BiggerPockets Podcast054 with Lisa Phillips Transcript

Link to show: BP Podcast 054: Investing in Under $30k Real Estate, Working a Day Job, and Good Vs. Bad Neighborhoods with Lisa Phillips

Josh: This is the BiggerPockets Podcast Show 54.

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Josh: Hey what’s up everybody this is Josh Dorkin host of the BiggerPockets podcast here with Brandon Turner. Hey Brandon!

Brandon: Hey Josh how are you?

Josh: I’m good man I’m good I know I make you laugh every time I announce you don’t I?

Brandon: You are clever in your announcing I guess.

Josh: I am indeed…

Brandon: Look at you.

Josh: Yup, yup, so how are things man? You’ve had a bit of a wet week haven’t you?

Brandon: I have had some plumbing issues this week but I think we got it all figured out. Somebody had flushed large rocks down the toilet we think and completely clogged up the drain in one of my, the recent foreclosure I bought. So, the last guy wasn’t too happy about being foreclosed on so he decided to flush some potato-sized rocks.

Josh: Nice that’s awesome.

Brandon: Yeah, those are the stories you don’t hear about you know? You never hear like the late night guy you know like on TV saying $59.97 price you can learn how to dig rocks out of a sewer pipe you don’t hear those.

Josh: That’s true, that’s true.

Brandon: Yeah.

Josh: Well I am sorry to hear that but I’m glad you guys resolved it and I’m glad your stress is gone because you were a little stressed out.

Brandon: Yeah it was, it was fun, I couldn’t find a plumber. There’s the other, you know we were talking about roll investing right? Like…

Josh: Yep.

Brandon: That’s the prob-, I mean as much as there’s great things about it and I love the fact that I can buy a house for you know dirt cheap. And then this triplex was $70,000, the fact that you can’t get a plumber on the weekends is a downside. I mean I called all 7 of them in my town and none of them answered or called back the whole entire weekend. Like I, yeah, it’s…

Josh: I truly believe people don’t want to work, I don’t get it. You know everyone complains about how bad the economy is and nobody can find a job. And I tell you what man, I’ve been trying to hire people and for BiggerPockets and it’s amazing you know, I’ve responded to resumes with interview requests and people don’t reply. I’ve gotten 40% of the resumes that I’m getting have like horrible major, major typos and I’m like, now what is going on here? Do people really want to work or are they just too damn lazy to do it? I don’t know.

Brandon: Yeah, I don’t know it’s insane.

Josh: And rent.

Brandon: And rent. Well that actually leads us well into our quick tip for today. All right there you go, alright so my quick tip is always get the cell phone number of your plumber not just the company number. Because if you, you know build your list of maintenance guys and your plumbers and stuff ahead of time don’t just have a company number because a lot of the times they will not answer on the weekends get a cell phone number. I now have a really good plumber cell phone number I got from a referral. He’s twice as much as everyone else but he showed up finally and yeah quick tip. Cell phones they’re good.

Josh: Alright, alright. Well why don’t we move on past your personal problems and get on to the show here?

Brandon: Thank you.

Josh: On, yeah you know, I’m here for you Brandon. On today’s episode were going to talk with Lisa Phillips. Lisa is being video blogging on the BiggerPockets blog for quite a few weeks now and it’s really putting out some pretty cool content about investing in properties that you know quite frankly scared a lot of people away. Properties in the under $30,000 range. Now I have owned some scary properties and this show is one that I kind of wish I had before I started. But there’s some really cool stuff to: so definitely pay attention.

Lisa’s got an inspiring story about how she built her rental portfolio after going through a foreclosure of her own. She’s going to share some great tips on dealing with the nuances of investing in this lower-priced areas. So you know if you want to learn about what it’s actually like from the other side to be foreclosed upon or you now have despite the hard shapes you can turn things around and get the ball moving again for yourself this is definitely a pretty cool show to check out.

One more reminder that everybody please be sure to come and ask questions of Lisa or leave comments on the show notes page at BiggerPockets.com/show54. In fact you can even ask questions of Brandon or myself there if you want or just tell us how great you think the show is or how terrible we are.

Brandon: We do get those heat meal from time to time.

Josh: We do, we do. Alright with that let’s get moving and get to the show with Lisa. Welcome to BiggerPockets podcast it is very, very nice to have you.

Lisa: Thank you Joshua and Brandon.

Brandon: Ooh Joshua! I like it when our guest actually say and Brandon. Even though you’re the one that always welcomes them. So, Lisa thank you.

Lisa: Thank you guys for giving me the opportunity, it’s…

Josh: Yeah no problem, let’s get to this thing. The very first question I like to ask people, how did you get started with real estate investing?

Lisa: Okay, how I got started was sort of some bad lessons in overinflated housing markets and being laid off. So the quick story is that I was in Vegas and I bought in 2006, I just came out of college, I had my first job, everything was rosy then in Vegas. And I just felt like I had to get into the market. I bought it in 2006 and as you can imagine over the next couple of years the market fell off and I got laid off. So I had, so I found another job relatively quickly and I moved to Ohio.

But back then I had to rent out the other house that I had and [inaudible][06:15] it was overinflated and the mortgage, I had to pay like $800 a month to like cover the mortgage. And it’s like a really hard lesson to learn about overinflated housing and being forced to be a landlord. Then the second part of that story is I, then the second part of that story is so I was there for about a year and a half and my new, Ohio I’m like I guess I’m going to stay here I purchased a condo that was distressed for about $35,000.

And it was built in 2001 and when I purchased it that was a grand pay and I was going to fix it up and I had all this money saved for that. Well then I got laid off, good old 2009.

Brandon: Oh nice.

Lisa: So that’s the story coming into, I did have a foreclosure which is, I’m glad I had that at an early enough age where I think I had more than enough time to recover from it. But it was a, it was a hard lesson I don’t recommend for people but I learned a lot in the process. And so I just purchased this other distressed property that was built in 2001, it was a foreclosure. And someone said, hey why don’t you fix it up? And I was unemployed so I said, hey why not? And that’s what really got me like looking at real estate investing has a strategy.

Josh: So I’ve got a tip for you. So if you are working for somebody right now and you really hate your job just go buy a property. Because it seems like every time you buy a property you get laid off.

Lisa: It’s weird, I love, here’s the deal. Like a lot of us have this instinct where you just love to buy real estate. You might not be in a place where you should but we have like this internal need to like buy a home and fix it up. You know like people love doing that but I think I got caught up in it, that was an experience.

Josh: I would say I have a good disease yeah I caught the bug and I can’t get rid of it. I even tell my wife okay we’re done for now, we’re going to stop for a while you know. We’re going to lick our wounds and make everything you know stable. Yeah then to think, oh that house just came on the market that’s really cheap and oh look how good it would look when it’s done. Yeah, yeah so I’m with you there, I get it.

So let’s go back to that story of, I want to go back to your very first one and kind of talk about the Las Vegas property. Because…

Lisa: Yes.

Josh: I mean there are people that are worried that we are in another bubble again just like we saw in 2006.

Lisa: Right.

Josh: In some areas of the country prices are even higher than they were back in ‘06 which is…

Lisa: Right.

Josh: Insane. I was talking to a guy just couple days ago and he was telling you like, he bought these, it was a condo in like Miami for I don’t know $200,000 or $300,000 and they’re worth like $600,000 or $700,000 now. Like just absurd amount of depreciation there. It’s like yes I get, what are your thoughts? I mean how? You obviously you know, weren’t as experienced as you are now…

Lisa: Right.

Josh: Going to that. So what lessons I guess did you learn about investing in that’s kind of a market?

Lisa: I did learn a very important lesson that honestly I never heard anyone say this I really had to go through it before I figured this out. I wish someone would have it would have saved me a lot of time. Even if you are investing or buying or buying for your real home, if you purchased at property and your monthly mortgage payments even with 20% down or whatnot is more than what the market rents are in your area I’m really, the house is overpriced regardless. And there’s going to be a settling period.

You know when I was being $800 a month you know so you know because I was trying to keep the house and I had a, I finally did get a job you know. I was like yeah, when I tried to rent it out, I’m like yeah, can you guys want to rent this out for $2,000 a month? Like no. Are you crazy? You get $1,200 and that was the market. However, if I would have known that I would have been you know, I would not have invested in that housing or myself. You know I would have stayed firm to that.

So that was the biggest tip on how I judge every property from now on. So if it does fall you’re going to go right back to where it should be. You know, you’ll be able to rent it out at cost.

Josh: That’s actually, that’s the exact advice I give to my friends when they say they’re going to go buy a house. I always tell them the same thing, okay great but make sure that your mortgage payment, you can rent it out for at least that. So at least you’re maybe breaking even if you had to move suddenly.

Lisa: First case.

Josh: Yeah. Everybody always thinks that they’re going to stay forever. It’s like they don’t think of two years down the road or three years down the road they just think all I can afford the payment. But…

Brandon: Right.

Lisa: That’s so true.

Brandon: I think that’s good advice, the only issue I have is you know there’s pretty big difference between your primary residence and a rental property. But I guess you guys are taking it from the angle of, you need to consider your primary as a potential rental property in case of a worse-case scenario. And I guess, I guess that makes sense but you know ultimately when you buy a house you know you really do need to determine and judge how long you’re going to be there.

And if you’re going to be there five years, 10 years it doesn’t matter if you are upside down for five of the 10 years. I mean you know you’re there to live and have a home and you know presumably your buying that house for the neighborhood, for the schools, for whatever purposes. So, I don’t know, I take somewhat of a different approach to it but thus far I’ve been lucky and it hasn’t bit me.

Josh: Yeah.

Lisa: Yeah, or some people once you’ve been bitten by that layoff bug and that outsource, like it really changes your whole outlook on life. And it happened when I was relatively young so sometimes those are the lessons that stay with you the hardest. So yeah, so even if it is my primary because of that, that fight that I’ve experienced before I’ll still probably be very cautious and go you know, what if we both lose our jobs you know? So it just sort of sticks, it just sticks for me.

Brandon: Yeah, I agree and I think part of it might also be Josh that you know, like you’re self-employed and so I guess maybe you’re a little more, you’re probably not going to get fired from your job. You know like, so you don’t have to worry about suddenly having to move. But you know if you had a job and all of a sudden you got transferred out of the State…

Lisa: Right.

Brandon: Use some of that rental that’s or I mean a property that’s upside down, you can’t sell it, you can’t rent it, you’re just, that’s how the foreclosures happen.

Josh: No I gotcha.

Brandon: Maybe that’s part of it I don’t know.

Josh: Well I tell you…

Lisa: No I…

Josh: Go ahead Lisa, sorry.

Lisa: No I think that’s part of it. I say like say I’m an Alaskan fisherman like they follow the salmon. You know like I follow the jobs that I always think I’m going so stay. Like when I bought the property in Ohio, I’m like yay, I like Ohio, Columbus is great and then I get the opportunity in the DC area so I moved there. But I, I did think that I would settle there for some time but you know sometimes you just got to move…

Josh: Hey and what…?

Lisa: The economy they call it.

Josh: And what’s great about this is you are, you’re not the only one doing that. You know there’s plenty of people, I’m hiring right now and you know. I’ve gotten a lot of resumes from people who are in Ohio and random other places. And I’m like wow it’s amazing people really move around a lot for jobs. So it’s you know anyone listening you know don’t, probably want to pay heed to Lisa here and yeah…

Lisa: Follow the jobs.

Josh: Follow the jobs, yeah.

Lisa: It doesn’t always mean the real estate market will be perfect where you land.

Josh: That is true, that is true. Alright so for you know, that first deal you know, a bit chaotic, the follow-up a bit chaotic. Let’s talk about, I actually want to talk about the down and dirty, the ugly ‘F’ word, the foreclosure that you had…

Lisa: Okay.

Josh: Brought up.

Lisa: Yeah, no it’s okay, I’m open about it I am open about it.

Josh: Yeah well I mean that’s fine. I think as long as you are, if you’re not like you know top secretive and then people find out later like, oh yeah, this person did this, well okay. So what happened? You know, how? You know you bought at a price that was probably not the right price and what was the process like? That’s something I’m pretty curious about.

Lisa: Okay so yeah I was overinflated although I didn’t realize that till the market falls then you realize oh crap. This was not the price I should have bought this out. And you know and inexperience leads you to that so it wouldn’t happen again. And so I had just purchased the new property, it was $35,000 so like the mortgage after taxes and everything is like $350 a month then I found myself laid off again. And so I had a choice and the choice was well I just bought this one and this is way cheaper to keep as long as I’m unemployed.

So I was like well I could afford to live here and I can’t necessarily afford to pay $800 a month. Like I have my on living situation I’m in Ohio now I’m not in Vegas you know, the IT industry that them in is moving further East not necessarily staying right here in the Las Vegas area. And so, so I called them up and I’m like hey, I just lost my job so I don’t know if we are going to do this, like can we work something out? You know because and 2009 was big in the modification so modification was everywhere but things weren’t necessarily doing it. There were just saying that maybe they will.

So I was hopeful for that however you know that at the time I’m going through it with everyone else so I hear all these stories about, yeah they said that they were going to work with me and I paid them according to their contract. But after a year and a half they still foreclosed so they didn’t like keep to the contract they just got as much money as they can while they went through the foreclosure process. So I was like okay are you going to work with me or not? Because if you’re not I didn’t really have any faith in them and they didn’t seem to really work with me. And they were like well we can’t really talk about modification so you’ve missed payments.

And so like I said I had to make the firm choice and I think what a lot of people get in touch with is they tried to keep on versus accepting when they showed, you know call it quits. I’m not saying call it quits is what you should do but you got to recognize where you’re at. And I’m like, have an unemployment check.

Josh: Yeah, yeah.

Lisa: Like I can’t do until I find something new and I didn’t know what time frame this would be. I was like this isn’t happening I can’t keep putting in $800, that’s fine when I was single and I had a nice job but it’s not at this level when I have my own expenses here. So it was just very clear I could have like taking a little bit of that and paid it over but I was like these overinflated house, this isn’t going to work in the long-term you know. If I don’t get a job I don’t want to sacrifice so much for a property that at this stage was a bad investment you know.

Josh: Yeah.

Lisa: So I cut the cord and I think that’s why, and it’s stressful on some levels and you know so it’s not easy. And I had to rearrange my whole strategy of real estate investing because of it because I couldn’t get any more conventional mortgages. And I can’t on a second, rental property for about 5 more years, for primary residence after three years but for rental investment I have to wait 5 more. So it determined my whole entire strategy but if you go ahead and cut the cord when you need to versus hoping for that, what is it, the ‘Hail Mary’ to save the day?

I think you may be able to manage it a little bit more easier. And so since I knew that next, well this is sort of me, so I knew the next month that that payment wasn’t going to go in because I was like got to cut the cord. And then I’m going to call them back in three months and see if they are willing to work with me. So like I went and got my loads at Home Depot since I just purchased the new property and I knew I was going to fix it up. But I knew I had a little bit of income coming in so just to have like because I knew credit would take a ding so I went and got that before the ding came.

And I think you know, and I already had my Best Buy card for appliance. So it sort of was like well, let’s work with the situation as it is. So that actually helped because I was fixing up my next place, I’d like 6 months free financing and when the payments are like $40 a month you can stretch that if you have some sort of income and your monthly living expenses are low because your house payment is $350 a month you know. You have a little bit more wiggle room.

Josh: Yeah, yeah.

Lisa: And so, so yeah so as far as the foreclosure process after that you know payment notices went out and the default notices. I mean there wasn’t any calls except for investors wanting to buy my property. They would send me these letters and say hey, if you are interested in a short sale, I actually tried to do a short sale and the investor was very motivated and we were calling the bank every day and they were like trying to decide you know. So the house I originally paid $388,000 for the investor was trying to get it for $120,000. And…

Josh: Low.

Lisa: Yeah and the bank was like no.

Josh: Yeah, yeah, interesting, interesting.

Lisa: So, we would rather foreclose. So they were working and working but they weren’t coming to a conclusion. So then it was foreclosed and they took it back during that process so that just sort of…

Josh: Gotcha.

Lisa: Went up in flames and I, I had a first and second mortgage soon the second mortgage which was honestly sold. Like as soon as I bought the house my second mortgage was sold to someone else. But so they were sold and so I got in contact with them and offered to settle and tip for anybody who wants to do that they’re going to play games with you. Just play it like hey, I can give you 10 per-, you know, I can give you this much 10% usually works. And if they say oh we can’t do that you know just go oh well too bad, call me when you can and then hang up.

And then a second tip is because I talked to a lawyer, they’re like make sure you get it in writing that if you do pay and settle it’s paid, settled in full and it shows that and get that in writing from them. And when I called they’re like well sorry we can’t do that and I’m like well I need someone who is authorized to make that deal to do it. And you know send me the paperwork that say that before I sign and pay to settle this debt. And then they said they couldn’t then I was like call me when you can and they called. And they were like, Miss Phillips here is my supervisor she’s authorized to do this and they faxed it over. And I was like alright.

Josh: There you go.

Lisa: So that was pretty easy.

Josh: Nice.

Lisa: They sent me the deed.

Josh: Gotcha, gotcha, gotcha. Well so you know I mean listen a lot of people have found themselves in this situation and it is really easy to point fingers and say, well look Lisa you are irresponsible or Lisa you screwed up. Or you know I can go on and say a lot of bad things and yeah look at, you know but…

Lisa: Life happens you know.

Josh: Life happens.

Lisa: Inexperience happens.

Josh: It’s a contract and you know that’s why contracts exists you know to give the banks an alternative you know when you don’t pay. I’ve found, it’s really interesting quickly that you know the modification process, the banks were, it was really an interesting time because you know people were negotiating with the banks to get modifications. And they straight up said you know we will not work with you until you miss a payment. Which…

Lisa: Yes.

Josh: Is this, I mean you know, I get, I stopped, I’ve got banker friends, I’ve talked this through with a lot of people and that policy to me just makes no damn sense. You know it’s like that’s money out of pocket immediately on the part of the banks. You know if they just stopped and gave some folks the opportunity you know who they were going to modify or foreclose on regardless you know. They would have saved themselves a ton of money by just saying alright Lisa, you know what you’re paying whatever you were paying $2,800, $3,000, $2,500 you know, we’ll cut your payment by X for a period of Y you know. We see that you’re in good credit we’re going to work with you. Great! Great!

Lisa: Right.

Josh: You know when things turn around you know the modification goes away and you know you’re paying again you know. And they don’t have to deal with the process of you know vacant property for months and months on end. Everybody would have won, it just, it made no sense to me.

Lisa: Not at all and it took 17 months of no payment that they got. Can you imagine you know?

Josh: Yep, that’s crazy, that’s crazy.

Lisa: But it…

Josh: Yeah.

Lisa: But you know it is their choice and I was like okay.

Josh: Oh of course.

Lisa: But I have to do what I have to do to protect myself. So…

Josh: Well sure.

Lisa: So that’s how, you know it’s like oh I made a mistake this happened you know but I still have to live. And my thing is I do not want to be the person who graduated from college and have to go back and live with my parents. I was always like you know, I’ve got an Engineering Degree so I was always the smart one. So going back home afterwards because I had no money left, that was just, for my on pride that was not going to happen. So I was like sorry house in Vegas but the house in Ohio, we can work with this, can work with this.

Josh: But hey, before we get to the, I’m moving on a little bit. I have a question for you because you kind of have a unique perspective that most people on this show that we’ve interviewed don’t have. And that you’ve been, you been on the other side of that equation right, you’ve been hit with a yellow letters and the direct mail. So I guess what I am wondering, do you have any advice for investors who are contacting people like you were in your shoes then? Like what made you talk to the one investor that actually encouraged you, you know that you started to work on the short sell. What made you attracted to them? Or what can people do to help people in your situation?

Lisa: I can give you some advice, so the person that I finally went with it just came at a time when the, it sounded like the banks would consider a short sell. We’re as before the banks were very hesitant about that but I started hearing you know in the news that okay short sells are an option they’re working more. And so once I heard that they were open to it then I gave it a shot, before I didn’t think they were. And I think anyone trying to get in touch with me, what I could have done to get a soo-, faster response, is like be very clear right on that front page what you can do for me.

You know like, we will negotiate a short sell you know immediately, like that would have gotten me to pick, I’m like hey, that’s a better alternative than a foreclosure. But you know there’s all this other stuff and I see a lot of letters but there wasn’t any, ‘what are you going to do for me’ in this current situation. So maybe that clarity and big, big letters so I don’t throw your, the letter away would’ve worked you know. I heard from the news that…

Josh: Yeah.

Lisa: Short sells ere now, they’re going to maybe start working with people. But you know, it would have been nice that they may be, said it at the very beginning when they sent me a mailer of what the solutions might be.

Josh: You know that makes perfect sense on why I you know guys like you know Jerry Puckett who we had on the show and other direct mail people. Why they say that the big old letter that just has like hand written words like, ‘I will buy your house for cash’. Like that’s why that makes sense. It’s a go okay, that’s exactly what I’m looking for. There’s no like long story and yeah I mean, I love hearing that from you on that perspective because that’s exactly why the people react to those kind of letters. They don’t need to be fancy or really on professional paper anything like that.

Lisa: Tell me what you are going to do and we will talk from there. But not, don’t give me fluff, I don’t need fluff at this moment. I have tons of people giving me stuff I don’t need you know, give me something I need but it very clear that I need it. And that I don’t have to…

Josh: Yeah.

Lisa: Search for it.

Josh: Yep, awesome. Well cool, let’s go on to, so after that happened you moved on to the property in Ohio. How did you buy that then if you couldn’t get a mortgage? Or did you have the mortgage at that moment?

Lisa: I did and then I got laid off afterward and then…

Josh: Okay, okay.

Lisa: And then yeah so this one is sort of fine and it’s a little faster than this and that’s why I found rental real estate to a thing that I can depend on in times of hardship. Because I was able to fix it up and do a lot of it myself probably because it was newer and there’s a lot of resources out there. And YouTube is big with people showing you how to do it yourself. So I went ahead and…

Josh: Yeah.

Lisa: I did a lot myself and I feel so great. The knowledge you gain when you can fix up a house is some of the best knowledge in the world to have, being handy around the house. And it just got me thinking you know and then right before I got my job I got a roommate. And they came in and because my you know, I’m charging them $650 but my mortgage is $350. So all of a sudden like you’re sort of up, everything’s paid for and you realize that okay, so for me it just struck home so strongly that real estate is amazing because you could always rent a room and have someone else pay your living costs.

And through that you can, you can survive, you know things aren’t as tight. And so then I got in this thing of okay let me look for other houses under $35,000. Because I saw that they were in different parts of Ohio. So I was like this works and I’d visit the neighborhoods, they weren’t that bad and then I got my job offer in DC area. So I came out to the DC area and I’m like, I want to put this strategy so it was very, so this is when I got more strategic about I want to fund another property under $30,000. And prove to everyone that a. it can be profitable and it doesn’t have to be in the worst part of town.

Josh: Yeah.

Lisa: So that’s when I got into this but more deliberately than the first two [inaudible][27:43], things that happen.

Josh: Well it’s a little, let’s talk about that, what was your strategy for doing that? What was the deliberate choice you made?

Lisa: Great! So I’m in the DC [inaudible][27:53] and houses are honestly like a 900 ft.² single-family goes for $400,000 if not a duplex. So I mean very expensive even my rents, I mean a one-bedroom apartment like an affordable housing complex is like $1,230 a month. And so I mean it’s very high. So I’m looking around I want to do real estate and I’m like and I go to realtor.com and I’m like, give me a 20 mile radius everything under $30,000. And then for me that was Baltimore, Maryland which is about a 45 minute drive. With traffic it’s an hour but when it’s Saturdays and Sundays it’s not.

And I went out there and I looked at a bunch of properties, some were in neighborhoods that I was like, ooh, a little iffy but then others were perfectly fine. And you know, but I had to go and see so I went with my realtor. He was a bit, it was sort of interesting, he didn’t go to those parts of town either so he was a little nervous. I’m like, John we’ll just go and see it if we don’t like it we’ll just keep driving. He was like, okay but I was able to get in touch with him because he had listed his own like, sub like $15,000 properties.

And he was like, well I can’t be uppity about showing this to you since I listed it, I have properties at this price range. And there are other real estate agents that they were not even trying to hear that, that wasn’t worth their time or inclination. I get that so you just have to find somebody who is willing to work with you in your sweet spot.

Josh: Yeah, yeah that makes sense.

Lisa: Yeah so, yeah that’s what I, that’s what I did and I got started. The first property I bought more deliberately was at $13,000 in the middle of Baltimore about a mail and a half from John Hopkins. Because I heard all these rumors about John Hopkins revitalization project. So you know I figured if you’re going to go low in go next to where tons of money is going to be poured into it.

Brandon: So you go…

Josh: That’s a good tip.

Brandon: Yeah so you went pretty much bottom of the barrel and next to…

Lisa: I did.

Brandon: Soon to come with a vast investment area.

Lisa: Yes, rumor or mouth.

Brandon: Yeah, yeah, or sure for sure why I also started you know with low end properties and be fascinated you know. I know you like to talk a lot about that in fact you know so some videos on it you talk about it on BiggerPockets. Let’s talks a little bit about you know the pros and cons of lower income properties. I mean obviously you can buy these properties for very little money. What did you say, $15,000?

Lisa: $13,000 yeah, $13,000.

Brandon: $13,000.

Lisa: I had a foreclosure.

Brandon: And what did that rent for?

Lisa: The first renter was $975 but there was a bit of an adjustment because we didn’t keep him for long. So now it’s a $900…

Brandon: Even so.

Lisa: Right, yeah.

Josh: Wow! That’s incredible.

Lisa: It’s, there’s, you know, there’s more, it’s funny you know in these neighborhoods you’re that first investor. Like 5 houses after me, you know where different investors came in so you come in and they’re like, oh someone believes in this neighborhood. Well I’ll come too so like all the houses are now rented out.

Brandon: Who’s…?

Lisa: It really trickles down.

Brandon: Who are those investors? I mean the problem I faced was I was one of those people too I was one of the first guys. And you know it was an area that I, you know I thought would potentially turn and I went in and tried to do my part. And what I noticed was the people around me were, the properties were just not getting taken care of. The renters, it was you know, it was attracting very, very low, the low of the low. And you know, the folks that, the people who are renting form my property were afraid of being around. So I couldn’t for my units anymore and then ultimately I had to get out, I had to bail.

Because you know I didn’t want to be the one propping up the entire neighborhood. You know I would have had to buy quite a few properties around my own just to prop up that one property, it didn’t make sense anymore.

Lisa: Right.

Brandon: So you know, and I think a lot of people face that particularly who are newer at investing in those types of properties. So I’d love your feedback on all that.

Lisa: Well I think there are clear dividing lines and I think some people aren’t really, if you don’t go down there and look sometimes you don’t get those clear dividing lines. Because there are neighborhoods that I won’t buy in, I don’t care how cheap you are. You know like, no! I look around and I’m like, this is no, I don’t want people living around you. And that’s visual, it’s gut, it’s clear as day to me that there’s not a lot of people working and there’s many people hanging out outside.

Brandon: Yeah.

Lisa: But it’s too many like I don’t mind one or two families hanging outside because sometimes your house gets a little cramped. You go outside on the porch where everyone’s at. But if it’s like the majority of people, like no that’s a sign to me.

Brandon: It’s like a block party all day long.

Lisa: Unless you’re retired I don’t want to see you out. Well yeah but like no one’s happy you know it’s like mean bad dog and like people come and like who are you? You know like you can tell people are friendly because you know they’ll nod their head and say hi but you can also tell when they’re like “Yo, you know.” Didn’t work for me. So yeah I think it’s, and then I also, if I wouldn’t do this out of State if, so here’s I think where people get in trou-. They hear about Detroit, there’s $500 houses, you have all these property managers and you know they’re bad property managers you know.

So you hire them to take care of your investment but you’re paying all this money and things start being done shoddily and there’s no oversight and you’re being gouged. And that’s about experience because and I think like when you outsource this type of things to these neighborhoods I mean unless you know the property management team and you trust them I mean there’s a level of being on the ground and seeing it for yourself and seeing over the work yourself. What I think when I try to be completely hands-off in these neighborhoods sometimes they don’t get like the people who have the most pride in their work.

So I think that will help as well. Yeah, you can get invested in these properties but you know go down there and see or make sure your property management is cream of the crops so they can handle this and they’re comfortable in this neighborhood and they have good maintenance staff. So they’re not doing the work half, you know half-assed. Can I say that?

Josh: I think s that works.

Lisa: Sorry. So they’re not doing this type of work that like they, no one would be proud of you know so that can get you.

Brandon: Yeah, yeah well I guess, are you managing your own properties then or do you use one of these property managers?

Lisa: I use a property manager and I’ve gotten better and better at it. I tell, so now there’s key factors. First of all I ask if they’ve ever, they have homes in this neighborhood. If they don’t I’m like okay thank you but I want somebody who invest in this neighborhood. And two, I had bad experiences with property managers who get paid even when there’s no one in the unit. Now they justify it in a lot of different ways of why they get paid even if no one’s there.

But sometimes they charge just as much as if there is a tenant there. They’re like I have a minimum of $100 regardless. And it seem that when I went to property managers who only get paid for performance when someone’s running the unit that I have much successful, much more successful time about it. I mean I went through my bad ones and it’s so frustrating.

Brandon: Yeah, the thing…

Lisa: Now the key is to break it off. So no I’m like what’s your break off? Like I don’t want anything to have like a termination fee, like…

Josh: Yeah, well the thing to be wary of with those guys in particularly again for the newer investors is the ones who get paid on a success fee are also inclined to put in crappy tenants. And that was again something that I faced back in the day because I didn’t know how to screen tenants, I relied on these guys it was a nightmare. And you know Brandon put together an amazing piece you know, we worked on this article for a while, it’s how to screen your tenants, The Ultimate Guide to Tenant Screening. And we’ll link to that in the show notes at BiggerPockets.com/show54. But you know you definitely have to be careful when dealing with property managers.

Lisa: Yeah.

Josh: That they’re not going to put somebody in just to get somebody in there because you know they’re not getting paid.

Brandon: Yup.

Lisa: I 100% agree, I 100% agree with that.

Brandon: So do you have any, do you have any good tips then for finding a good property manager?

Lisa: You know I found a lot of, yeah so I like NARPM, I just found out about them a few months ago and I’ve been using them I think for two different properties.

Brandon: What’s that?

Josh: The National Association of Rental Property Managers.

Brandon: Wow Josh look at you.

Lisa: Residential Property Managers.

Josh: Residential Property Managers, yeah NARPM.

Brandon: Oh, oh.

Josh: Whatever you know what, sorry NARPM.

Lisa: I like them as well. So I’ve changed over through my experience, I only do top-rated anything. So if I go to Better Business Bureau you need to have an A+. If I go to Angie’s list you need to have an A. If I go the Residential Property Managers at least you, if you go NARPM like if they don’t do their jobs right you have something where you can escalate to within their own organization that they care about you know. So I want them to have some skin in the game as far as their reputation goes.

And that cuts out a lot of the tasks you know. So you get a, a lot of the people out of the way doing that. And then secondly, I don’t like anyone that have like a termination fee, like I shouldn’t have to pay you too quit like if I don’t like the work you’re providing to me. So I’ve noticed that the companies that do have a termination policy I don’t like them as much. I’ll deal with them like if I have a current property manager that’s like that and they just do barely enough. But I’m also, I’m very aggressive with them. Like if they don’t get back to me and I have to send a second email 3 days later I CC the manager of the company.

And sometimes I’m like, “May I speak to the owner please”? And I do this because I’m like look I’m not, you know I’m going to be polite but I’m not trying to be your friend this is my business and you guys cause me too much stress being nice with you. So you know, so when I asked, so that’s also something if you could escalate quicker rather than later and be polite about. But you know, owner, the manager will be CC-ed on this. Hey this is my second email, can you please answer this question why this accounting error occurred because there shouldn’t be.

Or why my tenant didn’t get this or what you know, why isn’t this being, went in faster, what’s going on, what needs to change? So that’s a good tip too and it’s not easy to do, no one likes to be the tattletale. But when it comes to business it just makes things run smoother. So I’m a CC-er.

Brandon: That’s a great tip.

Josh: Yeah.

Brandon: A great tip.

Josh: It has worked wonders for me in the past oh yeah. There’s nothing, it’s not about being a tattletale it’s about you not doing your job, you’re getting paid to do a job and if you screw up I’m going to go to your boss. And if they fire you’re A-S-S, as you used that earlier you deserve to get your ass fired because you didn’t do your damn job.

Lisa: I agree.

Brandon: That’s kind of the reason why I like Twitter, I think Twitter is the best customer service. You’ve said that before Josh too like…

Josh: Yah.

Brandon: You can publicly call out companies for not returning phone calls or emails and they’re very, very quick to return them right after that.

Josh: Oh yeah, works wonders.

Lisa: I get personal emails from managers, I’m like well, thank you. All I wanted in the first place you know.

Josh: There you go.

Brandon: That’s funny, well very cool. Well I have a question specifically how much are you paying property manager? Like what’s your current like monthly rate, turnover fee and all that?

Lisa: Yeah, okay. It depends where you’re at. Some place if it’s a full month for some place it’s like $300 to place a tenant. And some place it’s half the month’s rent so it’s really it’s local. But it’s pretty standard. If one place does like a full month everyone else in that area does and vice versa with half month o just a flat fee. And then it’s 10% pretty consistently across all the place I do property management. And that’s why I like doing it at this price range because I have so much more room. Because you know there’s usually quite amount of cash flow I have where that extra it could be, you know $90 to $100 they can keep. But my life is so much smoother. So…

Brandon: Yeah.

Lisa: Yeah so I take the 10% but I do it at a price range where I can afford it and still have a nice positive cash flow every single month.

Brandon: Okay in those…

Lisa: So that’s the other key to it so I’m not doing the work, I don’t want to do the work, I have too much to do so it’s a big part of my strategy.

Brandon: I’ve been, I’ve been, the reason I asked it’s kind of a personal reason. I’ve been going back and forth the last I mean years but specifically the last few weeks whether or not I wanted to start transferring all my properties over to property management. Because the more I get the more and more time I’m spending on them just with administrative things. And it’s probably come across in the podcast over the past few months like it just, more and more it’s getting like irritating.

So I’m very, very, very close and that’s why I’m curious. So on another kin of related note, with these property managers what kind of evictions are you seeing on your properties or vacancy rates? Like are they managing them pretty well or are you still because it’s a lower income area are you having a lot more difficulties?

Lisa: Good that you asked me that, no, no difficulties. If you make it nice people will come and some of the neighborhoods I’m in you’d be like, oh Lisa are you really investing? I’m like yeah it’s fine! But it looks really bad so you would think that you find nobody. But it’s, no, if I say I was at $975 that was the one rent eviction I had and that’s when I realized that it’s a little priced over the market for the neighborhood and I shift it down to $900. And that’s been consistent for about a year and I don’t see them moving anywhere.

But there’s two parts to it. How do you fix the place up? You could always sort of minimum you know you’re not going to go all out in these neighborhoods but you could always put a minimum. But I make a little extra effort to make it homey and it doesn’t necessarily cost a lot of money, it’s you know, it’s brown walls, it’s tan walls versus white you know. And it’s something maybe it’s just my nesting natural instincts but like the little thig you can do to make it just a little nicer. So now on my properties I put this nice soft tan that everyone walks into and they love on the walls you know.

Or maybe I have on the cabinets, they do a little trim and molding so when people come into my places all they see is like, wow, cozy, warm and you know comfortable. You don’t have to necessarily pay a lot of money for that you just have to put the right details in that resonate with the mother or father or with kids. Or just something that like gets them going so for those two reasons I put it to my standards of what I think is nice to live in versus just the bare minimum. I don’t put that cheap, there’s like this cheap $.70 a square foot carpet like the office carpet.

Josh: The Home Depot office carpet yeah.

Lisa: Some people put that in their rentals but it looks extremely cheap, anyone can tell that like you don’t care about this. So you don’t upgrade to like the $1.49, it’s not the $3.00 but it’s the $1.49 at least it looks like you’re trying to make this a home, not like as cheap as you can get it. And that’s a differentiator with I think why you know they come into my place, not that do carpet anymore I try to do laminate. But why they come into my place and it’s not hard to rent out.

So, no and if, I can always lower the rent, I get these houses at low enough prices, I go down a lot lower before I’m not breaking even. So there’s a bit of wiggle room for me to lower it as needed to get someone in. But I will, I don’t think I’ll ever not have a renter, knock on wood, so.

Josh: What, you know so you know I kind of prefaced some of this with you know positives and negatives. Positives obviously cash low can be really good, the turnover tends to be somewhat higher I think typically. It’s harder to find folks who have you know good credit and things like that, no evictions in many cases. I’m being very broad and generalizing here but you know what kind of real negatives have you experienced? Safety is certainly can be a concern I know.

Theft can be an issue I’ve dealt with you know, AC units being stolen for copper, I’ve dealt with you know, I’ve dealt with drug dealers I’ve dealt with all the cray stuff that you can talk about. Have you experienced any of that?

Lisa: I have some negatives but they’re not but they were mostly like self-inflicted because I was doing my due diligence. So turnover, when the first gut turnover and I had to evict him I realized that $975 was too much for that neighborhood but the neighborhood’s fine but it is a little you know a little bit more trash in the alley way. You know what I mean?

Josh: Yeah.

Lisa: People try to keep it up but it’s there and it wouldn’t be here in my neighborhood you know. So there are these little nuances that do appear that makes the neighborhood not look as nice even if the people are really nice. And so that whole appearance thing really does slows things down on the appreciation front because you’re like as long as you guys keep dumping your trash in the alley way we’re never going to…

Josh: Yeah.

Lisa: We’re never going to make this neighborhood work. So that’s a negative so you get a little frustrated but that’s the neighborhood it is so it cash flows but I don’t like looking at the rats in the alleys. So that’s a negative. The tenant I have to, I usually pass almost a couple times, you know I pass on people you just have to. And the ones I get aren’t necessarily like stellar, they might have a blemish. But if they have a blemish on their credit but they pay everything else on time and they have good rental records but they’re not completely charge off, charge off, charge off, charge off then I’ll take a chance with them.

And just the different neighborhoods you know like my 2001 condo in Ohio in a nicer neighborhood you know I just don’t get those sort of tenants and with blemishes. So…

Josh: Yeah.

Lisa: I’m a little bit more consistent on paying in the rent. So you have to be patient, you got to let some people pass. There’s people who applied and I know they wanted to live in my property because where they’re coming from they’re like, this is like you know so nice. And you know I wanted them to have nice things but I could tell they just couldn’t afford it and they’re not that responsible with making their payments. Though there’s a level of being strict not letting people with dogs in. If you say you’re not going to let animals in don’t let them in.

And sometimes you just want that money but in these neighborhoods you’re going to pay for it now or pay for it later. So pay for it with time now so you don’t have to pay for it with money later.

Josh: Good advice.

Lisa: So you just keep that in mind, just keep that very firm in mind and hold of even if it takes a few months.

Josh: Yeah I agree.

Brandon: I think.

Lisa: If you fix it up nice it shouldn’t take that long.

Josh: Yeah, I think that’s great advice so you know I think people get nervous and you know when there’s vacancies. But in particularly in lower-end neighborhoods you definitely do not want to run and get somebody in there and sacrifice on a credit score or sacrifice on somebody who’s going to pay. Because you know it’s going to be a headache down later for you.

Lisa: yeah, yeah and they know how to keep on and use that.

Josh: Oh yeah.

Lisa: They use those courts, that human emotional appeal man it comes out.

Josh: Oh yeah.

Lisa: With tears and then the kids, just trying just saying, like you know you don’t want to mess with them, they’re good. And so get the right person in.

Josh: Yeah that’s true.

Brandon: You mentioned the word appreciation a little bit ago. You know like what are your views on that? Obviously you’re a cash flow investor you’re looking for the high cash flow, do you expect your property to go up in value? Do you take that into account at all? Or do you assume because you’re buying low-end it will stay low-end it will always stay low-end always be cheap same price? Like what are your views?

Lisa: I do expect appreciation even in my slightly dirtier one here in Baltimore the cash flows really well. And appreciation is a thing that’s sort of, you know, things get to you I think the conversation really needs to turn to why is there such a guarantee of appreciation Like I hear so many people say it’s a nice neighborhood now it’s going to always be a nice neighborhood. But you know I would feel more comfortable if people told me why they’re so sure that 20 years from now that house is still going to be worth more not less.

You know I know about forced appreciation, you bought it distressed, you fixed it up, now it’s at market. Like I get that I get oh there’s really, they’re revitalizing across the street, millions are being invested across the street. That’s going to have an effect because people like nice things it will attract nicer, you know it will attract people with money who like nice things. Like I get that but there’s such an acceptance that a house in a nice neighborhood will be nice in 20 years. In 20 years and I’m like, where does that knowledge and surety come from.

Because economically if you’re not, it seems to me if you’re not in the hotspot of economic activity like a San Francisco or a New York or DC like how are you guaranteed that this neighborhood’s going to stay so consistent over that long of a time. So it’s sort of, you know, I think I’d feel more comfortable with people if they offered some reasons for it. But I don’t get the certainty that everyone has that appreciation’s guaranteed. I don’t know, maybe you guys can tell me a little bit more about that but there’s no backing it up. It’s all, it seems very speculative that it’s nice now it’s going to be nice 20 years from now. Why?

Josh: Yeah I tend to think it will just probably go up with inflation I don’t like to assume much more than that.

Lisa: Yeah that’s the minimum

Josh: It will go up just like yeah, just like everything. I kind of assume income is going to go up about with expenses probably not a lot more so I don’t usually assume. And again that’s my area because I’m a little bit lower income area just like you are investing in. So I assume that maybe it will just go up with the economy but I don’t hinge my investing strategy upon it.

Brandon: I think it’s one of those things where you know you can somewhat predict areas that will be appreciating. And the way to potentially predict that is things that you had talked about. Say John Hopkins went and spent a billion dollars to renovate you know that part of the campus. That’s, they’re throwing a lot of money in they’re not going to want to see a lot of shoddiness around it so they’re probably, you know there’s, you’re going to start to see people sprucing up around it. Or you’re going to, take Detroit for example, you know Detroit starts raising properties and you know getting rid of all the eye sores and businesses start coming in.

Well you know there’s going to be jobs, money’s going to start pouring in so you’ll begin to see appreciation. But you know I think…

Lisa: Those are obvious, yeah.

Josh: But I think you need to be smart about it, you know I always tell people that it’s you know appreciation is just kind of a little bonus right? You know, buy property based upon the cash low and if you get appreciation that’s great, that’s the icing on the cake.

Lisa: I do tend to agree with that.

Josh: Yeah well so you know, how are you financing your investments? You know, you had that foreclosure are you just paying cash for the properties? Are you just paying private lenders? What are you doing?

Lisa: The whole reason I started looking at sub $30K properties was because I had a foreclosure, I was like and a 401K too. So I had a foreclosure, I couldn’t get conventional financing but I didn’t want this train to stop. I’m like no I really enjoy real estate investing, I was like I’m so sure I can find these properties under the 30 – anywhere. You know and I can do this and make it work. And because of that I am constrained by, because I was constrained about the type of mortgages I shifted my price down to $30K which I already wanted anyways but it’s because they could afford it.

So I figured this was my premise even if I took my paycheck and I I’m making $60,000 a year I took half of that and I saved it, that means I can buy one property a year. So I cut my living expenses down and I’m like just on my own salary I want to purchase one property a year. And so I go out here and I start searching, oh I just wanted to mention this when I do this. The reason I think there’s such a disconnect with me looking in these sub $30K property ranges whereas a lot main street talk is like it’s, it has to automatically be a headache.

Is that I came into this is 2009/2010 and the internet has built up so much. There’s so many different websites that I use. I use crime websites, I use you know crimereports.com or spot crime you know. Local realtors have their listings on site so they have lower priced homes typically than local homes and the big national MLS and even rentometers. So I use all these things that are here now and I leverage them and I’m finding these $30K properties, good. And so the part of the financing comes, okay what can I do? So with one house I raided and demolished as much as I can because they don’t let you take all of your money from your 401K, you have to ask permission for it.

I took as much as I can and I purchased a property with that and I paid for, that was my year-long renovation. I paid for the renovation out of lines of credit with like Home Depot and Lowe’s because they do installation or different contractors offer financing so I tended to gravitate towards them so I could use their financing get it on 12 month refinancing. SO that took a year and I paid for it out of my own pocket the rest. So if I had to wait 2 months I had to wait 2 months to pay for the big thing.

But then the other things I purchased, I purchased one property I can talk to you about this at the end for $11,000 and I titled my car. So I’m a pay things off type person and so you know I paid the car off and then as soon as I can. And so I went and got, titled my car for like 5% interest rate and I purchased the property. And Honda Civics really keep their value FYI, just want to put that out there. And I purchased another vacant property and that was, that was right across the street from this $40 million school that’s going to be developed when I purchased it. But it was just intoxicating. They were sectioning things off but no one knew about it.

So I’m like I’m just going to buy this property now. So I could talk about that later because that’s my, what’s happening next. And then the last product I had was I got a personal loan from the credit union because they tend to prefer credit unions. Banks don’t even like want to talk to you if you have any blemish on your credit which is fine that’s their prerogative. But you know, I don’t like to put money in institutions that won’t give me loans. Because that the relationship I want. I put my money in your bank you give me loans when I need it based on my credit.

So they don’t do that so then I got a personal credit loan and it was like 9.5% a little higher but you know house pays it off. So yeah I just use different loan investing products. I, you know your 401K, your cash out of your pocket, personal loans if it’s at a low enough price and lines of credit to do the renovation.

Josh: Okay alright that sounds a lot like how I got started. I mean most of my early properties we were just pulling from various places. When I say, earlier I said I want to take time to just stabilize that’s what I’m referring to. You know like I use so many different things and I was so creative you know like while I was building my portfolio. Now like…

Lisa: Right.

Josh: That’s my stra-, I mean that’s my goal, that’s my resolution for 2014 is to stabilize it all. Get everything turned over to 30-year fixed mortgages, start you know, simplify and so I don’t necessarily think it’s a terrible idea to be, I man I love creativity and I love you know the whole kiyosaki idea of don’t say I can’t afford it, ask how can I afford it? And that’s exactly what you’re doing but it definitely dos make for some interesting times. So it’s good, it’s good, I mean it works. Anyway, couple more questions before we wrap this up.

First of all I’m wondering what advice do you have for new investors who maybe want to get into maybe a lower-priced housing like this? Especially if they’re living in a higher-end area where, you know DC, New York something like that.

Lisa: Okay first thing off the top of my head is leverage the power of the internet like I mentioned, there’s a lot of ways you vet these properties before you go, even in Google Street View you can use. There’s no reason for many of these things for you to know exactly what that neighborhood looks like and how far it is from the main attraction by following a little arrow. So use the internet, there’s a lot of, and if you go on BiggerPockets people tell you sort of step-by-step what they do use.

And that’s a big part of it for these little lower-income neighborhoods so you can really vet them especially with crime. There are certain crimes that I will not purchase with but other crimes that I will. So theft, that is, I live in a nice part of Arlington, Virginia and guess what? There’s thefts here, you’re just not going to get away from it okay? So if I go to these neighborhoods and I see theft I’m okay. Burglary I’m like, not so much, maybe if it’s far away I might but and robbery no, okay? Assaults, drugs and narcotics, prostitution, no.

However, there’s different types of things like if it’s a domestic issue because those will pop up on these rime reports and crime websites that has had no effect. So there are neighborhoods I bought where I’ve seen that sort of issue come up but that does not affect my house probably because they keep it inside the house. Now I’m not saying this is a could or should I’m saying what is. That does not, that sort of stays inside the house so it really doesn’t necessarily affect everything. So that’s something that if I see that on a report that’s not going to scare me away form a neighborhood.

And also if we’re going to do it you have enough leeway you should have to be able to hire a property manager to take care of this. You know use that as part of your strategy you know, you can afford it, it’s worth it, so you don’t have to go down there yourself, just you know vet them very carefully and only get top-rated and whatever you need to. So if you have to pay a little bit more trust me you know pay now or pay later it’s worth it. So I think those are the biggest things you know, fully vet them, you know leverage the internet, property management and I forgot the other thing I said but.

Brandon: It’s good, it’s good.

Josh: No that’s great. So what about going forward for you? We’re very quickly running out of time here so tell us what does your future look like? What do you want to do next?

Lisa: So really quick, the vacant I purchased in 2011 for $11,000 they are breaking ground on the $40 million school.

Josh: Nice.

Lisa: But because I need time – yes, K through 8, it’s charter but the only people who can automatically have their kids enrolled are people who live in my property. So it’s a bit of an up and so I need a year to stabilize as well so I’m paying off all the other creative investment things I did. So I have you know 9 months where I’m just going to kill on that and so I’m looking to have a deal where I’m, first deal where I am raising funds after the-, this is like my 4th property. And ow people are telling me, Lisa if you find another one I’ll give you some money on it.

So now I’m at the point where I you know going to ask them for the renovation cost then work out some deal. So that will be my first and I’m excited about it. And two I will be video blogging about investing in low income housing. So anybody wants to check me out on BiggerPockets or my other information I just do it so people can be more comfortable investing in house price range, I think it can be very profitable, our money goes a long way than it would in another neighborhood. And I think it’s a good prospect to add to your portfolio. I think some people are a little nervous about it but there’s ways to do it a little strategically so you can take all that nervousness out and just go straight with, fast-pace off other people’s experiences with it.

Josh: Right on, right on.

Brandon: Very cool.

Josh: Right, fantastic, well this we’re going to move forward to our second to last part of our interview here the…

It’s time for the fire round.

Josh: So what is fire round Brandon?

Brandon: Alright the fire round id questions that we get from the BiggerPockets Forums. These are questions that people are having in the real world. So we want to fire them at you. Alright, number 1. Should I be using Quick Books when getting started or am I okay just using a spreadsheet?

Lisa: Yeah you [inaudible][1:01:13] so I’m like yeah a spreadsheet it fine you don’t have to make it, you know when you get the time you can invest in Quick Books, learn it when you get the time to invest in a Bookkeeper do it. But is an Excel Sheet fine? Yes, don’t make this too complicated.

Josh: Good, good.

Brandon: What kind of flowering should I put into my rentals? You kind of answered that.

Lisa: Oh yeah I do not do carpet anymore, yeah no carpet. I do laminate because it’s cheap an indestructible or tile and it’s long lasting, 100% worth it carpet, you just have to clean and it gets crazy.

Brandon: Alright duplex or single-family, what’s the best way to start?

Lisa: I always like duple but only if the cash flows you know, some people are like 100 or 150. I mean minimum for me would be $200 per unit unless you’re living in one of them. If you’re living in one of them you’re saving in so many other ways. So go duplex if the cash flow’s nice, if it doesn’t go with single-family.

Josh: There you go. For rent signs are they effective still in the electronic age?

Lisa: They are very effective in my neighborhoods, before I’m finished they’re calling that number. You know you put the little phone number up or they call to get an application. So in my neighborhood you know a lot of people walking by see the house and have a friend that they’d like to have come live near them. Because you know they see inside, they peek and they’re like, oh it’s nice. You know why don’t we get our cousin to come I’d love to live next to them. So for rent signs they work at least in my neighborhood.

Brandon: I agree, I agree, right on.

Josh: They work well in mine too. So, alright it is time for the world famous,

Famous Four.

So, famous four, these questions that we ask everyone, so let’s go with number one, what is your favorite real estate book?

Lisa: My favorite real estate book, oh gosh, Rich Dad Poor Dad. Well no it’s not really a real estate book.

Josh: It’s close enough, I mean that’s what a lot of people say, I mean almost everyone says.

Lisa: Yeah.

Josh: Like that’s mine too.

Lisa: Yeah I’ll go with Rich Dad Poor Dad, it’s not creative, sorry there wasn’t anything more groundbreaking than that.

Brandon: I mean you could say something like I don’t know BiggerPockets, I mean [inaudible][1:03:30]. But you know I mean…

Lisa: But I do love BiggerPockets, I’ve been on here forever.

Josh: Yeah, see, that’s what we love.

Lisa: We’ll work with that.

Josh: Alright, what is your, what’s your favorite business book non-real estate?

Lisa: Non-real estate, I’m really enjoying the 4 hour work week I really resonate with Tim Ferris and his outlook on life.

Josh: Right on.

Lisa: And I think it’s jam-packed with things that you can start immediately to get your time back. So I love it, I recommend it for everyone.

Brandon: What page are you on Josh, what page are you on?

Josh: I don’t know.

Brandon: 27 you can say it.

Josh: Inches and inches of [inaudible][1:04:11] so…

Brandon: You’ll pick it back up.

Josh: One of these days. What about hobbies? What do you do for fun?

Lisa: I have a diva in me like karaoke which…

Josh: Oh nice.

Lisa: Yeah, I was just there last, you know the karaoke every weekend, that’s my outlet a lot of fun, a lot of, I always wish it was more popular than it is. It’s always just like kind of a, at the bar like on rotations like never more. And then you go like to some of the spots where it’s like there’s a 100 people who want to get their favorite song in.

Josh: The Japanese love their karaoke.

Brandon: Josh you know whenever you know we have the next BiggerPockets Summit we’ve got our entertainment now.

Josh: Oh we can have Lisa do karaoke.

Brandon: Karaoke there we go.

Lisa: Yeah, someone’s not shy.

Brandon: There you go.

Josh: Nice, alright, final question. Alright what do you believe sets apart successful real estate investors especially maybe in the lower-end price point from those who don’t ever get into it or fail or end up giving up?

Lisa: It is having a vision, you need to have a vision, you can’t just do it to do it, do it for what? Like what’s the vision? Where are you trying to see yourself? I mean if you have the vision you know exactly what you’re working for and you are going to do it. It also takes a level of guts, you got to face your fears things I found are not as bad as everyone thinks they are. Fear and the human psyche is so strong it keeps people from doing so much in life.

And my favorite quote is, “Fear is the enemy of action”. I heard it when I was 12 and I’ve lived by it since then but it’s amazing once you understand that it stops you from doing what you need to do an you break past that and you face it. Most of the times you find out that it’s not that bad, I’m sure there’s circumstances that there is but that you live, you live. Okay it’s not the worst thing I’ve ever imagined. That’s really going to get you someplace because you can’t do what everyone else is doing that’s safe and comfortable and think you’re going to be this breakout success doing what everyone else is doing.

If it worked everyone would be a breakout success. You have to take a little bit of guts and go after it.

Josh: Wow!

Lisa: You have a vision to know what you’re working for so that’s what I think is the key difference.

Josh: Wisdom in the last moments of the podcast, I love it.

Brandon: It was good, good stuff.

Josh: It’s great. Well Lisa its ben a pleasure we definitely appreciate having you on the show. Thank you so much for taking the time and for being a part of BiggerPockets as well. We appreciate it so thanks for being here.

Lisa: Thank you! I had a great time, got an expletive or two out, thought that was pretty interesting. But no, you guys are great thank you Brandon, thank you Joshua, thank you for letting me present like the different voice and you guys are great.

Brandon: Thank you.

Josh: Thank you.

Brandon: Hey Lisa, where can people find more about you?

Lisa: You can find me on BiggerPockets but also on my video blog, affordablerealestateinvestmensts.com if you want to find out a little bit more like the real stories of how and why you can invest in these properties and working class neighborhoods successfully and more strategically.

Brandon: Very cool, very cool.

Josh: Perfect.

Brandon: Well thank you very much Lisa this is great.

Lisa: Thank you, bye guys.

Josh: Bye.

Brandon: Bye.

Josh: Alright everybody that was our show with Lisa Phillips hopefully you’d enjoyed the show, lots of interesting conversations, lots of really interesting insight to what it’s like to work in these lower income properties. I definitely want to thank everybody for listening. A quick reminder to check out the show notes at BiggerPockets.com/show54, that’s BiggerPockets.com/show54. And yeah come hang out with us on Facebook.

Actually on Facebook we’ve been asking these trivia questions about once a week and it’s been fascinating, kind of a multiple choice kind of thing. And the conversations have been phenomenal. So definitely if you’re not already getting involved in these discussions link up with us on Facebook at facebook.com/BiggerPockets. Follow us on Twitter, GPlus, GPlus is awesome and of course BiggerPockets.com itself. If you’re a listener and don’t have an account on BiggerPockets you need to set one up today. And if you have an account on BiggerPockets and you’re not using it then you are absolutely missing out because the deal-making, the networking, the interaction that happens on the sight is just incredible.

And just you know by creating a profile and doing nothing or not creating a profile at all you’re missing out on the action. So get in there, get involved and start making money. Because people on BiggerPockets who are interacting are making money, make it happen. I’m Josh Dorking signing off.

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