51 Units and $900/Month in Pure Cashflow on a “BRRRRnB” with Shelby Osborne

Brandon:
This is the BiggerPockets Podcast, show 406.

Shelby:
So I saw the For Rent, and I called it. I was like, “Hey, just inquiring about this property, and I was wondering if you might want to sell instead of rent.” And the guy was basically like, “Please. I don’t want it, and I have another one that I want off my hands.” Of course it takes a lot of calls before you find that one guy who’s willing to sell, but they’re out there.

Speaker 3:
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 today with another phenomenal show with my cohost, Mr. David Greene. David, how you doing there, man? You breathing okay there in California with all those fires?

David:
Nope, got the mask on. We’re staying indoors. The whole state’s on fire. So you can’t really go outside. But that’s okay because we recorded an awesome episode of the podcast, and if you, too, are like me, and you’re getting cabin fever stuck in the house, this podcast will definitely lighten your mood and get you pumped up.

Brandon:
Yeah, so good. Today we’re talking with somebody named Shelby Osborne. I’ve seen her around the BiggerPockets community a lot. She was even in one of the BiggerPockets Wealth Magazines recently. She just has a phenomenal level of energy and passion and just intelligence around real estate investing and how to really scale a business, going from a military, full-time job to being able to quit that and then have 51 units now. Some of them, she owns with partners. Some of them she’s just done from… She’s done BRRRR. She’s done house hacking. She’s done everything, just an amazing, cool story. She’s going to go through the whole thing today and tell us a lot. Her answer to what sets apart successful investors at the end of the interview was one of my favorite I’ve ever heard. So you guys are going to love today’s show, especially, by the way, make sure you also listen for her conversation on delayed financing. That alone could change a lot of people’s lives if you plan to do BRRRR investing down the road, the buy/rehab/rent/refinance/repeat strategy. So stay tuned for that. But before we get to that, let’s get to today’s Quick Tip.

David:
Quick Tip.

Brandon:
Today’s Quick Tip is, if you have not checked out the brand new BiggerPockets Insights, which is amazing… We have this new thing called Property Insights on there, where you can look at property, get a bunch of details on previous rents and what their current rent would be, what the market’s been like. BiggerPockets Insights is designed to help you make the best choices on what market to invest in, what neighborhood to buy in, and what property, and what that property’s going to likely do in the future. It’s really, really cool. It’s part of our BiggerPockets Pro membership. We just launched this whole Insights thing. Do yourself a favor and just go check it out, biggerpockets.com/insights. Again, biggerpockets.com/insights. I think you’ll be pretty impressed, and it’s going to help your business quite a bit. So that is today’s Quick Tip.
And now it’s time to get into today’s show. David, anything you want to add before we jump in?

David:
Yeah. We talk a lot about how there’s parallels between building a real estate portfolio, which is really a real estate business and how Shelby built her real estate agent team. Frankly, this applies to anybody. You may have a job where you’re a mortgage broker, or you’re a contractor, or you do something that has nothing to do with real estate but you want to scale that into something bigger. Pay close attention to how it is pretty much the same principles regardless of what you’re doing that leads to people being successful. And when you reverse engineer that success into a bigger portfolio for yourself, it can also make you more money in your job. That’s one of the things I love about our podcast and really BiggerPockets in general, is on this podcast, we learn all about how to build wealth through owning real estate. But then you can go listen to Jay and Carol Scott and learn about how to build wealth through business. You can listen to Mindy and Scott Trench talk about how to build wealth through managing your finances better. There are so many ways to build wealth, and I feel like today’s guest touches on how she’s kind of combined a lot of those strategies together.

Brandon:
Yeah, very true. And one quick warning: Shelby is a… She was raised in the military and was in the military as she got through her 20s. So there is some, as you typically find with military people, a little bit of explicit language, just a little bit. If you’ve got young kids in the car listening, just be warned. Yeah, but this show is phenomenal. With that said, let’s get to it.

David:
Let’s do it.

Brandon:
Shelby, welcome to the BiggerPockets podcast. Awesome to have you here.

Shelby:
Thanks. I’m so stoked to be here.

Brandon:
Cool. All right. Well, let’s get into your story. How did you get into real estate investing?

Shelby:
Okay. Once upon a time, back in 2012, I graduated from college at University of South Carolina and commissioned as a lieutenant in the army. My first duty station was at Fort Lewis, Washington, near Seattle.

Brandon:
Oh, nice. Yeah.

Shelby:
Yeah, you probably know where that is.

Brandon:
Yeah, traffic sucks by Fort Lewis.

Shelby:
Oh, yeah.

Brandon:
Every time you drive by it, it just slows down to nothing. Yeah. It’s awesome.

Shelby:
It’s a monster. It’s terrible. Yep.

Brandon:
It is.

Shelby:
So I went out there, and I had zero interest in real estate. I figured I’d just find a sweet-ass apartment in downtown Tacoma and just hang out with my friends, literally no concern for the future, really. And then my dad actually planted the seed relatively aggressively. He’s an aggressive man. He was like, “You should use this thing that you have called a VA Loan, and you should buy a house with 0% down. Why would you pay someone else’s mortgage when you could pay your own?” I was like, “Fine, Dad. I guess that sounds like a good idea.” And it turned out to be a fantastic idea a couple years later, when I moved to Fort Bragg, North Carolina. This is four years now, so 2016. And that’s the land of the 82nd Airborne Division, the largest military installation in the United States, and it’s also very intense when it comes to the military. Anyway, I went to Airborne School, jumped out of airplanes, did some air assault stuff, and I showed up to Fort Bragg ready to roll. And I did roll for a year, and it was badass, but with badass comes frustrations.
In the military, I don’t know how much you know about it, but there is a lot of lack of efficiency. There is lots of shit that you do that doesn’t make sense and disorganization and a lot of “because we’ve always done it this way,” as opposed to what makes sense. That does not fly with me. So I started to pick my head up and look towards the next 5, 10, 15 years and saw exactly what the military would bring me and decided that that was not the course for me. So it was right around this time that I decided that I was going to make a change, that I fell into a lot of things at once. So I read my first Robert Kiyosaki book. I started paying attention to my property back in Washington that I had kept as… I didn’t run numbers or anything, but I bought it for $158,000 back in 2013, and now it’s worth about $260,000, and it cash flows. I fell into this amazing thing, and I was like, “Hey, real estate, this is awesome.”
And the Robert Kiyosaki, the thing that really hit home was that Cashflow Quadrant. And I came into PT with my guys the next day, physical training in the mornings… It’s like 6:00 a.m., and they’re hungover and half asleep still, and I’m drawing on this dry erase board like, “Guys, we’re employees. We need to be investors.” So they all thought I was crazy, but it’s fine. I decided real estate was my future, and from there started taking off.

Brandon:
That’s cool.

David:
This is the first time I’ve ever heard Robert Kiyosaki’s Cashflow Quadrant being applied to military personnel, which the whole goal of the military is to keep you in that employee…

Brandon:
The employee.

Shelby:
Oh, my gosh.

David:
Do exactly what we say and only that. That’s really funny. Did you feel like any of the seeds you planted took root at all?

Shelby:
It did a little bit. It’s funny. So I decided to get out, and that was around April of 2017. By November, I had bought my first intentional investment property, and I had gotten my license at night school. It’s funny. My first year was 2018. That’s when I decided on terminal leave. But by the end of 2018, my soldiers were hitting me up, and they were like, “Yo, do you got any side hustles you can do?” I had them working at rental properties doing handyman stuff. Some of it stuck a little bit.

Brandon:
That’s cool.

David:
That’s cool.

Brandon:
I want to know that first property real quick. I want to go into the… because a lot of people get started with the accidental rental thing, which means they buy a property, they live in it, and then they decide to move out and keep it. Why did you decide to keep it? And then what kind of challenges did you face, or was it all pretty easy at that point? What was that like, transitioning there?

Shelby:
I decided to keep it because, again, my dad. I was like, “Hey, what do I do with this?” And my dad had done a couple rental… He was not big into real estate, but he has a really good mind for money and investing. He was like, “You should just keep it and rent it out.” So I did, and I have a fantastic property manager out there who does really great work. Every time there’s a turnover, she increases the rent. I’ve actually never really had an issue because I bought it turnkey. I bought it nice because the thing about 22-year-old Shelby was like, “I want to live somewhere nice.” Now I live in a shit-hole. How times have changed. But, yeah, I bought it 0% down.
Then my first intentional investment property in November of 2017 was a 25% down conventional loan. It was a duplex for $75,000, and now it rents for $725 and $675 each side. So it’s almost a 2% deal, which… loved that one. Then, in January of 2018, when I got out of the army and started doing real estate full time, I was an agent as well as an investor. By the end of 2018, I was the Keller Williams Rookie of the Year for all of North and South Carolina, and I acquired a total of 16 doors. That was year one.
Year two, started my realty group, which we specialize in helping investors invest. We are agents who specialize in working with investors. Then, by the end of 2019, I was up to 41 doors. Whatever you want to talk about.

Brandon:
Wow, all right. All right. Yeah, I want to unpack all this stuff. You got out of the army. You decided, “I’m going to go and build up this business. I’m also going to be a real estate agent,” because you needed to have a source of money, right?

Shelby:
I had to, yeah.

Brandon:
Yeah, it’s lame, but we somehow got to pay the bills.

Shelby:
Right.

Brandon:
So why become a real estate agent? What was the idea behind that? Did you just love real estate, and you were like, “I just want to help other people”? Or where’d that come from?

Shelby:
No. Okay. I do like helping other people, and it’s funny because recently I’ve been reflecting on the fact that I don’t even love real estate that much. I just love the avenue, the opportunity it brings into the world. But, yeah, I decided to be an agent because it directly correlates to your work ethic and your ability to solve problems. Your income is not tied to promotion rates or amount of time in a position. I loved the fact that I got my license, and my very first year, I made twice as much as an agent as I did as a captain in the army the year before purely just off of me being able to figure shit out and make things happen. I loved that. It fueled my active income, which I threw it all into my passive.

Brandon:
Yeah. So what do you think… When people ask, “Should I get my real estate license to invest in real estate,” what’s your answer?

Shelby:
It depends. It really depends. If you are like me, and you are going to make it a full-time, balls-to-the-wall type of thing, I think that it does make sense. If you are good with people and you can make people trust you, then you can be great at real estate, having your license and being an agent. But if you are just doing it slower and you still have a full-time job, I really don’t think that you’ll be able to get in the weeds with the MLS and make it worth it. I think it’s much better to find an agent who is riding those streets and hustling. That’s your source of leverage in outsourcing your time. So it really depends on your situation.

Brandon:
Yeah, but, Shelby, being a real estate agent is nothing but putting a listing on the internet, and that’s it, right?

Shelby:
Oh, my god. Get out. I quit. Bye.

Brandon:
All right. I want to ask the same question to you, David, because I know you and I have had a million conversations about this. Should an investor get a real estate license to invest in real estate?

David:
No, and it’s the same answer. I would tell them…

Brandon:
Moving on, all right.

David:
Yeah. If you said, “Should an investor get their appraisal license and learn how to do appraisals? Should an investor become a general contractor and learn how to fix a house? Should an investor become a property manager?” The best part of real estate is owning the real estate. And the best part of the business of real estate is how easily it can be leveraged. It is the fact that, easier than most things, you can leverage off big chunks of it. If I decided I wanted to create a brand of clothing, and I wanted to make jeans, it’s a lot of hard work to figure out who’s going to design the jeans. Where are they going to be manufactured? How are they going to be marketed? Who’s going to sell them? It is a lot of time that you have to spend to build up the support system that you would need to eventually make money from jeans.
It’s not like that with real estate. I just bought a house. Who’s going to manage it for me? There’s a ton of people saying, “Ooh, ooh, ooh. Me, me, me. Let me do it.” You’re a lead to them. I want to find a house. How can I find someone to help me? There’s a ton of Shelbys that are like, “Ooh, ooh, ooh. Me, me, me. I want to help you find that house,” because their business is based on you. You become the in-demand person when you’re the investor. It’s just kind of silly to me that people would say, “Even though it’s so easy to go out there and find someone who’s probably better than me a doing this part of it, I want to learn how to do it myself.” I’m going to let Shelby, actually, run with this because I have a bunch of questions I want to ask you about…

Shelby:
Yeah. Well, first of all, I was going to say… You said that there’s a ton of Shelbys, and there is one, one of a kind.

David:
[crosstalk 00:13:19].

Shelby:
Okay? Let’s just make that clear. But besides that, I totally agree. I totally agree. I found that, especially starting out, people are more concerned that they don’t want to show that they don’t know what they’re talking about. So they don’t want to ask the questions, and then they waste hours and days and weeks of their lives trying to figure out all these details where literally I am the first one to be like, “I don’t know. I’ll find out.” Then I make the phone call to the attorney, to the lender, to the appraiser, whoever it is, and find the information like that. So all of these people are specialists, and you should use them as such.

David:
Now, I want to ask you a question not just for the investors, but there’s a lot of agents who listen to the podcast. Shelby, I think you’d agree. You probably hire a lot of them.

Shelby:
I do.

David:
Right?

Shelby:
Yeah.

David:
Because one of the reasons I… Just like you, I don’t love real estate, but I built a team and became a broker because there’s so many parallels between owning property, bringing down deals, finding them and leveraging the work, and owning a real estate team where you’re finding down deals, getting people involved to leverage it, closing the deal. Can you explain maybe the synergy or the similarities between those two ways of building wealth and why if you’re good at one, you might be good at the other?

Shelby:
It makes so much sense. Okay. I think of it as you are able to be the conductor of the orchestra. I really like this analogy because then you have each piece of the performance coming together. And all you are is… You’re directing, and you’re overseeing everyone come together and create this beautiful whatever, if that makes sense. It’s the same way as an investor as it is if you own a real estate company. Even if you’re a broker, you can use a lot of the same strategies, is you find the right people for each piece and then just utilize them correctly, treat them right, and oversee it all.

David:
That’s really good. Yeah, and I think because, Shelby, you sound like you just accepted, “I should not be doing everything,” that you scaled so much faster. I mean, look. You grew a bunch of doors, and you became the Rookie of the Year at the same time in your first year. That’s not a coincidence. It’s because the area that you excelled in, which is, “I know what I’m good at. Let me find people around me to do the rest,” worked in both worlds. That’s kind of the blueprint that I want to highlight for the investors. If you’re getting in your own way, that might be why. What do you think, Brandon?

Brandon:
Well, I wanted to ask this because I agree. That skill, to hire other people and be the conductor, is so powerful in every business. I mean, every business owner I ever talk to, whether it’s real estate or otherwise, that’s always where the conversation goes to almost every time, is they’re struggling being the conductor, and they’re trying to do too much themselves. The question I want to fire at each of you, but I’ll start with you, Shelby, is how do you balance that with not being successful in the beginning. Like, “I don’t have any money. I can’t go and hire a team.” If you’re new, how do you become the conductor without first playing third saxophone in the back row or something? How does that work?

Shelby:
Okay. For me, there’s three steps. You got to start with systems. Then you move to people, and then you move to the community or the vibes that you create. I started with systems. I started by doing as much as I could myself. I don’t mean this to backtrack what I had just said about using specialists. You use specialists, but, I mean, for your specific role as an investor, for your specific role as an agent and what you do, document it. Document it, systemize it, and automate it.
For instance, for me, my rule of thumb is I will not do the same thing twice if I have to struggle through it. So I will struggle through it, and I will literally write it all down, create a checklist, and then file it. And then the next time that comes up, I just pull it up, and I’m like, “Oh, that’s how I do it.” Or when a client asks, when another investor asks, “How do I do this?” I’m like, “Perfect. I already have this one-page cheat sheet.” And I send it out. I do the same with every email that I’ve ever written. This really helps my agents, as well, is I have a whole package of draft emails for buyers and for sellers specific to how the flow of the process goes. And then there’s a checklist for everything that we do.
So systems first, and once you have that, you can take the right people, which we use DISC and Myers-Briggs a lot to identify natural characteristics of people. And we pair them to those checklists, essentially, so you can execute those way better than I could ever, if that makes sense. Does that make sense?

Brandon:
It does. It does. You start with systematizing everything. In the beginning, that could be… If you’re a real estate investor trying to buy your first duplex, in the beginning, yeah, you’re going to have to be out there doing a lot of the digging around for numbers. You’re going to have to be looking on the MLS. But start thinking, “What are you looking for? What does that criteria look like? How can you put that into a checklist so that it becomes more and more clear?” Then you can tell other people to go find those for you. Is that what you’re saying?

Shelby:
Exactly. It’s really hard to start with the end in mind when you’re just starting out. But even if it’s not the end… Not everyone knows what their five-year vision is. If you can start, when you’re creating the systems, knowing that someone else will be doing it down the road, that will help you a lot better, being able to articulate because it’s not for you. It’s for that other person to take that torch and run with it, if that makes sense.

David:
That’s really good, makes a ton of sense.

Brandon:
Yeah, David, what do you think?

David:
I agree 100%, Shelby, with what you’re saying. I think that most people, frankly, don’t progress down the Cashflow Quadrant that you mentioned not because they can’t figure out a way to do it, because they won’t let go of either the fear of doing it on their own or the trusting of other people to do it or the actual necessity that you have to lead people when you’re doing that. There’s a hesitancy a lot of people have to step in and lead others. There’s a lot of personal things that we could get into about why that happens, but-

Shelby:
Oh, my gosh, so many.

David:
But the common thread with everyone we interview who got a lot of doors or a lot of properties or scaled every time was either they stumbled into it or they purposely built it, a system, an organization, a way of this person does this and this person does that. You can wander around for 15 years and then finally figure it out, and, boom, you’ll scale, or you can get it in the first six months or three months or whatever it is, and you’re going to scale much faster. But the road’s going to be the same. If you’re trying to do everything yourself, if you don’t want to be disciplined and write down, “I do this. Then I do this. Then I do this,” you’re just going to tread water forever.

Shelby:
Totally agree. Yeah, and then finding the right people, that’s a whole other challenge in itself because I do see what a lot of people fear. It is hard to trust something that you’ve built and grown in the hands of someone else. But once you are able to identify talent and can trust people, you really have to let them take the reins because 9 times out of 10, if they’re the right person, they will be able to build that position even better than you could’ve ever dreamt it to be.

Brandon:
Let’s get an example. Let’s start with rental property. What’s a system that you built, and how did you automate it? And then we’ll talk about: what people did you bring in?

Shelby:
Okay. There’s so many different ways I could go with that. That’s why I was like… I guess we could talk about how I did use to manage my own rental properties, and I built a system for that. It’s just a quick cheat-sheet on exactly what to do from once you get the property, the photos, how to market them, the sign in the yard. And then also, I don’t know if people do this is different markets, but we have multiple pages on Facebook, Facebook Marketplace, like Moving to Fort Bragg, Moving to Fayetteville, all these different places, so systematically marketing on each one of those to get an influx of tenant applications, and then using Cozy to screen tenants. I’m a huge fan of Cozy. I used to use it for all of my properties before I switched over to property management team for that. So I guess just I did that once, and I struggled through it. I freaking read that yellow book. What’s it called? Brandon, wasn’t it yours?

Brandon:
Yeah, the book on managing rental properties.

Shelby:
Yeah, I freaking read that book. I mean, I loved it. I pulled everything that I needed for each… I pulled the meat out of it and made it a quick checklist for me. Then I just repeated it for each one of my properties. I guess that that’s one example of how I’ve been building systems. Does that make sense?

Brandon:
Yeah. I think that’s perfect. I mean, the key with systems, I like to think, is: can you put it in a checklist somehow? If you can put it in a checklist that a high-schooler could follow, it’s probably a pretty good system. So the more things in life… I think sometimes people go through life thinking, or when they hear this, they think, “Yeah, but whatever I’m doing is more complicated than that.” But if you really stop and think about it, most things we do are not. We’re just doing those checklists in our head, and then we skip steps and we mess things up. You could go to an extreme. Dating could be a checklist. You could literally be like, “Did I greet them with a smile? Did I take them to a nice restaurant versus a crappy restaurant?” I’m not saying you have to have a checklist. That’d be really funny, actually. I would love that. You’re pulling out your thing, “You have nice eyeballs. I mean eyes, not eyeballs. Ugh,” scratching off on your paper.

Shelby:
Screwed that one up, yeah.

Brandon:
Aw, man.

David:
That’s hilarious because I’ve noticed that there’s a progression of how I built systems. It started with a checklist, just like you said. It moved into a spreadsheet, which is now easier, that I can say, “Okay, on this spreadsheet, we’re making sure we did the things.” Then it moved into what I call an auto-plan, which is some form of CRM that reminds you to do this.

Shelby:
Yes, yes.

David:
And I was just thinking as Brandon was talking that your phone would give you notifications, saying like, “Find something to compliment her on. Here’s three things that you could choose. Ask about her siblings.” You’re getting all these reminders in your AirPod telling you what to do.

Shelby:
Oh, my gosh.

Brandon:
It reminds me of… I just watched Aladdin the other day, and the genie’s acting like a bee in Aladdin’s ear. He’s like, “Compliment her, compliment her.”
“You’re punctual.”
“Punctual?” Anyway, I watch a lot of Aladdin.

Shelby:
No, it’s good [inaudible 00:22:58].

Brandon:
Yeah. So that’s what checklists are. They’re like a little bee buzzing in your ear, telling you what to do next.

Shelby:
Yes.

Brandon:
Because we just naturally forget the stuff. Whether it’s buying rental properties, whether you’re driving around looking for deals, whether you’re doing direct mail marketing, whether you’re talking with an agent, all that stuff can be put into somewhat of a checklist and systematized so it actually gets done. That’s what we’re trying to do with systems, is making sure it actually gets done and gets done correctly.

Shelby:
What David was talking about with automation, that’s the next thing. It’s like document first and then automate next. You should not trust your brain for anything. Reminders, calendars, CRMs, all of those sort of things will save your life because your brain is not trustworthy.

Brandon:
Yeah, it’s not at all.

Shelby:
It’s not. But yeah.

Brandon:
Yeah, any time I rely on my own brain to remember pretty much anything, 50/50 shot it gets done or that I remember to do it.

Shelby:
Totally.

David:
Oh, less than 50/50.

Brandon:
Probably.

David:
And people don’t realize how much of the anxiety they experience in life is due to the fact that you’re relying on your brain to be this thing that was never meant to do. It’s terrible when it comes to remembering that. And then what we do is we beat ourselves up. We go, “Oh, I can’t believe I made that mistake. I should have remembered. A better person would have remembered. I’m not meant for this,” whereas the most genius people, the best ones are like, “No, I’m an idiot. I would never expect myself to remember that. That’s what my computer is for.”

Shelby:
Yeah. That’s all the time, man. People say stuff, and I’m like, “I’m never going to remember that.” So my system is I text myself, my email. I email myself, and because I know that if it gets on my email, I can flag it for followup, and I will not miss an email. But if I get an inquiry from Instagram or Facebook or all of these different systems, I have to screenshot it and email it to myself because that is my one source that I will not lose stuff.

David:
Yeah, that’s great.

Brandon:
Yeah. All right. So you got the systems. Then you got to automate them.

Shelby:
The real estate, yeah.

Brandon:
Then, lastly, you said people. Let’s talk about that for a minute. When it comes time to bring in people into your team whether you’re trying to find that real estate agent or a contractor, or maybe it’s an employee, an assistant or whatever, what have you found has worked really well for you in finding good people to work with?

Shelby:
Finding the right people, a lot of it has come from word of mouth. For my experience, people who know me, like me, and trust me already know other people who I would feel similarly about. So those tend to be really strong referrals for people to join or build the team. But then, once I have those people, we go through a checklist, a series of checklists of… They need to do the DISC and the Meyers-Briggs assessments. I know, David, you’re familiar with this. Do you guys know Meyers-Briggs?

Brandon:
I haven’t worked with Meyers-Briggs. I know of it.

David:
No, we use the DISC more commonly. Why don’t you share with the guests what the Meyers-Briggs does and why it’s important for building a team?

Shelby:
Thanks, man. So the DISC and the Meyers-Briggs are both very, very helpful tools and do different things. Meyers-Briggs, in particular, is the one where it’s going to say introverted versus extroverted. That’s how you recharge. It’s not even whether or not you like to be around people. It’s how you recharge from being around people, and generally we want… Our agents tend and even admin tend to be extroverted. You want them to be around people and be good with their clients. The next one is intuitive and sensing. So that is whether or not you are a visionary versus you can see… You work with what you have in front of you. Generally, people who are visionaries, I’m an N, they take what they see, and then they create more from it. Does that make sense? All of these things are just good factors to know when you’re dealing with employees or with clients. Then the next one is a feeler versus a thinker, so are you emotion-driven, or are you logic-driven?
Then the last one is the most important one in regards to admin, at least for me, and that is perceiver versus judger. So the Ps, the days happen to them. They’re really go-with-the-flow. Then the Js, they attack their day. They’re going to have a schedule, and they’re going to have a checklist and do all the things. Those are just really important to me, in particular. The Js are what I look for, generally, for admin, the ones who attack.

Brandon:
Yeah, I was going-

Shelby:
Does that help? I don’t even know. Is this cool to talk about?

Brandon:
Yeah, this is great. Yeah, this is awesome because a lot of people’s hiring and my own for years was literally like, “You have a pulse. You’ll do.” What I’m sensing from you, and I know this is true of David, as well, is this intentionality behind hiring. Hiring is not meant to be like, “Oh, you’ll do. Hey, you’re my brother’s friend’s sister. You’ll be fine. You’re in my space. That’ll work.” There’s so much more to hiring.

Shelby:
Yeah, exactly, and you’re not going to be able to know all those things just from a five-minute coffee conversation with someone and looking at two assessment results. So what we always do is, if it seems like a good fit, we bring them on, and we do a 30/60/90-day process. I recommend this to anyone who’s trying to build their business. But they’re there for the first 30 days. At the end of that 30th day, you sit down with them, and you say, “Here are the things that you did really well. Here are the things that you can improve on. Here is the way ahead for the next 30 days.” Then you do that again at the 60-day mark and again at the 90-day mark. That way, there’s always this open line of communication. No one feels like they don’t know what’s going on in the process or whether, “Oh, are they liking what I’m doing?” if I’m not. Then it’s very clear-cut at the end of the 90 days. You’re either a good fit or you’re not, and there’s no hard feelings.

Brandon:
Yeah, that’s really good. I love to say you never know how somebody is going to be until you work with them. I love that. You just never know. We do a lot of internship programs with Open Door Capital. I have three interns right now. We want to work… In fact, most of my team, maybe all of my current team came from working together first in a limited way, and then bringing them up once they did. I’ll give you a quick example. Mike Williams is my Head of Investor Relations. He’s in charge of all the raising money aspect, everything like that. And ironically, Mike, I met him through an interview for BiggerPockets. He was applying for a job at BiggerPockets years ago, and he ended up not getting the job. I kept in touch with him, and then we launched this 10-person internship two years ago. And Mike clearly stood out as the leader of that group. He was grabbing people together, going through ideas how to find deals. He was a leader of that. So we ended up bringing him in more heavily and then more heavily, and today he’s… He moved up to Maui now, him and his family. We just do life together, and he helps organize.

Shelby:
I love that.

Brandon:
Yeah. So, over the course of… Now, if he would’ve just went and worked for BiggerPockets, he would’ve been in Denver, and I wouldn’t be hanging out with him here in Maui. So it’s much better now. But I love finding ways you can do that. You can’t always just go grab a huge intern team like that. I recognize that I’m kind of lucky in that regard and that a lot of people want to do it. But you can find limited ways to work with people. One more example, real quick, sorry. I just thought of this one.
I had a video guy, and I hope he’s not watching this right now. I had a video guy, local in Maui here, who wanted to… He really wanted to work with me more heavily on video stuff. So I had him film a couple videos for me. Then he took the video files back to his house. And for a month and a half, for six weeks, he didn’t upload the video files to Google Drive, where then Zach, our head of video at BiggerPockets, would take them and go edit them. He just never uploaded them. It’s like a five-minute job for him to go and just upload. He never did it. So then, a few months after that, he’s asking me, “I haven’t heard from you about that job. Am I going to be able to work with you full time next year?” And I’m like…

Shelby:
No.

Brandon:
Yeah. That was the interview. That’s what people don’t realize. That was the interview.

Shelby:
Right, exactly.

Brandon:
Anyway, sorry.

David:
Let me jump. I want to comment on why they work so well, okay? If you think about what your experience was like going to school as a little kid, you were following a system that someone else made. You sit in this desk from this time to this time. When the bell sounds, you get up, you go to here. You’re allowed to do these things but not those things. There’s rules you have to follow. When the bell sounds, you come back. Your brain responds to the environment you put it in. Shelby, you can attest to this, being in the military, right?

Shelby:
Yep.

David:
The first part of what you’re doing is throwing out everything that you thought you knew, and this is the systems that we use here, which is one of the reasons that people like Jocko Willink loved it, by the way, because he’s like, “I don’t have to think. I just have to follow exactly what you told me to do, and it’s easier.” What I’m getting at is people respond well to systems. Most people that you’re going to work with as an investor have a W-2 mindset that was developed from every job we ever had, which was working in someone else’s system. And if you think about every job that you worked, your first job, Hot Dog on a Stick, McDonald’s, you were following a system that some corporation made, and you played the very last piece of it. Someone else drove customers in the door. They found leads. They created marketing. They developed a way to create the hamburger. Your job was to stand at the computer and do that last 1% of the transaction and collect their money.
So we start to think that that’s all that work is, just do this last part. We don’t realize that someone else has done an insane amount of work to build this whole system that we can operate in, okay? So, as an investor… Shelby, you’re loving this because you recognize it. When I would struggle with an agent who couldn’t do what I wanted them to do… This was a common problem. “I don’t want this property. I want that property. Why do they keep sending me this?” Their brain is probably trying to figure out, “How do I fit into this person’s system?” But it’s different than everybody else’s. So they don’t know how they’re supposed to ring the cash register at your store. I would literally make this spreadsheet and give them a link to it in Google Drive and say, “Here are the 14 things that I am doing. Work this.” Then, boom, it made sense to them. “Oh, okay. He wants this, and then after that, and then after that.” I literally handed them the playbook for how to be successful with me. And what do you know, deals started to come in.
Then I could go to the property manager and say, “Here’s my checklist for how I get a property ready.” Now, the cool thing was they ended up taking that, incorporating it into their business. Then they would copy that with everyone else. Several times, they actually became so successful from that that they wouldn’t work with me anymore because they had too many more clients. I haven’t figured out that part. But the point is the system makes it easier to be successful, and that’s why we’re talking about this right now. For the people that are floundering, it’s probably that you’re so unorganized, you don’t know what your target is. If you don’t know what your target is, you don’t know what direction to move in. You can’t get going.
Shelby, can you explain how you built the number of doors you did so quickly and maybe what systems and automation that you put into place to get you there?

Shelby:
Gosh. So a lot of these systems were just built along the way, and a lot of our doors… Some of them are 100% me, and some of them I’ve done with some of my partners that I have here. It’s pretty cool, actually. In my realty group, we do a lot of deals together. I’ve done a couple flips with my admin. I do a lot of deals with my agents that I have. So it just turns into fun, and the fun compounds. So that’s how it’s really happened so quickly. But I’ve done a lot of different strategies to get the number of doors that I have. That very first one was the VA. Then I did 25% down conventional, and then I bought another VA house hack. It was a quadplex, so I got four more there. Then, after that, as you guys know well, I’m sure, that when you stop your W-2 job, you won’t get loans anymore in your personal name. So I went through that whole struggle.
A lot of this comes from finding a way to win. People tell me no all the time, and I’m sure people tell you guys no all the time, too. But no is not good enough. It’s just finding a way to make it happen. So, no, you can’t get a loan. Okay. Well, how am I going to make this happen, anyway? So I have used a lot of private money. I’ve done hard money. I used lines of credit. Lines of credit were a beautiful aspect of me being able to acquire deals until COVID has really tightened that up a little bit, so BRRRR strategy. I’m really big on, once I have that private money or that line of credit, being able to recycle it by using the BRRRR strategy. That’s pretty self-explanatory for being able to recycle the funds. Lately, I’ve just been doing a ton of BRRRR and Bs, is what I’ve been calling it. It’s the BRRRR strategy, but instead of a long-term rental, it’s the Airbnb.

Brandon:
That’s cool.

David:
How did you find most of these properties?

Shelby:
All different ways. Some of them were on the MLS, and it wasn’t until recently Fayetteville has become incredibly saturated on the MLS. I think it’s due to [inaudible 00:34:51] talking about delayed financing, myself and my team being pretty loud about how great Fayetteville is. And it still is great, but the MLS has dried up in a lot of ways. So a couple of these have been… There’s a for sale by owner in here. The 16-unit apartment complex that I got was a For Rent sign in the yard. And I drove by, and I called it and asked if I could buy. And I ended up getting that one as well as a duplex because he just didn’t want to be a landlord anymore. Then courthouse foreclosures are really, really big for us right now.

Brandon:
Can we pause there real quick? That’s so good stuff.

Shelby:
I talk a lot, sorry.

Brandon:
No, this is great. This is great. Can you re-say real quick? Because I want everyone to listen to what you just said here about the For Rent sign in the yard. Notice that she didn’t say the For Sale sign in the yard. Explain that again.

Shelby:
Yeah. For Rent signs are my favorite thing to see, especially the crappy, handwritten ones because I’m like, “Ha, ha, you’re not a formal landlord. You probably hate this.” So I saw the For Rent, and I called it. I was like, “Hey, just inquiring about this property. I was wondering if you might want to sell instead of rent.” And the guy was basically like, “Please. I don’t want it, and I have another one that I want off my hands.” Of course it takes a lot of calls before you find that one guy who’s willing to sell, but they’re out there.

Brandon:
Yeah. I love that strategy because it goes to this analogy I’ve used before, but I’ll say it again now. Sometimes when you wake up with a headache, you don’t think about taking medicine right away. So you just have this headache that’s kind of dull and brewing for a while, and it gets worse and worse throughout your day. And you just never think of taking medicine because it started so gradually until your wife walks in the room or your husband or whatever and just says, “Hey, did you take some medicine?” And you’re like, “Oh, I haven’t even thought about that.” Right?
The same thing is true for rentals. It creeps on these landlords over time, and they hate it more and more and more because they’re not good at systems. They’re not good at processes. They don’t have people. They write handwritten signs in the yard, and they probably inherited the property from something or whatever. So they’ve got a headache, and they don’t even think about the fact that they could sell it until somebody says, “Hey, I know you have this property for rent, but any chance you want to sell?” And if not that property, they might have other properties. I mean, every landlord’s got a property.
I would say almost every landlord has a property in their portfolio that they would consider selling, whether it’s not the one you called about or not. So now, all of a sudden, your options are millions of options out there of potential properties. You can go Craigslist. You can look on Facebook Marketplace for For Rent. It’s just such a cool strategy, but it require work. It requires a system to regularly… Every week, you’re calling 10, 15, 20 of these people. Over the course of months, you might be able to pick up quite a few of them.

Shelby:
Totally.

David:
It also requires you to be looking actively instead of passively. And I know a lot of investors now are obsessed with a tech option. They think that there’s some program they can design that will scrub the world and bring them on a silver platter an amazing deal with a motivated seller who will do 100% seller financing at 0% interest. All of their time is spent developing something to avoid what Brandon just described. But if you work backwards from why people give up deals they don’t want, how you get good deals, it’s you found a person who didn’t want to own a property. You didn’t find a database of properties that could all be amazing deals because if you do find that, Blackstone’s going to come in and buy it before you ever touch them. You have to accept you’re going to be boots on the ground doing some of this work that Shelby’s talking about, that Brandon’s talking about to get that deal. That’s maybe the first step. “Okay, I’m going to have to talk to human beings. I’m going to have to find the human beings that I should talk to and target those properties.”

Shelby:
I’ve found that as long as you go in the conversation with the goal of solving their problem, the reception will be so much better. If it’s like, “Hey, what problems are you facing? Is there any way I can help you solve them?” as opposed to, “I’m this hungry investor who wants to create a dynasty.” It’s a different conversation.

Brandon:
Yeah. I have a question about the deal-finding and you being a real estate agent but also an investor. I get this question a lot when I talk about… In new investments, I tell them, “You should go check out… For example, if you go to BiggerPockets, go up to the navigation bar across the top, there’s Network. You hover over that, and it says Real Estate Agents. You can find agents on BiggerPockets. What better way to find an investment-savvy agent than somebody who hangs out on a real estate investment website, right?

Shelby:
Right.

Brandon:
But then I always tell people this on the webinars, and I always get the question, “Why would I want to work with an investment-savvy agent, though? Wouldn’t they just take all of my deals? Wouldn’t they just steal all my deals?” Yeah, so-

Shelby:
Oh, my gosh. This is scarcity mindset. Oh, my god.

Brandon:
Okay, explain. What do you mean by that, and why is that not, probably, and issue?

Shelby:
I completely disagree with that. I can see the point, 1,000,000% I can see the point. But there’s so many pros that go along with working with an investor-savvy agent: understanding the language, understanding how to run numbers, being able to ask the right questions to a potential seller, off-market deal, wholesaler, all of that stuff to present you with an opportunity that is completely different than trying to talk to a normal agent. It’s a completely different conversation. But more to the point, which I believe in the scarcity mindset type of thing, is, “They’re going to take all the good deals.” Okay. First of all, I can’t buy all the good deals. Neither can any of my members of my team. We can’t take everything even if we could. But also, if there is ever a direct competition about a client who wanted a deal, and I also wanted it, 100% of the time, that deal is going to the client because I know that deals come… you know what I mean? There’s a million deals. There’s tons and tons of opportunity.
Even though for our market in particular, deals are scarce on the MLS, it’s finding a way to win. What we’ve done is we have capitalized on off-market properties. We have a real estate investors meetup where we promote wholesale deals. We try to get wholesalers to come in and actually give their properties to us. And we’ve created an off-market MLS tracker for our clients where we hang all of our wholesale deals as well as our courthouse foreclosure properties because in this county, in, example, North Carolina, the courthouse foreclosures are not listed on the MLS. And it’s an archaic, terrible system that, if you are not ready to put in a shit-ton of legwork, you’re never going to find that deal. So we have, again, built this system to capitalize on off-market to give our clients more options within this market.

Brandon:
Yeah, that is so good. All right. You mentioned you have a meetup. What is that like? Can you walk people through that? What’s yours like? Then, for people who are attending, people listening to this show right now, saying, “I want to either start a meetup or attend a meetup,” what should they expect and what’s worked well for you?

Shelby:
I have a checklist I can send you if you want to start your own meetup.

Brandon:
Of course you do.

Shelby:
Yeah, of course I do. Ours is called Pints and Properties because it started at rotating breweries. You drink a pint, and you talk about real estate. It all came from the fact of, when I was first getting started, I felt like there was a gap in our community for a place for like-minded people to get together and talk about lessons learned and stuff like that. So Pints and Properties was born. It’s once a month on the second Saturday of every month at 3:30 in Fayetteville if anyone wants to come. We start with an educational portion. So we’ll generally have a guest speaker come in and talk for no more than 30, 45 max minutes on very quick information that everyone wants to know. Then, after that, it’s just complete networking. People usually stay out for far longer than I’d expect because whenever there’s beer and real estate involved, people just get really excited. It’s turned into a really good community that draws in wholesale deals, that draws in the right vendors, that draws in community, yeah, if that makes sense.

Brandon:
Yeah. I think that’s great. I think people get a little bit intimidated by the idea of a real estate meetup because they think it’s going to be some super weird, formal thing, everyone’s handing out business cards. All the good ones I’ve ever been to have usually been at a brewery or at something that’s a little more casual. Some are at colleges. I know, David, you rent out a space, don’t you? Where do you do yours at, David, now? Usually, they’re in a classroom somewhere sometimes.

David:
Well, right now, we don’t do them anywhere because California’s all shut down.

Brandon:
Well, yeah, true. Yeah.

David:
But, yeah, I rotate all over the place because it’s hard. We either outgrow the space or they want to start charging people. Then we have to charge the people who come, and I try to always look for free spots to avoid that. We found a comedy club in the Sacramento area that we were able to start doing those at. But if you’ve got a thing like Shelby-

Brandon:
Do you tell jokes? Do you tell jokes on stage?

David:
Yeah, knock-knock jokes. Why did the chicken cross the road?

Shelby:
Oh, bad jokes [crosstalk 00:43:08].

Brandon:
I just flew in from New York. Boy, are my arms tired.

David:
Yeah. That’s a really good one. Yeah.

Brandon:
There you go.

David:
I’ll be here all night, folks.

Brandon:
Yeah. Okay. So, again, they don’t have to be stuffy, formal things. You don’t have to show up in a suit, usually. There might be some people out there that do that, but, yeah, they’re relaxed and they’re fun. There’s such a vibe of like, “Let’s help people. Let’s do this together.” That’s something that I think a lot of people don’t expect when they get into real estate investing. It’s not what you see on TV of cutthroat, “I’m going to beat you, and I’m going to take all the deals and bankrupt you.” It’s such a cooperative environment, the real estate investing space because most people don’t have that scarcity mindset. There’s always the one oddball who’s super weird. But most people are like, “Yeah, there’s lots of deals. Let me help you. I’ll tell you exactly how I did my last deal. I’ll show you how I just found that deal, and I’ll show you who my lender is.” People are usually pretty open because they know it’s going to come back to them in the end.

Shelby:
Totally, totally agree. I found that absolutely in my experience, as well. The people I surround myself and myself, we give away everything we have, essentially, because, by all means, go forth and do great things. Even with direct competition like other agents and stuff, I give away all of our tools, all of our checklists just because you can go be great, too. You know?

Brandon:
Yeah, that’s awesome. If we can, could we toss in a link to that checklist of how to start a meetup, a good meetup, and just put it in the show notes?

Shelby:
Yes.

Brandon:
All right. We’ll put it in the show notes at biggerpockets.com/show406, again, biggerpockets.com/show406. I’ll put the link there to that checklist, which would be awesome, so good. So where are you headed? Where are you headed in the future? What do you see your business looking like? You’ve got, what’d you say, 50 units now?

Shelby:
I have 51, yeah, 51 doors.

Brandon:
51, yeah. That’s awesome. 51 doors, all right. So where do you see yourself headed?

Shelby:
Okay. Actually, physically to Charlotte. Yeah. We’re in Fayetteville right now, and myself and one of my partners, Michael Glaspie… He’s fantastic. We’re moving to Charlotte, and we’re going to start another Pillars out there. So we’re doing that. We’re also doing consulting to help agents on how to work with investors because we found that they need help. And more deals, for sure, but I’ve decided… People ask me this all the time. They’re like, “Why aren’t you into apartments? Why are you doing these small deals? Get into bigger deals.”
So what I’ve been doing a lot is I’ve been reflecting on what makes me happy, and the idea of that doesn’t make me happy. What I like to do is I like to be really creative with projects. I’m really enjoying flips lately, and I’m really enjoying Airbnbs. I want to start a quirky Airbnb business, where each Airbnb is a complete experience as opposed to just a cute property.

Brandon:
That’s so good. Have you read the book The Power of Moments?

Shelby:
I haven’t. Should I?

Brandon:
It’s so good. Yeah, add that to your list. I would recommend it to everybody listening. I need to actually get those two guys, Chip and Dan Heath. They’re brothers, and they’re really smart. But anyway, they wrote a book called The Power of Moments, and it’s so good. It’s all about what people remember is those special, 1% of their day moments, whether it’s on vacation, whether it’s at Disneyland, whatever. They don’t remember the mundane and the boring. People remember the magical moments of life. So it’s all about how to incorporate more of those magical moments in life. Quirky Airbnbs are a good example. People will remember like, “There was a bright pink telephone. It was crazy,” just something stupid like that. But people love the quirky things, and that makes them happy long-term.

Shelby:
For sure. Yeah, totally agree.

Brandon:
Yeah, check out that book.

Shelby:
Yeah, so all that and then world domination, also.

Brandon:
All right, just a little bit of world domination. I like it. Military experience will come in handy for that. You might need it. Use some of that. All right. So I want to move into the next segment of the show, which we lovingly refer to as our Deal Deep Dive. This is the part of the show where we dive deep into one deal that you’ve done recently. Do you have a property in mind that we can dig into and ask a bunch of details?

Shelby:
I do, yeah. I have one. It’s in the middle of. So it’s the freshest of the mind, but, yeah.

Brandon:
All right. Let’s do with. Number one, I’ll start with: what kind of property is this, and where is it located?

Shelby:
It’s located in Fayetteville, North Carolina, and it is a single-family. It’s a BRRRR and B.

Brandon:
Okay, a BRRRR and B, single-family in Fayetteville.

David:
Can you restate what a BRRRR and B is again?

Shelby:
Yeah. That is a BRRRR, which I think everyone knows what BRRRRs are. I don’t have to…

Brandon:
You can explain it, anyway. Go ahead. Go ahead.

Shelby:
Okay. It’s when you buy, you rehab, you rent, you refinance, and you repeat. But generally, traditional BRRRRs have been with long-term tenants for the rental aspect. This is with short-term. So the BRRRR and B play is just like an Airbnb mixed with a BRRRR. It’s like they have a little baby, and that’s what it is.

Brandon:
Yeah. It’s a super powerful strategy.

David:
Brandon is secretly pinching himself that he did not think of that. He always comes up with the clever names. Good job, Shelby.

Brandon:
Yeah, way to take that. I like it.

David:
It’s the BRRRR remix. Okay. For this particular deal, how’d you find it?

Shelby:
This one is a courthouse auction foreclosure. It was off the MLS, and it was one of those deals that my team pulls from the courthouse.

Brandon:
Which, by the way, quick plug here… BiggerPockets recently launched a book called Bidding to Buy: A Step-by-step Guide to Investing in Real Estate Foreclosures by our good friends, Aaron Amuchastegui and David Osborn. No relation to you, though, correct? Because you have different last names’ spelling.

Shelby:
No. I love him, though.

Brandon:
Yeah, David Osborn, he’s pretty awesome. Aaron’s not too bad, either. All right, good dudes. Next question: how much was the property?

Shelby:
Okay, purchase price was $52,000, and the repairs were $14,000, and we put $8,000 aside for furnishing and setup. So all in, we were at $76,474, so $76,500 essentially.

David:
And how did you negotiate that price?

Shelby:
There is no negotiating with the courthouse. It is what it is, man. How it works with our courthouse, at least, is you have to put in a bid. Then there’s a 10-day upset bid period where the next bid has to be at least 5% greater than the following bid. So you just have to cross your fingers and hope that no one outbids you in that 10-day period.

Brandon:
That’s a weird way of doing it, just different than what I’ve heard before. Usually, now everybody like, “We’re selling it this morning.” But that one drags on like an annoying eBay.

Shelby:
Yeah, if they’re on the MLS, it’s like that. It’s like, “Yo, get your offers in. Then there’s a highest and best period. But the courthouse is not linked to the MLS, and they are literally an archaic system. It’s ridiculous.

Brandon:
Interesting. Actually, one of the reasons I like the idea of foreclosures, and I’ve had some big success with foreclosures, as well, is because it’s archaic. It’s annoying. It’s complicated. It’s sometimes difficult to figure out. It changes in every county across the country. There’s little, unique things. So, in other words, it is hard, and I love hard things.

Shelby:
Me, too.

Brandon:
Yeah, because hard things means that everyone else is going to go run away and go watch TV instead of figuring out how to do it. So the more you can run towards hard things in life, the more successful you’ll be at almost everything.

Shelby:
Totally agree.

Brandon:
All right. Number five: how did you fund that $76,000?

Shelby:
Yeah. This is one that me and one of my agents are doing together as a fun project. We each have lines of credit. So we each used our lines of credit, which are just 8% interest only to split this 50/50 for the $76,500 all in.

Brandon:
The lines of credit, when you say that, are these home equity lines of credit on your house? Are these from banks or private lenders? What’s this 8%?

Shelby:
Right. So, before COVID, First Citizens Bank is here in North Carolina. I think it’s in a couple other states, as well. Literally, one day I just was on a mission, and I’m like, “Hey, I’m going to find some lines of credit,” and went to a couple banks and went in First Citizens and was like, “Hey I’d like a line of credit. How do I do that?” And I walked out with $76,000 in lines of credit. One’s a personal, and one’s a business. Then I told all my clients about it, and it was great for a while. Then COVID happened, and they shut it down. But mine are still open.

Brandon:
Yeah, a lot of lines of credit got shut down. I actually set a goal for myself by the end of the year. My company, we all set these mini goals. We call them rocks from the book, Traction.

Shelby:
I love Traction.

Brandon:
Yeah, I love that book. One of my rocks is to establish several hundred thousand dollars in lines of credit by the end of the year because I have paid-off properties and I’ve got good credit, and I’ve got a good income. I’m like, “Why don’t I have just a bunch of lines of credit? I should have that, or at least a line of credit that’s nice and large and in charge.” So, anyway, I’m working towards that. If anybody knows of any good lines of credit companies right now, go ahead and put them in the show notes at biggerpockets.com/show406. Help everybody out, if anybody knows any good banks that are lending right now on lines of credit. That would benefit everybody.
All right. That’s very cool. What did you do with it, or what are you doing with it? You said it’s the BRRRR and B.

Shelby:
BRRRR and B, yes. It is currently in the rehab process. It’s almost done. Our Airbnb designer has already started her piece of the puzzle, which, by the way, I don’t like to… This is back to leveraging again. When tasks come in, I don’t think, “When am I going to do it?” I think, “Who is going to do it?”

Brandon:
Who is going to… Yep, felt good.

Shelby:
So, when I first started getting into Airbnbs, I was like, “It’s fun to think up the ideas, but I freaking hate ordering three sheets, three duvets, counting knives. I’m not going to do it.” So I had one of our real estate stages who is fantastic, I just called her. I was like, “Hey, are you ready to take it up a notch?” So now she’s created a whole business on taking the rehabbed property and getting it fully furnished and ready for the property manager to take over.

Brandon:
That’s so good.

Shelby:
Yeah. Anyway, she’s doing her piece right now. The rehab’s almost done. Then we’ve actually already started the application for the finance because it’s not a refinance for this one, actually. It’s a delayed finance because we bought it cash. Then the ARV is $110,000. So we plan to pull out everything that we put in.

Brandon:
Could you explain delayed financing real quick? I know we covered that back with Alex Felice. I think it was show… What was it? 301. But can you… What is delayed financing? Because that’s a really cool strategy that I’ve never personally used, but I really should be using it more often.

Shelby:
We use it a lot, and our clients use it all the time. It’s truly when your financing is delayed. So you buy a property cash, and you make sure that your entire rehab, all of your costs associated with the purchase, are on the closing disclosure or the HUD. So all of the costs for the project are right there at your first closing. Then you do the rehab, and as soon as the rehab is done, there’s no seasoning period. That’s the difference. There’s no seasoning period. You can start the finance immediately, and they will give you 75% of the ARV or the max that you put in on that closing disclosure, whichever is less.

Brandon:
Which is why you want to put the rehab costs on the HUD one.

Shelby:
You have to throw everything on that HUD at closing or else you’re going to miss on pulling that money back out. So the benefits of it are speed. It’s the speed process of it because it’s not like… With a regular BRRRR, you have the opportunity to potentially cash out extra if there is extra equity. So there’s no cash out involved, but it is a great way to very quickly recycle funds.

Brandon:
That’s so good. Do all lenders do that? Is that a Fannie Mae/Freddie Mac thing? What do you know about that?

Shelby:
It is Fannie Mae and Freddie Mac if you do it in your personal name. You can do that, and you can do it up to 10 times with the Fannie Mae rates, which is great. Then you can do it on the LLC side. The rates are a little shittier, but you can still do it.

Brandon:
Okay. All right. Very cool. So that’s the plan? You’re in process right now of basically not refinancing it but financing it, or refinancing if you want to…

Shelby:
Exactly, because you’re leaving nothing in the deal, if you’re doing your numbers right.

Brandon:
And in case people are a little confused, let me just explain one thing. When you say you bought it, you said you used a line of credit, but then we’re talking cash, using air quotes around cash, right? Because you didn’t buy it with a lien, you didn’t go get a mortgage on it to buy with a line of credit. A line of credit, you can use for whatever you want. You can go buy a really expensive dog if you wanted to with that line of credit, or you could buy whatever. Basically, you took the cash out of the line of credit. Now that’s your money. It’s cash. And now you went and property cash. So it’s not a lien on the property. That’s what you mean by you bought it cash, which is another reason why I want to do that large line of credit… is so that I have this ability to buy things for cash.

Shelby:
Exactly.

Brandon:
But it’s really not cash, but it is.

Shelby:
Exactly, and that is the stipulation that I don’t think I emphasized clearly enough or at all, is that in order to do delayed financing, there cannot be a lien against the property, which is why I said cash. You can use true cash. You can use a line of credit, a key lock, or a 401k, anything that’s liquid verifiable funds. You can use private money, too, but you have to be careful, which I can tell you if you want, but you have to be careful about how you do that.

Brandon:
Interesting, okay. Yeah, I’m guessing they can’t have a lien on it. Is that the idea with a private one?

Shelby:
That’s the idea, yeah.

Brandon:
Yeah, okay. You can’t have a mortgage on it because you’re not doing a refi. You’re doing a financing. It’s just delayed.

Shelby:
Correct.

Brandon:
All right. Next question, David.

David:
Okay. Normally, we ask what the outcome is, but it’s still being built. So it’s not finished yet.

Shelby:
It’s going to be perfect.

David:
Do you have projected numbers for how you think it’s going to perform?

Shelby:
Yes, I do, and I actually ran them on my BiggerPockets calculator before because I figured you guys would ask. Okay. So we have several Airbnbs that are similarly located and sized, beds, baths, amenities and stuff like that. And after everything is considered, including property management and all expenses, we’re looking to profit cashflow about $1,000 a month. It’s $933 is our projection for this projection of pure cashflow after it has been financed with the mortgage and all of that.

Brandon:
Do you expect to get all your money back, or are you going to leave any in there, do you think?

Shelby:
I expect to get it all back.

Brandon:
All right, so almost $1,000 a month, no money invested at the end of the day. That sucks. That sucks.

Shelby:
Exactly. It’s terrible.

Brandon:
Do a little better next time, Shelby.

Shelby:
Terrible deal. But it’s crazy. It’s great numbers, especially since property management for Airbnb because obviously, I’m not going to manage it. I can’t do that. It’s anywhere from 25… We’re down to 20% because once you have x amount, then they’ll drop the management fee. We’re down to 20%. But even that cashflow accounts for the 20% property management, the two times a month lawn care, all of the utilities that we have to pay. We’re still walking away with $933 a month.

Brandon:
That’s awesome. I love that you said pure cashflow. It’s the phrase that I’m trying to use more often because there’s this misconception when we talk about there’s cashflow, which is like, “Oh, yeah, my mortgage is this much, and this is how much my rent is. I’m making $800 a month or $1,500 in cashflow.” No, you got to account for the property management and the repairs and maintenance and all that. Now, hopefully, with the BRRRR and B, you have fewer repairs and maintenance, but things will still break. And I’m sure you’re accounting for that. You account for all the actual charges you will get long-term, even if they don’t happen every single month, regularly, and you get the actual pure cashflow that’s gone through the fire and came out the other side. That’s the way you get real estate and get some good cashflow.

Shelby:
For sure. I do love the… which you touched on, is that you’ll hopefully have less maintenance and repairs and stuff like that. For those of you who are out there who are considering Airbnbs, I do love the fact that’s there turnover frequently because then we have a cleaning crew. Our property manager’s walking it and making sure that the property is not distressed. And then, also, if you think about it, Airbnbs, generally people come in at night. They drop their bags. They go out to eat. They crash, and then they leave. So, if you think about the wear and tear on a property, it, in theory, is significantly less than a long-term.

Brandon:
Yeah. Yeah, that’s cool. I love Airbnb. It sucks some places. With COVID, obviously that hurt a lot of the Airbnb industry and the vacation rental industry, but it’ll bounce back. It’s one of those things that we couldn’t have predicted, kind of a black swan event. You know they shut down pretty much all Airbnbs in Hawaii, the whole state? They made it illegal to rent on Airbnb or any… You just can’t rent anything, condos, nothing, if it’s zoned, right? They just shut it all down. They just don’t want visitors here. So, not counting things like that, which are just absurd that we never saw coming, I love the idea of vacation rentals. Very cool, and BRRRR-ing, combining that, that’s genius. All right, last question of the Deal Deep Dive: what lessons did you learn from this project?

Shelby:
Off-market properties do exist in places other than wholesale deals or driving for dollars. That’s something that I thought is a good takeaway. Then the other thing is there’s always new financing strategies to find. And as long as you are continually learning about different strategies to finance properties or delayed finance, the more opportunities that you can have on hand, the easier you can do creative things with different deals because a lot of times, a deal will come in, and you’ll be like, “Oh, that doesn’t work for me.” But it might if you knew about doing X, Y, and Z and tying these things together. So it’s really about continuing to learn and building your tool kit.

Brandon:
Yeah, that’s really good, really good. All right. Well, that was the Deal Deep Dive. That was fantastic. I think people are going to get a lot out of that one. Again, I see a lot of potential in the future, especially as people start traveling again. I think that’s a really cool business model that a lot of people here are going to make a lot of money off following and modeling. Thank you.
Let’s move on to the last segment of today’s show. It’s time for our Famous Four. But before we get to the Famous Four, we’ve got a whole BiggerPockets Podcast network out there. So let’s hear what’s happening this week.

Felipe:
Hey, guys, it’s Felipe from the Real Estate Rookie Show. Last Wednesday, we had Prescott on the show, who talks about using his parents key lock to invest in real estate, creating that true generational wealth, graduating college with no debt, doing a full-time nurse, serving in the military, and investing in real estate. You got to go listen to the nuggets that he drops. Make sure you go back and listen to last Wednesday, Prescott.

Brandon:
All right. Now go check out that show right as you finish this one, and now let’s get to the Famous Four Questions. Number one: Shelby, do you have a favorite real estate related book?

Shelby:
That’s a hard question, and I’m going to say that my favorite is How to Invest in Real Estate by you and Josh Dorkin…

Brandon:
Oh, thanks.

Shelby:
… because I use it all the time with clients when they’re like, “How do I get started?” I’m like, “Go read this book.”

Brandon:
Thank you. That’s fun. Did you know the original title of that book was going to be called Start Here? We changed the title at the last minute, but it was because people are like, “How do I get started?” We just wanted to be like, “Here, Start Here.” That was the idea, but we didn’t think it was… I don’t know. We like to have very long, complicated titles like The Book on Blah, Blah, Blah. So, anyway, thank you. That’s the first time, I think, anybody’s said that, I think, on the show. So it warms my heart.

Shelby:
Oh, you’re welcome.

Brandon:
Next question, number two.

David:
Number two: what is your favorite business book?

Shelby:
My favorite business book is not exactly a business book. Crap. I screw this up every time I try to say it. It’s Morning Millionaire. Nope, that’s wrong, the David Osborn one, Miracle Morning Millionaire. Dammit. That one, and it’s funny because it’s literally my favorite book, and I always screw up the title. I should’ve written it down. But that book has changed my world from a personal but also from a business standpoint with how you start your day, how you’re really intentional with what you do. It helps you prioritize things well. So I think that that book above all other… Also, I do love Traction, and we both mentioned that earlier. It’s a great one, too.

Brandon:
Yeah, we’re actually hiring an EOS, which is the model that Traction uses, an implementer to take over our whole business and consult us on how to be more perfect on the EOS model through Traction.

Shelby:
Dude, hell, yeah. That’s awesome.

Brandon:
Yeah, it should be good. All right, number three, David.

David:
When you’re not buying every single property in the Carolinas, running the top-producing real estate team that you have, jumping out of airplanes, and being an overall awesome person, what are some of your hobbies?

Shelby:
I love to learn stuff. I have a very strong sense of curiosity. I like philosophy, psychology, anthropology, history, stuff like that. I’m learning Spanish right now. Then I love anything that’s physical. I like to work out, but I also like to climb mountains or surf or ride horses or whatever, stuff like that.

Brandon:
That’s awesome. Very cool. Well, we’ll have to get you out to Hawaii the next time we do one of those big mastermind things. We’ll surf. It’ll be fun.

Shelby:
I’d love to go.

Brandon:
All right. Number four: what do you think separates successful real estate investors from those who give up, fail, or never get started?

Shelby:
I think it’s ownership. I think that people don’t truly understand how much they can control if they wanted to. And the minute that they start blaming someone else is the wrong answer. So, even if like, “Oh, well, we didn’t close on time,” my instinct is, “Did you check in? Did you call them the week before and say, ‘How are things going? Can I help with anything? Do I owe you anything?'” So literally ownership, and you have the impact to control your future.

Brandon:
That is one of the best answers I think I’ve ever heard for that question. I love it.

David:
Yeah, really, really good, and that’s a common theme that we see from successful people, is they say, “Everything is my fault.” They just look at everything that way, and they don’t beat themselves up and use it as an excuse to say, “I suck at life. Everything’s my fault.” It’s more that you empower yourself when you say, “This went wrong, and that’s because of me, and I can fix it.” That’s awesome.
All right, Shelby. For people that want to learn more about your awesome ways, where can they find out more about you?

Shelby:
On Facebook, Instagram, Real Estate with Shelby Osborne, and shelbyosborne.com or Five Pillars Realty Group. Definitely check out my team. They’re pretty bomb.

Brandon:
Very cool. All right, Shelby. By the way, what are the five pillars? I’m assuming you have five pillars that your name comes from.

Shelby:
I do. It’s an acronym, and it’s ENCAP, which encapsulates what we stand for. So it’s education, networking, creativity, action, and perseverance.

Brandon:
Mm, so good. All right, Shelby. Thank you so much for being a part of the show today. I look forward to seeing where you’re headed in the future and appreciate all the help you give back to the community, the BiggerPockets community and those investors in your market. You’re making a big impact. Thank you.

Shelby:
Thank you. Thanks so much for having me, guys. It was super fun.

David:
Thank you, Shelby. This is David Greene for Brandon Making Traction Turner, signing off.

Speaker 3:
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