BiggerPockets Podcast 074 with Jordan, Jacob and Jeromie Transcript

Link to show: BP Podcast 074: Buying My First Investment Property- A Newbie Podcast with Jordan, Jacob and Jeromie

Josh: This is the BiggerPockets podcast, show 74.

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 a 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 Mr. Brandon Turner.

Brandon: Hey not much Josh. How’s life in your end?

Josh: Life is good, life is good. Been busy. We’ve been crushing it here on the site dealing with all sort of chaos which we’ll talk about shortly. Got a little of sickness in the house which is a bit unfortunate but looks like it’s on the mend so things are alright. What about you?

Brandon: Not too much. I got some exciting news that’s completely unrelated to us or real estate but I just saw the new trailer for the new Dumb and Dumber Too movie.

Josh: I saw that too last night. Did you see on Fallon?

Brandon: I didn’t see it on Fallon but I saw it on YouTube video from Fallon.

Josh: The last scene of that trailer had me in tears.

Brandon: Check it out people I’ll leave the link to it in the show notes at BiggerPockets.com/show74.

Josh: Definitely check it out. If you enjoy our show you would probably enjoy new Dumb and Dumber movie.

Brandon: What are you saying Josh?

Josh: Let our listeners make their own judgments about us. As I alluded before I want to talk a little bit about what’s been causing all this chaos and that’s kind of our Quick Tip. Today’s Quick Tip the new redesign of BiggerPockets is now live and available for you guys to check out and test out. If you go on www.BiggerPockets.com login to your account you’ll see a bright orange bar at the top of the site and there is a button on there that will let you opt in and start using the new site. New site is absolutely amazing. Its cleaner, it’s brighter, it feels better, it’s easier to use, more functional, we’ve got lots of news of whose-its and whatsits and we definitely recommended you jump on. We will be releasing this to everybody to the whole world in the coming weeks but as an early adapter jump in and make moves.

Brandon: One thing I want to jump in and just point out is to checkout your post score. Your post score is kind of an algorithm number that shows your influence on BiggerPockets. You can kind of see how well you’re doing, are people voting on your post are they saying good job by clicking the vote button or not. Kind of a cool feature and you can check out the leaderboard and see who the top five post scores are on BiggerPockets right now. You can check that out on your dashboard by just going on BiggerPockets.com and logging in it should go right into your dashboard.

Josh: You can actually see your profile views on a graph compared to a post score and your interactions on the site. Ultimately the more you engage on the site as we always tell people the more interest you will get in yourself and your profile which as a result usually ends up with you doing more business, more deals, finding more partners, more colleagues so jump on it. That’s it check out the new site and we wish you lots of luck on that. That is today’s not-so-quick tip.

Today is a special show. We haven’t done anything like this in a long time. I believe it was episode 25 was the last time we did something like this. Today we are going to sit down with not just one but three different folks. We are going to do three different interviews with brand new real estate investors and we’re going to talk about their first deals. This is a really good show for those of you who are newer at investing but even if you are sophisticated investor there are actually some pretty cool things you’ll pick up as well so pay attention.

Brandon: I like these shows a lot because perspective you get and the excitement new investors have you can just tell there is something everybody whether you’re new or advanced can pick up from that and glean off these shows. I know I certainly do.

Josh: Our first of three guests today is Jordan Thibodeau. Jordan actually works full time on the main Google campus in the Bay area in San Francisco California. Jordan’s got a great story of overcoming that difficult markets and jump into real estate game in a way that those of you guys listening to the show might be facing as well. Ultimately he’s in an expensive are and has found way to make things happen. Definitely want to check it out. Besides that he’s just a great guy and very funny.

Brandon: Don’t mind our hysterical laughing during the whole thing there.

Josh: He’s like a little standup comedian or something. That’s awesome. Let’s hop in. Jordan welcome to the podcast good to have you.

Jordan: Oh this is a pleasure to be on the Rich Dad, Poor Dad show. This is awesome thank you guys.

Brandon: Yes, we had few guests say that’s their favorite book.

Jordan: Really?

Brandon: Just a few. I know it’s shocking. When we ask you later we better tell us something different.

Jordan: I’m going to over cash flow quadrant.

Brandon: For you who don’t know Jordan actually brought us in to the Google camp, me and Josh, to give a little speech on investing in real estate back a few months ago so today we are excited to bring him on our turf and talk to him about real estate.

Josh: Beat him up a little bit.

Jordan: Not the face that’s the moneymaker.

Josh: Enough jokes. Speaking of jokes our presentation with jokes at Google it was a good presentation but it totally flopped because wonderful engineers at google they don’t laugh.

Jordan: I think it started before that when we were at google earth demo and two of my friends came up and said “Hi, would you guys like to try this barbecue dish?” and Josh turns to them and says “That is disgusting!” both of the guys stared at me awkwardly because I know them because they really got up at three in the morning, got to the kitchen at four, cooked entire day, they saw me and you “I’m sure they’ll like this barbecue plate.” I brink this New Yorker here and “That’s disgusting” but thank god Brandon walks in and says “I’ll try that”

Brandon: I will try it. It was good. It was amazing barbeque.

Josh: This is going to be a tough show I can tell. Let’s talk about real estate Jordan. You are a novice real estate investor is that correct?

Jordan: Yes, that is correct.

Josh: Put some context there. Jordan is working over in Goggle in probably one of the more expensive areas in the planet to buy real estate that is the San Francisco Bay area and talk to us a little bit about that. How did you get excited about real estate and how did this whole path begin for you?

Jordan: I was longest time invested in the stock market and after a while I just stated figuring out that there is nothing of value I can really add to my stock investing. I can do index funds or whatever but its noting else I can do. After the financial crisis my old man was like telling me constantly you’ve got to get involved in real estate, you’ve got to buy something. If you don’t buy something you are a looser and I was like “I just graduated from college, I barley have any funds I can’t afford anything and we live in Silicon Valley where it costs like $2,000,000 for cardboard box. After some time there was a big story in papers that Amazon was going to building a fulfilment center in Patterson so I looked over to Patterson real estate and I saw oh my god I can actually get a house for $50,000, this is a great idea. Then I started doing more research and found out that besides fulfilment center there’s really not that many jobs in the area plus that fulfilment center is mostly going to be occupied by robots. Jobs that they are going to create are mostly six figure salaries so anyone who has that funds will be buying a hose in Patterson and not rent.

Josh: And robots don’t need to rent houses.

Jordan: No, not at this point fortunately. Then I went up to Sacramento because have some family friends there and I said this would be great area to start looking for real estate. Before I started embarking there I first had to decide how I get involved in real estate. I started doing some google searches and went on YouTube.

Josh: You didn’t search on Bing?

Jordan: First I searched on Bing and then I went to web crawler, couldn’t find anything then I went to yellow pages. After that I went to Google. Went online saw a lot guru stuff. There is one guru pitch on YouTube which these two guys who are telling you like “Does anyone in your family ever die? Because if they do die you can probably buy real estate from them.” I realized that’s not the way I wanted to do things so I came across this BiggerPockets website and I just started reading some of the articles and I think every day I read the articles, post on comments in the articles and then I just start listening to the podcast like over and over again.

Josh: I’m sorry.

Jordan: The first podcast was like you two were in your parent’s basement using a ham radio and smoke signals for communication and everything. Gradually over time around show 50 it started off with Brandon and Josh both happy and by the end of show 50 Brandon was still happy and josh was depressed. You could see there is so much you can take from this show. Get to the Rich Dad Poor Dad question, what do you do with your family? The show was excellent. A couple shows that really stand out for me were definitely show number one. Marty and his story about how he got portfolio to 8,000,000 properties and then at blink of an eyes he’s bankrupt and down by $2,000,000 and really started thinking because during the real estate crisis everyone was saying “Not the prices are so low just buy everything you see, leverage yourself and everything is going to be okay.” After listening to his talk I really started thinking I need to make sure I embark on a more conservative model because I don’t want to overextend myself. From there kept on listening on the other podcasts and I started making trips up to Sacramento every weekend.

Brandon: You said that you had family there but was the only reason you were looking there? I don’t know California at all, is that cheaper or what’s it like there?

Jordan: Sacramento is cheaper, it’s a little bit more rural and it’s at a heart of our states capitol so there’s a lot of government jobs and steady employment in the area. There’s also Stockton which is south of Sacramento but they just went to bankruptcy. You can go to Fresno if you want to, there’s all different areas but I decided to do Sacramento first because I was kind of familiar with the area.

Josh: In those areas Brandon are similar even though it’s west coast California you feel like you’re pretty much Middle America.

Brandon: Interesting.

Josh: It’s very different than San Francisco. How far are you guys from Sacramento?

Jordan: Two to two and a half hours away.

Josh: It’s still within a decent driving distance.

Brandon: Which always goes back to what I always tell people there are places to invest within couple hours’ drive from where you live. People while about things being too expensive but this is good example and well get in the exactly what you bought.

Josh: They whine? Really? Picking on the listeners that’s not the way to do this. You don’t want to piss off the listeners they are already mad enough they have to listen to me all day.

Jordan: You got the DRG listing at the time – Depressed real estate guys. First of all he hates his investments, he hats the church he hates the job just doesn’t like his contractors and now he’s listening to you guys cutting jokes. This got to be serious.

Josh: What kind of got you pulling the trigger? You listened enough of us and decided that you don’t want to hear any more help from us so you just did it?

Jordan: Pretty much. I was like if these two can do it I should be able to do it. I just went on Zillow and I saw a listing for a house in Sacramento at the time I don’t know if I wanted single family or duplex or whatever. House looked good and I was contacted by the realtor and she said “Do you have real estate agent?” I said “No” she’s like “Okay can I be your realtor?” I’m like “Okay.” She just loaded up and checked the MLS and she just took us through multiple houses in Sacramento area. She took me to one house that looked really nice from the inside and I was going to make an offer on it but day later some guy got shot and killed in front of it. That dint quite work out. After that she took me to another house and tis is in the middle July Sacramento was like 100 degrees. She’s like “Before we go in here this house is little lived in but once you get used to smell..” My dad’s like “Son you can go in first I’m not going to leave the car” I open the door and it was just like the smell of 100 cats just peeing.

Josh: No jokes Josh, that’s not what my house smells like.

Josh: If you visit him up in Montesano you’ll smell it from the outside.

Jordan: You don’t have birds in walls or something too?

Brandon: Those are gone I patched the rat holes. I rescued those baby birds with my own gloved hands and they flew. I have a nice house. Moving on.

What price range were you looking at? Again I don’t know Sacramento so what are we talking about here?

Jordan: When I first started I really had no criteria but I was saying something like between 100 and 200,000. I discovered that after looking 50 houses. Before that I was like I want to get something for 70 or 80 and all those are pretty much slummy houses. Another house I looked at it turned out the next door there was gigantic meth lab and weed farm so it didn’t quite work out. That’s when I first started learning firs of all I need to get my criteria together and second of all a realtor who is willing to push back on me when I suggest to go to homes that just have no curb appeal whatsoever. I let go of my first realtor and I knew she was excellent because she would give me data about the neighborhoods and tell me like I didn’t feel comfortable walking this neighborhood, this is a good middle class neighborhood you should start looking here and there, this is the price ranges you should look at. Me and her started working well together and I started giving her criteria of what I’m searching for. What was really nice before you start any endeavor they always say “Have a hobby plan or a business plan” This for me is a hobby so I created a hobby plan and what’s great I did it on Google Docs and this is not product placement commercial. What’s really cool I’m looking at my hobby plan right now and its page and a half and pretty solid but then I go to revision history and originally it said “I want cash flowing producing properties managed by property Management Company to decrease my time involved and produce a steady income which can financing my way of life. I would like to generate a monthly cash flow of 10,000, pretax.”

Josh: On one property?

Jordan: Exactly. That was just boiler plate MBA first year business plan. Then after time I got much more specific to what I have right now and says “I buy and manage duplexes in the area surrounding UOP law school, UC Davis med area and north east Sacramento airport. I screen tenants and bring quality tenants neighborhood, I will purchase properties with curb appeal and for the first three years ill reinvest profit into the properties.” I went into different criteria about what I’m looking for cash flow and how much I’m willing to put down.

Josh: Do you mind sharing any of that?

Jordan: One thing I notice on the forums it’s a forum so there’s always going to be debate and there’s people who are one side of the fence saying be ultra conservative other say be ultra-liberal and hence forth and for me at my end I want to buy one duplex a year, I’m not trying to build a whole entire empire so I’m more in conservative end. I do 25% down, I do more curb appeal meaning that people walk up to my duplexes and they think they are attractive and they want to stay there. I also want them to cash flow at least $200 per door within three years. Then my business plan goes into risk factors such as having adequate cash reserves, about taking too much risk. My numbers on thing is I don’t want to hit home run I kind of just want to hit consistent singles so I can stay in the game long enough so when people are swinging from the fences and missing I have enough cash to go gobble up those properties at a better price.

Josh: Talk about the within three years thing. I’ve never had anybody phrase it that way. Typically they say I’m looking for property that cash flows a $100 a door. If you are aiming for $200 a door within three years why would not the property cash flow $200 right away? What are you doing to increase it?

Jordan: The first thing is it would be check on myself. We have this tendency because now we are real estate calculators that we can do real time quantities analysis of how well are our properties doing. You kind of become like Sméagol from Lord of the Rings where all you’re doing is focusing on your precious COC return, cash on cash, all you do is you focus on that all the time but then what are you going to do to support that number is you are maybe going to dip into your main reserve, dip in the cap acts, try to charge higher rents which increases vacancies and you’re not focusing on the key things that adds value to your property.

Josh: What are those?

Jordan: For me the ad value of the property is I got to make sure that property I do buy looks attractive which is completely subjective but it’s got to look like someone took care of this property, has fresh coat of paint, the shingles aren’t all destroyed, the floors are in good conditions. I also put a wash and dryer combo on my units. I use naked feel that there’s value being added to where you stay because I feel like a lot of people see duplex and say “Oh the rents are low on this and I can just increase the rents” but by dong that sends cascading effect where now your tenants feel like you didn’t really increase the value of your property, you are not giving me any other services you’re just squeezing more out of me so I don’t really feel like this is a good deal. Going back to three year thing I learned and this is a newbie mistake I didn’t do the best due diligence when I was checking the rent roll because I inherited one tenant who just signed new lease for three years which locked his rent in about a $100 below market rate. In about three years I’ll get to where I should be. I’m still cash flowing fine. Right now my cash flow on that duplex after all my expenses, this is not including appreciation, cash flow is about $350 a month. Once that lease expires I might be able to increase the rent but you know also for me having tenants in there for long term that are happy and pay rent on time and being that tenant is consistent I might even keep his rent at the same rate it is right now.

Josh: Right now you’ve got this one duplex and both sides are rented?

Jordan: Yeah.

Brandon: Originally you said having property manager mange this for you but that sounds like that’s changed, correct? Now you’re doing it?

Jordan: It changed.

Brandon: Tell me about that. Why did you decide to manage yourself and that is long distance a lot of people are scared of that kind of thing?

Jordan: This is kind of a side story but my aunt was a property manager in my apartment complex where I used to live at and she took over she just increased the value of the whole entire apartment complex buy getting all the riffraff out of there and bringing families there who are college educated and hardworking people. It created do much value in apartment complex that she never had put out for rent sign she had referrals coming 24/7. Then she left and landlord put in this guy who was a three fingered man. He literally had three fingers and he would close his property contracts at Home Depot parking lot at night for some reason and after time went by I used to watch Cops on TV but every day at apartment complex all I had to do is open my door and get some pizza and sit and relax, fights break out and the cops are coming. The cops were coming three of four times a week. What I learned from my aunt is value of good property management and if I’m going to contract out a property manager if I don’t really know how to be a community manager myself then what can I do to be able to assess the this.

Josh: I agree with you completely and I think it’s all too easy to say “Let’s just hire somebody who is professional” Which you should be able to do and count on them. Unfortunately and this is just point in fact some property managers aren’t going to be happy about it, there is a lot of property managers who do an absolutely awful job and I think it’s so important for investors I’d say if we had industry where 95% property mangers rocked it then it would be easier to say “You don’t have to worry about it just go find good property manager and you’re good to go” I think that’s just not the case and that’s unfortunate. Ultimately you kind of have to learn the business if you’re going to hire somebody because you’ve got to know what they need to be doing. I really truly believe this. Again if the industry had better quality property management, program, training, national, something, certification, I don’t know what it is but perhaps we’d be talking about something else here.

Brandon: I think the problem is the most property management companies are run by people and there’s no training. If you go to McDonalds you might have some really good employees but you might have some really terrible ones because there’s not whole lot of training that goes into minimum wage work. That’s the problem with it.

Josh: There is McDonalds University, Brandon. There is no Property Management U.

Brandon: Exactly.

Jordan: Have you tried making a double-double its pretty tough.

Josh: That would be in and out my friend.

Jordan: Excuse me. I don’t go to McDonalds anymore.

Brandon: Do you have any advice for newbies that are in your shoes a year ago or two years ago who wanted to get started, who live in expensive area like you live in, do you have any advice for them?

What do you plan on doing next? You said one duplex a year but what’s your long-term goal?

Jordan: Before you initially think “Okay I need to go out of state” try actually just looking at some properties in your area or surrounding areas. You might take you hour and a half, two hours to drive there but in the process you are going to learn a little about the business so that if you do decide to go out of state at least you know some of the lingo and you can at least keep property manager accountable to what’s going on. I like having ability being able to drive to property and check on it whenever I have to.

Brandon: You can listen to the podcast in the car.

Jordan: Exactly. Then before you pull the trigger I always suggest look as many houses as possible. Don’t fall in love with the first one because it’s so easy. You think this is the best deal of all time but odds are if there’s so many deals out there then there’s no real deals.

Brandon: That’s a tweetable topic right there.

Josh: Little bit of wisdom from Jordan over here. It sounds like that realtor thing was kind of a mistake, were there any key mistakes you made that you might want to share where other investors could kind of take a lesson and learn from where you messed up?

Jordan: It’s better to setup your contractor’s network before you need it. I got referred in from family friend who is a home builder that friend referred me to handy man and he was able to take care of log work for me. Then when it came to emergency repairs I didn’t have system setup for handy man to take care of that work. One time on Friday at 11:30 at night I got a call that a sink fell and I needed to get it fixed. I contacted one of my handy man to go and fix it but I realized that I didn’t have a system setup for that. If I would have setup my system beforehand I wouldn’t have to take that call at Friday night at 11:30.

Josh: If you live in Montesano Washington even if you do have that setup Brandon have things fall apart on the weekends and still has to take care of it even though he has a network because they don’t work on the weekends apparently where he lives. I’m poking fun but at the same time it’s legit. This is something that you kind of have to think about. If you’re buying properties in areas like that you really do have to think about repercussions of how I get maintenance handled any time any day.

Jordan: That’s true.

Brandon: Do you have any resources that you’ve used that helped you in your real estate investing?

Jordan: Yeah. The best one for scouting would have to be NextDoor.com. Its social network for people living in certain zip codes. What you need to have is a zip code and an address and you enter it and this allows you to gain access to the social network for that area. You don’t even have to live there to gain access to it. I joined my social network for my duplex up in Sacramento and what’s best about this is unfiltered view of what’s going on in your neighborhood. If you go to Zillow, if you go Trulia talk to some of your realtors they might try put a lipstick on a pig and what’s going on, this will show you nitty-gritty of the issues that are happening in the community or if this community is on the up and up and they have strong neighborhood watch. The way to keep tabs on your community without you being physically present.

Josh: I use NextDoor for my home area and it’s great. Our local police department posts all sorts of alerts and the neighbors will warn each other of things, do yard sales, help each other with referrals – things like that. It typically is a closed network so if you do not live in the area you have to verify your address in order to do it. Are you just giving the address of the property that you own or are you using it prior to even getting in?

Jordan: There’s two ways of doing it. I use one for my neighborhood I live in in Laguen[?] and then for the property owned what you do you contact customer support and you tell them you own residence in this area. They’ll say “Register to the different email and we’ll give you access to that area.”

Josh: Nice. That’s really good advice.

Jordan: Other one is an Asana project management software. I thought my contractor how to use it. What I do is I tell him “Part of our system is anything under $300. What you need to do is go into Asana, take a picture of what you’re going to repair, take a before and after shot, write down what you did and then attach invoice to the Asana task and then assign it to me.” What’s greater amount this you can create multiple file folders for each property so if I’m going to do due diligence and I’m going to try to sell my property I walkways believe the best sellers are the ones that are transparent so hopefully if someone wants to come by my duplex I’m going with them Asana, share all the work that’s transpired on this property so there’s a record. It’s pretty nice

Josh: That’s a really good idea. That website Asana.com its pretty good project management platform. Definitely recommend it.

Where do you see yourself, you’re kind of inching up with property a year, do you see some cap? You started with this plan what was it $10,000 I feel like I’m on? Are you still looking at that long term or is that kind of tuned down a little bit?

Jordan: Right now I’m still going to go for that one duplex a year. 10k goal is appealing but I have to figure out how I’m going to get there first. I started with duplexes because I look at it as before you go into apartment complexes or anything else you should at least know how to manage small two person dwellings and then from there sort of level up to commercial and go for apartment complexes.

Josh: There is no wrong way to this except to go and do illegal stuff and bad things. Everybody has their own path and we definitely appreciate you sharing yours with us and hopefully at some point in the future we’ll have you back and we’ll get to do a bigger and better show.

Famous Four

Brandon: What is your favorite real estate book?

Jordan: Buy and Hold by this gentlemen I can’t remember right now.

Josh: He’s googling it. What about business book?

Jordan: Fooled By Randomness.

Josh: I’ve never heard of that, what is it?

Jordan: This economist who started day trading basically looks at stock traders and business man and says its maybe 30% skill and then maybe 60-70% luck and some of us what we like to do is create narrative of why things transpired in the past but actually some things are unexplained.

Josh: What about hobbies besides cracking jokes?

Jordan: I’m big into mediation, I also enjoy barbequing and hiking and all other typical San Francisco hippie stuff.

Brandon: What do you believe in your experience sets apart successful real estate investors from those that never get out of couch and do anything?

Jordan: People who are aware of their own emotional climate. Understanding their thighs and their lows, understanding when they don’t have a full picture what’s going on, the people who are self-aware are probably the ones who are going to do best in real estate.

Josh: That’s insightful my friend. We definitely appreciate having you on board, thank you so much. We appreciate having you as a member and all the support you gave to BiggerPockets and we wish the best of luck to you going forward.

Jordan: Thank you and thank you guys for everything you’re doing. Your website is amazing.

Josh: Where can people find out more about you?

Jordan: You can find me on BiggerPockets.com Jordan Thibodeau and that’s where I usually look around so go ahead and reach out to me.

Josh: Alright Jordan, take it easy man, see you around.

Brandon: Take care.

Josh: Alright everybody that was our interview with Jordan Thibodeau. Of course we encourage you guys to come and say hi to Jordan on the show notes at BiggerPockets.com/show74 and ask him any question you may have or just congratulate him on getting that first deal handled and of course if you want to ask him your favorite google questions I know he’ll be happy I’m putting this in here and he’ll be glad to answer them. We’ve got a lot of ground to cover today so why don’t we move on to the next interview with Jacob Allen. Brandon maybe you want to take this one?

Brandon: Jacob is a brand new investor from North Carolina who just flipped his very first house and he’s got a ton of good lessons to share with us. Jacob actually reached out to me long time ago and we kind of connected through his flip and now I’m really excited to bring you the interview because you know honestly a lot of flippers end up losing their money on the first hoes but not so with Jacob so we’ll talk all about that. With that let’s bring him in.

Jacob, welcome to the show.

Jacob: Thanks guys I appreciate it. Good to be here.

Brandon: You and I connected long time ago and you were talking about getting in real estate and talking about kind of a lot of different options you had. Then you reached out to me kind of threw process little bit and we strayed connected and now you actually done your first deal so that’s what we want to talk about today.

Josh: That’s a really sweet story by the way.

Brandon: I know, it is. I love to see people from beginning to end.

Jacob: It was kind of like match.com kind of thing.

Brandon: Exactly. Why real estate investing? How did you get into that idea?

Jacob: Couple of reasons. I guess those TV shows are always kind of good kicking point for people. Just sitting around Saturday morning watching those but I saved some money from my job from the past five or six year staring to work and I wanted an active way to invest in my future I guess I didn’t want to throw everything in 401k and just sit there and let stock market be as volatile as it is, up and down. I wanted to be active in my retirement and real estate always interested me, my dad was a contractor growing up and I was kind of always hanging around his jobs and I guess the flipping shows coupled with that interested me enough, I thought that he numbers made sense. It was just an easy concept.

Josh: You are CPA, right?

Jacob: That is correct.

Josh: The numbers are something you obviously you pay close attention to.

Jacob: There is a distinction here. You say CPA and people automatically assume you’re a tax guy. I want to make it clear here that I’m an auditor I know nothing about tax, my tax advice is worthless.

Josh: So don’t call and bother me.

Jacob: Exactly. There’s several people on the forums that are more than qualified to give you tax advice anyways. I just wanted to make that disclaimer.

Josh: You’re doing this CPA thing, you’re interested looking into real estate and after weeks of holding Brandon’s hand and gone to campfires together you decide that you’re going to do some kind of investment and you find a deal. Why don’t you tell us what that was? What was the first deal?

Jacob: It wasn’t quite that easy.

Josh: It was that easy – you paid Brandon $997 and you had the answers, right?

Jacob: You’re right. I logged on the BiggerPockets I upgraded to pro and that was it. It just fell in my lap. No, no, no. I’ve done some research and I tried to pull my team together and all that good stuff. I got real estate agent and I guess we kind of went to work trying to find house and I probably looked at 20 houses before I found this one but it worked out perfectly because my contractor I used on this first flip his wife is my real estate agent. They kind of worked together and I could just give one of them call and be “Hey lets go check this house out” they would be “Yeah, sure” It’s kind of a team effort we just went over there and checked this house together and that’s how we find the first after it took 15 to 20 houses to check out. The rest is history.

Brandon: What was that first deal? It was a flip, right?

Jacob: IT was a flip, yes sir.

Brandon: Why did you decide flipping and not another avenue?

Jacob: That is a good question. Flipping it just makes more sense to me. I just can’t wrap my head around buy and holds. I just can’t. I know both of you guys are multifamily guys and I just cannot wrap my head around having a tenant and getting calls from them and constantly having them bothering me about stuff. I just cannot get my head wrapped around it. I want to get in, fix it up, and get out.

Brandon: I can’t fall asleep at night unless I have three phone calls about toilets.

Josh: Didn’t you have a call this morning Brandon about something? What were you complaining about to me this morning?

Brandon: This morning I got a tenant who’s giving us some trouble. I might have my second eviction coming up here which I’m sure we’ll talk about. Anyway we officially filed it I think. I found out we looked at her original application and where she worked and we thought it was a nursery and we found out that it wasn’t a nursery it was a pot growing farm because that’s legal now in Washington. That explains everything. There’s the tip for everyone listening don’t just call the place of employment and ask if they work there, find out what kind of job that actually is.

Jacob: Can you discriminate against pot farmers?

Brandon: I don’t know but I think so.

Josh: I’m pretty sure you can.

Brandon: I probably would have.

You decided flipping was the way that you want to do it, you still had a full time job despite this, correct?

Jacob: I do. I have a job I enjoy very very much. My boss he’s a really good friend of mine, we play golf on Fridays and all that good stuff, I just really enjoy working there and he’s very flexible with my time. As long as I’m doing my stuff done there I’m flexible to take Friday afternoon if I need to or something like that so that definitely helps out with real estate side of things.

Brandon: I concur.

Josh: No, Brandon does not get to go off on Fridays.

Brandon: How much did you pay for this thing?

Jacob: We paid $51,500 for it. IT was kind of a deal where it had come on and off the market I guess two or three times and it just fell in my lap one day, it just happened to be perfect timing. There were multiple offers kind of highest invest situation and we ended up with a best offer.

Josh: You got it for around 50, you’re in North Carolina, correct?

Jacob: Yes, that is correct.

Josh: What kind of condition was this thing in?

Jacob: It was total piece of crap. It was a gut form head to toe. Good thing it had going for it was classic 3/2 brick ranch. The outside was solid, there was no problems, no cracks, no noting. It was sheer just fully inside cosmetic rehab. It was complete gut job. There was everything you can imagine wrong with the inside it was wrong.

Brandon: Do you know what year it was built?

Jacob: 1972.

Josh: You got this first deal, you got this big piece of crap and were you prepared for that or were you hoping you were going to get carpet and paint flip here?

Jacob: We all hope for that but that doesn’t really exist does it? I’m yet to find one.

Brandon: Likewise.

Jacob: My contractor played a huge role in this he kid of held my hand trough it I guess the expression but her really installed confidence in me to go ahead and we can do this for the number he was saying and he even put a clause in our contract that we had that he would pay for any over wages over the contract amount, he was that confident in his numbers.

Josh: You know what? That is freaking brilliant.

Jacob: Isn’t it?

Josh: I think everything I do going forward is going to have that clause in it.

Jacob: There you go. If I can provide one tip that one for you today.

Josh: I don’t know Brandon have you ever heard of contractor doing seeming like that? That’s pretty confident right there.

Brandon: Buddy of mine have been talking about that a lot lately how if you are going to do a major remodel its actually a lot of easier to estimate those numbers and be confident in your numbers because you know that the sheets are getting remodeled or getting redone. You know that flooring every bit of it is redone, there is a whole less surprises where it’s a gut job.

Jacob: We saw every inch of this house when we were down. The wall were completely open, you could see completely through the house from one end to the other so we knew what we were going in to when we got into it.

Josh: What did you guys end up putting into it?

Jacob: We put right around 60 into it. That included the roof, I mention just interior, but that included the roof, the widows, flooring, everything, new kitchen cabinets. We even put a deck on the back put a fence up. Basically everything you can think of.

Brandon: You had this one contractor, he did the whole thing? Was he like general contractor?

Jacob: He was a general contractor. We had a bunch of subs he hired out obviously but our job just solely dealt with him. He was kind of like my intermediary. I solely dealt with him it saved me a lot of time and a lot of headache of having to talk to a lot of different contractors and going out there and find all these different guys.

Josh: Presumably he did a good job?

Jacob: He did a good job. I was very happy with him.

Brandon: Did you mention how you found him?

Jacob: I think I googled one day general contractor flip or general contractor rehabbing or something like that for somebody who had specific experience rehabbing a complete house and I just ran across him.

Josh: How did you vet him, how did you check him out?

Jacob: I did references and all that good stuff. He gave me two or three references and I called up those guys and he checked out. I did a background check on him.

Josh: Really? Tell me about the background check.

Jacob: It wasn’t official background check but I googled and did everything you can do from your home computer to check someone out and all that good stuff.

Brandon: I bet you 99% of people when they’re hiring a contractor do not do anything. I don’t. I should but I don’t.

Jacob: When you’re trusting someone with so much money and that responsibility I think you owe it to yourself to do the minimum at least. Go out there and check him out on google or something.

Brandon: Lawsuits are public record so you can find out if someone every sued your contractor. That’s really important thing I don’t think I never thought about that.

Jacob: He actually gave me a number he dealt with another real estate investor in area with who he flipped houses before so I actually got to talk to another investor and figured out how they worked together. That was big.

Josh: how did you finance things thing? Was it cash or how you at least finance the contracting side, the repairs?

Jacob: The whole thing I financed was line of credit on my house. I guess it was cash at very low interest rate. We can talk about how long I held it in a little bit but that was big because I got really low interest rate on this line of credit on my house so that played a peeping call sound.

Brandon: I don’t think we had anyone else on the show that specifically has done that strategy of using home equity line of credit and that’s one of the things I’m huge fan on that. I’ve done that I think once or twice. Let’s talk about that. What does that even mean?

Jacob: Basically any equity that you have in your house you can use as collateral to obtain the loan to finance anything pretty much. I think there are few restrictions on what you can finance with it. You basically take amount of equity you have in your house and they’ll loan up to a certain percentage of that value. If your house is worth $150,000 and you have it completely paid off they will loan you up to 70 or 80% of that value. They’ll loan you $120,000 at prime which is 3.25 % right now. A lot of banks do prime plus one so you’re getting a good chunk of money at three four percent interest witch is really hard to beat.

Josh: You put in 60, bought it for 50, what did you end up selling this thing for?

Jacob: We sold it for 154.9.

Josh: You made 44.9 right?

Jacob: That what’s the flipping choses had you believe correct? Nothing else goes in there? There was a few other things we ended up having to put city water, we hooked up city water that I didn’t include in that number because we actually had it under contract twice. The first time the guy wanted city water as part of the deal so I agreed to do that. 7,000 later he backs out and gets cold feet so I’m stuck hooking up city water so that ended up eating $7,000 of my profit.

Josh: Take away city water, your holding costs and everything else, what do we end up with hon this puppy?

Jacob: We ended up netting after closing calls and real estate commissions and all that good stuff that I mentioned we ended up netting $11,000 which it’s not a home run by any means but for my first deal I felt pretty good about it. Making any money on this size of the job I felt pretty good about it.

Josh: What would have you done differently if anything? Was there anything that stands out or did it go pretty swimmingly?

Jacob: I think I probably would have been little more active on the job and being around more just because I think we ran into some issues with inspectors towards the end about the quality of work so I wish I would have been around little bit to maybe oversee some things and have some of the subcontractors redo few things but overall I think it went pretty smoothly.

Josh: When did you wrap up on that?

Jacob: We closed two weeks ago. I don’t know when you guys plan on airing this but that was April 20th somewhere around there.

Josh: Do you have anything else on the pipeline or what’s working next?

Jacob: I’m actively looking. I desperately want to get into another one but it seems stuff is flying off the shelf here right now. Market is super-hot.

Josh: You are in Raleigh right?

Jacob: That’s correct.

Josh: If there’s any wholesalers in Raleigh area that have a good deal that they want to send…

Jacob: Contact Jacob Allen.

Josh: Would you want to do another rehab? Presumably you don’t want buy and hold because you don’t like that.

Jacob: I definitely want to stick with rehabbing. I think I want to keep the scope of work down a little bit next time maybe. This was a really big job and I’d like to get the scope of work down if we can.

Josh: How long did it take?

Jacob: The rehab itself took about probably about three or four months. Somewhere in there but we had some vandalism on the house. That set us back probably a good month.

Josh: That happened?

Jacob: We had drywall up, we had painted, we we’re probably within a week of finishing and someone came in, I don’t think police ever determined where they came in but they came in and they took a crowbar or something and they just knocked holes in the drywall throughout the house every three feet. There was holes everywhere. They put gang signs over the walls, the busted up my kitchen cabinets I think they took some coper from some piece of equipment from the AC unit.

Josh: Who did you piss off?

Jacob: I don’t know. The call that I got that morning was a punch in a gut for sure.

Brandon: Is there insurance that covers that at all?

Jacob: There is, yes. It was like builders risk policy that you hear on the forums and read about but they covered pretty much everything. I think it was about $15,000 worth of damage and they covered everything I think I had to come out of pocked $1,000. I came out alright it just set us back a month and a half because all the subcontractors were on another jobs and stuff at that point and it’s hard to get people back again and finish the stuff up.

Josh: Is there anything you could have done to have avoid that from happening?

Jacob: I don’t really see that. If someone wants to get into the house they’re going to get into the house. There’s not really much you can do. I could have had flashing security light I guess in there or something like that that would scare them off but I don’t know. I have thought about getting some of those security systems put inside. Just motion detector making noise.

Brandon: Pitbull.

Jacob: Pitbull will work.

Josh: Didn’t we talk about that in one of our shows?

Brandon: We had Amanda Han ion the show back in one of the earlier ones.

Josh: You can write off dog as business expense.

Jacob: There you go, she’s your tax pro.

Brandon: She is my tax pro.

Mistakes. Did you have anything that you said “We did this wrong, this was a mistake”

Jacob: Other than paying a little bit too much for the house I don’t see too many glaring mistakes. Because I wasn’t that involved in the rehab, I had GC do everting for me. I know alto of rehabbers on the BiggerPockets and other places you’ll see they like to get in there and they’ll hire all their GCs out and they might even do some of the work themselves but I was so hands off on this I just showed up and approved work and answered phone calls and chose paint colors and all that good stuff.

Brandon: That’s the fun part of things I think. I hate dealing with subs. I don’t have general contractor but if I did…

Jacob: It cost me more money but I think it was well worth it.

Brandon: I want to be you Jacob. It’s my goal in life is to flip hoes like you.

Jacob: It’s not that glamorous.

Josh: What advice would you have for other new investors who are about to do their first deal? You just experienced it so what would you tell somebody who says “I want to get out there and do it”?

Jacob: First and most importantly I think it’s probably just to have confidence in yourself. You’re going to have a lot of people telling you this is a terrible idea, don’t do it, you’re going to lose all your money. If you find something that you know numbers work, you’ve done your research just go for it. Get in there and get after it.

Josh: I know this is going to air probably after this happens but rumor has it that you’re getting married this Friday.

Jacob: That is correct, this Friday so couple of days from now. I’m looking forward to it. It’s been a long time coming.

Josh: Congratulations to you and soon to be wife and when this airs hopefully your honeymoon is going well.

Jacob: That’s what I’m looking forward the most I want to spend a week in the Bahamas.

Josh: Nice.

Brandon: Josh I think we should crash his wedding.

Josh: Where is it going to be?

Jacob: You guys are more than welcome to.

Brandon: I want to be Owen Wilson you can be Vince Vaughn.

Famous Four

What is your favorite real estate book?

Jacob: I’m not much of a reader, I have read Rich Dad, Poor Dad, I have read The Richest man in Babylon so I guess I have 4-hour workweek. I’m kind of like Brandon I’m on page.

Brandon: That’s Josh who’s on page 27.

Jacob: Josh, right.

Brandon: I’ve read that book seven times so don’t insult me.

Jacob: I think I’m on page 40 or 50 so I’m doing better than Josh.

Josh: Some of us have to work. Can’t just sit around leisurely reading all day.

Jacob: I really enjoyed Rich Dad, Poor Dad, it’s one of the few I read so if I have to choose one that will have to be it.

Josh: What about your hobbies? We know you don’t read what do you do with your time?

Jacob: I’m a big sports guy. I like anything sports related. I like to get outside, I like golf, I’m a big baseball guy, football guy.

Josh: Who’s your baseball team?

Jacob: I’ve grown up playing baseball my entire life and I don’t have a baseball team. I don’t know how that’s possible there’s not really in North Carolina or South Carolina.

Josh: Moving on.

Jacob: Are you guy’s sports guys because you never hear any of that talk. It’s kind of all real estate related on here.

Brandon: I once scored a goal in a basket in high school.

Josh: And he’s 6’12”.

Brandon: That would be 7’2”

Brandon: I’m 6’5” and I played basketball for a week in middle school didn’t work out for me.

Josh: The five footers were picking up on him the whole time.

Josh: I’m a Mets fan, I’m a baseball guy, and I’m a Nicks fan sadly.

Jacob: I’m so sorry.

Josh: It’s pathetic. Maybe one day they’ll turn it around.

Brandon: I’m a Seahawks fan.

Jordan: Seahawks and Rockets are in the super bowl this year.

Brandon: Yeah, Josh how that go? Do you remember that Josh? Who won that?

Josh: Remember what?

Brandon: The superball, anybody remember the score there?

Josh: I don’t remember.

Brandon: I thought so.

Josh: Can we finish this up? You can’t flip this interview on us.

Brandon: What do you believe sent apart successful house flippers from those who give up or those who fail or never get started?

Jacob: From my expert opinion like I said earlier it’s probably confidence. Just confidence in your numbers confidence, in your research. Just taking action and just doing it. I think if you can get to the point where you can get out there and force yourself to do it I think that’s the biggest step that you can take. If you can do that you’ll be alright.

Josh: Where can people find more about you?

Jacob: I’m on BiggerPockets. I hang on BiggerPockets quite a bit. I try to contribute as much as possible. Other than that I don’t have a fancy website or anything like that.

Brandon: We’ll think to your profile in the show notes.

Josh: Thanks so much for being on, we appreciate it. If anyone needs to reach out to you we’ll point to the profile in the show notes and thanks so much for being on the podcast.

Jacob: Thanks for having me guys, I appreciate it.

Brandon: Thank you.

Josh: Take care.

Jacob: See you later guys.

Josh: That was our interview with Jacob Allen. If you’ve got any question or comments or just want to leave him a virtual hi five the show notes can be found on BiggerPockets.com/show74 and you can leave Jacob a quick note there. Why don’t we great to our final interview of the day with Jeromie Hamann?

Brandon, once again, I will defer to you in the introduction of Mr. Jeromie so why don’t you take it.

Brandon: Jeromie Hamann is real estate investor brand new form Minneapolis area and he became interested in real estate actually because he stumbled upon BiggerPockets trough my personal Facebook wall. That will make more sense in just a moment. Couple quick things about Jeromie. Number one Jeromie is a no kidding rocked scientist for a job. That is his job, he is a rocket scientist and I had known Jeromie longer than BiggerPockets has been around. You’ll hear both of these things in the interview so let’s get to it.

Josh: You get to learn some dirt on Brandon so that’s going to be the fun part.

Jeromie welcome to the show, good to have you here.

Jeromie: Thank you. Thanks for having me.

Josh: Good to have you.

Brandon: Jeromie and I know each other form high school so this is really exciting for me because Jeromie is one mf y goods buddies.

Josh: Really? Jeromie you know Brandon from high school?

Jeromie: I do have to admit, yah.

Josh: You might have to share a story with us.

Brandon: There are no stories.

Josh: There’s stories. Money buys stories and I’m paying.

Brandon: Me and Jeromie were mathletes together and we used to compete and do math tests every Saturday together. Not against each other.

Jeromie: Donuts and pocket protectors, it was a great time.

Brandon: It was a great time.

Josh: hey Jeromie you’ve got to dig up some pocket protector photos of Brandon from back in the day.

Jeromie: I’ll see what I can find.

Josh: Please, please I will do anything.

It’s good to have you, glad you joined us. You’re a newbie real estate investor?

Jeromie: I am, yeah.

Josh: What exactly inspired you to get in the game?

Jeromie: It’s kind of funny we already mentioned that I knew Brandon beforehand and I was actually following some of the things that he was doing as far as blogging and writing online. Kind of followed him to BP reading what he was writing and more for the quality of the writing but as I read I just got drawn more and more into real estate by some of the things Ultimate Guide to Tenant Screening and stuff like that and my wife and I have been talking about going a house at some point in the future and the more I read the more I got involved in BP the more it seemed that investing was a way to go and really would setup a lot of options for us in the future.

Brandon: Nice. That’s cool. I’m glad you followed me from probably Facebook, I think we’ve been Facebook buddies forever and got you in BP. We sucked you in, it’s a dangerous thing. I actually find that quite often not just people I know from high school but in general people tend to get sucked into real estate because it’s so appealing or what but there’s something resonates with people when you talk about real estate investing. It’s nice to see that worked form you. Why don’t we start at a very beginning? You said you wanted a house. What did you end up looking for and how long did that take to find?

Jeromie: We were trying to balance wanting a placed to live as well as having investment property. It seemed to us multifamily property made a lot of sense so we kind of started our search for duplex, two unites kind of seemed manageable for out first time in real estate. An agent was recommended by coworker and we started working with him to search for properties.

Brandon: You are in Minneapolis area, correct?

Jeromie: Correct.

Brandon: What was the market like when you started searching?

Jeromie: This was little over a year ago and the market was pretty hot then especially for what we were looking for. It was really hard to find anything that was on the market for more than 24 hours. Some of the houses that we looked at looked like they were straight out of horror film basically.

Brandon: That is a problem with a lot of multifamily properties. I don’t know why that is but I notice that with alto of the larger multi-families. Smaller multifamily but sometimes larger house they tend to look like they came from the Adams family or something. Like my ugly purple triplex – same way.

The market was super-hot and I remember you calling me and maybe we Facebooked and you said every time you looked at something it was gone immediately. For those people that are listening that might have same problem this is across the whole US are seeing in their areas, what do you recommend for kind of getting over that?

Jeromie: We tried to be really responsive any time we saw something come up we contacted our agent right away tried to get booking in within 24 hours if at all possible. We went that road for a while, we ended up putting an offer on a house it was one of multiple offers and houses ended up going over asking price, all cash and we kind of realized at that point we couldn’t really compete for what we were looking for and where are we looking for it. We decided to make a few changes, we stepped back a little bit and expanded our search area and applied for some cooler markets it would look at few more houses.

Josh: What was your original range and then what did you actually expand to? I think a lot of people find themselves in the same situation and it’s always nice to hear what other people are doing. What did you do?

Jeromie: Our original range was kind of 150 to 175 and we limited to our favorite neighborhoods in Minneapolis and as we just started looking more and more into these houses we realized that we wanted in those areas was out of our price range. We increased our range as much as we could. Went up to 200k and we broadened our search to include Saint Paul, the neighboring city as well as a few suburbs.

Josh: You went from few proximate neighborhoods to say half hour – hour away?

Jeromie: About half hour.

Josh: Ultimately I’m guessing that helped.

Jeromie: That helped a lot, yeah.

Josh: Tell us what you found and how it all went down.

Jeromie: by this point it was little later in the year we were looking at Thanksgiving, Christmas and as we were looking at these houses were just noticing a lot less competition, things are staying on the market a little longer. Were also viewing houses in blowsier weather that something probably had to do with it. We ended up finding a few that we really liked and decided to put in an offer on one at particular and went through right away. We were able to close on the first offer we put in at this point.

Josh: On the cold weather isn’t that kind of norm up there?

Jeromie: Maybe like nine months out of the year.

Josh: You guys close on the deal, what are the numbers, do you mind sharing that?

Jeromie: Asking price was 195 and we offered 190 as well as seller paying some of the closing costs.

Josh: This was a diplex?

Jeromie: Correct.

Josh: We’re they both rented when you purchased it and did you have to kick somebody out or what was going on there?

Jeromie: The upstairs was rented, the second unit was rented. The seller had kind of made a deal with a tenant. He was trying to have access to the property so he could fix up a lot of the stuff so he had given her half off rent in order for her to stay. Before that she’d been planning on moving out so when we took over we offered for her to say in the property but had to bump rent back to market value. She stayed for 30 days and then juts decided to move out at that point.

Brandon: When she left what were you asking for rent for that unit?

Jeromie: For that unit we were initially looking at $900 a month and we ended up just over a 1.000 for that unit. We were pretty conservative when we were first looking at properties.

Brandon: That today? You are now getting a 1,000?

Jeromie: Yes.

Brandon: When she left for how long was it vacant for?

Jeromie: Two weeks.

Brandon: That’s not bad at all. Any tips for finding that first tenant?

Jeromie: We referred to your Ultimate Guide to Screening Tenants. We used that a lot and we used Craigslist for advertising. We also used Postlets, it’s by Zillow and it kind of blasted out to a lot of different sites and both of those were helpful. We had a lot of leads come both.

Brandon: Nice thing about that is both of those are free. I think a lot of people think you still have to put an ad I the newspaper, maybe some areas you do, but I find in my area newspaper is just dying very quickly. We went from seven days of newspaper to three day a week newspaper and just because in a year from now we won’t even have newspaper. That’s how fast it’s dying in my area. Craigslist is where most of our leads come from and a few from Zillow as well.

Josh: You know Brandon old man Johnson falling off his trailer isn’t really news anymore.

Brandon: Our local newspaper does a section “A 100 years ago what was the top headlines?” so it’s kind of fun to read that every week I try to check that out. I read this week ago the top headline was “A gang of hoodlums was making their way down by horse from Olympia down to my area” I just thought that was the main headlines that there was thugs and hoodlums or something like that.

Josh: Unfortunately by the time people read the newspaper they were all beaten up.

Brandon: What is your mortgage payment on this thing?

Jeromie: My mortgage comes to 1280 that including taxes, insurance and principle interest.

Brandon: You are roughly spending $280 plus utilities and such for living there?

Jeromie: Right.

Brandon: And that’s obviously a lot cheaper than if you were to go and buy a house or whatever.

Jeromie: Our rent before this as almost as much as the entire mortgage.

Brandon: That’s why I want to get you in the show because I love that strategy. I did it with my first rental property was a duplex and my numbers were a lot smaller I think my first one was 60,000 and rented for $500 a month. Still I was able to live for roughly free I had maybe to pay a little bit utilities. It definitely is a good way to go.

Josh: Tell us what’s it like living in a property with a tenant? I think that’s one of the things a lot of people worry about. I personally know I wouldn’t want to do that and a lot of people don’t care. I still recommend it, I think its great option.

Brandon: That’s because you’re old, Josh.

Josh: Wow. You just insulted more than 50% of country so whatever.

Brandon: No, only you are old everyone else is young.

Josh: Tell us about it.

Jeromie: It was a little bit of a concern but the place we had been renting we had neighbors either upstairs or next-door anyways so it wasn’t a huge shift for us and I think what really made the difference was screening the tenants well. We got kind of lucky but we ended up with tenants that would probably fit in well in our fiend group as well as being our tenants so it helps alto knowing that we can trust them and they’re happy to be there too.

Josh: Had there been any issues that have come up at all and has there been any awkwardness at all or everything’s been pretty good?

Jeromie: Just this weekend we had our first major issue. The toilet upstairs had a leak, the plunge broke, so we had water rotting away the floor. We are in the middle of doing of remodel, tearing up the floors which means that our upstairs tenants have no bathroom and so they are now using ours for the next few days.

Brandon: That could be awkward. Would you say you are friends with these people now, do you guy’s hangout together or do you try to keep it separate?

Jeromie: It is getting more and more combined. They’ve only been in for about a month maybe a month and a half so we haven’t had dinner together or anything like that but we see each other and we stop and talk and these last few days sharing space a little more hasn’t been as bad as I would have thought originally.

Josh: I guess the advice when picking up tenant who’s going to live in a building that you’re living in as landlord, maybe two three or four-plex might be something like find somebody that not only is a good tenant but find somebody who also you could potentially want to live next door to.

Jeromie: I think that’s great advice. Obviously there’s fair housing laws, you don’t want to be discriminating.

Josh: I was not insinuating such things but yeah.

Brandon: I think that’s a good idea. I think that’s one time that you can actually choose your neighbors. It’s very few opportunities in life where you can choose your neighbors but that definitely gives you the ability. It’s just another benefit of owning those small multifamily properties.

Jeromie: I think another thing that helps a lot to us – this is short-term. Our goal is to look for single family home in the nearer future and then move out and rent the second unit. We figure anything for a few months or a year we can handle that no problem.

Brandon: Do you think you can get 1,000 for your unit or more or less?

Jeromie: Our original was 900 for upstairs and 1,000 for ours. Not that we’re in it, now that we’ve done a little market we are obviously getting over 1000 upstairs and I’m probably guessing 1,200,1,250 for the unit were currently in.

Josh: That would be pretty sweet deal then.

Jeromie: That would be fantastic. Move out and get some cash flow.

Josh: Where are you headed? You got this first property, you’re in there. What are the next steps? Are you planning on getting a home outside of investment property or are you going to stay there and pick up the next one?

Jeromie: Our next one will be single family home just for us to live in and maybe further down the road three or four will be investment properties. Our plan is to have a place for our family separate from the investments and go from there.

Brandon: I recommend small multifamily for people all the time is a good way to start. I wasn’t totally kidding when I said back than Josh that you are old What I meant by that was you’re established. You’ve got kids you are not going back to that. But people who are just staring out I talk a lot in real estate a need for sacrifice. You have to sacrifice especially if you want to invest in creativity. If you don’t want to put ton of money down you have to sometimes sacrifice little and that’s good way to do it is by living in a duplex for maybe a year. You can always move out and a lot of people don’t know this but when you move out you don’t have to get new loan. That loan is your loan for 30 years if you get a 30 year fix mortgage. Essentially you can just move every year pick up a new one. That’s actually how I acquired my four rental properties I think are all rentals I lived in and every year id move to the new property and keep that one as a rental. Going back to the financing thing – how did you finance this property?

Jeromie: We did conventional mortgage. Five percent down was an option we had with the mortgage company we are with so that’s what we did. We also had opportunity to pay our mortgage insurance up front as a onetime fee so it would have been roughly $120 a month had we not done that. Up front it was 1,800 and it’s just done.

Brandon: Really? I never heard of that before.

Josh: Tell me about 5% loan that you got. Was that FHA or something like that or was your bank just offering really good financing?

Jeromie: It wasn’t FHA or anything like that, it was conventional. It was just a good deal through a mortgage company we were with.

Brandon: It’s nice to hear those loans are coming back again. For a long time they didn’t have anything that was less than 20% down but I am hearing that friend of mine is looking for their own house as well and they told him he needed I think it was 10% but I might have been eight. Still conventional but I never heard of that prepaying your PMI so you don’t have to pay it monthly. That’s fascinating.

Josh: I heard that couple of times. That’s what happens when you’ve been around.

Brandon: Yeah, that’s what happens when you’re old. Importance of that of course is that you found a lender that would do that for 5% down. A lot of people go to one bank and they go and ask what can you do for me and they say “Well we have this loan product here, 25% down, you can have a house” Then they go “I can’t afford that” and they leave. They just don’t even consider going to multiple places and ask. This is proof that if you shop around a little bit you can find a great mortgage. How did you find your montage company?

Josh: I was going to ask how much shopping did you actually end up doing at this thing.

Jeromie: We had fantastic agent. He really did all of our recommendations so he recommended three deferent companies. We went with all of them just to get quotes and this one came back as the best.

Brandon: That’s also a very good tip right there to get multiple quotes. I’m actually doing that right now, I have three of them on investment property and that way you can kind of shop around, you can turn it around. This is something Jimmy Moncrief talked about on the podcast we had with him a while ago is turning around idea of “I need a loan” to offering banks “I’m a good borrower, who wants my business?” it’s just the mindset twist you can do ,you can sometimes get better terms, better rates and five percent down apparently.

Josh: Is there anything that you would like to share for other new investors, anything that you might have wanted to know that you didn’t learn from BiggerPockets or anywhere else that you’ve kind of gained through your experiences?

Jeromie: I think the biggest lesson I learned was that sometimes you have to move forward even if you’re kind of afraid or unsure. Going into it big fear of mine was that we’d get this house and id miss something or make a mistake and everything would be downhill from there. There were few things that went wrong I mention the bathroom rehab were doing right now. Another one we bought the property, we had insurance policy in place but when they sent out inspector they noticed we had asbestos sighting and they decided they can no longer insure our property. That was kind of a hassle. Took us about a month to swap trough that and get a different company that could insure us. Things like that. They’re just going to come up so you just have to be prepared to act in spite of those fears.

Brandon: I had that exact same problem. I have asbestos sighing on couple of properties and the sighting there’s nothing wrong with it but some insurance companies they don’t want it because little kid goes and pics a sand glass and inhales a fumes so they don’t want to be liable. There are companies that do insure it and they are not that any more expensive just have to find the right ones.

Famous four

Brandon: What is your favorite real estate book?

Jeromie: I’m going to go with a crowd here and say Rich Dad, Poor Dad. I really liked a whole mindset of being financially intelligent, financial IQ, I think it’s brilliant.

Josh: What about business? Brandon tells me you’re bit of a genius so I’m curious what your business book would be.

Jeromie: I think this one’s a little bit different is actually say Drive. It’s about what motivates people, a lot of to do with people and leadership.

Brandon: I had someone else recommend that book for me this last week.

Josh: I feel that’s come up before.

Brandon: Someone told me about Drive. Cool.

Josh: What about hobbies? Are you in fact a genius or are you rocket scientist or something?

Jeromie: I am a rocket scientist.

Josh: Oh shut up. Are you serious?

Jeromie: I am. I wouldn’t classify it as a hobby its more of a job.

Josh: That’s awesome. You’re rocket scientist by trade what do you do for fun?

Brandon: Travel for free.

Jeromie: Spend time with the family and yes, my latest hobby is travel hacking. I’m using frequent flier miles to travel the world for free.

Josh: Sweet.

Brandon: Jeromie is super good at this. He’s always sending me emails dude check out this offer here you can get this 60,000 points on this card and I I accumulated 120,000 points in the last six months just from his recommendations.

Josh: Jeromie we are going to talk.

Brandon: He’s the guy I told you need to talk to.

Josh: Oh then it’s perfect.

Brandon: Now you know each other.

Josh: I’m desperate to start travel hacking and I don’t have the time to sort It out so I’m going to pick your brain.

Jeromie: I’d love to help.

Brandon: In your experience, from what you’ve seen, what do you believe sets apart successful real estate investors from those who maybe never get started, maybe never get their first deal? What do you think it is that made you successful in getting your first?

Jeromie: I touched a little on this already but I think being willing to act. You’re not going to know everything. You’re not going to fully prepared. If you’re conservative and just learn quickly, move quickly, be willing to take action I think that’s going make all the difference. The first ones are the hardest. Just learn from there.

Josh: Where can people find more information about you?

Jeromie: Probably easiest place on the BiggerPockets forums.

Brandon: We’ll point to your profile in the show notes.

Josh: Thanks so much for being on the show, we appreciate it and I will look forward to getting some of those blackmail pictures of Brandon from when he was 15. I’ve got one already. I’ve got a picture of him in a Mohawk so I’m just holding that one.

Brandon: You hold on to that one.

Jeromie: Add to collection.

Brandon: Jeromie nice talking to you as always. We’ll talk to you soon.

Jeromie: Thanks Brandon, thanks Josh.

Josh: See you.

Brandon: Thank you, buy.

Josh: Alright everybody that was our interview with Jeromie Hamann - the rocked scientist turned real estate investors. Not quite sure why but its all good. No, I get it. I totally get it. That should be the new slogan. Even rocket scientist invest in real estate.

Brandon: That will be our t-shirt.

Josh: Just to make this point one more time – if you’ve got questions or comments for Jeromie or for any of these other guys do jump on the show notes at BiggerPockets.com/show74 and be sure to leave a comment there.

Brandon: Also if you guys are interested in learning more about that strategy that Jeromie used to get started I wrote and ill link in the show notes an article super in depth called “How to hack your housing and get paid to live for free.” It kind of outlines that whole basic strategy so I will oink to that in the show notes. Also I included a whole chapter of that in upcoming BiggerPockets book on creative real estate investing which we talked about few weeks back. It’s coming out soon so keep an eye out for it.

Josh: If only I could get past page 27.

Brandon: You read that and it’s coming out.

Josh: We are definitely excited for that to come out soon. I know it’s taken a little while to get this released since we announced it but it’s worth it. Just like everything else we tend to put out. Why don’t we wrap this up? As always I want to invite you guys to come and join the BiggerPockets forums. Jump in, start engaging, build your network, check out your postscore on the new BiggerPockets site and start making things happen doing deals finding partners, financing people. BiggerPockets is not just about the education there is a whole hack of a lot happening and it typically happens for those people who are active and who engage. If you think creating profile is going to do anything for you are deeply misguided. You have to actually participate in social of the social network that is BiggerPockets for great things to happen and we encourage you to do that because we’ve got more success stories and we can talk about as a result of people doing that. Finally jump on Facebook, Twitter and G+. Last but not least if you have not yet left us a review and rating on iTunes we absolutely would appreciate it.

Until next week get out there, make moves, crush it and we’ll see you next time. I’m Josh Dorkin, signing off.

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