5 Rentals on Autopilot with Full-Time Highway Patrolman Ruben Galindo

Ashley:
This is Real Estate Rookie show 22.

Ruben:
I’ve had a good solid team. Now, I need to continue to build on that because it doesn’t mean that, that one person is going to be there forever. I need to continue to grow that team just in case.

Ashley:
Hey. I am Ashley Kehr and I am here today with my wonderful cohost Felipe Mejia who has promised me a matching T-shirt, so we can match at one of the episode, so we have to hold him to that.

Felipe:
Absolutely. I’m wearing my Mexico soccer jersey. One of my favorite ones is this black and green neon with it. Anyways, I’m going to send you one Ashley and we will do one together.

Ashley:
Okay. I have to tell you something, and you could probably tell I was a little frazzled today when we first hopped on to record this episode, because I had bank fraud happen on one of my property accounts. The bank is like, their system is down, so they can’t even pull the checks, but I was able to pull it on my online banking and I had to send them to them, but it’s not even my checks. To make it all worse, the person the checks were written out to is someone I know that I had hired for a short time to clean the Airbnb. I’m really hoping that someone just stole her identity or something like that, but we will see. It’s been a stressful day. After this, I have to go file a police report.

Felipe:
Man, that’s tough, Ashley. I’m so sorry that happened. I know that, that can be stressful because at the end of the day, one, you know your money’s okay, but it’s still the wasted time. I hate that because I hate more wasted time than wasted money. If somebody in my instance needed it, I would rather just let them borrow it or have it than steal for me, so that sucks. I’m sorry that’s going on.

Ashley:
Yeah. Well, I have to say that I’m in a way better mood after we recorded this awesome podcast recording with our 48 year old police officer who started investing… How old was he when he started? I mean, fairly recently.

Felipe:
Yeah, he said he really recently started investing in real estate. He’s a full-time police officer, was in the military and still found the systems in place using Cozy and a couple other tips, that I’m not going to give out yet I’ll let him talk about that, where now he’s automated everything in his business. It’s funny though because he talks about that he still changes the air filters. Someone’s got to figure out how to automate that, but what a great show. Having full-time job, late investing in real estate, but he said he joined BiggerPockets, became a pro member, ate up all the knowledge and started his investing with his friend as a partnership in his very first deal.

Ashley:
Yeah, and they go on to talk about how they structured that partnership, what their first deal was like and how he has continued on. He has five deals now and living in a six until he can build his dream house, and then he will also rent that out. He talks about foreclosures and how he actually took over the mortgage payments for someone who was in pre-foreclosure, and that is just an awesome strategy that I don’t think gets talked about enough. Make sure you listen to that little bit. Hi, Ruben. Thank you so much for joining us today.

Ruben:
Hi. Thank you for this opportunity. I appreciate it.

Ashley:
Yeah, Let’s just-

Felipe:
[crosstalk 00:03:20] Ruben, what’s up, man?

Ruben:
Hey, what’s going on, Felipe?

Felipe:
[Spanish 00:03:23].

Ruben:
[Spanish 00:03:24].

Felipe:
[Spanish 00:03:26].

Ashley:
Let’s jump right in and tell us a little bit about how you got started in real estate.

Ruben:
Well, about three years ago or so, I’ve a close friend of mine that I grew up with that is a real estate agent in the San Antonio area. He was aware that I was trying to get into real estate investing. It’s just something I always wanted to do. I started doing a little research by reading, watching podcasts, became a BiggerPockets pro member back in 2015 and started saving up some money. One day, he called me out of the blue, he said, “Hey, I know you’ve been looking at trying to get started. There’s a great foreclosure opportunity. It’s such a good deal. I’d like to go in halves with you.” That’s what we did. Him and I combined our money and we bought our first deal.

Ashley:
How did you trust this person? What made you decide that you’re going to do this with them?

Ruben:
Him and I grew up together. We grew up a block from each other. We’ve been best friends ever since, so no trust issues whatsoever.

Ashley:
No hesitation there.

Ruben:
No.

Ashley:
Yeah, that’s awesome.

Felipe:
Let me jump in a little bit into your background there, Ruben. You said you’ve been looking for real estate for a little while. Is that what you did full-time or? I mean, give us a little bit of background on yourself.

Ruben:
I’ve been a police officer for the last 27 years. I’ve been working for the State Police here in Texas for the Texas Highway Patrol for the last 22 years. I just recently in 2019, also retired from the Air Force Reserve. I retired with 25 years of service there. I’ve been in law enforcement pretty much my entire adult life.

Felipe:
Man, first off, let me start by saying thank you for your service. I mean, thank you for what you’re doing.

Ruben:
Thank you.

Felipe:
From law enforcement, real estate, what happened in the middle there?

Ruben:
Man, I don’t know. I’ve always had an interest in just real estate in general, but never really pursued it until here the last few years. It’s something that I always wanted to do and I went ahead and started learning some basic foundation type knowledge and took a dive.

Felipe:
How old were you when you started? You said you’ve been in the military and all that, so at what age did you start?

Ruben:
About 45 years old is when I really decided that it was time to start learning and start taking action.

Felipe:
We’re never, never, never too old to start learning, man. That’s awesome. I love that. You’re going to crush it. You went military and then you went on the road as a police officer, and now real estate going kind of forward from there. What obstacles did you find that you came across kind of trying to jump into the game at that time?

Ruben:
Well, not really knowing the market from outside the real estate world, it’s kind of hard to really know what’s a good deal, what’s not a good deal, what’s a good rent comp, what’s not a good rent comp, how much do you need to cashflow. all those little things that come with real estate investing are extremely important to be successful. However, again with that friend of mine, he’s the one that kind of got me started, taught me how to start analyzing deals. I just kind of started learning from there by watching webinars, podcasts, reading books, and I just built my knowledge just doing that.

Ashley:
You didn’t get stuck in analysis paralysis, you analyzed and studied as you kept going. That’s awesome.

Ruben:
Yeah. That’s definitely something you got to do because if not, you’ll never get started.

Ashley:
What does your portfolio kind of look like now?

Ruben:
I currently have five rentals, five cash flowing rentals. I did have purchased a sixth property. However, because of a situation with my civilian job, I got an opportunity to transfer back to San Antonio area. I ended up moving into what would have been my sixth property. In the meantime, I’m living in that property and in the process of trying to close on some vacant land, so we can build our forever home.

Felipe:
There [crosstalk 00:06:59]we go. I’m jealous. Just like Ashley, she has built her home on a thousand acres or so. She owns half the state.

Ruben:
I’m not that lucky.

Felipe:
Rube, let me ask you a quick question though because I know that a lot of our listeners have full-time jobs, and you’ve had a couple. How do you have five houses that you manage and have a full-time job and then moving back into your sixth property? I think it’s six as your portfolio, but do you have a full-time job? You shouldn’t be able to do this. What’s going on?

Ruben:
Well, here’s the thing, you just got to have your systems in place. Now, as I started learning and doing the job, I kind of started to realize that I needed to set up some systems in place. One of the biggest things that’s really helped me a lot is that Cozy website. It’s been very helpful for me because I’ve been able to list my properties on there. It syndicates with other property listing websites, which allows me to market those properties. I also utilize Zillow to market that property as well. Cozy makes it very easy to be able to apply online, get the information that you need. Through other learning material, I kind of learned what to set up as a applicant criteria. Everything’s done digitally. Now, I’m a real estate agent as well in San Antonio. I have that software that’s called DocuSign. That’s how I get all my lease agreement signed is digitally. I don’t have to go meet anybody for the most part. The only time I really go see them is when I do a move in inspection at the beginning of the lease, and then at that point every quarter, every three months, I do an inspection of the home.

Ashley:
You’re doing the full property management, not just the leasing. How do you handle maintenance requests?

Ruben:
Well, again, I’ve been very blessed that I’ve been able to secure a good team to help me out. I got my plumbers, my roofers, my electrician. I think the one that I’ve used the most is a plumber. Plumbing issues pop up every now and then.

Felipe:
I feel like that’s everyone.

Ruben:
Yeah.

Felipe:
Everyone’s plumbing always.

Ruben:
This guy is great. I got him through another referral, another friend of mine and man, I take care of him. All my guys are able to be there, if not that day, the very next day and they take care of the problem, and then that results in happy tenants.

Ashley:
What advice would you give to someone who’s looking to build a team like that? How do they find people that will be there that day or next day, and what are you doing to treat them so well that they want to do work for you?

Ruben:
Well, because I like to stay connected with the real estate world, I try to get from other real estate agents and referrals from them since they work with them as well. When I hear of a good, whether it’s a farmer, whether it’s electrician guy, I use them. I try them out, test them out, see how they work out. If I like them, then I put them on my team, so to speak and then I take care of them. I pay them as soon as the job gets done. I get confirmation from my tenants. I always check with my tenants, how was the plumber, how did they take care of the property? Any concerns? I’ve never had anybody say they had any concerns. As soon as I get that seal of approval, I go ahead and get them paid. Most of the time, I’m able to pay them to Venmo, Cash App and it’s easy.

Felipe:
Yeah. I couldn’t agree more. I feel like our team is the most important part of continuing the business real estate. We spend so much time trying to find those properties, and then if you try to cheap out on who’s going to help you maintain it, that’s like buying a Ferrari and then going down to your local Jiffy Lube for an oil change. That’s not how you treat your investment. You do the best that you can. I agree with you, Ruben. I tried to take care of my guys as soon as they’re done. There’s nothing like getting paid within the first three or four hours of the job being done. When I was out working my tail off for another guy, I hated when it was like, payment’s going to be in two weeks. I never wanted to do work for that guy again. I loved when it was like, confirmed, everything is good. Come pick up your check right now, or I’m going to forward it to you as soon as I can.

Ruben:
I’ll have to assume that if they see my number calling them, they’re going to pick it right up, they’re going to take care of it because they know they’re going to get paid.

Felipe:
That’s exactly right. Whenever I knew the contractors that paid on time, every time as fast as they could, that’s the first number that I would pick up. Then the contractor that was like, I’ll pay you in two weeks or whatever, or it’s on backlog, that’d be the last number that I pick up.

Ruben:
That’s right.

Ashley:
Over time, how long has it taken you to build this team? You have five properties now, did you have them from that first property?

Ruben:
No, I did not. No. It was trial and error the first probably two years. I think for the last year, year and a half, I’ve had a good solid team. Now, I need to continue to build on that because it doesn’t mean that, that one person is going to be there forever. I need to continue to grow that team just in case.

Ashley:
Have those options out there.

Ruben:
Yes, absolutely.

Ashley:
That’s a great tip to make sure that those people aren’t going to be in place as long as you want them to, so it’s good to have options, especially as you grow, you might need more than one plumber at once.

Ruben:
Yeah. I also asked them, who would you recommend if you’re not available because they want to make sure, especially if him and I have a good relationship, they don’t want to turn me on to someone that they necessarily wouldn’t approve of either.

Ashley:
Yeah. That’s a great tip right there. Let’s kind of go back. You have your property management, you have your team, let’s talk about the acquisitions of these properties. Can you kind of walk us through how you found these properties and how you purchased them?

Ruben:
The very first deal that I did was my friend, it was a HUD foreclosure. He was actually the one that found it. Soon after that, I became a real estate agent as well, so I got access to MLS, but you don’t have to have access to MLS to find these HUD foreclosures. You can just go to their website at hudhomestore.com. Once I learned that from my friend, I started looking at that pretty frequently. I practically look at it every day.

Ashley:
Can you explain to us real quick what a HUD foreclosure is for anyone that doesn’t know?

Ruben:
Well, I’m not sure if I know the full, accurate answer, what I do know it is a foreclosure that there was a government loan on whether it’s an FHA loan. I think it’s an FHA loan that was foreclosed on, and now the bank has taken possession of it and they’re listing it to sell it. That’s my understanding of that.

Felipe:
Perfect, Ruben. Perfect.

Ashley:
Yeah. Sometimes they offer it first, an offer period only to people who are going to live there, and then if no bid is accepted or no one puts an offer and then it opens to investors, correct?

Ruben:
That’s correct. Yes. Owner occupants, I think they get 10 or 15 days. I think that varies, different markets have different requirements, but you’re correct. It’s offered to owner occupants first, and then after that they opened it up to investors.

Ashley:
These are generally better prices than if you went and got something off the MLS or the reduced rates, right?

Ruben:
The first couple of deals, I think I bought it with at least $35,000 in equity right off the bat.

Ashley:
Wow, [crosstalk 00:13:57] that’s awesome. Just for everyone listening because just hearing that, I’m sure a lot of people perked their ears up as to how can I find a deal like that. Ruben had mentioned that he got these off of the MLS that you can find these HUD foreclosures on the MLS. Let’s move on to the other deals. What are some other types of strategies you’ve used to purchase houses?

Ruben:
The first two properties were HUD foreclosures. The third property was actually a short sale, and it was a short sale in a neighborhood where I already had a rental. I knew that neighborhood, I knew that market, I knew the demand and there was a short supply. Obviously that was a big interest to me, and I started just watching it, submitted an offer, got an accepted and ended up closing on the deal. Now, that one was not as good of a deal as a HUD foreclosure again, because that short sale had to be approved by the bank. I think I got it at the end of the day with $15,000 to $17,000 in equity, but I was already cash flowing over $300 a month, and it’s been cash flowing ever since.

Felipe:
Hey, Ruben, let me jump in there real quick. Can you explain short sale for those who are listening? I know that sometimes we kind of just go over these terms, but I’d love for people to kind of get a little bit more of that.

Ruben:
A short sale is when the owner of the property owes more than what they’re going to sell the property for, so there’s a negative balance will result in the end. Because of that situation, the bank has to prove that they will take some losses, but I’m sure they have their parameters, and if it falls within those, they’ll approve the seller that home.

Felipe:
That sounds like a great opportunity to find some good equity in a property and some great cashflow producing property. Let’s move on to the rookie deal. I know we kind of talked a little bit about it. I think per our notes, it’s an off market pre-foreclosure. I mean, man, I would love to sit back and watch you go through the nuts and bolts of that. Would you mind kind of digging into that for us?

Ruben:
Here locally in Bexar County, there’s a website that has all these foreclosures within the county. I just kind of typed in Google Bexar County foreclosures, this website popped up. I started doing a little research. I started again focusing in those neighborhoods that already have properties that I know are going to cashflow and I already know their market values. I know what price I need to get it at to make it a great deal. When I did that, I found, I think there was four, five properties that were listed in these neighborhoods that I like to target. I mailed out letters to all those owners, never got a response. That weekend actually, I was stationed in the Valley in Weslaco at the time. I drove up to San Antonio that weekend and actually went and knocked on these doors, did not get an answer. However, I did leave a note with my business card, and lo and behold, one of those owners gave me a call during the middle of the following week and said, “Hey, I got your note. When can we visit in-person? I like to see what you have to offer.”
Of course, I said I’ll be there Saturday. I drove up back to San Antonio Saturday, met with them and I already knew what the value of the property was, like I said, because I have a rental. I actually had two rentals in this neighborhood. I looked at it, I already knew the square footage. I’d already done my homework through the Bexar County Appraisal District. I had a good idea of what kind of price point I would be at for this property. Of course, depending on the condition of the home since people were living in it, I assume I’m sure the home is going to be just fine. Sure enough, when I came in toward the house, the only thing it needed was the hallway. The carpet had gotten wet, so the owners had taken that carpet out and it was just bare concrete, just a slab foundation. That’s an easy fix for me. Started negotiating and I offered them a price where it was going to give me about $40,000 in equity, almost $50,000 in equity. They accepted, later found out that I actually offered them $10,000 above then what other investors had offered them, and that’s why my deal was selected.

Felipe:
Ruben, I think that’s really important because I think in that situation, maybe two parties one, I think you and the seller, because maybe you got them out of a tough situation where you offered them $10,000 more than anyone else was offering. Maybe they took a breath of fresh air and now you’re taking over a property and you have the financial backing to get it where it needs to be for you to have that $40,000 in equity upon purchase. I love that because in real estate, there doesn’t have to be winners and losers. Correct me if I’m wrong, Ruben, but in real estate, I think both parties can be winners.

Ruben:
Yes, absolutely. Still to this day, these people keep in touch with me and I wish them the best and I’m always trying to see how else I can help them maybe acquire that next property.

Felipe:
You’re just going to follow them around, [crosstalk 00:18:54] house. Ruben’s just going to be like, “You’re ready to sell your house again?”

Ruben:
Yeah.

Ashley:
Oh, that’s great. Well, let’s talk about the rehab for this property or what needed to be done after you purchased it, and was the purchase process any different because it was a pre-foreclosure?

Ruben:
Yes, yes. That was something that I had never done before. I was a little nervous about it, but the deal was such a good deal. I was going to figure out how to do it and do it right. I went ahead and contacted an attorney. I told him what I was trying to do, and he went ahead and drew up the paperwork where I would acquire the property, it would be deeded over into my name. However, the financing remained in the previous owners’ names and the agreement between me and the sellers were that, give me at least 12 months to do a refi, and then I’ll have the loan in my name at that point. That’s what we agreed upon. I had an attorney type of this agreement for me. We went to the local title company. This title person is always helping me out and she went ahead and processed that, notarized it and filed it with Bexar County. The house was deeded over into my name. However, the mortgage remained in the previous owner’s name for, and I just recently refinanced in May. I acquired this property in January, so about four or five months, it was under their name. Then here recently, I went ahead and switched that over.

Ashley:
That is called a quick claim deed when you just transfer the deed over to someone else.

Ruben:
Yes.

Ashley:
That puts a lot of trust these people had to have in you for you to make their mortgage payments timely for them. A guest we had had on here, Elise from California who does out of state investing. She actually just did this on a deal too, and I was kind of learning more about it, where they have access to the same login, so these people can double check each month to make sure that she is making those payments and she’s going to do the same. I can’t remember if it was six or 12 months, but after she fixes it up, she’ll go and refinance and pay their mortgage off. She also gave them, I think it was maybe $5,000 upfront. It was kind of payment for them to take to walk away from the property and her to cover their payments, but they weren’t going to have to go through a foreclosure.

Ruben:
Right. My situation, they were about seven months behind, so I needed to pay that upfront to get them out of the foreclosure because I had two weeks before it was going to get sold at the local courthouse. Their final walk away was $17,000. I gave him $8,500 upfront in addition to paying those seven months in back pay. Then when the refinance was completed, the other half, the other 50%, the $8,500 was actually paid by my new mortgage company. I’ve paid off the loan plus the $8,500 that I still owed them was rolled into that refinance mortgage.

Ashley:
That’s awesome. That’s such a cool strategy to learn about.

Felipe:
Ruben, I got a question about that because right now there is a house that I’m looking at as well, same thing. The gentlemen is way on by, he hasn’t paid for, you’re not going to believe this, but he hasn’t paid his mortgage in seven months. Due to COVID, they’re not kicking anyone out of their house, and I understand that, I’ve told him many times, I’m like, “Look, I’ll take over whenever you’re ready. Just let me know.” I think I’m going to try this setup that you did, where maybe he does make some money, I pay his back. He can quick deed us into the title. I think I’m going to try that. I’ll let you know how that works out. That’s interesting because I was just offering him cash for his house like, here’s the money, but maybe that’s just not what he’s looking for right now. I’d be also interested to see how that affects somebody’s credit score in a positive way, if you back pay their eight months, right? Can they take that off of their credit score? I didn’t think about that as well. I mean, there’s a lot of positives, I think to your strategy. I think you really wanted to take care of the seller in this position, and I think you did the right thing. I think I need to implement some of that myself.

Ruben:
Right.

Ashley:
How did you approach them with the strategy or was it their idea? How did this happen?

Ruben:
I just thought it through. I talked to other investors that I trust and just listened to the input they gave me. I knew what the price point that I needed to pay, and I was trying to figure out how can I make this happen now. They stayed in the property for an additional 30 days after I acquired it. Because of that, that’s why I came up with the idea. I’ll pay you half upfront now, and the other half at the tail end when I do the refinance to ensure that even though I gave them some money, they’re still looking for that additional half, so they’re going to follow through with the agreement, so to speak. I didn’t want to give them all their money and then they just sit in the house and not leave.

Ashley:
Right, yeah. Is it difficult to do evictions in Texas? It’s very pretty landlord friendly, isn’t it? That’s always a concern.

Ruben:
Yeah, it is landlord friendly. I’ve been very fortunate I have not reached that point yet, so I can’t answer that unfortunately.

Ashley:
Well, that’s good. That’s good.

Ruben:
Yeah.

Felipe:
Hopefully, you’ll never have to.

Ruben:
Right, exactly.

Felipe:
Speaking of that, for your properties, can you give us a little overview of how rents work, how you’re using, I know a minute ago you said Cozy, how is all that working together now with your portfolio?

Ruben:
Because I use Cozy, Cozy is real good about sending you emails, updates on payments. Out of the five tenants that I have, three of them pay through Cozy. They set it up where they automatically withdraw from their checking account and it gets routed into my bank account. The other two tenants, they have selected to go to the local bank here and just make that deposit. When they make their deposit, they send me a text message at payment has been made. I confirm using my app, and once I make confirmation right on my phone, I get into Cozy, update their account and show that their rent has paid. They get an email that they’ve been credited. Cozy keeps up with all of that, all the accounting piece of it. It’s a pretty convenient and pretty user friendly.

Felipe:
That’s really good.

Ashley:
That’s great. There’s other property management software too out there that I’ve used, AppFolio and Buildium. I mean, just technology these days to manage a rental property is great, and Felipe really needs to get on board with this and get out of his Excel spreadsheets and picking up his rent. I feel like we’ve been talking about this since the very first episode, Felipe, of doing that.

Felipe:
Yeah, we have. I need to just buy a bank. Have you guys seen that? I think it’s called The Banker. I can’t remember what it’s called, but I just need to buy my own bank where I can make my own rules. It’s getting tougher and tougher.

Ashley:
Let’s talk about banking actually. Ruben, when you went and refinanced this deal, this pre-foreclosure, how did you do that, and what did the bank want from you to do this?

Ruben:
Obviously since I have other rental properties and all those mortgages under my name, you have to offset those mortgages. The way you do that is with your tax return to Schedule Es. Now, I do have some properties that I… I have one current property right now that don’t have a Schedule E, so they require a lease agreement. I guess now that I have a history of being a real estate investor, I have other tax returns that have Schedule Es. The properties that where I don’t necessarily have a Schedule E, I think they’re more receptive to accepting just the lease agreement because they can see a history that I’ve been doing this for a few years now. I know the first time, I’m sure the underwriter was a little nervous.

Ashley:
[crosstalk 00:26:37] Yeah, they want to see that history.

Felipe:
… I first started. When I first started, man, I messed up and I didn’t have a good CPA. This is the importance of a CPA is keeping yourself bankable. Man, when I first started, I had all my income going into just one schedule. My bank was like, when I was applying for loans, they were like, “Well, we don’t know what property is doing good and which one’s doing bad. All your money is just in one pot.” I was like, “Oh, I didn’t know that I was supposed to separate them into different schedules.” My CPA hadn’t told me. He was just putting everything together saving me as much money as possible, which I was happy for, but it didn’t keep me bankable. Shout out to my CPA because a CPA I think is worth their weight in gold because they can keep you bankable with exactly with what you’re talking about because I wasn’t educated in taxes and all that.

Ruben:
Right. Here’s the thing, I mean, not only that, you also have to as you start building your portfolio, you got to have the cash reserves to be able to get that final approval from the underwriters. That’s something that I’ve learned throughout the years and because of my civilian jobs and 401K, that is what’s kind of helped me out in that aspect.

Ashley:
Yeah, definitely having that W2 income really helps you get some of that financing, especially in the beginning. That’s why when people tell me they want to quit their job and just jump right into real estate, I recommend keeping your W2. We’ve had so many examples of people who can do this and keep their W2 because those first two years, that’s what helps you get the financing. What did the numbers look like for this, your purchase price? How much did you refinance?

Ruben:
The agreement was $152,000 minus the $7,500 that I had to pay upfront. At the end of the day, I paid $145,000 and it had a value of $190,000, the property. All I did was take out all the carpet and put a vinyl pipe flooring, that costs me about $3500 to do. Then I repainted the majority of the house, that cost me probably another $1200, and that was it.

Felipe:
I’m not going to let you skip over that. You just said you got a whole house painted for $1200.

Ruben:
Yes.

Felipe:
[Spanish 00:28:49].

Ruben:
This guy, man, he is awesome.

Felipe:
[Spanish 00:28:56].

Ruben:
This guy is great, man.

Felipe:
[crosstalk 00:29:02] Yeah, I love that.

Ruben:
Anyhow, so I got that for about $145,000. I ended up giving them, like I said, an additional $17,000 by the time it was all said and done. When I did the refinance and they added the $8500 into the loan, I ended up financing, I think $120,000. Right now, my mortgage is [inaudible 00:29:25]. I plan on living here probably another couple years, maybe depending on how quick I’m going to get my forever home built. At that point, I’ll convert this property into a rental, and right now the rent rates here about $1575 or higher.

Ashley:
Wow, that’s awesome. All your expenses will be covered, and what do you think will be your cashflow after your property taxes insurance are paid for?

Ruben:
Probably $450,000.

Ashley:
Yeah, that’s great.

Felipe:
That’s going to go towards your forever home mortgage. I mean, you get two or three properties that are cash flowing. That’s the power of delaying your gratification, and notice what I said there by delaying your gratification, not denying your gratification, right? You want your forever home, but you decided to make an educated decision, an educated financial decision to buy real estate to pay for your forever home. Now, you don’t have to worry about the payments on your forever home. You’ll be able to use the cashflow from these properties that you purchased to cover that. Now, you can work, not work, do what you want, love your house and not have that financial burden of, Oh my gosh, I have to pay my mortgage or I got to pay this. You know that your properties are going to be doing that.
What’s awesome about that, let me add Ruben, is that your properties are not going to have history, right? You’ll have two or three years of history with those properties paying you cash flow and you’ll be able to know and feel secure at night that your mortgage will be getting paid by these properties, and not just that, you are providing a great house for someone else to live in, tested by Ruben because you’re living in one now, but you’ll be able to say this is a great house, right? Then someone that maybe can’t get a mortgage right now, or that’s needing to rent for the next couple of years, you’re providing that. Speaking of that, what’s your typical tenant? Give us a little insight in your area. What is your typical tenant look like in the properties that you have? What’s an ideal tenant?

Ruben:
Well, it’s hard to say, because I’m getting from all different walks of life. I got a guy that works for a flooring company. I have another set of tenants that they work at the local juvenile center. I have another set of tenants that they worked for the federal government. I have another tenant that they’re teachers, and then I got another guy who works for an oil field company. I mean, it’s just-

Felipe:
Across the board, just everywhere.

Ruben:
Across the board.

Felipe:
I love that.

Ruben:
I’d like to share something with you all then.

Felipe:
Yeah.

Ruben:
I think it’s very important if you set your mind to it, you’re going to figure out how to get it done. This off-market deal we just talked about, the pre-foreclosure situation, I was under contract on another foreclosure when this opportunity came up. I had money set aside for the down payment on the one I had under contract that I purchased off of MLS. Then about three weeks later is when this pre-foreclosure situation pops up, so now I’m like, I got another opportunity for another great deal where I’m going to walk into it with about $40,000 to $50,000 in equity, but yet I have this money already committed to this foreclosure that I’m about to close in about 30 days. How can I make it happen? I start thinking and I had another rental that I had a lot of equity, so I called my mortgage lender, I said, “Hey, I got an opportunity for another off-market situation and I need the money. This is what I’d like to do. I’d like to take this property over here, do a cash out refi, take that money and utilize it to be able to fund this off-market deal.”

Felipe:
Before you were closed on it?

Ruben:
Yeah.

Felipe:
Wait, wait, wait, wait, wait, wait.

Ruben:
Yeah, I know,

Felipe:
Hold on. Let me reverse that.

Ruben:
Okay.

Felipe:
Before you closed on a property, you were leveraging the equity to buy the next one.

Ruben:
Yes.

Felipe:
All you were just under contract.

Ruben:
Yes.

Felipe:
Okay. I need that underwriter’s name, number and all that information. Wow, I’ve never heard of that. Ashley, have you heard of that?

Ashley:
Yeah, I’ve actually done it where a bank gave me a 90-day unsecured loan to purchase a property. Another property wasn’t collateral that I hadn’t purchased yet or anything like that, but they gave me a loan with no collateral on it to purchase a property.

Felipe:
No, he’s saying he leveraged the property that was just under contract, not even in his name.

Ruben:
No, no, no.

Ashley:
Right, but there is no collateral on that one, correct? That you were purchasing.

Ruben:
No, Felipe. I didn’t leverage the property I had under contract. I leveraged a property I already owned.

Felipe:
Oh, okay.

Ruben:
I had one under contract that I was pending the final purchase, but I grabbed another property, refinanced that one to fund the off-market deal.

Felipe:
Sorry. I needed a GPS to manufacture all that. That’s amazing though. Good job, Ruben. I love that.

Ashley:
That is such a great point. I’m glad that you thought to tell us that even though we had an ass, because it seems like that is a challenge for people is growing and scaling, but sometimes you just don’t have the money, and that has been a hurdle for me where I have this line of credit as I buy bigger properties, that money is tied up and then I have to kind of wait for it rinse, wash, and repeat before I can pull it in use again, but pulling equity out of your property, finding a partner, getting private money, hard money lender. Those are all great ways to help you grow to be able to purchase more than one property at once. Obviously there’s the disclaimer, be careful how much you’re leveraging yourself, stuff like that. Out of curiosity, once you had pulled more equity out of that property, what was your loan to value on that property you pulled more equity out of? Did you stay safe and under a certain amount?

Ruben:
Well, 75% is the only loan to value amount that the bank would lend me. My mortgage payment increased on that property by $90. However, it gave me an additional cashflow in property of $350,000.

Felipe:
That’s an easy math problem.

Ashley:
Right.

Felipe:
That’s good.

Ruben:
It happened. At the end of the day in the long run, it’s just going to get even better.

Ashley:
Your tenant is paying down the mortgage on that property.

Ruben:
That’s correct, yeah.

Felipe:
Hey Ruben, before we move on to the MVP portion of the show, I do have one question. I know that sometimes this is a hot topic among investors. Would you use equity in your personal residence to purchase rental, and how do you feel about that?

Ruben:
Yes. I’m glad you asked that, Felipe. On the short sale that I told you I acquired a property back in 2018, I had already applied for a HELOC on my personal residence. I had been approved for $35,000 HELOC, so when I found this short sale, obviously you have to have 20% down for a conventional loan. What I did is I grabbed that 20% from my HELOC and ended up buying that property. You can say that I got that property finance at 100%, 80% by the mortgage company and the other 20% from my HELOC.

Felipe:
Ruben, sorry, man. I don’t mean to cut you off, but if you would’ve started this when you first started your law enforcement career, billionaire. You’re so wise with this man. It’s so smart.

Ruben:
Thank you. I will say this, Felipe, I would have never done that on deal number one because I think it’s too risky at that point. You really don’t know what you’re doing. I think just the deck would be stacked against you at that point. Now that I have several properties, I’m comfortable with that.

Ashley:
Just because you financed 100% of it, I bet that you still had reserves in place for that property.

Ruben:
Absolutely.

Ashley:
It’s not like you had no money at all and you walked into it, deal financing, leveraging the whole thing with no reserves in place.

Ruben:
That’s correct, that’s correct.

Ashley:
That’s an important thing for people to remember is there is opportunity to do these no money down deals, but you still have to have those reserves in place because day one, furnace can break down, your property can flood, all these different things can happen. It’s very important to have reserves in place when you do these no money down deals. Let’s move on to something more exciting than reserves. Let’s talk about the MVP. Who is someone that has really helped you build your business, and you talked about having a great team in place. Felipe, what do we call this segment?

Felipe:
The MVP [crosstalk 00:37:32]. MVP.

Crowd:
MVP. MVP.

Felipe:
Ruben, who is that person for you, buddy? Who is that MVP?

Ruben:
That is that best friend of mine that we grew up together. His name is Adan Aguillon. He is a local real estate agent here in San Antonio. Him and I, we’ve known each other all our lives. He’s the one that got me started, and he’s the one that found me the second deal. We talk just about, at least once every week. We stay on top of a real estate. He tells me about properties that are on the market that I haven’t seen and vice versa. We have a lot of discussion with rent comps and things like that.

Felipe:
For your MVP, your friend that you’re talking about, and excuse me, can you say his name again?

Ruben:
Adan Aguillon.

Felipe:
Adan, okay. For your relationship with this guy, man, how has that grown now that both of you guys are in real estate, and I’ll preface that with, I think it’s awesome as you’re talking in your story, it seems like you’re cool with just helping other people as well. I mean, both of you guys are in real estate. You should be against each other, right? You’re both real estate agents. How have you guys kind of created and formed a better relationship now that you’re both in real estate?

Ruben:
Man, I think we both came from very humble beginnings. I mean, we’re doing very well. We’re very blessed and we’d like to share that with other investors, clients. I help out other people, he helps out other people. We talk about each other’s opportunities. It’s all about helping others. We help each other out and we help other people. At the end of the day, that’s what it’s all about is to just spread that love and that wealth because there’s plenty of deals out there.

Felipe:
I love that. I feel like a lot of times, even when I first started out, I’ll man up to it, I felt like I was like, there’s not enough. I got to get all the deals for myself and no, I’m not going to give this to anybody else, and I wasn’t growing. It wasn’t until I had a conversation with my buddy Diego Corzo. He’s a realtor actually in Austin. He was telling me that his job as a realtor is to help other people find their homes. That wouldn’t click for me. I was like, “You’re an investor. You should be looking for houses for yourself.” He’s like, “Felipe, my wealth didn’t start multiplying stack-on-stack-on-stack until I realized that helping other people was what was giving me fulfillment and therefore adding value to myself as well.” I love that you’re saying that there’s plenty to go around, right? Reach out, help other people. You’re going to get what you want.

Ruben:
Yeah.

Ashley:
How can you recommend that someone… Did your friend approach you or you approached him about getting started, and how can someone else find which friend of theirs would be a good fit to do a first deal on?

Ruben:
As far as me and my friend, Adan, we were just in conversation. That’s how we learned of each other’s passions. I would recommend for somebody to out there if they want to get into start into real estate investing, go to your local meetups, social media has a lot of people out there advertising that. Of course, I would be careful with your typical guru, and ask around. Ask other real estate agents or at the meetups. I think the meetups would be very, very helpful because you’ll find those people that are in that business that’ll be nearby.

Felipe:
Yeah. If you don’t have a meetup in your town, you can always go to biggerpockets.com and you can create your own meetup in your area. I think that’s really helpful too. We get a lot of REI meetings mentioned on the show. Ashley loves them.

Ashley:
Yeah, I do. I was going to mention the Rookie Facebook page too. If you search Real Estate Rookie on Facebook, we have over 5,000 people in the group right now. Actually, I think it’s closer to [crosstalk 00:41:09] 10,000 and ask people on there if they know of a meetup in your area, or there would be plenty of people to connect with to start a meetup in that group too. Thank you for sharing your MVP with us today, Ruben, and we will connect to more information about today’s MVP on biggerpockets.com/rookie22.

Ruben:
Let me say one more thing.

Ashley:
Sure, yeah.

Ruben:
Okay. Another MVP that is extremely important to me because she helps me when I manage these properties and getting these properties renovated, and that’s my wife, Araceli Galindo. She is awesome. Without her, I wouldn’t be where I’m at today. I got to give her a huge shout out as well.

Ashley:
That’s awesome.

Felipe:
Shout out to Araceli.

Ashley:
[crosstalk 00:41:53] I think you’re the first person to mention their spouse on here as the MVP, I think. Yeah.

Ruben:
Yes.

Ashley:
That’s awesome.

Felipe:
That’s awesome, that’s awesome. Okay. Let’s move on to the Rookie request Line and remember that you can always reach us anytime at 1-888-5-ROOKIE. That’s 1-888-5-ROOKIE to leave us a voicemail and we might use it on the next show.

Speaker 5:
Scott on the DMV here, [inaudible 00:42:18] investor with a question about reserves for [inaudible 00:42:22], maintenance and [inaudible 00:42:23]. There’s a lot of talk about the amounts, but my question is about the mechanics of how a model includes $10,000 unit reserve kind of purchase [inaudible 00:42:36] and add 20% per month. Thanks to Josh and Brandon there. I’m looking for some advices for best practices for how and where those reserves are held. Thanks a lot guys.

Ruben:
I think setting money aside is extremely important. What’s helped me, and again, I didn’t do it on purpose. It just ended up that way, but I would encourage anybody who has a W2 job and has a 401K plan with their W2 job that qualifies, at least is qualified in my case to be considered reserves. That’s another strategy that I’ve used is I just keep adding to my 401K on a monthly basis from my W2 paycheck.

Ashley:
That’s awesome, and that’s interesting. I’ve never heard anyone give that answer before. What would you do in that scenario if you needed to use your reserves, would you take a loan against your 401K?

Ruben:
Yes, yes. I would take a loan to avoid that penalty.

Ashley:
Yeah. Then you’re paying interest back to yourself when you repay that 401K loan.

Ruben:
Right.

Ashley:
Yes, you’re losing that amount of money making a return in your investment portfolio, but you’re able to use that for your reserves and then you’re paying yourself back interest. Yeah, that’s a very interesting strategy. I haven’t heard that before. That’s great. Felipe, what do you do for your reserves?

Felipe:
I don’t have any reserves. I just go… I’m crazy. No, I’m just kidding. Both of you guys’ face was epic. It was like, “That’s terrible.”

Ashley:
Well, mine wasn’t because we’ve talked about this before and [crosstalk 00:44:08] yours is ten times more what mine is.

Felipe:
I have a family, right? I got a two year old, almost three now and then my wife. I have a little bit more reserves than probably most people should, but one of my biggest reserves is definitely my line of credit. I have an open line of credit for a larger amount that if, I mean, stuff really just hit the fan, then I would pull from that to help whatever property needs a little bit of help. That’s about right about, just like the gentleman said, about $10,000 to $15,000 per property in cash. Then the rest is off the line of credit that we have if we needed to pull more from that. Honestly, I don’t want people to forget it’s really important to also have insurance on your properties, right?
I think if sometimes if it’s more than $10,000 or $15,000 in repairs or something, I’m going to be looking at calling some insurance companies because I want to make sure that I’m not depleting my cash reserves. Now, I want to have them because, as Ruben said earlier, it helps you when you’re bankable, right? It helps you when you’re applying for more properties and things. You can show the bank that you’re a wise investor by having cash reserves in regards to your properties, and banks love that. That’s kind of how I handle my cash reserves, my lines of credit and things of that nature. Another thing that I’m doing right now, Ashley is I’m actually refinancing my properties into longterm, low rate debt because rates are so low. That’s another kind of play that I’m doing as we speak right now as well.

Ashley:
Yeah. I want to add, because I know you haven’t done any commercial loans yet Felipe, right? Yours are all on the residential side.

Felipe:
That’s right.

Ashley:
I’ve never really thought about this before until right now, but I’ve never had a commercial lender ask me for reserves before. They’ve never asked for a bank statement or anything like that showing that I have reserves in place, but when I’ve done residential, they do ask for that. That’s interesting to me to think about that. Then for my reserves, I just hold them all into, they’re in a savings account, a high interest savings account, and it’s at a bank that we don’t usually bank at, and the money to transfer it is not easy to transfer it. I kind of keep it so that it’s out of sight, out of mind and I don’t touch it. That’s kind of my strategy on that, so it’s not easy to have access.

Felipe:
Yeah, that’s a great strategy.

Ashley:
Let’s move on to our fun questions now. Super random, and to kind of get to know you a little bit. Felipe, do you want to take the first question?

Felipe:
Yeah, absolutely. Ruben, what is the one REI tool or piece of technology that you could not run your business without?

Ruben:
Cozy.

Ashley:
We should have guessed that was the answer.

Ruben:
Yeah, I know. Cozy, internet, cell phone. That’s been very helpful for me. Cozy has been very helpful and it’s free. It doesn’t cost you anything.

Ashley:
Okay. My question for you is what is one fear or self doubt you’ve overcome or are trying to overcome right now?

Ruben:
Maybe just when I’m acquiring that next property, is this going to rent out? Even though I know the numbers are good, I know the demand is there, but still that human side of me, it gives me a little fear.

Felipe:
I think that goes back. I can’t remember the book, but where it talks about taking your emotions out of it, because that’s just an emotional feeling, Ruben. You know it’s going to rent, you have five other properties that are doing fantastic. You know that next property is going to rent, and I have that trouble as well. I got eight rental properties and I buy that next one, and if it doesn’t rent the very next day that I purchased it, I’m freaking out, but I know that, that’s just an emotional feeling. I want to tell our listeners, don’t feel that way. It’s okay. The place is going to rent. You’re going to be fine as long as you ran your numbers correctly. If you took your emotions out from the very beginning, don’t put them in right before rent, right? I mean, just take the emotions out of it.

Ashley:
That’s another thing where reserves come in to play too because if you really are worried about that and you need it to be rented right away to make that mortgage payment, then maybe make sure you have enough reserves so that if it isn’t rented right away, you can cover those mortgage payments for several months. I would still even recommend that even if you think it’s going to rent right away, but I’m a big thing and if it’s going to help you sleep at night, then just do it, have those reserves in place, don’t over-leverage yourself. There’s no rule as to you have to have this much from reserves, you have to have your property rented out right this second, you have to do these things. A lot of it is mindset and getting over that hurdle and what helps you sleep at night and makes you comfortable. Yes, as a real estate investor, there are many times where you have to get uncomfortable to get that next project or find the next property or get it under contract, but a lot of times there are things that you can stay comfortable in and that’s how many reserves you have. When Felipe first told me how many reserves he has, I was like, “Oh my God, what are you doing? You can buy another, down payment on a property and still have enough cushion.” That’s what helps him sleep at night.

Felipe:
That and NyQuil. Ruben, let’s move on to the next question here. What’s your toilet bowl story, and we get this question where Brandon Turner in the OG BiggerPockets show talks about he had a toilet that he was carrying through a rental property and he just basically said, “Screw it. I’m creating systems for this because this is ridiculous.” What’s that moment when you realized you were approaching a real estate problem the wrong way, and you just had to change something?

Ruben:
I think the maintenance, when I first got started, I was trying to do it myself. I quickly learned that was not the job for me. I needed to go ahead and man up, fork out the money and get the professionals to do the work because I just wasn’t going to be able to do it.

Felipe:
I think as Latinos, that’s hard for us because I’m in the same boat, bro. I’m like, I can do this better and faster than anyone else and I can save myself $250, but then I just spent six hours trying to fix that problem where I could have went and found another acquisition or something. I understand you in that regard where it’s like… Now, I did read in your [inaudible 00:50:08] that you still change your air filters. I’m going to pick on you about that one.

Ruben:
That’s because, and I do that for this reason because I do quarterly inspections. I do quarterly inspections of the home, and that gives me an opportunity to change up to filter just to make sure it gets done and that’s not that big of a deal anyhow.

Felipe:
Because my tenants don’t change it either. I go change all my air filters and it gives me an excuse to get in the house and creep around, make sure everything is good.

Ruben:
Exactly.

Ashley:
Okay. For our last question, it’s a little bit of rookie hazing and we want to know what is your guilty pleasure song, and can you sing a little bit of it for us?

Ruben:
Sure. I’m here in San Antonio, Texas now and I was a huge fan of the late Emilio Navaria, who is from San Antonio. I love all his music, but there’s one specifically that I really like is called Remedio De Amor.

Ashley:
Can [crosstalk 00:50:58] you sing a little bit of it for us?

Ruben:
All right. (singing) That’s it.

Ashley:
That’s one of our best, I think. Yeah.

Felipe:
That was really good. I want our next guest to do El Grito. If someone can do it-

Ruben:
Oh, yeah.

Felipe:
You got it? You want to try it?

Ruben:
Oh, yeah.

Felipe:
Do it.

Ruben:
All right. Let’s see.

Felipe:
Oh my God. That was amazing. It tops anyone else’s. That is amazing. I love it.

Ruben:
[Spanish 00:51:40].

Felipe:
Got you, bro. I love it. Big old Texas. Boy, I love it.

Ashley:
Well, Ruben, can you let everyone know where they can find some more information from you if they want tips on buying foreclosures or singing advice, please tell us where they can find you.

Ruben:
Singing advice, I don’t know about the safety part, but Facebook, I’m on Facebook, Ruben Galindo. I also have a Facebook page, Ruben Galindo-San Antonio Finest Realty. I also have my Instagram. I do have a YouTube channel. I haven’t really built on that much, but I can be reached there as well. I have a couple of websites, but just Facebook and Instagram, probably the best way.

Ashley:
Yeah. Thank you so much for joining us today. We loved learning about everything that you’re doing and I’m sure the audience is going to love it too.

Ruben:
All right. Thank you all for the opportunity. I enjoy watching you guys, so it’s been an honor for me.

Ashley:
Thank you.

Felipe:
Bye, Ruben.

Ruben:
Bye. Thanks.