5 Steps to Reach Financial Freedom in 15 Years Through Long-Distance Investing With Elyse Rasmussen

Ashley:
This is the Real Estate Rookie show number 15.

Elyse:
For us, we’re using our house as an asset, not a liability. The way that we’re doing that is we’re taking that money and we’re using it to make us more money. So, it is what it is. It’s sitting equity for us.

Ashley:
My name is Ashley Kehr and I am here with Felipe BRRRR Mejia. You’re finally finalizing a BRRRR refinance. Tell us about it.

Felipe:
I’m finally in the BRRRR family. I was able to finally close on a BRRRR that I was doing from during COVID-19, it really slowed everything down. I got the same rate that I had when I previously got it. But the reason that I was going to refinance this property was because it was on a five-year adjustable rate mortgage, a five-year arm, and my rate might have changed. So, I wanted to get into a 30-year mortgage fixed, and the only implications was, I got some money back, I kept the same rate. I’m going into a 30-year fixed mortgage and it only affected my cash flow negative $100. So, if I was making about 1200, now I’m going to be making about 1100 on this cash flow, right? I love it. I got some money back out, I’m going to redeploy that money into another rental property.

Ashley:
I’m curious, what is the interest rate that you’re getting.

Felipe:
For now, I’m getting a 5.5. It’s a little bit high. But, like I said, I’m out of a five-year adjustable rate mortgage, where my cash flow was dependent on somebody else telling me what I was going to pay. But I wanted a 30-year mortgage, where I was guaranteed what I’m going to pay, so now I can make positive decisions based on that property because I know that my rate’s not going to change for, boom, 30 years.

Ashley:
Right. And I think that’s why it’s a higher rate because you’re getting that 30-year fixed. So, that makes sense to me. But I’m doing a refinance myself right now too, but I’m doing it on the commercial side. So, it’ll be amortized over 15 years, it’s going to be a five-year fixed. And the interest rate, if we close today, would be 3.19%. I just got the commitment letter yesterday, which I was like, what else should I refinance at that rate? But, yeah, that’s awesome to hear that you’re doing that. And what are you going to buy with your check? A Tesla?

Felipe:
No, I wish. I’m going to go reinvest it. That’s what happens with real estate. And Elyse, actually, who we’re having on this show today, talks about that, about the importance of out-of-state investing. This is wild. She is a full-time employee and her husband is as well. They have a daughter who is two and a half, I think, she said, and they’re investing out of state, buying properties, tripling their portfolio, from start to finish, over and over and over. And they have a 15-year plan to retire by 45. It’s amazing.

Ashley:
Yeah. Elyse, pretty much, she breaks it down into five different steps as to how she’s going to reach financial independence using real estate by the age of 45. One thing that she touches on is insurance. And we actually had someone call in to the Rookie request line. If anyone wants to call in and leave a voicemail for us, it’s 18885-Rookie, and leave us a voicemail. Today was about an insurance question as to what kind of insurance does Elise have on her properties? And how does she find the best insurance? And that leads us into Policygenius, who is our show sponsor today.

Felipe:
Absolutely. It’s really cool because Elyse talks about the importance of insurance. And with Policygenius, you’re actually able to go into their website, policygenius.com, plug in your information a little bit there, and then you’re able to get a quote from a bunch of different policies and pick what best fits you, right? It’s really cool because you don’t have to go shopping one by one, you plug in some information about your property and boom, you have all of these policies, right then and there. And this kind of hits home for you, right? Ashley, aren’t you some type of…

Ashley:
Yeah, I am a licensed insurance agent. I got licensed two years ago. And I went on policygenius.com, and I couldn’t believe how user-friendly it was trying to get the different quotes. You just plug in your information, it was very easy. And they also do all the legwork for you to get your information switched from your old policy to your new policy, which I think is just great. And I read through the testimonials from customers as to how much they’re actually saving, and on average is about 1,100 dollars a year. That was crazy.

Felipe:
That’s definitely something to look into if you’re going to save that kind of money. So, if you’d like to put a little bit of money back in your pocket right now, just go see how much you can save by re-shopping your home insurance rates at policygenius.com. Okay, that’s amazing. So, let’s bring Elyse out so she can tell us more about this.

Ashley:
Okay, Elyse, thank you so much for coming on the show with us today. And why don’t you tell everyone a little bit about yourself and how you got started in real estate?

Elyse:
Yes, thank you guys so much for having me. My name is Elyse. I’m 32 years old. I live in Southern California with my husband and our two-year-old daughter. Both of us work full-time W2 jobs. Myself, I’m a public health nursing supervisor for the health department. So, we’re a little busy with this thing called coronavirus.

Ashley:
I’m sure.

Elyse:
But we’ve been investing out of state since 2017, then full-time income properties. So, we’re actually in four different states, but technically, it’s three different market areas. And it’s just been an incredible few years of growth for us, and we’re totally getting obsessed. It’s crazy.

Felipe:
Wait a minute, you’re telling us that you and your husband have full-time jobs, and you’re investing out of state, and you’re investing in three different states?

Elyse:
Yes, that’s correct.

Felipe:
Okay, that’s got to be a handful. And you have a daughter under, or at two. I’ve got to know how you’re managing your time.

Elyse:
Honestly, when you want to do something, there’s team no excuses, right? I’m not exercising every day because that’s not my priority and not something I want to do, but real estate investing, we work it in, we both enjoy it a ton. We’re becoming totally obsessed.

Felipe:
What states are you in? Sorry, I should have asked that.

Elyse:
Yes. We’re in Indiana, Florida, Kentucky, and Tennessee. So, a little bit of the Midwest, but mostly the South.

Ashley:
And how did you pick those states?

Elyse:
We actually looked into a network, I would encourage everyone to join maybe a group or a network and we were looking at different guides that our network had to offer. And they basically had a lot of different information about different market areas across the country. And every single market area that we chose was one of their recommended areas.

Felipe:
Interesting. So, you got with a network that referred a certain area that you wanted to invest in, like you said, mostly the South with Indiana, Florida, Kentucky, and Tennessee. Can you give us a little background of what you have maybe in each state, and why you chose that certain state, if you would?

Elyse:
Yeah. So, we don’t invest in California, first and foremost, because it’s more of an appreciation market. Right? The returns on investment as far as like cash flow, aren’t there. So, we looked to Indiana, it was both a cash flow and appreciation market, which was perfect for us. So, for our very first rental property, it’s in Indiana. Our second rental property was a one-off in Kentucky, and then we have a duplex in Florida. And we have 12 single family homes in Tennessee. So, we’re really right down the street from you, Felipe. We like Tennessee a lot.

Felipe:
Yeah. Wait a minute, wait a minute, I’m not going to let you just blow past that. Wait, what? How many in Tennessee?

Elyse:
Yeah, we have 12. I guess, let me just say, just a big overarching view, we have 19 properties total and 20 doors. A couple one-offs, right? Like Indiana and Florida are one-offs, and then we have 12 in Tennessee and five in Kentucky.

Ashley:
And let’s talk about how that growth happened, because you just accumulated a bunch of those very recently, correct?

Elyse:
Yes. So, year one, we started investing in 2017. Year one, we bought one property. And then, in 2018, we bought two more properties, which tripled our portfolio from one to three. And then, year three, in 2019, we bought three properties, which doubled our portfolio from three to six. And then, in 2020, we tripled our portfolio from six to 19.

Felipe:
Elyse, whoa, look, I’m going to be the guy that does not let you blow past some of these numbers. I think it’s what Brandon Turner talks about in the BiggerPockets Show, where he talks about the stack, right? And I might be butchering this, but man, you went from one to three to six to like you just kaboomed, right? Earlier, you said that a group and a network really helped this growth. So, can you explain to us a little bit of how you literally doubled, it seems like year to year, and how does that work? I mean, let’s say a newbie investor that has a five-year plan, a 10-year plan, how does he double year after year? What did that look like? And you have full-time jobs.

Elyse:
Yeah. We really keep our money moving. So, that wasn’t the original plan. I wouldn’t say that when we went into our first property, we were stoked and we didn’t have plans to double, triple and build this huge portfolio, we actually didn’t. We were looking to get some cash flow and place our money somewhere where our money could grow. But as you get more into it and a little more stressed, the main thing that’s helping us now is the BRRRR strategy. We’re taking our money, we’re refinancing, we’re looking for value adds, and then we’re continuing to move our money and make it work for us. So, that’s, yeah.

Ashley:
That is so awesome. And congratulations on that growth. I mean, that’s, I think, a goal for a lot of people, that, to start out like that and then, every year, just double, triple, quadruple after that. So, is your plan financial freedom, with these rental properties? And can we go through maybe a couple steps that’s going to help you reach that financial freedom?

Elyse:
Absolutely. That is absolutely my husband and I’s plan for our family. We started investing right around 30 years old, and by 45, we hope to obtain financial freedom. So, in 15 years, we’re banking on real estate, we’re funneling all our money from our jobs into real estate, to get us there over these next 15 years, so by 45, we can retire. And then some steps kind of what we’ve been doing, that first piece that we started touching on is joining that group in that network. We use that network to help us, they provide us referrals also in those out-of-state areas. So, that was key, because you have to have a team when you’re working out of state, you have to have that agent, that property manager for us to contractors.

Ashley:
What is that network that you use? And we can add it into the show notes.

Elyse:
It’s Marshall Reddick. You can go to marshallreddick.com. And they don’t actually charge you anything. It’s for, they take a piece of the agent and the property manager. So, it’s totally free to the end user.

Ashley:
Okay, yeah. So, if anyone wants to check that out, we’ll put the link to that at biggerpockets.com/rookie15. Okay, sorry to cut you off there. Go ahead. But I even wondering, so, I know that our audience will as well.

Elyse:
Yeah, no problem. And there’s tons of them out there. You’ll find a lot of turnkey networks and providers that will help you with this. And you don’t have to buy the turnkey properties, you can just use their referral networks to continue with the agents and the property managers. And that’s what we did, because we were looking for that first property for the 1% rule of thumb, and the turnkeys don’t always get you that. So, we just use the referral network. But, either way, I really like the quote, “Build a longer table.” So, build that longer table, surround yourself with others that are investors, and we still do that to this day. We can help those, we started a meetup for ourselves for particularly for out-of-state investors. So, those that are less experienced than us, we give back and we teach and share our knowledge.
And then I’m still trying to connect with people that have much more experience than us, because we’re trying to learn. There’s a quote from Michelangelo that says, “I’m still learning.” And not that I’m trying to compare myself to Michelangelo, but it just speaks to the volume that there’s always something to learn. So, build a longer table and either share with others, or learn from others. And I think there’s, if anyone knows about REIA, the Real Estate Investing Association, you can find meetups or these REIAs near you, and surround yourself with like-minded people, and just either extract knowledge, share knowledge. I really think networking has really done well for us.

Ashley:
I love that.

Felipe:
That’s interesting.

Ashley:
And Felipe always tells me that I harp on meetups, because I do think that they provide a lot of value. And if someone is looking for a meetup, how would you suggest is the best way for them to find one?

Elyse:
We actually use the meetup app, and then we also have, we post our meetups on BiggerPockets. So, both of those platforms are what we use, and we’re seeing a lot of growth in our meetup. I think those are good avenues to find something near you. And then the REIA website.

Ashley:
Very awesome. So, now that you have your meetup, you have your network, you have your people you’re connecting with, and I’m sure they’re giving you recommendations as to what markets you can go in, what steps do you take next to actually pinpoint a market?

Elyse:
Yeah, you definitely want to look at what other investors are doing. That’s, you don’t have to reinvent the wheel every time, just look at what other investors are doing, and then look at criteria that you want. It’s important that you know what your entry point is, because, even if it’s a real estate, if it’s a market area that is experiencing a lot of growth, if you don’t have the capital for that area, or whatever your entry point that you want, that’s going to help determine that market area for you also. So, figuring out your criteria, and then looking at overhead costs too. So, even if we were looking at that 1% rule, that would have changed if there was high property taxes in that area.
So, you have to really dive into an area. There’s a learning curve when you are investing out of a state. It’s true. So, you have to look at what are the property taxes like in that area? Like, Ashley, I know you’re in New York, right?

Ashley:
Yeah.

Elyse:
So, property taxes are more.

Ashley:
It’s very easy to hit the 1% rule. I mean, I’ve hit the 3% rule on a property, but the property taxes don’t meet that 50% rule, where your fixed expenses are 50% of the rental income. That rule is very hard to meet sometimes in New York, but you are really correct on that, that you need to look at all the different rules and not just base your criteria off of one thing.

Elyse:
Yeah, that’s why it’s more a rule of thumb as you start diving into those deeper details, right? Like Texas, New York, they have much higher property taxes, so, maybe you’re looking to get a 1.25% rent to purchase price, or maybe a 1.5% rent to purchase price. So, those are things that you really need to dive into. And I think I have a learning lesson, if I want to be really candid with your listeners, our very first property, we were looking at areas that have lower property taxes. And we went to Indiana. And unfortunately, when you look at, let’s say you even Google property taxes across the U.S., you need to be careful that those are, sometimes they’re different for non-owner occupied properties.
So, if you’re a landlord in another state, that property tax could be higher for you and that is exactly what happened to us in Indiana.

Ashley:
Wow.

Elyse:
Yeah, we thought it was going to be 1%, but they have something there called the 123 Cap, and it’s 1% if you owner-occupy the property, but it’s 2% if you are not occupying that property. And then it’s 3% for commercial properties. Those are the tax rates. So, that one took us a little bit by surprise, after the fact. So, it’s really learning your market area.

Felipe:
When you’re doing research in a certain market area, and a minute ago you had said that REIAs and your network and your group of people in that area are really important, and then, maybe leveraging that, how important is it? And I’m guessing, super important. But how have you used, if you know somebody in the area that you’re going to invest, and let’s say you join a meetup there, do you go to them with certain questions regarding what areas to buy in and things like that? And then, how do you build your network of people in an area that you don’t even live in? How do you go about doing something like that, especially for our listeners who are like, “Well, I need to invest out of state, because I live in California where everything’s super expensive but I have capital to invest in another city or another state, and I want to be able to build a team like Elyse did, to be able to really stack up my portfolio”? How have you used or/and helped other people in other states?

Elyse:
Yeah. For me, we found other investors, we found Facebook groups for investors. There’s one particularly in the Clarksville, Tennessee market, which is our primary market, and that’s been amazing because people go on those threads and they’re talking about, “What contractor do you use for this?” But my husband, a lot of time goes on BiggerPockets, not to continue to put BiggerPockets on a pedestal, but you can literally just type in the search bar the area that you’re looking for, and then you can network with other people, maybe real estate agents, property managers, contractors, everything in one spot. But, yeah, utilizing social media, those are the best ways.

Felipe:
Yeah, absolutely. I love that you said using social media, because I feel like sometimes that’s one that a lot of people don’t use, and I’ve been able to leverage that quite a bit here in Tennessee. You literally just, you can go into the search bar and type in, “#Nashville, Tennessee painter,” and you’re going to see other people’s work. A lot of the times we tell our listeners, it’s, make sure that you get referrals to whoever you’re going to use, but what better referrals do you have than a client that went on your social media page and said, “Wow, X person did great job on this paint, check this out. Boom.” And typically, they’re tagging who did that work. So, I think social media is a platform that a lot of people aren’t using, that is really beneficial if you’re going to be investing in another state or something like that.
What other things do you look at though, when you’re choosing a market to invest in? What are some of the other things that affect whether you do or you don’t?

Elyse:
Yeah, a part of that learning curve is that the weather is different in different places, right? There’s different natural hazards. Even one of the things that took us by surprise is that the renting season slows in winter. I had no idea that was a thing. And I don’t even mean to say that, that’s a thing.

Ashley:
No one wants to move their stuff in the cold.

Elyse:
Yes.

Ashley:
That’s how it is here in Buffalo, the move-outs all happen in the spring and the fall when everyone wants to get in or out before winter.

Elyse:
I’m probably sounding naive to some of your listeners, but your reality is the market that you live in, and you have to learn these things when you’re investing out of state. And the same is true for a lot of these natural hazards. We have a duplex in Florida, in the south west area outside of Fort Myers, and hurricanes are real. Now, that I knew going into it. You can’t help but see on the news. But these are things that you have to look at, like, where are you investing? And what are the natural hazards? And how is that going to affect your bottom dollar? So, that way, you’re not thinking, “I’m going to make $300 in cash flow,” but really, you have to price in some of these things.
Another example is, we have a property in Kentucky. We just, I’d shared with you guys, we purchased a 13-property portfolio. Some of those properties are in Kentucky, and one of them is a very high flood zone. So, you have to buy flood insurance, and it’s astronomical. So, I think, if we have like a $10,000 deductible, if we were to come in, if something, flood damaged our property, and we had a $10,000 deductible, we would have to pay $6,500 a year for flood insurance. That’s a cash flow killer.

Ashley:
Wow. Oh, my God.

Elyse:
Yeah, that’s insane. 6,500 a year, and that’s for 10K deductible. Let’s say we wanted to take our deductible down to like 2,000, it was over $9,000 dollars a year.

Ashley:
I want to touch on that a little bit because I have a property that’s in a flood zone, too. You only are required to get the insurance if you have a mortgage on the property. Correct?

Elyse:
That’s absolutely correct.

Ashley:
Okay. Yep.

Elyse:
Yeah. We did different financing modalities in this portfolio. A lot of them were financed by our credit union, and then a few were seller financed, and then one we purchased with cash. So, we weren’t afraid to mix and match there. But we’re over here playing chess, not checkers. So, we have that property that’s owned outright, seller financed by that. Because then we don’t have to pay the insurance, and we knew this is “a loser” in this portfolio. So, that one’s seller financed, so, we are not paying flood insurance on that, because they own the property outright, they do not have a mortgage. And we’re right now in the middle of working on that property, and we’re going to turn around and sell it and burn it.

Felipe:
Burn it. Wow.

Ashley:
So, this is a deal where you had to take all or none.

Elyse:
A lot of these are, when you purchase a portfolio, they’re not going to let you just take the winners, you’ve got to take a couple of the losers too.

Ashley:
I did that before and they called the good one, the six unit, the golden egg, or the golden goose, if you want, the golden goose, you’ve got to take all the other ones.

Felipe:
The rest of them. I heard something really funny about insurance, and I don’t know exactly how this works. But I’ve heard and I actually talked to my banker about this, regarding that property you said about flood insurance. So, I asked my lender, and I said, “Hypothetically, if I buy a property…” Because Nashville has flood zones, right? We flooded in 2010. I said, “Hypothetically, if I stopped paying my flood insurance, what would you do?” And my bank said, “Well…” and this is where I think she messed up by telling me this. She said, “Well, actually, if you stop paying, then we are going to put a flood insurance on it and just charge you what we’re paying.” But, based on my research, I’ve also heard that the bank will have better rates for flood insurance than you can get.
So, I don’t recommend this for anybody, but that is a hack that I think, and I don’t think I want to do it, because I don’t want to ruin my relationship with the bank. But, if your insurance is $9,000 a year, I would talk to my bank and be like, “Look, this is might be what’s about to happen if you guys don’t put better insurance.” Because they get better rates, right? They have hundreds and hundreds of homes. The insurance company’s going to give them way better rates. And I’m like, “You’ve got to put me on, man, because this isn’t going to work. 9, 000 is way too much.”

Elyse:
Yeah. I’ve heard that same thing.

Ashley:
Yeah, I’ve heard it before too. And I think it was almost Brandon Turner maybe had someone on the podcast.

Felipe:
Was it?

Elyse:
Yeah.

Ashley:
Yeah, that he said that. And, yeah, so, that’s funny you said that too. But I have a property too, and that’s in a flood zone, but we pay 1,500 dollars a year and it’s 480,000 dollars worth of coverage, but I don’t even know offhand what my deductible is. But, I mean, as soon as that mortgage is paid off, we’ll be getting rid of that flood insurance and just self-insure if there is a flood there.

Felipe:
That would probably be right. Okay. So, we’ve talked about making sure that you have a good group, a good network in the state that you want to invest if you’re going to go out of state. We’ve also talked a little bit about how to choose your market wisely, right? Okay, let’s say someone’s done that. They’re like, “All right, I got my group of people that I know are going to be able to help me out there. I’ve done all the research on my market. I’ve got this locked down. I think I’m ready to move into this city here.” What is the next move that someone needs to take when investing out of state after they’ve got their group together, they’ve localized their market down to numbers and what it’s going to take to do that, what’s the next step?

Ashley:
Felipe, don’t you know you fly out there every single weekend and do house tours, or it’s somebody being boots on the ground?

Felipe:
If you got money like Ashley, then I’m sure that’s fine. Have you guys seen her wedding ring? God.

Ashley:
Oh, stop.

Elyse:
Whoo! You have to choose your agent. And the thing is, you want to choose an investor-friendly agent. We’re totally a different breed. We’re numbers based, we’re not like someone that’s buying their forever home that’s more emotions. You’ve got to have an investor-friendly agent. So, whether you got that information-

Felipe:
Can I pause you right there real quick?

Elyse:
Yeah.

Felipe:
Everyone says that, an investor-friendly agent. What does that mean to Elyse? Elyse, what does that look like to you? And then I’ll let you move on. But, when you look for an out-of-state agent, this is a mouthful, when you look for an out-of-state real estate investor-friendly agent, whatever, what do you look for? I mean, what are those key things that you need?

Elyse:
Yeah. I think any agent, honestly, that we’re looking for, will need to be responsive. Because we’re looking for deals that are value properties that other investors are also going to be looking at. We need a very responsive agent. We need them to be able to run a comparative market analysis or a CMA within a day. And I’m not saying they need to pick up your phone call in that very first ring, because, also, if you have a rockstar agent, that’s not going to happen. So, don’t build your expectations too high. If they’re that ready and they don’t have any other clients, they’re probably not that rockstar agent, but they should be responsive. They should be texting you like, “Hey, I’m in the middle of this, I’ll call you back at this time,” and getting you those comparative market analysis.
And we also, again, because we live out of state, we rely on them heavily. We need them to lead us astray from neighborhoods that aren’t good areas for us to have rentals in, and they need to be able to understand, what is the after repair value? What are we trying to get out of this property? So, though we have an agent, we really like property manager/agent combos, that’s worked really well for us in a couple of our markets. Because, when they go run to that property that we’ve asked them to go video, do a walkthrough for us, they can immediately tell us what that’s going to rent for when we rehab it, and what that after repair value is. And that’s key for when we go to do our math on what we’re going to offer. We really like that in an agent.
So, responsive, getting you those CMAs, getting your offers in, and understanding and not trying to talk you out of some of these low prices that you might be starting with, right? Other agents might try to talk you up, and no, this is what I’m starting at. So, those are some of the things that we look for.

Felipe:
Interesting, because we’ve heard that a lot, right? Somebody who’s real estate friendly, that knows the market, that knows the area, but I think you’re probably one of the first to say, a real estate agent, and someone that can also manage your property or help manage it, I think is very crucial. Because, one, they’re not going to want to sell you a property that they’re not going to want to manage. Right? And that’s key. If I was a mechanic selling you a vehicle, you’ll be like, “You know what? Okay, cool, I’m going to buy this vehicle from your shop, but you have to maintenance it every whenever it needs it.” I’m going to sell you a good car to make sure that you don’t come back all the time, that it’s just flowing for both of us, right?
So, I think that’s really good, that’s a key nugget right there, find yourself a real estate agent that also is willing to manage the property because they’re not going to just sell you whatever to get a commission, knowing that they’re going to be in your face every other month or whatever the case may be when doing property management. So, I think that’s gold right there for sure.

Elyse:
And with those insights, this is a saying that I love, “You can take the crap out of a house, but you can’t take a house out of the crap.” And I’m so sorry for saying that, but it’s so true. You can rehab a house but you can’t change the location. I’m sorry for saying.

Felipe:
Well, Brandon would beg to differ because a mobile home, you can sure snatch up out… No, I’m just kidding.

Elyse:
But you can change the whole park. He owns the whole park. He’ll just change the whole park. Right?

Ashley:
The whole neighborhood, yeah?

Elyse:
Totally. Totally. So, that’s different when you’re buying the block.

Ashley:
Yeah. Okay, I want to ask you about something else too, because you purchase through auctions, right?

Elyse:
Yes.

Ashley:
You’ve been using online auction. I’ve never done that. I’m actually Working on my first bank-owned property, and that has been an awful experience, I can’t even imagine doing it through an auction. So, if you could go ahead and talk to us about that, and especially doing that from out of state too.

Elyse:
Yeah. So, we’ve really focused our market in Clarksville, Tennessee, for the last year and a half or so, and it’s kind of a hot market right now, I’ll be honest with you. So, the deals are getting harder and harder to come by, especially if you’re trying to do a full BRRRR and get all your money out. One of the best ways that you can do that right is trying to increase your supply, increase your funnel, whether it’s wholesalers are going direct to seller off market, and we found we liked auctions to get these distressed properties that are a value add for us so we can do a BRRRR. So, we’ve had a lot of success for two for two with our auction properties that… Can I run you through a little bit of how the auction website goes? Is that okay?

Ashley:
Yes. I would love that.

Felipe:
Oh, please do. Yeah, absolutely.

Elyse:
Okay. We’ve used both auction.com and xome.com, which is X-O-M-E. I really like auction.com. They should probably pay me a little bit for how much I promote their business. But the way it works, being out-of-state investors, they think everyone imagines being on the courthouse steps. And that’s not what we do, we’re out of state. So, we’re not going to fly out there every time we’re interested in a property. We look online, and there’s filters that you can do. Once you select your market area, we select online, vacant, with interior access. Those are all really important for us because we’re not going to fly out there. If it’s vacant, we’re not going to have to deal with evictions, because, sometimes, people, when they’re being evicted, they don’t treat your property right on the way out. So, we don’t want any unforeseen damage.
And then, interior access because we have our agent go, we have our contractor go, and we get our numbers right from the jump. So, we know what the after repair value is going to be, we know what it’s going to rent for, and we know what it’s going to cost us for that rehab. And that’s what we use to do our offer. So, what is the all-in purchase price that’s 75% of the after repair value? It becomes simple math for us at the end of the day. But the auction websites, they’re pretty interesting. They get pretty exciting. So, make sure you stick to your number when you go in there. And, be advised, you’re going to have to put your credit card information in, because when you go to register for an auction, they put a little hold. They don’t charge your card, but they do put a little hold of like $2,500.
And I think the other misnomer that a lot of people have is that, when there’s a bid price, that that’s what the bank would let it go for if no one else bid against you. And that’s just not true. So, let’s say the starting bid price is $25,000, there’s a reserve that has to be met before the bank lets it go for that price.

Felipe:
And obviously, the bank’s not going to tell you what that reserve is, right? Obviously not.

Elyse:
Most times, they do not know. It’s a secret reserve price. Auction.com, it is really interesting, they just started this thing. At the top, there’s a tab, where you can go find properties that the reserve price is disclosed, but most times, it’s not. So, that’s an interesting tab they just added. They keep doing things. They even added now that you can bid in in-person auctions, which is totally new. You do have to submit a best and final offer, but now you can compete against in-person auctions. And there’s direct to seller, so, you can offer directly to the bank on some of these, and then tell them why, “No, it’s not worth that, here’s my contractor bid,” and you can now basically, like it was on the MLS, negotiate with the bank. They’re adding a lot of things all the time.

Ashley:
I have to ask, when you do your deposit on your credit card, do you bank in those credit card reward points, do you have full advantage of that?

Elyse:
I don’t know if we get the reward points because it’s just a hold, but I hope we do.

Ashley:
Okay, if you win the property, do they charge your card then as your deposit?, Or, do you pay it a different way.

Elyse:
We pay it a different way. We have to submit the earnest money deposit. And, say, if we didn’t come through and we were the winner, then I think they charge the card. We submit the earnest money deposit.

Ashley:
Okay. Yeah.

Felipe:
Elyse, I’ve gotten this question a lot too, when you buy a property off auction, do you always have to pay cash for it?

Ashley:
Most times, yes. But I’ve heard of people that said, “No, I didn’t.” most times, yes. And we use our home equity line of credit as cash. So, we have that money sitting ready to go. And then, within a week, you are paying for that property, and within two weeks, you’re usually closed.

Felipe:
I love that strategy. And I don’t want to call it risky, because I don’t think that it’s super, super risky, but I love the line of credit strategy, because you have access to capital without paying interest on it until you’re deploying that. Right? So, you have cash ready to deploy from your HELOC or your line of credit, to buy rental property that later you can refinance, if you do everything right, get your money back, and you’re basically using the same 100,000, 200,000, whatever line of credit is, over and over and over and over again to buy more properties. Let me give you a quick story. When I was young, I always wondered how the rich get richer. I was like, “How do these people continue to work to make a million dollars?” I’d ran a little bit of dumb math that probably didn’t make any sense.
But I was like, “If I’m making $80,000 a year, I’m not going to be a millionaire anytime soon. I have living expenses.” And I finally got the courage to ask somebody, and my mentor, Tony Filipe, “We just use revolving money. I use the same $100 to make me $10 every single day. That same $100 goes out, it brings back $10. It goes out again tomorrow, and it brings me back $10.” As I grew up, I understood that concept and I saw it visually in a line of credit, just like you just said, Elyse. You get this property off an auction, you use your line of credit, now you owe that money to the bank, leveraged against the house that you have. And then what you do is you refinance that rental property. You’re going to lose the big cash flow that you were having when it was paid off, but you’re still making 300 bucks, 400 bucks a month, based on your numbers.
You get to keep the asset that your tenants are paying down, you get to keep the tax appreciation and the tax depreciation, based on 27 and a half years roughly, I’m not an attorney, I don’t know, or a CPA, but something like that, and then, you get your money back. You get all of that, you get your money back, and you go and do it again. Which is how I bet you’re doing the stack with buying two, three. Did I just crack your code? Is that about right?

Elyse:
Yeah, we’re constantly moving our money. That’s exactly it. And to be honest with you, I know there’s different schools of thought on this, and some people will not touch their house, and that’s fine. But for us, we’re using our house as an asset, not a liability. So, the way that we’re doing that is we’re taking that money and we’re using it to make us more money. So, it is what it is, it’s sitting equity for us. And to be honest with you, this isn’t our forever house. So, we also have some differences there, but we are continuing to use our money and recycle our capital to scale.

Felipe:
I’m in the same boat as you, Elyse. I’m living in my home, that’s not my forever home yet, and we are, me and my wife are itching to buy our forever home, but we’re just like, delay gratification, delay gratification, and we use the line of credit to continue to buy rental properties. But, I don’t… that’s a good question, Ashley. I’ll ask you because you have your forever home on like a million acres, it takes you 30 minutes to get to the end of your driveway, but I don’t know that I would put a line of credit on my forever home. Ashley, would you?

Ashley:
We don’t. Actually, we did have our house appraised probably six months ago. And we have about 120,000 in equity in our home that we could easily pull a HELOC from. But we actually have an old farmhouse where we used to live before we built our house, and that is, it’s an investment property now. We have a renter in there, and we actually were able to get a commercial mortgage line of credit on that property. So, we use that line of credit to purchase our rental properties. And I do go back and forth about putting the line of credit on our primary, but I think if push came to shove and there was a really great deal that I wanted, my other line of credit was already working for me or something-

Felipe:
Your husband would not let you do that. I would make-

Ashley:
Oh, he would. He would. Yeah, he would not care.

Felipe:
Someone needs to coin that though. Because you hear about the BRRRR strategy all the time, but I honestly think that that’s only half of the strategy that can be done, the other half should be or could be the line of credit strategy. Now, it’s not got a fancy name like the BRRRR, I don’t know what I would call it, the HELOC or the line of credit strategy. But I think that that’s a really cool way. Because we get asked all the time, “I’ve got 100 grand, how do I best use that?” And I’m like, “Don’t use it, revolve it. Don’t go out there and just spend it and then not use it again.” Revolve it like Elyse just said, pay it off BRRRR, pay it off BRRRR. Keep the asset, pay it off BRRRR. Keep the asset and then so forth. Someone needs to coin whatever that’s going to be called.

Ashley:
I like that too, because then you’re saving your own reserves. And I like that, is that, we’re not using a big chunk of cash to purchase these properties, we’re using line of credit and we get to keep all of our cash, and we’re saving that in reserves.

Felipe:
That’s exactly right.

Ashley:
Yeah.

Felipe:
Sorry, Elyse, we kind of stole the show from you there. But is that along the lines of what it is you’re doing with your line of credit?

Elyse:
No, that’s exactly what we’re doing. We’re recycling the same capital over and over, continuing to scale. I will say, on this last 13 property portfolio, we’re going to take a beat, and we have to rehab a lot of these properties. So, don’t expect me to double my portfolio twice next year, but-

Ashley:
Do you know how many times I did say that and just said, “Oh, this is so nice not to be spending money and just collecting that cash flow,” and then, nope, another deal comes along.

Elyse:
I know.

Felipe:
Another deal comes. Look, she’s going to have a 26-unit apartment complex get offered to her. She’s going to leverage those 13 properties and flex into that watch.

Elyse:
I’m laughing because the other day when we had an off-market brought to us, that’s the other piece of networking, right? You’re increasing your funnel. I’m laughing because I immediately took the property to the title company. I’m like, “Run this, how much do you think they owe on the property?” Trying to figure out what we can offer… Oh, sorry, I’m going to literally go back for one second. When you do the auctions, run a title, please run a title search. That’s super key. And I’m sorry that I forgot to mention that earlier. They will have, in the auction website, they’ll have some information on title, but run your own title. And that way, you can get a special warranty deed and title insurance. That’s super key. So, I hope people continue to listen to this point.

Felipe:
Let’s plug into that really quick, why is that important, Elyse?” Why is it important to run your own title information?

Elyse:
Yeah, you want a clear title, and you don’t know when that title was run, you don’t want any liens on the property or the person that’s going to buy the property. You need to know if there’s any encumbrances, any easements, anything related to that property. And then you can get title insurance, so, that way, you are free and clear. If someone comes after you, the title insurance covers that.

Felipe:
Let me tell a quick story. I know a gentleman who, down in Daytona, Florida, bought a lot, just a lot, no houses on it. Actually, he had a lot and he bought the lot next to him. And so, he’s had his lot for like 10 years. And he’s like, “Okay, I’m going to buy the next door lot as soon as I can.” And the lady finally, after like eight years of begging her, he was like, “I have the cash, I have the cash, I’ll buy it from you, I’ll buy it from you.” And he bought the property from her on a contract on the back of his vehicle. Off-market, it was great, it’s in the way of everything. He bought it for like 20 grand.
Come to find out, it had $80,000 worth of lien on it, where the city had a lien on it because she had never cut the grass there, there was dump there all the time. The city would hire companies to come clean it up, the lady never took care of the property. They were about to take it from her if it reached a certain limit, which I don’t remember exactly what it is, but he ended up having to pay like… Now, here’s the other thing, luckily, his wife was great at what she does. And she went out to the city and was like, “Hey, my husband didn’t do his due diligence. We know that the lien luckily is with the city and not with a private owner,” and was like, “What can we do to straighten this out?” And they were like, “You know what? If you can pay half of it, we’ll take it.”
Obviously, he’s way under what it was worth, he had to pay way more than that property’s worth because of liens. But that is the importance of checking to make sure there’s no active liens. Because, she told him like, “No, there’s no liens, here’s the proof,” or whatever, but that proof was like eight years old or something because it was ridiculously old, and there was all this money that he ended up having to pay after he purchased property and he was devastated, devastated. He was about to lose the property.

Elyse:
It’s so quick to get title run. We don’t even get charged for it anymore because we work with our title company so much, they just do it for us, but I think it’s a couple 100 bucks, they can do it quickly, and then you get your title insurance immediately. So, there’s really, it’s just the risk versus reward ratio.

Felipe:
100%. I couldn’t agree more.

Ashley:
That’s great. Yeah, thank you for including that for everyone, even for myself to listen to. We’ve gone over some general steps for people who want to also reach financial independence, what is one piece of advice that could be like your final step to do out-of-state investing?

Elyse:
Be patient, right? You do want to be quick, but you don’t want to rush. There’s a difference between being quick and not rushing. When a deal comes your way, you be ready, be prepared, but be patient. And it needs to meet your criteria. Don’t get emotional, you’re an investor at the end of the day, and your returns need to be what you set out for.

Ashley:
That’s great.

Felipe:
That’s really good. And when you say, “Be ready,” I’m guessing you’re meaning be ready with your cash to deploy, which would be, like you said, maybe getting the line of credit in place or a hard money lender or whatever the case may be, so that when a deal like that comes about, you are ready to deploy those funds. But I like what you said about that is be patient. It’s really hard to be patient when you have a deal ready to rock and roll. And what I tell our listeners all the time is, have a gold standard, right? Okay, meet the 1% rule or do the 50%, there’s all these rules out there that we can follow, and all that is great, but at the end of the day, if it doesn’t make sense for Elyse, and her personal financial goal, to be financially independent in 15 years through out-of-state investing, and if it doesn’t meet that goal, you pass on it.
Because then it’s just going to be a rabbit trail this way and a rabbit trail this way, and you’re never going to finish building that bridge of 15 years that you want. So, I love what you’re saying about that, like, yes, be ready, be actionable, but be patient, because the deal that meets your goal is going to be out there. And if it is in another state, all of the things that Elyse said, join a group. When you choose a market, make sure that you’re asking the right questions. Make sure that insurances and all of these things are there. Choose a wise agent, someone that’s real estate investor friendly. Don’t be afraid of auctions. And like you said, the golden nugget a minute ago, check for titles. Make sure that it’s got a clean title all the way across the board. No liens or anything like that. And then, like you just said now, be patient, it’s going to happen.

Ashley:
Yeah, thank you, Elyse, those are great steps that you’ve put together for us and our listeners. But I want to move on to the next segment, it is called… Go ahead, Felipe.

Felipe:
Oh, you thought I was going to do the MVP. I was going to hold off for you. So, this section is called the MVP, MVP.

Group:
MVP, MVP.

Ashley:
This is where you tell us someone who has been a key player in your business. So, who’s someone who has really helped you grow your real estate portfolio?

Elyse:
Definitely, Tiffany. Tiffany is our agent and they also own the property management company, Tiffany Mckeethen in Clarksville, Tennessee. And, I mean, she’s just a rockstar. She gets us the CMAs quickly, she tells us about some off-market deals, she runs to places and does the video walkthroughs for us. She’s an absolute rockstar. She even has different fee structures for us. We’ve had different ways of acquiring properties, like the auction website, she’s gone on those before we bid, so we want to give her a little something for those, if it doesn’t have a commission included in it. This huge portfolio, we negotiated a flat fee per house. So, she has different fee structures. She couldn’t be more investor-friendly if she tried. We love her.

Ashley:
I think that’s great that you include payment to her, even though it’s not paid by the sellers. Because, a lot of times people get wrapped up in, well, let’s use a realtor because we’re buying on the market, we don’t have to pay anything. But, she has such great value to you, that you are willing to pay her to walk these properties, even though she’s not going to get this huge commission check at the end. So, you’re making it worth her while, you’re building that relationship with her.

Elyse:
Yeah, she’s got to get paid. She’s our key player to helping us. So, even like we bought this portfolio through a wholesaler, we could have done this potentially, but she helped us so, so much. We absolutely, we need her.

Ashley:
Just to do the paperwork too. Everyone always ask me, “Are you going to get your real estate license? Do you want to be a realtor?” Blah, blah. I’m like, “I don’t want to do the paperwork.”

Elyse:
Oh, and there was a lot. We changed the purchase and sale agreement several times.

Ashley:
Yeah.

Felipe:
That’s awesome. You’ve got to do what you’ve got to do. So, Elyse, I want to find someone like this, what do I do? How do I find a rockstar agent that’s going to bring me the best deals in the area and just be through and through for me? How do I do that? Step by step, how do you do it? How do I do it?

Elyse:
Ask other investors, ask around in people that invest in that area. You can totally search on BiggerPockets. To be honest with you, we didn’t find this realtor that way. I went and looked up property management companies that had good reviews, and then I interviewed, I called and interview the agent. Because I knew, going into it, that I wanted a two-in-one, and they had solid reviews from other investors and most of the tenants, but there’s always a view, right? So, that’s how we did it. And then we interviewed her and she talked about how she loved to help investors and she liked that there was no emotion in the game and it’s actually what she prefers.

Felipe:
I want to be a fly on the wall one day on successful out-of-state real estate investors like you, because I hear that all the time, “Oh, we interviewed the realtor.” So, I just want to be a fly on the wall and hear some of those questions that you ask. Would you mind giving us two to four of the questions that you asked that realtor, to find out how… because that’s really important to the success that you’re going to have in that out-of-state market. But what are some of the questions that you asked that realtor?

Elyse:
Yeah. I usually do an open-ended question, like, “What does investor-friendly mean to you?” And then I hear what they have to say. And that was where that piece came in where she said, “I know it’s about numbers, and I know it’s about being quick.” And we were like, that literally could not be a better answer. If you tried, you don’t even know. It’s about numbers and you need to be responsive. And then it’s also, you date your agent, but you marry your property manager. It just happens to me that we look for two-in-one. And so, we ask a lot of questions about the property management company, about how many doors, and then the ins and outs, the terms, things like that that are really important to us because you marry your property management company.

Ashley:
Yeah, that is very true. I recently hired-

Felipe:
I like the way she said that.

Ashley:
Yeah, a property management company in February. And it’s been a huge relief off my shoulders, but I rely a lot on them, and I still have to answer questions for them until they get to know the properties and it’s still very involved. But, you’re right, it is like being married to them. You put a lot of trust and faith into them.

Elyse:
Yeah.

Ashley:
Thank you very much for sharing your MVP with us. And if anyone wants to find out more, you can check out the show notes at biggerpockets.com/rookie15, and I know that Felipe is going to be upset with all of these investors coming to Tennessee to work with Tiffany.

Felipe:
I’ve used them all. No, it’s true. I love the Clarksville market. It’s not something that I’ve invested in, but, man, we haven’t said this yet, but there’s a military base there, and I did, back before I was full-time real estate, I was in the moving industry, and, Jesus, we moved a lot of soldiers in and out of Clarksville. So, there is constant renters. What I like about that market, and I know I’m giving out Elyse’s secrets here is-

Elyse:
Yeah, that’s my space.

Felipe:
Yep. They love to be off base and be able to rent. Because most of them are not buying in Clarksville. They’re based there for three to five years or whatever, and they are going to be quality tenants. Because, first off, they’re in the service, they’re in the military, they’re trained well, and I’ve heard nothing but great stories from Clarksville. And there’s a lot of multifamily out there, and it’s a great place to invest. I’ve heard nothing but raving things from out there.

Ashley:
Let’s take some of your experience and expertise and help out one of our rookies. Today, on the rookie request line, this is where anyone can call in and leave a voicemail for us for the guest to answer. So, you can reach us anytime at 18885-Rookie, and leave a voicemail. But here is today’s question.

Ivar:
Hi, Ashley and Felipe, this is Ivar from Virginia, and I wanted to ask, what would you recommend with searching for different types of insurances for your properties, and changing insurances? All right, thank you.

Elyse:
Okay. Actually, my husband used to be an insurance agent. So, you’re asking the second best person in this household. But I’ve learned a lot from him. We have rental dwelling policies, of course, on all our properties. It usually costs anywhere from like 40, $50 per property. I mean, that’s basically like you have homeowners insurance on your own property, rental dwelling or landlord insurances for your rentals, right? But on top of that, we have a PLUB and a CLUB. A PLUB is the personal liability umbrella policy. So, that’s what you start out with. It’s usually up to a million dollars. It covers your personal home, it covers any excess coverage for your automobiles, and up to four rental properties.

Ashley:
And, Elyse, as far as I know, those properties have to be in your personal name. Correct? Not like an LLC to be included on your umbrella policy.

Elyse:
Oh, yeah. They were in our personal name. The first ones that we were buying, all the loans were in our personal name. So, I’m not sure, I didn’t run into that hiccup because they just were in our name.

Ashley:
Okay. Yeah, I’m pretty sure that’s how it is. So, just everyone knows that if you have it in, at least, in New York State, it might be different, elsewhere. But, if you were to create an LLC, you would need another umbrella policy for that LLC covering those properties.

Elyse:
Yeah. So, that covered our first four rental properties. And then, starting at property number five, we got the CLUB, which is the commercial liability umbrella policy. And we have a few million in coverage, and we think those are just vital to covering us against major issues at any of these properties.

Ashley:
And then, who do you use as your agent? Do you go to just an agency that’s specific to one insurance company, or are using a broker that can quote you out? And are you getting quotes every year, or just renewing your policies?

Elyse:
Because my husband was a State Farm agent, we’re pretty partial to State Farm. Everything we have is through State Farm. So, our PLUB and our CLUB is all based out of California. But when you get into the rental dwelling policies, you have to have agents in those states. So, we do have four different agents because we’re in four different states.

Ashley:
And did your realtor, Tiffany, help you with that connection to find your insurance agent in Tennessee?

Elyse:
No, actually, my husband just reached out. He’s got his own network. So, we just ask our agent here, and then they connect us directly with the agent in that area.

Ashley:
Oh, cool. Okay, we’re going to start to wrap it up a little bit. But first, we have some semi-random questions for you. So, go ahead, Felipe, why don’t you ask her the first one?

Felipe:
Absolutely. I actually wanted to ask, earlier, we had talked about your forever home. So, out of curiosity, if you want to tell us, I know you don’t want to stay in California, where is ideal for you? What are you going to look for? Because we know what you look for when you’re looking for rental properties, but what are you looking personally? Where would you like to live?

Elyse:
We’re coming in to you, Felipe. We’re coming to Tennessee.

Felipe:
Heck didn’t I know that?

Elyse:
We love Tennessee so much.

Felipe:
Beautiful here. I can wake up to the mountains or the lakes, or there’s this gorgeous here.

Elyse:
The property taxes are amazing. They’re like half of the national average. I mean, it’s insane. Only 25% of the value of the house is what they use for the appraised value to use the tax rate. I said that fast. But, basically, the property taxes are amazing, it’s a great state, it’s beautiful. We love Nashville. We’re coming to you.

Ashley:
I love how you know the property tax data for all these different ares. That’s awesome. Okay. What is one… No, let’s see. I’m going to pick a different one because we do that one a lot. What is something you’ve changed your mind about?

Elyse:
That’s interesting. I, forever in a day, have always wanted to be a nurse. I’m 10 years into my nursing career, and, I don’t know, I see a future possibly where I’m leaving nursing. I’ve changed my mind. It’s interesting that once you do real estate, you develop a little bit of a different mindset, and I might not have the employee mindset anymore.

Felipe:
Elyse, that’s so true. I’m going to ask myself a question that I want you to answer after me. And this is going to be a crazy one. Okay? Something that I don’t like about real estate. You ready for this? I don’t like that real estate has opened my eyes to my financials. Like, I can’t go out and buy a brand new Tesla yet, because I can still buy more rental properties. And I’m like, “Dang it.” I know that that Tesla is not an asset to me and it doesn’t positively affect my goal. So, what has real estate opened your eyes to, aside from the nursing thing?

Elyse:
I mean, I think I’ve evolved over time, financially speaking, that, at first, I was like, “What’s a good income? What’s a solid job? A stable job,” right? These are all things that I looked for. Heck, I even got a master’s degree in nursing. But, then it became not how much you make, it’s how much you can keep. So, then that was my next kind of evolutionary thought, “How much can you keep?” And then it came to be, “How can my money make me more money? And how can I repeat it?” And so, all along that path, it’s, things are changing. So, that’s what real estate has done for me.

Felipe:
I agree. I think real estate opened up my eyes quite a bit to just a different, like Robert Kiyosaki had, just different quadrants, man. There is definitely levels to this game, guys.

Ashley:
Okay. The next question we have is actually a bit of rookie hazing, but Felipe will help you out on this. What is your guilty pleasure song? And can you sing a little bit of it for us?

Elyse:
Yes. Anyone that follows me on Instagram knows that, every first of the month, I post a little picture that says, “Rent’s due,” every first of the month.

Felipe:
I always repost it, too.

Elyse:
And I have Bone Thugs-N-Harmony on there, first of the month. And that just goes to, we get paid on the first of the month as landlords. All right, are you ready?

Felipe:
Let’s do it.

Ashley:
Yeah.

Elyse:
Okay, it goes, (singing).

Ashley:
Yay!

Felipe:
I love that. That was so good.

Elyse:
Get paid.

Felipe:
That’s right. Okay, next month, Elyse, you have to do that live and sing it, and you have to have a chalkboard in the back that said rent to the [crosstalk 00:55:40].

Elyse:
Negative. Negative.

Felipe:
Speaking of Instagram, Ms. Elyse, where can people find out more about you, and where can people connect?

Elyse:
Yeah. My Instagram is, Investing for Financial Freedom. And then my husband, you can find him on BiggerPockets, his name is Todd Rasmussen.

Ashley:
Yeah, thank you so much for joining us today, Elyse. And I just love it because, when we had first talked to you, about six months ago maybe, you were a rookie, and then it’s like you have grown so much. I mean, more triple portfolio since then, and then it’s just been awesome to watch your growth then, follow along on your Instagram and get to know you. So, thank you so much for doing the podcast with us today.

Elyse:
Thank you, guys. This was truly a blast.

Ashley:
I’m Ashley and he’s Felipe. You can check out the show notes at biggerpockets.com/rookie 15. And don’t forget to join our Facebook group, you can search Real Estate Rookie. Thanks, guys. See you next week.

Felipe:
Bye, Elyse.

Ashley:
Bye.