Doing Deals While Quarantined with Jeremy, Kristen, and Rafael

Felipe:
This is the Real Estate Rookie Show number five.

Jeremy:
So I talked to my agent, I’m like listen, I need to release a contract or I’m offering something like 20 grand for this house. And she just kind of laughed, she’s like yeah, you’re not going to get that so I’ll send you the contract. Like all right, cool. So an hour later she calls me and she just is laughing. She’s like, “Oh my God, they took $20,000.” I’m like what?

Felipe:
What?

Jeremy:
Yeah, she’s they took 20 grand. She’s like I never would’ve thought they would’ve taken $20,000. She’s been doing this for 15, 20 years, her and her husband they have 60 rentals themselves. She’s like I want this for $20,000.

Ashley:
I’m Ashley Kehr and I’m here with my cohost Felipe Mejia, who’s here to give us a full weather report from Daytona Beach, Florida.

Felipe:
I always get nervous about what you’re going to say. I’m like okay, how is she going to introduce? How are we going to play this out? I’ve got to be ready. So I’m looking around what is she-

Ashley:
Yeah, do you know the weather forecast?

Felipe:
It is beautiful out here, I actually rented a small hotel room by the beach for this recording I was super excited about it. Maybe got rid of the parrot. I have the ocean behind me, it’s 85 and sunny it’s a gorgeous day. But it’s kind of sad though because there’s no one on the beach for good reason, but it is what it is.

Ashley:
Right. That has to be weird to look at though, just the empty beach.

Felipe:
It’s really strange. It actually is.

Ashley:
Yeah. How is your family doing?

Felipe:
Yeah, everyone is good. We’re like I said in the last show, we’re out here on five acres in Daytona, Florida. My son’s running around getting tired, doing his thing. We bought him a small pool and a trampoline so that he can enjoy the outside so he’s really loving that. How’s your family Ashley? How’s everyone up North?

Ashley:
Good, good. I put my kids to work this weekend in a rehab unit. So my son, my six year old he did great with the screwdriver. He took all the poles and the hinges off of kitchen cabinets for me so that was great. I didn’t have to do that and he did it all and I only had to make them pizza as payment so worked out to my advantage.

Felipe:
Yeah, good luck with that when they’re teenagers, they’re going to be asking you for a cheque. I can’t wait til my son can help me with my rehabs though, so that’s exciting.

Ashley:
Yeah. So today’s show is a lot of fun. We did the Facebook Live again and we had on three investors who either just closed on a deal or are in the process of closing on a deal. And it’s interesting to hear their perspective on why they’re still going forward, even with everything that’s going on. And I love their perseverance, their endurance then they have great energy. So the three we talked to today’s Jeremy, Kristen and Rafael.

Felipe:
Yeah, they were really cool because they talked about how like you said, perseverance I think seemed to be key that they had to push through what was going on even more than typically to push their real estate investments and purchasing properties. Now you have this pandemic on top of that so pushing through that. And then Jeremy talks about pushing through, making sure that the rehab is going to finish, getting everything done and getting a huge discount on his purchase price. Close to 20 grand I believe so that was really interesting.

Ashley:
And these are not experienced investors who have gone through a crash before or done this for years. Each of them only have two or three deals under their belt or this closing might be their second or third. So I’m really excited to talk to them more. Let’s bring on Jeremy, Kristen and Rafael.

Felipe:
So today we’re going to start out with Jeremy. What’s up man? How are you?

Jeremy:
Good. How are you good man?

Felipe:
Good man, just hanging out.

Ashley:
Do you want to tell us a little bit about where you’re from and what you’ve invested in so far?

Jeremy:
I am out of Avon, Ohio West side of Cleveland about half hour, 40 minutes West of Cleveland. I am a educational aid for a high school where I work with special needs and a full time strength conditioning coach. I have two investment properties, a condo in Lakewood and I just bought a single family home in Elyria, Ohio.

Ashley:
Congratulations.

Jeremy:
Thank you.

Felipe:
Now is the single family you just purchased during this whole pandemic thing and everything that’s going on?

Jeremy:
Yeah, so I started in December looking for more investment properties, making my offers nothing was clicking. And then this actually particular property, it’s a two bedroom, one bath, 700 square foot with a 180 square foot sunroom, enclosed sunroom off the back. And the day I went to originally see it, it had gone contingent but I’m like still going to go see it just in case you never know. So went and saw it, I liked it, did a walk through, crunched my own numbers and came back and it was contingent so I didn’t bother with it, didn’t even make a backup offer and it came back on the market. When it came back on the market, I immediately texted my agent, I was like let’s offer on his house.

Jeremy:
The asking was $45,000 it was sitting on the market for over a hundred days and this was like, man like two weeks before corona happened and offer 35 on it. The seller immediate was no problem, 35 but the seller lives overseas so they wanted to use their closing title company and everything because they’ve done closing titles with them before. I’m like fine, but I want 32,000 now. I just finished J Scott’s book on negotiating so I was like I learned through there, if they don’t budge at the original number come back and keep going. So they’re yeah, no problem 32 is fine. So then I’m like okay, I might have even more wiggle room.

Felipe:
30, let me keep going.

Jeremy:
Exactly. So they’re like yeah, 32 is fine. I’m like okay, well yeah now I have 30, 28 in my mind after inspection. So because my walkthrough, I mean there was it’s a rehab so there’s foundation issue but I only noticed the one wall and so I started lining up on my inspection. The first day of inspection there was something that happened and it got delayed and then we set up the second time for inspection and it got delayed so I had to have two extension periods for inspection. By this time they’re kind of frustrated and my agent’s listen, they would rather stay in contract right now versus backing out because this is when corona started happening.

Jeremy:
So this is probably, I would say five days into everything where I finally got my inspection. The report comes back and basically my inspector’s like listen, three out of the four walls in the basement have problems. The sunroom in the back, the slab sloping towards the house, there’s plumbing issues. Like the kitchen sink they ran the sink down into the slop sink and then had a pump pump it out of the basement wall or out of the basement window. Which I didn’t notice at first I just didn’t look-

Ashley:
That’s not normal?

Jeremy:
Yeah. I guess that’s normal for that rental. So he’s like you need to call a plumber ASAP because that’s going to be a big issue. So all the alarms start going off in my head, I’m like I got to get out of this. So I talked to my agent I’m like listen, I need to release of contract or I’m offering something like 20 grand for this house. And she just kind of laughed, she’s like yeah you’re not going to get that so I’ll send you the contract. I’m like all right, cool. So an hour later she calls me and she just is laughing. She’s like, “Oh my God, they took $20,000.” I’m like what?

Felipe:
What?

Jeremy:
Yeah, she’s they took 20 grand. She’s like I never would’ve thought they would’ve taken $20,000. She’s been doing this for 15, 20 years, her and her husband they have 60 rentals themselves. She’s like I want this for $20,000. She’s like but you need to close ASAP and at that time it was Wednesday the 15th and we were already set to close on the 17th that Friday. So I’m like all right, let me rerun the numbers just to make sure and make my calls. So I hang up, I call my foundation guy and as a strength coach, one of the clients I train her husband is a plumber, so I use a lifeline right there. And I called her up, got her husband’s number and made basically an emergency meeting at this house within an hour.

Jeremy:
We did another walkthrough, the plumber looked at everything and when it was all said and done, the what came from inspection added another 2,000 to my renovation budget. And I was like “Oh, this is awesome. Let’s go.” So I called my agent like send me the papers, let’s close on this I’m good to go. She’s like great. She sent me the papers, we started working on closing. The title company called me Friday when we were set to close and they go, hey, we couldn’t file the papers today because the courthouses and everything they were adjusted hours and they didn’t find out about it till Friday. She’s like so we got to push it to Monday. So I’m like okay, fine, as long as we close no big deal.

Jeremy:
Well, that Sunday our governor came on and basically was just like we’re shutting the whole state down, only essential people. And I’m sitting there like I’m supposed to close on this house tomorrow, this may actually fall through. I’m not going to get this deal, I’m starting to get aggravated. So my wife Carly, we’re both sort of looking up and he referenced the Homeland Security Act that they’re going to follow. We literally looked up the Homeland Security Act of who are the essential employees, who’s going to be working and who’s not to be working. And we see title companies, blah, blah, blah they’re essential and I’m like all right, awesome. We can do this.

Ashley:
Did you ever have any fear in your mind though with everything that was going on? Going through with the deal?

Jeremy:
Not really just because the house was getting paid in cash and I knew worst case scenario, I would just sit on it and I don’t have any payments besides the interest for the HELOC and I knew that I could just wait it out. And especially with the deal that I got on it, I knew I had plenty of wiggle room with this because originally it was going to be a BRRR. I was probably going to have to leave three, $4,000 but now getting it at 20 I’m like okay if this is going to be a BRRR I’m going to get everything back and maybe [crosstalk 00:10:02] myself.

Felipe:
Jeremy earlier you said that the sellers were overseas. Where were they overseas? Do where they were?

Jeremy:
That I do not know, I didn’t get that information but basically when my agent called me she’s like yeah, with everything going on they just want to get out of it and they’re done with the house. I’m like-

Felipe:
I’m wondering if they were in a position where they had to sell and that’s probably why you got it for 20 grand. I mean that’s an amazing story. You’re going to be able to BRRR all your money out, maybe even some more. Pay off your line of credit, which assuming your game plan is going to be. You’re going to have a crushed deal, you are going to have no money in the deal and you’re going to have cashflow month after month after you’re done fixing it. That’s awesome. That’s the perfect scenario.

Ashley:
It doesn’t hurt to ask. If you wouldn’t have asked then you never would have gotten that deal. The worst they can say is no.

Jeremy:
And my agent said, she kind of said it passively and thank God she just threw it out there because I would have been out of the contract. But yeah, just you always ask the questions and I mean with all everything that I’ve been reading from BiggerPockets it’s always ask why or the worst thing they can do is say no.

Felipe:
Yeah, absolutely. I’m always about the why.

Jeremy:
Not like they are going to hunt you down or anything like that. It’s just ask the question as to why if they say no okay why? And if they don’t budge on their number or if they easily say, “Yeah, we’ll take that,” you have wiggle room. Keep working it down.

Felipe:
Cool. Jeremy that’s amazing, that’s a great story of persevering. It sounds you had to hit a lot of little bumps there. Sounds like you’re going to do great, you’re going to crush it. Tell us what the ARV is going to be. How do you feel the rehab is going to go? And then talk to a little bit about tenants.

Jeremy:
So right now the ARV was looking conservatively at 75.

Felipe:
Good.

Jeremy:
I always low ball that. I was like all right, I’m not going to sit there and be like “Oh, it’s a $100,000 house.” No, let’s say conservatively 75. The renovation budget I was looking at about 30. And originally me being working full time with the school I mean it was mainly going to be contracted out, but now we don’t have school I’m still getting paid luckily. I have all this time now where I’m handy, during the summers I do a lot of handiwork around the community. So YouTube’s great, everything you can YouTube on how to do it yourself. So my renovation budget just came down a little bit more because I’ll be able to do a lot of it myself. And then rents in the area are conservatively 850 and up so I should be able to get it fully rehab 900-950.

Ashley:
How long do you think the rehab will take you?

Jeremy:
It’ll take me no more than two months.

Ashley:
Yeah.

Jeremy:
Basically the big chunk of it I’ll be able to get done in the next three weeks. But I’m getting full all new replacement windows, so that’s going to be the estimated four to six weeks. So I’m looking at no more than six weeks I should be in there and all renovated and good to go.

Ashley:
This coronavirus quarantine came as a positive to you that you have this time now to rehab over the next couple months and in your own private rehab you’re still pretty much quarantined. It’s not like you are out working but-

Jeremy:
I have a few months. My wife she’s seven months pregnant, so I got a little bit of time before the baby comes in about 40 days. So I’m going to crunch away for the next 30 until our little girl comes.

Ashley:
Well congratulations.

Jeremy:
Thank you.

Ashley:
Yeah, that’s exciting.

Felipe:
Congratulations. Are you worried about finding tenants at all? How has the market there looking for you? Is there any concern there?

Jeremy:
I’m not too concerned with that. My plan was to start take the front picture of the house and get it out there and start getting feelers of getting applications rolling. Still listing it, I know some people are like don’t do it until it’s fully rehabbed but like I said why not? Why not list it? And maybe I’ll get a tenant and say, “Hey, coming to market in five weeks or this date. Fully rehabbed home with and list what I’m doing.” And maybe I’ll get some hits off it but worst case scenario I don’t and they want to see the inside and wait till it’s done. So like I said, I’m not overly concerned with finding a tenant. I know it’ll happen, it’s just a matter of when.

Ashley:
Yeah and we have a comment here from Nathan on Facebook. He says, “You should go back to the sellers and ask them if they have any other deals they’re trying to sell.” And that is a great point because I always say the same thing.

Felipe:
And go ahead and post them in the Rookie Real Estate Facebook private groups so some of us can get some of that bread man, that’s amazing. I want a $20,000 house that I can rehab.

Jeremy:
I’ll talk to my agent after this actually, that’s a good idea.

Felipe:
Yeah, I would definitely go back. That’s pretty interesting.

Ashley:
I saw on Instagram someone bought a bunch of plumbing materials and stuff off Facebook marketplace and they said, oh yeah, it’s an investor. He owns 60 plus units. He’s selling his portfolio, getting rid of his inventory. And I was like you got to ask, are you selling those properties? Who are you selling them too? Can I buy some?

Felipe:
Don’t worry about the plumbing stuff, where’s the house at? Where are you at the plumbing stuff?

Jeremy:
Very fortunate too with my renovation. My wife’s family they own a online liquidation auction company, so they get pallets of flooring, vanities, toilets et. They’re yeah, go grab whatever and just [crosstalk 00:15:06] so that helps as well with the rehab.

Ashley:
So what would be one tip you could give our listeners today about your situation and the coronavirus and everything that’s going on now? Do you have one piece of advice you could give everyone listening?

Jeremy:
If you’re not over leveraged and the numbers work go for it. Especially if you have the ability to sit down and wait it out definitely pull the trigger. But like I said, because of this going on don’t be afraid to go out and still look at deals, make offers, make your low offers and keep wiggling that number down. But if the numbers make sense and you can sit on it and you’re not over leveraged, go after it. Why not?

Felipe:
That’s awesome Jeremy. Thank you for what you’re doing in education. Before we get onto the next part, I just want to say thank you. I have a little brother who is special need classes and he talks about being outside all the time. He hates the classroom but loves being outside with his PE coach and so thank you for what you’re doing Jeremy. You’re doing awesome. Keep crushing in real estate. Thanks for coming on the show and we’ll see you next time but for now we’re going to bring in Kristen.

Kristen:
Hey.

Ashley:
How are you?

Kristen:
I’m so excited. I stalk you guys almost every day. I’m a fan of you.

Ashley:
We’re happy to talk with you today. We’re excited. Can you tell us a little bit about what you have going on in real estate right now.

Kristen:
What I have with [inaudible 00:16:25] it’s been more than one seller. This particular house has been sitting there for five years and I was able to get the house from my wholesaler. For this particular house is 1,300 square feet and the neighborhood is right next to a high school, which is not too bad. And it is in a floodplain however, it doesn’t flood as bad or anything. So it’s a lot of people that’s renting in the neighborhood, a lot of student rentals.

Ashley:
Okay. So where are you investing right now?

Kristen:
In Columbia in South Carolina. I’m sorry I forgot to tell you that.

Ashley:
Okay. And so this is your second deal and it’s going to be buy and hold correct? Or it’s just a flip?

Kristen:
Buy and hold yes. It’s buy and hold but it is the full renovation.

Ashley:
Okay.

Felipe:
Where’d you meet the wholesaler? And tell us a little bit about the property, the numbers and go through the deal.

Kristen:
On Facebook Marketplace. I kept seeing this person posting this deal. Who keep posting this deal, it was nice deal too. And the number were like 40,000 where he had it under contract for $40, 000 [inaudible 00:17:31] 3000 and the ARV was around 116,500. The most I’ve seen stope was around 140,000 with it be 140,000 less renovation and this would be a full gut renovation to be around 150,000. I was like okay it’s not a bad, I have the money to purchase it myself, but I was going to get my [inaudible 00:17:57] money for the renovation as of yesterday. But I’m still going to buy the house though regardless because this is a good deal. I can sit on it until I get an actual lender to go for it.

Ashley:
Yeah. So what happened with that lending and was it private lender or a bank lender?

Kristen:
It was a hard money lender. At first he said [inaudible 00:18:17] money for [inaudible 00:18:18] and the reason why it can’t be just for the renovation because he wasn’t sure about his money due to the whole coronavirus. Well I say okay then, just lend me the money for the renovation then I’ll pay part the money to purchase the house. Yeah as a yesterday he decided not to go for it because he said he found out the house was on a floodplain and he said, due to the fact he doesn’t know what’s going to happen later on, he’s going to go ahead and just fall back on this one. So my attorney asked if I was still wanting to go through the deal and I said, yes. I still have the money, I’m going to go ahead and buy the house. I’ll just have to just look around for someone to help, but I’m still going to buy the house.

Ashley:
So what steps are you taking now to find someone to help out with those renovation costs? I feel like a lot of private money lenders are doing the same thing. They might be a bit skiddish to invest right now until they find out what’s going to happen with the economy.

Kristen:
Well, I’m probably going to market it. I am a part of a local REI so I’ll let know that I just need innovation and I’m willing to give them above average of return. I do 10% usually, so I’ll go and just see if they would to and then at 6,000 for the renovations and then they’ll get their money back and then I take $6,000. The thing about private lenders as a real estate [inaudible 00:19:42] it’s hard to find legit private lenders. So that’s been tough that I’ve noticed that too, that that’s just been kind of tough for me. So I mean I’m going to just keep on marketing there. I’m still going to get the house though regardless. And I have a cousin who’s a contractor, so he’ll be able to help out whenever he can or if I’m not able to get him, then I’ll get my other contract multiple other options so.

Felipe:
Kristen you sound a go getter. It sounds you don’t care what the obstacle is, it looks you’re going to just bust right through it and I mean that’s the kind of attitude you got to have to be successful in this game. So I’m really excited to see the outcome of this. Please come back and post it in the Facebook group, in the Real Estate Rookie Facebook group. We’d love to see the outcome of that. Do you have any worries about tenants or anything post renovation and any of that or what are you thinking?

Kristen:
No, I don’t because the plan [inaudible 00:20:32] hopefully after then Airbnb and then possibly get a higher property management to find tenants. So I will allow them to find a tenant for me. I do have a regular full time [inaudible 00:20:45] have other side hustle job outside of real estate investing. So to me it’d be more easier to just hire a property manager to find the tenants for me. And if they can’t find tenants then I can easily just get Section 8 to come on in.

Ashley:
That’s awesome. Yeah, we’re really excited for you. Do you think that there’s going to be anything strictly from the coronavirus that’s going to affect you directly and what advice do you have for everyone going forward? That’s trying to look for their first deal right now or maybe waiting to close on a deal.

Kristen:
Here’s the thing. I’m going to be honest [inaudible 00:21:20] about the whole coronavirus pandemic when it comes to real estate. Because people, they still need a place to stay regardless of where you are right now. So maybe because I’m still new, but I don’t see the whole big deal about people being so scared about real estate investing unless you’re just over leveraging. Now if you are over leveraging that’s on you. I don’t see it affecting me at all. The only thing [inaudible 00:21:49] I’m pretty sure I can get somebody in there. I mean I don’t know too many people want to be homeless, I don’t.

Felipe:
I really Kristen’s attitude. Kristen I really enjoy your feedback, I mean your energy. I think you’re going to go far in real estate girl. You have this go getter attitude and you’re smart about it. You’re like I don’t want to be over leveraged, I want to make sure that it’s something that I can do. You know that people need a place to stay right? Heads in beds is the name of the game so I love that attitude and that’s exactly what you need to win in this game. You’re not skiddish, you know you’re going to do well. You’re not scared of a rehab during this pandemic and good for you girl you’re out there crushing, it I’m really proud of you. I’m excited to see what comes out of this one please post it we’d love to follow up.

Ashley:
Yeah, great job that you’re doing and thank you for joining us today.

Kristen:
Thank you.

Felipe:
Man she was really… I really enjoyed. Someone like that is like a refresh they’re just not scared, ready to rock and roll I mean-

Ashley:
Right. Just the energy and just this didn’t work, so I’m going to do it this way. And that’s the attitude to have.

Felipe:
Love it.

Ashley:
And I loved how she’s set and this is why every time we talk to guests, I love hearing their opinion on things and how she said, yeah, people don’t want to be homeless. People are still going need homes and I thought that was a great point.

Felipe:
All right, so before we get to Rafael, we actually have a question here. Any opinion on buying a house hack during this epidemic? What do you think Ashley?

Ashley:
I think that’s the best strategy right now honestly. Because as long as you by yourself could afford the mortgage payment and your property taxes, insurance, you can afford that on your own. And then you still house hack and that is just the cherry on top, that’s just extra money coming in. So I think house hacking is a very safe strategy right now. If you are not over leveraged and you can still afford that payment, if you can’t find roommates or rent your other unit, I think that’s a safe strategy to go. What do you think Felipe?

Felipe:
I agree 100%. House hacking right now is probably king on the rental property side of real estate not speaking about flipping or wholesaling or any of this. I think when we’re talking about buy and hold like Airbnb and renting traditionally and all these other ways to do it, I think house hacking right now is king. Because even if you lose one tenant you still have three others or two others or whatever the case maybe. Plus you’re living for free so you’re able to deploy your finances in other ways. You don’t have the stress of, “Oh my gosh, I got to make my mortgage payment.” You have two or three other people who are in the house together as well. I almost see it-

Ashley:
You get to quarantine together.

Felipe:
Oh my gosh. I almost see it and make sure you have your little Purell bottle right there as they walk in, making sure everyone’s sanitized. Yeah, I think house hacking is probably one of the best things you can do right now. As long as like Ashley said, that you can pay the mortgage by yourself, you’re not over leveraged. Your tenants that are in there are the cherry on top. So yeah, I love that. So let’s bring in Mr. Rafael. How you doing brother?

Rafael:
Hi, how are you guys doing today?

Ashley:
Good. How are you?

Rafael:
Good, good.

Ashley:
So where are you from?

Rafael:
I’m from Colorado.

Ashley:
Oh, okay. Is that where you’re investing in right now?

Rafael:
Yes.

Ashley:
Yeah. Okay. So tell us a little bit about what you have going on.

Rafael:
Okay, so a little bit of background on myself. I have two rentals and I was getting into right now ever since February into what I was going to be a fix and flip, but because of, I don’t know, the uncertainty of the market actually what I’m going to do is I’m going to hold it so I’m going to rent it out.

Ashley:
Okay, awesome.

Felipe:
Good for you man. Did you think of that strategy before you got the property, or are you doing a pivot and going from there?

Rafael:
Yeah, it’s actually an exit strategy that I thought of just because I don’t know what the ARV may be or if the price drops or anything that. So renting it out would actually give me a pretty good cash flow.

Ashley:
That’s awesome. When we had on the show a couple of weeks ago, we had Steve and Joe on and they talked about having two exit strategies. So that’s great that you’re already doing that before you even have your deal in place that’s awesome. And how many deals have you done before this one?

Rafael:
So I have two rentals, and this was going to be my first fix and flip, but now it’s going to be my third rental.

Ashley:
Yeah. Okay. Congratulations.

Felipe:
Do you plan on flipping the property after this whole pandemic? Maybe selling it off, getting some money out, or what’s your plan post pandemic?

Rafael:
Oh, okay. So yes, I do think of it. I was actually deciding whether I want to do a six month lease with tenants or month to month or maybe a year. So I would think probably next summer is when I want to get rid of it.

Ashley:
Okay.

Felipe:
Oh, okay.

Ashley:
And your reasoning for that or you just think that would be a long enough time for all this to be over with?

Rafael:
Honestly, I’m deciding still just because it’s going to cash flow pretty good. So I might keep it to be honest because what I’m going to do is I’m going to do a BRRR and then get the money out and then get into a flip eventually.

Felipe:
That’s hilarious. You’re going to end up keeping it, bro. I’ve regretted every property that I sold. Even the flip that I had, I know right now it would have been cash flowing pretty well. So any property that I’ve ever sold, I’ve regretted. I love the hunt, I love the deal and then it’s I’m married to that property and I’m just giving it away. I ended up wanting to keep it as long as the cashflow is working. What I ended up doing is getting a line of credit on a property if I want my money back. I just get a line of credit out, use it again the rent pays off the line of credit. But there’s a bunch of strategies, man so that’s really cool. The property that you’re going to be renting when are you going to finish? What do the numbers look like? Tell us a little bit about it.

Rafael:
Yeah, so I got actually through a wholesaler with a $10,000 nonrefundable earnest money. So that is one of the reasons why I kept going with the property.

Ashley:
Right? Yeah. It’s kind of hard to back out.

Rafael:
Exactly, yeah. So it was either say bye bye to my 10,000 or move forward and come up with an exist strategy. So actually the way that I got this when it was at a wholesaler it was first come first serve. So I got a buddy, a contractor he went to look at the property. I didn’t even look at the property and all and on the spot we put the $10,000 down and it was a good spread for a flip. Then two weeks after I went for the appraisal and actually looked at the property and I was wow, this has a mother-in-law basement has its own entrance, this will be a great rental.

Rafael:
But my head was still in a flip and I was still thinking, flip, flip, flip I got to do that and then the coronavirus happens. So then I’m like okay, I’m reaching out to a few people that know, actually Steven was one of the people that I also reached out to on Facebook. And I was what should I do? Everybody’s like exit strategy, try to get a rental, make it a rental so that’s exactly what I did. So I decided to just go ahead and do that but I was going purchase the property with a hard money lender and then they eventually halfway through the deal, they backed out. They were like no we’re not going to do that. We’re only going to do 50% LTV, which was not what I wanted to do.

Ashley:
Did they back out because of coronavirus and what’s happening?

Rafael:
Yeah. The broker that I was talking to said that the CEO was not willing to do it anymore. They were making you put more money down and not really going finance you on the rehab. So I was like okay, well I’m going to pay the rehab myself and I found another hard money lender that I could use so I’m closing on the 3rd of April.

Ashley:
Okay, cool.

Felipe:
I love that you grinded through it. I know that 10,000 was a big motivation, right? To not back out of the deal, but even without the 10,000 let’s say that it was only a thousand dollars earnest money I would challenge you to do that throughout your career, man. Continue to grind through obstacles because you’re going to get a lot of those, you’re going to get a lot of obstacles. I mean, every single property that I’ve purchased even to this day man have had obstacles up until closing. I’ve never per se had a perfect closing, nothing going on, right? So I’ve always had to persist through it. Even at my closing company, my sister works there and she’s always like, “Oh my gosh, there’s another Felipe property here we go.” We got to every single thing, there’s always something man so I’m just proud of you for grinding through it man [Foreign Language 00:29:30] so I think that’s awesome.

Ashley:
So once you close, what’s the plan? Are you going to start right away on the rehab? Do think you’ll be able to find contractors?

Rafael:
Yeah, so the rehab, I actually had my friend that is a contractor, he’s going to help me out. The rehab is only going to be 20,000 maybe 25 worst case scenario. I actually called my property management from my other properties and I was like “Hey, how much can I get rent here?” So the mortgage is going to be about 1,700, 1,800 and for each floor because it’s two bedroom, one bathroom on the first floor and two bedroom, one bathroom on the basement. It actually has a kitchen in the basement as well. So I’ll be able to collect she said 1,600 each so it’s going to be about 3,200 and mortgage is going to be about 17, 1,800 so it’s going to cashflow at least $900, $1000.

Ashley:
Wow, that’s awesome.

Felipe:
And is the mother-in-law suite the one downstairs?

Rafael:
Yes correct. Yes.

Felipe:
Cool, very nice.

Ashley:
So that will be your mortgage after you refinance, correct?

Rafael:
Correct, yeah after I refinance yeah, that’s the goal. To refinance as soon as I get a rehab and refinance with 30 year and it should be good.

Ashley:
And how long do you think it’s going to take for you to rehab it and get it refinanced and rent it out?

Rafael:
It’s going to be quick actually. The guy told me in three weeks? Because everything like the basement is already set up, people were actually using it as a rental in the past. So there was a person living on the top and a person living in the bottom so it just needs paint a little touch up and it should be good.

Felipe:
I love that.

Ashley:
Are you worried about contractors not being able to work at all? I know in New York state where I’m from we’ve had they put a hold on non-essential construction projects. So I actually had someone staying in my Airbnb and they had to postpone it a month because their house was getting remodeled but now the contractor can’t work because of this new rule. Do you have any fear that might take place in Colorado?

Rafael:
No, I don’t. So I think he should be able to go in there and do it right away but I actually calculated everything to a four or five months.

Ashley:
Oh, so you have time. Yeah.

Rafael:
I calculated all that on my costs because I was worst case scenario, four to five months added up or I saw the interest for the hard money lenders. So I calculated all that and that should be good.

Felipe:
Are you worried about tenants at all Rafael? Are you worried about finding the right tenants or what’s your strategy regarding that? Let’s say you do finish in three weeks.

Rafael:
Gotcha. Yeah. So I talked to my property management company and they’re still getting people renting out. I actually bought my second rental in September and they were able to get someone in within two weeks. It’s a little bit different now but, but they told me there’s still pretty busy. People are still looking for a home, they need a place to live so.

Ashley:
I actually have a question here from someone on Facebook for you. Okay. So it’s from Dena. Hi my first house hack with no tenant in the pandemic first mortgage due tomorrow. Stressed out, but I have my mortgage. Any ideas for next month? Tenant traffic is slow.

Rafael:
Well I wonder where that is because I know it’d be in a different state. I would say either, I don’t know if they have a property management in place I know that’s usually who I use. I don’t have too much experience with the lease and all that stuff, but I usually have someone else in my team that helps me out with all that and I ask questions. I actually have three property management people that I ask questions for and I asked them as well right now to make sure that they still employed, they asked some them questions, “Hey, do you think you’re going to lose hours later on in the next couple of weeks, month, so they ask all those questions.

Ashley:
How did you find your property managers?

Rafael:
I was actually in a group where we would just that meet every week from different businesses and we refer each other referrals for our businesses that I was back in a day.

Ashley:
Here we go meetups, another common theme why everyone has to join a meet up.

Felipe:
You’ve heard meetups 100 times man and I think we’re going to hear it over and over again.

Ashley:
Yeah, even Kristen today.

Felipe:
Kristen said the same thing. I think a lot of success comes from coming together and bouncing ideas off of each other. I might have a problem that you’ve already had a solution for and vice versa, so we’re able to jump back and forth. I can’t remember who asked that question a minute ago but I would tell them make sure that you’re using every avenue, Craigslist, Facebook, join groups, REIs. If you’re out there doing everything you got to do to find tenants, you’re going to find people that need a good place to stay and you are going to find quality tenants. So join REI meetings, get together with other people that are doing the same thing that you’re doing, like minded people and you’re going to find it. And so I think that’s awesome yup.

Ashley:
Rafael, do you want to take one more question?

Rafael:
Yeah, sure.

Ashley:
Okay. This one is from Jake. It says, now seems a good time to work on your own deals. Pay yourself as you would a contractor if you’re handy. Okay. I guess it’s not really a question, but do you want to at least comment on that?

Rafael:
Yeah. So I was actually thinking about doing the paint myself and I painted my bedroom back in the day, so I was going to take that job onto this since I have quite some time. So I’m going to just lock myself in there by like a sleeping bag spend the night, do it again the next day. Just get it done.

Felipe:
YouTube man.

Rafael:
YouTube exactly.

Felipe:
YouTube is the new university.

Ashley:
Yeah, that’s what I told my husband. I said if we are shelter in place and can’t leave work packing up and move into one of my rehab units.

Rafael:
Exactly.

Felipe:
Packing up the kids and everybody, we are all going to get this thing done.

Ashley:
It would be camping.

Felipe:
Let me ask you the last question man. Let’s review those final numbers on your deal. Walk us through the deal real quick. The numbers, how everything is going to work out.

Rafael:
So yeah, so the purchase price was 330 and then based on the coronavirus I went back to the wholesaler. I was like, “Hey, is there any coronavirus discount per se or what’s going on right now and so is there anything room that you can do something.” So he lowered it down to 15,000 so it ended up being 315 which is still it’s a little bit, so it’s going to help me out. And then I am spending 20,000 in rehab and then I’m probably going do a BRRR. So I’m going to rehab it and I’m going to rent it out and then I’m going to refinance it and get my money out pretty much. Because the ARV of this property is 430 so there’s about a 100 spread, 110.

Felipe:
I mean that’s just the truth of running your numbers during this time. And if the numbers work one of my mentors told me, Felipe if the numbers work the economy, it doesn’t affect real estate if your numbers work. You got $100,000 spread and your rehab is way under that right? Your refinance, it’s going to be great. You can get your money back out and then just redo it over and over and over again. You’re going to rent it out for 3,200 bucks you’re not going to sell it, you’re going to want to keep that cashflow.

Rafael:
No, I want to keep it yeah. [inaudible 00:36:06] For the tax purposes too as well. On the float you’ve got to pay high taxes and I’m probably going to keep it for two years to be honest, just not pay the taxes on it.

Felipe:
Heck yeah.

Ashley:
That’s great. Do you have one piece of advice you’d to give everyone who’s maybe thinking about, maybe this is their first time getting into a real estate deal. They’ve been looking and now they’re hesitant to actually get started, do you have any advice for them?

Rafael:
I have a couple. So just make a lot of connections, meetups, Facebook groups. I probably get 20 to 40 deals through wholesalers, through my phone all over the United States. I just signed up, when they begin and I just want to check out all the deals, run numbers. I’m not going to buy all of them but that’s how I got started. I probably get 10, 15 from California and I’m not even there, but I just to look at it and all that.

Ashley:
That’s awesome, the practice.

Rafael:
So yeah, that’s probably one of the best things to do and then also reach out to people. I reached out to Steven, I reached out to Joe and a bunch of people they responded to me what should I do on this thing, on this deal. And then most people were just exit strategy is the way to go, always have an exit strategy.

Ashley:
That’s great advice.

Felipe:
Rafael I love that you’re killing it man. I think that’s awesome. I want to see you continue to grow bro. Make sure that you’re putting it in the Real Estate Rookie Facebook group man, we want to see the outcome. We want to see some post pictures and if you’re in your sleeping bag painting bro, we got to see that one. All right Rafael. Thanks for coming out man.

Ashley:
Yeah thank you.

Felipe:
We enjoyed having you bro.

Ashley:
Good luck with your rehab.

Felipe:
He was cool. I’m wonder if he would really do something like have this. I’m a visual person so I can see him sleeping in his sleeping bag in the room, waking up, painting, going right back to sleep when he’s done. I think that was funny.

Ashley:
I can already see your wheels spinning as just something you could do similar to that to post on Instagram.

Felipe:
I’m so going to do that. That’s hilarious. All right take this one.

Ashley:
So we have some questions for us now Okay. This one is from Tristan. “Hey guys, I recently bought my first house and paid cash for it. My plan was to be able to pull money out of it by either HELOC or Refi. Now with all that’s going on, it seems to be hard to get the credit and stuff. What’s the way in your opinion, to be able to get another property without needing to pay 20 to 25% down since it’s classified as an investment property?”

Felipe:
Good question from Tristan Church. So I would definitely explore the option of a HELOC or Refi as much as possible I would not just go on one bank or one lender or whatever, I would call many. I mean if you call 10 to 15 you’re going to get maybe not the answer you’re looking for, but you’re going to get more options and that’s always a good thing. So really stress the Refi or the HELOC as much as possible so you don’t have to put 20 to 25% down. And another thing that I would be doing as well is if you’re going to be buying an investment property during this time, things right now are not business as usual. You can call banks, everything is negotiable. If you have a property that makes sense that the lease is going to be great, you going to have good tenants, you know the numbers work and you take it to a bank I’ve seen banks drop that 20, 25%.

Felipe:
And one of my flips that I did in Cookeville, Tennessee, the bank let me down to 15%. So 20 to 25% nothing’s a law, I mean you can take your different options to the bank and say, “Hey look what if I do this, this and this can we do this option?” I mean be negotiable, take your plan, be ready. Don’t go into a meeting and just see what they tell you, go into a meeting prepared, be negotiable. You don’t have to always put 20% down, look for a hard money lender that might be able to help you. So those are kind of the things, some of the things that I would be doing and I’m a big believer in if you have a deal, the numbers work, the money’s going to be there. It’s not impossible. You’re going to make it work, push through that.

Ashley:
I also think it’s important to focus on the strategy of Refi-ing or getting a HELOC because I think you’ll have a better chance at that right now than doing a new purchase. Especially since you own that property already in cash, I think it might be a better outlet for you. I would go to small local banks, credit unions and fully base that talk with them. There are people out there still lending. I have a loan I got called today that I got commitment last week and I got the call today that the appraisal is getting started. So there definitely are banks that are still lending out there even and this was on an investment property. So I would say still keep looking out there.

Felipe:
It’s all about relationships. I had a really interesting call yesterday. My bank called me and was like, hey Felipe, thanks for referring. Because I refer all business to my bank that needs loans or whatever. And they said right now we’re not going to be doing business with people we don’t have relationships. I don’t know if that’s even like… I know she didn’t email it to me, but she called me and she was like no offense to anyone you’re sending. Thanks for the people you have been sending but right now we’re doing business with relationship clients. And I was like interesting.

Ashley:
I heard something similar.

Felipe:
Did you?

Ashley:
I reached out to a bank that was referred to me and they actually said that the property I had was out of market and they’re only lending in their market and usually they will make exceptions, but they’re not currently making exceptions out of market.

Felipe:
They’re basically doing relationship only.

Ashley:
Yeah.

Felipe:
That’s cool.

Ashley:
Okay, so our next question is from Jake Rogers. Is there a way to refinance a property without a full time job? Ha ha.

Felipe:
Ha ha.

Ashley:
Nice. I’ll give it a quick easy answer. My sister when she graduated college, she was 20 and she had a part time job and got a mortgage, an FHA loan for a duplex. So for a part time job, yes but part time job was still W2 so I don’t know if maybe that’s more what you mean by your question because that is a lot harder to get alone without a W2 income. If you’re self employed you can definitely get it but you want two years of tax returns I found most banks want some maybe even three, especially in the commercial side. The two commercial loans I did the past in the two months they both wanted three years of tax returns and not two. What do you think Felipe?

Felipe:
I think it always goes back to relationships Ashley. My bank that I used prior to the one I’m using now and maybe I should be shopping around for more banks because I’m really just using one bank right now, but maybe I should have a couple more. But my bank prior to this that I used out in Cookeville allowed me to Refi with leases in place that were signed for a year. So as long as I had leases that were signed for a year and I was in good standing with my mortgage payment, they were willing to look at other things for the refinance versus just my W2 job. Or just myself employment because I’ve always been self employed since I graduated high school. So I’ve been able to use that. I’ve always had to find ways to get creative because I’ve never had… Well I’ve had a W2 job but just not long. And a lot of banks are like well we know you don’t have that history, so let’s look at your leases. Do you have good standing? And history and relationships say a lot.

Ashley:
Was that on the commercial side or residential side that loan?

Felipe:
It was a six unit small apartment complex, so there was a quadplex and a duplex. They were separate buildings but because they were on one it wasn’t commercial.

Ashley:
No, the loan was the loan-

Felipe:
Oh it was a commercial.

Ashley:
Okay. Yeah I was going to say that has more flexibility if you go on the commercial side than the residential side. So that is a great point Felipe. They’ll look at the leases and what profit is that building going to give you and will be able to cover the mortgage.

Felipe:
Awesome.

Ashley:
You want to take the next question?

Felipe:
Then let’s do it. Aaron Anderson. Oh, I love the picture of him and his son. I think the glasses that’s a really good picture. Aaron Anderson says, “I keep hearing success stories from people using wholesalers. Where is the best place to find wholesalers? I’m in Washington, but open to investing anywhere.”

Ashley:
Meet ups.

Felipe:
Man. So you go to this website, it’s a Walmart for wholesalers and you just pick them off the shelf. No, I’m just kidding. I can go first on this one. I think to find really good wholesalers is connections. I sound a broken record, REI meetings. You go to meetings where 10 people have used the same wholesaler and had success with him or her then that’s who you use. I would not Google wholesalers in Washington, that’s just not how I would do it. I would look for, just like I find good plumbers, I ask for references. Just like I find good partners I look for references. Just like I would find good wholesalers, I look for references. People that have used this wholesaler strategically in the past and have had good outcomes with them, then that’s who I use it. Even if I have to pay a little more on points to get that money, as long as they have a good rapport or a good business standing within the REI community where I’m going to invest, I will use that wholesaler. Ashley, what about you?

Ashley:
Yeah, I agree with that. Referrals are definitely king on this topic, but what you can do too is you can post on social media and that’s how I’ve connected with a couple of wholesalers. They actually just messaged me and said, “Hey, we know you’re from Buffalo, we wholesale on Buffalo. Would you to be on our buyers list?” And I said yes so now I get emails from them. So you could go ahead and put it out there on social media that or in different Facebook groups even, “Hey anyone know wholesalers or is anyone a wholesaler? I want to be on your buyers list.” And then you can run the numbers on the deal yourself, you could get to go and look at the property. The emails I get have pictures. The rehab numbers you want to come up with, you don’t want your wholesaler to tell you the rehab numbers anyways.

Felipe:
Nope.

Ashley:
They’ll tell you what their purchase price is, what they’re asking, what the wholesale fee is and then you go and look at the property and you look at the neighborhood. And I haven’t bought one yet, but I still get excited when I see the email that I get to run numbers on a deal. So I would suggest trying to do it that way too and then you can always ask them for references. “Hey, do you have some buyers that you worked with that I could talk to about you?”

Felipe:
Yeah, absolutely. Just like a contractor, you’re going to ask a contractor for pictures and good customers that they’ve served or that have been served you. You do the same thing I think with wholesalers. You treat them just as another team member part of your business and you make sure that they are who they say they are and not just some person that wants to screw you over whatever. So make sure you do your due diligence with that.

Ashley:
Okay. You ready to wrap it up? I’m getting sick of talking to you.

Felipe:
Let’s wrap it up Ashley.

Ashley:
It was more fun when we had the guests on.

Felipe:
Oh my gosh.

Ashley:
No, I’m just kidding.

Felipe:
Ashley hates me y’all.

Ashley:
I just like to have fun.

Felipe:
Lessons that we learned today. What do you got Ashley? What have we learned today?

Ashley:
Okay. Number one thing I’m going to say is exit strategies. So important because we talk about that-

Felipe:
Oh I thought you were going to say REI meetings.

Ashley:
I did write that down to say on my list, but I wrote exit strategies first so.

Felipe:
Go for it.

Ashley:
Okay. So exit strategies have at least two of them. So whether you’re going to rent it out, you’re going to sell it those two right there simple, easy ones. Or maybe even you’ll wholesale it, who knows? But very important to have two strategies. Maybe you’ll even have the opportunity, you could turn into a house hack or you can just rent it out altogether. What do you think about exit strategies?

Felipe:
Yeah, I like that. I think that’s really smart to make sure that you have to exit strategies right now when you’re purchasing properties. A year ago things might’ve been a little different you buy a flip, you sell the flip and move on, right? I think that was cool, but I think right now is the time to pivot a little and make sure that you have to exit strategies when purchasing a property. Whether it’s going to be renting or refinancing or flipping and holding or two complete separate and the numbers have to work from both.

Felipe:
Dr. Joe I think taught us that on the last episode so I think that was really good. I think one of the things that I learned for sure and we talk about all the time REI meetings are really important, but when you’re going to get a lender shop around. Look for people that have used that lender. Ask people how the experience went, what it looked like. Are they are who they say? Are you going to close? Was the closing process smooth with this lender? Shop around for lenders, make sure you get plenty of references. Treat them as another part of your team that’s one of the-

Ashley:
And even lenders, you can just Google too.

Felipe:
Yeah.

Ashley:
So, okay Google because you’re just going to call them and you want a term sheet from them that will show what your interest rate would be, what your amortization is, how many years of payments you have. I think that’s something you can actually Google as maybe not a private or hard money lender, but a bank you could because you’re just going to call them and you’re going to ask them the same questions that you would any other bank. So I think looking for small banks in your area, trying new ones that’s a great idea shop around. And then what else did we learn today? Concessions from sellers. Negotiating purchase prices.

Felipe:
Yup. Ask for, what did he ask for? $13,000 off after $20,000 is what he got it down too. I think that’s awesome.

Ashley:
Yeah, the original asking price is 45,000 I think got that down to 20,000. Yeah like a dream comes true.

Felipe:
Yeah I’m going to do that from now on. I’m just going to do embarrassing offers and see what happens right now during the COVID. One of the things that I think a lot of a lot of the investors that we just talked to have in common is that real estate is essential, right? Real estate is something… I don’t want to say it’s as essential as food and water, but it’s pretty close. I mean people need a roof over their head and as real estate investors we can provide that, right? We are putting heads in beds and that’s really important. I mean people need a place to-

Ashley:
Yeah, shelter is an essential. Yup.

Felipe:
There you go and we’re providing that. So I think if you have the resources to be able to provide that, go for it and continue to push forward with real estate. It is an essential need right now.

Ashley:
And if you guys have concerns this week about a deal that you’re going through, Felipe and I are going to be very active in the Facebook group this week answering you guys’ questions. We want to help you guys get through this as much as we can. If you have tendency you’re worried about not paying Felipe you made that YouTube video, gave great advice you guys can find that I’m on BiggerPockets YouTube. But we’re here for you guys and we want to help you guys because you guys help us too. And we love reading your responses and your recommendations in the Facebook group. So if you’re not in the group already, you can join it. Just search Real Estate Rookie on Facebook.

Felipe:
Absolutely. Well, Ashley I never get tired of talking to you. I would love to stay on here forever and ever, but I love talking to you.

Ashley:
I’ll look forward to your call right after this.

Felipe:
Oh, I will. Hey, Ashley what was that now? Well, I’m glad we got to jump on here.

Ashley:
Yeah. And thank you to Jeremy and Kristen and Rafael for being on the show today. We had a lot of fun.

Felipe:
Absolutely.

Ashley:
Okay. Bye bye.

Felipe:
Bye guys.