Ashley:
That is Actual Property Rookie, episode 335. My title is Ashley Kehr and I’m right here with my co-host, Tony J. Robinson.

Tony:
And welcome to the Actual Property Rookie podcast the place each week, twice every week, we convey you the inspiration, motivation, and tales you’ll want to hear to kickstart your investing journey. Immediately, we’ve bought somebody who’s like a born, bred, raised within the bask of all issues BiggerPockets. We bought Tim Yu on the podcast and he’s been a trustworthy listener for fairly a while. He stated he listened to the podcast on daily basis for nearly two years, however actually use the whole lot he realized within the podcast to essentially kickstart his investing journey. The man closed on 10 offers in a yr. Rather less than a yr truly. And also you’ll get to listen to precisely how he made that occur.

Ashley:
Yeah, I really like how we undergo each single deal. So take heed to him discuss all of the methods he was in a position to finance these offers. Not one was funded the identical actual approach, so he’s going to interrupt down every deal he did and the way he was in a position to get financing for them or get a really inventive… One deal, he solely paid $2,000 out of pocket and didn’t must go and get a financial institution mortgage. So he explains how he was in a position to try this.

Tony:
He even bought paid to purchase a property. He went to the closing desk and bought a test again. So that you’ll get to listen to how he made that occur. However general, Tim is simply, I believe, a shining instance of what occurs if you’re a giant a part of the BiggerPockets neighborhood. He was lively on the Actual Property Rookie Fb group and the YouTube channel on the precise podcast itself and the boards. And it’s like if you do these sorts of issues, good issues usually occur.
So for those who’re a part of the rookie neighborhood and also you haven’t but, we might love for those who may depart us an sincere score and overview. We’re at 1,595 rankings as of this recording. So hopefully by the point it airs, we’re at like 1,700. We ought to be there at the least. However take a couple of minutes, let somebody know what you consider the present as a result of truthfully, the extra critiques we get, the extra of us we’re in a position to attain. And hopefully that results in extra tales like Tim’s. So take a couple of minutes, depart that overview for us.

Ashley:
And in case you have a narrative like Tim’s otherwise you simply accomplished your first deal, we might love to listen to about it. Please apply to be a visitor on our podcast by going to biggerpockets.com/friends. And I’ll let you know that for those who don’t suppose that your story is nice sufficient, it in all probability is nice sufficient and we’d like to have you ever on. I’ll additionally let you know somewhat secret that when our producers undergo the applying, they love, love additional element. So actually take your time and provides us the entire nitty-gritty about how you bought into actual property investing and we’d like to have you ever on for those who would take the time to share it with the rookie neighborhood and encourage others. Welcome to the present. Thanks a lot for approaching with us right this moment. Are you able to inform us somewhat bit about your self?

Tim:
Yeah. Hey, I admire you guys bringing me on the present. I’m Tim. I’m 30 years previous. I’m truly a full-time Military officer stationed at Fort Knox and I dwell in Louisville, Kentucky. I began investing again in November 2022, and I type of dabbled in loads of various things all through the final yr. At first, I wished to do long-term leases by way of BRRRRs, after which I ended up having a love and keenness for repair and flips. After which I went into the inventive area and that’s the place I’m proper now.

Ashley:
Superior. So earlier than we go any additional, simply give us an general image of what your portfolio appears like right this moment.

Tim:
Sure. So I’ve two duplexes. I’ve three single households in Louisville, Kentucky. I’ve two partnerships in Oklahoma. They’re two single households as properly. After which we even have a repair and flip partnership in Atlanta, Georgia. I’m presently engaged on a repair and flip proper now in Louisville, Kentucky, which we simply began renovations after which we’re closing on a property in a few weeks, which is a vendor finance deal.

Ashley:
So that you had stated 2022, so this was all inside a yr.

Tim:
Yeah. So November shall be my one-year anniversary.

Ashley:
Wow, superior.

Tim:
… of actual property investing.

Tony:
That’s superb.

Ashley:
Yeah. It’s very cool.

Tim:
So it’s been so enjoyable.

Tony:
I simply wish to ask one thing as a result of… Let me ask this query first. Earlier than you bought that first deal in November 2020, how a lot time would you say you spent educating your self, getting your self mentally to some extent the place you have been like, “Okay, I’m prepared.”

Tim:
So there was loads of issues that I did. I used to be all the time an investor of some kind. I had that mindset with shares. So I did the 401(ok), I did the Roth IRA sort factor. My brother-in-law is definitely a giant investor with shares and stuff, so he would train me, “Hey, for those who make $50 mowing a garden, put half of that away in a 401(ok) after which you’ll be able to hold that half to spend it.” He advised me that once I was 11 years previous. As quickly as I began working a full-time job, I all the time determined to place cash away into my funding accounts, which we’ll go into that in all probability later of how I used it to put money into actual property.
However previous to that, I dwell in Louisville, Kentucky. So if anybody is within the navy, particularly the military, that each one the responsibility stations are horrible places. I used to be single on the time, so I wished to dwell in a metropolis, so I needed to commute to work on daily basis. So I drove 50 minutes every approach on daily basis for 2 years and I bought began on actual property by listening to you guys. So I listened to the Rookie Podcast each single day for nearly two hours a day for a yr and a half. And I’m sitting-

Ashley:
So that you’re sick of us by now.

Tim:
I nonetheless take heed to you guys. It’s completely unbelievable as a result of I sat in my automobile in the future and I noticed I used to be listening to you guys for a yr and a half and I by no means did something about it. I all the time wished to say, “Hey, I wished to purchase a home now, however possibly I’ll simply do it later.” I bumped into an actual property agent by probability once I was making an attempt to get out of my rental lease. So I used to be asking the girl, “Hey, when do I must let you know I’m shifting out?” And he or she’s like, “Why are you shifting?” “Effectively, I wish to go purchase a home.” An actual property agent actually walked across the nook and was like, “Hey, I’m an agent. Do you wish to work with me?”

Tony:
No approach.

Tim:
And I nonetheless work along with her to today. She’s unbelievable. And I used to be like, “Let’s do it. Let’s go get a property.”

Tony:
That’s a lesson realized for all of our brokers which can be listening to the podcast. Simply lurk round corners and simply wait till you hear somebody say that, “I wish to promote my home.” However Tim, so you have got this yr and a half journey of teaching your self, which is what I’ve discovered is the standard time vary for those who actually take motion is someplace between a yr to 2… Six months, a yr and a half is an effective timeframe usually, however you shut on that first deal and you then simply go on a rampage the place you’ve bought 10, 11 offers accomplished in a yr. I do know we’ll get into the specifics, however simply at a excessive degree, was it your intention going into it to maneuver this shortly from the start? Did the motivation or the momentum simply construct after one deal? What was it that means that you can transfer so shortly?

Tim:
This was positively not the plan. I wished to do one property each couple of years as a result of I’m a veteran, so I wished to make use of my VA mortgage. So I wished to do home hacks. That was the massive technique that I wished to begin off with, which, “Let’s home hack a deal or let’s renovate a property in BRRRR and simply slowly develop from there.” I believe they name it the actual property bug. I purchased one home and I used to be like, “Oh my gosh, that is so enjoyable.” I believe essentially the most enjoyable I’ve now could be going to the closing desk. So I believe it’s simply been a rush. It’s been a lot enjoyable and the folks you meet in actual property world is unbelievable. So I believe it simply snowballed from there.

Ashley:
So let’s discuss having the ability to fund all these offers in a yr. The place is all of this funding coming from? Let’s begin out with the primary deal after which possibly stroll by way of the way you have been in a position to fund the opposite ones.

Tim:
Okay. So the primary deal initially was going to be a BRRRR. So it was round Thanksgiving time. I used to be strolling within the park with my girlfriend on the time who’s now my fiance.

Tony:
Congratulations.

Tim:
Thanks, man. I admire it. And he or she was truly yelling at me saying, “Hey, get off your cellphone. We’re exterior. Benefit from the climate.” I’m creeping on Zillow the entire time. It was on the MLS and a home was $100,000 and it truly dropped to $50,000 in a single day. So we went to go see it. There was positively one thing mistaken, however there was a squatter within the property that the vendor needed to eliminate and he was out of state. So I supplied $40,000 money to buy the property. They accepted the contract the subsequent day and I noticed I didn’t have that cash in my checking account.
So I requested my agent, “Hey, what do I do?” She’s like, “Take a look at arduous cash loans.” I had no concept what they have been, so I went on YouTube and have become a YouTube warrior and was simply watching movies on arduous cash loans. I ended up linking up with a tough moneylender at certainly one of my native actual property meetups and he was like, “Hey, if that is your first deal, I’ll fund you.” As a result of I truly had some points getting some arduous moneylenders to approve me simply due to my lack of expertise and so they weren’t precisely assured on the property, however he truly took an opportunity, so he loaned me 90% of the deal and I needed to discover the remainder to shut.
So I begged my mother and father, I used to be like, “Hey, mortgage me some cash. That is going to work out.” And so they truly stated no. So that they’re very old skool. We don’t have a monetary background. That they had all their cash in a checking account and for the final 20 years, so that they didn’t actually really feel snug with one of these funding. So what I did was, I used to be like, “Effectively, for those who don’t lend me the cash, I’m going to promote my 401(ok) off and I’m going to fund this deal myself.”
That’s what I made a decision. It’s like we talked about earlier, my complete basis was shares and make investments for 30, 40 years and retire off that cash. I’m sitting in my room considering, liquidating the account.

Ashley:
Pushing that button.

Tim:
Oh my gosh. They needed to name me and say, “Are you positive you wish to do that?” I actually was like, “I would like one other day to consider it.” However on the finish of the day, I believe I took an opportunity and took a bet. And I believe loads of buyers and entrepreneurs must take that leap in the future. I stated, “I believe I’m going to earn more money doing this than sitting in my retirement account.” And that’s just about how I made a decision to press the button and promote all of it.

Ashley:
So first I simply must acknowledge this, you threatened your mother and father to provide the cash otherwise you’re going to liquidate your 401(ok). Did they are saying, “Go forward, I don’t care, that’s on you”?

Tim:
They principally advised me like, “Hey, you’re an grownup. For those who actually consider on this, you doing that exhibits that you simply’re critical.”

Ashley:
Yeah.

Tim:
Don’t assist me.

Ashley:
Which I believe is a superb response. Yeah.

Tim:
They assist me in what I do.

Ashley:
Precisely.

Tim:
Do they agree on the whole lot? One hundred percent, no.

Ashley:
It’s the assist that’s vital that they weren’t saying, “Don’t do it in any respect. You’re making an excellent silly determination.” It’s that, “For those who’re actually captivated with this, you wish to do this, then make that funding.”

Tony:
Sorry, earlier than we transfer on, I simply wish to ask one query since you talked about this, Tim, concerning the arduous moneylender, and also you stated that since you didn’t have any expertise that loads of arduous moneylenders weren’t essentially excited to work with you, which is true. Numerous arduous moneylenders are likely to favor working with of us which have a bit extra expertise. However you stated you discovered this difficult moneylender at an actual property meetup. Had been you simply going round shaking palms saying, “Hey, somebody give me some cash.” Or how did you broach that dialog? And if I’m a brand new investor in the same scenario, what ought to I be doing to search out that tough moneylender?

Tim:
So I watched a video a very long time in the past on YouTube. It was one of many huge buyers on the market and he stated, “Hey, for those who go to a meetup, don’t simply go to a meetup to only community.” He stated, “Have an intention and have a plan.” So I went to that meetup on the lookout for a lender of some kind. I wasn’t positive if it was going to be a personal particular person the place it was a good friend and one to only lend on the deal or if it was going to be an entity, like a tough moneylender or one thing like that.
So I requested everyone, “Hey, are you aware any lenders? Have you learnt any arduous moneylenders?” And that’s how I bought linked with a few them. All through the week, I referred to as each single certainly one of them and so they have been like, “We’ve got a minimal sum of money that we wish to mortgage out.” And my deal was beneath that threshold. So loads of these arduous moneylenders wished at the least 100 thousand {dollars} loaned out and I used to be asking for 70.
So that they have been like, “Effectively, it doesn’t meet my requirement and in addition, you don’t have loads of expertise, so we don’t actually wish to lend on this.” And fortunately this one man stated, “Hey, I’ve been in your sneakers earlier than and so long as you’ll be able to present that you’ve got some form of cash within the again.” So I leveraged the 401(ok). I stated, “I’ve this cash in a piggy financial institution and I’m keen to let all of it go if this deal goes south.” And he was like, “Let’s do it. Let’s shut.”

Ashley:
So with that first one, was it extra simply the expertise half or was there one thing truly with the deal they didn’t really feel good with?

Tim:
Numerous it was the expertise and the sum of money I’m asking to borrow. So as a result of it was beneath 100 thousand, they’re like, “It’s not value it for us to take the possibility.” And in addition they requested me what number of properties have we accomplished? I used to be like, “That is my first, zero.” And it wasn’t in the most effective neighborhood both.

Ashley:
Okay. That’s what I used to be questioning, simply because generally the arduous moneylender will truly do their very own evaluation of the deal and curious as to in the event that they stated, “We don’t just like the numbers on this property in any respect.”

Tim:
Truly, the man who agreed to do the deal truly despatched out his personal appraiser after which it ended up appraising for 118. So we have been all in on the deal for 70, and it appraised for 118, so then he was like 100% good to go on it after that.

Ashley:
Okay. So let’s simply go into the way you funded a number of the different properties actual fast, after which possibly we will go into a type of offers and work by way of the precise numbers on it. However I believe what lots of people wish to know, “Which I wish to know is how have been you in a position to get these 10 properties throughout the yr?” So what have been a number of the ways in which you scraped up cash? So your first deal liquidated your 401(ok), and you then had your cash man, however what are a number of the different methods you’ve needed to fund the offers?

Tim:
So after we bought the primary property and we have been renovating it, or I had the actual property bug, so I used to be on the lookout for one other deal. Since I liquidated the 401(ok), I had about $30,000 left simply sitting within the pot. So we discovered a duplex on the MLS that wanted somewhat bit of labor. So I went full conventional. I did the 20% down on that property and I did the sunshine renovations myself, after which that’s only a long-term rental. After which as we moved ahead, I used to be out of cash, so I used just about all my cash on that down cost.
So then I began wanting to make use of my VA mortgage. So the subsequent property was the duplex. That’s the home I’m in now. We bought the 0% down with the VA mortgage. After which we additionally had sellers concessions the place the vendor truly paid for the down cost. So I truly bought paid a pair hundred {dollars} to shut on that. So I dwell in a single unit, after which the opposite unit within the duplex is definitely a midterm rental for nurses as a result of Louisville has a loopy nursing market out right here.
There’s like 5 – 6 hospitals round right here. Now, I’m utterly out of choices. I’ve no cash, no VA mortgage. And I used to be like, “Let me strive wholesaling.”

Ashley:
Actual fast, Tim, earlier than you go ahead, for anybody that doesn’t know what a VA mortgage is, let’s simply break that down as to no down cost. So that you didn’t want any cash for that. Did you qualify to haven’t any closing prices or did it’s a must to pay closing prices on it?

Tim:
Yeah. So it’s a must to pay closing prices with the VA mortgage, however you’ll be able to negotiate what the vendor to have sellers concessions, which you should use that cash to both purchase factors down on the mortgage or you’ll be able to go in the direction of the closing price, which is what I did. And the actually nice profit concerning the VA mortgage in comparison with the FHA is you don’t pay the PMI, so that you don’t pay the mortgage insurance coverage, which saves you loads of cashflow. In order that’s what the VA mortgage is superior. And in addition you should use it for any residential property. So one to 4 plexes, you should use the VA mortgage on it. So it’s an excellent software to accommodate hack.

Ashley:
That was an excellent clarification. I believe there’s one circumstance the place you’ll be able to keep away from paying closing prices, and I believe that’s in case you have a sure eligibility of incapacity.

Tim:
Yep. So for those who have-

Ashley:
Yeah, I don’t Keep in mind what the restrict is although.

Tim:
In order that’s a loopy program. Clearly, I’m nonetheless in, so I don’t have that incapacity. However yeah, in case you have the incapacity on you, you additionally… The extra you employ your VA mortgage, so the primary time you employ it, you don’t must pay this loopy price, however that price is waived each time after getting your incapacity. So it will get even higher for you.

Ashley:
We additionally did an episode just lately quantity 329 the place we did a extremely deep dive into doing VA loans if anybody needs to study extra about that.

Tony:
Only one fast remark too, Tim, you talked about that you simply bought paid to shut on that duplex. Are you able to simply clarify what meaning for folks since you glossed over that, however I imply, it’s a cool idea.

Tim:
So in Kentucky there’s a sure most proportion of sellers concessions. So I believe I bought about 9 to $10,000 of sellers concessions and my closing prices have been nearly about that vary. So since I moved all that cash to my closing prices, I truly was within the internet optimistic. So if you present as much as the closing desk, it’s loopy that they minimize a test to you. I used to be actually stunned, but it surely was sufficient sellers concessions to repay the whole lot, which is nice.

Tony:
So inform us what occurs from there, man. So that you get to get this duplex. Transfer us to the way you funded the remainder of these ones after the VA mortgage is gone.

Tim:
I didn’t have any extra money, so I used to be type of like, “Man, I nonetheless wish to purchase stuff. I nonetheless bought a loopy habit to making an attempt to purchase homes.” So I began making an attempt to wholesale and that actually didn’t go properly. I attempted working for any individual and that’s how I began with the partnership stuff. I wished to work for any individual and acquire some data and mentorship by serving as a chilly caller. I noticed that I actually didn’t wish to do this. So I began seeing inventive finance choices, the vendor finance. The topic-to offers and all that stuff. After which I began getting actually into that and that’s what sort of landed me on my subsequent deal in Louisville was a single household.
It was a topic to deal and that’s once I took over the particular person’s mortgage funds. She was truly a full-time nurse and didn’t wish to handle her property anymore, and it was zoned for Airbnb. So after we talked to her, she wished to hear in the marketplace, but it surely had no fairness within the deal. So if she bought a home, she would truly must lose cash to take action. What we tried to do was… I truly pitched arbitrage. I didn’t know the way to try this. She didn’t wish to do this. She wished to promote it outright.

Ashley:
Clarify what arbitrage is actual fast.

Tim:
So it’s when somebody leases a property from any individual and furnishes it and lists on Airbnb and the one that furnished it manages the property and also you don’t personal the property in any respect. So the vendor or the one that owns the home nonetheless owns it, they’re simply leasing it out to you and also you’re doing all of the legwork on it. In order that’s how one can generate that short-term rental income with out truly proudly owning the property. And I hope that was a ok clarification.

Ashley:
Yeah, that was nice.

Tim:
However sure, she didn’t wish to do this. She wished to promote it outright. So I actually talked to her on the cellphone for 2, three hours about subject-to and if it was authorized or not. We truly satisfied her to do it after which I ended up shopping for it subject-to, after which I truly turned that right into a midterm as properly.

Tony:
All proper. So let’s break down what subject-to is for folk that aren’t acquainted with that phrase as properly, Tim.

Tim:
Okay. Buying a house subject-to is if you take over an present mortgage. So her mortgage was 3.96% rate of interest, and I believe on the time once I was purchasing round, rates of interest have been round 6%. So I bought a extremely good mortgage fee. So the PITI was tremendous low. And I suppose the way in which I defined that is for those who’re shopping for a bag of groceries at a grocery retailer and you’ve got the bag of groceries and also you swipe your bank card, who owns the groceries? You do. You’re holding the bag of groceries. For those who give it to your aunt down the highway and also you give her the bag of groceries, who owns the bag of groceries? Your aunt.
How do you show who owns the groceries? It’s the receipt to the grocery bag. So we deal with the receipt of the groceries because the deeded to the property. So they provide us the receipt or the deeded to the property, after which we simply take over their bank card funds or their mortgage funds and also you’re now the proprietor of the home.

Ashley:
That’s a extremely cool clarification. Yeah, go to analogy.

Tim:
Thanks.

Tony:
Yeah. That’s like higher [inaudible 00:22:10]

Tim:
I imply, we heard that story from Tempo, so it’s burned in my mind. However I believe that’s an excellent story to elucidate sub-to. So I paid her $2,000 on prime, so we took over the property, we took over the mortgage and we gave her $2,000 on prime and the motivation was she was going to lose $7,000 within the deal. So as an alternative of shedding seven, she gained 2000. Now she doesn’t have to fret concerning the mortgage and we took over the property.

Ashley:
So let me ask you this. That is one thing I’ve all the time questioned, particularly when Tempo talks about sub-to and I see loads of brokers who particularly go in the direction of trip leases, short-term leases saying purchase homes at sub-to. Are loads of these folks promoting? So if they’ve that actually nice rate of interest, they in all probability purchased it throughout the final three years and it looks like a few of them are promoting as a result of it’s not worthwhile for them. Why would any individual else wish to are available… So that they’ll have the identical bills from them and take over these funds after which renting it out.
What’s the factor that I’m lacking on this hole? Is it poor administration? Is that they’re not benefiting from pricing? What am I lacking in that state of affairs is that if somebody’s not earning money on this home, they wish to promote it, why would I are available, take over their funds in?

Tim:
I believe folks attempt to get into the short-term rental enterprise and particularly in the event that they’re out of market. So in the event that they’re out of state, I believe it’s to our benefit as inventive finance buyers as a result of they suppose it’s going to be tremendous worthwhile till they understand they bought to cope with the fixed turnover managing the cleaners. After which additionally in the event that they’re out of state, they in all probability have a property supervisor and so they’re paying some huge cash to handle these short-term leases.
For us or for me on this market, if I take over somebody’s mortgage and I hold all of the PITI the identical, I’m in all probability going to save lots of some huge cash on managing the property myself out there. And in addition, you save that 15, 20% and I believe that’s large. After which additionally since I’m boots on floor, I can go see the property and be sure that the cleaners are doing their job and doing all that different small stuff that truly will get folks dinged up on their critiques or it simply eats into their cashflow. However I believe from my expertise, I believe it’s due to that, they’ve all of the bills.

Ashley:
You might have that benefit that self-managing or saving that administration price, after which additionally you’re in a position to have a greater product since you’re the boots on the bottom overseeing it and you’ve got that high quality management I suppose.

Tim:
Yeah. And I don’t do any short-term. That short-term rental, that in all probability would’ve accomplished properly as a brief time period. I simply became a midterm as a result of I’ve the midterm within the different unit proper right here. So I’ve some expertise with that. I believe I just like the slower turnover as a result of I do at the least three month contracts with my midterm nurses versus, “Oh, there’s a weekends there and I can handle it myself with that.” But when it’s a short-term rental, I in all probability would’ve to rent any individual as a result of I’d must hold going and turning over the property and stuff.

Ashley:
Yeah. I’ve all the time questioned about that as a result of it looks like it’s turning into quite common that persons are doing sub-to to trip leases. Tony, what are your ideas on that? Have you ever guys purchased something sub-to?

Tony:
Yeah. We haven’t bought something sub-to, however when it comes to why would I purchase a property, I believe loads of what Tim stated is true. It’s like, I suppose first taking a step again, there’s in all probability a few totally different motivations as to why somebody would wish to promote their short-term rental. It may very well be as a result of they’ve a property supervisor in place and that property supervisor simply isn’t performing properly and so they don’t have the time desirability to handle it themselves. They’re like, “Hey, I may make extra by promoting this than persevering with to pay this property supervisor 25 or 30%.”
The opposite motivations that they’ve been managing it themselves, however possibly they’re burned out. Perhaps they underestimated how a lot work goes into managing a short-term rental. They haven’t actually arrange the instruments and techniques and automations and software program to do it the appropriate approach. So that they’re like, I simply don’t wish to do that anymore. And in each of these conditions, like Tim stated, I believe there’s a chance so that you can are available as a brand new host and enhance the efficiency of the property.
Let’s say that first motivation the place possibly that they had a property supervisor that was charging them 25%. If I are available and I’m it myself, I’m instantly including 25% to the underside line, even when the whole lot else stays the identical. And that may very well be a giant distinction in profitability. I may need to pay my VAs a couple of bucks an hour, but it surely’s considerably cheaper than 25%. Or possibly they weren’t doing issues like utilizing dynamic pricing instruments. Perhaps they’ve actually previous itemizing pictures.
Perhaps they hadn’t modified the linen for the reason that ’80s. Who is aware of what it’s? However you are available, perform a little little bit of a refresh, and I do suppose there’s a chance there for folk.

Ashley:
Okay. So, Tim, sub-to, what’s your subsequent financing you probably did? We’ve bought the VA mortgage, sub-to, liquidating a 401(ok).

Tim:
Yeah. So now we go into the partnerships in Oklahoma and Atlanta. So I truly met these companions by way of a mentorship that I joined down the highway and I met these companions by way of there. For the partnership stuff, it’s a extremely scary sport too since you’re not solely marrying the deal, you’re additionally marrying that companion.
So those in Oklahoma, I truly met any individual on the market that does GC work himself, so he does all of the renovations and manages these sort of tasks. And people two offers have been truly sub-to offers as properly. I funded the offers by elevating capital. So I introduced the cash to the desk and to the offers, after which he managed the challenge and located the tenant patrons. So how we removed these offers as long-term leases have been we truly lease optioned these two homes out to finish patrons. And that’s how we fund the offers.

Ashley:
Are you able to clarify what that course of is doing a lease choice?

Tim:
So clarify the lease choice course of?

Ashley:
Yeah.

Tim:
So a lease choice course of, I suppose the simplest approach for me to elucidate it’s that you simply lease it out to any individual with the choice to buy the house later. So I suppose the slang time period is lease to personal or one thing like that, but it surely’s a two -part deal the place you lease the property to any individual and so they lease it after which they’ve the choice to purchase it from now to nonetheless lengthy you set the phrases.
So for these two properties, we set a five-year time period. So it’s a hard and fast buy value for that period of time for that purchaser to qualify for a mortgage after which buy it outright with a lender.

Tony:
And Tim, you’ve bought so many instruments in your software belt right here, man. So I suppose what’s been your course of for like… I suppose let me body the query this fashion. There’s lots of people who learn on sure matters or YouTube college, podcasts, no matter it’s. However such as you stated, it took you 18 months to type of really feel assured to try this first deal and also you went from that deal to the duplex, which was considerably related, however you then actually took off into the inventive finance area.
Was it that you simply have been surrounding your self with the correct of individuals? Since you talked about going to the meetups. You talked about that the mentorship program, you talked about all these different belongings you’ve been assembly folks. Was it your community that gave you that confidence to check out these totally different methods or was it one thing else?

Tim:
One hundred percent. So I do know lots of people discuss Robert Kiyosaki’s e book, Wealthy Dad, Poor Dad. And it will get them began in investing and it’s an incredible e book, however the e book that I actually love that I dwell by on a regular basis is Who Not How by Dan Sullivan. That e book actually modified my mindset with enterprise proudly owning and entrepreneurship as a result of it actually talks about as an alternative of you spending hours, months and years studying a method like lease choice to discovering the particular person in your neighborhood or in your mentorship program that has been doing these sort of offers. And to search out these folks that will help you, the who’s in your world that will help you catapult your profession or catapult your journey and the way in which that you simply get these folks that will help you is strive to determine what worth you present.
As a result of I do know there’s lots of people that say, “Hey, go community with folks, go community.” It’s completely true, however I really feel like lots of people simply ask folks for assist and so they don’t actually know easy methods to ask for assist. So for me, I like speaking to folks. I like constructing relationships and I believe that’s the place I found out like, “Hey, that’s how I’m going to convey worth to the staff. Let me go speak to buyers and produce some cash to offers as a result of I don’t have the cash myself and I’m not producing the leads myself.”
So to search out somebody that has loads of leads however doesn’t have the funding to get these offers accomplished, that’s once I type of figured, “Hey, that is the place I’m going to sandwich myself in between these offers.”

Ashley:
So do you suppose a giant a part of this, if any individual is simply beginning out, is discovering that cash companion, discovering easy methods to finance a deal first by making these connections? Or is it discovering the deal first, then going out and looking for these connections?

Tim:
I believe for those who discover a actually whole lot, and also you guys might have totally different experiences, however for those who discover a actually whole lot and the numbers make sense and it’s going to generate income for you or a companion, I believe the cash will come as soon as you discover the deal. As a result of even me as a traditional man taking a look at properties and stuff, if the deal makes completely sense and I can fund it one way or the other or convey the cash, we’re each going to win.
So I believe lots of people are afraid. I used to be too. I used to be like, “I don’t have the cash to do all these items.” However as soon as I began realizing when you convey a great deal to the desk, the cash goes to come back from someplace for those who attain out to sufficient folks.

Tony:
Yeah. Tim, I’m so glad you stated that as a result of I couldn’t agree with you extra. I believe discovering a great deal makes the whole lot else exponentially simpler. And I heard this story over the weekend. It was this advertising and marketing man, however he was speaking about how gross sales is less complicated if you’re higher at advertising and marketing and he gave the instance of two totally different vehicles that you simply have been making an attempt to promote for $400,000 and he stated, say think about the primary automobile is like an previous beat up VW bus with blown out tires and the air conditioner doesn’t work and hasn’t been touched since 1970 and also you’re making an attempt to promote that for $40,000.
After which the second automobile is Rolls-Royce which retails for $300,000 and also you’re making an attempt to promote that for 40,000. You may be the world’s worst salesperson and nonetheless promote the Rolls-Royce for $40,000 as a result of it’s an incredible deal. And you would need to be a hell of a salesman to get somebody to purchase the VW bus for you.
Numerous that comes right down to elevating capital as properly. It’s like if I’ve bought a extremely, actually whole lot, it doesn’t matter how huge my community is as a result of somebody goes to search out that deal. I may go right into a random Fb group and say, “I’ve bought a extremely whole lot and also you’re going to have folks breaking down your door.” So for lots of our rookies which can be listening, I believe if the capital is a constraint for you, then attempt to focus your energies on how do I discover a actually whole lot after which let the whole lot else movement from there.

Tim:
Completely.

Tony:
All proper. We’ve been speaking somewhat little bit of funding. Did we get by way of all of the offers but? I believe you’ve bought a pair extra left in there. We haven’t touched on all of them. Let’s fast fast fireplace the previous couple of offers and the way you funded these.

Tim:
Okay. So the repair and flip in Atlanta, I truly… It’s type of loopy. The Atlanta flip, I used a bank card, so I used a enterprise bank card that had a promotion on it. It was like 0% curiosity. So I funded that deal on Atlanta. We promote it and we listed this month.

Tony:
Wait. Maintain on for a second. Did you employ that to buy the property or to fund the rehab?

Tim:
To fund the rehab.

Ashley:
Okay. I used to be going to say how [inaudible 00:34:29] with a bank card.

Tony:
I’ve by no means seen anybody purchase a property with a bank card.

Ashley:
I’ve seen folks do a money advance and pull out the money off the bank card.

Tim:
So I used the bank card. I paid the two% no matter to switch the cash into the checking account, after which I wired it to the Atlanta title firm after which he’s renovating the property after which we’re going to checklist it truly in a pair weeks.

Tony:
Wow. Was {that a} enterprise bank card or a private card?

Tim:
Enterprise one.

Tony:
Gotcha. Which one was that?

Tim:
It was a Wells Fargo card. So it had 0% curiosity for I believe 9 months. So it’s coming due quickly. We’ve bought to promote this home.

Ashley:
Effectively, I used a Wells Fargo one too for a funder rehab. We truly did it for all of the supplies.

Tim:
Oh, good.

Ashley:
So we didn’t do a money advance or something, however we did it for all of the supplies. And so they had a promotion too that if for the, I don’t know, first 9 months, for those who made your minimal cost each month that they might lengthen it to 12 months. I believe-

Tim:
That’s good.

Ashley:
… we paid it off already, but it surely did lengthen in case we’ve one other challenge that comes up we’d like it for.

Tim:
Yeah. I imply they’re a extremely good software. They’re so underrated.

Ashley:
Undoubtedly. I imply, you possibly can fund a fairly good rehab doing all of your supplies and you then simply have to fret about developing with the money to pay your contractor until your contractor takes bank card. I simply truly did a dumpster removing the place they cleaned out a property and took the dumpster and the whole lot like that and so they emailed me the invoice and so they’re like, “All proper. Pay by bank card.” I’m like, “Yep, racking up these bank card factors.”

Tim:
Wonderful. Superior. After which the subsequent deal, the one which I’m renovating now could be a tough cash mortgage. It’s only a regular repair and flip. We did a money supply after which used the non-public moneylender to cowl the remainder of the prices and holding prices. We simply began reno this week. After which the home that we shut on in a pair weeks, it’s a vendor finance deal, so we’re going to do gentle reno. Little down cost and we’re going to make use of a personal moneylender on that deal as properly.

Ashley:
Okay, superior. So all kinds of various methods to finance properties. I do wish to return to. Okay, so that you’ve been in a position to buy all these properties with this totally different funding, however now I’m curious concerning the rehab portion of it. Did you have got any type of development expertise in any respect?

Tim:
No, completely not. I appeared for normal contractors on the Fb pages and networking occasions and that led to my first offers struggles due to my lack of expertise and lack of community and having these techniques in place. So are we going to speak about that extra in depth? That type of led into my first cope with the contractors and the dearth of expertise. I believe the contractor knew that that was my first challenge and I lacked expertise. I picked the most cost effective one as a result of I figured let me use the most cost effective contractor to take advantage of unfold on the deal, and it ended up costing me much more cash as a result of we needed to rent a brand new contractor afterward to repair loads of the stuff that he initially did.
Additionally, since he knew that I used to be actually inexperienced, we didn’t do a contract and it was the final third of the challenge and he truly requested me to pay him upfront as a result of he needed to pay his staff. I stated, “Yeah, you’ve accomplished a extremely nice job for me the final month or two. Yeah, completely, I’m going to pay you.”
So I gave him the final third after which he actually stopped exhibiting as much as work. I do know lots of people have points with their first GC and all that stuff, and it’s positively true. He disappeared on me, so I needed to paint the home myself and put all the sunshine fixtures up myself to get this listed. And the challenge took actually lengthy as a result of I needed to do it myself in the direction of the tip. I bear in mind I used to be imagined to BRRRR this home and I ended up itemizing it on the MLS to only eliminate it as a result of I used to be simply bleeding, holding prices and all these items.
As quickly as that home was listed, there was a drug bust proper throughout the road. So it was loads of insanity. I wished to only cease actual property investing after that and it ended up promoting. So we made somewhat bit of cash off it. So I believe that’s why I felt okay, but it surely was in all probability the most costly studying expertise that I’ve had. And I believe that’s what’s helped me with the additional tasks as a result of now I truly GC my very own tasks right here in Louisville the place I rent my very own contractors, flooring, home windows and all that.
I believe my navy background helped me with that as a result of I like managing stuff like that. So it’s loads of enjoyable to me. And I really feel like I can sleep higher at night time.

Tony:
Tim, I suppose the logical subsequent query is you have to’ve picked up that drug bust home on a fairly whole lot. Proper?

Tim:
I attempt to purchase it. I attempt to purchase it. I couldn’t get ahold the vendor, however I attempted.

Tony:
I ponder why.

Tim:
I actually tried. It was all boarded up and stuff too, so I used to be like, “Oh, let me attempt to discover the vendor.” However no, I couldn’t get ahold of them.

Ashley:
I used to be at an actual property meetup as soon as and this wholesaler got here as much as me and-

Tony:
A drug bust occurred?

Ashley:
No. The wholesaler got here as much as me and I believe he was a more moderen wholesaler. I didn’t know him. And he’s like, “Oh, folks advised me I ought to speak to you that you simply make investments on this space.” It was one of many rural cities that’s truly near the place I went to highschool and he’s like, “Right here, I’ve this home right here. Right here’s the deal with and stuff.” He was like, “Okay. I’ll have a look at it. I’ll e-mail you.” And so I pull it up, I’m like, “Why does that home look acquainted?”
I searched the deal with, simply Googled the deal with and it was a meth lab, the those who owned it. And I bear in mind my mother calling me and telling me that there was this meth lab, this drug bust happening on this home or no matter and this was in all probability like 5, eight years in the past possibly. So I stated to the wholesaler, I stated, “Effectively, has there been any remediation accomplished?” And he’s like, “What are you speaking about?” I’m like, “This home is a meth lab and it’s a [inaudible 00:40:32] the cops busted up.”
He had no concept or no matter. And it was simply, you actually Google the deal with and knowledge like that got here up. So simply you’re making an attempt to wholesale homes otherwise you’re shopping for homes. Simply take the time to place the deal with of the property in and google it and see if there’s any information articles on that property. However truly I see that lastly any individual ended up shopping for it and so they’re slowly doing stuff to it.
Okay. Effectively, any final phrases of recommendation for any individual that’s doing a rehab or challenge managing? So that you stated your navy background has positively helped you with that. What are a number of the issues that you’ve got carried out that make you a robust challenge supervisor?

Tim:
So I wish to set deadlines now. I believe organizing the challenge in thirds or quarters and having that contract laid out, I believe that’s actually vital is to not do these handshake offers along with your contractors and to have that contract that’s organizing, “Hey, I’ll pay you in thirds or I’ll pay you in halves after you end this set checklist of things.” It’s truly very nice too as a result of for those who’re utilizing a tough moneylender, loads of these arduous moneylenders pays you on your renovations after they go see it. They examine it otherwise you take photos of it.
So truly it helps us too out if you break down these funds in these organized manners as a result of as soon as they end that challenge, then you’ll be able to name the arduous moneylender. They’ll examine these objects after which they’ll minimize you the test and you may pay your contractors. And with that contract, it actually retains your staff in test as properly. And in addition, I like so as to add somewhat bonus too. So if I’ve a 45-day challenge, I’m like, “Hey, for those who end it in 40 days or 38 days,” no matter it’s, I like to present them somewhat cash on prime so that they have somewhat little bit of incentive. But additionally not too quick. So that they rushed the deal and the challenge type of will get tousled.

Tony:
Effectively. Tim, it looks like you’ve realized quite a bit since that first deal and generally issues going south will be the most effective instructor and also you are likely to study quite a bit when issues go mistaken, generally much more than when issues simply go completely nice. So I’m glad to listen to that you simply’re in a position to take a few of these classes. The subsequent query I’ve for you although is about the way you’re truly structuring these totally different partnerships and clearly Ash and I wrote the e book on partnerships for BiggerPockets. Head over to biggerpockets.com/partnerships. However Tim would love to listen to simply your expertise on the way you’ve structured these totally different partnerships throughout the totally different offers.

Tim:
I truly had a partnership with any individual that didn’t work out, so it’s not all the time sunshine or rainbows. However loads of it’s you discover what you’re lacking in your software bag. So for me was the lead era and discovering somebody in these areas out of the market or out of your native actual property market that will help you. So for me, clearly, I’m not boots on floor. I don’t know easy methods to generate these leads in these random cities like Oklahoma or Atlanta. I met a few of these guys by way of the mentorship. And also you all the time must do your homework in your companions as a result of as soon as you’re employed collectively, you’re caught collectively till a great or unhealthy end result occurs.
Numerous it’s to see, as an alternative of simply analyzing the deal, you bought to investigate your companion. So you bought to see what their credibility is, what number of offers they’ve accomplished. So I normally attempt to discover them on social media first to see in the event that they’re truly posting content material on Instagram, Fb, or YouTube and to see what sort of tasks they’ve had. Additionally since I’ve met these guys in a mentorship, I truly requested a few guys and ladies in my mentorship in the event that they labored with them.Numerous different college students had some actually optimistic critiques about these guys, and so I felt like I can belief them.

Tony:
Bought it. I really like that you simply’re doing somewhat little bit of homework on folks beforehand. I believe you talked about this earlier, however generally getting… I imply, not generally, each time in loads of methods moving into an actual property partnership is sort of a marriage. So you actually wish to just remember to’re “moving into mattress with”. However Tim, love your story to date, brother. I wish to leverage all of the expertise you’ve gained this previous yr and allow you to reply a query from somebody within the rookie viewers.
So we’re going to go over to our rookie request line. So for all of our rookies which can be listening, for those who’d wish to probably get your query answered on the present, head over to biggerpockets.com/reply and we simply would possibly use your query for the present. So right this moment’s query comes from somebody by the title of Ja Mac and Ja’s query is, “In your opinion, what are the highest three issues that improve rental worth? I’m gathering concepts for a house that we purchased and deliberate to lease out.” So Tim, in your opinion, how would you reply this query for Ja?

Tim:
To extend rental? Are they speaking concerning the rental earnings, how a lot you’ll be able to cost?

Tony:
I suppose let’s have a look at each, proper? Each rental worth and the after restore worth.

Tim:
For the after restore worth, you’ll be able to all the time… You probably have some additional area, possibly add one other bed room or loads of the tasks that I do is we’ve large closets in the master suite and it doesn’t have a rest room. So we normally add a rest room in there as a result of it provides a ton of worth. Renovating a kitchen. I believe one of many tasks I did truly in my midterm, the kitchen appeared prefer it was an image from the Fifties. Has it been renovated? It had the bizarre flip knob ovens.
So we modernized that, ripped out all the cupboards and gave it a facelift, stainless-steel home equipment on and all that. However something which you could add some worth to your property will certainly increase your ARV. And clearly for those who make issues nicer, you’ll be able to positively elevate the rents of these properties. In case you are making an attempt to make it much more worthwhile, if it’s in a very nice neighborhood or a great marketplace for a midterm or brief time period, you’ll be able to all the time add worth like that by altering the quantity of earnings you’re getting. So there’s the couple of suggestions that I can consider proper now to spice up the worth and in addition to spice up your rental earnings.

Tony:
Yeah. I really like that reply, Tim. I believe a giant half for me is taking a look at your comps as properly. So what different properties have bought in that space and what info are you able to get from these properties which have bought? We just lately had Serena Norris on episode 330 and he or she got here in and simply gave a masterful breakdown of managing rehabs. So a part of that dialog was how closely she depends on comps to provide you with her scope of labor. So Ja, for those who’re eager about rehabbing a property, I’d say have a look at a few of these different properties in your space, perceive what they’re providing to of us and see what you are able to do to match.
All proper. Let’s go to our subsequent section right here, which is the Rookie Examination. Tim, these are going to be the three most vital questions you’ll ever be requested in your life and also you’re doing it in entrance of the rookie viewers. Are you prepared for the examination?

Tim:
I’m prepared.

Tony:
All proper, man. So query primary. What’s one actionable factor {that a} rookie ought to do after listening to your episode?

Tim:
For those who’re making an attempt to get began in actual property, and I believe you need to discover a actual property investor targeted agent, it’s no price out of your pocket to make use of an actual property agent. I believe for those who discover an investor pleasant agent that’s targeted on investments and personal their very own tasks, they can assist you comp, like what Tony was speaking about earlier, comp properties, discover out what the values are and let you know what a deal is or what not a deal is. Additionally, if you purchase a home on the MLS with an agent, you’re not paying the fee. So it’s freed from cost for you and I believe it’s a great way to get began and in addition construct your community as properly.

Ashley:
Yeah. I believe that’s nice recommendation. And BiggerPockets has the agent finder software too. For those who go to biggerpockets.com/agentfinder, you’ll be able to see the number of investor pleasant brokers to essentially assist you out. Okay. Subsequent query is, what’s one software software program app or system in your enterprise that you simply use?

Tim:
So I truly use your guys’ program for my property administration. I take advantage of RentRedi. As a result of since I’m a professional member, I get it without cost and I’ve been utilizing it for the final yr and it’s tremendous simple. This isn’t an advert, but it surely’s tremendous superior. I imply it made my life quite a bit simpler as a result of I used to be tremendous apprehensive about being a property supervisor and it’s tremendous good to get your requests for repairs on there. Additionally, it actually goes on to your checking account. Numerous your tenants will actually prefer it too. They don’t have to chop a test to you, they’ll simply wire the cash to you. In order that’s my primary software program that I take advantage of.

Ashley:
And so they don’t must name you to place within the upkeep request. They’ll simply put it in by way of the app.

Tim:
Put it in, tremendous simple. However for actual property stuff, I take advantage of REIPro. My REIPro, so I take advantage of that as my system to tug up addresses, to tug up details about the properties. Now, that prices somewhat bit of cash, however if you’re making an attempt to wholesale or looking for some good offers off the market, that’s a system that I take advantage of.

Tony:
That’s fascinating. I’ve by no means truly heard of REIPro earlier than. Have you ever heard of that one, Ash?

Tim:
So it’s type of PropStream.

Tony:
Attention-grabbing. There’s so many different choices which can be popping up. And Velo is one which has a relationship with BiggerPockets. Privy is one which I only recently discovered that truly appears fairly, fairly cool. A lot of choices on the market. However final query for you right here, Tim. The place do you intend on being 5 years from now. For those who hold the identical tempo, you’re going to be at like a thousand doorways in 5 years, however what’s your private objective the place to see your self being in 5 years?

Tim:
For me personally, within the subsequent couple of years since I’ve been shifting in the direction of the repair and flips and shorter stuff, I’m actually making an attempt to complement my W2 earnings so I can comfortably depart work and begin specializing in the enterprise full-time. I began off with the long-term leases, making an attempt to generate 100, $200 a cashflow a month. However that might take me a very long time to ultimately really feel snug to depart my W2. So I believe in 5 years from now could be to concentrate on actual property full time and begin constructing long-term wealth with long-term leases and nonetheless utilizing the flip earnings to outlive.
However I believe in the long term is I want to begin moving into multi-families bigger than the traditional residential stuff. I believe it’s an excellent alternative on the market. There’s loads of cool issues to get into and it’s one thing new, one thing that I’m not acquainted with. So I actually like studying, so I believe that’s what I wish to get into down the highway.

Tony:
Superior, brother. We’re excited to see you make {that a} actuality, Tim.

Tim:
I hope so.

Tony:
So earlier than we wrap issues up, I wish to give a shout-out to you. This week’s rookie rockstar, this week’s rockstar is Marielle Lily Walter. And Marielle says, “It’s nearly unbelievable how a lot life can change in only one yr if you determine to get out of study, paralysis, worry and doubt, and go for one thing better. One yr in the past I made a decision to plunge headfirst into actual property and go arduous in the direction of my targets of monetary freedom. At the moment, I had accomplished just some actual property offers. Now, I’m about to rejoice my one-year anniversary of taking the actual property plunge and determined to look again over the yr.”
So she says in only one yr, she’s accomplished 12 actual property offers, together with seven flips, two condominium constructing investments, three rental properties, and 4 new offers beneath contract. And he or she finishes off by saying, “Your desires are on the opposite facet of your worry.” So Marielle, congratulations supplying you with a run on your cash, Tim, with 12 offers in a single yr. However tremendous excited to see that success occurring too, man.

Ashley:
Tony, once I first learn that earlier than you stated it out loud, I assumed it stated, “Your desires are on the opposite facet of your toes.” And it was as a result of there was like somewhat smear on my laptop display screen. I used to be like, “Huh, I by no means heard that one earlier than. You bought to maneuver your toes to take motion to succeed in your desires.”

Tony:
Transfer your toes to make it occur.

Ashley:
Effectively, Tim, thanks a lot for becoming a member of us on the present right this moment. Are you able to let everybody know the place they’ll attain out to you and discover out extra details about you?

Tony:
Yeah, thanks for having me on the present. It’s been a lot enjoyable. You’ll find me on Instagram. It’s @itstimyu. So we hold it tremendous easy with my title and you could find me on there. And thanks a lot guys.

Ashley:
Thanks a lot for listening to this week’s Rookie Podcast. I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson. And we shall be again on Saturday with a rookie reply.

Speaker 4:
(singing)