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BiggerPockets Podcast 148 with Nazz Wang Transcript

Link to show: BP Podcast 148: From 0 to 51 Units Despite Living in a Crazy Expensive Location with Nazz Wang

Josh: This is the BiggerPockets Podcast Show 148!

Nazz: That’s kind of my goal. I’ve always liked to be lazy, so I wanted to find out how I can be lazy. That’s why I don’t do a 9 to 5 job.

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, here with my co-host Brandon Turner.

Brandon: Hey Josh! So let’s talk about the World Series.

Josh: Really?

Brandon: Yeah because last week you were really, really cocky about how good they were going to be.

Josh: They? Who is they?

Brandon: The Mets, the mets. You even called me Mr. Met.

Josh: Yeah, the bobblehead.

Brandon: Yep, but at the end of the day, as everybody knows who listened to last week’s, you made a gigantic fool of yourself.

Josh: I did not make a fool. The Mets, on the other hand.

Brandon: They made a fool of themselves.

Josh: They lost. And you know man, at the end of the day, two pretty good teams going up against each other. Great baseball games to watch, except if you’re a Met fan. I mean, you can’t make 10 errors in the World Series and expect to win. It’s just not going to happen. So we lost. We lost, and that’s it. So yeah, thanks. Salt in your eye. I appreciate it.

Brandon: Let me make sure you have a paper cut and pour some lemon juice on it. All right. Hey.

Josh: So how are you doing?

Brandon: I’m actually doing really really well. IN the words of Dave Ramsey, better than I deserve. That’s his thing.

Josh: How’s your hand recovery?

Brandon: Oh yeah! So I’ll show you it. I don’t know. There’s the one wound, and there’s the other wound. I took the band-aid off today. I was taking out the laminate countertop out of my kitchen counters, because I’m putting new counters in. So I was taking the laminate off, because the company I hired, Lowes to come in and do it, which was great, but they were like, yeah you have to demo the counter before we can come in and measure. Anyway, at the end of the day I had to pull it out myself, and I cut my hand up pretty deep.

Josh: Nice. Awesome. Awesome. So why don’t you ask me how I’m doing?

Brandon: Okay! So today’s guest is Nazz. Oh! Josh! How are you doing? What’s new? I heard you got a new office?

Josh: Yeah I mean, come one! This is big news! Yeah we did. We got a new office. It’s very exciting. We actually will, by the time this airs, we will have just moved in, by the time of this recording.

Brandon: I heard you got lost at Ikea yesterday for nine hours.

Josh: We had a bit of an Ikea adventure, a few of us. And we left non-divorced, so the rumors aren’t true.

Brandon: I heard they found you crying underneath one of those Swedish beds, and it was a sad moment.

Josh: I was wanting and longing for my meatballs.

Brandon: I know you were!

Josh: Yeah! It was great. We’re very excited and hopefully the next show will be recorded from our new studio. But let’s get to today’s show! We’ve got an amazing show for you guys, but before we do, let’s get today’s QuickTip.

All right guys! Today’s Quick tip, and we’ve talked about this in previous shows, but I just want to make sure that you did not miss it, but we have launched a BiggerPockets Android mobile app. You guys have been begging for this for years now, and it’s there! It’s out! People are starting to use it. We’re getting great feedback on it, we actually are also improving our BiggerPockets iOS app, adding some new features to that very shortly, if not already by the time you listen to this.

Brandon: Yeah! Like Keyword alerts, and instant messaging and all that, right?

Josh: Private messaging and things like that.

Brandon: Yeah! It’s going to be pretty awesome.

Josh: Yeah, yeah. If you have not yet downloaded the app on your iOS or Android device, go to the stores, the Google Player or the iOS App Store and download it! Check it out! That’s today’s quick tip.

Brandon: Quick tip! All right! Before we introduce our guest, why don’t we touch on today’s sponsor.

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Josh: All right! Big thanks to today’s sponsor. We definitely, definitely appreciate that.

All right guys! Today’s show, really really cool show. This is, by the way, show 148 of the BiggerPockets Podcast. You can check out the show notes at BiggerPockets.com/show148 and if you’re on iTunes, oh by the way! Android is launching a podcast app! I don’t know when it’s going to happen, but we’re in the new Android podcast marketplace, even though it hasn't yet launched, so if you are also an Android person, definitely download that app now, or whenever it comes out and make sure to get our podcast and leave us ratings and reviews there guys! Also do it on iTunes. That definitely helps us. And we’re climbing up there in the rankings on the number of ratings and reviews we have.

So keep them coming, we definitely appreciate them. But today’s show, guys, Nazz Wang is our guest. She is a real estate investor from San Francisco. So for everybody listening who’s thinking, “Hey! I live in New York, Miami, San Francisco, wherever the heck you are, and I can’t invest because I’m in a big city!” Please stay tuned, because you will find out exactly how this wonderful woman is out there and making things happen. We’re really excited, great show, great energy and there’s a whole lot of cool stuff to learn from her. So pay attention, and let’s bring her on!

Josh: All right Nazz! Welcome to the show! It’s great to have you!

Nazz: Great to be here!

Brandon: That was the first time Josh got your name correct! And that was what, the third time we started this introduction?

Josh: Can you blame me? Can you blame me?

Brandon: I can blame you, but that’s okay. That’s okay.

Josh: It’s hard. It’s hard.

Brandon: Nazz like Jazz, right?

Nazz: Nazz like Jazz, exactly.

Josh: Nazz like Razzmatazz.

Brandon: Exactly. So Nazz welcome to the show! Who are you? What do you do? How did you get into real estate? Let’s start there.

Nazz: I am a human who lives in… get that cleared up.

Josh: definitely not an android.

Nazz: There you go. I am from California, and I’ve been in real estate maybe about nine or 10 years or so.

Brandon: Now you’re not just in California. You’re in San Francisco, right? The most expensive city on Planet Earth pretty much, right?

Nazz: I was trying not to bring that up so that people wouldn’t discriminate against me, because apparently there’s a reputation out there for people who live in San Francisco.

Brandon: Apparently there is.

Nazz: But yeah, I live in San Francisco.

Brandon: All right. Okay, and that’s why I wanted to talk to you today, because so many people are always like, “I can’t invest, I’m in San Francisco.”

Josh: “I’m in San Francisco. I can’t invest, it’s impossible.”

Brandon: Or LA, New York, Denver, whatever. Everyone has their reason why the can’t invest because they’re in a big city. So today we’re going to pick your brain to see how the heck you’re investing, even though you’re living in San Francisco?

Why don’t we start at the very beginning? What was your very first deal?

Josh: I want to go before that, forget her first deal. Why real estate? How did you actually, I’m taking over! I’m in charge here.

Brandon: Take over! I don’t want this.

Nazz: There you go. I can see who’s wearing the pants. Sorry! That was funny.

Josh: That as funny, and the frightening thing is that I think Brandon probably podcasts with no pants half the time.

Brandon: Probably you know. But I’ve got jeans on today.

Nazz: Thank you.

Josh: All Right, so what got you into real estate? Why invest in real estate? You know what was the impetus?

Nazz: I thought about this story for a long time yesterday, whether I should tell you or not, because my mom might be listening to this next week. So, hi mom! I’m trying not to offend her, but you know, my mom’s a big entrepreneur. She owned this clothing factory in China, actually. She ran it for decades, selling a lot of clothes all over the world, so she was one of those types who would just kind of earn a lot of money and spend a lot time. And at some point in her career, I just kind of looked at her, and I was about to go to college, 18 or something, and I thought, wow. She does all this work, and she makes all this money, and the most reliable asset she has after 20 years of being in this business was two pieces of real estate and some cash in the bank account. So I’m like, why all this work? Why don’t I just start with real estate and cash in the bank account?

That’s kind of how I really wanted to get into real estate. Okay, well just get to the end, and then yeah. That’s how I started.

Josh: Cool. That’s awesome. So she, you know through the course of her business had picked up some property. Was that property in China or was it in the US?

Nazz: It was actually in China. It was a primary residence that she had, which as a high-end condo that she still owns, and then a vacation cabin somewhere.

Josh: Okay, Brandon. Why did you book Nazz and not her mom? She seems far more interesting?

Nazz: You should! Next show.

Josh: All right, good! So we got you, you see your mom’s doing all this stuff, and how old were you? Were you in college? Were you just out of school? OH, no you were 18 you said.

Nazz: Yeah, I was going onto college. I was trying to pick a major, actually. That was part of the college application, right? So I picked political science, of course.

Josh: That helps with real estate.

Nazz: I didn’t finish up with that.

Josh: Cool, so how did that transition actually help you to get started in the business?

Nazz: Well, at college I ended up renting a house, that was a four-bedroom house and at the time I hated my roommates, and I didn’t have anyone to kind of move into besides one other guy, so I said, wow this house a good deal. Let’s rent it and figure out what to do with it after. So I ended up sort of sub-leasing all the rooms out and ended up paying almost nothing for a few years living in this huge house because I was sort of house-hacking in a way. And then I though, whoa, great! That was easy. Doing nothing and kind of getting paid, so I want to be a landlord. That’s kind of how I got started.

Brandon: Nice, I actually did the same. In college I rented a four-bedroom apartment, and I ended up living on the couch because I rented out all the bedrooms because I realized how awesome it was to be making money in college so I could live on the couch.

Josh: So, couch surfing your own house?

Brandon: I did! I rented them all out.

Josh: That’s cool. All right.

Brandon: That gave me the inspiration then. You said, I want to be a landlord. So you’re a buy and hold investor, right?

Nazz: Yes I am.

Brandon: Okay, let’s talk about your first deal then. How did you buy the first property of your own?

Nazz: Yeah, so that was the biggest mistake I ever made in my career?

Brandon: Oh! Good!

Nazz: But, that will be fun to talk about.

Brandon: Yeah, let’s hear it.

Nazz: Freshly married, out of college, got this great job, my husband’s got this great job. We got all cocky and we say, “Hey! Let’s go get this partner residence. Let’s go see how much we can afford, right?”

So I end up buying a condo in the college area that I went to school.

Josh: Where did you go to school, by the way?

Nazz: UC San Diego.

Josh: Cool.

Nazz: Yeah! A niche town. It’s great though. I loved the condo while it lasted. It ended up that we went to the top of our price range and bought a condo. And I hate condos. At this point, I will never buy a condo again.

Brandon: Oh! Josh loves condos! They’re Josh’s favorite.

Nazz: Oh, I’m sure.

Josh: Not a fan. Not a fan. Not a fan. It might be for the same reasons, we’ll find I guess as you continue the story if Brandon wouldn’t keep interrupting.

Brandon: I’m done. Zip.

Nazz: All right. So great condo. It’s got a pool! How cool is that! And there’s college students, so if I need to rent it out, I never have to worry about it! You know, it was brilliant, and it takes care of itself. But all of those things turned out to be negative points.

Josh: College kids and the pool.

Nazz: Exactly with the HOA members. There you go. So we lived in there for four years as a primary residence, and then we moved on to the next condo I bought. That was great while it lasted, but then when we rented it out, we realized, oh wow, it doesn’t cash-flow. So I forgot to do the cash-flow analysis part when I was young. That was really stupid, so we probably ended up about a $1,000 a month leasing that apartment. We really didn’t like that, but you know, at the time, we could afford it, so we kind of said, oh you know, we’ll just move onto the next investment property. We did that as a primary, a condo as well. And then we just kind of went from there.

Josh: I’ve got my hand up. I’ve got a question.

Nazz: Sir?

Josh: So your first condo, the pool one. And then you went and bought your second condo. Which was the one that got the lost? Was it the first or the second one?

Nazz: It was the first one.

Josh: Okay, so it was the first one. So when you bought, was your intention to buy it for investment purposes or was the intention was to buy it to live in, that’s my first question.

Nazz: So the intention was to buy it, to live in it and then when we grow out of it, we’ll rent it out.

Josh: But you weren’t thinking long term about the actual analysis when you bought it, which was certainly one mistake. You said you made a bunch of other big mistakes in there. I feel like there’s a story in there with college kids jumping off of balconies into pools. Where’s the fun part of this story?

Nazz: Well the fun part of this story, do I really have to tell you?

Josh: Yeah! Of course! You’re here on the air, live with Brandon Turner and his minion Josh Dorkin!

Brandon: Minion. I like it.

Nazz: Perfect. Well you know, that condo was great and we had a lot of fun having turnovers every single year, because it was a transient population, so I mean, it depends on what you’re looking for. You know students tend to be transient. They don’t like their roommates, they move out and they don’t really consider how much it is to change housing. So it cost a lot for me, and turnover is the most expensive thing to have. And so every single year I was showing it, and showing it and the way that the condo as set up it was truly difficult to show. Because there’s like four different gates, and you have to go to the front gate and walk people in to the second gate. It was just super duper secure. It was very difficult and it was a lot of work. And then there’s a whole bunch of new housing that came up in the area by the school, so rent just dropped and it was just.

Josh: Got ya. So there’s a few issues there. I mean, one, obviously we talked about which is the whole, if you’re going to buy with any intention down the line to do some kind of investment with it, you’ve got to do the analysis, right? Two, it seems like the difficulty of kind of accessing it was problematic and I could see that certainly being a problem. The transient population. We actually just did a show last week or two weeks ago about college rentals and you know, I think if you take that in mind.

Here’s the beauty of real estate, I think it’s just kind of important to talk about. You know that doesn’t work for you. That wouldn’t work for me. I wouldn’t want that population either, but some people focus on that niche, they thrive in that niche and they rock it on that niche. And that’s the coolest thing about this business, because everyone is like “Well, I’m going to be a real estate investor. I’m going to do buy and hold.” You’ve got to define it even more. You’ve got to really narrow it down to exactly what you want to do within this business and figure out what’s going to fit you and fit your long term goals.

You know just because that didn’t work for you, doesn’t mean anything you’ve found obviously your niche later, and we’ll go there. You had really quickly mentioned the HOA, and it sounds like HOA was an issue for you with this and potentially the other property. Is that true, or is that not at all the case?

Nazz: I want to circle back on your point, I actually thought that was a really good point that I wish I brought up, because then I would seem more intelligent than I am now. It’s true! See the thing I like about real estate is that I get to choose who I deal with. So I’m kind of my own boss. And it depends on what you want to do. So the premise of this whole theory is that I’m a lazy person. I want to use my time really effectively. So I want to do them minimum amount of work to make enough money so, I don’t want to be super duper rich, and I’m lazy, right? So for me, it was management intensive, so it didn’t work out. And it’s important for people to kind of think about what do you really want to get out of it? Do you want to have a big corporation and have a bunch of employees, and that’s fine, or just kind of hang out.

Josh: I’m going to interrupt you on that again, hold on because this is really fascinating to me. No, because a lot of people come in here with this dream like “Hey, I’m getting into this business because I want to be filthy rich, I want to have everything, you know.” It sounds like you don’t care. And I’d love to know exactly what your goal is? It sounds like, as you call yourself lazy, I’m just using your words, I’m not calling you lazy at all, but you know. It sounds like you want to just build a portfolio that kind of takes care of itself that you don’t have to work too hard for and you can just kind of live your life at that point. You can just live comfortably off of your real estate. Is that kind of where you’re going?

Nazz: Exactly! Exactly, that’s kind of my goal. I’ve always liked to be lazy. So I wanted to find out how I can be lazy and that’s why I don’t do a 9 to 5 job, because it’s a lot of work. You know I have to be there all the time, do the minimum amount of time and just have enough. So my goal.

Josh: You are lazy as hell!

Nazz: That’s why I’m a landlord, right? That’s why! Landlords don’t do anything. They just collect their rent checks and go and sip on their martinis.

Brandon: Yep! That’s what I do!

Josh: You’re making a bad image for landlords!

Nazz: A lot of people think that anyway. I have income that I want and I’m there, so I’m feeling pretty relaxed right now talking to you guys.

Josh: That is awesome.

Brandon: How many units do you have now then?

Josh: She does need to come back to the HOA thing, though.

Brandon: Oh yeah, we’ll talk about HOA, but how many units do you have?

Nazz: 51

Brandon: 51 units? Are they all single family, multi family, or what?

Nazz: A mixture. Mostly single families, I’ve got a 10 unit, I’ve got a whole bunch of duplexes.

Brandon: Okay, okay and those are all in San Francisco, I’m guessing not?

Nazz: No, some are in California. Some are in the Midwest, in Wisconsin.

Brandon: Oh, okay! Okay, we’re going to get into that, so before we dump into that. We want to talk about that. But, HOAs. Josh will yell at me if I don’t go back to HOAs. Okay, so what is the problem with HOAs? Why do people struggle with HOAs? Or why did you struggle with them, or did you even? What’s the issue with that?

Nazz: So many facets, oh my gosh! First of all it’s super expensive! My HOA at the time was $485. And it went from $385 to $485 over the course of a couple of years. Okay $485 $500, doesn’t sound like much, but what do you get out of it? You get landscaping, and all this other stuff that I don’t really care for.

Brandon: You get a pool!

Josh: You get a pool!

Nazz: You do get a pool and a Jacuzzi. But it’s very expensive. I mean, a gym membership is much cheaper than that. And the worst part for me is that you actually have to work with other people in order to do stuff, you know modification to your own house. For instance, if you were doing plumbing, well every other Wednesday is the plumbing day. The water gets turned off for the whole building, that’s the way the buildings’ plumbings set up, you have to shut off the building to do any work in any individual unit. So it was a huge collaboration between me and the plumber and the tenants and the building HOA person. It’s a lot of work. I don’t want to do it anymore.

Josh: It adds an extra layer, right? It’s enough work to actually manage your tenants and your property, but now you have to manage this group of people who are in charge of the HOA and it adds a layer of complexity to something that it puts part of the business out of your control, which is, I think, the biggest issue. That’s probably how I would phrase it. There’s a bit of a loss. And one of the reasons we all go into real estate is so that we can all have more control then say stocks. You know, you buy stock, you have no control over what the board does, or the company or the CEO. Now you’ve got this HOA that’s unpredictable. They may vote for something, decide to spend money here, you know whatever it is, and you know suddenly your financials look very different, right?

Nazz: Absolutely. And even just to the control, the second condo I bought, the HOA board actually decided that they don’t want anybody to rent out any units for less than two years. So those are things that directly affects your financials. The common lease is one year. So things like that is why I don’t work with HOAs.

Brandon: That’s what I tell people too, is that somebody else is making your financial decision and it can be dangerous. All right, so you’ve got 51 units now. Mostly single family. I mean, how does that happen when you live in San Francisco, and you live in an area where a single family house costs more than, I don’t know, my entire town? How does that happen?

Nazz: It’s a long story.

Brandon: We’ve got time. Josh doesn’t, he’s going to sleep, but I’ve got time.

Nazz: Well you know, we bought this condo, we rented it out and we just kept buying houses. Well the second deal was a condo. The third deal was a single family home, the fourth, well it’s been single family homes and duplexes ever since. At the time we bought four different properties in California, and that’s pretty close to the bottom of the market back in 2010, 11, 12 ish. Those properties were kind of my anchor properties, because those are pretty much bought with a minimal cash flow. My standard at the time, if it’s less than $200 negative a month, I’m buying, which is really rare in California. Because, I thought, rent appreciation, that’s how you make money. And then those houses rarely appreciated, so we kind of took out the equity from our existing holdings and we used that to buy shared properties in the Midwest that cash flow really well.

We’ve bought most of our portfolio in 2014 and 2015.

Brandon: Okay, so here’s an interesting, I had a conversation with a friend the other day who lives in Southern California and he was looking at a duplex that he wanted to buy. This thing was like $500,000 and it rented out for a total of like $2200 a month. And I ran the numbers and I showed him, and it was -$700 a month cash flow. And I showed it to him, and he’s like, “Okay that’s not bad. I think I might do it.” And I was like, “What?!” And the longer we talked about it though, this guy that doesn’t know that much about real estate he was on to something. This was kind of the philosophy that we talked about, and I’m not saying that you should go do this, that’s not what I’m saying, but here’s his philosophy.

He’s like, “I don’t need cash flow. I’ve got more cash than I know what to do with right now. What I want is long term wealth, so the cash flow is going to be offset by the loan being paid down every month.” So those are going to cancel each other out over the long run. The mortgage being paid down and the cash flow will cancel out, so it’s almost like I’m putting money in a savings account, but I’m buying in a great little area in Southern California that I believe is going to go up in value. Again, that’s playing the appreciation game.

I’m not suggesting that people do that, but it’s an interesting philosophy. He doesn’t need to the cash flow. He makes a ton of money at his job or in his business. I don’t know. What do you think of that philosophy? Is that smart? Is that a really bad idea to bet on that appreciation, hoping that’s the only thing that is going to bail you out long term is California’s prices doubling every year?

Josh: And I’m going to add something. I mean, $700 versus $200 or less loss. Not an insignificant difference there, but yeah, what’s your take on that?

Nazz: I mean, why would I ever spend money to lose money? That’s a strange decision, I’m going to spend money to lose money. That’s a no for me.

Josh: I think it’s crazy!

Brandon: I would not do it.

Nazz: I mean, it’s nuts. But getting back to the negative $200, I always under run my properties with way too many rules and I usually overshoot for things. So in actuality, you’ll make about $2,000 a property on those -$200 a month.

Brandon: Per year?

Nazz: Yeah! So it actually is possible. So really, I always overshoot. I would never pay money to lose money ever again.

Josh: So here’s a question. I think a lot of people, let’s call them, well I mean they call themselves investors, but let’s call them speculators, because that’s what they are. A lot of speculators, or wannabe speculators hear “Oh, California’s up 12% per year, 15, 18, 23% whatever it is. Denver is up 18% last year. Cool! I’m going to buy some property and get those gains, and it’s okay if I lose a little bit of money.” Just because something increased in the past does not necessarily indicate that it’s going to continue to go up. You’re somebody who actually said, you know you’re willing, even though you’re making money on these and you’re not losing the $200, you’re willing to lose the $200 because you believe you’re going to get appreciation.

So we don’t really push the button on this a lot, and since I have you and you’re willing to do that, I want to ask. What is going to be an indicator for you that prices are going to go up? What do you actually gambling on? Because you are doing a bit of speculation here. You’re doing smarter speculation than probably the guy that Brandon was talking to and other folks. But you know, calculating that negative $200 just because you’re going to make money over time with respect to appreciation. What do you want? What do you look for in an area? What’s an indicator to you that you’re going to keep going up?

Nazz: See, at the time, appreciation wasn’t even a part of my plan to be honest. It kind of just worked out that way. It worked out well for me. I was thinking that rent is going to go up with inflation, so I know at exactly what point, that was my thinking. It’s not what happened, but rent is going to go up with inflation, which is what 4 or 5% a year. And I know exactly when I’m going to start making money and with the cash flow I would eventually have all these rentals that make money.

To have it break even in my under-riding procedures, I’ve never seen prices like that, so the best I could do was negative $200. And that is not actually a correct assumption, but that was at the time, that was my thinking. And it turns out that appreciation, just because of the negative $200 guideline, that pretty much puts me at the bottom of the market, or close to the bottom. And it worked out okay for me. I guess I never planned to work on the appreciation approach.

Brandon: So your strategy wasn’t like my friend’s who specifically went into it, or he’s trying to go into it, knowing he’s going to lose a ton of money. But yours is more like you went in because you just didn’t know any better.

Nazz: Yeah.

Brandon: Okay, cool.

Josh: I thought it was more intentional, so sorry.

Nazz: I wasn’t that smart, sorry. I didn’t plan that in my head at times.

Brandon: But it worked for you! Five years ago I would have said that somebody would be crazy for buying a bunch of California real estate only counting on appreciation, but let’s be honest, that person who bought a bunch of properties five years ago in California, made a lot more money than I did. Right? So, were they really that stupid? Or were they lucky? I mean, I don’t know.

Josh: That’s why I asked the question of what do you look for? If somebody knows the answer to buying appreciation, I’d like to know it. It’s the same answer, as what’s the answer to buying and winning the money with stocks. I mean I think it’s long term play, so over time it should.

Nazz: I would like to bring this up too. So you have to time the market, right? So I don’t time the market. What I do is that I buy things that I can afford to keep. Does that make sense? So it has the cash flow positive with margins, in case poop happens, and I can’t afford to keep it, so it doesn’t matter where I buy it in the market, as long as rent doesn’t plummet, I can afford to keep this property. Over the long run, you always have appreciation in real estate. If you keep it for 30 years, most likely it will appreciate. So that’s my goal right now.

Josh: So you calculate reduction, potential reduction in rent, in your formulas? And this is a question I don’t think either of us, Brandon, has asked anybody. Is that something that you include? “Hey, rent might go down by 10, 20, 30% over the next couple of years, so maybe I shouldn’t buy this.”

Nazz: I don’t. But I do buy single family homes, which I think is the niche to protect myself from volatile rent up and downs. I think what, in my perspective, if you buy a single family home, you know there’s only so much of them, and it’s suburbia development. It takes a lot to develop a whole suburbia. And then you only have so many single family homes. If you have condos, you have competitors and people can build those up in like 12 months. So that’s kind of like, if someone is willing to rent a house. Like, I’ve got a tenant who’s a mom and she has two sons and a granddaughter, and she has to stay in a single family home. She has grand kids. She wants a yard to play with. So she’s never going to move, right? I’ve got another family who have four kids and the kids are all in elementary school and they’re going to stay forever. So you have a niche and you have people who are going to stay there for a while and people are actually competing to get into your property. That’s kind of my thing.

Brandon: Cool. Yeah well I was going to say, I want to know how you’re investing out of the area. WE started this talking about, if you live in an expensive area, it’s hard to invest. I mean there is the appreciation play you can get into, but how did you get into Wisconsin? What made you say, well I’m going to go invest over in Wisconsin? How does that happen?

Nazz: Actually, I listen to your show with Maron and also with Rick Schmidt. And they’re the ones who actually gave me the idea of the Midwest and that general area. My parents live in Chicago, so I was thinking, okay what is feasible for me in the Midwest. I’ve got to have somebody who’s kind of on the ground to help me with this whole thing. I just kind of drew a two hour driving radius around where my parents’ property is and I said, I’m going to look at any city in this two-hour radius so that they can help me out with it. And so I did spot about four or five different cities that I was looking into. I did a whole bunch of ground work in the beginning, contacting realtors, learning about markets so I narrowed it down to a few different cities.

Then I made a trip out there to see my parents and we drove to every single town and spent a considerable amount of time there doing research. Milwaukee just happens to work for me.

Brandon: I love that you did that right? That you got on a plane. You flew to Chicago, you went and visited those cities. You did the boots on the ground work needed, it wasn’t just like, “I’m going to pick this random city because somebody on a podcast told me it was a good idea. And now I’m going to go buy a bunch of properties sight unseen, because I heard somebody said that they’re making money there.”

Josh: I mean it was a good podcast! Don’t get me wrong.

Brandon: It was!

Josh: That BiggerPockets show is pretty decent, but you don’t know.

Nazz: Indeed. Indeed.

Josh: Well cool.

Nazz: I mean it’s fun to go to the Midwest! It’s so different than California. You know?

Brandon: It is. It is.

Nazz: And they talk so cute! They say “aboot”. It’s just so cute!

Brandon: You should hear my mom talk. My whole family’s in Minnesota so they all have the cute little Swedish accents.

Nazz: Aww that’s cute.

Brandon: Yeah, it’s cute.

Josh: Yeah. So you’re investing overseas, quote, unquote. You’re investing at a distance, in Wisconsin. It might as well be overseas, right?

Brandon: Might as well be.

Josh: Those Wisconsinites. No I don’t know. I have nothing bad to say about them.

Brandon: I have a lot of bad to say about Packers fans, but we’re not going to go there today.

Josh: That’s fine, that’s not my thing. Although, you know, this is the show following the World Series, and it would, I’ve got to say, my Mets lost. Congratulations to the Kansas City Royals. They emerged victorious. They did not win, we lost. But, anyway. We referenced it last show, and I’ve got to bring it back up.

I want to circle back to a really obvious fact. You are female, correct?

Nazz: Last time I checked, yes.

Josh: No, I mean, listen. We try to get, we try to be as balanced as we can, you know guys, gals. We have a hard time getting gals, ladies, women to come on the show. I don’t know why, but I think it’s super important to talk to you guys because when we go and we look at our demographics on BiggerPockets, when you look at the overall demographic of the real estate investor, it’s very very heavily weighed in favor of guys, of men. So you know, I would not be doing my job if I were not to ask you about investing as a woman, if you have run across, or run into any situations, you know, where you face challenges because of your sex?

Nazz: I did not expect to go there. The whole gender issue, and the feminism type of thing, but I guess, yeah. I mean, I’m a stay at home mom. Well okay, technically I’m a real estate professional for tax purposes, but I stay home with my kids. I’ve got two little ones. Just the cutest kids in the world pretty much, ever.

Josh: They sound great!

Nazz: Did you hear them? Anyways, so I have young kids, they’re under five. I’m busy. You know with, just taking care of kids.

Brandon: And buying 51 units!

Nazz: Exactly, exactly. As a female, just the arrangement that we have in our family kind of enables us to have somebody who, well myself, dedicated full time to doing this thing that we want to achieve. And my husband works for a tech company down in the Silicon Valley. I used to be an engineer myself, that was kind of my profession by training, and I quit when I had babies, and I stayed home. We’re doing, well I was doing this full time. It worked okay. A lot of people like to ask me about it. I’m actually kind of working on that pitch. People ask me, “what do you do?” and I don’t know what to say sometimes.

Josh: A real estate investor!

Nazz: Real estate! Yeah.

Brandon: My wife says the same thing. She really struggles with that same question, “Well what do you do?” Because she doesn't go to Starbucks anymore, she used to work at Starbucks. You know she manages our properties, but she’s not an official property manager. She really struggles with that. Every time someone asks her what she does, she says “I don’t know. I have rentals.” I don’t know it’s weird. She’s working on that pitch as well.

Nazz: Yeah. That landlord, the landlord question doesn’t get good answers though. It doesn’t get good responses. People are usually like “Oh, you’re a landlord? Ew!”

Josh: That’s the problem! That is the problem. That’s why we do what we do. That is one of the reasons that BiggerPockets exists. We want to change that perception. I mean, you’re a stay at home mom that’s buying rental properties to take care of your family. Clearly, you’re a horrible person and landlord! I mean, it’s so silly.

All right, so back to this female thing. Beyond being a stay at home mom and the actual ability to answer that question, I mean have you faced any issues, challenges, or it’s just kind of par for the course, this is what I do? The reason I ask these questions is this. There are a lot of women who listen to this show and at the end of the day I think we need more female role models in this industry and you being a successful real estate investor who is running a portfolio, not your husband. He’s out gallivanting in the Silicon Valley, so you’re busy doing this, so you are a role model. We’ve got you on the show, there’s tens of thousands of people and thousands and thousands of them are women listening to the show. What would you say to the women who are on the fence saying “You know this is a man’s world.”?

Nazz: I don’t think that’s true. I think it depends on the personality. I think one of the biggest things that I think is important in this show, in this industry is that you have to be good at math. And you’ve got to do your cash flow analysis. That’s like the first thing you need to learn, how you make your money. And you can be a woman or a man to do that. I really haven’t faced any challenges, not predominant ones, anyway as a woman. I mean I get talked down to by the old timers. “Oh you don’t know anything, get your husband on the phone.” Well, I am the husband, you work with me, so I’ve have that a couple of times, but it’s really not a big issue these days. But I’ve noticed a predominantly male hosts or guests on your podcasts. I counted them the other day. I think it was like 10?

Brandon: We honestly ask equal numbers. We just get shot down by a lot more women. It’s like high school again.

Nazz: Oh, there you go.

Josh: I don’t know, speak for yourself then. Because I didn’t have the nerve to ask.

Brandon: That’s true. We’d just pretend. All right, let’s go back to your out of the area investing, because again there’s a lot of people listening who want to do that. I’ve got a few questions to ask you, like the basic. How do you find them when you live out of the area? How do you finance them? And how do you manage them? Those are the three questions, I’ll guess I’ll fire all three at one time to you.

Nazz: So I fly out to my properties quarterly. So every three or four months or so, I mean, I do a family trip too, all right. My parents happen to live there. But I do go look at them, and I do want to make sure that everything is going in the right direction.

Brandon: Do you go there, and do you go look for properties while you’re there in person to go buy, or do you buy them all online?

Nazz: I buy them all through, I have a pipeline set up, you know it took a few iterations to get the right people to work for me, so I have realtors and a property management company that I really like to work with. Actually they’re a husband and wife team that I just kind of ended up happened that way. But we went through bowls and bowls of realtors before we found the right ones that worked for us. And we find rehabbers, people who are contractors, that does our work for rehabbing. We constantly have kind of have little meetings to autocorrect what’s going on and make sure we’re on the same page. Does that answer your question?

Brandon: No, that’s good! What about financing? I mean that’s kind of how you manage, that’s how you do the contractor stuff, that’s how you do realtors, so you’re obviously buying on the MLS, correct? And then what about financing? Are you just doing typical bank loans? I mean people always say you get shot down after 10 loans, you can’t get anymore.

Nazz: Well we had equity, and we had savings. We are kind of, we save a lot. We save about 75% of our income, so we’re ready for when once the opportunity is there, and then after we use all of that up, we do the Burr ethic, and we did that a few times with portfolio lenders. We bundled up a few properties together to kind of take some equity out. And then after that, actually I am currently working with a private lender, a particular investor who was interested in investing with me. I didn't really look for it, it’s family, but it kind of just worked out that way.

Brandon: So for those who don’t know what we’re talking about the Burr strategy, just in case you’ve never listened to the show before and you've never heard me talking about that. It’s where you buy a property, you rehab it, you rent it out and then you refinance it and you pull your cash back out. So you basically, you buy properties, get it rented out, get it fixed up looking good, and then you can get your money back so you can go and do it again. You’re using a portfolio lender to do that.

Nazz: That’s correct.

Brandon: And what are portfolio lenders, for those who don’t know?

Nazz: Portfolio lenders are pretty much banks that manage their own portfolio, which means their own cash reserves instead of it going to Fannie Mae or Freddie Mac which is the federal reserve for the mortgage funding source. They actually use their own money, which means they are a lot more lenient on how they want to structure their loans.

Brandon: Okay, okay. And you, I want to ask you one more thing about managing the manager. Managing the property manager. I mean I have a property manager who is terrible who lives in my area. I mean, I’ve just had terrible experiences with my rental properties with her.

Josh: By the way, really quickly.

Brandon: Are you going to make fun of me for not firing her yet?

Josh: A, and B, it’s astounding to me that you have not yet had your property manager listen to the podcast!

Brandon: Maybe she does!

Josh: I think you haven’t because you’re deathly afraid that she’s going to find out how much trash you talk about her.

Brandon: I know, I know. I don’t want her to listen. I mean, it’s tough to manage a property manager. Granted, I gave her two properties, and one of them burned, so that’s not even rented anymore and we’re dealing with insurance on it, so it’s 50/50 right now, and I’ll take care of the rest later. Which I have more fun stories, but I’m not going to go into them now.

But yeah, how do you manage your property manager? What do you do? Do you call them all the time? Do they just do things right the first time so you don’t have to bug them?

Nazz: I used to call them everyday. But now I call them once every two or three days, because we’re still buying gradually, you know. Yeah, I guess there’s a huge trust factor there too. I’ve gone through a lot of property managers too, and they were just, you know. They charged a lot and they didn’t do the job. I once hired a property manager and it took her a month to rent out something that was totally rental ready. A month! A MONTH! It was unacceptable, but this particular company I’m working for. They’re doing funny faces for those who can’t see. I can’t concentrate. Anyway, so, these people are great though. I really love my property managers, so I talk to a lot of people on the phone. It doesn’t just come easy, it’s not like I’m lucky or anything.

I probably talked to 100 property managers on the phone before I found the one that was just like you know what, you’re it.

Josh: What stood out for that one that was it? What was the one thing that stood out for them that made you say, okay, because you know 100 people that’s a lot!

Nazz: Well okay, this needs to come with some background. I used to be in engineering sales, that sells heavy, whatever, equipment, right? So I’m pretty good at telling apart bullshit with truths. And these people didn’t lie to me on the phone. That was honestly the reason. When I hear lies, I can detect them. And these people didn’t lie to me on the phone. They were very honest. They were straightforward. They weren’t the cheapest ones, actually, they weren’t. But I believe that to have a good team, you need to feed them. It sounds bad, but you need to make it a win-win situation. Everyone’s got to make money in this thing, and you get what you pay for. So that’s kind of my thing. I heard them and I thought, OH! You’re it.

Brandon: Trust is huge. I love it. Well cool, well hey let’s shift gears real quick. I know we could probably talk to you forever.

Josh: I think we could!

Brandon: I know, but let’s shift gears and we’re going to move over to the World Famous Fire Round! Which is sponsored by FreshBooks. So, if you are a real estate hustler, you probably billing people for stuff quite often, like late rent, contracting work etc. I know that I do, which is why I am a huge fan of FreshBooks and I recommend them all the time. FreshBooks is an incredibly easy to use invoicing software designed to help entrepreneurs get organized, save time invoicing and get paid faster. You can also use it to keep track of your employee’s hours, track expenses and generate awesome reports. So bill like a boss! Try FreshBooks free for 30 days. Just go to Freshbooks.com/BiggerPockets and enter BiggerPockets in the “how did you hear about us” section when signing up.

It’s time for the fire round!

Brandon: All right, the fire round. These questions come direct out of the BiggerPockets forum. We’re going to fire them right at you. Number 1, what are the pros and cons of buying a short sale? Somebody asked, what are the pros and cons of buying a short sale? I’m not sure if you’ve done short sales, but I wonder. That was one of the questions we grabbed. So what are the pros and cons of buying a short sale?

Nazz: I’ve offered some short sales, but I never really can come back timely. It takes forever. You can get a really great deal every once in a while. But they do take a very long time to preclate. Sometimes it takes a couple of months and I’ve had ones that have been lingering, it’s still ingering and I made an offer in 2012.

Brandon: I’ve got one of those too! And every six months, they’re like, are you still interested? And we’re like, yep! Still here!

Josh: All right. Cool. That’s good. Fair enough. Fair enough. Our next, next question, how much, and I think you kind of answered this, but how much cash, well no, you answered it back in the day. Today, how much cash flow for rental property would make it worthwhile to you? So what is your criteria as far as cash flow is concerned today?

Nazz: 15% return on investment.

Brandon: Okay.

Josh: Okay, okay got it.

Nazz: Well actually 15% net. So if you finance it, your return on investment is closer to 40%, maybe and I don’t buy anything under 15%.

Brandon: So 15% if buying all cash.

Nazz: Yes.

Brandon: Okay.

Josh: Got it.

Brandon: So essentially…

Nazz: 15 cap.

Brandon: Yeah, 15 cap, but you don’t really use cap for single family houses, but same kind of concept. Okay, cool. Which of course you can get more easily in the mid west than you’re going to find in San Francisco. All right, next one, are homes built in 1900 worth investing in? Should I even consider a house built in 1900?

Nazz: Like over 100 years old?

Josh: Yeah.

Nazz: I personally wouldn’t, because it’s probably on some sort of historic registry or something like that and it costs a lot more to remodel them. But, in my portfolio, I personally like ranches built in the 1950s. It’s just, they’ve treated me well and that’s kind of my niche. So I don’t personally.

Brandon: I think my oldest one is 1894.

Nazz: 1894!!

Brandon: I think my 5-plex is 1894. I mean it’s just a nice old house.

Nazz: I mean was there any difference in the amount of maintenance you have to do?

Brandon: If that one is 1894, which I’m thinking it is, there’s like no maintenance on that one, but it’s been cared for over the years. And that’s what matters more than anything is, whether it’s been cared for over the 100 years, and that’s hard to tell. I generally don’t advise buying them that old, but you can do it. So, all right. Josh?

Josh: Yeah my brother’s got a 100 plus year old house that apparently the underground railroad went through it or around it, I think they’ve got tunnels under the home. It’s on the historic register, and it’s an absolute nightmare. It’s like the money pit, if you remember that Tom Hanks movie. All right, last question in the fire round. How can I find out what the differential is between the value of a distressed property and the retail value of SFR as a particular area? So basically, if I find a distressed property, how do I know it’s distressed versus SFR, or versus just the standard retail property? I think it’s kind of an obvious question, so I’ll just throw that home run to you.

Nazz: How do I know it’s distressed? To me it doesn’t matter. I mean I’m looking for 15 cap, so 15 cap, if you don’t mean 15 cap, I don’t care if its your grandma selling it or the bank. To me it doesn’t make a difference.

Brandon: Real quick, on that 15%. I want to run back to that real quickly, when you say that, let’s just say for example you find a property that you could buy for $10,000 but it needs $20,000 worth of work, so now you’ve got $30,000 into it. That’s the number you’re basing your 15% return on is that $30,000 not the $10,000.

Nazz: Total investment.

Brandon: Okay, total investment, not just the purchase price. Cool. Perfect. That’s what I thought. Cool, that’s the end of the fire round. Why don’t we close this up and head on over to our famous…

Famous four!

Brandon: All right, the famous four. These questions are asked of every guest, and I’d love to know your thoughts and I know you listen to our show, so you probably know what’s coming. Number one, what is your favorite real estate related book?

Nazz: I don’t read about real estate! I’ve thought about, I wanted to sound smart, but I don’t read about real estate. I like to read sci-fi and fiction, so what happens is the husband reads it and he gives me like a reader’s digest.

Josh: The husband who doesn’t do any real estate is reading the real estate books, while you’re reading Larry Niven and other fun things!

Nazz: Yes! I like to read about martians and stuff like that. But I do want to mention, that the most influential idea I got for wealth management real estate book is probably Kiwosaki’s book, where in one part he mentioned that there’s two types, or there’s two ways to spend money. You can buy a liability or you can buy investments. So liability is things that you spend money on that you have to spend more money to maintain it. Or investment, where you spend money, but it gives you money in return. So that has really kind of shaped my spending habits.

Brandon: Yeah, and it’s Rich Dad, Poor Dad, the book, correct?

Nazz: Yes, correct.

Josh: Well what’s the best sci-fi book, by the way? Just to add to our famous four. We’ll stack it because you’re a sci-fi fan and I am too.

Nazz: Dune

Brandon: I tried to read it and I couldn’t get into it.

Josh: Yeah I couldn’t do it.

Brandon: I’ll have to try it again.

Josh: I saw the movie when I was a kid, never fully watched it.

Nazz: The David Lynch one?

Josh: You know, the scary one with the big giant worm, that goes and like.

Nazz: Yeah! Well the first three-quarters of the book is hard to get into, but then the next six books is just fabulous.

Brandon: Maybe I’ll keep trying. I’ll keep trying.

Josh: Well you don’t read real estate. What about business? Do you read business books at all?

Nazz: No, I read the BiggerPockets forums a lot.

Josh: That counts. Nice, that’s a good business book.

Nazz: Yeah, it is. It’s interesting to see people’s ideas. They have tons of good stuff on there.

Josh: Fair enough, fair enough. What about hobbies? What do you do for fun? You’ve got your two little rugrats running around. What do you guys do?

Nazz: We go to the parks a lot. We wait around a lot for the kids to kind of finish what they’re doing.

Josh: That’s very exciting!

Nazz: I don’t know, but I like to do math, mathematical analysis.

Josh: That’s not weird!

Nazz: I love math! I really do!

Josh: Nerd alert! Nerd alert!

Brandon: We should have t-shirts Josh that say something like, “I love Math, BiggerPockets.”

Josh: Yeah, real estate investors are math nerds mostly.

Nazz: Or science. I like to read science magazines. Discovery or Scientific America or something like that.

Josh: Fantastic!

Brandon: All right, my last question of the day. Nazz like Jazz, what do you believe successful real estate investors from those who give up, fail or never get started?

Nazz: I think doing the ground work is obviously one of the prerequisites. But also, as real estate investors, things are difficult. Nothing was going to be easy, but it’s all about how you can figure out a way to make it happen. So the people who are actually trying to think of it innovative way to make what they want happen, happen are you know, the successful ones. And then the ones who are just like “Oh that’s too difficult, or that’s impossible I don’t want to do it.” There’s always a way to do it, you just have to get in there, spend the time and get on with it.

Brandon: Hey! Can I ask you one more question? I know it’s not part of the famous four, it just popped in my head and I want to ask you. You said you listened to the BiggerPockets podcast that one with Mayor Ron where he talks about investing in Milwaukee. How many properties did you have before that? And how many have you bought since that? Were you just had the four before that?

Nazz: No, I probably had a couple in Milwaukee? And I think I bought something like probably 10, 10 doors in 2014 and the rest in 2015. So this year’s been a big year for us.

Brandon: Okay, so you had a few beforehand, and when you heard that podcast, that’s what really made you commit to more. I just want bragging rights, so I can be like… you know?

Josh: So what you’re trying to say here is BiggerPockets is responsible for you having a kickass portfolio.

Nazz: Entirely. And for me and my children’s future.

Josh: Wow! Put the pressure on. Nice, nice.

Nazz: No, you guys are doing great stuff here. I really enjoy the shows.

Josh: Oh, that’s great. Hey Nazz! Where can people find out more about you. Where can they find you?

Nazz: BiggerPockets is probably the biggest place.

Josh: That’s perfect. Perfect perfect. Awesome, awesome. All right, well listen. It’s absolutely been a pleasure. A whole heck of a lot of fun and we definitely appreciate having you coming on our show, I can’t even say things correctly! But we’re definitely glad you decided to join us, and we will look forward to seeing you on the site!

Nazz: Glad to be here!

Brandon: All right Nazz!

Josh: Take care!

Nazz: Take care, bye!

Josh: All right guys that was Nazz Wang! Big thanks to Nazz! She’s awesome. She is rocking it man!

Brandon: She is! She’s doing really really well! She’s definitely passed me up, and pretty soon she’s going to pass up Serge and the rest of the world.

Josh: Well I mean, that’s the coolest thing about her, she doesn't want to, she doesn’t need to. She’s not in it for any kind of “Hey I want to be the biggest, I want to be the best.” She’s building a portfolio for exactly her own purpose, which is to just kind of have enough property to live off of. That’s fantastic.

Brandon: Yeah, I love it. I love it. Definitely, and you know it’s something I’ve been thinking more about lately. We’ve talked to guys like Gray and Cardone who is like 10x your stuff and get a million properties and make millions of dollars, and this is kind of the other end of the scale, and you don’t necessarily need that. You know I was talking with Chad Carson, who was on the podcast just a few weeks ago, but me and him were just talking the other day about this concept that we all get into real estate investing for financial freedom, but then most people that get into real estate just end up getting back into this race to achieve something and then 50 years down the road, they’re like, what the heck did I just waste 50 years of my life doing? And then they remember, oh yeah when I was a kid I just wanted financial freedom. Why not remember that, right now. I thought that was kind of a cool philosophy.

Josh: Well, all right guys! Thanks so much for listening. Obviously this is the BiggerPockets Podcast.

Brandon: Obviously!

Josh: Hopefully you guys enjoyed it. Show 148. Check out the show notes at BiggerPockets.com/show148 and if you have any questions for Nazz, leave them for her there. Otherwise, thanks for listening! Please spread the word! Let people know about the BiggerPockets podcast, let them know about the BiggerPockets website. Tell people, share us on Facebook, Twitter, Google +, LinkedIn, whatever social networks you use! Share our content, share the site, invite your friends to join you on the site. Build your network on BiggerPockets. It’s a great place to be. Thanks for being a part of our world and we’ll see you next week at show 149. I’m Josh Dorkin, signing off.

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