Financially Free in 10 Years by Using Real Estate the Right Way

Scott:
Welcome to the BiggerPockets Money Podcast, where we interview Jenny Bayless and talk about her financial journey. Hello, hello, hello. My name is Scott Trench and with me today is my guest co-host from our sister podcast on the market, James Dainard.

James:
How you doing Scott?

Scott:
I’m doing great. Thank you for joining us today.

James:
I’m excited to be on.

Scott:
Absolutely. James and I are here to make financial independence less scary, less just for somebody else to introduce you to every money story because we truly believe that financial freedom is attainable for everyone no matter where or when you’re starting.

James:
And whether you want to retire earlier, travel the world, go on, make big investments in assets like real estate or start your own business will help you reach those financial goals and get money out of the way so you can launch yourself towards your dreams.

Scott:
James, I’m so excited to be here with you today and I understand that you have a very special guest joining you for today’s show.

James:
Yeah, randomly so at BPCON last year, you guys… BP did an auction where a lot of donations went out and someone bid and they bought me, they’ve actually bought me for an eight hour Zoom call and we ended up shipping him out here for two days instead. So, this is Justin. He’s from Austin, Texas, bought us at the BPCON, now he’s here hanging out with me for two days. He actually, we over delivered, he got way more.

Justin:
It’s been amazing. So, BPCON amazing opportunity and it’s been a great time hanging out with James and getting to understand his operations. So highly suggest going and hanging out there.

James:
Are you going to bid on Scott next?

Justin:
Yeah. Scott is next.

James:
He’s on the list.

Scott:
I was his second choice, so right. James was right here. He told me right before we recorded, and I was right there. So…

James:
Now, you got to come out to Orlando and secure Scott on the next one.

Justin:
That’s it. I’ll do it.

Scott:
That’s right. Will you be going to this year’s conference in Orlando?

Justin:
Oh yeah. I already got tickets and going to go a little early and take the family to Disneyland.

Scott:
That’s awesome. We’ll see you in Orlando and we’re thinking about bringing our little girl there as well to see Disney World.

Justin:
Yeah. It’s an amazing opportunity to do so. Thanks, Scott.

Scott:
And if you’re interested in going to our conference this year, 2023, check out biggerpockets.com/orlando and you can find tickets. We, actually, just opened those up last week. We’re recording this in late March, so we’re really excited about that and hope to see you there. All right. We have a new segment of the show called Money Moments where we share a money hack, tip, or trick to help you on your financial journey. And today’s money moment is need a break, but want to try a staycation before you spend thousands of dollars to feed the travel bug. Try taking a couple days off and being a tourist in your own city or even surrounding cities near you. I’ve actually done this two or three times in the last year and it’s amazing, here in Colorado we have just 40 minutes away a wonderful ferry land in the mountains in the summer and it’s a wonderful getaway just for a little weekend right near home.
You don’t have to get on a plane or go anywhere far away, so check that out. There’s probably incredible sites near you that you can go to very affordably. If you have a tip for us, email [email protected] and we’d love to hear it. Please give us your name and contact information, so we can give credit where credit is due. Before we bring in Jenny, let’s take a quick break.
And we’re back. All right. Jenny has been investing in Colorado Springs since 2016 and has experienced sourcing deals to the MLS wholesale, for sale by owner, and networking. And she’s performed a variety of different financing methods to include conventional, hard money, and seller financing. She currently owns 18 units.
Jenny, I was so excited to hear your story at the BiggerPockets meetup on February 23rd where I think actually James, my co-host today was there as well. It was fantastic to hear the story and we thought we have to get you on the BiggerPockets Money show. I’m so glad you accepted our invitation and I’m so excited to talk with you today.

Jenny:
Scott, James, I’m so excited to be here. Thanks so much for having me on.

James:
That was a fun meetup.

Scott:
Yeah, it was a good time. Well Jenny, could you tell us a little bit about yourself and your money story?

Jenny:
Absolutely. So, as you touched upon, if we fast forward to today, I own a couple handfuls of units in Colorado Springs, but kind of starting back to the money story origin, it is pretty typical I would say just worked through high school service type jobs. College, I had an internship in my field, worked there during summers and during the school year. So, I graduated college with pretty decently paying entry level job in a pretty high cost of living area just right outside Washington DC. And I would say that our first major money milestone was that my now husband and I saved for a little less than two years and bought our first primary residence. We thought that you had to use 20% down. That was the only way you could do it. I really wish going back in time, I would know a little bit about house hacking.
That would’ve been an amazing start to our money journey. But hindsight’s 2020 now, and we really continued to just do the typical thing. We went to work, contributed the match to the employer retirement account, saved cash, really nothing out of the ordinary for quite a few years. And then, a couple years of working my W-2, I started to realize that the thought of having my job for the next 30 to 40 years didn’t really sound like my idea of a great time. So, I started researching how to retire early and per Google real estate was the resounding answer, stumbled upon BiggerPockets and just became obsessed at that point. Just studied as much as I could, reading the forums, listening to the podcast, blogs. So, definitely, a huge plug for BiggerPockets because it’s literally all right there. So, fast forward to 2016, my job allowed me to take a position out in Colorado, which happens to be the same year that we started to invest in real estate, and we actually started investing out of state with turnkey properties.
And I wasn’t really loving it due to really just kind of a lack of control. And at that same time, I began exploring purchasing, buy and hold properties in Colorado, specifically Colorado Springs. So, that was really the nexus of our investment journey. So, between 2016 and 2019 we BRRRR about 10 times and that’s kind of when it dawned on us, this is incredibly powerful way to expand our rental portfolio very quickly. So, we sold off all the out-of-state properties and focused exclusively in Colorado. And then, about in 2020 I took that major leap from my cushy six figure stable W-2 job to self-employment. So yeah, that was very, very scary point. I probably could have quit my W-2 job earlier from a financial standpoint due to our rental property cash flows as a backstopping.
But it was just a really scary decision to give up a stable great paying job for really the unknown and the catalyst to making that decision was that we had just had our first child and I literally woke up one day and decided that I didn’t want to go to work anymore, and I wanted to have the flexibility with her.
So, I put in my two week’s notice and at that same time a local real estate investment agent team was looking to expand. I was able to connect with them and now I’m working as an investment friendly real estate agent. I absolutely love it. I’m helping people and educating them on buying rental properties, which is just incredibly fun for me. And I would say kind of getting to where we’re at now between 2020, 2022, we did a couple of major rehabs on our existing properties. So, I don’t know if you want to call them a double BRRRR or what you want to put a name to it, but we kind of took them from rental grade to just as the neighborhoods turned, we made them more higher end and actually we’re able to get higher rents behind that. And we’re also able to use the equity from the previous properties to almost double our portfolio. So now we have 17 units in Colorado Springs and one in Pueblo, and that’s where we’re at today.

James:
I think, Jenny, that is such an amazing story because you get to that breaking point as an investor, is that where I like to call it the jump off point or that moment of clarity where we all go through, it’s like we have this light introduction into real estate where you start testing it, you got your first home, which is probably one of the best ways you can build wealth is buying that first home wealth. I mean, your story matched up a lot with mine. I did the same thing. I was in college, I bought my first home and then you get to that jumping off point like you did at year four and after you bought 10 properties and that’s where you make that decision to go all in, which is actually pretty terrifying for a lot of investors. But for me, I had made $0 and I was like, “All right, I’m going all in.” And it was scary.
Let’s talk about that a little bit because you’re an accountant, accountants to be very right in my experience work with them and they like to have a steady, they like to know what… They want to have a good game plan, they want to see the good pathways. And so, that’s an unknown. You’re switching careers. You went from payroll to all commissioned a scary thing for a lot of people. So, what was that moment of clarity that you had to get that jump off point going?

Jenny:
Yeah. So, my husband and I, we had talked for several years, probably like 2018, 2019, early 2020. Hey, from a financial standpoint, I could take a pretty big pay cut doing something that I would enjoy a little bit more with the supplement of our rental properties to make up for what I was making in my job just from a numerical standpoint. But it was just that mental block of leaving a high paying job, it’s just honestly it seemed foolish to give that up. And it was just kind of coming to that conclusion that from a practical standpoint, why would I give up this good job for going into the unknown? But when I had my first child, it kind of like there was an emotional catalyst for me and that took over, that was a more powerful than the logical side of things that, “Hey, I’m lucky enough to be in this position.”
I absolutely need to take advantage of it because a lot of people are not in that position. They would love to be in that position. I’m so lucky, why else did I work so hard to get to this point? So, absolutely.

Scott:
Could you define this position in a little bit more detail? How much cash did you have? How much passive income and what put you over the edge to feel confident?

Jenny:
So, I pretty much matched my take home pay via our cash flow with the exception of benefits, which my husband’s W-2 job that he loves, we could hop on his benefits and then, of course, retirement, the employer match, that sort of thing. But then, I came to the conclusion that, “Hey, these rental properties are the retirement, so it’s okay.” So yeah, it was pretty darn close to take home pay in that case.

Scott:
Okay. And then, a few additional questions. Could you give us some idea of the degree of magnitude of the cash flow? Was this $5,000, $7,000, $10,000 a month? And then second, how much cash on hand did you have in the bank at the time of that transition? Because I find that that’s often a really good, a powerful, I guess, safety net to have in this transition process.

Jenny:
Yeah. So, I would say at that time we were probably cash flowing about, I don’t know, 6,000 ish a month and we definitely had six figures of padding in the bank. So, all the logical pieces were there. It was just taking that leap, I think.

James:
And I think that is really important. I’ve seen a lot of people go from W-2 Tech into full-time real estate, but following that, okay, you want to mitigate your transition, which is having cash in the bank, you supplemented your income with rental properties, which is the definition of financial freedom. You buy properties as you slowly bring it back. One question I had, did you wait… Being W-2 makes it a lot easier to get access to money, which is a huge deal for investors. You know, hit magical 10 and then was that part of the strategy? Okay, I maxed out my credit lines for traditional loans with my W-2, so this is a good time to leave or was it just by chance you kind of maxed it out and then went on?

Jenny:
So, my husband and I have always taken turns purchasing rental properties and each of our names. So, he would buy some, I would buy some, so that we’re not both at that 10, the magical 10 number for Fannie and Freddie. So to answer your question, it was just kind of by circumstance, happenstance that we hit the 10. But I had also been doing real estate agent work part-time a few years prior, so I was actually able to qualify to purchase additional rental property in, I guess, 2021 because I did have history of… It was small self-employment income, but it worked for what we needed it for.

Scott:
Awesome. Well let’s go back a few minutes to the BRRRR strategy. BRRRR 10 times successfully. Can you walk us through the systems you put in place, kind of a bread and butter deal, if you had a loser, we’d love to hear about that. How did that process go in building this portfolio that allowed you to make this transition?

Jenny:
So, I would best describe the strategy as failing forward. So, we messed up a lot, especially on the first couple properties. Our first BRRRR was, I consider it an accidental BRRRR, thinking that we knew everything that there was to know, of course, right after having just done one property, jumped into the second and literally made every single mistake possible. I didn’t understand that there was seasoning requirements. So, we had our money stuck in there for a long time. I didn’t get an inspection done because I wasn’t going to win the property from the wholesaler, if I was going to get an inspection done. Highly don’t recommend that. Come to find out the sewer line was totally collapsed and all that and trying to do some of the work ourselves and I’m just not a very handy person, so it takes me 10 times longer than it would take a professional to do it.
So, really just kind of making every single mistake in the book and kind of dialing it back and saying, “Okay, what are we good at? What are we not good at?” Let’s get an understanding of all the requirements like lending requirements, what do hard money lenders require? What do permanent finance lenders require? Trying to get that in order, trying to segment the rehab part of it. How much is this on estimate, how much is painting, flooring, that sort of thing. And really just collecting data through messing up and then we are able to turn things around a lot quicker for our subsequent properties thereafter. So, that’s kind of how I would recommend doing that.

James:
And I’m actually really glad you brought up seasoning requirements, right? Because we all make our own mistake. I still make mistakes on property today. I’m like, “God, why I skipped a step?” Access to money and debt is, you have to have that to BRRRR property. That is one of the key components is you got to find the right deal, but you also have to slay the right debt on there to make it work. And that’s that rush in because you want to get into your deal, you got the great buy, but then not being prepared. So, how did you deal with that seasoning and what do you do? What did you do moving forward? Because that’s, a lot of times people don’t even know about that. The banks don’t want to refinance you in conforming debt because it looks weird in the time period and that kind of stems back from the 2008 banking crisis and fraud that they want that layer of time in there to figure out why the property increased in value so rapidly.
So, how did you get around that or how did you deal with that? Because that can trap money, which is bad to grow your money and what do you do forward to make sure that doesn’t happen?

Jenny:
Yeah. So, with the caveat that this is several years ago, I’m sure everyone knows out there that the seasoning requirements are changing. So, I’ll just speak to the past what the requirements were there. So yeah, a few days before what I thought was going to be a cash out refinance and the lender calls me and said, “Hey, we’re going to have to do a rate and term refinance. We cannot cash you out.” I said, “Well what do you mean?” “Oh, well you didn’t own the property for at the time, it was six months before you can do a cash out.” And I said, “I had no idea that that was the case.” She’s like, “Yeah, sorry. You’re going to have to… Only going to be able to do it right and term refinance to basically pay off the hard money lender,” but you’re going to be stuck with the note essentially for what the hard money loan was for six more months and then you can do a cash out refinance.
So, luckily we had other capital that we could deploy during that time on subsequent projects. And believe me, I learned my lesson the hard way on that. But yeah, so kind of what we are able to do to be able to turn our properties over a little bit faster during that time, now that I learned that hard lesson, we had a lot of money stuck in this one property for six more months is we spoke with the lender and said, “Okay, well what’s the best way of a quicker turnover on this process?” Well if you can get a private note or a hard money note at 75%, 80% ARV, we can immediately do a rate and term refinance. And I believe that’s changed since then. But that was kind of the turning point that we were able to prove ourselves with our hard money lender through these past couple projects that we had done, show them our plan forward and then we’re able to utilize our rate and term refinance to just continually turn out of these properties into permanent financing.
So, that was how we mitigated it in the future. So, it actually ended up probably being better because we learned a hard lesson that way.

Scott:
I’m glad you’re able to figure this out, otherwise you would’ve been supporting financial freedom for your hard money lender for way too long, in the context of this property. I just want to alert everyone who’s listening that the seasoning requirements have actually been updated and are now, if you had taken on that project today, you’d be even more screwed than you were at that time because the seasoning requirements are now one year before that refinance for many conventional loans. Something to keep in mind. Don’t make the same mistake Jenny made because it’ll be much more costly this time around.

Jenny:
Yes, for sure.

James:
And nothing’s worse than having your gunpowder trapped in a vault. You’re like, “I want to get access because I want to get the next deal.” And so, setting it up and other things. Jenny, have you ever looked into working with like for me, I’m a private lender too, and so I network with other private lenders. And so, if I’m, actually, looking to buy a BRRRR though, I can get a first and a second on there because then I’m also giving them loans out too. Have you ever looked into that network because you can still rate and turn refi it, and I think that’s important for this year seasoning right now, it’s all about setting up your debt structure correctly, upfront, and sometimes you can mitigate enough risk by getting pre-qualified or like Jenny’s talking about, she built a reputation which gave her more experience, allowing more leverage and by reputation and mitigating risk would take out financing in a good plan. Sometimes you can get a first and a second and then rate and term refi it to where your money’s not subject to that seasoning.

Jenny:
So, I have not done the first and the second, but I have used private financing towards the end of our BRRRR phase, I guess you’d call it. I wanted to be able to prove ourselves before we went to a private individual and be able to provide a track record that, “Hey, we actually kind of know what we’re doing here.” I felt, I guess, less guilty in a sense doing it from a hard money lender because they’re vetting the deal as well, so they’re not going to lend me the money if they think the deal is terrible, but a private lender not, doesn’t necessarily understand it as well. So, I really wanted to have that track record down for the private lender. But yeah, I enjoyed working with the private lender because it was obviously less expensive, and it was also had the same ability to do the right and term refinance at that point.

Scott:
Let’s take a step back and talk about the first deal that you did and how did your money story lead you to that point? How did you bring the cash or finance that first deal and make that transition into real estate investing?

Jenny:
Yeah, so that’s a great question. So, the very first… I’ll say Colorado Springs steel because that was kind of the aha moment to our portfolio. We just put the 20% down and that stems back to the whole, “Hey, I don’t really know what to do other than just save cash, work a job, save cash, work a job, save cash. So, we were able to put 20% down on that and we also funded the rehab.

Scott:
And how big was this property financially? Was this a $50,000 down, a $100,000 down?

Jenny:
It was about 125,000 purchase price and I think we put 20% down. So, it wasn’t earth shattering or anything, but it was still scary for an investment property. So, we were just able to put that down, didn’t think anything of it. Yeah, I needed some work, so let’s pay for some work to happen. And then, at that time I was actually in our garage painting the kitchen cabinets to this home and I was listening to Brandon Turner’s audiobook, the book on, Low and No Money Down, and it dawned on me, “Wow. I, actually, think that maybe what we’re doing could be a BRRRR.” I don’t know the whole concept of BRRRR, I kept hearing it, but I didn’t really understand it in practice. And that’s when it kind of clicked for me. I’m like, “Hey, we’re doing all this rehab. I know that there’s properties down the street that are selling in the high 100s. Maybe this is what this BRRRR thing is all about.
So, we didn’t really think too much of it for that point, but got a tenant in there and then happened to be like six, seven months after having bought it. That’s when we did the cash out refinance. So, that’s why I didn’t know about seasoning period was because just we took our time on it and that’s when I kind of got bit in the butt on the other side of it for our intentional BRRRR after that.

Scott:
So, you were able to accumulate, this isn’t an extraordinary amount of money going into this deal. It says $25,000, $30,000, $40,000, something that is achievable over a few years of saving and being frugal, which it sounds like is what led you that. And then, how much cash were you able to pull out when you refinanced?

Jenny:
We were able to pull out pretty much our entire down payment and rehab costs, and that’s when the light bulb clicked. That was kind of when we went pedaled to the metal on that because it was funny, I remember having this discussion with my husband, I’m trying to tell him like, “Okay, this is what we’re going to do and this is how we’re going to pull money out.” And he said, “Why would the bank give us money? That doesn’t make any sense.” He just thought it was just like the most foreign concept. And then, when we had that check, he’s like, “Okay, I understand it now. This is amazing. Let’s keep doing this.” But yeah, so we rolled that fund into the next property and so on and so forth, but we still really make sure that our cash savings was still a very healthy amount. So yes, we were able to pull out the money and reuse it, but we didn’t go on a vacation or buy a fancy car or anything with it. It was all business purpose.

Scott:
So, I’m listening to this, this is amazing. I wish I could go back to 2016, and do exactly what you did 10 times and achieve financial freedom and quit my job. Although, I love my job. I don’t want to quit but this one. But anyways, I’m listening now and I’m thinking, “Well geez, that worked in 2016, but is that going to work today in 2023?” Can you give us some advice or input on what you’re thinking about personally and maybe how you would’ve gotten started again in 2023 today if you were starting over?

Jenny:
Yeah, so I agree with you. I don’t really think that today’s environment blends well to BRRRR. The deals are just real thin, especially if you’re not a full-time professional investor and you’re just kind of seeing wholesale emails, MLS type things, not enough equity in the deals, more or less, you have interest rate risk, you have rehab costs risks, you have appraisal risks. So, it is just a very risky endeavor to try to do BRRRR right now, in my opinion. So, what I advise my clients currently, at least in Colorado Springs, I think house hacking is an amazing option.
And I also think that room by room or renting room by the room is also an amazing option. I think room by room renting is a lot of time involved. You have five leases now, but if you’re willing to put in that effort the same way that we were willing to put in the effort on the BRRRR side of things, if you’re willing to put in that effort, that’s kind of painful in the moment to get that first property up and running, but it’s going to cash flow pretty well. That’s kind of what I would recommend to people is look in your market, it might not be the easiest strategy, or it might not be the easiest option, but if you want to optimize your rental property performance, you probably have to roll up your sleeves a little bit.

James:
Yeah. I love that you have shifted the focus, right? Because one thing that… Sometimes I feel like people forget, including myself, it’s like this is a transitioning market and as the market changes, you have to evolve as an investor and look at for different strategies going from BRRRR, which I don’t think is dead. You can get it done in this market, the cash flow is just not that great. I call it a temporary BRRRR where it’s like you’re just waiting their rates to come down and then you’re looking good, but it switching to house hacking and the fact that you’ve learned these things. And then, you’re also a real estate broker that works with first time investors or investors.
And I love that because as you switch your pit, your strategy, you get to educate your clients. So, I did the same thing when I was an investor, a flipper, buy and hold, and then we became licensed and now we get to teach people what we do. And so, how has that affected being able to change your strategy? How has that been able to help you as a broker working with these investor clients or people that are trying to get into their first deal, just like you did to keep the ball moving?

Jenny:
Yeah, absolutely. I mean, I kind of just like to explain to people that any one of my properties that I bought several years ago was never perfect on paper. There was always some piece of the deal that gave me pause and hesitation, but I was able to wrap my head around what the risks were and try to mitigate it as best as possible either within the property itself or externally through cash in the bank, that sort of thing. And I think that is just kind of telling people that there is never a perfect time to invest. There’s never a perfect property to invest in, but I think you need to look at your long-term goals and really work backwards from there. So, a lot of our clients say they want one, two, three rental properties to supplement their income. Great. Just buy a single family home in this market.
You might need to put 30%, 35% down, buy one every couple years and you’re set in 30 years from now. Some people are a little bit on the more aggressive timeline. Great, well, you’re going to have to probably roll up your sleeves a little bit. You’re going to have to house hack, you’re going to need to do room by room. These are the pitfalls that you’re probably going to experience and just kind of work backwards, I think is really the best way of doing it while being shining a light on some of the issues that people might come across. It’s not all sunshine and rainbows all the time.

Scott:
So, Jenny, you’re financially independent, you’ve got a big real estate portfolio, a thriving agent business. What does day-to-day life look like as financially independent? I’m going to assume multimillionaire in living in Colorado Springs. What do you with your time?

Jenny:
That’s a good question. So, over the last couple years, I was working really, really hard. Being an agent did phenomenal the last couple of years now that breaks have been stepped on in the market and sentiment and everything. And to be honest, it doesn’t really bother me. I’m like, oh, this is a nice welcome break. So, if business is a little bit slow right now, just traveling, hanging out with my kids, yeah, just really enjoying life. And yeah, it’s been great. I mean, obviously still having to deal with headaches when it comes to the rental properties, but that just takes up such a small part of my overall life right now. I couldn’t wish for anything different is how I would describe it.

Scott:
How many hours a week would you say you’re working today?

Jenny:
Oh. As a real estate agent or…

Scott:
Everything combined.

Jenny:
Oh, man. Well, I hope my team leader isn’t listening to this, but probably less than 20, I would say over of this year. So…

James:
That’s a good gig.

Jenny:
Yeah.

James:
That’s a good gig. And I love that you pointed out, yeah, I think all the brokers in the last two to three years were so busy, I feel like I shaved five years off my life by just how busy it was. And it was like when the rates start going up, it was kind of like, “Whew. All right, now we can get settled.” But then, as a broker though, are you looking forward right now? Because for us as the market changes and you pivot the strategies, are you… Because it sounded like you were working with a lot of BRRRR investors. Are you putting together as a broker to market yourself going after the house hacking first time home buyer sector, or what are you doing as a broker to grow? Right. Because at some point, if that’s your career, you got to make money with it and keep it moving.

Jenny:
Yeah, absolutely. So yeah, I joke that my gray hair is like, “Oh, that was this fourplex, that was this house to get the deals done,” like you said. Yeah. So, a lot of our clients are really just kind of set it and forget it long-term horizon investors, which I love because I think that is probably the most reasonable. So, a lot of our clients are really just, they’re in it for the market. They believe in Colorado’s Springs as a long-term market, and they’re fine with thin cash flow, of course, assuming contingency is built into it by the time you run your numbers. So, we’re still moving. We just have a lower volume. So, we have a couple house hackers, have a couple just buy and hold investors on smaller properties that I think are just really long-term holds. And to answer what you alluded to with the interest rates going down, I actually took it as a really welcome slam on the breaks because I had my second child last summer right around the same time that the interest rates rose.
So, I was able to just take it all in and be kind of appreciative of the timing of it. So, going forward for this year, I mean, we’re really just going to keep pushing deals that our clients are doing in this market. We still have people doing good deals. There’s nothing special about the properties that they’re buying, but yeah, just here’s their 30 year hold plan. All right. I think that this would fit for pretty much most people that are looking to get into investing.

Scott:
So, James, I think the answer to your question, what are you doing to grow is “I’m perfectly happy with my life as it exists right now. It was wild to have all this business the last two years, but I’m declared victory, I’ve won. I have my passive cash flow, I’ve got my savings in the bank. We have two kids now, and I’m totally fine working just a few hours a week and not looking to grow.” And that to me sounds like a wonderful answer and live in the dream. Is that a correct phrasing interpretation of your response, Jenny?

Jenny:
Absolutely. I’ll just take it as it comes. If rates dip in the market goes crazy, again, just I’m along for the ride for sure, but otherwise I’m just going to enjoy it and not let the lack of commission income coming in stress me out.

James:
Oh, yeah. I like your mindset, Jenny. I think I need to adapt some of this.

Scott:
Inability to turn it off.

James:
No, I think it’s the early retirement police, the people who… You’re not retired, we’ll come after you and arrest you for violating the rules of early retirement and making money with your agent business. But I think that this is a one definition of victory in the path to early financial freedom. And it sounds like you’re very happy with everything that’s going on in your life from a business and family perspective.

Jenny:
Absolutely. And I can’t really ever picture myself not doing anything. I can’t picture myself being able to just hang out on the beach all day. That’s just not how I’m wired. So yeah, when I’m 80 and we have this conversation, that’ll probably be pretty similar.

Scott:
Well, you had a couple of tips that you brought in and some advice you wanted to share with folks when we talked about you coming on this show. Would you mind sharing those three tips that you think every investor should think about and any other advice you’d have for folks that are looking to repeat some of your success?

Jenny:
Absolutely. So, the first one is to track your expenses. And Scott and Mindy, you guys… I think every single episode you say track your expenses. And I can attest, we have been tracking our expenses since 2014, so about nine years now. Every single penny that gets spent, gets tracked. So, while I’m not as zoomed in on, “Hey, we spent too much on this month or anything like that, it’s good to just see where your money is coming in and coming out and being able to adapt to how things change when you double your family size in a few years. Yeah, that was pretty jarring against the family budget, but it’s just kind of good to be able to know where things are and yeah, so absolutely track your expenses even though it’s incredibly tedious. You will thank yourself for it.

Scott:
Jenny, how have you done in terms of moving the goalposts in tracking your expenses? Have you wanted to spend a lot more as you crossed the threshold to financial independence and is success with your agent business, or have you been able to keep that spending pretty tight and pretty consistent?

Jenny:
Yeah, so we used to be… I would say way more frugal than we are currently. Definitely, have loosened the purse strings a little bit over the last couple of years. So, I would say that there’s definitely lifestyle creep that that’s occurred in addition to just regular inflation and family expenses getting a little higher. But things that we don’t place a lot of value on that type of expenses we’ll go through and cut it like, “Hey, we don’t really need this, we don’t really need that,” so that we can have more in savings, have more to reinvest and pay down properties and that. Yeah, absolutely. And then, the second tip I would say for investors is probably focused and dedicated effort for, is needed for exponential returns in real estate. So, what I mean by that is if you wanted to do a hands-on approach like doing BRRRR, doing room by room, you’re going to see those outsized returns that are kind of advertised as the benefit of real estate as opposed to just buying a turnkey rental property and letting it sit.
You can’t expect to have the same type of return between those two products. And I think that’s really important because people often think of real estate as just being the end all, be all option to invest and be able to quit the next day and go live on a beach somewhere, but it’s definitely not the case. Yeah, we basically had a second job for many, many years getting these properties stabilized. And then, the third tip would just be patient.

Scott:
How many hours did you pour into these properties after work hours in the period where you did these 10 BRRRRs before quitting your job?

Jenny:
Oh, dozens and dozens every single weekend. We’re down here doing work on the properties or meeting with people or doing something hands-on after work, just doing bookkeeping, calling people. I would say at least 10 to 20 hours a week for years on top of that. So yeah, it was not easy while having a full-time job that’s for sure, but I don’t regret it for a second now that we are able to get over that hump per se of that.

James:
Yes, that short-term pain, long-term gain, just getting through that hump because how many hours a week do you work on it now? Like for your gesture rentals, not broker side.

Jenny:
Yeah. Not many. Less than five or 10 probably, depending on, you know if there’s a turnover that’s going to be more.

James:
Yeah. It’s a startup pain. And when you’re starting a new real estate business which is buying rental properties as a business, that startup pain is people, that’s where sometimes people just jump out of it and it’s like, “No, no, no. Just push through, get to the end goal.” And then, I’m sure being overworked for a couple years to now you’re hanging out with the kids all the time, that’s the goal. It’s that short-term pain, you just got to make it through.

Jenny:
Yep, absolutely. Yeah. And then, the third tip is be patient. I’m sure you know guys probably hear from a lot of aspiring investors that I want this property to cash flow as day one, I buy it. I just don’t really think that’s too common. I’m not saying it’s impossible, but a lot of times it takes a couple of years to really get the property performing to where you want it to be or where you expect it to be, just because things pop up, you don’t know what you’re doing, you’re making mistakes. And for several years we didn’t take a dime out of our cash flow and just consistently reinvested it back into the properties. And I think that that is necessary as well for anyone that’s looking to start.

Scott:
One last, a very quick question. How much were you spending per month in the early part of this grind? Grind period? I’m calling it a grind for several years while you build up this portfolio.

Jenny:
So, I think I was spending about 3,500 a month.

Scott:
Great. So, your three tips are track your expenses, you’re going to have to focus, and you said focus and directed effort, but it’s really this… You’re going to grind 10, 20 plus extra hours a week on top of your day job in order to build this portfolio. And I’m going to sustain, I’m going to be patient, which means I’m going to sustain this low expense level and grind for multiple years to achieve my goal like four or five years in order to really hit that inflection point where I can say that I’m financially free. So, I just want to… This is an intense all out burst of effort that is sustained for multiple years that allowed you to get to this hump. But in saying that, it’s nothing special.
And I don’t mean that to as a disk to Jenny. I mean, this is something that a lot of people could have done in this period of time, and a lot of people can do with a varied strategy, rent by the room, house hacking or something else in the future. It’s not that glamorous, but the life you live now is as a result of that effort.

Jenny:
Yeah, absolutely. And just to kind of tag along to the be patient side, I’d like to add that when I bought these properties in 2016 through 2019, looking back interest rates for, I don’t know, in the high fives, low sixes, and I didn’t think anything of it, but in 2020 and 2021 when some of these properties dropped, of course, they had to be on my husband’s in his name because he was the one with the job at that point. But we’ve cash out refinance quite a few of those properties. We were able to keep the same mortgage payment but pull out cash, and then we bought several other properties using that. So, it is just kind of like that delayed. The longer you wait in real estate, just the better it gets. So, just yeah, keep that in mind too, that your equity can be a tool as well in the future.

James:
Yeah. Instant gratification is not always a great thing. Just wait for it and it’s way better that quick hitters won’t get you down the road as fast.

Jenny:
Absolutely.

Scott:
Well, Jenny, thank you so much for sharing your story. This was wonderful, really inspiring and really admire all the success that you’ve had. We’ll have to let you get back to your busy day and wonderful, lots of free time life. Thank you so much.

Jenny:
Well, thanks so much guys for having me on. It’s been a pleasure.

Scott:
All right. That was Jenny Bayless from Colorado Springs. I met her at the BiggerPockets meetup here. We had February 23rd in Denver. James, you were there. What’d you think of the show today?

James:
Oh, Jenny’s awesome. She actually… It’s amazing how we all kind of start from the same stories. We have a job, we find real estate, and then she just built her portfolio enough to where she’s… And the only difference is she’s looking at her glass as half full. I’m looking at it as half empty. She’s stopping and calming down, but I’m keeping going. But that’s the investor’s story that everybody wants. They get into it, they buy enough rental property, now they can live financially free. It’s a really cool thing to see.

Scott:
Yeah, I just think that her journey is so… It just fits the kind of, I’m going to use the word stereotype of the journey to financial independence in so many ways. It’s so classic, it’s so repeatable for many folks, right. I mean, this is someone… Yes, we’re earning a fairly good income, but not an outrageous one. We’re spending a reasonable amount, $3,500 a month is not a large amount to spend in 2015, 2016, ’17, ’18, ’19, ’20. This is someone who has a tight control of their expenses, someone who’s grinding it out for years, who shows up at work during the day and then fixes up rental properties during the evening, sustains this for several years in a row and then stops, which I think is the part that I can’t do quite yet. I haven’t been able to stop and actually say, “I’m going to cut back now on hours because I’m addicted to building BiggerPockets and building my portfolio.
Perhaps you feel the same way, James. And now, she enjoys this life of relative leisure and is just, “Hey, if more money comes in for my agent business, that’s cool. I’ll take it.” And she told us she used all that money to pay off three of her rental properties. If it’s not my portfolio’s great and I’ll just chill and enjoy my life on 20 hours a week or so of work.

James:
Yeah. She did the work, she made the decision to go passive, make the transition out. She suffered through that two to three year buildup period. And now, she’s getting to enjoy what she says. She’s working 10 to 20 hours a week maybe and get hang out with her kids and living perfectly comfortably fine. And that’s I think the definition of financial freedom right there.

Scott:
Absolutely. So, what an amazing story and really admire what she’s accomplished. All right. Well, James, should we get out of here?

James:
I think I got, unfortunately, I’m not like Jenny. I have work to do, so yes.

Scott:
All right. Well, this is the BiggerPockets Money Podcast. I’m Scott Trench. He’s James Dainard saying peace out Girl Scout. If you enjoyed today’s episode, please give us a five-star review on Spotify or Apple. And if you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.

Speaker 5:
BiggerPockets Money was created by Mindy Jensen and Scott Trench, produced by Kailyn Bennett, editing by Exodus Media, Copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.