Long Term vs. Short Term Rental Property Investing – One Pharmacist’s Perspective
On this episode of the YFP Real Estate Investing Podcast, Jared Wonders discusses his experience as a pharmacist and real estate investor with a variety of property and deal types. Jared explains how to get started in real estate investing, how to know when you are ready for your first deal, his perspective on long-term and short-term rental properties, and some foundational education for those who are just getting ready to get started in real estate investing.
About Today’s Guest
Jared Wonders graduated Pharmacy School in 2012 and completed his PGY-1 general residency at the Dayton VA in Dayton, Ohio. Jared has been working as an ambulatory pharmacist specializing in Geriatrics since 2014 in Columbia, SC serving our nation’s best! He married the love of his life on June 9, 2017 and is a happy father to a son, Theo, who was born in May. Jared and his wife are in active pursuit of FI in order to leave a legacy for their son and have both committed to incorporate real estate as a portion of their portfolio. They currently own 4 long-term rentals and one short-term rental and are hoping to acquire more!
Summary
Nate and David welcome Jared Wonders to the show, touching on how to get started with real estate, knowing when you are ready for your first property, and some foundational information that all real estate investors should know including advice for mitigating some risk. Jared shares his experience as a real estate investor, his highs and lows with various types of properties including both long-term and short-term rentals, and makes some recommendations for those interested in getting started.
Jared explains that a good financial plan is directly related to your ability to take risks with regard to real estate, citing the need to come from a position of financial strength. Jared describes his personal experience with his own properties and outlines specifics of a few deals including one less than ideal property. Jared shares how intentionality and good planning allowed for an exit strategy and a positive learning experience with a suboptimal deal. Jared closes with his advice to new investors. Aside from financial strength and an exit strategy, real estate investors should also be great time managers, be able to work with others and build a team or network around themselves and preserve their time by implementing and using systems for their properties.
Mentioned on the Show
- The Your Financial Pharmacist Podcast
- YFP Real Estate Investing 01: Intersection Between Financial Planning and Real Estate
- YFP 111: How One New Practitioner is on FIRE
- FIRE Movement
- Dave Ramsey
- Real Estate Investors Association (REIA)
- Rental Income Podcast
- Connect with Jared Wonders on Bigger Pockets
- YFP Real Estate Investing
- Join the YFP Real Estate Investing Facebook Group
Episode Transcript
Nate Hedrick: Welcome, everyone, to Episode 02 of the YFP REI podcast, our first official episode with a real real guest, not a Tim-based guest, right? So David, how are you doing, my friend?
David Bright: Good, thanks. How about you, man?
Nate Hedrick: I’m wonderful. We just had a really nice conversation with Jared. Jared is an awesome, awesome pharmacist. I actually met Jared a few years ago on Bigger Pockets of all things. We kind of connected on the fact that we were both pharmacists and I was looking to get into real estate investing at the time, had not bought a property. Jared had been — I think he was just on his second property at the time, so I looked at him as someone to teach me a little bit about real estate investing and reconnected and again, really I think Jared inspires the idea of what we’re going for here on this podcast. And that is he’s inspirational, he’s passionate about education, and he’s really good at connecting with other pharmacists. So I think bringing him on as our first guest makes a lot of sense, and I’m really excited for our audience to be able to hear what he has to say.
David Bright: One of the things I like too that he talks about different strategies like how to get started and how to know you’re ready. And so he brings a lot into that that’s very foundational as part of that inspiring story about how it’s possible to jump into this well. And there’s one in there specifically where he talks about a property that didn’t work out still worked out because he had a lot of intentionality and good planning in there. He also talks about coming from a position of financial strength that brings safety. And we talk about how pharmacists are definitely safety-oriented, and so he has — not that any investment is perfectly safe — but he talks about strategies to make real estate investing a safer investment than it otherwise could be.
Nate Hedrick: Yep, really excited about this one, guys. So we’ll turn it over to our interview with Jared.
Nate Hedrick: Hey, Jared, welcome to the show.
Jared Wonders: Hey, thanks for having me on, Nate. Real excited to talk to you guys and talk to you and David about real estate, man. So excited.
Nate Hedrick: We’re excited to have you here.
Jared Wonders: Yeah, thank you.
Nate Hedrick: This is the — you’re our first official official guest. We had Tim and Tim on Episode 01, but you are our first official guest of the YFP REI podcast. So welcome to the show.
Jared Wonders: Absolutely honored. It’s great to be here. Really excited.
Nate Hedrick: Awesome. Well, what we’re going to try to do is kind of set the stage for the rest of our episodes today. And we’d like to start off with what we’re calling the loading dose questions: two questions we’ll try to weave in for each episode to kind of set the stage for what our guests are going to be bringing to the table. So David, why don’t you kick us off?
David Bright: So for those that didn’t hear you on YFP Episode 111, let’s start out with your pharmacy story. So tell us about your pharmacy story. What is it that you love about pharmacy?
Jared Wonders: Yeah, absolutely. Honestly, pharmacy is a perfect avenue for so many different things. Honestly, kind of like real estate, you can do a lot of different things in pharmacy. To start out, I graduated from the University of Findlay 2012, did my pharmacy residency, just kind of basic residency in Dayton, Ohio. So I did it for the Dayton VA. My way of pharmacy was really, you know, my grandparents were both veterans and I really wanted to work with veterans. So it just worked out that the VA, I was luckily afforded the opportunity to work with the Dayton VA. And home-based primary care was one thing that I was super interested in when I was there. I met my wife earlier on in Cleveland, Ohio. We kind of reconnected in Dayton. She moved to North Carolina, I moved with her, and the rest is kind of history. So I kind of took a leap of faith with that and got really pretty lucky that I ran into a home-based primary care in — actually working now in Columbia at the Columbia VA down there and absolutely loving it. It’s a great resource for veterans, and it’s just been terrific. Been a really good opportunity for me. And I’m still really, really enjoying it. Learning something new every day. I have a resident right now. It’s working great. Loving it.
Nate Hedrick: That’s excellent. I love it. And again, our focus here is not just about the real estate, right? We’re going to talk about real estate today too, but the goal here is how do you mesh pharmacy and real estate together. That’s what makes this unique. So with that in mind, can you give us a little bit more background about Question 2 here, which is really what’s going on with your real estate life? You know, tell us how you got started and where you are today.
Jared Wonders: Yeah, so honestly, the real estate — a lot of retail pharmacists can probably attest to this, they’re kind of frustrated with their jobs, a lot of stuff going on. My wife is a retail pharmacist, so she definitely understands the — and I’ve worked in retail pharmacy as well, so I certainly understand the grind that comes with that. So that was kind of the biggest thing for us was we wanted to find opportunities that would maybe afford her the ability to be a stay-at-home mom if she wanted to or work part-time. And real estate was kind of the thing that we had jumped into along with the FIRE — or I’m sorry, the FIRE movement, which is Financial Independence Retire Early, which we’re kind of focusing more on the financial independence aspect of that rather than the retire early because I personally do like my job, I enjoy what I do generally, and we’re just kind of trying to find different avenues and different ways to set us up for potential opportunities that may work out in the future. And I think there’s just the freedoms that come with that. As I said before, with pharmacy, a lot of different avenues that you can pursue, and as we’ve learned in the last year, me and my wife, our personal story, there’s a lot of avenues in real estate that you can pursue too that we did not anticipate I would say for the last couple years. It’s been a really exciting journey. So really have enjoyed what we’ve been doing with real estate so far the last couple years.
Nate Hedrick: And Jared, that’s actually one of the reasons we really wanted to have you on as our first official guest. I think you’re newer as an investor, relatively, within the past couple of years, but you’ve really done a lot of different things. I mean, just looking at some of your portfolio, right, you started off with a single-family home, you have a multifamily home that you purchased with a partner, you recently bought your first short-term rental. So I mean, you’ve checked a lot of different boxes most investors haven’t even touched.
Jared Wonders: It’s one of those things where, you know, if you put yourself in a position of financial strength, which we have really done, then real estate can really be — afford you a lot of different opportunities. And you know, your first deal comes and then you kind of look at it and you’re like, wow, that deal was great, I can’t wait to get into my second deal. And then you get into the second deal and then you don’t realize that other avenues come into play of multifamily, three units, which if you’d have told me we would own three more units last year, I would have told you you’re nuts. Like there’s no possible way that’s going to happen. And then if you’d have told me last year that I would own a short-term rental, I would have said, “Wow, that’s — no. There’s no possible way.” So it’s just one of those things that if you know — you kind of plan out your situations accordingly. Like I said, I think one of the biggest things with real estate is you really need to buy from a position of financial strength. And you need to have exit strategies too just in case your first, your second deal go a little awry, which may happen. Our first deal was not the best. But we learned from it, a lot of sweat equity from the property. We bought well, but we didn’t buy well enough. So we learned how to optimize and we learned how to kind of get rid of our — not necessarily losers — but we were able to find better opportunities that were out there. Yeah, 2020 was a very busy year for us.
Nate Hedrick: Yeah, that’s great. And since you mentioned it too, do you want to dive into that before we get too far into the weeds here, do you want to dive into that first rental? Because I think a lot of people get nervous, right? They worry about that first deal that they’re going to do it wrong and it’s going to ruin everything. But you’ve had one deal, you’ve had deals after that, then you’ve looked backward and said, “OK, we could make adjustments.” So do you want to dive into that deal at all or?
Jared Wonders: Yeah. Yeah, I’d be happy to. Yeah, of course. You know, the thing about real estate is it’s great because you can learn from past people’s failures. And as a real estate investor, I don’t want people to make the same mistake I do because you know, there are deals out there for everyone. You just kind of have to be in the right spot and like I said, buying from a position of strength. So yeah, the first deal that we bought was actually in South Carolina, and we kind of knew this going into it that the taxes in South Carolina are not near as efficient as the tax situation is for real estate investors in North Carolina. So you really kind of have to weigh a lot of different things in real estate, and the tax situation was one that we had thought about it and we knew the taxes would be higher, but we didn’t really realize how much higher they would be. So basically, when we got the tax valuation the next year — and you know, we had to turnover tenants, and we looked at the numbers a little bit closer and we were like, you know, this really isn’t working out. We need to kind of take a step back and decide exactly what we want to do. And we bought in a way that we could still build equity in the property, like it was carpeted entirely, we knew that we could value-add by at least adding new appliances, like putting good countertops in there, painting the house and then also dealing with issues with flooring and kind of just improving the property because it needed some work, like it needed some TLC. But it was located in a very nice location, really good school district, it was definitely a property that a lot of people would find attractive I think. It just did not work out numbers-wise for investment as we have seen with future deals, especially once we got our second one. We realized how much better we could optimize things. So I think that that was one of the things that kind of opened us up to that. And you know, we ran through the numbers, and me and my wife were looking at each other like there is no way we’re not going to have a loss in this property. It worked out to where the sweat equity that we put in, the appreciation that we built, and us actually being comfortable enough with real estate to do like a for sale by owner rather than having any realtors involved really saved our skin a little bit in that investment. So we were actually able to net a profit from that, which worked out. And I know I’m talking to a real estate agent here, so I’ll tread lightly.
Nate Hedrick: I’ll close my ears. No, I mean, that’s amazing. Like what you’re showing is that even though you look at the property as not being a winner, it was the thing that got you in the door, right? A lot of times people can’t take that first step and you were able to do that. And even on something that you consider a loser property, right — throwing a lot of language at it — but a loser property, you didn’t lose any money on it. You actually made a little bit of money. And the most important thing is it wasn’t like it was financially ruinous. Even if you had lost $10,000 or $20,000, you mentioned coming in with a position of financial strength, it allowed you to do that and make those moves without having to worry about it.
Jared Wonders: Exactly. And ironically, that property that we bought kind of — so our partners that we have now for our multifamily, like that’s basically how I met that group of people, that network. So I was telling them about this investment, they kind of looked at it and were like, ‘Oh, he’s not really going to buy it.’ We were like, ‘No, we actually put an offer on. Like we have it under contract right now.’ So I think it was one of those things where they saw that these people had seen me kind of going and pursuing the deal rather than kind of, not necessarily being afraid, but knowing what we could do and kind of just taking the leap of faith and trying it out. I think that kind of gave them confidence, especially seeing us succeed at another deal with being able to partner with them. It’s worked out well, worked out really well.
David Bright: You said a couple things in there too that I really like because I know that pharmacists in general tend to be pretty risk-averse and conservative in what they do. And so you mentioned two terms: You mentioned financial strength, and you mentioned exit strategies. And both of those to me are terms that scream “safety.” So can you tell me a little bit about what you mean by financial strength and what you mean by exit strategies?
Jared Wonders: Absolutely. So position of financial strength in regards to real estate — and honestly, in regards to life for that matter — you really need to have some sort of emergency fund, in my opinion. And like I said, I’m not a financial advisor, all the disclaimers, such and such. But you really need to have a concrete base financially to where if you have a situation that comes up, you can pay for it cash, it’s not a big deal. Like OK, I have three months or so of my living expenses, it’s covered regardless of what happens in my life. It just kind of gives me, especially the potential to take more risk. In regards to real estate, I would say that being in a position of financial strengths means being able to cover the vast amount of situations that can occur with real estate. So if you have like a roof that leaks, you need to be able to have reserves. So you need to have reserves in place to be able to handle that roof leak, to be able to handle the HVAC situation. So those things are honestly of utmost performance, in my opinion. The exit strategy situation, so if you’re going into a deal and you’re like, ‘OK, this is a terrific deal. Like this is awesome, this is what I’m going to do,’ maybe in five years that deal is not so great. Maybe in five years, your whole family situation has changed. Maybe in five years, you don’t have the job that you had five years ago. You know, there are a lot of different things that can occur in life that just kind of come up, and you need to kind of tailor the deal to the potential exit. So that’s what we did with our first one. We knew that we bought in an area that people — that it was appreciating. Like we could tell it was gentrifying a little bit, meaning that it was increasing in value, had a good school district, so it had a really good base of what we were looking at, really. So that’s kind of where we went at with the exit strategy there. We’ve wanted the exit strategies, honestly, for all the deals that we’ve went into. And I’ll give another example of the short-term rental that we have. With the short-term rental we just purchased, our goal — and this is probably not the best way to kind of look at the deal — but we wanted our expenses to be paid. Like we knew we were going to rent it out short-term. But we also knew that we were going to enjoy it a little bit because, you know, what’s life without enjoying it a little bit? So it’s kind of just taken off in the past couple months. So we did not realize how well short-term rentals could be. And you know, when we purchased this property, we knew that we were purchasing it at a deal because we’d seen comps, we’d ran comps, like we knew. And by comps, I mean comparables. Like we knew what the comparable prices were on that particular street and knew just how lucrative the deals were in the area that we were buying.
David Bright: No, I like that. I think it makes a lot of sense about how to find different exit strategies so where it works if it’s a rental, it works that if you have to get out of it, you can get out of it and you can sell it and you can not lose a ton of money on that. And yeah, that brings a lot of safety. And so it sounds like you’re filtering through that in terms of how you pick out properties. So I think that we probably have listeners out there that are trying to figure out, you know, I want to jump in, I want to do this, I want to get my first property. But they haven’t done that yet, and they’re trying to figure out what do I look for? So when you’re looking for that exit strategy, when you’re looking for that safe first buy, what kind of things are you looking for in that — not that anything is perfectly safe, but safer first buy?
Jared Wonders: That’s a terrific question, David. So I think that it’s definitely a multilayered question. So you have to look at a lot of different things. You have to look at comparables in the area. You have to kind of understand that — and real estate is so local, at least for us, because Charlotte, the areas will take off and then other areas like around Charlotte, I mean, from personal experience, I would not buy just based on what I’ve seen in the population that typically resides there. So you kind of need to understand and you kind of need to know your nuances when you’re pursuing a deal, like OK, do I want to look at an A property, do I want to look at a B property, do I want to look at a C property, do I want to look at a D property? So A being your nicer, B being your pretty good blue-collar kind of situation, C’s and D’s potential warzone area that no one would really want to live in. So kind of looking at the areas where you feel comfortable as an investor, especially for your first deal. Another thing that I look at is value-add. So if I can add value to a property — and I’ll just give an example. For our second property that we purchased, when we had purchased it, we knew we were buying it at a deal, and we knew the area very well that it was located. We knew a hospital was actually coming up like pretty much right down the street from where it was being purchased, and it did need a lot of work. So it did need a rehab. And I’ll preface that with saying we were able to have the time to be able to do it without a kid at that time. So we had time to be able to pursue and do a rehab. Looking back on it now, like I would be more than comfortable hiring it out because I’ve kind of gained some more systems along the way and have felt comfortable with contractors going forward. So I think the biggest thing — and when you look at a value-add, you kind of have to think, OK, like how comfortable do I feel with doing some of the work myself versus hiring it out? And kind of pricing it out if you can. And I know that it takes experience to do that, but you just have to continually learn and think about — think through those things, especially on your first or second deal.
David Bright: So you said something really good about it takes experience but also that first or second deal, so how do you find that experience? And how do you find that support to kind of jump in when you don’t have that experience? What did you do to help you get into that?
Jared Wonders: Oh, man. There’s a couple that we met in Charlotte that we’ve really leaned on. They have been our future partners as well that have just been absolutely perfect. So — and the really good thing about the real estate community is people will talk your ear off about situations and about potential deals. There’s a helping hand there in real estate, which I was just amazed by the support with different resources like Bigger Pockets, like you can find mentors in the area that will help you. If you go into it adding value to like a potential mentor that you may see fit — so I helped them with some of their deals that they had. So I did some of — a little bit of the work when I was able to find some time to help them. I actually helped them tile — oh my gosh, will never tile again. So much tiling. But yeah, but just kind of moving forward on that, it is offering value where people need value. And then they can hopefully will be able to lend you some assistance in the future, which we found. And they’ve been a tremendous support. And we found some other investors as well that have really helped us out with some things. So it’s really a great community, honestly. Like people will help people. And I want to do the same thing by paying it forward to potentially first-time, second-time investors, however many deals they’re going into. That’s just what I’m about because I do think that real estate is a tremendous avenue, and I think it’s not talked about near enough. And I really think that pharmacists, especially, that they can definitely do it. Any pharmacist can do this.
Nate Hedrick: And it’s funny you mention that, Jared, because that’s actually how we met, right? So we met on Bigger Pockets years and years ago before I had my first property. And I was inspired. I was like, man, this guy’s buying places, I should be able to do this too. And so I think it’s cool to see how you’ve paid that forward, right? You learned from somebody else, brought that onto me, and now David and I are lucky enough to be doing this as a full-time podcast trying to bring up other pharmacists and engage this broader community that we’re in to really increase that education. That’s exactly why we’re sitting here tonight doing this. So it’s pretty neat.
Jared Wonders: Yeah, and I’ll tell you that nothing gets me more fired up than — I get motivated by other pharmacists wanting to pursue this because it’s definitely a great avenue I think. And real estate is one thing, but being taught like financial resources and being taught — oh man, I really wish some of this stuff was taught in the university that I was at. It would have been so helpful for a lot of people I think.
Nate Hedrick: And so I want to go back a bit because I think we’ve hit on a couple good things, but I want to make sure we pair back just a second. So the short-term rental versus the long-term rentals, so you started off with these long-term rentals. I think, you know, especially even for myself, right, when I jumped in, long term felt like this safer play, it felt like something I could understand and analyze better. Can you talk to us a little bit about the differences between a short-term rental versus a long-term rental and why you might go in one direction or the other?
Jared Wonders: Yeah, absolutely. So there are several differences between short-term rental and long-term rental. So I would say that the biggest difference is the time up front that you have to spend at a long-term rental potentially with the value-add, getting the property rented out, getting the property ready for potential tenants. With the short-term rental, the one that we purchased at least did not require much work. It was fully renovated. But with that, you need a little bit more capital to be able to acquire those properties. So that’s one of the things that could be a potential barrier. Another thing is long-term rentals, I think I’ve — man, I think I spent like one or two hours a month potentially on like the long-term rentals that we have. Some months better than others, but with the short-term rental, you know, you’re getting into these platforms and you have to look at it differently. It’s a completely different business because you have to be very responsive with short-term rentals. And we found that the response rate with people that — if we’re more responsive, the people are generally very happy with our property. I haven’t been in the short-term avenue very long, but that’s one of the things that I’ve noticed is as long as you’re responding within 10-15 minutes for most issues, they’re going to be happy with your response. And honestly, I couldn’t do it without my wife. There’s no potential — there’s no possible way. So with like there’s no way I could do my full-time pharmacy position and like the short-term rental. Like I definitely needed more help with that. And my wife is super responsive with that, and she’s kind of just taken off with it because she is the aesthetic piece. I’m more of the working in the background, behind the scenes, getting the property ready, work on the electrical, working on random stuff that needed to be done around the house, not the aesthetic stuff. She’s all about the paint. I can’t do that. I know that David has said his wife is really good with the aesthetics, and that’s how my wife is. She’ll put something on a table and be like, “Oh, a potential renter is going to love this.” And I’m like, “OK, do what you need to do. That sounds great to me.” But yeah, it’s just more so looking at it through a different lens. It’s just a completely different type of business, a little bit more hands-on I would say. But like I said, I think with long-term and short-term real estate, if you have the systems in place and if you have people that you can depend on to work with and to work through things, then you can be successful. So you know, pharmacy, we’re dealing with patients and the patients are the people that we’re working with. And with real estate, we’re working with contractors and you’re working with people and having good people skills is really important. So being able to depend on — you do have to depend on people for sure. That hopefully answered the question because it’s loaded. Yeah.
Nate Hedrick: You did. No, that’s great, Jared. You’re great. And I think one of the things that you mentioned that I think I want to key in on too is you mentioned the time management, right, and trying to respond at ease and be active. And so I guess I’ll ask, do you use property managers for any properties today? Or if you don’t, why not?
Jared Wonders: Yeah, so we actually do not. And this is actually one of the other reasons why on our first term deal, we did not have a good experience with a property manager for a long-term rental actually. And with the systems that we’ve put in place now, with the mentors that have helped us kind of through some things, we’ve learned a lot about property management and how to be responsive and potential contractors and subcontractors that we can contact if issues arise. Or I’ve learned from experience some things that I can actually handle on my own. So if I need to, I can kind of go over there and figure some things out. And the biggest thing with long-term investing, you need to screen your tenants. Like even if you do have property manager, in my opinion, I think that screening your tenants is so important because that’s the situation that we ran into with problems with our first short-term — or our first long-term rental was we just, we were really hands-off. And with real estate, you can be hands-off in some situations, but in our particular situation, it just didn’t work for us. We found out we just needed to be a little bit more hands-on. And ever since then, it’s really worked to our benefit. And I think with real estate too you’ll find things that work for you. So a lot of people will probably say property management is for us. And you know, that’s one of those things, if it’s not broke, don’t try to fix it. If it’s working for you in real estate, then keep doing those methods. And I would say with long-term, it’s not as pressing as short-term rentals. With certain situations that come up, emergency situations you need to deal with, water leaks, stuff like that, have to be dealt with immediately. But a lot of stuff can be dealt with a little bit later. So you just kind of have to learn through experience with that.
Nate Hedrick: You know, it’s funny. I think as we sit here, it’s really easy for us because the three of us are really excited about real estate, and it’s easy to kind of talk about it. And once you start talking to somebody with a passion there, you just keep rolling. But I think there’s a couple of our — at least a handful of our audience listening today that’s like, this sounds like a ton of work, guys. Like why aren’t you just throwing your money in the stock market and walking away? So can you talk to us a little bit, just kind of reset for everybody else, you know, why is real estate a part of your financial plan? You mentioned FIRE being really important, but like why is this the thing that you chose? Why is it the thing that any of us chose?
Jared Wonders: Awesome question. So I will say that we do have some index funding in our portfolio. So we definitely have that aspect in our portfolio as well. So we do invest in the stock market. However, in my personal opinion, real estate is a great avenue that there are so many different aspects of real estate that you yourself can control. I cannot control what Tesla does. I cannot control what GameStop does, just as a couple recency biases. So I can’t control any of those scenarios. But what I can control is OK, I see this property, it’s a value-add. OK, I can throw $10,000 into something to make it worth $50,000. I just know that from what I’ve seen and what I’ve kind of been able to do. So those types of things and being able to control the systems that I have put in place for both the long-term and the short-term rentals are great. And you know, for any system to work, you need to re-evaluate the systems and make sure they’re working for you. And when we were looking at the index fund investing and we kind of delved into OK, we were definitely part of the Dave Ramsey crowd where we need to pay off the mortgage as quick as possible type situation. But when I started getting into the financial independence crowd, I found out that there’s so many different ways to optimize things. When I delved into that, OK, stock market is great, but then I delved into real estate, I was like wow. Like you can control this tangible asset, like you can control if you do property management or not, like you can control what tenants go in there. There’s just so many different aspects that are beyond our control in stock market investing. So that’s one of the reasons why in a nutshell I am kind of doing real estate. It’s something that I’ve really enjoyed, honestly. It’s great. And teaching other people about it is definitely a passion of mine for sure.
David Bright: Now I love that one word you’ve thrown around a few different times is the word “systems.” What I think about systems is that that’s one way to help this take less time, especially if you build things up well. But that’s also an intimidating word because that means you’ve put a lot of time and effort into building something, right? So you’ve built this over several years, and you’re recapping this in a half hour show, right? So tell me about kind of how that process and system piece happened and how that’s helped you with the time that you’re dedicating to your real estate work.
Jared Wonders: Yeah. Absolutely. So my first real estate deal did not come quick. I mean, it took a lot of time for me to really delve into and really expand on my resources, kind of gain the network connections, talk to people on Bigger Pockets, talk to different investors. We went to a couple REIT meetings, which is like the real estate investors meetings, so kind of just putting yourself out there a little bit, just stepping outside my comfort zone. Obviously I didn’t have a deal in place, and I wasn’t even anywhere near close to a deal to be put in place, but it was just really interesting to hear people’s stories and hear people’s investing and just kind of see where people are at. You know, the systems that we were able to put in place we learned from other investors and we also learned to kind of put our own spin on things. And a lot of the valuable resources that you can find online, like I said, and I’ll plug Bigger Pockets again, it’s a free resource. Everything on there is — it is great content. It definitely has helped us out quite a bit. It’s a really good way to network people. And you can also find a lot of different strategies, you can also find a lot of different stories, honestly, because I’ve learned through previous experiences from other investors what does and does not work just by listening to podcasts and really just trying to soak in as much content as I possibly can. Yeah, and like I said, with the systems that we put in place work great, but like I said, you need to go back and make sure that those systems continue to work because if they don’t and you find a glitch in the system, obviously there are things that can kind of go awry a little bit. So — but that’s where the reserves come into place. So you have reserves in place that if those systems do for some reason not work, you have reserves in place to be able to handle those potential issues that kind of come up.
Nate Hedrick: I like that a lot. And as you built out the systems for both short-term rentals and long-term rentals, you found ways to make those both opportunities that you can handle as you are also a pharmacist. And so thinking that through, how you’ve been able to kind of conquer both sides, what’s next? What are you liking more right now? And for your next house, are you thinking of going more short-term rental, going more long-term rental? And why?
Jared Wonders: So I listen a lot to what my wife has to say. She loves this first short-term rental that we bought, so you know, we may try to look into the short-term rental side of things. We’re really obviously green in the short-term rental aspect of things. So we’re continuing to learn every day with that and as far as that goes. But I guess for me, we’re definitely not in the crowd that wants 60-70 units. Like we don’t want to own that much. We want to be able to provide for my family, and we want to be able to kind of work our way towards — and we’ll kind of find along the way I guess which one we kind of like more, which is kind of the fun thing about real estate is if I like one thing one day and then I don’t like it the other day and then man, the short-term rental thing is great, it’s not so great this day, you just kind of learn. And it’s been fun. My wife is already talking about a lake house, but I don’t know if we’re going to get to that anytime soon. We need to take a little bit of a break and focus in on getting things as optimized as we can and rebuilding that reserve funds, in my opinion. But I take a lot of stock into what she says, and she hasn’t steered me wrong yet, so.
Nate Hedrick: Behind every good real estate investor is their really good spouse, right? That’s the actual answer.
Jared Wonders: It’s completely true.
Nate Hedrick: Their even smarter spouse because my wife definitely is the smarter of the two when it comes to real estate investing.
Jared Wonders: Oh yeah, absolutely.
Nate Hedrick: I talk the talk, but she actually runs the numbers. So hey, actually speaking of numbers and data, you know, one of the last things I want to do here before we get to our final infusion questions is I think many pharmacists are very data-driven. We like examples, we like hard numbers, we like principles and practices we can walk through. Can you walk me through a deal? Can we go through one of these deals that you’ve worked on in the past and just throw out a couple of numbers for me to see what makes sense and how you got to a property and what cash flow looks like and all that stuff?
Jared Wonders: Yeah, yeah. Absolutely. I’ll actually use one of our investments that we currently have. So it’s a property that’s really close to us, about 15 minutes away. We know that we can manage it ourselves because it’s so close and also because we did the rehab pretty much ourselves. Like I know that property like the back of hand. If something comes up, I know how to deal with a situation that arises. So to kind of delve into the deal a little bit, we knew going into it — so it was actually listed originally at $175,000. However, we knew that this family was wanting out, and we knew the real estate agent that was working with us on this deal. So we actually lowballed at like — I think we lowballed at $140,000. And because they needed out of the house basically and they needed to kind of — they needed the equity because they had a second mortgage in a different town, we were able to — they were able to actually accept our offer of $140,000. And then once we got into it a little bit, we realized that there were a lot of deficiencies with the property, a lot of value-add that we noticed right off the bat. But it had awesome wood floors, like was in a great location, so we knew that this property would definitely be lucrative. There was definitely just some things that needed to be touched on, needed to add carpet, the kitchen needed to be touched up a bit. One of the subfloors was actually rotting in the bathroom, so we needed to deal with that. So obviously there was a lot of value-add in this property. So we actually were able to get it — actually at $137,500 because we were like, “Hey, you know, there’s a lot of work that needs to be done. Can you guys give us a seller credit?” So we were actually able to work through a seller credit as well on that, which was great. And then just kind of delving into the mortgage a little bit, we financed the mortgage at a 5.25%. So originally the mortgage was at like — I think it was around $800. But we knew in this particular area based on the connections that we learned through investing that we could probably get $1,400 for rent. So we knew that those numbers would work. So that’s really close to that 1% Rule, which I would say is not necessarily a magic rule, but it’s a pretty good hard-set rule. And when I say 1% Rule, I mean when you purchase a property at $140,000, you want to make sure it rents out for $1,400. If it’s close to around that area — OK, so let’s back further. $100,000, it rents at $1,000. Like and you can play with those numbers as much as you want. But if you can get close to that 1%, like you’re going to be good as far as a cash flow perspective. Moving forward a little bit, we were actually able to — these just amazing rates that we’ve seen, we were able to refinance that to a 4%. So now, our mortgage is down to $700. So we’re cash flowing even more on that property, which is amazing.
Nate Hedrick: Nice.
Jared Wonders: And we also were able to actually get the property appraised at much higher than what we purchased it for. So right there, we knew that we had another probably $40,000-50,000 in equity. And I was worried it wasn’t going to appraise. And it appraised higher than what I anticipated, and I was like, oh my gosh, like real estate is amazing. Like how did this work out?
Nate Hedrick: The best problem to have. I love it. That’s awesome.
Jared Wonders: Exactly. And yeah, I think delving into that a little bit more, I think that finding good tenants is really a huge thing because the tenants we have now are not high maintenance. Like I said, I think maybe I’ve spent on one rental, I’ve spent maybe an hour or two — it’s been mostly bookkeeping, it’s not like actual contacting tenants, issues arising, those types of things. So hopefully that was enough info. I’d be more than happy to delve into it further, but.
Nate Hedrick: No, I think that’s great. It gives us a nice overview. And I think that it gives me a reason to bring you back for another episode, Jared. I think we should have you back on for maybe a couple deal deep-dives so we can really understand the numbers better.
Jared Wonders: Absolutely. I would be happy to be back and talk more real estate.
Nate Hedrick: Awesome. Well, we’ll put that on the books. And we’re going to wrap things up today with our final infusion. So we have three questions we want to make sure we ask every guest to really kind of bring some consistency to each episode. So you’re the first to have these. And we’ll see how you handle them.
Jared Wonders: Oh man.
Nate Hedrick: The first one — yeah, I promise they’re not too hard. The first one here is what’s one tangible strategy that you can use to make sure you’re investing works hand-in-hand with your career as a pharmacist? Again, our goal here is to make sure that we’re pharmacists first and real estate investors after that, right? So how do you work hand-in-hand as a pharmacist and a real estate investor side-by-side?
Jared Wonders: Yeah, I mean, you really have to have really good time management skills and you really have to have good people skills. So being able to depend on people for certain situations is definitely one of the things that you really have to concentrate on. Going along with that is having systems in place. I’ll use that word again, systems that you know are going to work and kind of revamping those systems if you need to to make sure that they work. Like you said, as pharmacists, like we have busy jobs. We live professional lives. And the patient needs to be at the forefront of things. And if the patient is not the forefront of things, then whatever we’re doing outside of pharmacy does not matter, in my opinion — like outside of family, obviously. But you really just need to make sure that you have systems in place and I will say that, you know, like Nate and David said, having a spouse that’s on your side is definitely, definitely a perk.
David Bright: A necessity in my house, absolutely. Absolutely. So second question is what’s one resource that’s been most helpful to you in your journey, whether that’s a book, a podcast, person, author, website, what’s the one resource you go to?
Jared Wonders: I would say that Bigger Pockets is probably the resource that I do go to. I would say like the mentors that I’ve found from there have been just exceedingly helpful. I do want to plug another podcast that actually got me into real estate investing that actually might be a little older, and I’m not sure if it’s still playing, but it’s called “The Real Estate Income” podcast. I think Dan Lane is who actually started that podcast. And that was — and I don’t think he had actually purchased a property at that point when I had started listening to it. That’s how I really delved into real estate and really kind of started soaking up all the content that I possibly could because it was something that I could associate with with a lot of the things that he was doing, I wasn’t there yet, and I didn’t have paralysis by analysis at that point. So I feel like finding situations and finding people that are maybe just a little bit ahead on your real estate journey really make a huge difference because those are the ones that have the time to kind of encourage you and have the time to really kind of put a little bit of mentorship into what you’re doing and what you’re trying to achieve in real estate.
Nate Hedrick: Perfect. We’ll put both of those resources in the show notes. That’s great. And then the last one is what is one piece of advice you’d give to a pharmacist contemplating starting real estate investing? So somebody that has not jumped in yet, but you want to give them some advice. What’s that one piece of advice you’d give to them if you could look back a couple years?
Jared Wonders: Can I only give one? Or can I give a few? Because I feel like there’s so many.
Nate Hedrick: Whatever you want, you’re the first guest. You get to set the stage here.
Jared Wonders: Alright, well, I’ll probably list two — well actually, these kind of work hand-in-hand.
Nate Hedrick: Perfect.
Jared Wonders: But having a good financial base and working from a position of financial strength I think is the biggest thing, in my opinion because a lot of people go into real estate not having funds, and that’s where you get sunk. That’s where it just doesn’t work because if you do have a bad deal, that’s going to put a bad taste in your mouth, and that’s going to really set you up for the future. So actually piggybacking off that too, having an exit strategy too, you know, going into the deal in a position of financial strength and having an exit strategy and being able to get out of a potential situation that isn’t optimizing your life or your real estate investing.
David Bright: That’s great. That’s great advice. I love it.
Nate Hedrick: Well Jared, I sincerely appreciate you being here. Before we wrap up, you know, closing remarks here, where can people find you if they want to reach out or learn more about what you’re doing?
Jared Wonders: Yeah, I would say that Bigger Pockets is probably their best resource to find me. I’m not really big into the social media game, so once in awhile I’ll pop up on like a Facebook group that I think might add value to me, but other than that, I’m not really on social media too much. But yeah, Bigger Pockets would be the best way to give me a shoutout. Or if you have any questions obviously about real estate or just kind of delving in, like I said, I’m just so passionate about pharmacists getting involved into this realm because I think that it’s a way that we can help others, honestly, in real estate I think. And it can also help us as professionals as well. So everyone’s going to need a place to live. And you know, who better to help them out with that than people you know are going to take care of a property and take care of things for them?
Nate Hedrick: Great. Well again, Jared Wonders, wonderful having you on the show, man. This has been a great first episode. We’re really excited about the future. And again, just thank you for being on and everything that you brought to the table today.
Jared Wonders: Yeah, absolutely. Nate, David, you guys are doing a terrific job. And I’m excited to see where your guys’ real estate journey goes. And I’m really excited to see this podcast take off because I know it will.
Nate Hedrick: Thanks. We’re excited to have you back sometime.
David Bright: Thanks so much.
Jared Wonders: Absolutely. I’d be happy to be back.
Nate Hedrick: Take care.
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