From Server to Landlord with 10+ Units at 24 Years Old

Ashley:
This is Real Estate Rookie episode 133.

Karina:
Shortly after, I realized that the nine-to-five wasn’t really for me. I just remember looking around the room and there was nobody I wanted to be like. And that was a huge red flag for me. So I just I had to do real estate full time.

Ashley:
I’m Ashley Kehr. And I’m here with my co-host, Tony Robinson. And guys, guess what? We survived a Las Vegas pool party together. I’m back in Buffalo. Tony’s back in California. We made it.

Tony Robinson:
But it was so much fun. We had a great time in Vegas. We had some personal fun and we did some business stuff. We recorded a couple podcast episodes we were out there. So all in all, it was a good trip. And Ashley and I have already decided to make this like, at least a quarterly thing where we get out and we meet some of the guests in-person and do some recording face to face.

Ashley:
Yeah. Rookie Road Trip, we’ve coined it.

Tony Robinson:
Yeah. I don’t think we’ve told the BiggerPockets team that yet though. So this might be news to them.

Ashley:
Our producer is listening right now. So we’ll have to hear his commentary after we finish this intro to see if it’s been approved or not. But anyways, we’re going to go forward with it. So if you guys want us to come to your city, let us know, use the hashtag Rookie Road Trip and maybe we’ll plan something, we’ll come out, we’ll do a couple recordings and maybe do a meetup. We should have done a meetup in Las Vegas too.

Tony Robinson:
Yeah. And so this is a new thing. We’re branding it now. We’re saying we’re speaking into existence. So excited to see it happen.

Ashley:
Yeah. And then watch out for those episodes that are coming out too, that we did in person. So episode 125, we did with Brin. Really great episode. So actually that would have already come out.

Tony Robinson:
So you guys already heard it. And I’m sure you guys thought it was great.

Ashley:
That was awkward. Anyways, today we have Karina on the show. So she is going to talk about house hacking and especially getting started in real estate in a very expensive market.

Tony Robinson:
Yeah. And listen for what she says about the mindset that she had when she got started. Ashley asks a really good question about how she chose what strategy to take. And listen for her answer on that, because it is such a powerful response to a question that so many rookies struggle with. And she said, it’s so nonchalantly, like she didn’t even realize how great of a statement she had just made. So definitely keep your ears open for that. But in addition to house hacking, she talks about tenant screening about investing out of state and making the transitions to that, why she’s choosing to purchase turnkey properties over the traditional kind of BRRRR method. So just lots of are really good things that a rookie can resonate with.

Ashley:
Yeah, I agree. And I think a lot of value will be brought out in this as to not even like picking the strategy, like you said, she really clearly defines how she did that and it’s just so reasonable without giving away exactly what she said. But so I think if you’re struggling that this is definitely the episode to listen to, and then how she is pivoted as her life has changed, her income has increased, different things have changed for her, she started to pivot her business strategy and why she decided to do that. So let’s bring Karina onto the show.

Tony Robinson:
Karina, welcome to the Real Estate Rookie Podcast. We’re super excited to have you on today. Why don’t you start off by sharing a little bit about yourself, who you are and how you got started in the world of real estate investing?

Karina:
Yeah, absolutely. My name is Karina. I’m 24 years old and I’m a real estate agent in Boston. I graduated college about two years ago. I went to a pretty good school and I felt like I had to get a good job. It was what everybody around me was doing. So I got a job in commercial real estate as evaluation analyst. At that time, I was also working part-time as a server and closing a couple of deals as a real estate agent. So I was able to save up pretty quickly to buy my first property. Shortly after, I realized that the nine-to-five wasn’t really for me. I just remember looking around the room and there was nobody I wanted to be like. And that was a huge red flag for me. So I decided to do real estate full time as an agent. I’m now in my second year. And it’s been amazing. Because of my new increased income, I was able to start buying more properties. I’m currently on my second house hack with my girlfriend and we’re buying property out of state.

Tony Robinson:
What an interesting start to the story. So you’re first 24, right? Kudos to you for already having your first couple of deals in your early 20s. You don’t see that too often. But I guess my question is what sparked your interest initially? Was it a course you took in school? Was it someone that you knew, someone that you met? What led you down that path?

Karina:
Yeah. I think it was when I took a course in real estate development, it sparked my interest, but at the same time, I had a couple of people I knew that were getting their real estate license and I didn’t have an internship lined up going into my junior year. So I decided, well, I could do this in the meantime. And then when I tried it, I realized, oh, I actually like this a lot.

Tony Robinson:
One thing I want to call out, because I don’t want us to gloss over this, but you were also hustling, right? You said you graduated from college, you had this full-time nine-to-five job as a valuation analyst, but you said you were working as a server and you were working as a part-time agent as well. Those are the parts of the story that I think people often miss. They see you killing it, that’s you crushing it, but they don’t see all the work that happened behind the scenes to help get you there. So I just wanted to make sure we highlighted that because you probably don’t pat yourself on the back enough for that, but it’s that hard work, that discipline, that hustle that I’m sure has helped you succeed.

Karina:
Yeah. I remember taking calls in between different jobs. And it was definitely a lot, but I got through it.

Ashley:
So when you made that transition into being a full-time agent, how long before you knew that you wanted to be an investor? Because there’s lots of real estate agents out there that never end up investing.

Karina:
Yeah. So I got my license when I was 18. And I already knew I wanted to be an investor prior to going full time as a real estate agent. That’s why I had already bought my first property before I switched from my W-2 to self-employed. And honestly, I just remember, I don’t know when I stumbled upon BiggerPockets, but after that, I just used to read a lot of the websites and the forums. And that really sparked my interest, started listening to the podcast, kind of all of that.

Ashley:
How did you narrow your focus down? There’s so much content, so much information out there, how did you find the path to getting your first property, your first investment?

Karina:
Yeah. So I just looked at what I could do, that was what was reasonable for me to do at the next moment, which for me at the time with my W-2, it was saving up for a down payment and using a low down payment option to buy multifamily property. That was kind of the easiest route I saw. And it wasn’t until after where I realized, okay, now I can buy more property, but I’m not in a market that is necessarily affordable that I started looking out of state to do that.

Ashley:
Can you describe that loan process for somebody who maybe doesn’t know what was it? FHA, did you say?

Karina:
Yeah.

Ashley:
Yeah. Can you describe that for somebody and how that can benefit them as a home buyer?

Karina:
Yeah. So an FHA loan is an owner occupant loan that allows you to put down 3.5% as a down payment and as long as you intend to live in the property for at least a year. And the only drawback I would say of an FHA as opposed to a conventional is that PMI stays on for the life of the loan. But I don’t really see that as a whole negative as long as your numbers make sense. And I think it’s a good opportunity for people who are looking to buy their first property.

Ashley:
So what happens next after you’ve gone out, you’ve got your loan, you’ve got your property, what was the next deal?

Karina:
So that was the first one, it was three units. It was a multifamily in like a suburb of the Boston area. And the second one is the house hack that I live in now. It’s also a three unit in another suburb of the Boston area. And I originally thought that I was going to BRRRR. And the reason I thought that is because I had my W-2 income and I knew what my salary was and that was kind of capped. So I figured I looked at all my personal expenses and finances, and I figured I could only save enough to buy one property a year. So I had to use the BRRRR method to recycle those funds. And I got really into it. I even had an offer on a BRRRR and all that in Philadelphia.

Karina:
And then I realized once I started making a lot more money in sales that I didn’t necessarily have to do that anymore because I would have the funds to buy multiple properties per year. And my time was better spent focusing on increasing my sales to be able to buy more properties. And so then that was a transition to just buying turnkey buy and hold.

Ashley:
That’s really interesting that even onto your second deal, you’ve already realized the value of your time. I think there’s a lot of new investors out there who want to be hands-on as possible and do all of these different roles and task and not outsource things or go with a different strategy just because they want the most bang for their buck and they want the biggest return, the biggest cash flow. Can you talk about how you had that mindset shift, where you realized your time was more valuable focusing on the sales and giving up a little sliver by not doing BRRRRs and finding other properties that didn’t need that?

Karina:
Yeah, definitely. I think that that all comes from just the content I ingest. So whether that’s podcasts or books or the groups. I’m around the conversations I have. I definitely don’t think I would have those thoughts or ask myself those questions if I didn’t constantly ingest that type of content. I would definitely say getting around people who have the same mindset is a big driving factor.

Tony Robinson:
Karina two things I want to highlight that you said that really stood out to me. First is what you just said about the importance of community. For a lot of rookie investors that are listening, they may not have very many people, if any at all, in their circle that invest in real estate. And when you start going down the rabbit hole of BiggerPockets and the podcasts and all these other things, you get super excited, but at times it can feel like you’re on this island by yourself because you look to your best friends or you look to your family and none of them are on this journey down the rabbit hole with you.

Tony Robinson:
So having that community, having something that you can bounce ideas off of, that’s huge, that’s critical. So for the rookies that are listening, if you haven’t found your community yet, the BiggerPockets forums, great place to start, the Real Estate Rookie Facebook group, I’ve said it so many times, tens of thousands of people, super active, super engaging. But find a way to surround yourself with other investors that are like-minded, because as Karina said, it can have a positive impact on your business.

Tony Robinson:
The second thing I want to bring up that you said, you said this a while ago, but I want to make sure that we bring it back up. When Ashley asked you like, how did you decide what was the right path for you? You said, “I just looked at what was a reasonable next step for me in that moment.” And what a simple and elegant way to approach that dilemma that so many people face, right? You just said, “Hey, what is the easiest next step for me to take?” And you said, “Okay, house hack.” Boom. And now your first deal is done. Then you’re off to your second deal.

Tony Robinson:
I think rookie investors, so many times they get like paralyzed with all of the different options, the fear or whatever it is. But if you just say, hey, what is the easiest next step for me in my personal situation? And you go attack it, then you can find success like how you have Karina. So man, and you just said it all nonchalantly. I don’t think you realized how powerful it was that you said that, but it was a really great statement. So I want to keep rolling with the rest of your deals here. Okay. So you have the first house hack, staying in that for a while, then you get the second house hack, loved they’re both triplexes. Talk us through the journey after that. What happens after those first year house hacks?

Karina:
So I think it is critical I think for me to point out that I did join a mastermind. I hired an investing coach at the beginning of this year. And he introduced me to the mastermind. And within that group, I met people that were investing all over the US. And I connected with a property manager in a specific market, which is Augusta, Georgia. And him being himself an investor, we basically just connected and I felt like I could trust him. And that was critical in being able to pull the trigger in a market that I’ve never visited. So I do think that that transition of joining the mastermind was the big step that changed my ability to be able to pull the trigger in out of state market.

Tony Robinson:
How many deals have you done out of state so far?

Karina:
So I’ve closed on two. I have four under agreement. And it’ll close this month.

Ashley:
Karina, with those out of state deals, what was your role and your responsibility that you had to take on to actually close those deals? How much were you involved in the process and how much did you trust the property made manager to do as the boots on the ground?

Karina:
Yeah. I do think it’s important to do your own research and your own due diligence as well. I looked into this market, I decided it was a market I wanted to invest in for a variety of reasons. And some of the deals were on MLS. So I was the one actively running the numbers and bringing it to my agent and saying, “Hey, can we submit an offer on this? What do you think?” And then some of them were off-market property manager or agent would bring them to me. I would run my numbers as well, make sure that they made sense. And then I would go ahead and look for the financing and put those things together.

Tony Robinson:
So I want to drill back down on the house hacking. We give listeners an overview of your entire portfolio, but a lot of people are interested in the house hacking. It’s a really efficient way and typically inexpensive way to get started as a real estate investor. So you’ve done it twice now, right? And are you like in the other house hack right now? Is that where we’re talking to you from?

Karina:
Yeah.

Tony Robinson:
Okay. Beautiful. Right. So when you did that first house hack, you said it was a triplex, right? Were you renting out just the other units or were you also renting out rooms in the triplex that you lived in? And then how did you go about finding the tenants to live with you?

Karina:
Yeah. So that time, I did not rent per room. I just rented the other two units. And I had the tenants lined up basically as soon as I closed. So being an agent, I do think I had a leg up on that front. And I basically ran their income, their credit score, background checks and their references as well, and made sure that they were well qualified and I’ve had zero vacancy since then. So I think that’s something people can do. I’m sure there’s websites out there. I think Experian allows you to look up somebody’s credit report for $14.

Tony Robinson:
Yeah. Just how did you manage that relationship with your tenants? As a first time landlord, someone who’s never done this before, how did you build the confidence to be a good landlord, kind of holds your tenants accountable and just manage that relationship?

Karina:
Yeah. I don’t think that I was necessarily nervous. I think that I relied on my experience with leasing and building the leases out in order to make sure that the tenants knew what the expectations were. And I was pretty confident on that end.

Ashley:
What kind of tools did you to self-manage those? Did you use any software? Did you use Excel? And how did you learn what the process was or even what a lease agreement is and how to form one and the different things you had to know?

Karina:
Yeah. So at that time, I was already an agent. So I knew how the leasing process worked because of that. But if you don’t, I’m sure that there are forums online that you could look up, like empty lease agreements and things like that. I don’t particularly use software yet. I do think that as I think about building systems, that’s going to be a part that needs to be implemented into them. But I don’t think that you should wait till you have everything together before you make that next step. So I don’t think you need to have all these systems to build or write a lease with a tenant and build those relationships or learn the process.

Ashley:
Yeah. BiggerPockets does have lease agreements available. If you’re a pro member, they’re free to and they’re state specific. So if anybody wants to check those out. So how has it been being a landlord? What has it been like for you? Do you have any great stories, awful stories? How long have you been investing for since you bought your first property?

Karina:
Two years.

Ashley:
Two years. Okay. So in the past two years, how has it gone?

Karina:
I did have one bad experience. But basically what happened was that the tenant was smoking weed, which I don’t really care about as long as it doesn’t disturb any other tenant. Of course, it was. So that became an issue. And after multiple offenses, I asked her that she would have to leave because she broke the lease multiple times. And when I went to give her notice, turns out that I get a text from some random person saying, “Hey, I’ve also been living in this unit and I can’t leave by that date.” So that came to a complete surprise to me, not knowing that there was a random person living in that unit. But it definitely felt overwhelming at the time, but I dealt with it I think fairly well. I ended up just having to, in this way, give her cash for keys. And then I helped her lease another unit and actually got the broker fee from that. So I got paid back, even though I wasn’t from her directly.

Ashley:
Well, that’s really smart and that’s a really good technique is to go and help her find an apartment. So you’re helping her out, you’re helping yourself out because you are not going to have her in your unit anymore. And then you’re getting some money back that she had owed you from the broker fee. Can you explain to everyone what cash for keys is though?

Karina:
Yeah. So it’s instead of going through the eviction process, which can be lengthy and it can be costly as well, you basically offer the tenant to pay their moving costs to move into a new apartment. So that can look a variety of different ways. It could be either be a flat fee or a couple months worth depending on your market. And usually, they’re pretty happy with that. They’re basically getting free money.

Tony Robinson:
Yeah. I think some investors hear cash for keys and they’re like, “Why would I ever pay someone to get out of an apartment that I own?” But at the end of the day, it’s the smarter and sometimes more prudent business move, because even if you give them whatever, a 1000 bucks, 2000 bucks, it’s cheaper to do that than losing rent for however many months or them trashing the place or something like that. So yeah, love that approach.

Tony Robinson:
I want to talk about how you transitioned to the second house hack. So I just want to make sure I got the timeline down here. So you buy house hack number one, use that just with kind of money that you’ve saved up through your hustling, you stay there for a year and then you find your second house hack. So I think that’s where some rookies get stuck is like, okay, they can wrap their head around deal number one, financing for number one, the savings for number one, but deal number two is where they’re like, “Holy crap. Like, How do I make that happen?” So for that second house hack, for the down payment, was it money that you had just saved up from your first house hack, from all of your other hustle that you were doing? And then from a financing perspective, were they able to take the income from your first house hack and use it towards your approval for the second house hack?

Karina:
Yeah. So it was a combination of just saved money and capital. I also did the, this one went under the name of my girlfriend. So it was basically a combination of using, I could have also done it under my name and you can have two owner occupant loans as long as you move out of the previous one, but we chose to do two FHAs. And in order to do that, it had to be in different names, because you can only have one FHA loan at the time. And in terms of the bank being able to use your rental amount to qualify you for another property, yes that’s something that can be done.

Tony Robinson:
Using your girlfriend’s name for the mortgage I think is super smart. We do that like all the time for our short term rentals, where we have partners sometimes okay with the mortgage, like whoever it makes the most sense to carry the mortgage is the person that does. So I’ve got some, my partner has some, his wife’s got some, my wife’s got, like it’s just like a mortgage party, everybody’s got a mortgage. But it’s whatever makes the most sense to help you continue to scale your business. I think it’s a great point for the listeners.

Ashley:
I want to ask a tough question because we don’t really ever talk about this, but what happens if you guys were to split up, do you guys have an agreement in place? We talk about business partners where they have the operating agreement in place, what happens there, or if you’re married and you get divorced, what happens there, but we’ve never talked about if you’re dating someone, how does that happen if you guys are doing this business together and putting names into different properties?

Karina:
Ashley, she’s going to listen to this, right? So I got to say the right thing. But no, so we have had that conversation. We communicate very well. So we’ve talked about that. And I think just for us, it’s going to be different for every partner based on how you went into that deal. But for us, it would make sense for us to keep our individual triplexes. And then we hold all of the out-of-state properties under an LLC, which we’re 50/50 owners. So we would split that that way accordingly. So we would do the same thing with the four more that we have under agreement.

Ashley:
That is a great answer. And that’s awesome that you guys have that figured out and you made it clear before going into the properties.

Tony Robinson:
Can I add one thing to that, Ashley? It’s a lot of people don’t want to think about those tough situations that might pop up. It’s so funny before we started recording, I had a Zoom call with our attorney and we probably spent like 45 minutes just like revamping our joint venture agreement because we had things that were missing, it was like, what happens is one of us dies? What happens if one of us gets a divorce? What happens if one of us wants to sell before this date? There’s so many different what-ifs. So for the rookies that are listening, just find a good attorney, spend 45 minutes to an hour with him. And just, they’ll kind of guide you through the process of all the things you should be asking to put together the right kind of operating agreement, venture agreement. So it’s honestly a lot easier I think than most people think to work through some of those potential problems before they even arise.

Ashley:
Yeah. Honestly, even if like my husband and I did a business together, I would still have an operating agreement, even though like, if we got divorced, there’d be a divorce settlement, but I would still put an operating agreement with exit strategies and different scenarios for that business specifically too.

Tony Robinson:
Yeah. There’s no downside to it, right?

Ashley:
Right. Yeah. And I think sometimes we get caught up that things are going to work out and you always have to look at that worst case scenario and how you’ll overcome it because breaking up or splitting up with someone, whether it’s your girlfriend or your business partner or your husband or whatever, that’s tough as it is. And you don’t want to have to try and figure out what’s going to happen with your businesses or your properties when you’re going through a breakup, I guess.

Tony Robinson:
Yeah. So let’s keep talking a little bit more about the out-of-state investing, right? So we got the idea of the house hacks, kind of how you’ve made that work. When you made this transition to the out-of-state investing, you said it was relationships that led you to that market, Augusta. Now are all of these properties turnkey properties or are some of these buy them, rehab them? What’s been the complete strategy out there?

Karina:
So three of them are turnkey. The last one that I’ll be closing on is a duplex that does need rehab. It needs about $50,000 in rehab. And the plan is to use a fix and flip loan to finance the acquisition, then refinance out of that into a longterm loan and cash out the money I put into it. So I’m pretty excited for that one because it is the first time that I’ll be overseeing a rehab, which I have stayed away from at first.

Tony Robinson:
How hands off are you on those turnkey properties? And then for the rehab, will you be as hands off, like as a property manager, managing those or is that you running it all by yourself?

Karina:
I would say I am a bit hands off in so far as that I have a property manager managing those properties. The ones that are located in Massachusetts, I do manage myself. And the rehab, I will be overseeing. I’m not managing it. I do have a project manager on it. And this just goes back to the idea of me spending my time where it’s best spent.

Tony Robinson:
Yeah. Because like my first couple of investments were out-of-state long distance BRRRRs. And I was not super, super involved on either of those either, like I would FaceTime the general contractor like once a week and he or someone on his team just like walk me around. Once the rehab was finished, I had passed off to a property manager. They literally did everything. They just sent me the DocuSign when it was time to sign the lease or whatever. So it’s like, you can make real estate investing really, truly passive, where you’re putting in a very small amount of time.

Tony Robinson:
But like you said, you should only go that route if it aligns with your priorities, with your business goals and all of those things. Like I was in the same boat as you where I was a high earning W-2 worker. So I didn’t mind just throwing the cash out that way, but for someone that maybe has a different approach, maybe you want to be a little bit more hands on. So I guess what I’m saying is that there are so many different approaches to real estate. It’s all about finding the one that resonates with you, the one that syncs with your goals and makes the most sense for you.

Karina:
Yeah. I do think that it’s really important to focus on me keeping the equity and not just buying that and giving it to somebody else. I think that’s what makes real estate really stand out as an investment. But I also didn’t want that to stop me from just getting started. So at that time I don’t feel like I would’ve been as confident to do a rehab, but I think I’m getting to that place now.

Ashley:
Karina, before we go into one of your deals and talk numbers and how that went for you, I want to know what’s next for you. So you’ve done house hacking, you’ve done out-of-state investing, what’s your goals and your plan from here forward?

Karina:
So I guess I’m starting this first BRRRR, which I’m excited about. I think that as I get more comfortable with rehab, my hope is that I do more of these and I really want to build a solid amount of capital to get into like small to medium size multifamily. So I’ve done triplexes, duplexes, but I want to do like 15 to 20 units. So that’s the next step.

Tony Robinson:
Yeah. Can’t wait to see you crush it with those bigger units. I’m sure it’s coming. One last question for me before we get into the Rookie Deal Review is when you chose that new market of Augusta, was it strictly based on the recommendation of the other investors that you knew or did you do some of the analysis digging yourself? And if so, what did you see in that market that made you say, “Okay, this is a good place for me to go?”

Karina:
Yeah. I started off by looking at a couple of markets. And between those markets, I chose the one that made the most sense for me. But I think that there’s a lot of information out there in terms of what are good markets and what isn’t. You can literally go on Google and search what are the top cash flow markets? BiggerPockets, investors talk about this all the time. I think as long as you choose, let’s say two, and really dive into them to look for positive economic indicators. So that’s what I was looking for. I wanted to see positive job growth, positive population growth, my diverse economic workforce, and I wanted the price of rent ratio to be greater than the 1% rule.

Karina:
Also, not as important, but I did consider whether it was a landlord or tenant-friendly state. So all of those things are things that Augusta, Georgia, fit. And there’s a lot of markets that will fit those categories. It’s just a matter of fact of choosing one. I think a lot of people get stuck on deciding which one is the best one. I think you should just focus on one and move within that direction.

Tony Robinson:
One follow up question for you on the market selection piece. There’s the debates amongst a lot of real estate investors of appreciation versus cash flow, I guess, where do you stand on that debate? And did that play a factor at all in your decision here?

Karina:
I would say I’m in both. Boston is an appreciation market and then Augusta is a cashflow market. I think appreciation is a plus. It shouldn’t make up the entirety of the deal as the properties I bought in Boston, they also cash flow. And the appreciation that I’ve experienced as a result of living in this market is great, but it’s not something I would bank on. So I would definitely choose cash flow over appreciation.

Tony Robinson:
Yeah. And that’s part of the reason why I think I’ve fallen in love with the short term rentals is because it allows me to invest in markets where appreciation is heavy, like California, where there is healthy appreciation, but you also get really, really strong cashflow from that as well. So yeah, I agree with you. It’s like, how can we seek out both appreciation and cashflow and it’d still be a really good deal?

Ashley:
Karina, let’s move into our Rookie Deal Review. Do you have a property purchase that you want to talk about?

Karina:
Yeah. Sure.

Ashley:
Okay. What type of property is that?

Karina:
So I’ll talk about my first property that I bought. It was the triplex house hack.

Ashley:
Okay. I’m just going to ask you a couple of rapid fire questions and then you can get into the story of how you acquired it and what’s happening with it now. So what was the purchase price?

Karina:
567,000.

Ashley:
And did you do any rehab or updates to it?

Karina:
I would say I did, but minimal, not something I kept track of, to be honest.

Ashley:
And then you used an FHA loan to purchase this?

Karina:
Yeah. The actual purchase price that the seller received was 560,000. I just wrapped $7,000 of the closing cost into the loan.

Ashley:
And then what are the other units running for?

Karina:
So currently, I’m not living there. It’s fully leased out. So they rent for 1950, 1950 and 1350.

Ashley:
And what is your cash flow on the property currently with you not living there?

Karina:
So it grosses $2,000 after the mortgage has been paid off. I would say after accounting for expenses, it’s really about 1600. And then if I were to take out CapEx and that sort, it would be a little less, but I have a good amount of reserves where I don’t necessarily take out a monthly portion of that every month.

Ashley:
That’s awesome. Congratulations on the deal. Do you want to go in and tell us the story of how you found the deal and made your offer and what the acquisition looked like?

Karina:
Yeah. So it was on the MLS. I submitted an offer and it actually was not accepted. They went with another offer. But the day came back on the market because the other buyers’ financing had fell through. I saw, I come back on, I submitted an offer right away. And this time a more competitive offer and the sellers didn’t want to accept, that they wanted to wait until they hosted an open house. But I basically was able to negotiate and play hardball, I guess, and tell them that if they didn’t move forward, I had another property I was going to move forward with. And since it was a great offer, they didn’t want to lose it. They canceled the open house, accepted the offer. And I had it under agreement.

Tony Robinson:
Can we pause on that really quickly? That’s like a really cool tactic. I don’t think I’ve ever heard anyone mention that before. Was that like your own idea, something that you read? Was it your realtor’s recommendation? Like, how did you guys come up with that?

Karina:
So I was my own realtor because at that time, I did have my license. So I knew the things, how negotiations took place. And I knew that she needed to believe that I actually was going to walk away and that she might lose that offer in order for her to take it.

Tony Robinson:
I need you as my realtor out here in California. Oh, sorry. Continue. So you finagle your way into getting them to cancel the open house. And what happens from there?

Karina:
Yeah. And so I had a home inspection. It was kind of for informational purposes only, I suppose, but my parents wanted to come. They weren’t really not involved at all. I just told them, “Hey, I have a property under agreement. Do you want to come see it?” And it was probably the worst decision I made. My parents were like, “This is awful. You should not buy this. Nobody’s going to rent here. The rooms are tiny.” Basically wanted me to back away from a deal. And I remember being super bummed out, but I went back home and I reran the numbers and I looked at worst case scenario, likely best case scenario. And even the worst case scenario still made a lot of sense. And I knew then that it wasn’t me being emotional or anything, the numbers just made sense.

Karina:
So I decided to move forward with that deal. And it was fine. We closed within 30 to 45 days, had the property leased up literally the week that we closed. And it has been cash flowing ever since. To be completely honest, I did buy this property with the intention of moving out. I knew that this was my technique to get a property under agreement. And so I made sure that when I did move out, the property would cashflow.

Tony Robinson:
You said something really important there about filtering out the advice from your parents. And no disrespect to your parents, but how many units do they own?

Karina:
Yeah. They have their primary property, but they just have a conservative mindset.

Tony Robinson:
And so many people do. And I’m sure for many people who are listening, their parents will probably tell them the same thing. And if not their parents, maybe it’s their brother, maybe it’s their sister, maybe it’s their best friends, maybe it’s their coworkers, like somebody is going to tell them when they talk about that first deal that they want to buy that they’re making a mistake. Like almost every investor I talked to, someone in their life told them, you shouldn’t buy that property. But typically the person that’s telling them that has zero investment units themselves. And they’re going based on what they read in the news headlines and all these other places.

Tony Robinson:
So super, super kudos to you, Karina, for going back and saying, okay, what is the worst case scenario? And okay. Even in the worst case scenario, this deal still makes a ton of sense. And I love what you said. You said, “I know that this isn’t an emotional decision, but I’m using the data. And the data says that this makes sense.” So man, what a great lesson for everyone that’s listening to focus on the data, not so much the naysayers in your life.

Karina:
Yeah. And so I was the agent on that. So I got paid a 2% commission to purchase the property. And although I had the funds for the closing cost, I decided to that I didn’t want to bring them at closing because I wanted to be more liquid. So I basically run the P&S that I would pay a higher sales price, but the seller would give me those $7,000 back at closing. So the seller nets the same amount, but you’re able to wrap those closing costs into the loan. And that’s about it. It’s been pretty good ever since.

Ashley:
When you negotiated that, did you put in your offer with a contract and then after they accepted it, go back and change the purchase contract to reflect the new purchase price?

Karina:
Yeah. So I know that it works differently in different markets, but in Boston, you submit an offer, there’s an inspection period if there will be one, and then you sign a document called the purchase and sales agreement. And in between that time period is when I ask, basically the P&S will overwrite any of the terms in the offer. So you have an opportunity to change those terms, but the seller could have said no. So if it’s something a buyer needs, then it should go in the offer. But since I didn’t need it, I didn’t want that to take away from the offer being accepted.

Ashley:
I guess what would be the downside to the sellers accepting that? Since they’re still getting the same bottom line, why would someone say no to that?

Karina:
So I’m not going to tell the seller this when I’m representing a buyer, but I guess you’re technically might be paying a slightly higher tax on capital gain tax if you’re paying capital gains tax. It should be minimal if anything, but that would really be the only drawback. There really isn’t another one.

Tony Robinson:
And just like logistically, I just want to break this down for the listeners. So when you get this credit back from the seller, so the purchase price is 560, technically it was 567, right? But so you just get a refund for $7,000 at the closing table. Like when you go to sit down, you sign on your documents, you Karina, get a check for that $7,000 balance.

Karina:
Correct. But it’s applied towards your closing cost. So I just didn’t have to bring the additional closing cost. The house does have to obviously appraise for that higher amount. But as long as it does, then it shouldn’t be an issue.

Ashley:
And what did this one appraise for?

Karina:
I think at the time it appraised for 567.

Tony Robinson:
Right into that.

Ashley:
So like right into that.

Karina:
We know how that goes, but…

Ashley:
Yeah. Tony, do you want to take us to our mindset segment?

Tony Robinson:
I do. But before we do, one last question. So where is your parents stance now, Karina, on your success as a real estate investor?

Karina:
So they support me. They are still a little nervous about everything I’m getting into, but I know their mindset has definitely changed in regards to everything I’ve been doing. And they see that I know what I am doing.

Tony Robinson:
Yeah. And I asked because I assumed that’s what their stance would be today, but more so just to show the people that are listening that even the doubters or the naysayers in your life, no matter how well-intentioned they are, I think they’re always going to be fearful for you to do something that’s as new and as scary as buying half a million dollar investment property. But once they see the success that you’ve had with it, that’s when they get on board.

Ashley:
Tony, what about you and your parents? I don’t know if we’ve talked about this before, but how were your parents when you first started to get into this? And then, you’ve grown so much, what do they think about it now?

Tony Robinson:
I was in a unique space or kind of a situation because my dad was the one that introduced me into real estate investing. So he was like head over the moon when I got my first deal, super happy for me. And I think my mom just seeing my dad throughout my life, she understood the importance of building wealth that way as well. So I think I was in a bit more of a fortunate situation that both my parents already had like an entrepreneurial mindset when it came to real estate investing. What about you? Have we shared this before? What did your parents say?

Ashley:
My parents really didn’t say anything. They like just didn’t acknowledge it. But then I guess when I knew that my dad was supportive or on board with it was when I went to go buy a camper van and I called him from the dealership ready to sign the paper and just like, because he worked in the area, I was like, “Do you want to just come and see it quick?” And he yelled at me on the phone, like, “What are you doing? Don’t waste your money. Go buy another property.” It was yelling at me on the phone. This is just like less than a year ago. And this I think that was like my thing, like, oh my dad actually thinks this is a good idea. Okay. So I didn’t buy it. I walked out of the dealership.

Tony Robinson:
There you go. That was the aha moment. But they all came around, right?

Ashley:
Yeah. But they were never like said this isn’t a bad idea or anything like that. They just never really acknowledged that I guess.

Tony Robinson:
Well, good news. I’m glad they’re on board now, Karina. So let’s roll into our mindset segment. So this is where we get into the psyche of our guests and understand what’s going on on the inside there. So if you think back to Karina before that first house hack, before you got to your first deal done, what were some of the misconceptions that you had about being a real estate investor that turned out to not be true?

Karina:
I would say thinking that I had to have it all together or know everything myself. I think now I definitely realize that it’s more about who do I know that is an expert in this or that and how can I work alongside them to get much further, much quicker than me having to know all of the pieces myself.

Tony Robinson:
That’s a great answer. So many people get started or so many people wait to get started because they feel that they don’t have all of their ducks lined up in a row. But again, going back to the statement you made at the beginning, like, okay, what’s the easiest next step for me to take? And if I’m prepared to take that next step, let me take the next step. If that means the next step is choosing my market, okay, cool. Let me do my research, let me choose the market. If the next step after that is okay, let’s go get prequalified, cool, I know how to get prequalified. And if I don’t, I’m sure I can figure out that one step. And okay, I need an agent, cool, let me ask this person. And it’s like if you just break it down step by step, I think it does make it a little bit easier to not feel like you need to know all of these different things that are required to get that first deal done, just like, okay, what’s the next step? So love that advice.

Karina:
I think I realized that a lot with investing out-of-state is that I didn’t have to know which street was the worst street or which street was the best street as long as I relied on somebody who did and other things as well.

Ashley:
We used to have this segment about like team members and like, who is somebody that’s valuable on your team? Do you have a little bit of advice as to how you can find somebody like the property manager you found or even like questions to ask them? If you are talking to somebody, what are some good questions to ask?

Karina:
Well, for me, it was really important that this property manager or your real estate agent is also an investor. I think they will know exactly what you’re looking for if they also do it themselves. And that was one of the things that my property manager had. And he also knew the area very well. He was the primary property manager in the area. So I knew that that came with a substance, that he wasn’t just somebody that managed a couple properties, he knew the area very well. He knew a lot of sellers and was able to get off-market deals because of that. So just finding somebody who is well-referred, covers a large portion of whatever neighborhood you’re looking at and is also an investor themselves.

Ashley:
Okay. So we’re going to go to our Rookie Request Line. If you would like to leave us a voicemail, you can call 1-888-5-ROOKIE. And leave us a question. We may play it on the show.

Benjamin Layman:
Hello. My name is Benjamin Layman and I live in Williamsport, Maryland area. And my question is about house hacking, specifically about house hacking, where it is, for example, a three bed, two bath apartment or house, and you would want to house hack with two other guests renting out those rooms. Is it even possible? And how do you change your lease agreement to accommodate that arrangement? Thanks.

Karina:
Yeah. So it definitely is possible. It’s something that I do right now in my house hack. And the lease agreement would be fairly similar. I’m sure there are things you have to think about that you don’t with the longterm rentals, such as how will utilities be split, who will clean things, things of that nature. I don’t have a lease with the tenant that is in my actual unit. So I don’t know those things that you would actually do, but I imagine that’s what you would do.

Ashley:
Yeah. So if you, I think because one of the things Benjamin said is if it’s an apartment, so if you are renting the apartment and you’re going to lease out the rooms, make sure, first of all, that’s okay in your lease agreement for the apartment that you are allowed to sublease those other rooms. But ultimately, if you are the only one on that lease with the building and the landlord, just know that you would be responsible for, even if you guys decide to split the rent and to split utilities that if it’s in your name, you’re going to be responsible to make sure that payment is made. But it’s definitely possible if you own a house or if you’re renting a property to still rent out the other rooms.

Tony Robinson:
Well, one follow-up question for me on that, Karina. So was your process for tenant screening to find someone to actually live in the unit with you the same as it was for finding the tenants live in a separate unit or were you a little bit more stricter, picky maybe with the, yeah, selective is the word I was looking for?

Karina:
Yeah. No, definitely more selective. And it really came down to a personality type of thing. For us, we are very clean. So that’s a very important factor. And we actually realized that it probably wasn’t for us. We decided to, we have three bedrooms and we keep one as a guest bedroom because we don’t really need that extra money. It was nice to have, but we would rather be comfortable than giving that up. The other tenant we have is my girlfriend’s sister. So we’re very comfortable. The rules are laid out very well. And that’s why we room with her.

Tony Robinson:
Friends and families probably a little bit easier to do in the same unit kind of house hacking. But we’ve had guests on the show that have done it both ways. So that’s the beauty of the house hack strategy is that it works in many different ways. All right. So want to move us on to our Rookie Rockstar. We’ll give a quick shout out to today’s Rookie Rockstar. And if you want to be highlighted on the show, get active in the Real Estate Rookie Facebook group. Every week, we choose someone from there to give a quick shout out to.

Tony Robinson:
So today’s Rookie Rockstar is Darrell Lewis. And Darrell just closed on deal number one. So congratulations on getting that first deal done. But Darrell says that I was in analysis paralysis for a while and I finally decided to make an offer. I figured the worst they could say is no. What a great perspective to have. But anyway, he ends up getting the property, was listed for 124. He offered $80,000 and was able to get it for $85,000. So a bit of a discount off the asking price. And best of all is that it appraised for $98,000. He financed 100% of the purchase price. He got a mortgage for 80% and then used a HELOC on his primary residence for the other 20%. So he’s in $0 out of pocket. So Darrell, congratulations on the first deal. And can’t wait to hear how it turns out for you.

Ashley:
Yeah. Great job, Darrell. And congrats on being the Rookie Rockstar of the week. That’s awesome. Well, Karina, thank you so much for joining us today. Can you tell everyone where they can reach out to you and find out some more information about you?

Karina:
Yeah. Thank you guys for having me. People can reach me on my Instagram @karina. That’s K-A-R-I-N-A_mejiaa, M-E-J-I-A-A.

Ashley:
Well, thank you so much. We loved hearing your story and sharing the house hacking and your out-of-state BRRRRs. Thank you so much.

Karina:
No, absolutely. Thank you guys.

Ashley:
I’m Ashley @wealthfromrentals. And he’s Tony @tonyjrobinson on Instagram. And we’ll be back on Saturday with the Rookie Reply.