YFP REI 68: How a House-Hacking Pharmacist Turned Full-Time Investor

How a House-Hacking Pharmacist Turned Full-Time Investor

Dylan Koch, PharmD, RPh, shares how he pursued financial independence through real estate, first as a house-hacking pharmacist and now as a full-time real estate investor.

About Today’s Guest

Dylan Koch, PharmD, RPh, was born and raised in a small town in western Ohio. Always knowing financial prudence was important, he started to read personal finance books close to pharmacy school graduation. After spending hundreds of hours learning about personal finance and investing, Dylan decided that real estate would be his preferred method towards financial independence. Upon graduating in 2017, Dylan built a small portfolio of 13 units with some partners, sold the entire portfolio, and built back up his own portfolio to 10 units. Dylan left full time pharmacy in October of 2021 to do real estate full-time and fast-track his path towards financial independence.

Episode Summary

Dylan Koch, PharmD, RPh, joins the YFP Real Estate Investing Podcast hosts, Nate Hedrick, PharmD, and David Bright, PharmD, MBA, BCACP, FAPhA, FCCP, to share his experience going from a house-hacking pharmacist to a full-time real estate investor. In the episode, Nate and David share a bit about their real estate investing partnership while introducing Dylan Koch, the former real estate partner and good friend of a previous guest. Dylan explains his pharmacy journey, his start in real estate investing as a 2017 pharmacy graduate looking to reduce his living expenses, and what makes a great partnership.

Dylan started in real estate investing as a path toward financial freedom. In 2017, he was living with several roommates, paying down his student loan debt as aggressively as possible, saving every dollar he could to invest in real estate properties, and looking for ways to scale his income. Real estate offered a solution to those issues, and in June of 2018, his real estate investor journey began with a duplex that he house hacked, bringing his living expenses down to about $300 a month. In the following months, Dylan formed a partnership with pharmacist colleague, Tanh Truong, and together they aquired several properties before parting amicably. Dylan shares insight on what makes a great partnership, creating partnership agreements, and the many benefits of sharing risk in a partnership. Dylan closes with why he chose to pursue real estate investing full-time in September of 2021 and his advice for those considering real estate investment.

Links Mentioned in Today’s Episode

Episode Transcript

[00:00:08] NH: Hello and welcome to the Your Financial Pharmacist Real Estate Investing Podcast, a show all about empowering pharmacists to achieve financial freedom through real estate investing. I’m Nate Hedrick. And each week, my co-host, David Bright, and I explore stories from pharmacists all over the country who are achieving their real estate goals, while maintaining a meaningful career in pharmacy. Whether you’re a first-time investor or a seasoned pro, we’re here to provide education and inspiration about the world of real estate. Please note, this podcast is intended for educational purposes only and should not be considered financial or investment advice.

[INTRO]

[00:00:42] NH: Hey, David. How’s it going?

[00:00:43] DB: Hey. Good, thanks. How are you doing, man?

[00:00:45] NH: Good. So I know that most of our audience is probably aware. But if you’re not, we are not just podcast co-hosts, right? We are investment co-hosts of sorts.

[00:00:57] DB: Yeah, yeah. It’s been fun. We wrapped up a flip that we worked on together this past winter, which was a lot of fun. So I think that working with another person in real estate investment, whether that’s in like a true business partnership or whether it’s different people bringing different things to the table and are brainstorming or accountability or coaching or whatever that looks like, there’s opportunities to push ahead, to learn, and to grow with and from others, and sometimes even to pull capital in like a lending relationship or something like that, when a project may be out of reach.

So many ways that you can work together with another real estate investor, and I don’t know that we talk about that enough, but that’s where we’re going today, right?

[00:01:38] NH: Absolutely. I think if you remember it all, we had Tanh Truong back on episode 42 and way back on episode 4. So today, we were lucky enough to get his business partner from back in the day, Dylan Koch, on the episode, and just a really awesome investor just like Tanh.

[00:01:55] DB: Yeah. Both got to start in the residential space. So just, Nate, like you and I do. But these guys, they worked right out of the gates, right out of pharmacy school, worked super hard, and just crushed it, doing a ton of real estate investing early on, as they were just brand new pharmacists.

[00:02:12] NH: Yeah. Dylan is a pharmacist. He is an investor. He is a local Ohio boy like myself and just really all around great guy that has a great vision for real estate and how it can fit into your financial plan, support a family, support a wealthy life. Just, again, really a great person to have on the show.

[00:02:33] DB: Yeah. I think another thing that’s interesting about this story is Dylan and Tanh, they’ve gone their separate ways in their investing since the early days when they got started. That’s not necessarily a bad thing, right? In this case, they’re both still great friends. They just went to different real estate strategies that they wanted to pursue with their investing. So as Dylan mentions, it can be super good to go into a real estate partnership or any kind of relationship lending, whatever that would be, knowing that it might not last for forever, for whether that’s good reasons or bad reasons, whatever that would be, but having a plan in place in case dividing and getting out ever makes sense.

[00:03:11] NH: Yeah. I think that’s super important. Again, it’s great to hear that they could use that partnership to benefit each other and then move on to better and different goals as time moves on. I just think that’s super inspiring. Again, Dylan in his own right is doing some amazing stuff now in the real estate space. So I wanted to bring him on, talk about those things to see how you can go from student pharmacist to new investor and beyond. I hope you guys enjoy it as much as we enjoyed talking to Dylan, and we’ll take you to the episode.

[INTERVIEW]

[00:03:41] NH: Hey, Dylan. Welcome to the show.

[00:03:44] DK: Hey, thanks for having me.

[00:03:45] NH: Yeah. We’re really excited to be here. I reached out. I know you and I have been – Gosh, we’ve talked a long time ago. Then we reconnected recently, and it’s great to have you on to talk about all things real estate investing. So why don’t we jump right in, give everybody a little background on your pharmacy story and what got you where you are today?

[00:04:01] DK: Sure. I mean, I went to the University of Cincinnati. I did two years of undergrad and then four years of grad school. I graduated in 2017. After that, I worked for Kroger for the longest time. I was a floater for a while, then got staffed. I ended up managing a store. So sure, I will talk about it later. I eventually left Kroger, and I went to a mail order facility. That was basically – So I wasn’t working 50, 60 hours a week. I worked 40, and the rest of the time was built on the real estate business.

[00:04:33] DB: Well, that’s a nice transition then to the real estate story. So can you walk us through what got you into real estate and your why behind your real estate investing?

[00:04:42] DK: Yeah, absolutely. So the why at the start was basically financial freedom. I don’t have the ambition to be the next Warren Buffett or billionaire, anything like that. But I do want basically enough passive income to provide for myself and for my family, so I can do what I want, when I want with who I want. I mean, that was the main goal, right? You type in the financial calculators at age 65, but I wanted to basically move that up to 35, as quickly as I could to just enjoy life and travel and do that.

How I got here was when I graduated pharmacy school, the first personal finance book I ever read was Dave Ramsey’s Total Money Makeover. I was very much following the baby steps, paying off debt aggressively. When I graduated pharmacy school, I had around $72,000 in student loan debt. From what I understand is from the national average, it’s still good compared to the median.

[00:05:36] NH: And you’re low.

[00:05:38] DK: But I was paying two to three grand a month to try to pay that down as quick as I could. My first year of school, I was living with four other roommates. So I could like – My living expenses were pretty low. I had a paid off car. Then as I was on these floater routes that you’d go between source like driving, I eventually listened to Rich Dad, Poor Dad by Robert Kiyosaki. You basically have these two different schools of thought, especially when it comes to debt and what that kind of looks like.

But just doing the math and penciling it out, from a return on an investment standpoint, real estate made the most sense to me at the time. So I dove down that rabbit hole as quick as I could, of course, BiggerPockets, ABCs of real estate investing, all the purple books. I had a realtor at the gym I went to, and I basically said, “Hey, like this is what I’m looking for. Can you help me?”

In June of 2018, which is still pretty much a seller’s market, I acquired a duplex where I lived in one unit, rented out the other, and was able to drastically like even reduce my living expenses even more to what they were even with the roommates. So that was in June of 2018. If you guys want, I can go into some of those numbers.

[00:06:45] NH: Yeah. I want to stop for just a second, though, because I think house hacking is huge, right? Because a lot of people talk about it or haven’t heard of it and everywhere in between. How did you actually find out that like, “Okay, this is the way I want to jump in real estate investing.”? You decided it was for you, but what made house hacking the fit to kind of be the first place to go?

[00:07:02] DK: It just seemed like the most logical next step at the time. I mean, I was young. I was 24 years old, and I didn’t care about having roommates or anything like that, and it seemed like the lowest risk at the time. So like I still had a place to live. So like it wasn’t any different paying rent to me. I mean, I guess you do have the fears of what if something goes wrong. But I’m very much like I can know 80% of information and jump in and then figure out the rest along the way. I don’t know. At the time, it just seemed like a low risk way to get my feet wet and start.

[00:07:37] DB: I love it. I love that. When we hear about risk reduction, I think that resonates with pharmacists, right? I think pharmacists are also very spreadsheet-oriented. So I’m sure there’s people that really want to know the numbers on this. So can you walk us through a little bit about what you paid for the property, the rent from the other side, how they compared to your mortgage, and what your costs end up being?

[00:07:57] DK: Yeah. So I did the 3.5% FHA down payment loan. The house was $272,000, so I think it was like 10k out of pocket when it’s all said and done. It’s around there. Principal and interest was like $1,000 a month. Tax was like $300 month. Insurance was like $100 a month. About this property, though, is I would never do this now. But it didn’t have separate utilities. So like all the utilities, even though it was a duplex, I had to pay for all the utilities, water, electric.

Then you have PMI, the private mortgage insurance, when you don’t have a down payment. So all in all, I think it was around 1,850 a month was my all in cost, and I was running the other side for 1,500 a month. My living expenses, with a pharmacist’s salary, were $350 a month total. I mean, at the time, I felt like I was stealing, right? It was a way for me to pack cash a lot.

Eventually, with that same property, though, I ended up refinancing into what they call like an 80-10-10 loan. So 80% first mortgage, 10% second mortgage, and then 10% equity because I had made some improvements. I put on a new roof, I put in new windows. It just had natural appreciation at the time, so I was able to lower those expenses even a little bit further and get rid of PMI because no one lender saw that I was 80% levered or less. So that helped a lot too.

[00:09:19] NH: That’s awesome. So you get to basically move out or move into a place and live for not free, but just about as close as you can get, while building equity in a market that’s appreciating. I mean, that’s the dream. That’s awesome.

[00:09:31] DK: Yup. Tax benefits as well. Yeah. I mean, it worked. In hindsight, it worked out better than I could have imagined at the time.

[00:09:38] NH: How long did you stick with that property before moving on to the next phase?

[00:09:42] DK: So I lived in that property for about three years. I did end up selling that property. For listeners, too, I believe the federal tax code is like if you live in a property two of five years, then those are tax-free gains you get when you sell. Now, I mean, I know that property is worth more than what I sold it for today too, so take that with a grain of salt.

But that purchase was in June of 2018. When I graduated, I made good friends with a past guest of yours, Tanh, and we basically formed a partnership together, where we decided that we had similar ambitions. We had similar goals. That if we see something, again, like lowering our risk, it felt like at the time to have someone else involved with half the money, half the work. So we ended up buying another duplex in Cincinnati in August of 2018. Then we ended up buying another duplex in January of 2019. So it’s three duplex purchases for me that were between June and January. That was six months’ timeframe there. But then, eventually, you run out of money quickly in real estate when you try to acquire properties at a fast pace.

[00:10:46] DB: Yeah. That’s like my first thought, right? So I’ll step aside for a second. You mentioned Tanh. We love Tanh. He’s been on the show twice, both episode 4 and episode 42, for everybody else who wants to check that out. Big shout out to Tanh. But, yeah, my first thought is, okay, so you bought a place in that 10 grand. I get that. But then you bought two more. How are you financing that so quickly? That’s awesome.

[00:11:05] DK: I mean, it really was saving every penny I could, working a ton of overtime, and having very low living expenses. I didn’t have a car payment. I mean, I didn’t have a significant other at the time. I have a dog. I didn’t have any responsibilities a lot of people have when they’re older. So my living expenses were so low that I was able to stockpile cash. Tanh will tell you the same thing, living expense is very low, very frugal scenario, where we are just able to stockpile cash from our jobs and working a ton of overtime.

[00:11:35] NH: I think that’s huge, especially for our listeners who are about to graduate from pharmacy school or just graduated from pharmacy school, depending on when you’re listening, and you’re thinking about, “Well, now I’m making this pharmacist salary. I can go get the bigger house. I can go get bigger rent payment.” If you just do a little bit of this work up front, you can really set yourself up for success down the road by cutting expenses early on. Then you can figure the rest out later. But I love that thing. It’s a really good point.

[00:11:58] DB: One of the things you mentioned too about partnerships, so we have some guests that come on, and they say that having a partner helps to just make it easier to jump in because you have someone else to run the race with you. Other people would say, “Well, you bought two duplexes together. Why don’t you just each buy one duplex so that then there’s no drama down the line if you guys go your separate ways at some point?” Like it just makes it a lot simpler to own your own and own it 100%.

So kind of with that tension between those two philosophies, where did you land, and what made you decide to jump into a partnership with your early investing?

[00:12:32] DK: Yeah. This is going to be situation-dependent on every case-by-case basis. But what was comfortable for me is like we had had those conversations of what do we want this portfolio to look like in five years? What do we want it to look like in 10 years? So we had similar ideas of and then not only what we wanted to look like in 10 years, but how are we going to do it, right?

I guess we are so alike in our goals and ambitions, and I had no trouble, like I trusted him to do – If he ran the numbers, I wouldn’t even – Like, “Sure, let’s buy it.” I think he would say the same thing for me too. So it was a lot of trust in the other person, and that goes back to our relationship like in pharmacy school too. It’s not like we just met, and we’re like, “Let’s do this,” right? We had a prior relationship to that.

As we’ll probably get into, though, like our partnership has since dissipated. It did end very – He’s like still one of my closest friends. He’s a groomsman in my wedding. All said and done, like Tanh and I still love each other very much. But one thing I will say on this partnership idea is it doesn’t matter how aligned you are at the beginning, is life does change. Tanh has moved on to commercial doing some other stuff, and I’ve really stayed on the residential side. But my goal here is to build a wholesaling/this real estate investment company, so I can acquire other stuff for myself too.

If I’d give any advice on the partnership front is not only make sure you’re aligned at the beginning but still have those documents in place, regardless. If that’s operating agreements, if something does happen, like this is spelled out from the beginning. This is what we agreed upon. Don’t have your strengths and weaknesses be the exact same. Tanh will be the first one to tell you this. I’d say we are almost too much alike when it comes to running the numbers or our risk tolerance or what we’re good at.

To be frank, if you see me with a hammer, it’s probably a bad thing. I’m not a handy guy by any means. So like we both feel comfortable running the numbers, running Excel sheets, doing comparable sales, like that kind of stuff when it comes to real estate, negotiation. But neither of us are handy people, probably don’t like confrontation the most, like dealing with headache tenants or whatnot. So property management neither of us like to do. If you’re going to partner with somebody, just make sure your strengths and weakness complement each other, versus are congruent with each other.

[00:14:46] NH: It’s too much to lead you with, but I imagine you also set up some stuff in advance, right? So that when this dissolution happened, and you started to sell off some of the properties, everything was lined up in advance, so it wasn’t contentious, right?

[00:14:59] DK: Correct. Yeah. No, you hit the nail in the head. I probably couldn’t have said that any better.

[00:15:02] NH: Yeah. Just because I feel like some people go into these partnerships and think, “Well, I know you. I trust you. We’ll figure out the rest later.” But the best thing you can do is set it up from the beginning so that when X, Y, and Z happens, you know exactly what path you’re going to walk down and how it’s going to look so that nobody is left holding the bag.

[00:15:19] DK: Yup. I mean, life happens and life changes. As much as we are aligned at the beginning, that was still five years ago. So like things do change, and just keep that in mind when you’re starting that path.

[00:15:30] NH: I mean, think about where you were five years before you bought your first investment property, right.

[00:15:35] DK: Yeah, exactly. That’s a great mental model to use when you’re doing something like that.

[00:15:39] NH: Yeah. That’s huge.

[00:15:40] DB: Yeah. And you mentioned operating agreement also. Like there are some standard business documents that walk you through some of these kinds of things, right? So if you were to talk with an attorney and formally set up a company, they would kind of force you to answer some of these questions. Was that your experience?

[00:15:56] DK: Yeah. Tanh and I, specifically, we network a lot with a lot of local investors. Our CPA recommended us to a real estate attorney, right? So we feel comfortable going to them, and they’ve done this before. So they’ve seen every scenario that you can think of. So relying on those people who have had years of experience, like that have seen all this stuff, they know what questions to ask, how to set things up appropriately. Don’t even ask yourself if you should be LLC in Texas, an S corp, versus a C corp, all that kind of stuff. They let the experts handle that.

[00:16:26] NH: That’s great advice.

[00:16:27] DB: Yeah. And that was my exact experience too, is like when going to an attorney that’s been through that, that has helped people go through – They gave – Here’s all the questions you need to talk with your future business partner about bring me back your answers. But take a few hours and talk this through. Like what happens if? What happens if?

Yeah. Having that all not only figured out but written down in advance is so such a huge deal. So that if something goes sideways or people grow apart or whatever, you’re covered, and it’s just major stress reduction.

[00:17:00] DK: But if the people, the listeners out there, who might be thinking like partnership or not, I feel like pharmacists are – They like to have control a lot of the times. I don’t know if that is a correct stereotype. But I would say don’t do it then at the start. But like if you can give up a little autonomy, and you want to reduce your risk, and that risk is carried 50/50, and that gets you to at least do your first deal, then I would say do it and go for it.

[00:17:25] NH: Yeah. David and I talk about that sometimes too, where like every once in a while, like even into like 10% of deals you buy are probably going to be stinkers. It’s not going to work out. There’s going to be a problem you oversee. So if you can share that risk with somebody else, when you do catch that bad one, it doesn’t hurt so much because you’re sharing that risk. You’re sharing that workload. I think that’s –

[00:17:44] DK: Yeah. I mean, the perfect example, that first duplex that we bought together, the plumbing broke in the middle of the night and one of those like winter days. So I got the call. But the next day, I had to work. Tanh didn’t, so he was able to take care of, right. So it’s just like stuff like that.

[00:18:00] DB: So you mentioned earlier that you’ve kind of made the jump in pharmacy jobs and now even from there. Can you tell us kind of more about your most recent jump into real estate full time? What kind of threshold made you feel like you were able to do that and how that’s gone?

[00:18:17] DK: Yeah. No, great question. So I went full time in real estate in September of 2021. Prior to that, we had built up a portfolio of 13-ish units, all between single-family and like duplexes, essentially. Upon that, like the disbursement of those, we were sitting on some cash because we sold a lot of stuff. Since that time in September, I’ve built it back up to about six wholesale deals, one flip, and seven units to keep for myself. So that’s been in a frame of little less than a year.

The reason I was able to do that is because, one, I had a decent stockpile of cash I felt safe with. Then, two, my now wife is a pharmacist as well, and we still live pretty modestly. To be completely transparent, her income covers our living expenses. So before we have kids and before I have these extra responsibilities of life, it’s either now or never, if I want to do it. So I jumped ship, and I don’t regret doing so. It is one of those things where you can read about it in a book that people tell you it’s a roller coaster ride, but you really don’t know it until you feel it. it definitely is.

There was one thing I was going to add on to that, but it’ll probably come back to me here in a second.

[00:19:33] NH: So you mentioned you had several wholesale deals. Is that kind of the core of your business, where you’re looking for these off-market deals and then keeping it going through yourself and wholesaling off the others? Is that the model, or what is the goal with the business?

[00:19:46] DK: That is exactly right. Real quick, I’m going to backtrack because I remember what I was going to say. Like going the transition from pharmacist to full-time real estate investor, there are two main reasons. I no longer liked going into work every day. It was a big part of that. Two, I guess I have financial goals that are probably bigger than what a non-scalable income can provide, right? So I know all the pharmacists out there know that, I mean, you’re not max when you start, but it’s pretty much like a sharp pick up from intern to somewhat of a very low slope plateau from an income perspective. So I’ve seen it work, and I’ve seen people take these businesses. They know that, some of them, depending on how big you want to do, they can do six figures a month in profit. Then they use those to wholesale the rest. Or wholesale the rest, keep the best motto is what I was kind of aiming for, right?

I’m still a one-man crew. I have a couple of VAs that pulled some lists for me, and I did end up joining another mastermind. A shout out to – If people are familiar with BiggerPockets, Ryan Dossey has been on a couple of times. He runs a mastermind program called Create Cash Flow or CCF for short. So I joined that. It cost me a decent chunk of change to join that mastermind. But that was really like the spark that got me to how to pull the right list. What does the copy look like on the mailers? How do they run those numbers differently, the accounting that’s behind, everything that’s behind not only real estate investing, but running a business behind it?

Yes. You can probably figure out all that on your own with YouTube and books, but decided to pay the money up front to basically this jump that learning curve. It’s now allowed me to do not a lot but seven units and a couple wholesales in six months, seven months. It’d been well worth it, I guess, is what I’m trying to say.

[00:21:41] NH: I’d say it’s quite a bit. Yeah. As someone who has sent out some mailers with just YouTube knowledge, I can tell you it’s not a good – I’ve done exactly one wholesale deal ever and barely.

[00:21:53] DK: Yup. I did end up getting my real estate license, like agent license, as well. Not with the intent to sell single-family homes in the suburbs but for access to data. Access to deals, to properties was the main goal kind of.

[00:22:07] NH: Yeah. You can also do some referrals if you wanted to too, depending on the leads that you get. Yeah.

[00:22:11] DK: Yup, exactly. There has been one where I was like, “I can offer you X for your house,” which is my cash price. They were, “No.” Like, “I want retail. I want 100,000.” I’m like, “Okay. Well, I can probably get you that. I’ll list it for you if you’d like.” We’ve had two of those that’s worked out that way.

[00:22:27] NH: That’s great. What a great model. I love it. I think that goes back to what you were talking about earlier about the Rich Dad, Poor Dad mindset. I just remember there’s a chapter in there that talks about like being an E, right? Being an employee, and that it’s great. People have done it for generations. You make a steady income. You have great job security. But there’s nothing else, right? I think you had that. You clearly exemplified that where you’re talking about stepping away from just that stuck paycheck every single month and trying to accelerate that in a different direction. I think that’s awesome.

[00:22:59] DK: Yeah. I recognize I’m in a very fortunate situation ,where my living expenses is like I probably would not have made that jump if I didn’t have my wife’s income to help support that. I would have needed more passive income, more units before I felt comfortable doing that.

[00:23:12] NH: But who knows if it all goes well, right? Then she can leave in a little while, and then you can both just hang out and do it.

[00:23:16] DK: Yeah. Those are the conversations that we now have, right? Like if you know once we get to X number not of units but X numbers of cash flow, then that’s where we can talk – We can have those conversations.

[00:23:27] NH: With today’s market, though, so today’s interest rates, today’s housing market, it’s obviously on fire even still, where’s your focus at? Is it still the same game? Or has your game plan shifted?

[00:23:38] DK: Great question. I actually love macroeconomics. I love like going down those rabbit holes and following the [inaudible 00:23:44], their dot plots, like that kind of stuff. So we can literally talk for hours about that stuff. But not to be like a bear with anything, but I do think we’re going to see a recession probably in the next like 6 to 12 months. Not financial advice by any means on any of this.

But I do think it’s very like local-dependent to your market, and I could speak Cincinnati dependent, and I think supply and demand, Trump’s monetary policy, when it comes to most things. So, yes, they’re probably going to raise interest rates another 75 points next month. But if there’s still 100 buyers for one house, then you’re still going to get deals. In fact, like June and going into July, some of our marketing has even done better because I feel like this current environment has other people very tentative, right? So they’re not – I have less competition now.

On the flip side of that, I think sellers are like, “Oh, I better sell now before my price, my houses dip down like they did in 2008.” So that has actually prevented causing more opportunity in the current market than it has in the past six months.

[00:24:47] DB: Yeah. Definitely seeing more listings in our area. So I think that could be that people are thinking now is the time to sell. Is this shifting from a buyer’s market to a seller’s market? But it sounds like one of the things that you’ve done to help with that is you’ve become a realtor. You’ve got access to all the data, and so you can see how quickly houses are moving days on market. You can get into those statistics. Rather than just, “Well, I talked with my neighbor, and it feels kind of like this,” like you’re able to get at the really good data, which also feels very pharmacist like.

[00:25:18] DK: Very much so. Yeah. I was just going to say the same thing. Pharmacists love to spreadsheet analyze and do all that kind of stuff. You can get very nerdy with this kind of data too but the days on market going up a little bit, seeing price declines. A house that you used to get $30,000 over asking with appraisal gap coverage and waiving inspections, they’re probably still going to get pretty close to less than one or two offers.

The pocket that I target is probably a 250k or less, right? So I think some of those more upper scale like 500,000, 600,000, those are ones get hit by interest rate hikes the most, right? So if you can say in a certain pocket that’s probably going to be popular the majority of the time, you’re, again, just reducing your risk. If you can buy a house or a property, whatever it may be, an income-producing property after you account for all those expenses at 50 to 60 percent of what it’s worth, then I don’t care what the environment is. It’s probably still a deal.

[00:26:16] DB: So to clarify for people too, part of your perspective on this is in wholesaling. So you’re buying houses, and you’re selling the contract, or you’re listing them, but you’re not doing as much like rehab within a house kind of house flip type work. Is that correct?

[00:26:31] DK: Correct. So they’ve done about six wholesales. That’s, again, like flipping paper, essentially, is what it is. I will say that wholesaling is popular, especially to newbies, because it’s low-hanging fruit. You don’t need a lot of money to get started, and you can have low risk. But I would argue that wholesaling should be one of the last things that investor takes on because you have to know how to run comps, how to run rehab numbers, how to negotiate with sellers. So it requires a skill set more than I bought it for 50, and I sold it for 100. I think a lot of the stuff out there makes it sound more appealing than it actually is.

I have done one flip. I can say I’m not a fan of flipping all that much. If you could wholesale a place and make a $10,000 spread or flip one and make, I don’t know 30, I’m probably still going to take the contract, just because even though – Less time, less risk, less headache is really what it comes down to, unless there’s people that if that’s their skill set. Like I told you earlier, if you see me with a hammer, that’s a bad thing. I am still very much learning all the rehab side of things.

I have taken on a couple of BRRRR projects that I’m working on refinancing now, and some of those interest rate hikes have changed the math. But luckily, when you underwrite those deals, like I don’t underwrite with 3.5% interest rates on a rental. If you can underwrite at 5.5, 6, even 7 percent, where you think they might go and it’s still cash flows, it shouldn’t scare you away from the deal, in my opinion.

[00:27:57] DB: Yeah. That’s kind of where I was going with the flip question, too, is you talking about the market. One of the things that I’m hearing is people afraid that the market may drop. If they’re trying to think through like, “Well, I’m going to buy this house, it’s going to take me six months to rehab it, and I’m going to sell it. But, hey, the market is going up 20% a year, so I can expect it’ll keep going.” It sounds like you’re not necessarily in that camp.

[00:28:20] DK: No. I would be very wary. Their interests are probably going to go up, which is probably going to affect housing a little bit. Again, if you can buy a place for 100, it’s worth 300, and you got to put in 50k. That is a different story than if it’s worth 300, you’re buying it for 250, and you have to put in for it, right? It depends on how big that margin is and how comfortable you feel running those numbers.

Like specifically in Cincinnati, a lot of the houses are 1920 or older. So they’re going to – You’re going to run into more issues than you see than the 1970s ,1980s builds, where you just have to account for more and in a miscellaneous or over budget category when you’re running these numbers.

[00:28:58] DB: No, absolutely. Although I’ve also had a ‘70s house, it was a real doozy. So, yeah, the doozies come in all shapes and sizes and ages. Absolutely. But I know what you mean. Like knowing the housing stock, knowing what kind of problems to expect, like there’s a lot of things that can go wrong in a house flip. Yeah, if you’re not accounting for all that, if you’re not underwriting that well, it’s an easy way to get hurt.

So from a risk standpoint, like you’re talking about, the ability to wholesale a house, essentially just pass it off to another investor and work out a finder’s fee for that. Like there’s a lot less risk in that model, and that enables you to focus more time on getting more deals and building that machine that you’re doing. Just find deals constantly.

[00:29:41] DK: And a reward trust for – If you want to talk about if you want to scale quickly, the BRRRR method, in my opinion, is one of the best ways to do that. So if you can go in and have a stockpile of cash, do the rehab and not flip it, but then refinance out and get the majority, if not all of your money back, then you can then redeploy that. Your velocity of money goes up a lot. So if you want the opportunity to scale, you don’t need hundreds of thousands of dollars to do that.

[00:30:06] DB: Yeah. I think the BRRRR method has come up a couple of times. So for those not as familiar with the method that are listening, can you walk someone through just very quickly and basically what is a BRRRR method?

[00:30:17] DK: Yeah. So if you follow BiggerPockets, I think Brandon Turner is one that came up with the acronym. But the strategy has been around for a long time, where you basically buy a property, you rehab the property, you refinance, refinance the property, rent it out, and then repeat. So B-R-R-R-R.

This is another example. This is our best one, and it was our very first BRRRR property, and we’ll probably never get one like this again because it was good, because we almost didn’t know what we were doing at the beginning. There was a place in Northern Kentucky. We bought it for like $22,000. It was very rundown. We ended up putting 60 grand into it. So you’re in for 80. It came back and it appraised at like 160, I think, 150, 160. So the bank, what they’ll do, since you own this house, they’ll write you a check on the refinance for typically 70 to 75 percent of what that house is worth.

So we were able to walk away from closing, getting paid like 20 grand to own a cash flowing rental, right? That’s what I’m talking about. If you have the ambition to scale and like recycle your money, it’s one of the best methods, in my opinion, to go out there and do that.

[00:31:27] DB: With what you’re building so quickly, I’m curious, especially seeing like – I think listeners that have listened to the last several episodes have heard Tanh’s story of jumping into the commercial space. You’re building a machine with wholesaling and BRRRR method and residential. Does the future look like pivoting over to commercial? Does the future look like staying in residential, or why one versus the other?

[00:31:48] DK: Good question. I would say that commercial is definitely like the numbers are bigger, and everything they tell you is like – I won’t say easier because I don’t know. But like the tenant mix is probably easier. If you can get in that triple net sales ever, the tenant takes care of everything. You’re not getting really phone calls, and you can place one tenant and get seven-figure deals in some of these worlds. That could easily be on the table.

But I guess what I would do, for me, me personally was I saw the roadmap on how to do the residential scaling business model because of that mastermind I’m in. I don’t want to build too many bridges at once. So I just wanted to focus on getting this to the point where I’m not working on it 40, 50 hours a week. I’m working on it maybe 5 to 10, and I can hire out those people, and then I can take that money I’m stockpiling and then use that maybe for commercial deals down the road.

I’m not saying it’s not on the table. It’s just not what I’m focusing on at this time because I feel like I’ve been – That squirrel syndrome where I’m like, “Oh, I should do Airbnb. I should do multifamily. I should do commercial,” right? So I just need to sit down and focus in like one thing at a time, until I feel comfortable with where it’s at and then kind of diversify.

[00:32:58] NH: Yeah. I love that classic Brandon Turner analogy about building multiple bridge –

[00:33:03] DK: It’s a good one. I say that I’m also trying to stand on my first Airbnb right now.

[00:33:11] NH: It’s true, though. Like if you’re trying to get to one island, you start building a bridge, you give up halfway and start another bridge, you’re never going to get there. You’re just going to have a whole bunch of half-finished bridges. So I think it’s great what you’re talking about, focusing. Yeah. Like you said, there’s 1,000 different directions you could go. So I think that staying focus makes a lot of sense.

I want to switch over to our final infusion questions, Dylan. Three questions we ask every guest on our show. The very first one is same as always. What’s one tangible strategy that you use to make sure that you’re investing works hand in hand with your career as a pharmacist?

[00:33:41] DK: Good question. The best way I can answer that, the best that helped me at the beginning, was try to network with people who have done it in your local market. There’s probably a BiggerPockets meet up. There’s probably a RIA like event somewhere. Go there and talk to people who have done it in your market. That’s how I’ve made a lot of the connections here. Like I mentioned earlier, CPA, lawyer, handyman, plumber, electrician. If these are your unanswered questions, someone there is going to have your answers.

[00:34:08] NH: Love it.

[00:34:09] DB: No, I absolutely agree. I find that those meet ups are super inspiring too. If you’re just stuck, that really helps you to get going.

[00:34:16] DK: Yeah, 100%.

[00:34:18] NH: So what’s one resource that’s been most helpful to you in your real estate journey, whether that’s a book, podcast, person, author, website, whatever that would be?

[00:34:26] DK: I have to go to BiggerPockets. I pretty much listened to every podcast episode that they had all the way from Josh Dorkin to – Now, they have so many, right? They have the new On the Market one too that I can nerd out with. But there are calculators online. There are forums. It’s a big resource. I’d say if there’s one thing, it’s all encompassing. You could get lost for hours down that rabbit hole.

[00:34:51] NH: All right. Then what’s one piece of advice that you give to a pharmacist that’s contemplating a start in real estate investing?

[00:34:57] DK: If you’re even thinking about starting, get to the point where you feel comfortable pulling the trigger and then just do it because you can read all the books, you can read all the forums, listen to the podcast, and have all the answers. But until you go and actually do it, it’s not going to get ingrained into your head. It’s kind of like practicing pharmacy. You can take all the tests. But until you’re practicing, it’s different, right? So it’s the same thing with real estate.

[00:35:20] DB: I love it. If people want to reach out, talk more with you, where can people find you?

[00:35:26] DK: Facebook Is probably the easiest, just my first and last name. You can just DM me anytime. My email, it’s probably not on there but just DM me. If you want to talk, I’ll talk.

[00:35:34] NH: Perfect. We’ll put it in the show notes, so people can reach out well.

[00:35:37] DK: Yeah, absolutely.

[00:35:38] NH: Dylan, really appreciate you coming on the show today. It’s been awesome talking. I’m sure we’ll see much more of you in the future. Again, just really appreciate you sharing all your great wisdom with the audience.

[00:35:46] DK: No, thanks for having me. This is great. Thank you.

[00:35:48] NH: Thanks so much.

[END OF INTERVIEW]

[00:35:50] TU: Thanks for listening to the YFP Real Estate Investing Podcast. If you like what you heard on today’s show, please leave us a review and subscribe to the show, so you never miss an episode. If you have a question, know someone that would make a good guest, or want to connect with Nate or David, head on over to yfprealestate.com and join the growing YFP Real Estate Investing Facebook group.

As we conclude this week’s episode of the YFP Real Estate Investing Podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

Furthermore, the information contained in our archived newsletters, blog posts, and podcasts is not updated and may not be accurate at the time you listen to it on this podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward-looking statements which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer.

Thank you for your support of the YFP Real Estate Investing Podcast. Have a great rest of your week.

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