought about it in that way, but I like it.

Josh: Yes.

Brandon: Alright, now officially we are going to move on to the.

Announcer: It’s time for the Fire Round.

Brandon: Alright, the Fire Round. These questions come straight from the BiggerPockets forums. We’re going to fire them at you. You aready? Are you ready? Are you nervous? Are you ready?

Elizabeth: We’ll see.

Brandon: Alright, here we go. First one, when purchasing a buy and hold property, what should a person look for other than cash flow and purchasing it under market value. What should a person look for besides just the cash flow and the purchase, what should they look for?

Elizabeth: Okay, so I don’t even look at those before I look at this. I’ll look at the neighborhood and the schools.

Brandon: Yes.

Elizabeth: I only buy in good schools is

Brandon: Okay, that’s good. How do you determine what a good is. I’ll add.

Elizabeth: I look at the Great School or whatever the numbers and most people—it because again I appeal to families, they want a nine or ten so if you’re not a nine or ten or on like the top one or two, I tend to go two because one’s too expensive, but if you’re not the top one or two, I don’t even touch you because that goes back to neighborhoods.

Josh: You’re talking about ratings on GreatSchools.com or what, yes.

Elizabeth: Yes.

Josh: Okay. Got you.

Brandon: I didn’t know that was a thing, but.

Josh: Yes, there’s a website that will rate schools and basically, based upon, you know, presumably schools that are going to be more expensive to live near so.

Elizabeth: Then the other thing though is again, we talked transient population who’s what I appeal to and what we are so the first thing that I look with no kids is what the school is because if I know and I. If I know if I move to a great school area, the likelihood that it’s an amazing neighborhood is very very true—is very very positive and possible. You find a lot of people that will gage an area based on the elementary school. Specifically, elementary school because it’s a much smaller region.

Brandon: Interesting. Fascinating.

Josh: Got you. Got you alright well, my question—it’s actually not my question. It’s somebody else’s, but is it a bad idea to use your money when doing a buy and hold property when as for purchasing a buy and hold property.

Elizabeth: This goes back to what we’ve all discussed repeatedly so my husband and I live off our salaries, not these homes so for us, we want our tenants to pay off because in 15 years we want them to purchase it so you will see me as a high advocate for a highly leverage property. If you’re going to live off of these, you might not want to think about using only someone else’s money because you need some skin in the game because you have no fall back. Our fall back is our salaries.

Brandon: Okay, okay.

Josh: Yes, makes sense.

Elizabeth: For us, we only use other people’s money if we can get away with it.

Josh: Got you.

Brandon: Okay. Makes sense, alright, next question. I’m going to read this straight from the forums because it’s kind of a cool question. Alright, do you think that giving away my Porsche is a innovative strategy? It says, they’re thinking about giving away a Porsche as a marketing tactic.

Josh: I just saw this by the way.

Brandon: Yes, to find investors.

Josh: Kind of bizarre, but.

Brandon: Yes as a way to like I don’t know, get people to know the business like to get out there and get leads. I think they have like a “We” you know, like “I buy houses” kind of a company. They’re thinking about giving away a Porshe, what are your thoughts?

Elizabeth: You know I’m not a wholesaler. I’m a buy and hold girl. For me, that would add no value.

Brandon: Okay.

Elizabeth: That would just cost me money because my people come after my houses so buying in a great area, spending a little bit more money not having to add that marketing—just having a good houses brings people all on its own so I mean I have five or six people fighting over my house every time so having that expense would add no value, for me.

Brandon: Yes.

Josh: Got you. Got you.

Brandon: It’s an interesting question, anyway. I just—it stood out to me on the forums I was like huh. That’s kind of funny.

Elizabeth: You should ask that to a wholesaler because I would say if you’re trying to get leads, that could be a huge lead generator.

Brandon: Yes.

Josh: Interesting. Interesting. Alright, final question for me is open houses, do you hold them and why or why not?

Elizabeth: I do not. I do schedule people every 15 minutes.

Brandon: Oh okay. Yes.

Josh: Okay, so you don’t have people over lap, you’ve kind of break it up.

Elizabeth: Every 15 minutes, no one runs on time so it kind of does overlap.

Josh: Yes.

Elizabeth: It also, you know, I have found that when you are there to answer questions, you give them undivided attention. You tend to rent your house out quicker. We had an open house situation accidentally because three people showed up all at once and I found it just didn’t’ go as well, personally.

Josh: Makes sense.

Brandon: Okay, alright.

Josh: Right on.

Brandon: My last question of the Fire Round is.

Josh: No my last question.

Brandon: You already asked it.

Josh: No, you—what?

Brandon: What?

Josh: You asked the first one so I’m supposed to ask.

Brandon: Okay, fine, my last question, I’ll give you one more, but where—I like this question a lot. Where would you invest for long term buy and hold if you could go anywhere in the US? Assuming your total goal is return on investment. The entire US, where would you buy?

Josh: Podunk, Washington.

Brandon: My backyard.

Elizabeth: Return on investment.

Brandon: Yes, what do you think is the best place you’d like to invest if you could go anywhere in the USA. I won’t hold it to it either.

Elizabeth: Sorry, I’m speechless.

Brandon: That’s alright.

Elizabeth: I like central Cali.

Brandon: Okay.

Elizabeth: I don’t know if that’s the best return on investment per say. I will say that whatever answer someone comes up with, make sure you check your escrow cost because we left Somerville, South Carolina because then we’re paying more in our principal and interest than we are in our mortgage and our interest and like principal building. It kind of turned me off so I don’t know.

Brandon: Okay, that’s alright.

Josh: You don’t want to invest anywhere where you’re not upside down is a good?

Elizabeth: Yes.

Josh: Safe bet, it’s a good safe bet.

Brandon: Are you captain obvious, Josh?

Josh: Apparently.

Brandon: Good, alright, Fire Round last, do you want to take a last one or do you want to move on?

Josh: It’s time for the.

Announcer: Famous Four.

Brandon: Alright, Famous Four, these are the questions we ask every guest, every show. You know what’s coming, I think. First question, what is your favorite real estate related book?

Elizabeth: The NOLO series and I’m probably pronouncing it wrong.

Josh: Oh NOLO, the legal series?

Elizabeth: Yes, I tried to read that in every state I go.

Brandon: Fascinating. Good idea.

Josh: Got you.

Brandon: Good idea, okay. Josh?

Josh: Nice nice nice. Favorite business book?

Elizabeth: Same term, I—I use them for both.

Brandon: Okay.

Josh: Fair enough. Fair enough.

Brandon: Cool cool.

Josh: Nice nice nice. Hobbies? What do you do outside of.

Brandon: Hobbies.

Josh: What do you do outside of real estate?

Elizabeth: I love to ski.

Josh: You love to ski.

Elizabeth: We actually—the second reason we got into this is you see the question a lot is how do you get a reluctant spouse to participate and my husband was—I don’t want to say bribed because that sounds harsh, but my husband got involved because I told him that when he got out of the Navy, we could live on a boat and sale around the world, living off the cash flow.

Brandon: Nice.

Elizabeth: Sailing is our second big hobby. I would say it’s equal to real estate because mine is real estate, his is sailing.

Josh: Nice nice, both fun hobbies.

Brandon: I’m glad you actually brought that up. I had somebody just today send me a private message and asked that question. How do you get your spouse on board? I think that’s kind of a cool way to do it is to show like, you know, if we don’t do any kind of investing in our life, here’s where were going to be.

Elizabeth: Right.

Brandon: If we do this right, here’s where we’re going to be. You pick. You know like that.

Elizabeth: Well, we got, you know he’s a computer science guy and we actually—he actually built a program to prove me wrong and it proved me right, but we won’t go there. You know, the point was when it reached how much we needed to save per month, by putting it into a 401K or whatever or if we put it into real estate or whatever you’re comfortable with. Real estate is just what I understand and so if—it’s what I can invest in that it would provide that cash flow and honestly, to go back to that, you know, don’t pressure people. The big point I hope that you come away from my podcast and even from Josh and our little sparring is that everybody has.

Josh: I wasn’t sparring with anybody.

Elizabeth: I—I’m sorry. I’m a redhead, but so we were having our little discussion is that everybody has their own way of doing it and so for us.

Brandon: Yes.

Elizabeth: For my husband and I, we got started through the baby step. He wasn’t comfortable with most of it, but as long as I proved every time that we didn’t screw up. He was okay with going forward and you know, before you know, we went from buying a total fixer upper to short sales that need no work and so it makes it easier on him who’s my fixer upper guy so I would just say take a baby steps don’t tell him you want to buy 30 houses, which I do. Tell him that you want to buy one and then do so well at one that you buy two and before you know it, he’s more of an advocate than you are and honestly, you know, he is the biggest person in our team work, but it didn’t start that way. I’m sure people have seen he played Angry Birds the first time we looked at houses.

Brandon: Nice.

Elizabeth: It’s not, how it ends up is not how it starts and be okay with that it’s a transition.

Brandon: I love that advice. I really like that advice is not to overwhelm the spouse with here’s where we’re going to go, we’re going to buy 50 houses. Like, it’s, yes, take it one at a time. It’s a lot.

Josh: Yes.

Brandon: I mean that’s—that’s a good way to keep it focused in your own head as well.

Josh: Yes.

Elizabeth: Be okay with not 100% participating. I mean my husband still doesn’t participate. I have three POAs that I signed for him because he’s gone right now, but the point though is—don’t make it about them, make it about you with their support. I mean that’s the same thing, you asked us our hobby? He—he’s the chief sailor, I just do what I’m told and be okay with that and before you know it, they’re going to find out what pieces of puzzle they like to do. My husband loves pulling apart bathrooms and redoing it and I don’t want to even look at plumbing so be okay with however that works out, but know that that won’t begin that way.

Brandon: Okay, I like it. Great.

Josh: Makes sense. Yes, just figure out where you kind of fall into place so cool.

Brandon: Cool, alright.

Josh: Brandon.

Brandon: My final question for the day. What do you believe sets apart successful real estate investors from those who fail, give up or never get started in the first place?

Elizabeth: Figure out your business plan and I know this gets back to businessy-ness, but figure out what your goal is and our goal was early retirement and from there, we have just plotted towards that goal and the second thing is, understand that life, that you will change so turn lemons into lemonade. We had hoped to spend our entire time investing in the Virginia Beach Area and before you know it, 18 months later we were transferred so we have turned every lemonade or every lemon into lemonade and California, if we hadn’t moved out here, I couldn’t tell you where we are and we’d be having this discussion on podcast so just keep going and be okay with not being the norm. I mean, we aren’t the norm by own, any sense of the means and we do okay. Look at what you’re given and turn your stuff into that gem.

Josh: Cool.

Brandon: Cool.

Josh: That’s great advice.

Brandon: Great advice.

Josh: Alright Elizabeth, where can people find out more about you?

Elizabeth: Well, I’m on—obviously on BiggerPockets and then I started a website to kind of talk about my strategy, ReluctantLandLord.net.

Josh: Awesome, awesome.

Brandon: Cool.

Josh: Alright, well listen thank you so much for being on we definitely appreciate it and lots of luck to you going forward and thanks for being on the show.

Elizabeth: Thank you and I’ll look forward to seeing everybody on the forums. It’s great area. It’s a lot of fun.

Josh: Thank you. Thank you.

Brandon: Awesome. Thank you.

Josh: Cool.

Brandon: Alright, we’ll see you there, bye.

Elizabeth: Bye.

Josh: Thanks Elizabeth.

Josh: Alright guys that was show 103. I walk away with scratches on my face with a black eye. No no it wasn’t that bad, but.

Brandon: That was fun. That was really fun. I liked that a lot.

Josh: What do you like me stepping in?

Brandon: I like, no I like the passion that was in that right. Like, like I love just I don’t know. That’s one of my favorite things about real estate is people get so like excited and passionate about it and I don’t know, I love people to share.

Josh: There’s different ways to do things.

Brandon: Yes, exactly.

Josh: Right, that’s the bottom line here is like she’s doing something that works absolutely well for her.

Brandon: Yes,

Josh: However, as a outside observer, I sit and I look and I say, you know, that’s not necessarily something that most people will work for most people. In fact, I think it won’t work for a good chunk of people, but because of their circumstance, their situation and their capacity to make it happen, it’s working out and I applaud her and I’m really happy that it is working and I hope it continues to do so and frankly if it works for other people, then that’s great too so definitely thanks to Elizabeth for coming on the show.

Brandon: Cool, cool, alright, well let’s take this thing out I guess. Once again, ratings, reviews, if you’ve not yet left one on iTunes, please do that and you can check us out of course on all the big social networks, Facebook, Twitter, all that good stuff and jump into BP. I mean, we say it every week, but jump into BP. Ask some questions, answer some questions, get involved, if you’re not yet a Pro member, you don’t have to be you know, have done 50 deals or even your first deal. Become a Pro member, support BiggerPockets and that’s it. Josh, want to take us out?

Josh: Awesome, alright guys. We’ll see you next week. Happy New Year. I’m Josh Dorkin, signing off.

You’re listening to BiggerPockets Radio, simplifying real estate for investors, large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place.

Be sure to join the millions of others who have benefited from BiggerPockets.com, your home for real estate investing online.