BiggerPockets Podcast 124 with Jered Sturm Transcript

Link to show: BP Podcast 124: BP Podcast 124: Building a Real Estate Empire At a Young Age with Jered Sturm

Josh: This is the BiggerPockets podcast, show 124.

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Josh: What's going on everybody? This is Josh Dorkin, host of the BiggerPockets podcast. Here with my co-host, Mr. Brandon Turner. What's up Brandon?

Brandon: What up Josh? How are ya?

Josh: I'm good. I'm good man. Excited about today's show.

Brandon: Good. Me too. Me too. This is a good one because I'm a young guy, you're an old guy. So you know...

Josh: Ha-ha. You got one upped, man. You got one upped.

Brandon: I did get one upped. This guy is showing--

Josh: --like this young dude, who like jumped in and was successful really early and today I think he beats you by like five years, doesn't he?

Brandon: I think I got my 24 unit which would have put me at 30 units when I was like 25. And he's just 25 now and he's got 20 units. So he might pass me up if he buys another one this year. It's a race.

Josh: You don't have to show off.

Brandon: I'm showing off. It's why I do.

Josh: Nice. Ha-ha.

Brandon: Yeah. Very inspiring story whether you're young or not - listeners out there - if you're 50 or 60 years you're still going to love this show. But the fact that it's very inspiring to see a guy at 25 years old, just crushing it. It's awesome.

Josh: Oh yeah and there's some really great tips and we'll talk about it in a minute here. But before we do let's get to today's quick tip. Alright guys, today's quick tip is if you have not yet tuned it to the Ask BP Podcast, check it out. You can find it on YouTube. You can find it on iTunes. We've got it on Sound Cloud. This thing is all over the place and it's great. It's a little, short - what is it like five to ten minute - answers to your questions in audio / video format.

Brandon: So if you have a question, leave me a question. Go to Twitter and just do like @BiggerPockets and then #askBP and then leave your question. And then I'll answer it or somebody will on the Ask BP Podcast.

Josh: Awesome guys. Hey listen, really quick. Before we move on and get started with show, I just want to first off thank everybody for listening. We really appreciate all your listenership. I don't think you guys fully understand how much Brandon and I truly, truly appreciate that you guys tune in to us every week. It really means a lot to us. It's awesome. We're glad that we're glad that were helping you out. With that said, if you are one of our regulars and have yet to jump on iTunes and leave us a rating or review, we would very much appreciate it. Those things really, really help us. They help expand the visibility of the show. If you could just go to iTunes. And you could do this even if you're a PC user. Just go to iTunes, find the BiggerPockets podcast and go ahead and leave us a rating. You could do four to five stars. Hopefully five but yeah. Zero to five, but hopefully five. And you can leave us a review and that's going to help other people find us.

But with that, why don't we get into the show? Today's guest is Jered Sturm. Hopefully I didn't just massacre his last name. Jered Strum. Jered is a real estate investor in the Cincinnati, Ohio area, who's just crushing it. He's really, really doing well. The guy's young - Brandon mentioned it earlier - he's 25. Hes been doing this-- the guy's first house as you'll find out like literally right after high school. It's amazing, inspiring and there's really some great tips in here for everybody. The guy has buy and hold, flipped houses and working on flips now and working on wholesale. So lots to learn. Let's get to it. Alright Jered, welcome to the show man. It's good to have you here.

Jered: Thank you. Thanks for having me. I'm excited to be here.

Brandon: Awesome. Well good deal. You know, you came across our attention on the forums while back. You've been participating there, writing blog posts and just kind of sharing what you know. And then I found out that you were actually a pretty young guy. You're not old like Josh here.

Josh: You're still in high school, right?

Jered: Yeah.

Josh: Ha-ha. Nice.

Brandon: Ha-ha. How old are you?

Jered: I'm 25.

Brandon: 25 and you're a real estate investor. That's pretty cool.

Jered: Yep. So I've been a real estate investor for about three and a half years now.

Brandon: Cool.

Josh: Wow. Well what inspires a 21 1/2 year old to become a real estate investor? A lot of people who are listening here are like, "That son of a", you know, "I wish I did that!"

Jered: Well when I started I really had no idea about real estate investment. But I did know a lot about houses and working on houses because even prior to the real estate investment, I was in a contractor working on other people's houses. Doing kitchens, bathrooms and running our small construction company with my brother, doing that stuff. And then it got to the point where I was like, "Well, if we can do it for others, why not do it for ourselves?" So I jumped in to the real estate investment world really not knowing much about real estate investment but knowing more about houses.

Josh: But you were doing this in high school, this construction stuff, right?

Jered: In high school, I was more of a handyman. I worked for a local real estate investor as his handyman, just doing stuff to his rentals. Didn't know much at all but every time he would just say, "Oh, can you do this?" I'd just say, "Yeah." And we would figure it out along the way. Then I started to pick up small jobs with friends and family. They want their bathroom updated and it just kind of grew and grew and then left the working for the real estate investor a couple of years after that. But with him, I made it from handyman to working on his flips and doing a full flip for him.

Josh: Nice. And so the first house you bought, I understand, it was literally like right after graduating high school, is that right?

Jered: Yeah. I can't remember exactly but I know that graduation was in the way of closing. So we moved it, it was right there I can't remember.

Josh: Let me get my violins out for you.

Brandon: Ha-ha. So how do you do that? How do you buy a house that soon after high school? I mean I don't know anybody who's ever bought one that quick.

Jered: A lot of it was help of parents. I guess that was my first investment property but I had no idea what I was doing. Not even a little bit. It was a suggestion from Mom and Dad. I took it, ran with it. It really worked out. Lived there for five years with my brother who's my business partner now and four other guys. I guess, house-hacked it. Yeah. So did that for five years and it worked out really well.

Josh: Isn't that called like fraternity housing or something to that effect?

Jered: It was interesting. So five years of that. Now four of them with all of the same guys so it worked out pretty well and the reason we actually bought that house is because we knew we wanted to get into the contracting side of things and it had a 30 by 50 detached garage. So we were like, "Oh we can store all of our tools, trucks, equipment." That was the reason we got that house. We completely overpaid for it but we still own it today.

Brandon: You don't live there anymore though right? You rent that one or something?

Jered: Yeah it's rented out. Nice family who takes better care of it than--

Josh: Ha-ha. Hey, what happened to the fifth guy or do we not talk about that?

Jered: What fifth guy?

Josh: Yeah, that's what I thought. Ha-ha.

Jered: There was a guy that lived in the basement behind the furnace because we added a room back there. Ha-ha.

Josh: Ha-ha. Is that a troll? Was this like an imaginary guy that appeared when you guys are up late drinking?

Jered: He was a guy that stayed up like weird hours.

Brandon: Well, cool. So how did you go from that to becoming a real estate investor? Well maybe I can you first, how many deals have you done so far and what are they?

Jered: Well, I own 20 units, rentals. So me and my brother own 20 units, rentals. And then we are transitioning into flips now. I just finished up my first flip and getting ready to lift it at the beginning of the week. And we already closed on our second flip to get started on that, but haven't started any work. And in the process of working on my first wholesale deal now.

Brandon: Cool. How do you get 20 units when you're 25 years old? Are they multi-family, single family? Kind of walk us through that journey that you took.

Jered: Yeah. It started as single family. The way we did it was we didn't have much money and no one would loan us money. Rightfully so because we had no idea really what we were doing other than we knew how to work on houses. The way we did it was built up capital through working on other people's houses. Doing kitchens, bathrooms, decks, additions, whatever we could do. And it was working well and we make good money because we worked hard and kept getting referrals. That worked out well. That gave us a little bit of money to start and we bought our first property. Very cheap because it needed a ton of work. What we did was, we had the time and we had the will. But we didn't have the money. So bought them really distressed and just put tons and tons of our own labor into it.

Josh: Nice. I guess a lot of people are coming and say, "Hey, how do I do this? I don't have the resources. I don't have the capacity." And what you did was you found a way. You didn't say, "Hey, I don't have the resources." You said, "I don't have the resources. What am I going to do about it?" Built up the skill set that you can use within the realm of real estate to build up resources and then apply those towards buying that real estate. Which is really a cool idea. And I hear from a lot of young people are like, "I don't know what to do." Well, that's a great path. Start learning the trades. Start learning how to do the construction side. You know what kills me is you actually said, "Hey, all you got to do is work hard and do a good job and you're going to get referrals."

I think one of the biggest pet peeves of whether it's investors or homeowners or anybody who is looking to get projects done, is that. Because for some damn reason, 90% of contractors don't know what that is. They don't know what doing a good job is. They don't realize that if you do a crap job you're not going to get referrals. I'm talking personally about this because right now I'm dealing with a bunch of contractors. Once again I'm pissed off and they all suck. None of them ever want to be referred out to anybody. Just literally do a B job and I will send you to 50 people. And they will all gladly send you to 50 people. So for all the contractors that are listening - because there are contractors listening - just do that and you will have a huge business. You have no idea. But anyway, back to your whole thing. I love it. I think the idea of working, getting your hands dirty and then buying the worst properties, the ones that everyone else looks at and is like, "Oh man, this is nasty." You know, sink that time in because that's all you've got right.

Jered: Yeah. It was pretty much substitute our time and labor for the capital that we lacked. The first ones took a long time because we were bouncing back and forth from working. The side jobs, the working on other people's house took priority. So whenever we had a kitchen or bathroom for someone else, we were there. And then if there was ever a gap, like that buffer time, we would be back working on our rental. So they were slow in the beginning. And as we got up to eight I think, we said, "Okay, we're done working for other people and we're going to go to now just strictly working on our own properties." And even then at eight, it's me and my brother, it's really difficult. It's not that much money coming in to where you have to say, "Okay, I'm going to give up all this time," and really still not see any money because we were reinvesting everything back in.

Brandon: That's awesome. I feel like you and I took very, very similar paths and how we did this. Like we both did the construction thing and I was a contractor for a very, very short time.

Josh: Why was it so short?

Brandon: Ha-ha. I had a rough time. I was not that good at being a contractor.

Josh: Oh okay. I just wanted to make sure. Ha-ha.

Brandon: Yeah. I was not that good. It was fine but I made no money. Ha-ha. Like at all.

Jered: He didn't get any referrals.

Josh: Yeah. Ha-ha. I can see Brandon with a hammer just trying desperately to actually hit the nail.

Brandon: Yeah, it was rough. It's harder than it looks. It's like the whole E-Myth thing right? You can be good at swinging a hammer, but it doesn't mean you're good at being a contractor. Those are very two different skill sets to be good at.

Josh: Or the business side.

Brandon: Or you might be good at the business side and terrible at swinging a hammer and you don't need to be necessarily be good at both. It sounds like you Jered might be good at both but I'm definitely not because I wasn't.

Josh: Well until like the fifth house I had no clue on the investment side of it but it worked because I knew how to take care of the properties and I entered at the right time. You know I started in a market that could support mistakes. I think until the fifth house I didn't really have a clue and maybe somewhere around house six or seven is when I found BiggerPockets and that kind of help me put something behind what I was doing and more focused as far as the investment side and understanding really. I knew what I wanted but I didn't know how to do the math correctly or anything like that. So I was making good purchases based on the house itself. But real estate didn't come until later. So yeah, six houses in and I had really no clue what I was doing.

Josh: That's great. You know we've got a really good articles on real estate math. We'll link in the show notes to one or two of them. Obviously the BiggerPockets calculators come in extremely handy for those folks who are trying to get a better grasp on real estate math. You can check those out at BiggerPockets.com/calc

Brandon: Before we move on, one thing I wanted to touch on here is the fact that you do most of your work. Always did you own work, correct?

Jered: Yes, yes. In the beginning. Now on the flips, we're starting to sub out a lot of the work. Still being there as the general contractor and working on more of the expensive things like the electric or plumbing. On a flip, you can't just do it that way because you need to go a little quicker. Because we were buying inexpensive rentals so you could drag it out a little bit because the holding it off cost isn’t as bad. But yes, on all of the rentals, all of the work was ourselves. When I mean all of it, it was every bit. Electric, plumbing, anything you can think of.

Brandon: That's cool. And one of the reasons I wanted to have you on the podcast is to talk about that because it's a different side that what most of our guests have done. Most people were very like "work on your business, not in your business" and "hire people and outsource" and whatever else. But that's not the way most of us began. Whether or not we got there at some point - and you're getting there as well - the fact is when you start out, that's oftentimes what you have to do. I just think that's cool that you did that. You made it work and it kind of goes back to that - and we talk about a lot here on the show - the idea of the unfair advantage. Everybody has it. Everybody's got something in their life that they can do to harness and leverage towards their investing. It might be a wealthy family member. It might be having the ability to fix a toilet. It might be the ability to talk to people and network very well and you can raise money. Everyone's got something. Figure out what that is and run with it. And it looks like you did exactly that. Alright cool. So let's go on. You mentioned a second ago, now that you're doing the flips, you have to work a lot quicker. Why is that? Is that because you're buying a higher price point? And what are your thoughts on that?

Jered: Yeah, it's a much higher price point. So in our rentals, we're looking at $25,000 houses, purchase price.

Josh: Hey, where are you, really quick Jered?

Jered: Cincinnati, Ohio.

Josh: Okay, Detroit. Okay.

Brandon: Ha-ha.

Josh: It's that Rust Belt.

Brandon: There's like 20 states you just don't like.

Josh: I love them all. They love me. Maybe not. But like there's that whole Rust Belt where you know, it's possible.

Jered: By the end of the show, Josh is going to be thinking about Cincinnati, Ohio. Ha-ha.

Josh: Oh hell yeah. I'm coming man. I'm coming. They're going to throw me out when I get there, but I'm coming.

Jered: He secretly has money tucked in a Detroit house.

Brandon: That's his strategy. He just keeps putting it down so nobody else takes his--

Josh: Let me clarify again. I think Detroit, I think the Rust Belters are a really, really great place to invest if you know the areas that you're investing in. I think for an outsider coming, you just have to know the area because you get one block over and you're in deep trouble. And that applies for anywhere and everywhere.

Brandon: What's your purchase price on your flips then? What kind of ranges are you doing there?

Jered: The first one was $125,000 and we're going to list it at $220,000.

Josh: Okay. And what'd you put in on that?

Jered: $25,000.

Josh: Ah. That's pretty good, man. That's pretty good. Now you're doing a lot of the work yourself though, correct?

Jered: Yes, that flip took us 22 days and we were there every day for about probably average of ten hours.

Josh: So if you actually apply labor costs to your work, you and your brother, is that $25,000 really? $50,000 or $40,000?

Jered: I would say $40,000. But yeah so we would have charged $15,000 for that work roughly.

Josh: Okay. For those people listening, I think it's really important that we actually talk about this. Because saying it was $25,000 and you sold it for $225,000. Obviously there was your time and your money. Your time is worth something. When you do the analysis of a flip, or a buy and hold, and so you're managing the property yourself - you have to account for that time upfront to ensure that you have some kind of profitability at the back end. Now if you're doing the work yourself, it's going to sweat off you and it is money in your pocket. But at least for the new people listening who have yet to analyze deals, it's really, really important to account for that time. Because that could be the difference between a profit and a loss.

Jered: Our second flip's purchase price is $155,000. Means a lot less work. We'll probably end up listing it for $205,000. But one thing we're doing with our flips is because we now have more capital and access to capital is we're trying to hit a point where we're at the top of the price point to where we can then rent it for at least what the mortgage is. So that way we could always at least have that extra exit strategy. Yes, we could go get a half a million dollar house and flip it but we're just getting into flips so I don't want to make the mistake. I could probably make more money that way if it was successful but I don't want to set myself up for big failure. So we're at the top of what we're comfortable with. Even though we probably could go higher, we're focusing there to begin.

Brandon: Yeah, I recommend that to people all the time. If you're just getting started flipping, people lose money on their first flips all the time. So if you're going to go flip a house, your very first one and you're going to decide to go tackle a $800,000 property you think you can sell for $1.2M and then something goes wrong, and all of a sudden you wind up owing $150,000 when you go sell it. Those are real things that could happen on an early flip. Now it sounds like your first flip is going to turn out great but it doesn't always do that for people. So if you can start out small, start out a little bit smaller until you know what you're doing better. I think that's smart.

Jered: Yeah, first flip we were fortunate to find a great deal. That's where it really started. IT was just through a personal connection. A guy actually in my bowling league. Yeah, his fiancée was there and talking about how much she hated the house. The pipes froze. It was his rental. They had no handy skills at all. You know, "It's the second time the pipes froze. I hate this thing." He ended having his tenants come and stay at his own house. I mean that was a mess. And that's when I handed him my business card.

Josh: Ha-ha. There you go. There you go. That's great. Do you make that a regular habit? Giving your card out to pretty much everybody and letting everyone know?

Jered: Yes. In the past year, I've done a much better job of just talking to anyone that I can. Got that from the BiggerPockets podcast. That's where I picked it up. I did a really bad job of networking to start with. It was more just like work harder, work harder, work harder. And then in the past year, really just started talking to anyone that I can. Whether it'd be like the cash register lady at Kroger or anybody. It's amazing how much stuff just comes together, once you put it all out there.

Brandon: So a minute ago you mentioned you found that property via networking. Is that how you're finding most of your properties? Are you doing MLS? Are you doing direct mail? How do you find them?

Jered: A mix. So in the beginning it was MLS all the way. There was more there, I didn't know any other way so that's what we did and we used an agent at that time. Now, my business partner, my brother, is licensed. And ever since he got his license we have not got a single one of the MLS. It's funny. We did some direct marketing and did a lot of drive for dollars. Driving around, looking at distressed properties. Just writing down addresses, putting them on spreadsheets. Cold calling the ones that we could get their numbers off the auditor's site and them mailing to anyone else. That was extremely time consuming but it turned out really because we got our first apartment building off of it and a duplex as well. It was a huge success from that standpoint.

Brandon: Well, tell us some more about that marketing?

Jered: Okay. Well, it was just yellow letters. It was my first and only crack at it. It was successful which from what I hear it takes a lot to get a deal from it. But it happened to work out for us on the first one. And actually, we had our cold call list of about 100 landlords so you can only get the phone numbers here in Cincinnati. You can only get the phone numbers of registered rentals off the auditor's site. You can get their phone number if they're a landlord. So I had about a hundred phone numbers of landlords. The very first one I called was a five-unit apartment building. I had like a general script typed out. I gave them what I had and it kind of ends with, "Are you interested in selling this property to me?" And he's just like, "Yeah." And I was like, "Man, I'm good. I'm really good at this." Ha-ha. The next 99 were hang-ups, no's. "Don’t call me," "I'll sell it for the right price," stuff like that. But yeah, we ended up purchasing it and that's probably one of my favorite deals because this guy was an older gentleman that was just really burnt-out on being a landlord. He had converted a five-unit apartment building into a four. So it was built as a five and he converted it to a four. Then had only two units occupied, which he was paying for the utilities and they were all separately metered. So he was running it like a mess, pretty much.

So we were there. We showed him how much money he was actually losing and then he was ready to sell immediately. Well then we found out that his friend who lived around the corner, held a mortgage on it. So then we started to negotiate if he would let us assume the mortgage. So it was a 25-year mortgage and he was 13 years in. To make the long story short, we ended up assuming that mortgage as is and just giving the owner $5,000 and he was happy. He got out. We assumed the mortgage. Picked up the property for a purchase price of $75,000 after we turned it back into a five-unit to make it valued differently than a four-family. The value right now is a little over $200,000. We did a lot of work to that. I don't want to make it sound like we just changed it from put a wall and made a four to a five. We separated all the water lines and separately metered those. Put about $40,000 into it.

Josh: So you went $70,000. Put $40,000 and you're $110,000. You also paid $5,000 for the assumption of the mortgage, so you're $115,000.

Jered: No, there was no assumption fee. There was a balance of $70,000 on the mortgage. We assumed that and then we gave $5,000 to the owner.

Josh: Oh okay. Gotcha. Well, either way that sounds pretty good.

Brandon: A ton of equity in that. A couple of things you mentioned there I just want to point out. The fact that you found this landlord that had two units out of four or five rented, was really struggling - that is not an uncommon thing. Most landlords are terrible. I talked to a person yesterday. I actually got a phone call from a friend of mine who's like, "Hey, Brandon. I'm here with this friend of mine who's the manager of an apartment building here in town and she needs your help." I'm like, "Okay. Put her on the phone." And the girl's like, "Yeah. I don't know what to do. I don't know how to evict this person." And I'm like, "What?" She's like, "I got to evict. They haven't paid rent in months and I've got to evict them now for the owner but the owner's out of the area and so I have to do it. But I filed a bunch of paperwork and the county two weeks later told me I did it all wrong. I don't even know what I'm doing."

Those are so common everywhere. Oh, and she said this one funny thing. She's like, "You know, I've heard people do like background checks and stuff. I probably should start doing that." I'm like, "Yeah, you probably should." So anyway, I'm like, "Write down my number. Give it to the owner. I'm going to talk with him. Maybe I can help take care of his problem."

Jered: Is this the lady that you hired a couple of years back?

Brandon: Ha-ha. No. This is a different property manager. Yeah, it was crazy. There are a lot of bad landlords out there. If you just get in touch with them. Especially with the multi-families. If you just say, "Hey, I can clean this mess up for you." Walk away. Maybe assume a mortgage like that. Maybe you can do whatever. There's just so much opportunity. I think that's very cool that you did that.

Josh: Hey, really quick. Because I think the experienced people understand it. But the people who are new may not fully understand the assumption of a mortgage. Can you just explain that really quickly? How that works so people get it?

Jered: Yes. The previous owner had a mortgage on the property. So he borrowed the money from his friend to purchase this property. That mortgage still existed when wanted to sell it, so what we did was instead of paying it off with the money we borrowed from someone else or our own money, is we just assumed the note that was drafted originally by the seller. We purchased from his lender. Just taking it over right where it was left off. And that's just done through our attorney with a couple of documents. It's really simple because his mortgage was a one-page mortgage. Really basic because it was between two friends. It was really. Did I explain that well enough?

Josh: Well, you used the word to explain the word. Ha-ha. No, it was fine. The only clarification I would say is so you guys, instead of paying off the note were now paying the note to the note holder, instead of the other person paying the note to the note holder. Is that better?

Brandon: Sure. Ha-ha.

Josh: Wow! Grrr!

Jered: Just go to BiggerPockets and read about it.

Brandon: Yeah. Assumptions, mortgages. It used to be a lot more common than it is today. Most mortgages don't allow assumptions anymore. That's why people do things like "subject to" or whatever to try to get around that. But most mortgages say, well if you assume a mortgage, we're going to foreclose on you. That's called the "do on sale clause". But a lot of mortgages in the past and ones that are done between friends like that can be assumed without a problem. You're not going to go assume a Bank of America mortgage very easily but you might assume one from the guy that lives down the street like you did. Or if it's an old mortgage. I think it was FHA back in the day, used to all be assumable. And then that changed like 20 years ago or something.

Josh: You're just taking over. At the end of the day, you're taking over. You're now paying the note to the same guy, same bank who was the friend who had the note.

Jered: And we did have to meet with him prior. Well, we suggested it. We sat down with him. Showed him a portfolio that we give out to the banks and said, "Here. Here's everything you'll want to see," and then just chatted for probably 30 minutes. By the end of that he said, "I'm on-board." So it was really simple.

Josh: Hey Jered. What is in that portfolio that you shared with the banks? That's your lender kit right? What's in it?

Jered: Yeah. It's our business plan which I wrote specifically for that book. I didn't have it prior to that. We typed it up for that. We would have tax returns in there, PNLs for a year, we don't have tax returns. Just rent rolls. Description of our business. Anyone that we network with or use. Lists of our team. Any handyman we use. Any attorney. Anyone. I listed even my dad who's an accountant for a construction company. As long as you word it right, as a financial mentor, it will help you. It was 200 pages thick at the end of it. Not the business plan. But every document in there, returns and all of that. Rent rolls, anything you can come up with. What I do is just give them anything and everything and they say, "Oh, I'm not going to read all these, but it looks good."

Josh: Yeah, that's great.

Brandon: So I've told this story maybe before. I'm not sure if it was here or one of the webinars but I needed a loan on my fourplex that I turned into a fiveplex as well. Again, you and I are very similar. I needed a loan up but it was very tough for me to get this loan on the fiveplex. I got turned down by like three different banks. And then finally I was like, "This is stupid." So I went and did exactly what you did. I made this big, thick like packet. I put like a laminated cover on it that I bought at Staples. I went on BiggerPockets, the rental property calculator. Put in the entire numbers for the current property that I was trying to get a refi on it, showed how good of a deal it was, took that, put it on the front of the things. They opened it up and then handed that entire thing to this one bank. And this guy was super impressed because nobody has ever given him something that organized before and that put together for just a simple-- it was only a $120,000 or $90,000 mortgage. So he was blown away and they did the loan like two weeks later or three weeks later. Closed on it. So professionalism matters so much.

Jered: Yeah, actually we use a portfolio lender as well now. Later on, going back to him, he said, "The only reason I gave you the loan on the first meeting was because of that and you wore a tie." And I'm like, "That's it?"

Josh: I didn't hear you. You wore what?

Jered: Ties. Because he was like, "Nobody wears ties anymore."

Josh: Nice.

Jered: It's his decision. It boils down to his decision. Of course he has to take it to the board but he's the one telling them, "Yes or No. I think we should go ahead." He said, "Because of that book and because you wore ties, I gave it to you." I'm glad we wore ties.

Brandon: Okay so Jered, you mentioned portfolio lender. That you found one and that's what I use as well. But maybe for those people who don't know what that is, can you kind of explain that real quick?

Jered: Yeah, so it's a bank that I use. The only difference is they do not she'll off the loan after you take a loan with them. They keep it in-house. They're actually making the decision, "Do I want to loan to this person because I'm going to be the one collecting the payment," not selling it off to Fannie Mae or Freddie Mac or one the big government agencies to where you have to meet all of someone else's criteria being Fannie Mae or Freddie Mac's. So they make the criteria and that could be wearing a tie or anything they want it to be really and make the decision.

Brandon: Yeah, I like that too. What I just did, I just got that with my 24th unit, refinancing that. All I had to do was walk in. My lender walked in to the board meeting with them and said, "Here's the deal. I think we should do it." They said okay and it was done. It was such a old school way, I feel like, of doing business. Like that's how it used to be done back in the day, before. You have 12 layers of regulators and it's got to go through this and this and this. It's just like, "I think we should do this deal." Reminds me of - what's that movie? - It's a Wonderful Life? He was like a banker. I don't know.

Josh: Never seen it.

Brandon: You've never seen It's a Wonderful Life?

Josh: Of all the movies--

Jered: It's my mom's favorite movie.

Josh: At movies on every Christmas, I've never seen it.

Brandon: Yeah, it's a good movie. I haven't seen it in years, but it was a good one. Anyway, moving back. I got here on my notes that I wanted to make sure we touch on. It says that after two years you found a lender to do cash-out refis on the properties. You bought seven single-family residences and then did a cash-out refi. Can we talk about that? What do you mean by that?

Jered: Yeah, so the first seven were, the way I described earlier of buy them very cheap, put all the labor into it, fix it up, rent it out. So at seven, we owned seven free and clear. Even then, we were trying to find someone to do cash out refis on them to pull the equity that we had in those properties out. And still we couldn't find it. People thought "too inexperienced." We did not hold W-2 jobs. This was our full-time job from the very beginning. I haven't had a W-2 job since I was 17. So going to a bank was really difficult. Even our age played a part at that time. So what we did was finally I just said, "Well, I'm just going to cold call." And we made a list of 30 banks and I just called and called. Some of them had things they would offer. Variable rates and things like that. But being kind of conservative, I did not want to hold my rentals in a variable rate. I wanted something I could take and then forget about. One of the banks, the one I mentioned earlier, when he told me what they were offering and said that we could come in and talk, it was exactly what I was looking for. It was a 20-year, fixed at 4.75% from portfolio lender and I said, "That's exactly what we're looking for." And he said, "We'll lend to an LLC. We'll blanket the properties if you want to do it that way." So that's what we went with and what's what we've been doing to pull the equity out and move forward with our company.

Brandon: I love it. I love the fact that you talked to a lot of different lenders. You just kept pushing for it and trying to find that ideal loan. That might have been hard to find but the fact that you finally got it is great. I mean that's what it takes to become a successful investor. You got to have that persistence and I love it. Cool. Let's just gear a little bit before we get out of here. I want to talk about the age thing a little more. Because like we said at the beginning of the show, you're 25 years old, right? Obviously, people who are at a young age and I was there too.

Josh: What, you want me to give you my money? What are you, you don't even shave it yet, do you?

Brandon: Exactly, see?

Josh: They're not going to take you seriously.

Brandon: Exactly. People are apprehensive about working with young people. First of all what are the advantages of being young?

Josh: In real estate.

Brandon: In real estate sure.

Jered: For me, it was the lack of other responsibilities in life. Like I mentioned, we substituted our time for the capital that we lacked. If you wait longer in life, you're going to have all the responsibilities that usually come later in life whether it be kids, spouse. Well, I do have a spouse now. Later in life, kids, your parents are getting older, you take care of them. Things that take more time. Where as a younger person, I could not only devote the time but have the energy to work the 12 hours of labor or 16 hours of labor and just do that day after day. Now, I don't want to do that forever. I never planned on doing that forever. One of my books that I have for later is the E-Myth. I had read that and I thought, "Well, this is just what I have to do now to get that going." But as far as in real estate, being younger, the advantages is really just the power of exponential growth is the biggest thing.

Josh: Oh yeah.

Brandon: Can you expound on that for a second? What do you mean by that? But I agree.

Jered: Well, expand on exponential growth?

Brandon: Yeah, like what do you mean by that? For those people who don't know.

Josh: Yeah and how does it affect you better than it affects an old fart like myself? Ha-ha.

Jered: Yeah. It's already too late for Josh.

Josh: Woah. And you just insulted like 60% of the population.

Brandon: It's alright, you're fine. There's seven billion people on the planet.

Jered: Ha-ha. The exponential growth being younger, it's just like starting out and paying cash for that - it took a little bit of time. But since we did it in our early 20s, now we can just literally roll those cash-out refis one after the other, one after the other and just snowball effect this to where if I'm 50 and I start rolling that snowball, obviously if I want to retire at 60, the snowball is much smaller that if I start at 20 and start rolling it and still want to retire at 60. Yeah exponential growth is a huge factor of why I sacrificed so much in the early years to line up my goals for the later years.

Josh: That's great. Alright, disadvantages. I was talking smack earlier. Young baby face, yada, yada, yada.

Brandon: The irony is both of us have a little more manly facial hair than the other guy here.

Josh: Yeah. I can actually get proof when I go to a bar whereas you probably would not with your--

Brandon: Don't even ask.

Josh: Yeah. Anyway. Disadvantages. Obvious ones are some people won't take you seriously because you're young. Are there other disadvantages that come with being young? I would say like not having established credit probably could come in to play for some people. What else?

Jered: Really, if you have the right mentality and you just approach people the right way, I've never run into those obstacles. It's the way you carry yourself. If you're confident, even if you're 20, if you hold the ball and you go into the conversation and you direct that conversation, it doesn't matter if you're 18 or 20 or 40. People can find the confidence in you if you just carry yourself the right way.

Josh: So what you're saying there is not a single disadvantage to being young and starting. So all you young people get started.

Jered: Right.

Josh: There you go.

Brandon: Actually, I say this quite often. Investing at a young age is like your greatest asset. When you're young, that's just a powerful asset. Obviously for the reasons you talked about. But one more that you didn't mention, but I think I've seen in your stories so far, but when you're young, I feel like people want to help you get to where you're going. Like I love to help young people when they're like trying to learn real estate. They hit me up on the forums or they take me out to lunch or whatever. I love that because I was there ten years ago and now I want to help that person. And it doesn't matter if you're 30, 40, 50 years old but older people that are older than you, that are the next generation up want to help you get to their point. So I don't care how old you are, if you're 50 find a 70-year-old that's an investor. Or if you're 30 but a 50-year-old or whatever.

Jered: Yeah, a lot of the guys that we've done any kind of sell or finance deals off of, all comment on one way or the other, like, "Oh, you remind me of myself back when I was getting into this." Because a lot of these guys that we're buying off of were contractors or something like that so I can relate to them and then after talking for a little bit and then there, "Oh, I see myself in you," and just that rapport that you built with them immediately makes the deal so much easier.

Brandon: Yep, I get both those things all the time it's just that, "I see myself in you when I was that age," or they say, "Oh, if only I was like you when I was that age. I would be so much further along now." And so both those things they want to help. Take advantage of that. I have an article on the blog called How to Invest in Real Estate at a Young Age. So I'll link to that in the show notes as well in this show. Yeah, it just kind of lays out all those things.

Josh: Hey Jered, before we go to the fire round, I just wanted to ask. For those young people, we have kids who are 17 who would come on BiggerPockets, they're excited about real estate. And they're thinking, "I want to do this in a year or two." Or anyone else who's kind of in a similar place that you are. What would you advise them? Not everybody's going to be able to swing a hammer. What would you tell that other young person who's thinking about getting started in the real estate investing business, how they should go about doing it?

Jered: Yeah, I would say just take the sacrifices, whatever you have to do now. Because it'll be easier to take now than when you pile on all the other responsibilities that will come with life as you move forward. For me, it was taking the sacrifices of not spending the money that I could've earned during the contracting and then also sacrificing my own labor. However, that person needs to do it. Make the sacrifices now while you can because the power of exponential growth is so worth it to do those things.

Josh: You could stop digging the knife in my back man. I get it. I'm old. I started when I was 21.

Brandon: Sorry. Old guy. I know so many people like my age, like younger guys that are in their 20s, maybe late 20s or whatever complain about--

Josh: Dude, you're almost 30.

Brandon: I know. I'm almost 30 but I'm not 30 yet. I can still call myself young until I'm 30, alright? No, but I know all these guys that are like complaining about not having any money yet they play 10, 15, 20 hours of Call of Duty every week. You said that sacrifice right? I didn't have a video game system until last year or six months ago. And I haven't played it at all.

Josh: That's why he doesn't show up to work.

Brandon: That's why. Ha-ha. I was sitting and playing. No, I play my Xbox. I got an Xbox 1 actually. Daren Saeger traded it for me building my website or something like that. I don't even play it. It sits in my room and I haven't played it in a month and a half. Because when you're young you've got to sacrifice your time and I think it's huge.

Jered: You know one thing I said to my brother the other day was there is going to be time - it's hard to see it right now for a lot of people - but there's going to be times in life where I know I'll want free time more than I do now. And that's a really hard thing for a lot of people to wrap their head around. I'm planning to have children and when that time comes, if I can have the freedom to not work, I'll have it because I did what I needed to do now to set that up.

Brandon: I love that, it's so smart.

Josh: Cool. Well, why don't we move to the Fire Round?

It's Time for the Fire Round!

Brandon: Alright, fire round. These questions come to you from the BiggerPockets forums. And so these we plucked from different people who have asked questions over the past few weeks and months. Oh by the way, people can get to the forums. If you're not engaged in there, you should. BiggerPockets.com/forums. Big shocker there. Ha-ha. But number one, I'm trying to flip a house and I have no money at all. Do you have any tips?

Jered: Save up some money first because you're going to be in big trouble when you start to flip.

Brandon: There you go. Agreed.

Jered: That's a pretty easy one.

Brandon: Actually, I did a webinar last night. It was on the topic of no money down investing. I have like the four rules on no money down investing and one of them is you can't do without any money. You have to have at least a cushion or something to get you through. Even if you want to do it creatively, you got to have something. You have to save up something. So hustle, work extra hours, go be a contractor at night. Whatever you gotta do and work hard and make some money. I love it.

Jered: Yeah, if you literally have zero money, I don't even think you're going to be able to get a credit card to go put it on. Yeah, go save some money.

Josh: It's interesting. We actually had a member once who got mad at us because there was a woman and she's like, "Oh, I got no money and everything you guys say says money but these infomercials, they say you don't need money." And everyone in the site is like, "You can't do this." And she's like, "You know what? I'm out of here. I'm going to go to find a way to get money so I can give it to the infomercial guy. So that he can tell me how to do it with no money." Dude, slow down.

Brandon: Well, the funny is you can do deals without money. You can do deals without using your money in the deals. It doesn't say you can do deals if your flat-broke and you have twelve bucks to your name. There's a difference there, right? You can do deals without money, but not without money in your checking account. Or you shouldn't maybe anyways.

Josh: It's just not the smartest move, right?

Brandon: Save up with some money. It's going to be different for each person. Alright, moving on. Number two.

Josh: Look at you. Taking control.

Brandon: Yeah. Woosh.

Josh: Number two. Should I focus more on cash flow deals rentals or should I focus on fixing flips? I'm guessing there's some contacts missing but generally should they focus on rentals or fix some flips?

Jered: Yeah, that's pretty hard to answer. It depends.

Josh: Let's say new investor. Somebody who maybe they have a little bit of cash and they've got a steady job. Should they do buy and hold or fixing flips?

Jered: I'd go buy and hold just because I'm a conservative kind of guy and flips is definitely more of a job. So if you have a full-time job and have a little bit of money, you can just get a property that doesn't need rehab at all. Hire a property manager and sit back. That's, I guess, what I would suggest with that little bit of information.

Brandon: Cool. Third question. What would be the best way to find a fix and flip? I need something to flip. How do I find it?

Jered: Good question. I'd like to know the answer to that. I'm searching every day.

Brandon: I think that's key right there. I think you just said it. Search every day.

Jered: Any way you can.

Josh: Great answer. Hustle, hustle, hustle, right? Do one of the many things. Alright last one. I need to find a good property manager that is not like the property manager that Brandon was telling us about earlier.

Brandon: Ha-ha. I think she was like resident manager, not like a licensed property manager.

Josh: A manager's a manager. I need to find a good manager. Any tips?

Jered: Oh yeah. Can I answer this with a story?

Brandon: Sure.

Jered: So I didn't bring this up but I will be leaving Cincinnati in the summer of 2016 and moving to Atlanta. I will also be doing real estate investment there, right down in Northern Atlanta. Jay Scott's area because I read his book, I saw that.

Josh: He's not there anymore by the way.

Brandon: Yeah, he moved. Sorry. Okay, back to the story. Ha-ha.

Jered: Yeah. Property manager. So I need someone to take care of the rentals that we have here because we are not going to sell them. So this plan went into action. We know we're going to move. So we said, "We got to find a property manager." We started from the inside out. We went on to Zillow, or any other site where you can find rentals and we said we're going to start by acting like tenants and made phone calls. Whoever is responsive and whoever answers and then we'll set up a showing. And whoever gets us in quickly and is professional, we'll make a list of those people and then we'll select from them. We'll go talk to their sales people then.

Josh: So you were taking it from the tenant's side? You wanted to see who serviced the tenants best?

Jered: Yeah, we kind of started from the inside out. And really we had horrible, horrible results. Phone call after phone call. Probably about a hundred phone calls. No calls back. No one would answer. No one emails and it was looking pretty dreary. It got to the point where we said we're going to sell them because I can't hand this off to someone who's going to drive it to the ground. Just then, when we had decided to sell it and we were kind of doing the math on what the taxes would be, a guy from BiggerPockets that we had met at a BiggerPockets meet-up and we're colleagues on there, approached me and said, "I'm looking to get into real estate and would you be open to me managing your properties?

You guys kind of show me how you're doing things. You don't have to pay me as much as a professional service. I can do that for you." So we thought about it a little bit and it came down to, "Well, if we hire an employee, a one-person employee, for 20 units - we can't really do that. And if we do teach this guy, he's an entrepreneur at heart, we're going to teach him and then he's going to get his own, he's going to leave and we're going to be in Georgia and all our rentals is going to be in Cincinnati and we're going to be driving up here and trying to hire someone else." So the way it ended was, this sounds quick but after a lot of thought and a lot of talking to this person and figuring out who they were, we decided to work out a partnership. So later on at the end of the year, he's going to work for us as a property manager. As an employee for a while and see how he does. He's doing that now. Everything is working great. Then we will start to hand over equity shares of our company so that way, instead of him learning and leaving, he's going to control some of it and just take it over.

Josh: Brilliant.

Brandon: Interesting. Yeah, that's a cool idea.

Josh: That's really, really great. Awesome.

Jered: To answer the fire round question, I couldn't find one so we had to find someone else that could do it and make them a partner because no company cared about the properties as much as the owner. So we said, "Well, why not just--"

Brandon: Bring on an owner.

Jered: Bring on an owner, yeah.

Josh: Awesome, man. I love that idea. I have yet to hear somebody say that as a means for like ahem, Brandon coming to Denver, for example. And ahem, finding somebody to come take over part of his portfolio. I digress. I really liked the idea of calling them as a tenant because they're going to put on a show for you when you're coming on board and you're handing over your units. But you're really going to get to know how they operate if you're coming in to call on the units that they're promoting. That's going to show you how they run their business. I can't believe that after all this time that I've never even thought of that. Brilliant. Really, really good idea. And I encourage people who are interviewing property managers to give that a go as well. It's a great tip.

Jered: Not only the phone calls, but just looking at their listings. I'm sure a lot of other people will do that. But the phone calls help. Yeah a lot of listings don't have pictures. Very vague. It just says three-bed, one-bath and it's like how many phone calls do you actually get from that because it's so vague? Where are there fully listed trying to eliminate wasteful time phone calls. But yeah, start from the inside out.

Brandon: That's right. Love it. Alright, moving on. Let's end this thing with the world-famous--

Famous Four!

Brandon: The world famous Famous Four. These questions we ask every single solitary guest. You know what's coming. Number one. What is your favorite real estate book?

Jered: Well, I don't read too much because I'm not a strong reader but I listen to a lot of audio books. I'll do the monotonous parts of the contracting like painting or things like that, and it takes zero thought. So I'll knock out a book in a day of painting. When I listened to that, it was not exciting, but it held probably the most information that I would suggest to other young investors is Investing in Real Estate. That's the title of it and it's the sixth edition, is the one I read and it's Gary W. Eldred. Yeah, it was more textbooky. It was not fun to read, but it was just packed full of information.

Brandon: That's one of the first ones I ever read because they had it at the library. It was one of the earlier editions, but I got it at the library. It's very textbooky, but it's got a lot in there.

Josh: Right on. What about business books? What's your favorite audio business book?

Jered: Yeah, well I listen to E-Myth. And I like that a lot because when I listened to it I was like, "Oh, this is the exact path I'm headed on so I need to correct that." But I also liked Business Brilliant by Lewis Schiff. It just talked about different stories of people who have showed exemplary business brilliance. So one of them is like the Surface LA guy. It had a whole chapter on how dyslexics are really good at running businesses. And being a dyslexic, I related to that.

Brandon: Interesting.

Josh: Oh, right on. I've never heard of the book. It sounds really interesting.

Brandon: Yeah, very cool. I've been doing a lot of audible listening lately too. I like it.

Josh: Nice. And by the way, what I love about this show is not only are you a young guy, but the fact that you're willing to share that with everybody listening, just seeing how far you've come despite having the challenge of being dyslexic, I think it's awesome.

Jered: It really just means I'm bad at reading and writing.

Josh: Yeah. No, I mean listen. We all have something. Everybody's got something. The reason I bring it up is this: there is so many people listening to this show that have never done anything in real estate before. There's probably tens of thousands of people listening to your podcast, okay? And I bet you a huge percentage of them are saying, "Oh, I can’t do it because of the (incoherent blabbering)", and they have all their excuses and the reasons. And I'm not making fun of the people who have not yet done it. I'm saying take those excuses and get rid of them. Because if anyone's got an excuse, you know Jered you can say, "Oh, I can't do it because I was dyslexic." Well, that's BS right? We all have our baggage. We all have the stuff that we are good at, that we're bad at. Some people have problems. Whatever it is. We all have a way to get past that. And so if you really want to do it, you'll find a way to get past whatever it is that you can do. Not 100% of people will be able to do that, but most people can probably get past that one or two things that's holding them back. And so if you're one of those people, stop and just take a second and say, "You know what, I've been making excuses for a long time about why I can't do it. I'm just going to do it. I'm going to start planning. Putting pen to paper. Making things happen and get out there and execute on what I want to do." Don't let the excuses hold you back.

Jered: Or just find an alternate way. I'm not a strong reader. I can't make it through a book. Audio books. Same exact results.

Josh: Awesome. Cool then. What about hobbies? What do you do for fun besides real estate?

Jered: I work a ton so all of my free time is thrown to my wife, my family and my dog. So that's my fun.

Josh: What kind of dog?

Jered: Pit bull Lab mix.

Josh: Nice. Your dog would eat Brandon's for breakfast.

Jered: Yeah. It's all that.

Josh: I would love to watch that. I mean, I didn't really say that. His dog is so cute.

Brandon: Yes, Charlie is adorable. He won the cutest dog award, again. Nine years in a row, just keeps winning.

Josh: Ha-ha. Is that the award issued by you?

Brandon: Yes. I'm the judge so. Alright, final question. What do you believe, Jered, sets apart successful investors from those who give up, fail or never get started?

Jered: I would say self-discipline on not just the business side but all aspects of life. When you're a business owner, it carries over. It blends together. It's not like, "Oh, I work. I'm self-disciplined," but then when I go home, it's different. It's every moment and every choice. There's billions of choices throughout your life and having self-discipline throughout all of those is what's going to make it happen. One thing I can remember from my childhood, my dad saying, "Be someone who people will lend money to." And it had nothing to do with money when he told me that. It was just like the type of person you are, people will trust you even if you just said, "Hey, can I have some money?" They trust you to give it back even if you didn't say you were going to. So what I mean is the type of person you are is a disciplined person, you carry yourself that way throughout life.

Brandon: Love it.

Josh: Really, really love it. Listen man. It's been an absolute pleasure. Before you go, where can people find out more about you?

Jered: BiggerPockets would be the best place to go to talk to me. Facebook as well.

Josh: Right on. And you have a website?

Jered: I don't.

Brandon: You do not. There you go. Alright. Well, Jered listen. Again, it's been a real pleasure. Very fun show. Lots of really great tips. We definitely thank you for coming on board and for those people listening, you can go to BiggerPockets.com/show124 and check out the show notes with Jered. And if you've got any questions about the show, please ask them and I'm sure he'll be happy to answer the questions. Also by the way, congrats on coming on board as a contributor to the BiggerPockets blog. We're definitely excited to have you on board.

Jered: Hey, one thing I wanted to add to you guys, I want to say thank you because if it wasn't for the BiggerPockets podcast - I've listened to all of them - I probably would have been either bankrupt or in jail by now. I've started very aggressively and it kind of showed me a path on what not to do and yeah, thank you for putting that out there.

Brandon: Awesome.

Josh: That's great, man. We're glad that it has, in fact, helped you out. Interviews like these are what make me happy. They're what drive me. It's seeing somebody who's succeeding, you know, in part, thanks to what we're doing. And so thank you for being part of our world man. We really appreciate it.

Jered: Well, thank you.

Josh: Awesome. Otherwise, listen. If you guys are looking to get going in the world of real estate, BiggerPockets is a really, really great place to be. We definitely encourage you to check out the site. Get involved. Jump in .Create a profile. Interact. Network. Listen to the podcast. Read the thousands of articles written by experienced investors like Jered and Brandon and others. Make this thing happen. Take care control of your real estate because there is no reason that you can't do it.

So get out there. We'll see you on board BiggerPockets and of course, if you are a fan of the show, please jump on iTunes and leave us a rating and a review. We'd very much appreciate it. It helps spread the word about BiggerPockets. And finally if you are not yet watching slash listening to the Ask BP podcast, you can find that on iTunes as well or on BiggerPockets at BiggerPockets.com/askBP. That said, I'm Josh Dorkin, signing off.

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