How a 25 Year Old Bought $1M of Real Estate in 1 Year with Daniel Iles

Speaker 1:
This is the BiggerPockets podcast show 440.

Daniel:
One constant across all of the different banks and financial institutions is that you are the customer. And no matter where you go, they are always trying to get your business and sell you a loan. And once I realized this, it was like I found the missing piece of the puzzle that I was looking for when I wanted to invest in real estate wasn’t money but it was more so knowledge.

Speaker 1:
You’re listening to BiggerPockets Radio, simplifying real estate for investors, large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com, your home for real estate investing online.

Brandon:
What’s going on everyone, it’s Brandon Turner, host of the BiggerPockets podcast here with another phenomenal show with my buddy, my partner in crime, my soon to be hanging out in person in Hawaii, David Green. What’s up, man.

David:
Hey, I’m excited to be going to Hawaii. I’m going to look at buying a couple of condos out there as investment property. And I’m really ramping up what I’ve been looking at. I’m looking at condos with you, I’m looking at a new house sack for myself, and I’m looking at a couple of apartment complexes in the three million or so range in Georgia. So anybody who’s looking at properties out there and has an in with brokers, I’d love to hear from them. But it’s the season of buying again.

Brandon:
Yeah. Yeah.

David:
So I’m doing really good. This is when I’m at my happiest.

Brandon:
That’s awesome. Do you have a good team in place to help you buy stuff or do you still looking for a CEO of your life to help you build your portfolio?

David:
1000% looking for a new portfolio manager to help us ramp up. That’s definitely something that’s there. And then I also want them to help with acquisition. So if somebody has any experience with managing rental property, I probably don’t want someone who has none at all, but if they understand what to do and they want to grow, I’m definitely looking to hire. So yeah, thanks for mentioning that. How’s Open Door Capital going? Are you guys doing pretty well with both your acquisitions and your management?

Brandon:
Yeah. Yeah, actually we are. Now, this actually speaks to what today’s show will talk a lot about. We had a ton of properties under contract. We spent the last four months closing on them. In fact, we’re closing on a big one in Alaska right now. And speaking of Alaska, our guest today is from Alaska.

David:
Mm-hmm (affirmative).

Brandon:
And now we’re back in acquisition mode. It’s like this flow thing, where you go really hot and heavy into one thing and then really hot and heavy into the other thing, and then back to the one thing. And so we are shifting in acquisition mode right now, which like you, it’s fun. This is where we go on the hunt. It’s a good time.

David:
Yeah. Make sure that you listen to the show, listen to us here, because we do hit a really important topic on today’s show that has to do with, you can’t just get on one side of real estate and just stick to that unless you’re on a team. So if you’re on a team and you just like to manage it, you just like systems, you can get away because someone else is filling your pipeline up of properties to buy. And if you love the thrill, the chase, you love acquiring stuff, unless you’re on a team with someone else to manage it, you have to do that part too. So until you either build a team or join a team, it definitely feels like you’re running really fast to this side. And then the boat starts to tip over there and you run really fast to the other side of the boat and it starts to tip over there. And I would say, that’s where most people get started. So you got to have your running shoes on when you’re building up your real estate investing business.

Brandon:
There you go. But we forgot to do the quick tip today. So let’s get to today’s quick tip.

David:
Quick tip.

Brandon:
Today’s quick tip, go to biggerpockets.com/store. Go find a book there, read it. You’re going to hear why in this show. Why it’s so important to read. You like that? Is that a good quick tip, David?

David:
That’s really good. And if you’d be so kind, comment on Brandon’s Instagram, if the book that he wrote or the book I wrote was better-

Brandon:
All right. Definitely do. All right. Well, with that said, I think we’re ready to jump into today’s show. Anything else we need to cover? I don’t think so. So today’s guest is Daniel Iles. Daniel is a real estate investor from the far North, and he is really good at explaining what it really takes to get started building a portfolio quickly. I think he built a million dollar portfolio in the first year. You’re going to hear about both the upsides and downsides of doing that today, on today’s show. Plus he covers a lot of other stuff, everything from credit cards to how to get his no money down deals to other cool things like that. So you’re going to hear a lot about creative finance, and you know what, you’re going to hear a lot about some of his favorite books in the entire world, including the books that are very well-written, David Green, thank you very much.

Brandon:
With that said, let’s get to today’s show. Daniel, welcome to the BiggerPockets podcast. This may be the first podcast we’ve ever done with somebody who got on the show because of a TikTok campaign, which is awesome. Welcome.

Daniel:
Thanks Brandon. Thank you.

Brandon:
Yeah, this is going to be fun. So yeah, you got a big TikTok following and you said you put a thing out there like, hey, help me get on the BiggerPockets podcast. And I got all of a sudden blown up from people being like, you should get this guy on the podcast. And I watched your stuff and I was like, this guy knows what he’s talking about. So that’s how we’re here today. It’s going to be fun.

Daniel:
That’s awesome. I am so grateful for TikTok. It’s been really crazy ride these last couple of months.

Brandon:
Yeah. Yeah.

Daniel:
And actually I wanted to test something out with you guys. TikTok is by far one of the most underrated platforms out there right now. And just as a test to prove it, I had a video that did well yesterday, last night when I posted it and this morning it has 213,000 views. As of right now.

Brandon:
That’s crazy.

Daniel:
And I have 610,100 followers, but I expect by the end of the show, by the time that we’re done recording this, I’ll have even more. So I’m going to screenshot it right now and then I’ll remind myself before the end of the show and we’ll see how many followers I have by the end.

Brandon:
That’s funny.

Daniel:
Just to prove to anyone still doubting TikTok, it is definitely a platform to be reckoned with.

Brandon:
All right. So I asked Ryan Pineda this a few months ago when he was on the show, I said, “What value does TikTok bring?” So before we get into your real estate, while we’re on the topic, and maybe none yet, but what value does TikTok bring or what do you think it’s going to bring you by having a big following there?

Daniel:
So monetization-wise, it’s already brought me a lot of value. Between being able to collaborate with the brands that I really love and that I use myself or that I hope other people can benefit from. But on top of that, also just being able to make incredible connections with other people who I get to learn from and benefit from in this space. And it’s really been a shortcut to being able to talk to these incredibly knowledgeable people in all fields of expertise. Whether that’s finance, personal finance, real estate, talking to you, Brandon and David, or really anything else related to anything that people do on TikTok. Because it is so much more than just some teenagers dancing around. If you spend more than an hour on the app, I promise you, you will find something other than teenagers dancing on the app.

Brandon:
This is true. This is true. Everyone on the podcast knows this, but I’ve been talking about, for months, how I’ve been thinking about getting in TikTok and then I’m like, it’s just a waste of a ton of time. Where I’ve settled on at this point is, I’m going to do it and shortly, and I’m working on it right now, sort of. But I don’t want to be a consumer of TikTok as much as I want to be a provider of content for TikTok. The danger of social media is getting sucked into the constant scrolling and I just lost my whole life to watching 18 year old kids show off their abs. That’s the part that kills me. And I’m like, I don’t want to get sucked into that. But you’re right, it’s such a great way to either reach hundreds of thousands, if not millions of people, it’s a way to build connections, to build relationships with people that are influencers, that you want to get connected with or brands. I see that. I see that.

Daniel:
Definitely. Yeah. You do have to limit yourself to make sure that you’re not sitting down and then scrolling for two hours. I’ve done that once or twice and I promised myself not to do it anymore. So definitely got to limit it.

Brandon:
You ever got the little video? It shows how I got sucked into it. I don’t even have it on my phone right now, I uninstalled it. But that little guy will pop up and be like, hey, you’ve been scrolling for quite a while, why don’t you take a break? And like-

Daniel:
I am embarrassed too, that I’ve seen him once or twice. Yeah, maybe you’ve been warned.

Brandon:
Yeah, exactly. It’s always like, oh yeah, I have been here a while. I’m going to go try to do something with my life. So anyway, let’s do something with our life today and hear your story. Let’s go pre-real estate. What’d you do? Actually, let’s start with this. Where the heck do you live? Because I asked you, when you got on this call … those people who aren’t watching the YouTube right now don’t know this, but I asked you, I was like, is that a fake Zoom background? Because it looks like a fake Zoom background, because you have this majestic mountain out back and it’s dark and there’s snow and trees. And it looks like you’re on some fake Zoom background, but it’s not. So tell us about where you’re at.

Daniel:
This is a real Zoom background and I can move my computer for Brandon to see it, but everyone else, you’re just going to have to trust me. I can walk you around later. I don’t know.

Brandon:
It’s a real background. Yeah.

Daniel:
It’s a real background and it is in Alaska. So I’ve been living in Alaska for the last almost 20 years and I really, really love it. It’s an incredible place. And I just actually moved recently from Fairbanks Alaska to Palmer Alaska. So it is actually a lot warmer here. I moved down to the warmer part, but it’s still way colder than something like Washington most times of the year. And actually, Alaska fact for you, last year was the coldest winter in 40 years in Fairbanks where I was living.

Brandon:
Really?

Daniel:
So the average temperature between December and February was 10 below. And there were 40 days, 40 days. This is like a month and a half. 40 days below 25 below. So it got cold.

Brandon:
Wow. I’m reading this fiction book right now called Polar Vortex or something like that, it was offered on Kindle unlimited. Anyway, so I’m reading this book, it’s actually really good. But it’s about these people who plane crashed up on the North Pole. So the whole thing is about them going through the North Pole area in frigid temperature. And I’m reading, I’m like, why would anybody ever live in this? And then today we wake up and I’m talking to you. I’m like, why the heck would you live in that? But it’s just, it’s beautiful I here?

Daniel:
Yeah, it’s really beautiful. And I will admit, it’s tough to live in the 30 below area so that’s why I moved. But it is definitely still worth it. Plenty of incredible things here to do in Alaska. And in the summer, it’s actually really warm. So you can leave the house and enjoy it in the outside as well.

Brandon:
Right.

David:
You move to the tropical 10 below area of Alaska.

Daniel:
That’s correct. Yes.

David:
[crosstalk 00:10:03]. So let’s talk about how hot the real estate market is up there in Alaska.

Brandon:
Ooh, look at that connection, David, that was pretty good.

David:
I’ve been learning from Brandon, the transition King. We don’t get a lot of Alaska investors on here. And I would guess majority of our audience is really unfamiliar with how Alaska real estate works at all. Can we maybe start off getting a broad understanding of, if Alaskan real estate is different than other types of real estate? What the unique challenges are, and then maybe hear about your portfolio?

Daniel:
Certainly. Alaska is actually very similar to real estate down in lower 48. That’s what we call the other states. And it’s not too much different. We don’t have igloos, we don’t have a lot of polar bears, definitely no penguins. But we do have to have a few small changes to our properties to make them better insulated for the very cold winters, fuel delivery to make sure that the house can stay warm in the middle of winter is also really important. Pipes freeze up all the time if you’re not careful, if you don’t have the proper insulation. And usually, houses up here don’t last quite as long without additional weatherization or something done to it in every 20 or so years, just to make sure that nothing really freezes over.

David:
Yeah. So what about the roofs, when they got snow sitting on them all the time?

Daniel:
Oh, they’re insulated. The snow insulates it and we’ve got plenty of blown insulation in the roofs. That’s not actually that big of a deal. It’s more so of the structure itself being well-built and making sure that you don’t have any air gaps to let cold air in.

Brandon:
Makes sense.

David:
Right. Now, another thing I’d wonder about is tenant demand. Do you still see a large demand for rental property where you are?

Daniel:
Oh yeah, it’s huge. We have plenty of people up here in Alaska, it’s not just the 13 of us hanging out here. So we do have a lot of people. We do have great investment opportunities. I’m often able to find properties that meet the 1% rule. I have two properties that meet the 2% rule and there’s definitely even more opportunity if you’re able to look for it. And there are many properties which aren’t well advertised. Unlike Washington, where things are instantly scooped up because everyone has their eyes on the market and everyone’s driving by the same streets, there are a few properties here in Alaska that are very remote. So maybe a few miles away from other properties. And you would never know about them because they are very isolated. You only see them when they come up on Craigslist or Facebook Marketplace or through a connection of another friend. And that’s how you find some incredible deals on here.

Brandon:
That makes sense. Well, let’s talk about that. How’d you get into that and why real estate? What got you interested in it and what was your first deal?

Daniel:
So I was one of those crazy new year’s resolutionists who set some really wild expectations for himself. Knowing that even if I get half of them, I’ll still get half of them. You know what I mean? So one of those resolutions was that I would read 50 books in six months. And many of those actually ended up being BiggerPockets books because I was interested in real estate at the time and I wanted to be able to get into it. I didn’t know much about it, but I knew that a lot of wealthy people made their money through real estate, so I thought I should probably give it a try. And I remember one morning I was reading a book called The Book on Investing in Real Estate with No (and Low) Money Down, written by Brandon Turner who is smiling-

Brandon:
Amazing book. Amazing book. World-Class right there, won three Grammys actually.

Daniel:
I love that book. So you know exactly where this is going then, Brandon. I remember I came home early that day, so I could finish that book later that night. And it was an incredibly powerful book because it resonated with my struggles, the primary one being that I didn’t have much money. But it also caught my attention because it really pulled back the curtain on real estate financing for me. Prior to the book, I thought that you have to get a loan, you have to have 20% down. And if you go to the bank, you’re helpless. You show them your credit score, they pull your credit and you either get lucky and you get approved, or the big bad bank says no and you don’t get any property. But in fact, it’s really the opposite. There are many kinds of banks and you can always do things a little bit differently.

Daniel:
But one constant across all of the different banks and financial institutions is that you are the customer. And no matter where you go, they’re always trying to get your business and sell you a loan. And once I realized this, it was like I found this power and everything just clicked. I found the missing piece of the puzzle that I was looking for when I wanted to invest in real estate wasn’t money but it was more so knowledge. And once I knew what I could do to get started, scaling my portfolio without a bunch of money really seemed like something that I’d be able to pull off.

Brandon:
That’s cool. So what then did you do? How’d you take action on that information?

Daniel:
So once I figured this out, I started scaling and buying properties as quickly as I could, not with a bunch of money, but by leveraging what I knew about banks and credit already. And in a year, I ended up with a million dollars in residential real estate owned, all with less than $23,000 down.

Brandon:
Oh, wow. Okay, so we’ve got to unpack this. What was the very first deal then? What was the first thing?

Daniel:
The very first one was an FHA loan.

Brandon:
Okay.

Daniel:
And FHA loan is one of the most powerful ways to build wealth in real estate, but is available to the public. Just because it’s going to put you on a fast track to a life of financial independence quicker than almost any other legal opportunity in the United States of America. It is crazy powerful and not to be underestimated. And so that’s what I went with first.

Brandon:
That’s cool. I’m assuming you lived in … what was the property? And I’m assuming you lived in it.

Daniel:
It was a duplex.

Brandon:
Okay.

Daniel:
It needed some cosmetic updates, which very easy I was able to bang them out in a couple of weeks, not a big deal. And that’s how I started. With just a little bit of money that I had, I was able to control a large amount of assets and basically scale my investment with the principle of leverage.

Brandon:
That’s cool.

David:
Let me ask you a question, because I’d really like to understand the mindset of the guests when they got their first home, because a lot of our listeners are in that space. They’re trying to bridge that gap. Did you come up with this FHA idea from Brandon’s book?

Daniel:
I came up with the FHA idea from many of Brandon’s book and the rest of the BiggerPockets books.

David:
We talk about it quite a bit.

Daniel:
Yeah. Yeah, you guys do. And it’s great that you cover it because it is really one of the best ways to get started. But I created this blueprints, knowing what I knew about the FHA loan and the other loan programs possible and how I could continue to scale in the future. And what really made sense to me was that the FHA loan was a first time loan only. For people who don’t know, it is really generally a loan for first time home buyers. They have a lot of restrictions to prevent investors from being able to use an FHA loan to scale their real estate portfolio. It’s not the intended use of the loan, so it really only works as your first loan with a few exceptions.

David:
Now, you can get a second FHA loan if … well, you can only have one at a time, I should say. So if you have an FHA loan, if you refinance it into conventional or sell that property, you can use the FHA loan for another house. But you can only have one at a time. And you’re bringing up a really good point, which is understanding the loan products that are out there before you decide on if you can buy or if you can’t. I have people all the time that will say things like, oh, I don’t have 20% to put down. Those of us that are in the business know that’s ridiculous, of course you don’t need that. But a lot of people listening, maybe don’t.

Daniel:
Mm-hmm (affirmative).

David:
And that’s why I wanted to highlight how smart it was for you to read books, because you don’t know what preconceived notions you have that are restricting you from getting into real estate until you put yourself out there in the situation and you learn a little bit. And now we see that you’ve scaled pretty significantly in a market where people don’t think of a lot of real estate success being possible. So you have an awesome story and I want to dig into it. You mentioned that you created a blueprint. Can you share with us what that blueprint is?

Daniel:
Yes. And that was really just understanding all the loan products available and how banks work and how I would be able to continue to scale my portfolio after that first purchase. So, David, you’re right, I ended up getting a second FHA loan, so it is possible to get a second one after you’ve had a first. There are some restrictions, you have to be very careful with that. And I always recommend talking to a mortgage specialist before you try to pull a fast one. But once you understand that that has to be your first one and the restrictions related to it, you can go and plan your steps for your second or third property based off of that. So for example, I knew that for my second and third property, I wouldn’t be able to get an FHA loan. And I had to look at other opportunities that I could invest with low or hopefully no money down to be able to scale my portfolio while not restricting my cash, because I didn’t have that much.

David:
Right. And so what were some of those strategies you came up with? And I assume they’re part of the blueprint that you mentioned?

Daniel:
Yes. So one of them was being able to purchase a property based on its appraised value rather than its purchase price. And for that, you need to find a credit union or a bank who is flexible enough to lend to you based on that. And of course, for me, this had to be a different credit union, a different bank from the one that I used with my FHA loan, which was just a big standard large bank that you see. Like the Bank of America, Wells Fargo type of things.

Brandon:
Yeah. So you were able to find a bank that would say, hey, this thing’s worth 200 grand, and even though you’re buying it for 150, we’re going to give you the loan based on the 200. Is that what you’re saying?

Daniel:
Yes. And I created the strategy relying on the small banks to fund my investments. So I would go to them and present them a property, which had a very high valuation, but I was able to purchase at a discount and treat that spread as my equity, as opposed to a down payment.

Brandon:
That’s cool. So how did you find, let’s go to a particular deal, something that you bought, how you got this? How did you find your early properties or even all your properties? What’d you do to find them?

Daniel:
Finding them, well, most of them, I just found on Facebook Marketplace or Zillow. So the MLS portals, zillowrealtor.com, whatever you have in your area. But specifically in my market, Facebook Marketplace and Craigslist really work well. Often what you see is a very poorly taken picture of the front of the house with a bunch of junk out in front of it. And it looks like they spent maybe a minute and a half, maybe 60 seconds on the posting and you know it’s going to be a good deal. And we just went through a lot of those contacting a lot of the sellers asking about more information. Whereas you might not be lucky enough to find those deals in the lower 48 and the other states because they’re picked up so quickly, they are still out there and they are incredible deals because usually the homeowner is more concerned about selling the property rather than getting the best deal. And that’s how the advertisement reflects.

Brandon:
That’s cool. Yeah, it’s a cool strategy. We don’t really talk about it much here, but as Facebook Marketplace continues to expand and grow and more and more people are using it, there’s going to be more and more people who are like, I’m not going to pay David Green over here 20 grand to sell my house. I’ll sell myself. What does it take? Just put up a picture, boom, sold. So they’re going to be putting their stuff on there more and more. That’s just a really good tool to add to your tool belt, for everyone listening to this. Just set up a regular reminder, every day or every other day or every once a week. Go check your Facebook Marketplace and see what properties are for sale on there.

Daniel:
Exactly. Stop scrolling through TikTok for an hour and spend five minutes on Facebook Marketplace.

Brandon:
You’ve been scrolling through the Facebook Marketplace too long, why don’t you take a break and go on TikTok? That’s going to be the next video there. So tell us about, where’s your portfolio at right now? What do you have right now?

Daniel:
So right now we have nine units. We’re a little bit closer to the $1.5 million mark and we actually took this last year to slow down a little bit, be able to rearrange some of our properties. We sold one as a flip, which I’d love to talk about later.

Brandon:
Yeah.

Daniel:
But mostly we’ve just been organizing everything that we bought in that first year, because it was a huge, huge push to buy a lot of properties to accomplish this crazy goal. But of course, there’s a lot of management behind that and you have to be able to organize your systems and processes and get everything in place so it runs smoothly and you’re not always in a disaster mode.

Brandon:
I love that you said that and we should talk about this for a second, because this is something that David has dealt with, I’ve dealt with this and obviously you dealt with. Is, we are ambitious people and we are very big thinkers. We’re like, we’re going to buy a bunch of properties. And then you realize like, there are a lot of systems that go with scaling. And that when you just acquire, acquire, acquire, you don’t always have the time, you haven’t taken the time or the patience needed to stabilize, stabilize, stabilize, which is super, super important. So again, David, do you mind if I ask you, because I know you’ve dealt with that as well, you scaled really, really quickly as well. How is that principle of the idea of taking time back to stabilize? Have you encountered that?

David:
Yeah. What it feels like … I was thinking about this yesterday. It’s funny that you bring that up. Whenever you’re trying to grow quickly, you have a very unstable enterprise. So it’s unbalanced. You get into acquisition, and imagine a floating piece of wood in the ocean, you’re trying to stand on. You go acquire six properties and then it’s super unbalanced. Okay?

Brandon:
Yeah.

David:
You’re, oh, I’m going to fall. And then you got to run and put all your attention on, so I got to stabilize it, I got to manage them, I have to create spreadsheets and software and people and tools and change the way I think so that I can actually prevent mistakes from happening. And then it gets a little bit balanced and you’re like, man, I just hired all these people to help me do this, I can’t pay them all, we don’t have enough money coming in. And you run back to go, oh, I need to acquire. I often use a phrase, fish catching versus fish cleaning. Fish catching is going and getting business, whether it’s an agent or a loan officer or getting deals, if it’s an investor. And then fish cleaning would be servicing that business you got or managing your property.

David:
And you do have to be good at both or you have to find someone that can be good at both, but they’re both a big part of real estate investing. And we don’t talk about it a ton, the systems that go into keeping it so you’re not balanced. Because if you have too many properties and you’re not keeping up with them all, your real estate doesn’t always make money. You actually have to manage that asset or those groups of assets. So what I found is that you can’t get it perfect on either side, you have to run on one side and get good at it, then run to the other side and work on that.

David:
And it sort of works like, your left hand pulls you up on the mountain, then your right hand grabs and then it pulls you up, and you go back and forth between the two. So the best advice that I would have for people that are in this position is, don’t think that you’re just going to do one thing. You’re going to be doing both or you’re going to have a partner that’s going to be doing the other side. Is that similar to your experience, Brandon?

Brandon:
Yeah, that’s exactly. For me, for the years, I like the book The One Thing. He talks about not work-life balance, but work-life balancing. With real estate it’s like rental property and then rental property balancing. You’re always doing this balancing act a little bit until, like you said, you bring in a partner. So today, I buy mobile home parks. In fact, we’re buying one in Alaska right now. And so we are compartmentalized so that when we buy a property, now Brian Murray takes over from that point, boom, he’s on it. I don’t have to worry about it at that point. Same with other areas like due diligence, boom, Ryan’s got that. He takes that thing. And although we’re involved, we’re a little more separated on purpose, because we’d rather have everybody good at one thing. But in the beginning when we’re all starting, and we’ve all been there, you got to do everything, which means you’re balancing. Daniel, have you found the same thing?

Daniel:
Absolutely. And that’s actually what I wanted to mention. Is that first year for me was very much focused on buying and buying and buying, scaling as quickly as possible. And I didn’t have much time or really resources to be able to devote to management and organizing the systems. That’s something that my wife actually did an incredible job at, very thankful for her to be able to take care of that whole separate business by itself.

Brandon:
Yeah.

Daniel:
But it was very much focused on just acquiring as many properties as quickly as possible. And that was very difficult because I didn’t have the 20% down required to purchase every single property. And so, one of the things that I actually did first was acquire as much available credit as possible. Your credit report shows your available revolving credits and how much you have available to you on your credit cards. And so I rushed, creating a separate system, a separate blueprints for applying for all the right credit cards in all the right orders so I could maximize my credit limits and I could get a lot of available credits. And I actually ended up getting a little over 100,000 just on my credit cards available to me. Just out of college, I’m not making a crazy amount of money either.

Daniel:
And it’s not something that really works for big banks. But when a small credit union or a portfolio lender, even a family member pulls your credits or you can pull your credit report for them, and they see that you have $100,000 available to you, unsecured, across credit cards, it really sets the tone for the conversation. And then I took that and I took it even further to search for the best banks I could find. So I vetted dozens of banks, learning about what they lend on, the terms of the loan that they’re comfortable with, the costs and fees, just trying to find the best deal possible for financing. And since I am the customer, of course I had every right to shop around. And so I really took that to an extreme and I found a small credit union in a state that I’ve never been to. I honestly don’t even know the state. I think it was Ohio or Idaho, one of those two, far away from where I’m living.

Daniel:
I just found it through a very good real estate realtor referral and they had great terms and I knew that they would be able to fund the type of deals that I was looking to do and they would still be able to accommodate for all the flexibility I needed. And actually, on the first phone call with this bank, I spent like 40 minutes talking to the person and telling them about my story and my investments and everything that I wanted to be able to do in the near future with them. And only after keeping the person on the phone for almost an hour, did I realize this was the CEO of the credit union.

Brandon:
Oh really?

Daniel:
And once I hung up, he told me, once I hung up that phone, I knew instantly that I had hit the jackpot with this credit union. Because they were small enough to let me get away with things and they were still big enough to let me fund everything that I needed to in the next year with the purchases that I was planning.

Brandon:
That’s cool.

David:
Okay. So with the properties that you’ve scaled up to … I believe you’re at nine right now. Is that right?

Brandon:
Units. Yeah.

David:
Nine units. Okay. So with nine units, that’s basically … as far as managing it, it’s the same as having nine properties. It’s nine different locations and tenants that you have to manage. Can you share something about what you learnt creating systems and how you ended up now managing them for the people that may take a similar path? So that they know what to expect and what they can do to maybe shorten that learning curve of how you’ve now structured your management.

Daniel:
Right. I actually started managing with my wife for her parents’ property. And we didn’t officially manage, it was just helping out a little bit there. Sending a couple of lease agreements to the right emails, showing the properties. So very standby, very passive, not even management. But we did have experience in that and we molded a lot of systems on how we managed that sixplex for them. So we created a lot of very strict rules that we would follow and we had them written out for us. So much so that we even knew what to respond when a tenant requested one thing or another thing. It wasn’t that we were making a decision every time that we had a problem come to us, it was that we had our decisions written out and sometimes we just had to reference that manual to see what that decision would be.

David:
That’s so good.

Daniel:
It’s very similar actually to Brandon’s other book, which I of course read and then used a lot of your systems from there. Thank you, Brandon.

Brandon:
You’re welcome. You’re welcome. That’s funny. I like that you said that though. It’s like, when you make your decision … I don’t know exactly how you phrased it, but I’ll butcher it here in trying to quote you. When you make your decision ahead of time, you don’t have to make the decision in the moment, you just have to refer back to the decision you’ve already made. So you made it with a clear head and that’s like system and management 101, the best summary I’ve heard of that. I think it’s like, yeah, you made your decision already, so now you just got to refer back to it. That’s fantastic.

Daniel:
It takes the emotion out of it. And it helps you treat all of the tenants fairly. Even though there might be some extenuating circumstance that wants you to not charge a late fee for someone because you do really feel bad. And I have done that. I know that I probably shouldn’t have because they ended up bending the rules more in the future. But once you have these processes in place, it allows all the tenants to be treated fairly. And especially if they start talking to one another and asking why someone got a discount on rent or someone got their late fee waived and the other person didn’t. It just makes you seem like a jerk if you don’t follow your own rules in the end.

Brandon:
Makes sense. Makes sense. All right. So I guess you took the year to stabilize, you got your systems going, you got tenants going in there. What are you doing right now? What are you doing to find deals right now? What are you doing to grow your portfolio?

Daniel:
So right now it is winter and we are not doing that much. We are still scrolling through Zillow, Facebook Marketplace, looking for what we can find. But since we recently moved down to another part of Alaska, we are very excited to be able to start investing down here. It is a little bit different of a market, but there are still plenty of opportunities. Definitely more opportunities for a flipper too, just to keep us busy and entertained, and then also acquiring more long-term investment rentals. That’s what we try to specialize in, is just buying and holding for the long-term, collecting the cash flows, benefiting from the appreciation. And with no money down, as long as we can continue to scale that, it shouldn’t be too much of a problem. We just have to find the right deals, where we have enough equity.

David:
When you are looking for which area you want to be investing in, whether it’s the neighborhood, the city, regardless, what are some things that you’re weighing, but you’re in the direction of the other?

Daniel:
When looking, I really do try to take into consideration the potential cashflow from the unit, that’s very important for me. But also, since I do like to invest with as little money down as possible, I’m going to continue using that bank and using the equity that I have on the purchase to be able to act as a down payment where I don’t actually have to put my own money down. So the spread between the purchase price and the appraised value also has to be really high for me. It’s almost like I’m looking for a wholesale deal that I can wholesale to someone that has a spread in the numbers for me to be able to profit off of. But then rather than wholesaling to someone, I just keep it for myself.

David:
So it sounds like you’re looking more at the property itself than you are location or things like that.

Daniel:
Absolutely. It definitely is on a property by property basis. There is a wide range of properties in my market. They’re all really, really spread out, but I can’t say absolutely that I’m looking for properties under 200,000 or above 200,000. Because if it has a spread and if it has cashflow on the deal, I’m probably going to take it.

Brandon:
And what’s been your biggest challenge so far, in building your portfolio?

Daniel:
Definitely being able to scale and setting up the processes that come into place. It’s easy to do when you have a single duplex and you manage that duplex for a year or two, and then you get two more units and then manage those two for a year or two. But going from nothing to a lot of units, I think we were up at 15 at one point, the management aspect definitely takes a lot more time and planning than we initially expected. So having the systems in place, using a software to manage rent collection, we stopped accepting cash almost instantly because it was a headache. And then having things like fees automated, having vendors set up also has taken a long time. To be able to organize a list of people we call if the plumbing needs repair, if the electrician needs to come out, if it’s just a maintenance, if it’s a cleaning service, whatever it is. We have people on our list, on our roster and systems in place to be able to contact them quickly. To get the service out as quickly as possible. And that’s taken a lot of time to organize.

David:
Is there any specific software platforms that you’re using to manage that component of it?

Daniel:
Personally, right now we’re using TenantCloud, because it allows for rent collection and then also management of repairs and it’s just very easy to be able to communicate with the tenants on that app. But we’ve tried a few others. I can’t say exclusively that I’m going to use TenantCloud forever. It’s just something that’s worked really well for us now and it allows us to automate as much as possible.

Brandon:
Yeah, I’ve heard some good things about that. And this whole conversation is what we’re talking about, is what we were talking about earlier with stabilizing. This is all the stuff you got to figure out; who are you going to call, who’s your contractor, what’s your policies, what software are you going to use, how are you going to collect rent, what aren’t you going to do when you collect rent, like cash? So it’s figuring out all of those things. And then once you have, you go and then you build your portfolio for a little bit. And then you’re like, oh, I got to get systems, and you build your systems. And you’re like, okay, I got to go find some more properties.

Brandon:
And then you buy those more properties and then you got to get more systems for those as well because you’re usually taking it to a new level. And that’s just the life balancing or the work balancing of a real estate investor journey, which is cool to see that in your story. All right. So you mentioned earlier a flip, you did a flip. You said, oh, I could talk about that. I’d like to know about that. So are you flipping houses or was that an accident?

Daniel:
It was an accident and I didn’t really intend for it to be a flip until the very last moment. But this is actually one of the ones that I was hoping to save for the Deal Deep Dive, just because there was so much that happened with that property.

Brandon:
Well, good transition to-

David:
There it is.

Brandon:
The Deal Deep Dive.

David:
The Deal Deep Dive.

Brandon:
The Deal Deep Dive is the part of the show where we dive deep into a property that you’ve bought recently and get all the details about it. So since you have a property in mind, why don’t we start with number one, what kind of property is it and where is it located? It’s really two questions, but.

Daniel:
So it is a duplex in Fairbanks, Alaska.

Brandon:
Okay.

Daniel:
And it was just in need of a light cosmetic refresh, so we thought we could pick it up and quickly bag a deal.

Brandon:
All right.

David:
Okay. How did you find this property?

Daniel:
This property was on the MLS and my wife actually found it scrolling through Zillow. She’d found it multiple times over and each time it seemed like a better deal, so price was dropping, but it had been sitting there for eight months.

David:
Oh, that’s the key. Look for houses that have been on the market longer than what is typical for your area. Increases your chances a lot. Okay, Brandon.

Brandon:
How much was it?

Daniel:
They were originally asking 175, they kept dropping the price every couple of weeks by $1000. And I ended up getting it on a contract for $140,000.

Brandon:
Oh, wow.

Daniel:
And then after some more negotiation, we ended up buying for 130,000 with no money down.

Brandon:
Ooh, okay.

David:
Beautiful. Okay. How did you negotiate that price?

Daniel:
We had an incredible inspector just tear it up and write a New York Times bestselling novel, telling the seller everything wrong with the property. And it just ended up being this incredible negotiation between my realtor and the inspector. And it was just clear that the property, which was on the market for almost a year now, was not moving unless we had a really good deal to take it.

Brandon:
Yeah, definitely motivation increases. The negotiation becomes easier, the longer those properties sit for. Was it vacant for the seller when they were selling it or they rented for them?

Daniel:
There was one unit rented and one unit vacant, and we expected to be inheriting that tenant but it didn’t quite work out.

Brandon:
Okay. So you mentioned no money down. So how did you fund this then?

Daniel:
That’s what made the deal so special. This was my first no money down deal. And I worked with that flexible credit union I talked about and I got them to agree to give me a loan based on the appraised value. And this was very critical because usually, for people who don’t invest in real estate, banks lend on the lesser of the purchase price or the appraised value. This keeps them safe and just ensures that they have enough equity in the deal when purchasing, that you have enough skin in the game. But this credit union was letting me flip it and letting us finance the greater of the purchase price or appraised value, which made it very special. So they still required 15% as a down payment, and it was based off of the 130,000 purchase price, so we could only get a loan for 110.

Daniel:
Meaning, with 130,000 purchase price, we needed a 20% or a $20,000 down payment to purchase it. But since we were able to base the loan off of the appraised value, when the appraisal came in, the property was valued at $150,000. And that 15% down payment requirement meant that the biggest loan we can get was $127,500, making almost a $20,000 difference in the loan limits. And then I remember after I looked at the appraisal, I was like, ah, we’re just a little bit short. I still wanted that no money down deal because I knew it was possible. I knew it was out there. And after a quick call to the credit union, they were able to relax that 15% down payment and just round it up to a total loan amounts of $130,000. Meaning, I purchased the house for 130 and I was getting a loan for 130 and I had no money in it.

Brandon:
That’s awesome, man. That’s very cool.

David:
Okay. So now you mentioned it was a flip, so we don’t have to ask you what the dispo was, but why did you decide to flip it instead of hold it as a rental?

Daniel:
Well, this property was actually a really big disaster. And this is where I wanted to warn all of the hotheads getting into real estate, scaling to a million dollars in their first year thinking they’re the King of the world. Things can go wrong and you definitely have to have equity in the deal. You have to have some kind of barrier between you and losing a lot of money to keep you safe. Even though I had no money in the deal, I definitely did have equity. When I purchased the property, I had that $20,000. And if I didn’t have that, it could have easily ended my real estate investing career. So I was managing the risk and of course I did have some cash sitting on the side to keep me safe, and of course I had several zero APR credit cards that I wouldn’t have to pay back for 15 months.

Daniel:
But I definitely needed that little bit of equity to keep me safe through this. Because after all the remodeling, all the repairs, the vacancies and everything that we just put up with, it was a nightmare for six or eight months. And my wife and I just had too much of it, it was an emotional drain and we ended up calling it quits on the property. We wanted to keep it as a long-term rental, but it was just too much. And by that time, I think about eight or 10 months in, we already had a really solid portfolio that was giving us enough cash flow from the other units to where we could easily sell this one off. Again, because of the equity that we had when purchasing the property.

David:
And that’s the point to put out there, is there’s a lot of what ifs that you should be thinking about when you invest in real estate. It’s often the other way, like what you just mentioned, I wanted to rent it but the cash flows aren’t what I thought. If you bought it right, you can get out of that thing without that much damage. And it could go the other way too. I wanted to flip it, I wasn’t going to sell it for as much as I needed to, so I’m going to hold it as a rental. It’ll pay for itself and then I can sell later. So that’s a great lesson to take out of the Deal Deep Dive. Is, you should have more than one exit strategy, especially when you’re new. And this is exactly why that cushion saves your bacon.

Brandon:
Yeah, that’s cool. So what was the outcome then on it? And what’d you end up actually making on the flip?

Daniel:
So we purchased it in August for 130,000 and we sold it the very next August for 195,000. And that 65,000, it sounds like a sweet deal. It’s like, whoa, you made 65,000.

Brandon:
Yeah.

Daniel:
But we actually only made $10,000 of that in profit, the rest of it went to remodeling, repairs, dealing with a frozen pipe, dealing with groundwater that resulted from a really quick spring. All of the snow, the two feet that we had in the spring melted in the course of about 10 days and everything around there was flooded. So it ended up being a really close call. And definitely, if we didn’t have that 20,000 in the deal to begin with, we would have not made it out. And it could have been way, way worse.

Brandon:
Yeah.

David:
First time I’ve ever heard someone mention that the snow melt rate is something they had to take into consideration when flipping a house. It’s funny. It’s definitely a unique metric there. That’s good. Okay, so last question. What lessons did you learn from the deal?

Daniel:
Just because I had no money into this deal didn’t mean that I didn’t have the equity. With the loan for 130 and the appraised value for 150, I had that 20,000 to keep me safe. It’s just that I didn’t have to pay for it. If I went into this with 100% finance deal with no equity, I definitely would have been sunk. And so that equity, keeping yourself safe, risk management is definitely something to consider even when you know how to get loans without your money involved.

David:
Yeah. Good stuff, man.

Brandon:
Good. And I love Deal Deep Dives where the things … I wouldn’t say it was a disaster because you still made money and it was still good. But there was a lot of lessons learned in the Deal Deep Dive. I think that really benefits our audience. So thank you for sharing that, really good stuff. Before we start to move towards the outro of today’s show, couple of quick questions. First of all, where do you see yourself headed from here forward?

Daniel:
I definitely want to expand what I’m doing on TikTok and on YouTube. I’d love to be able to help people on there. And it’s really incredible to make money through real estate, but I think it is so much cooler to wake up to a DM from someone saying, hey, I did this thing with my credit card and my score improved. Now I’m able to get the house that I wanted for 1% less in interest, saving me hundreds of … I mean, that’s crazy and it seems unreal, and I definitely want to be able to continue doing that as much as possible.

Brandon:
That makes sense. That’s cool, man. What about portfolio-wise? Are you going to get in multifamily ever, are you going to stick with what you have? Where do you see yourself in five years?

Daniel:
Oh yeah, definitely more cash flowing rentals. I think it’s fun to flip, even more fun when it doesn’t end up being a disaster because of the snow. So I will try it again, hopefully all in the summer so I don’t have to deal with that. But definitely, definitely more opportunities for that. My wife and I just find it way too much fun. And we’re always going on our walks with our Huskies up here in Alaska and looking at different properties thinking, oh, that’d be cool. Or, look at the peeling paint on that one, that’d be a quick flip.

Brandon:
That’s awesome, man. And then my last question, before we head to the famous four, what can our audience do to bring you value right now? What are you looking for in your business, real estate-wise? What can people bring for you? Are you looking for type of deal? Are you looking for something else?

Daniel:
I’m looking for something else, I’m just looking to help you guys understand. So if you wanted to follow me on TikTok or on YouTube, I definitely break down all my deals on there. You can look at every single one of the deals that I’ve done, how much money I made, whether I lost money, what it cost me, that kind of stuff. And I think that it will be exceptionally helpful for people who are just starting out in real estate because they can see it’s not quite that hard to get started. And once you get started, it only gets easier.

Brandon:
That makes sense. Cool man. Well, that said, let’s get over to our last segment of the show. It’s time for our-

Speaker 5:
Famous four.

Brandon:
This is the famous four, the same four questions we ask every guest, every week and we’re going to throw them at you right now, Daniel. All right. Question number one. What is your either current favorite or all-time favorite real estate related book?

Daniel:
Definitely The Book on Investing in Real Estate with No (and Low) Money Down. Thank you very much for getting me started, Brandon.

Brandon:
Aw, thanks.

David:
I’ve always wanted to know, what’s that book about?

Brandon:
Shut up David.

David:
Yeah, we hear a lot of good things about that book. So thanks for mentioning it there. I brought it up earlier when you were talking because for people who are looking to bridge that gap between I haven’t bought a house, I want to get my first house, that’s a really good book just to put ideas in your head-

Brandon:
Oh, stop. Stop. Stop.

David:
… just to get some momentum going. I’m sure it’s terribly written, but the ideas themselves are very good. Concerned well-written books, what’s your favorite business book?

Daniel:
It sounds a bit corny. I know a lot of people say it, but it still is the four hour work work-week. I read it every year in December and I always find myself coming out with something new and some new highlights or something that I got from the book that I didn’t the year before.

Brandon:
I also read that about once a year. I listen to it about once every year on Audible and it always fires me up.

Daniel:
Tim Ferriss is definitely, definitely a writer. A good one.

Brandon:
Yeah, I agree.

David:
He’s had a shot at Brandon and his writing. [crosstalk 00:46:22].

Brandon:
He’s actually a good writer, unlike some people who write books.

David:
First book I mentioned. We should have Tim Ferriss rewrite The Book on Investing in Real Estate with No (and Low) Money Down. It’d be so much better.

Brandon:
Oh my gosh. You guys horrible.

David:
Anybody knows Tim.

Daniel:
Let him write.

Brandon:
Yeah, you guys are horrible.

David:
All right. When we’re not ragging on Brandon, what are some of your hobbies?

Daniel:
Wow. I love just being out in Alaska. We are very lucky to be living on a private airstrip and my father-in-law flies.

Brandon:
That’s cool.

Daniel:
So that’s an awesome opportunity to do anything fun. Either it’s fishing, walking our dogs, being able to ski, all kinds of fun Alaskan things.

Brandon:
All right. Well, I’m going to fly in and come hang out with you next week. We’ll be there, me and David, coming up.

Daniel:
Hey, seriously, let’s do it. Get on a private plane, let’s just take a quick trip on the mountains.

Brandon:
That sounds like-

Daniel:
I don’t know about the insurance on that, but-

Brandon:
Yeah, who knows, whatever, whatever.

Daniel:
If you’re wiling to risk it.

Brandon:
We got life insurance, we’re fine.

Daniel:
Okay.

Brandon:
Yeah, we’re good. My last question. What do you think separates successful real estate investors from those who give up, fail or just never get started?

Daniel:
I think successful real estate investors are definitely persistent. If you want to be successful, you have to keep trying to make it work, especially in the world of real estate where there’s always a way to make it work. Even if you have no money, you just need to be persistent.

Brandon:
[crosstalk 00:47:43], man. Very good. All right. Tell us where people can find out more about you.

Daniel:
I share everything on YouTube and TikTok. I have a community of over 600,000 followers now. Actually, let’s check on that. I forgot the number that I said at first.

Brandon:
Yeah, me too. [crosstalk 00:47:59].

David:
I think it was 13,100 or something like that.

Daniel:
So it is 610,800 followers, which I think is more than the first time. I think that’s like 700 more.

David:
Yeah, you gained 700. Yep.

Daniel:
That’s crazy.

Brandon:
Wow.

David:
That’s crazy.

Daniel:
What an opportunity. But I also wanted to leave the BiggerPockets listeners with some incredibly valuable resources. I’ve just put together a list of tools that I use to manage and master my credits and credit cards. These are things that I use every week, if not every day, sort of like a goody bag for the people who made it to the end of the show. I thank you very much. BiggerPockets listeners can get it completely for free, of course, at danieliles.com. That’s D-A-N-I-E-L-I-L-E-S.com. And I think you’ll find them incredibly useful as I have.

Brandon:
All right. Good deal, man. Well, thank you. This has been phenomenal. I appreciate you sharing your advice, your wisdom, and yeah, Keep crushing it over there on YouTube and TikTok. You’re reaching a lot of people, helping them, you’re spreading the good word about real estate and financial freedom. So keep it up, man.

Daniel:
Thank you so much, Brandon.

David:
Thanks Daniel. This is David Green for Brandon, good books, bad writing. Turner, signing off.

Speaker 1:
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