A Straightforward, Repeatable Path to Early Retirement with Jennifer Bayless

This is the BiggerPockets podcast show 310.

Get a check for 30 something thousand dollars from that first house and apply it directly to that second house and that’s when the lightbulb went off. We said oh my gosh we’re walking away with two houses for the amount of cash that we had originally put in one. They’re both cash flowing. This is amazing. We have to keep doing that.

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Brandon: What’s going on everyone? My name is Brandon Turner, host of the BiggerPockets podcast here with my cohost David the man Greene. It’s been a while since I threw in the man nickname. You like that?

David: Yes, but don’t you ever forget it.

Brandon: I will not forget it. No. Man have you been? How you been? You got to come out to Hawaii again sometime. We got to hang out.

David: I think we’re planning what like February, March around that some time.

Brandon: Yes somewhere in there we’re going to get you out here again because and actually Kevin who is our new producer of the podcast. Kevin is an awesome dude who’s actually here on this call right now, but his Mike is muted so nobody’s going to hear or see him, but Kevin you want to say hi?

Kevin: Hey hey.

Brandon: There he is. All right so Kevin is our new executive producer is that what we call you? I don’t know senior producer, executive. I don’t know whatever. You make this show good.

Kevin: The man.

Brandon: The man.

David: Yes.

Brandon: That works out.

David: It sounds like were keeping Kevin in a cage and we like let him poke his head out to say hi then shoved him right back in there.

Brandon: Yes, pretty much. Not everyone is always going to be like know our secret that Kevin’s here on the calls with us. Anyway, they we’re actually both going to come out here to Hawaii and hang out with me at some point do a little podcasting powwow, but with that said I don’t want to talk about us today. I want to talk about Jenny.

Our guest today is Jenny Bayless. She is awesome. She’s a real estate investor who has a very straightforward repeatable path. She has like 10 properties.

This is super attainable for everybody listening to the show right now and she talks about how she built that using the BRRRR strategy as well as some turnkey stuff. Make sure you listen to the discussion on turnkey. She talks about how she did an accidental BRRRR and how she used that to buy more properties. She says two cash flowing houses for the cash down of one. Listen for that.

You guys are going to be blown away by that strategy. It really illustrates the power of BRRRR investing and then I mean there’s so much good stuff in this, but especially listen to the end when she talks about Zorbing. You guys are going to love it. I can’t wait to try Zorbing. Apparently that’s like a thing so that said before I can introduce you to Jenny let’s hear from today’s show sponsor.

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Thank you to our show sponsor. You all are awesome. Thank you for sponsoring the show and of course everyone listening to the show. Make sure to rate and review our show over in iTunes.

Here we are going into a new year so you know it’s just after the holiday season and if you want to give us a holiday, Christmas, new year present just rate and review the show in iTunes then let us know that you did. Shoot us a message over on like Instagram or tag us in an Instagram post. You can tag @DavidGreene24 or you could tag @BiggerPockets or @BeardyBrandon. either one and let us know that you did. We can give you a virtual high-five that way and last thing before we get to Jenny. Let’s hear from today’s Quick Tip.

David: Quick Tip.

Brandon: All right short and simple. Today’s quick tip is to invite you personally to this coming week’s webinar how to make 2019 your best real estate investing year ever. It’s going to be super epic. It will likely be the largest webinar we’ve ever done at BiggerPockets.

Thousands of people are going to show up to this thing and you should be included. We’re going to talk about how to set the best goals, how to make an action plan to achieve them. It’s going to be awesome. Go to BiggerPockets.com/webinar to sign up again BiggerPockets.com/webinar and if you’re listening to this in the future, if you’re Pro member you can watch unlimited webinar replays so of course go back and check that out.

The replay of it and you know every week we add a new webinar so again biggerpockets.com/webinar and finally it’s time to get to today’s show so today’s guest is Jenny Bayless. Jenny is a real estate investor who invests first out-of-state now in-state of she lives in Denver and she doesn’t use that excuse of well Denver is too expensive to not invest. Instead she manages from a little bit of a distance and she is just got a really great attitude and a great strategy that anybody here can adapt so without further ado let’s get to the interview with Jenny Bayless.

Jenny welcome to the BiggerPockets podcast. It’s awesome to have you here.

Jenny: Thank you so much for having me on. It’s a great honor.

Brandon: Yes, this should be a lot of fun so I want to start. I love your story by the way from what I’ve read and what I’ve heard about you I just love your story and I think people are going to love it too so why don’t we start at the very beginning. How did you get into real estate?

Jenny: Sure so I feel like my story starts a lot like other people who get into real estate. Did the typical thing. Went to college. Got a degree.

Got a decent job afterwards. A couple years later bought our primary house. Then after that we realized that we were just saving up money then our savings account or our 401(k) and I knew that there had to be a better option out there you know 401(k), we’re not going to see that for 30 or 40 years. Savings account you get .001 interest you know percent interest on that so we started looking at different investment vehicles and that’s when I came across real estate investing.

Just the amount of benefits of that was just unbelievable as I was reading more and more about it and going into it I thought real estate investing was only for rich people and it wasn’t until I started understanding that this is something that an average person can attain and that is when the lightbulb clicked for us.

David: That’s awesome.

Brandon: That’s so true right I mean I think most people assume that real estate is something rich people do because it is something rich people do.

David: Yes.

Brandon: Like if you want to be rich, emulate what rich people do and rich people tend to invest in real estate. I would argue.

David: That’s good.

Brandon: Almost every rich person I know owns real estate somewhere. It might not be the primary thing in life, but almost every rich person I know owns real estate so, but the great thing is.

David: Can I jump in with a question here?

Brandon: Yes.

David: I’ve heard many accountants and bookkeepers say they got into real estate investing because they saw all of their wealthy clients owned real estate. Did that play a role at all with you Jenny? With your decision to invest?

Jenny: No, not in the line of my work that I do, but just through accounting like the educational piece of it. It helps me to understand the baseline of real estate investing so I think that helped a lot too.

Brandon: Sure actually on that note I mean while we’re on that topic we’ll start the show a little differently. Usually I ask about you know tell us about your very first deal. Before that is there anything I’m just curious is there anything from an accountant standpoint that like you feel that you are more of a rock star that you want or maybe where you understand better or that you feel like you’ve got a special power because you’re an accountant. I mean this answer might be no I don’t know, but you think is there anything that you’re just like oh yes I get this intrinsically. Everyone else seems to struggle with it because I’m an accountant.

Jenny: Oh no I don’t think that any of the concepts that you need to be successful in real estate investing is something that you have to have some sort of business background on. I’m not going to lie it definitely helps me jump through a lot of the beginning things. You know I understand how to read a balance sheet, an income statement. I understand the basic tax laws that relate to real estate investing so that helps, but it’s nothing that someone can’t do on their own or through the help of their accountant.

Brandon: Awesome. I love it. I love it and yes again I kind of ask that because a lot of people have the what’s that the syndrome we call it. It’s like must be nice syndrome I call it. The nice. Oh yes it must be nice to be an accountant. You can just jump into real estate, but I’m you know something else. Everyone has got that limiting belief of wealth. Must be nice. Right?

Jenny: Right.

Brandon: Like you said there is nothing that you, there’s nothing that your career so that you have to do that in order to succeed. Like anybody can do it. Again it’s nice. It’s helpful.

Jenny: Yes.

Brandon: But not required.

Jenny: Exactly.

Brandon: Okay cool. All right so first deal. What was your very first property you ended up buying?

Jenny: We actually ended up doing a complete 180 to our real estate strategy so our very first property we first couple of properties we invested in turnkey properties out-of-state in the Midwest and it wasn’t until. Well I guess I should probably backup. I lived in a very expensive market at the time that we started to decide that we’re going to move forward with real estate investing and kind of fell into the mindset of oh I live in an expensive market. I’m not going to be able to by anything local. I have to go out-of-state and during that time, during that same year 2016 we moved across the country to Denver for work and a few months after that we purchased our first local investment property. That local investment property was the catalyst to us completely reevaluating our strategy and doing a 180 on that.

Brandon: Why is that?

Jenny: Basically what happened was on our first property we were able to do what I call an accidental BRRR and through that process a lightbulb clicked and said, “Oh my gosh we’re creating equity doing it this way.” Whereas when we’re investing out-of-state everything was fine. There’s nothing necessarily wrong with it, but we didn’t have any equity other than what we put in. It was that lightbulb moment of after the BRRRR transaction completed is when we realized wow we’re creating equity. We’re able to turn this equity into more properties and we’re able to scale quicker than we ever would have been able to just putting in our own cash.

Brandon: Yes, that makes a lot of sense so okay so let’s talk turnkey again for little bit. This is a very common thing that people come to a BiggerPockets. They live in LA or you know you know Washington DC. Is that where you’re from? I think I read that you were there.

Jenny: Yes, right outside DC and.

Brandon: You are in DC. Places are crazy there right.

Jenny: Yes.

Brandon: You live in. Yes you live in Hawaii or whatever right. You live in an area where you’re just not going to find cash flowing rental properties right. Even people live in Denver tell me that you can’t buy properties in Denver. We’ll get to that in a minute, but like they say you can’t invest if you’re a Denver person so anyway the point being you decided to go turnkey, which is what a lot of people do right.

Jenny: Yes.

Brandon: Turnkey companies are for those who don’t know they are companies who exist to find properties, fix them up usually, not always. They’re always like every company is a little different, but usually we’ll fix them up for you. Then they’ll put a tenant in there and then they’ll rent them out for you. They manage it and everything pretty much all you have to do is like turn the key. That’s where the name comes from right. Like that’s what you did right.

Jenny: Yes.

Brandon: Do you think that was a good idea for your first couple of deals.? I mean a lot of people on the BiggerPockets audience listening right now are thinking well maybe I’ll start with a turnkey. What’s your overall impression of that?

Jenny: I am thankful that we actually did it. Believe it or not and the reason for that is because we are able to learn the process of going through buying an investment property, getting the monthly income coming in. Figuring out all of that stuff kind of like with training wheels is kind of how I equated it. You’re not going to go very fast, but you’re also probably not going to fall facedown. You could, but you know by doing those turnkey properties we understood the fundamentals of it and I think by doing that we were able to translate that to when we started going off on our own and doing it that way.

David: I think that’s a really good analogy. I’ve said the same thing. Training wheels will keep you from getting hurt, but they’ll also prevent you from realizing your potential and if you’re if you know that’s what your struggle is is your like man I really want to ride a bike, but I just cannot get over the fact I might fall and skin my knee. Then a turnkey solution might be perfect for you and you do one maybe two and you’re like okay I got this. It’s not as bad as I thought. You do your own thing. What you don’t want it is to get dependent on training wheels so that your idea of riding a bike is running around training wheels all the time and you never really learn the tricks that you want to go fast and get far.

Jenny: Exactly.

Brandon: Okay so I want to do a little bit more on the turnkey thing so you’re saying you don’t regret doing it because it was like training wheels. You got started a little bit. I agree entirely right. What are some of the downsides and what are some of the upsides of turnkey?

Jenny: The downsides would be the lack of control that you have. You don’t have the ability to create equity. You don’t really have the ability to have any input on the management side of things, which for some that might be a blessing. For us we wanted to do things a little bit differently. You don’t have control over the contractors that are being used. All those can summarize to control essentially in various place. Some of the benefits are you are a little bit protected in the sense that the turnkey operator is going to want to make sure that their reputation is upheld so they’re not going to sell you a bad product and this is speaking generally of course. There’s always you know you always need to vet everything, but they’re going to make sure that things are pretty decent so that you’re kept happy.

David: Yes that’s awesome.

Brandon: Okay so kind of to summarize a little bit. Again this is partially my opinion, but based on kind of what you’re saying is the same thing. Like turnkey can work. I mean that’s what we always believe. The turnkey didn’t work. Now there are some turnkey providers who are have a great reputation and people love them. In fact we’ve had sponsors of the BiggerPockets podcast and I have friends that own these companies right. I think they’re fantastic. Then there are other ones that you hear reviews in the BiggerPockets you know forums and all over like just shady people so like you can’t assume a turnkey company is going to be this golden ticket to wealth.

Jenny: Yes.

Brandon: You also can’t assume it’s going to be bad right. The same way if you’re going to hire a property manager 10 feet away from you versus a thousand miles away from you you kind of still have to do your due diligence. Still have to manage the manager. You still have to check your numbers right. I always say never let anybody do your math. Don’t let a turnkey company do your math. Don’t let your mom do your math. Don’t let your spouse do your math. Don’t let David Greene do your math especially. Like just like don’t like you got to do your own math. Right?

Jenny: Exactly.

Brandon: No, David is actually very good and math. Like at the end of the day you’re responsible for your financial future so don’t assume somebody else is going to get you there. Do you agree?

Jenny: I completely agree.

Brandon: All right rant over. I get this question so much on like BiggerPockets webinars. Like by the way speaking of webinars if you are. If you’re listening to this show right now you have not attended one of our webinars we do them every week. There are some go to BiggerPockets.com/webinar to sign up. Anyway I talk about that a lot because people just want to they live in expensive markets so. All right so you decided let’s transition back. You decided after a couple of turnkey properties out-of-state. What city was that by the way? That you bought the turnkeys in?

Jenny: Indianapolis and Chicago. Yes.

Brandon: Okay so you decided to change strategies and buy local. Now you’re in Denver. Are you buying in Denver?

Jenny: We’re buying an hour south of Denver in Colorado Springs.

Brandon: Okay.

Jenny: Yes we decided to invest there because my husband was down there for his job and he called me up and he said, “Hey have you do you know anything about this market?” I said, “No, not a thing.” Everything started to you know pencil out on papers when I started to do some more due diligence on it. Looking into the market and everything and once things started to pencil out I said hey I think we might be onto something.

We live right in Denver, but we’re only an hour away from the city that I think will be a really great potential for rental properties so we ended up just going down there pretty frequently. Walking the neighborhoods, looking at properties, either properties that had already been rehabbed. There are properties that needed to be rehabbed. To just get a general understanding of that city.

Brandon: I love that. I love that so one thing that Josh Dorkin and I used to say all the time back when Josh was here on the podcast and now David Greene and I have said it too like you can invest long-distance. In fact, David Greene here invests all over the country. He lives in you know the Bay Area of San Francisco. David even wrote a book on long-distance investing. It can be done, but at the same time long-distance might mean an hour from you. Like you did right like.

Jenny: Yes.

Brandon: We used to always say within a two hour drive of every single location in America you can find properties that cash flow. Now it might be a different quality that you were thinking or a different style you were thinking. Even here in Maui I can find cash flowing property. I have friends that do it, but it’s like a matter of maybe you have to get in your car and drive an hour or two right.

Like and that sucks, but you know what you know you make the sacrifice if you have to make the sacrifice. Then the same principles apply whether you buy an hour, two hours from your house or eight hours from your house. The nice thing if it’s an hour like you you can drive down if you had to to check out problems or whatever. I love that so you found that market just by you know your husband saying hey what do you think of this market? Do you know anything about it? Researching it and figuring out that it could work right.

Jenny: Exactly yes.

Brandon: Okay so what was the first property you bought there? What kind of property was it?

Jenny: I like to refer to our first property affectionately as our accidental BRRRR property.

Brandon: Okay yes that’s that one. Okay.

Jenny: We ended up buying it on the MLS and it’s a single-family home. Three bed and one bath. Really old house. I think it was built right on the turn-of-the-century and we were able to get it for $126,000 and we went about it the traditional way. Just kind of the way that I think most people think that’s how you acquire properties and that was by doing a conventional loan. Putting 20% down and we funded the rehab for the property ourselves so with the loan it was about $25,000 for a down payment and then we ended up doing $10,000 for our repair which included paint, flooring, countertops. Just cosmetic type stuff.

Brandon: Sure.

Jenny: From there we got a great tenant in there and it was when I was evaluating for our second property locally. When I started noticing that all these houses in the same neighborhood that are the same level of repairs. They’re selling for $180,000 easily like snapped up real quick.

Brandon: Yes.

Jenny: I said you know I talked to my husband about it and I said, “I think this is a potential for the BRRRR thing that we keep hearing about you know.” We keep hearing about BRRRR. We didn’t really know how it worked. We understood conceptually how it worked, but we didn’t know how to do it mechanically and at that point we were like well what do we have to lose.

We already have a house. It’s decent enough you know in terms of numbers. We have a lot of cash in it looking back at it now, but at the time we were like yes this is fine and what do we have to lose? We’ll learn something from it at a minimum so we called up our lender and said, “We would like to do a cash out refinance. We think that this house is worth a $180. Sure let’s get it appraised.” Next thing you know it was worth a $180,000 and I said, “Oh okay well this is great. Now what do we do?” We finished the refinance and interestingly enough we we’re actually closing on our second local property that very same day so.

Brandon: Oh nice.

Jenny: The day that we we’re going to complete the refinance of that first property, the BRRRR we we’re actually going to purchase the second local property that we planned to buy and when we were at title, we were able to get a check for 30 something thousand dollars from that first house and apply it directly do that second house and that’s when the lightbulb went off. We said, “Oh my gosh we are walking away with two houses for the amount of cash that we had originally put in one. They’re both cash flowing. This is amazing. We have to keep doing that.”

Brandon: Love that. I love that. Yes that’s the BRRRR strategy.

Jenny: Yes.

David: Jenny remind me what did you pay for that first house that you—the accidental BRRRR.

Jenny: $126,000 was the purchase price.

David: What did you put into the rehab?

Jenny: $10,000.

David: It was worth $180,000 right?

Jenny: Yes.

David: Okay so would you agree with me that the best I guess most meaningful part of this whole process of buying it, fixing it up, renting it out, rehabbing it, refinancing it was when you bought it because that’s when you may the majority of the money that was involved.

Jenny: At the time we did not realize that, but looking back and reflecting on it absolutely.

David: Okay good so that’s the point I want to make it is when you buy a deal below market value, you’re making the majority of your money right up front when you buy it. That’s why people say you make your money when you buy. If you pay too much you can’t make up for it by over rehabbing it or trying to push the rents up more than what they should be. It always ends up backfiring. By BRRRR-ing that house and getting your capital back out and that’s kind of cool that you immediately put it into the next one like same day.

If you’re getting a good deal on that second house you’re now making a lot more money the minute you buy another one below market value right. That’s what’s so cool about BRRRR is that it allows you to buy more homes and as long as you’re buying them at a really good price your wealth starts to stack up crazy. My guess is that’s why you’re doing it this way now instead of the turnkey model because when you buy a turnkey you’re not necessarily getting a lot of value in the house. You’re not buying it below market value so the curvature of building wealth is much slower because you got to wait for it to it to appreciate over time and wait for rents to go up as opposed to when you buy a really good deal right out the gates you added a bunch of equity and you’re making some pretty good cash flow and you’re moving down the path. Would you say that’s a fair summary of what you’re doing?

Jenny: Absolutely.

David: Okay and that’s why Brandon and I always talk about BRRRR right because you don’t want to run out of money so where you can’t keep buying homes especially now Jenny and her husband are doing so good with buying properties. If they ran out of money all this skill and talent that you have and the systems you made would be useless because you don’t have any way to keep buying houses.

Brandon: Yes that’s why we love BRRRR so for those who don’t know about it BRRRR stands for buy, rehab, rent, refinance, repeat. You buy property, you fix it up. You buy a fixer. You fix it up.

Then you rent it out and now you got a nice house. It’s already fixed up hopefully, which attracts better quality tenants, which hopefully won’t have many repairs and maintenance and cap X for years because you’ve already fixed it up. It’s renting at the highest to market you know rate possible because it’s a nice property in a nice area so then the property’s worth way much more money. Way much more.

Is that a thing? Way much more money so then you go to refinance it just like it was worth 180 so will you refinance it just like you did so you can get you’ll get all your money back out of it as much as possible and now you can repeat it. B buy, rehab, rent, refinance, repeat. It’s a strategy again we talk a lot about it. It’s actually been done for probably hundreds of years.

I don’t know about back we put the name BRRRR to it. I know David Greene is actually writing a book on BRRRR investing that will be out I think spring or maybe it’s summer of 2019. Something like that so if you’re listening to this show in the future look for that book. It’s going to be awesome.

I’m actually really excited for that book because I think BRRRR is probably the great—one of the greatest of the greatest strategy in a market like today’s for building wealth because you also now if the market drops let’s say that $180 drops down to $150. Oh man that sucks if you paid $180 for it, but because you paid $126 for it it’s not as big of a deal right. It builds in this cushion as well. Now I want to know about Jenny why did you. Like yours but a lot of people are probably wondering well how am I supposed to find $180,000 house for $126K on the MLS. Like that sounds impossible right so like how did you get such a good deal? Was that just luck or what?

Jenny: I want to attribute some of it to luck, but I would also I attribute it to persistence. Once we made the decision that we we’re going to invest in Colorado Springs I can’t even tell you which number house that was that I put an offer on with my agent and not to mention the fact that that particular house when we walked in it it had severe sloping so there’s clearly like a structural issue going on. The inspection as that unraveled yes there was about $12,000 in structural engineering that needed to be done, but we were able to negotiate that into the property. I think that might have scared a lot of people off as well.

David: Such a good point.

Jenny: Yes.

Brandon: Yes people should listen to that again. Rewind that 30 second and listen again like. You go into a property and if there’s a problem with it that scares everyone right. Foundation, a bad smell. You know like there’s a few problems that just people hate like mold, lead-based paint. Those are the things that everyone runs away from. Like why not. I mean everyone is scared right so why not make an offer and then just negotiate it as part of the deal right.

Jenny: Exactly. One of my favorite quotes is the worst that they can say is no. All you got to do is ask and see how it works out.

David: Yes somebody asked me this. They commented on an article I just wrote on BRRRR on the blog and they said well yes that sounds great, but what seller is going to be letting the house go that’s worth $180 for $126.

Brandon: Yes.

David: That’s always the objection that you get is. Well yes, but why would somebody sell it so cheap, but if it’s got a problem nobody else wants to fix and you’re willing to fix it. That’s what you look for as an investor. Like there’s some form of distress that you can solve and in this case it was the structure and you actually went back and renegotiated and got them to lower the price, which is how you got this really good deal. That’s what good investors do. They don’t just go cruise on Zillow, find a pretty house and say, “Oh man a dozen cash flow I guess I can buy.”

Brandon: Yes.

Jenny: Exactly.

David: Yes.

Brandon: Go ahead.

Jenny: In this particular house we were able to negotiate it so that the seller would pay for it at closing directly to the structural repair people so that because we were doing a traditional, conventional loan so that didn’t make us bring more money to the table because you know 20% of a $10,000 cheaper house isn’t that.

Brandon: Yes.

Jenny: Extraordinary opposed to a dollar for dollar match to the contractor.

Brandon: Love it. Love it. It just goes back to the thing that we say all the time. In today’s market you don’t find good deals and today’s market you make the deals. Right you made that property a good deal and you might have even done it accidentally.

I don’t I mean it sounds like. You said an accidental BRRRR, but you know what like and the fact that you made a bunch of offers you said like you weren’t afraid to get them rejected. So many people are like well I just can’t find a deal. I’m like well how many offers did you make? Well I haven’t made an offer yet. Well okay then. Like that says a lot right so.

Jenny: Exactly.

Brandon: I love that. All right so let’s move on. What happened next? I mean you bought that first property. You closed the second property the same day. How did you find that one? Then let’s take a whole summary after that your whole property. Like how do you find properties in general?

Jenny: Sure so the second property. That was an MLS deal as well. We actually found it the day that we we’re going to get that first house appraised. We went there for the appraisal.

Saw that house pop up. Called our agent and said, “Hey can we go check it out?” Said, “Absolutely.” We went over and the rest is history for that and the way that we find our other houses so as of right now we actually own 10 buy-and-hold properties in Colorado springs so we found half of them via the MLS. The other half via off market type situations.

Brandon: Okay so I mean that’s cool you can still find deals on the MLS, but what are you doing for off market stuff?

Jenny: We admittedly don’t have a good system for that. We’ve used wholesalers. I have done the method where I’ve reached out to people renting their house on Hotpad and asking them if they wanted to sell it and that one caught one. I got one off of a Zillow Make Me Move. I got one off of Facebook post.

Brandon: Okay let’s go back and hit both. Zillow Make Me Move. I’ve never heard anybody. I’ve seen it on Zillow, but I’ve never heard anybody get in a deal that way. Can you explain that?

Jenny: Sure so Zillow Make Me Move typically it’s like oh I want you know $1 billion for this house.

Brandon: Yes.

Jenny: We just happen to come across one that was extremely reasonably priced. It was for $165 and it was a three bed 1 1/2 bath. We turn it into a 4-2 and now it’s worth $235 so yes. We just kind of saw the potential in that and you know scooped it up. Worked with a seller on that to get that property.

Brandon: All right I got one more thing I want to pull out. There’s just so many like gold nuggets in this. I just love this. Again it goes back to today you don’t find good deals. You make good deals so this is one thing I love about doing the numbers.

Like when I do the numbers on a real estate deal like I use the BiggerPockets calculators, but however person does their numbers right a lot of people will go this is the purchase price. Or the at—I’m sorry. They’ll go this is the asking price. We just said that a minute ago right. They’ll run the numbers.

They say oh yes it doesn’t cash flow. Move on to the next deal. You’re looking at this and you went okay wait. It doesn’t you know like what if I were to add another bedroom in this and then what if I were to take that 1 1/2 bath to a two bath.

Now it’s going to probably rent higher, be worth more money. Like you find a way. Like this is not a one dimensional thing. Real estate it is not a one-dimensional thing. When you start thinking creatively and three dimensional I mean yes I took a fourplex once to a five unit. I took a single-family house that had a weird garage. Made it a studio house and now rents for $600 bucks a month. Like there’s ways to get creative and make good deals out of what normally might not be. Right?

Jenny: Exactly and in a market like ours you have to or else you’re just going to be sitting on the sidelines.

David: That’s good so I like that you live in Denver, but you’re investing in Colorado Springs because you know that you have a shot there and you’re using creative strategies to make a deal out of something that wasn’t there so now you’re kind of stacking up all the strategies Brandon and I talk about. When you get the right combination together boom you got a deal. How are you looking at these properties that are an hour away. Are you driving out to every single property or are you getting some help with that?

Jenny: Our agent it is amazing. As soon as we first started working with him he understood that we lived in Denver and we also all collectively understood that in order to be most competitive on these market deals we need to be the first ones in and we need to make a strong, clean offer. With that being said you know Mike and myself were working full-time. A lot of times we’ll call up our agent and say, “Hey you know this property just popped up. Is there any way that you can go over and video it and send it to us so that we can kind of take a look at it and make an offer?”

Absolutely he goes over there. It sends it to us in our email. Gives us enough information that we get a good perception of the property that we can make an educated guess and we’ve been able to be successful doing that quite a few times.

Brandon: That’s fantastic. I love that so how do you find an agent like that?

Jenny: We kind of stumbled across them so back when we were doing our market research in terms of we’re visiting properties that were renovated. Properties that needed renovation we went into a renovated property and my agent was showing it because he had flipped it or he had partnered on the flip or something like that and we got to talking. We didn’t have an agent at the time. Told him what we were interested in doing and we all just sort of clicked. He really understood what we want and you know we all worked really well together and it’s just kind of blossomed into kind of a never ending situation.

David: That’s awesome. Okay so you’re getting the videos. You’re seeing the house. You’re getting a feel for what it looks like. Now how are you going about getting your rehab in?

Jenny: We have contractors that we’ve worked with and you know admittedly the first property that we did we were way off. Extremely off on that. We didn’t know what we were doing, but now that we’ve done lots of different types of repairs whether it be an electrical panel or plumbing or flooring we have good estimates that we can go back and look at to be able to prorate out to our current property. That’s just by talking to contractors a lot.

Brandon: That’s cool. That’s cool. All right so you said you you know you’re getting better at this obviously when you’re first starting out the rehab thing is tough right?

Jenny: Exactly.

Brandon: Is there anything you can I guess tell our audience that’s listening that they struggle with that. They struggle with estimating rehab costs. What do you tell them?

Jenny: Man, I would say talk to people that have done this before. Other investors and ask them what they think it will cost. I think that’s the best way of doing it so speaking to experienced people. Like I can tell you to replace a federal Pacific electric panel that’s going to be $2,100. Like I can tell you that.

I can tell you that my flooring costs are a dollar 50 for labor and they are three dollars for material. I can tell you all that stuff because I’ve done it and that’s really the only way that you’re going to be able to get ballpark estimates. I mean if you’re close to a contractor that’s another option that you could you know take them out to lunch and ask them how much would it be for you a thousand square foot house and if I want to do this.

Brandon: Yes that’s cool. That’s cool. That makes sense.

David: Brandon. I want to ask you something.

Brandon: Go ahead.

David: Because this comes up a lot like a lot of people have the question of how do I estimate rehab costs right?

Brandon: Yes.

David: Would you agree Brandon and you too Jenny that probably the best place to start would be learning the metric that the contractor uses to come up with the price. You mentioned I know that my flooring and my labor are going to be three dollars for materials and a dollar 50 for labor to do flooring right? I think just understanding that’s the metric that a contractor uses to give you a price on flooring is a really good place to start. Roofs are measured in squares.

It’s a price per square right? Cabinets are going to be measured by a certain metric. Countertops, paint. There’s going to be a price per square foot. I think if you’re stuck learning those things first like what does a contractor look at when he’s going to give. He is going to put a number to this metric is a really good way to get a firm understanding of what you should be looking for. Would you guys agree that’s a good baseline for people to start with?

Jenny: Definitely.

Brandon: Yes, definitely. In fact a couple of quick things about that so first of all as our audience probably knows like so we’ve launched a book a few years ago. What is it five years ago now called The Book Estimating Rehab Costs by J Scott. The book has sold I mean tens of thousands of copies.

Probably even more than that at this point. This thing I believe it comes out on January 3rd, we’re actually relaunching that book with all new like updated information. Things that we can you know basically because five- six years ago things were very different today. We’re relaunching that.

It’s an updated edition. New edition so even if you got the last one, I’d encourage people to check out the new one as well. Again it comes out on January 3rd. Go to BiggerPockets.com/store to either preorder it, which you can do right now or you can just flat-out order it if you’re listening.

Really really good, but the second thing about that because again let me ask you before go back there that book is all about that right. It’s understanding how contractors think and how they evaluate things. Once you do that now you can speak their language. How much is it per square foot?

How much is it per linear foot? How much is it you know how many hours does that project take? Different things take different things. The second point I want to make is that a lot of people don’t realize this, but BiggerPockets actually has a rehab estimator calculator and when we built it it helps you go through all various categories.

It’s based on the book, but it goes through all the categories and then what’s cool is you can add up all your different things based on the three different most common types of way contractors bid things. There’s time and material right, which hey it’s going to be this much for material and this much per hour or whatever. The time, material, and then there’s the cost per unit right. Like for example per square foot, per linear foot. You can add it that way or this is a flat fee.

Like hey, the furnace is $8,000. Right so those are like generally the three ways contractors estimate things so you can actually choose while you’re doing an analysis on the rehab calculator so check it out if you have not played with it. It’s just a really good way to get organized with your bids and with your estimates. Go to BiggerPockets.com/calc, C-A-L-C or just click the word tools in the navigation bar and you can check it out there so yes. I think everybody can use it five times for free, but Pro members get unlimited access to it. Moving on.

David: If we pick apart why Jenny is doing so well. What I’m noticing is that Jenny you understand a lot of different aspects a real estate investing, but you don’t make it your job to do all of it. You understand how contractors value things, but you’re not the one out they are swinging the hammer. You understood how to pump up your ARV like how an appraiser thinks, but you’re not actually running appraisals. Right you understand how to make the rents go up.

Now maybe you’re managing your own properties, but you wouldn’t have to. If you wanted to have someone else do it you would know how to pass it off to them and how to know if you’re being taken advantage of because you get it and that’s a point that I want to make. You don’t want to be the person who does everything in your business, but you do want to understand every person who’s involved in it so that you can make sure you pick the right person and that you’re making good decisions.

Jenny: Exactly. That’s how I would qualify it. There are strengths in this as well and to be honest I think to add on that it’s almost a benefit that we’re an hour each way from our properties because it makes us really think is this something that I need to drive down for or should I outsource it and chances are outsourcing it tends to be the answer 99% of the time.

Brandon: I absolutely love that you said that. Right so this is something that I’ve said in the past. One of the like I always said I wanted to drive by my properties. I wanted it to be within like with short driving. Like I mean I wanted to buy in my town for years that’s what I did. I still think it wasn’t a bad idea necessarily, but here’s the downside of that is that every problem becomes I can take care of it.

Right. I can take care of it. I can take care of it. If there’s a somebody gets locked out I’ll just drive into town to take care of it so by doing so I wasn’t treating my business like a business. I was just taking care of things as they hit me and it limited me on how much I could grow. By buying at a distance, whether it’s in hour or two hours—ten hours. David you—David Greene is actually the guy that taught me this.

You’re the one that convinced me this while we were sitting on the beach in Hawaii like three years ago our two years ago. Like we had this conversation. It like blew my mind. Like if I forcefully buy out of the area I am forced to become a better real estate investor. That just was like pow, you know mind blown. Anyway I love that you said that Jenny. That’s perfect.

David: Jenny is using these principles even though her properties are just an hour away. She could go do all this stuff right.

Brandon: Yes.

David: Jenny understands no, I’d rather find the next deal or make more money or budget or do something more important. I’m going to have to outsource it to somebody else and now you’re using business principles not employment principles. Right and we all know what it’s like to have a job. We don’t all know what it’s like to run a business so it’s very easy to be like Brandon and slip into what’s comfortable, which is oh something needs to be done. I’ll go do—that’s what I do at my job, but that’s not how business owners think.

Jenny: Exactly. I like to joke that we have a core 3 1/2 because we still do the management.

David: Oh it’s because you’re doing property management. That’s good. You’ve read my book because you’re referring to core four.

Brandon: I like it.

David: Thank you Jenny. Way to go. Okay so Jenny tell us where are you headed next? Are you looking to buy a 100 properties or are you looking to buy them and pay them off and just retire early. Give us an idea of where you’re headed and what you’d like your business to look like in the future.

Jenny: I know that I just spoke a lot about how we’ve used creative financing to acquire all these properties so quickly, but right now we’re going to kind of do a pause and we realize that with the 10 properties that we have in such a strong market that we’re in that we can reasonably assume that we’ll be able to retire and live very comfortably off of all these properties once there paid off. Right now we’re actually going to be using themselves to pay themselves off and kind of do snowball method of that. That’s not to say if a deal comes across my desk or I stumble across something that I’m not going to jump on it because I definitely will. It’s just not part of our master plan at this point in time.

Brandon: That’s cool and I think that just shows also you don’t have to have ambitions to have hundreds or thousands of units like you have 10 good properties. This is actually like a John Schwab in his book I can’t member what it’s called like building wealth one house at a time or something. I think he kind of makes his point if you could just buy 10 over the first 10 years by 10 properties and then spend the next 10 years paying them off. At the end of that you’ll have 10 properties free and clear probably making 10 to 15 grand a month in passive income and great you’re retired.

Jenny: Absolutely.

Brandon: Like. That’s fantastic right so I love that just a different way of looking at life. You don’t need it. If you don’t need millions a year if you could live on a couple hundred grand a year in the passive income. That sounds pretty great to me and owning 10 properties free and clear sounds like a pretty low stress way to retire so.

Jenny: Absolutely.

Brandon: Super cool. All right well Jenny let’s shift gears here and we’re going to look at one of your deals a little bit more closely and that is in the deal deep dive.

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All right let’s get to the deep dive. Now this is a part of the show where we dive deep into one specific deal with our guests so Jenny do you got a deal in mind something that we can dive into?

Jenny: I do.

Brandon: All righty what. Question number one I’ll ask and we’ll just kind of go back and forth. Me and David, but question number one what kind of property is this? Tell us. What is this deal?

Jenny: It’s a single-family home. Three bed. One bath. One car garage.

Brandon: All right and that’s in Colorado springs?

Jenny: Yes.

Brandon: All right.

David: Okay. How much did you buy it for?

Jenny: We purchased it for $114,500.

David: Nice.

Brandon: How did you negotiate it? Was that what was listed at or what was it listed at and how did you get it for that?

Jenny: It was listed for $140,000. Same thing as on the MLS and we just negotiated it needed some work. It was part of an estate sale and we offered I think $106—something around there and they counted at $114 and we took it.

David: Okay and how did you fund that deal?

Jenny: We actually purchased it using a hard money loan. We were able to present to the hard money lender that the property’s ARV was $160,000 and they gave us a 75% ARV loan for that. We ended up getting a loan for $120,000.

Brandon: Awesome. I love that. All right so what did you do with it then?

Jenny: Since it was $120,000 for the property we were able to purchase the property for the $114,000. The loan covered the closing costs and a little bit of repairs so we ended up repairing pretty much the whole outside of the house. The gutters, windows, painted the exterior. New exterior doors. That was what we ended up doing for that property.

Brandon: All right.

David: Okay and then what was your outcome?

Jenny: We ended up doing a BRRRR, but we utilized a rate term refinance for this BRRR because the hard money lender had a three month term on it and we needed to be able to quickly convert that hard money loan into a traditional loan. We ended up doing a rate term refinance and the way that that worked was our conventional lender said if we can get something that’s 80 to 85% of the appraised value we can convert that $120,000 hard money loan into a conventional loan and that’s exactly what we did. It appraised for what we needed it to and we just changed it out that way. We didn’t do any sort of cash out method, but that was what we did.

David: Is that because your hard money lender allowed that option?

Jenny: Yes, the three-month term was the max that they’re going to allow.

David: They converted it to a normal amortized loan right?

Jenny: Oh so we went through a conventional lender. I think it was Freddie Mac on that.

David: You refinanced it out of the hard money?

Jenny: Yes.

David: Okay got you.

Jenny: Yes.

Brandon: Perfect. Do you remember what it appraised for at the end then?

Jenny: $160.

Brandon: Oh okay.

Jenny: Yes.

Brandon: You probably said that I just wasn’t listening.

Jenny: Oh no worries.

Brandon: All right so cool so you got it out there and then what lessons did you learn from this deal?

Jenny: When we bought the house it was tenanted and we learned how powerful effective communication with the tenants was in this situation because after we explained to them what we needed to do they understood that we needed to go in so that we could get the property to appraise for what we needed it to. We needed them to be accommodating to our contractors to fix everything up. Then they benefited from it because we were able to get them a fully repaired house. You know it was still a little dated on inside, but the outside and all the structural pieces of it is fantastic.

They were really appreciative of that and in fact one of the tenants she had mentioned. She said you know before this is just somewhere where I lived. It was a roof over my head and she said now it feels like home. It’s not drabby anymore. It looks fantastic. She loves it so.

David: That’s awesome.

Jenny: It worked well for all of us.

Brandon: What is rent on that property then if you have $140 you know purchase or you know value now or $160 value. What’s rent?

Jenny: We’ve kept the same tenants in there so we are gradually increasing rent each year.

Brandon: Yes.

Jenny: When we bought it oh my gosh it was terrible. It was like $850 or something.

Brandon: Yes.

Jenny: Now we’ve gotten up to $1,100. I think market value is $1,300 so we’ll get there eventually.

Brandon: Okay.

Jenny: Yes.

Brandon: Yes and that’s one of the downsides of inheriting tenants right is you feel like a jerk. You can’t just raise the rent $600. I mean you could, but like I never do. I don’t raise at $600 bucks overnight or whatever because you know. I don’t want to kick them out.

Jenny: Right.

Brandon: But it is business. Some people will do that, but it is what it is. All right very cool. Well that is the end of the deal deep dive. Let’s head over to the next segment of the show where our actual listeners can jump. Yes I guess like I don’t know. You can’t ask questions necessarily, but you can ask them on the forums and that is our Fire Round.

It’s time for the Fire Round.

Time for the Fire Round. These questions come direct out of the BiggerPockets forums, which of course like I said everyone go and ask questions in the forums anytime day or night and we may pick your question to ask our guest on the show so let’s see. Jenny, number one. This might be a little late for this one, but I think it’s a good question anyway. I’m going to ask it anyway even though like this show actually airs after the holiday season, but do you do anything for your tenants for like holiday gifts? Also I’ll add on there anything for holiday gifts or tenant renewals. Do you do anything like that?

Jenny: I don’t so far tenant renewals we have a walk-through and we fix up things that they may be asking for if it’s a small upgrade. We’re willing to do that. Terms of gifts we don’t do that I think that might be a slippery slope.

Brandon: Okay. Yes, I don’t think that’s a bad answer. I don’t really do anything either. I actually have so in the past I used to send like we sent like $25 Starbucks gift cards to every tenant and then one year we didn’t do it and guess what there was no difference. Right like yes like I don’t think people state any longer or shorter. Again maybe it’s a good idea to do it, but I have not seen any actual difference, but David you do anything like that?

David: I have one property manager that asked every year and I say no and they are always like well all the other landlords do it.

Brandon: Yes.

David: My question is what kind of an ROI am I going to get on this?

Brandon: Yes.

David: I just feel like you should ask that question for everything. Like you when I was a cop. I don’t know if I should say this, but like if you gave an inmate a Snickers bar you could get so much good information. Like your return on investment for that dollar 50 you could know anything that was happening in that jail right.

They’d tell you that was a very good ROI. You buy a little get an ice cream cone and their parents are going to love you for life right? Those are things that I’d be more likely to put my money to. I give I tenant a gift card and there probably going to say something like oh well yes it’s the least you could do considering what I’m paying for rent. It just doesn’t really help you so I’m not against doing it, but I’d rather put my time and energy and effort into something that I know is going to give me a better return than someone who’s kind of pissed off they got to pay rent in the first place.

Brandon: Okay yes next question.

David: I currently own seven single-family homes. It seems like this is the point where most people start investing in multi-family, but I don’t really want to do that. I like my job and I think I want to keep picking up single-family homes. Is there anything wrong with the single-family only route?

Jenny: Absolutely not. I say do what fits what you want to do. If single-family homes you understand them, you’re able to get a good return on them I’d say keep going for it.

Brandon: All right next question. How do you keep track of capital expenditures. Like do save up for them or do you budget for them? Do you keep money in reserves? How do you currently handle that? I’m going to ask the same question to David too.

Jenny: We’re actually undergoing a review of. We don’t really know what we’re doing in that.

Brandon: Okay.

Jenny: Sense so.

Brandon: That’s all right.

Jenny: I think that we’re waiting towards having some sort of a hybrid approach. As I mentioned before like my husband and I we have good day jobs. Our properties are cash flowing enough that if something were to happen we’d be fine. We’d be able to cover it that month, but if everything happens all at once I have some furnaces in my houses that are older than I am. Like if all 10 of them break yes, we’re probably going to be in a bit of an issue at that point so we’re thinking of having some sort of bank account set up with you know sizable amount for situations like that.

Brandon: All right David, what do you do?

David: As far as just planning for reserves or as far as.

Brandon: Yes like I mean knowing that things are going to break.

David: Yes.

Brandon: Like you’re going to have furnaces go out. You’re going to have roofs go out. Do you save up every single month for those? Do you have a big account that you keep stuff in or you just be like I’ll deal with it when it happens.

David: Well it depends on your personal financial situation so if you’re someone who lives paycheck to paycheck and you don’t have a lot of money left over you need to have a really healthy chunk of reserves set aside. If you’re someone who’s doing pretty well financially and you have extra money and that’s why you’re putting into real estate you can get by with a much smaller amount of reserves because you know you’re going to replenish that next month when you know you have money coming in that’s more than you need to live on. What I like to do is I tell people put as much away in reserves as you possibly can until it hurts and you’re ticked. Like I can’t buy this thing that I want because I have such a huge amount I put in reserves and let that motivate you to go make more money somewhere else.

Do a side hustle. Ask for a promotion at your job. Get out of the job you’re in and get into one that has a higher upside. Like get you out of your comfort zone because you made it harder on yourself rather than just storing up money in reserves all the time that keeps you from investing in new stuff.

Brandon: All right good answer. All righty next question. David you’re up.

David: Yes okay what are your go to materials for your rehabs? What kind of flooring and countertops you use and why?

Jenny: I absolutely love laminate wood floorings and so do our tenants and it avoids us from having to replace carpet every couple of years. It looks like real wood. It’s more durable. We had one tenant move out that had two giant dogs and not a single scratch occurred so that’s our flooring of choice and then for countertops laminate countertops that kind of looks like granite design on it that seems to be working well for us as well.

Brandon: All right. Good answer. Last question of the Fire Round. How do you keep track of things with the multiple properties like do you what software do you use or what system do you use to stay organized to keep your books together all that.

Jenny: In terms of the accounting for the properties I use QuickBooks online and that has been working really great for me.

Brandon: All right. Do you use anything else, any kind of management software? I mean with 10 I don’t know if you need it, but do you use anything like Cozy or you know Buildium, AppFolio.

Jenny: I use Cozy for tenant screening and rent collection.

Brandon: Okay.

Jenny: And then in terms of if there is a maintenance issue I will just collect that information and pass it on to my contractors to go over and fix and just kind of old school that way. It works.

Brandon: Very cool. With that. That is the end of our Fire Round. Now it’s time to get to the last segment of the show. This is our.

Famous Four.

All right let’s get to the Famous Four. These are the same four questions we ask every guest every week. We’re going to throw them at you. Number one Jenny what’s your favorite real estate related book?

Jenny: The Book on Managing Rental Properties.

Brandon: Woo hoo. My wife will love to hear that. Thank you.

Jenny: Yes.

Brandon: That’s awesome.

Jenny: It is fantastic I mean it provided a tactical approach to real-life situations.

Brandon: Ooh. Very. Wow.I actually put that quote.

David: That’s the only time anyone will ever say that about Brandon. Right.

Brandon: Very very cool.

David: Okay. What is your favorite business book?

Jenny: Cash flow quadrant.

Brandon: I love that one. Love that book.

David: Okay I have to ask you. We normally ask what your hobbies are, but I’d like for you to tell me about Zorbing.

Jenny: Oh yes so Zorbing is. It was based in New Zealand and you are in a giant blown up hamster wheel ball type of thing. They fill it with water and push you down a hill.

Brandon: Really?

Jenny: Yes.

Brandon: That’s like a thing.

Jenny: It is extremely fun. I highly recommend it.

Brandon: I was watching on the movie the mag right about the shark like the you know the big huge shark. Anyway and the shark ate somebody that was inside one of those on the water. I don’t know if I would go in one of those. Anyway that’s actually supercool. All right so I’m going to look that up now on YouTube after we’re done with this. Any other hobbies you do for fun?

Jenny: We just love traveling. We hit our sixth continent just a couple months ago so we’re hoping that we can.

Brandon: Wow.

Jenny: Knockout Antarctica in the next couple of years.

Brandon: Cool cool all right. What do you think separates successful don’t mind the landscapers who always show up exactly when I’m on the podcast. Like I. It’s like to call my wife. There like hey what times Brandon doing his podcast because we’re going to show up right then and do leaf blower outside, his window. Anyway. What separates successful real estate investors from those who give up, fail, or never get started?

Jenny: I knew that you guys we’re going to ask me this question so I wanted to put a lot of thought into it and I can boil it down to commitment and commitment to me is putting action to a plan so I don’t see commitment to real estate being any different than commitment to a relationship or a commitment to doing an ultramarathon for instance you know using that as an example. You’re not just going to wake up running 0 miles and the next day be able to run a 100 miles. The same thing applies you’re not going to be able to just read nutrition books and training books. You actually have to go out there and incorporate all of that in conjunction with physically doing it and that’s how you are successful in anything.

Brandon: I love that. I love that. I stay on the BiggerPockets webinars all the time two. There is a massive difference between desire and commitment. Right like some people say they’re committed to something.

They want to invest in real estate. They’re committed. They don’t. They just desire it.

Like I’m not committed to getting a sixpack. If I was I would have one right, but no I want a sixpack. I’m not committed to it. I am committed to other things like you know in building my real estate business up and I’m committed to being a good husband and a good father. Like those are actual commitments and the reason why is because plan of action behind them. Right putting action to a plan like this is exactly what you said right. That’s the difference between desire and commitment so perfect. I love that. I love that. All right final question. Go ahead David.

David: Jenny where can people find out more about you?

Jenny: Feel free to message me on BiggerPockets.

Brandon: All right and of course we will link to that additional notes and BiggerPockets.com/show1310. Jenny thank you so much for being here today. This has been fantastic. Of course people can ask questions on the show notes.

There’s a whole question answer area at the bottom, in the comment section. They can ask questions. They can follow up with you there of course. Again BiggerPockets.com/show310. This has been fantastic. I learned all about Zorbing and really like you’re just super inspiring so I just really appreciate you coming on here and just telling it like it is. Like it’s very real and open so. Thank you.

Jenny: Well thank you so much for having me. It’s been a complete honor.

David: Thank you very much Jenny. I just want to add that I love that you’re doing this and you’re very honest and transparent and humble about what you’re doing. Like these are the investors that I love talking to the most because you’re not trying to be Grant Cardone. You’re not trying to own $1 billion of real estate, but you’re just systematically building the future that you want and moving your way towards financial independence so good for you. We need more Jenny’s in the world.

Brandon: There you go.

Jenny: Thank you.

David: Thank you. This is David Greene for Brandon signing off.

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