YFP REI 134: From Pharmacy To Real Estate: Why This Couple Invests in Raw, Vacant Land


Quynh and Tri Vu, two professionals who transitioned from pharmacy and IT careers into real estate, share their journey into investing in raw, vacant land and building Secure Land Co.

Episode Summary

Quynh and Tri Vu, two professionals who transitioned from IT and pharmacy to real estate, share their journey into investing in raw, vacant land in this episode of the YFP Real Estate Investing Podcast.

Joined by hosts Nate Hedrick, PharmD, and David Bright, PharmD, Quynh and Tri walk through their early steps in real estate, starting with single-family rentals and moving into the world of short-term rentals like Airbnbs. As their experience grew, so did their ambition, leading them to explore diverse markets and ultimately carve out a niche in the often-overlooked space of raw, vacant land.

They break down what makes land investing unique, detailing the due diligence required, the creative value-add strategies they use, and how they evaluate properties with potential. Along the way, they also share how they balanced their demanding careers while building a real estate portfolio, leaned on community and mentorship, and eventually took the leap into full-time investing through their business, Secure Land Co.

Whether you’re just getting started or looking to diversify your real estate strategy, this episode offers valuable insights, encouragement, and practical advice from two people who made the leap and never looked back. 

Key Points from the Episode

  • 00:00 Welcome and Introductions
  • 00:21 Quynh’s Pharmacy Journey
  • 01:43 Tri’s IT Background
  • 02:12 Diving into Real Estate
  • 02:32 First Steps in Real Estate Investing
  • 03:45 Transition to Land Investments
  • 12:44 Balancing Careers and Real Estate
  • 19:04 Starting a Land Investment Company
  • 19:57 Why People Sell Their Land
  • 20:12 Methods of Acquiring Land
  • 21:35 Becoming Private Lenders
  • 22:17 Due Diligence in Land Investment
  • 23:40 Understanding Mineral and Water Rights
  • 25:46 Value Add Potential in Raw Land
  • 26:50 Owner Financing and Selling Notes
  • 31:17 Diverse Uses for Raw Land
  • 34:18 Getting Started in Land Investment
  • 35:31 Final Infusion Questions

Episode Highlights

“If someone doesn’t want their property, sometimes they’re just happy for someone else to take it over. And a lot of the opportunities that we’ve gotten are from people, sometimes they don’t  want the land anymore.  They may have inherited it, and they’re  just paying back taxes on it. They never wanted it to begin with. Or maybe they bought land thinking that one day they’re going to move there and retire, but their retirement plans might have changed.” – Quynh Vu [19:41]

“When I first thought about land, too, I was thinking beautiful farmland, really green rolling hills. We don’t have that. We have mostly a lot of land that’s in the desert, and people who want land in some of those areas, it’s high desert, higher elevation. So they may want the land to go camping. They may bring out their RV there for, you know, a weekend, a long, like a week trip, or something like that. But they just want land for  that purpose.” – Quynh Vu [31:54]

“ We have properties that are as low as  $2,000 and some of them around $20,000. So there’s a huge range in terms of the cost of the land. So, for a lot of families, it may be more reachable for them.”  – Quynh Vu [33:50]

Mentioned in Today’s Episode

Episode Transcript

[00:00:00] 

Nate Hedrick: Hey, Quinn, try welcome to the show.

Quynh & Tri Vu: Hi. Thanks for having us. Hey.

Nate Hedrick: Absolutely. Yeah. Really excited to have you guys here. Uh, Quinn, you and I got the Connect a couple weeks back, and I just, I loved your story, loved that you guys were doing this together. And so we wanted to have you on to discuss, uh, all things real estate, all things pharmacy, and, uh, uh, why don’t we start there then with pharmacy.

Nate Hedrick: Tell us a little bit about your background, um, your, your professions and kind of, uh, uh, how you got there.

Quynh & Tri Vu: Okay. Um, well, I graduated from the University of Texas in Austin and when I graduated I became a pediatric clinical pharmacist. Um, so I worked as a pediatric pharmacist for most of my career. And then even within pharmacy, I was like super involved. Like I did, um, you know, the C-B-I-C-U, the PICU worked night shift, IV room.

Quynh & Tri Vu: Just pretty much everywhere. And I also worked in retail too. So I worked in a community pharmacy ’cause I was a intern, a tech, like all of that stuff, even before pharmacy school. Um, and then back in like 2014, I started kind of [00:05:00] like getting really tired of like working night shift, weekends, holidays, all that stuff.

Quynh & Tri Vu: And my kids were pretty young. I. So I transitioned into like being a manager in the inpatient pharmacy. ’cause I thought it would be like a little bit easier to be a manager, but it was still like pretty crazy. Um, uh, so then after that we went, I worked at an adult hospital too. Went into management, worked, did healthcare administration at adult hospital.

Quynh & Tri Vu: And then the last few years of my career, I worked at a biotech company and did, um, you know, worked with the development team so they can create software for analytics for healthcare organizations.

Quynh & Tri Vu: Yeah, that was for pharmacy. We had a sweet Walmart, 10% discount back, back in the day. Really helpful.

Nate Hedrick: Tri, you are, you are not a pharmacist, right? So I, that doesn’t exclude you from the podcast, obviously. But we still, we still love hearing everyone’s background, so.

Quynh & Tri Vu: Yeah. Um, I’m a recovering IT guy. I was doing it in Dallas and then Austin doing the big boom with [00:06:00] Dell. And uh, then we moved out to California and, uh, yeah, just stayed in that space till about two years ago.

Nate Hedrick: Yeah, we’re gonna dive into that for sure. So it’s great. Thank you.

David Bright: Yeah, both of those careers at face value don’t really scream like real estate, so I’d love to hear how that jump happened. Or how that expansion happened, or what got you excited about real estate. Maybe just give us like the 32nd overview of the things you’ve done in real estate. Just like you gave us the 32nd overview of the variety in your career.

Quynh & Tri Vu: Yeah. So, um, I think we just bought single family houses just for ourselves, right? Just as a owner. And then maybe about eight years ago is when we broke into like Airbnbs and, uh, all the bigger pocket stuff kicked in. Like we did it all like long term rental, short term, midterm. And then, uh, out of state we got into doing burrs and flips.

Quynh & Tri Vu: And uh, I think the last one was like commercial with [00:07:00] partnerships. We moved into, uh, uh, vacant land, raw vacant land. No power, no literacy, nothing. The best one.

David Bright: So. And I feel like that is a, a departure, like you hit long-term rentals, short-term rentals, midterm rentals. We’ve talked about those on different episodes, and we can link to some of those in the show notes where that feels like the very kind of traditional real estate investing, a residential house just like you had bought personally, and then you buy that to rent it out outta state.

David Bright: Flipping those kind of things make sense, but vacant raw land. Is such a departure. So can you just give us the quick pitch of why anyone would invest in raw vacant land?

Quynh & Tri Vu: Okay, so I was actually, so I had left pharmacy, um, back in 20. Was it 2022? Yeah, 2022. And during, when I left pharmacy, I was working as a residential [00:08:00] real estate agent. And part of it was because our friends kept asking us like, Hey, what are you guys doing? And I was referring a lot of. Clients to my realtor and he was like, why don’t you just get a license?

Quynh & Tri Vu: And then I was like, okay. So I got a license and I started selling houses and um, I was also in a mastermind, so twice in like GoBundance men, and there was a female mastermind, GoBundance women. And I had a good friend who was a land investor. She was doing like Airbnbs, she had long-term rentals, short-term rentals, commercial property, all that stuff.

Quynh & Tri Vu: But she said the thing that she liked the most was land. And I actually didn’t really understand it at all. And she told me she just, you know, bought land from people. She didn’t really, um, she bought land from people who didn’t want it anymore, and then she would sell it to someone else. I was like, well, what would you do with it after you buy it?

Quynh & Tri Vu: Like, do you have to improve it, make it better? And she’s like, no. She just remarket it to someone who’s looking for that type of property. And I was just really [00:09:00] fascinated by it. So then I was like, well, I wanna do what you’re doing. ’cause it sounds to me like you’re just a bank that happens to sell land.

Quynh & Tri Vu: ’cause she told me she also did own our financing for those properties as well.

Nate Hedrick: Hmm. Yeah, and I wanna dig into that because I feel like there’s so many things to unpack there. So, so again, this journey of like. Short-term rentals, long-term rentals, traditional real estate, all the way to this, this step that really we haven’t discussed before in the show. I think it’s unique to a lot of people. Um, but how did you make that initial switch? Like whose idea was it to say, you know what, pharmacy it, like, it’s fine, but let’s think about adding real estate into our, into our portfolios.

Quynh & Tri Vu: We, I think Quinn read like Rich, that poor dad way back in the day and uh, you know, the four hour work week. And we were like, we’re, we’re too poor to do this. Right? We didn’t have any money. We had, we had like a thousand bucks savings after two years or something, and we were like, we can’t afford it. So it just kind of sat there in the back of our heads thinking.

Quynh & Tri Vu: Awesome. And, uh, you fast forward to about [00:10:00] eight years ago, nine, nine years ago, I had, uh, probably my second or third midlife crisis and, uh, she went into management and then first and like 10, 11 years ago. And then I went like shortly after. But, um, man, they don’t, sometimes they don’t train you and you just, you know, ’cause you’re, you’re doing technical stuff, you’re doing well and then you just kinda.

Quynh & Tri Vu: You know, uh, get promoted. I’ve seen a lot of pharmacists too, right outta high school. They’re managers now. Like, how did that happen? You know, you know, so it’s kind of the same situation where like, uh, you’re doing well, they think it would transfer over to other areas. And, uh, we had just a lot of issues with, um, with a lot of outages.

Quynh & Tri Vu: ’cause I was doing operations and um, I was just pulling, I was working like 9:00 AM to like 9:00 PM and after about six months, Quin was like. You gotta find another job. Like it was just, this is too much. And uh, that was like, all right, I gotta do something. I can’t keep, I can’t sustain [00:11:00] this. And years of bigger pockets, like all that.

Quynh & Tri Vu: So subconscious stuff was kicking in, like, try, sell everything, get into real estate. And, uh, I went to meet up, met a realtor that was pitching an invest, like how to invest in, you know. And, uh, single families. And I was like, all right, sign me up. And I didn’t know about loans, I didn’t know about anything.

Quynh & Tri Vu: And then he was like, you don’t have any money. So I had to get a heloc. It took another month. I came back to him, I got money now, and he’s like, all right, let’s go find land, or, uh, let’s go find a house. And I was pretty much making an offer in every house. Like the walls were crook and all sorts of stuff.

Quynh & Tri Vu: We had like GCs coming by, they were walking away like, don’t get it. And I was like, no, we have to do it. We have to do it now. Um, yeah, we was just like, you know how like when you suffer and struggle so much, like the pain is so like you had to do, like, it causes the change. And we were kind of at that point where we were just like struggling with like just too much work and uh, and we didn’t [00:12:00] know how to manage other, and we had to change something.

Quynh & Tri Vu: So that’s kind of when the, when all the equity was like, you gotta do something with equity, it just sits there. It makes no no sense. And all those books and podcasts just kind of kicked in.

Nate Hedrick: I love that we’ve got both of you guys on the show because one of the things that we don’t get to talk a lot about is like, what that was like as, as a couple, like figuring that out as partners. So Quinn, were you immediately on board, like, no, no reservations, like he’s taking. The HELOC and you’re like, yeah, let’s do it.

Nate Hedrick: Buy a house.

Quynh & Tri Vu: No, I was like very, very nervous ’cause I was not listening to BiggerPockets and I was scared and he kept like leaving to go to these meetups and come back, like really excited. And um, every time he would. Know, find a deal. He would like show me. And he was like, oh, what do you think? I’m like, oh no, that’s not good.

Quynh & Tri Vu: Not a good deal then. And then he would like keep coming back to me and say, Hey, like, what questions do you have about it? Let’s talk through that. And then, you know, I felt like that was, he was really patient with the fact that I was like still like nervous and trying to work it through [00:13:00] it with me. And then eventually he was like, okay, well at what price would it make sense?

Quynh & Tri Vu: So I like couldn’t say, no, it’s not a good deal. He was like, what price would it make sense where like all of the risk and stuff would not feel like risk. Um, so then I started like doing like more research and kind of like reading some of the books that he was listening to, listening to the podcast and just getting a better understanding of it.

Quynh & Tri Vu: And I was so nervous because I, I even told him like, we already have one mortgage, like, why would we want another mortgage? And we have four kids. So we wanted to live like in a nice neighborhood, good school district, flat street, cul-de-sac, like very traditional. We never wanted to even get a fancy house where we could only afford under two incomes.

Quynh & Tri Vu: We wanted a house we could afford under one income. ’cause that’s how conservative we were. Um, financially, I. So I was really, really nervous when we started, but I’m, I’m glad that I didn’t like just say, you know, I had to like, learn [00:14:00] more about what made me nervous. But I do think that if you’re at the point where you don’t know the difference between a good deal and a bad deal, you shouldn’t do anything.

Quynh & Tri Vu: You need to figure out at least that much.

David Bright: Yeah.

Nate Hedrick: think that’s great advice and I really like how try approached it of like, Hey, what is the number that makes sense? Is it a dollar? Are we buying this house for 10 bucks? Like, is that the only way this makes sense? Like, well no. Okay, so what is the number? Right? Rather than just none of these work, we’re not buying anything.

Nate Hedrick: I think that’s a great, like bring you along sort of a thing. And then you took the initiative to actually learn the pieces and do the deal analysis and I, I, I think that’s great. ’cause that’s hard for a lot of people out there and I’m sure there’s a ton of people listening right now. One of them is super interested in real estate.

Nate Hedrick: The other one has. No radar for that at all. And so how do you bring those pieces together?

Quynh & Tri Vu: And you know, the other thing too, Nate, that I was, I thought I was being like very conservative because, um. I didn’t wanna invest and try was like saying, well, you know, having only one source of income is kind of risky too. And I never looked at it like that until [00:15:00] he said that.

Nate Hedrick: great point.

David Bright: Yeah, that I, I love that mindset shift of what really is risk. And I think taking that on the question of like, what questions do you have? Creating a lot of that conversation, open communication, I. Sounds like that was all part of this trick that got you to buy the first house, right? And then eventually, it sounds like there was more than that, right?

David Bright: So how did that growth look? And uh, and particularly from a pace standpoint, like you guys described eight or nine years and you’ve already done all these different things, like I think that feels really intimidating to a lot of people. So I’m curious how that story evolved, uh, into the next house, the next house, the next house.

Quynh & Tri Vu: We were just all in. So we got the HELOC that first year, and we bought a house. Then six months later, we’re like, all right, it is working. Just do it again. We spent the rest of the HELOC and then we had to save up ’cause we ran outta money. We’re like, all right, let’s do it [00:16:00] again. So. I saw this chart, you can’t see it back here, but it was a little pyramid, like one year, two doors next year, four doors next year.

Quynh & Tri Vu: It was just a stack, right. It just stacked up and I loved it. And uh, it was two doors, four doors next year, eight doors, and then there’s a little break ’cause we were literally broke. Right. And, uh, ’cause like when you’re in real estate, you’re just stacking money away. All the money you make just goes right back into more property.

Quynh & Tri Vu: It’s delayed for, for sure. Uh, yeah. So that, that little pyramid really helped us, like kind of see the vision and it was kind of gamifying it. Um, but yeah, so we just saved money and reinvested everything.

Nate Hedrick: And during all that, like again, you’re both pretty serious careers. I mean, again, really involved in your careers at the time, even though you’re trying to start making this transition out like. Did you manage that? How did you maintain the balance? Like, was that, was that difficult or, or try, did you just totally step away and say, okay, I’m all in on real estate, let’s make this happen.

Quynh & Tri Vu: Well, the first [00:17:00] couple were Airbnbs and they were local and.

Quynh & Tri Vu: Pretty, um, assertive, uh, property manager helping us. We hired a property manager before we self-managed, and then, uh, we’re like, she’s not doing anything. We could do it. And we got greedy and we started doing rentals by the room. And, uh, that made a ton of money, but that was a ton of work too. Um, so we’re like, all right, we can’t, this is not sustainable.

Quynh & Tri Vu: We had like four listings outta one property. Like it was like four times as much work. But, uh. Was it the Bur book or the long distance investing book? Um, we started like looking, uh, out of state. It was a commercial and BiggerPockets, one of the intros or outros they had is promo, Hey, we do it all. We buy, flip and find a person and then you just buy it from us and we manage it.

Quynh & Tri Vu: And I was like, easy button, let’s do it. And uh, we went the, the property managed route, they find flip property, manage it. And we just did that for, uh, the next couple. [00:18:00] Um. We, we had this problem of shiny object syndrome. So you’re one market and you just keep on buying in that same market. So we got into like eight states or something, uh, just because that looked cool.

Quynh & Tri Vu: That looked cool. Okay. That number looks right, just buy, buy, buy. And um, so yeah, that’s how we kind of scaled, uh, unnaturally through all these other states and through property managers helping us scale.

Nate Hedrick: That’s awesome. Wow.

Quynh & Tri Vu: As far as the balance, yeah, we just had to leverage the, the other, uh, the teams and the, uh, the property managers teams to, to take care of everything.

David Bright: It sounds like it’s part of your story because you hinted earlier, like up until a few years ago, you were doing these things, so it sounds like there. Was some kind of like titration away from your careers and into more real estate. Um, and I know that there are some people out there that are looking to that.

David Bright: There’s some people out there that love their, their pharmacy job and they wanna stay in that. And I can totally [00:19:00] respect both of those avenues, but you guys have done both. So I’m just curious, since you’ve been in, in both of those, you know, the kind of the pros and cons or what made you think now is the time to make that jump?

Quynh & Tri Vu: I, I love this question because when we got to the point where we’re so busy between work and family, and then even if you’re not managing the rentals directly. Everything bubbles up to the owners. If there’s an insurance claim that needs to be made, if there’s some type of complaint, sometimes Airbnb calls us directly.

Quynh & Tri Vu: So we were still like involved and try kind of mentioned like, Hey, one of us needs to leave our job. Do you wanna go first or do you want me to go first? And I was like, I definitely wanna go first. I don’t even know what going first means. I,

Nate Hedrick: That’s awesome.

Quynh & Tri Vu: and then shortly after the following year left his. Those, those good advice that someone gave us. Like if you both were gonna check out and leave your careers, don’t do it the same year. Like one person [00:20:00] does it one year, someone else do it the next year. And um, I guess we were in the circles where like everybody was entrepreneurs and it was like, man, I gotta be one.

Quynh & Tri Vu: I need to leave my job. But. You know, I still, I, I really liked it and, um, it was kind of like a part of a identity thing, to be honest. It’s hard separating it. I’m sure you guys know, like, you know, what do you do? Who are you? You just naturally say, Hey, I do a tech, or I, I’m a pharmacist, and separate. It was hard.

Quynh & Tri Vu: And then when you all in as a entrepreneur, you still kind of miss it. So, um, I don’t think it’s for everybody, like some people are, if you’re good and you like what you do, just stick with it and give someone else money. And then invest passively. Like, you don’t need to like, figure out how to do real estate.

Quynh & Tri Vu: It’s a, it’s still a job until it isn’t a job. Right? So, um, I didn’t think about that initially. Like, flipping houses is literally another career. Like, why would you, if you’re good at tech, why would you learn another skill and have to like rema, you know, take [00:21:00] years to master that before you get good and great at it when you just gave someone the money and then they do it and still enjoy your job.

Quynh & Tri Vu: So. In hindsight, like you didn’t have to follow, we had like shiny object syndrome where I did at that point, like, I need to leave, I need to do, you know, entrepreneurship, give it a shot when like, I liked tech still, like even though it was like operations support, long hours, like it was super fun with the team fixing stuff.

Quynh & Tri Vu: So it really depends on your person.

Nate Hedrick: Yeah. I’m glad you mentioned the identity thing too, because I think a lot of people struggle with that. Even just in like, like for example, like when I got my real estate license, people were like, oh, so you’re done being a pharmacist? Like, well, no, hold on. Like I’m still working. Like you can have two things, but nobody talks that way.

Nate Hedrick: You just like, what is the thing you do for work? Like, or what is what? What do you do? Right? It’s not like. And everyone expects you to be like, I got a degree in blah, blah, blah, and I do x like, and that’s it. Uh, and so I think that’s, that’s a good thing for people to hear is like, it, it can be many things and that’s, that’s enjoyable as well.

Nate Hedrick: So I [00:22:00] think that’s, that’s a really good point. You, you, you landed on.

Quynh & Tri Vu: Yeah. And you know, there’s a lot of skills that I think we learn in our professional careers that translate into real estate investing, which it’s not like, okay, completely foreign. I mean, it’s very data-driven, which pharmacy is. Um, and just like kind of following, hey, what worked well for other people?

Quynh & Tri Vu: So like, just looking at actual case studies, um, other people who have been successful around us, I felt like has really helped us. So having that professional background, I feel like I. Really did kind of give us an advantage. Um, but if you were to just start researching and learning, like we didn’t go to school for, for business, so we kind of felt like when we’re learning about real estate, we had to like learn, we had to read books, we had to listen to podcasts, we had to like go to like a different type of school to learn about it.

Nate Hedrick: I think that’s great though. Like, and, and you have the skills. Both of you like to go in, out and do that, right? We’re all lifelong learners if [00:23:00] we, if we believe that, so that there’s a way to go out and, and get that information, so that’s great. So, so I know now you guys, today you run this, this, land investment company.

Nate Hedrick: I, I want to dig into that. ’cause again, that’s something we’ve not discussed on the show in the past. I think there’s a lot to a lot there. Um, so those listening are probably more familiar with, again, the long and short term rental stuff. But, but give us kind of the background of like, what does it look like to flip raw land?

Nate Hedrick: Like you’ve mentioned it a little bit, but like give us the kind of the, the details of like, looking for these properties and, and how you turn that around.

Quynh & Tri Vu: So great question. Um, in terms of like land, it’s very similar to traditional real estate in that you wanna buy low and you wanna sell high, right? And if someone doesn’t want their property, sometimes they’re just happy for someone else to take it. Take it over. And a lot of the opportunities that we’ve gotten are from people.

Quynh & Tri Vu: Sometimes they don’t want the land anymore. They may have inherited it, they’re just paying back taxes on it. They never wanted it to begin with. Or [00:24:00] maybe they bought land thinking that one day they’re gonna move there and retire. But their retirement plans might have changed. They may have had grandkids in a different part of the country and now they wanna live closer to their grandkids.

Quynh & Tri Vu: So, um, in terms of like how we get deals, we similar to like, you know, people who are doing flips and developments, they’ll send out letters to people asking like, Hey, do you still want your property? Or Have you ever considered selling? Do you know how much your property’s worth? So we do those things in terms of outreach.

Quynh & Tri Vu: In order to acquire land and acquire is sometimes people, even within the land space. They want a change, like everything looks greener on the other side. So they might like, Hey, I don’t wanna be in this state anymore. I wanna be in another state to buy my land. So then they’ll sell us all of their land.

Quynh & Tri Vu: So that’s another way that we can, you know, acquire property. So there’s a lot of different ways. Um, sometimes we buy land from wholesalers. Sometimes [00:25:00] we buy land from tax auction, and sometimes we buy like loans from people. So a lot of different ways in which we can acquire land.

Nate Hedrick: So really similar, honestly, it sounds like, again, we’re talking wholesalers, talking, you know, multiple people that want to get out of a tired investment. Like it almost sounds like you could be talking about single family rentals. That’s cool.

Quynh & Tri Vu: The same thing. So we were doing like cold when doing residential, and it’s literally the.

Quynh & Tri Vu: And then, um, on the tail end, which is kind of new, is like we unintentionally became private lenders when we sell or finance these lots. Um, you could buy lots just like your mortgage gets transferred or sold to another service provider, right? We just found that out recently in the last like six months, a year, that you could buy and sell these notes.

Quynh & Tri Vu: So as we build our portfolio of notes, so we sell our [00:26:00] financed. Buy or sell these things as well. So it’s a new niche that we,

Nate Hedrick: Yeah, that’s interesting. So, so just like, again, like people are buying and selling notes on, on other properties, it’s kind of the same sort of strategy,

Quynh & Tri Vu: yeah, they don’t have to wait as long to recoup.

Nate Hedrick: I. Tell me about, um, due diligence. Like, I’m trying to think of a difference now, right? Like you’re, you’re, you’re teaching me how, how similar it actually is, but like, what about due diligence? Like, you’re not sending out an inspector to see if the roof is collapsing, right? ’cause it’s just trees and bushes and like, so what is that process like for you guys?

Quynh & Tri Vu: Yeah, I mean we have like a team that does like due diligence for us, and what they do is they fill out a report and it has things on there, very basic. Like, Hey, what, how big is the property? What is the parcel number? Um, what is the zoning, what’s the legal description? Is there back taxes owed on it? Um, are there any easements on the property?

Quynh & Tri Vu: Um, you know, [00:27:00] does it have like legal access? Does it have direct road access? So the, the questions that we’re kind of looking at are a little bit, they’re similar to residential real estate, but it’s actually a little simpler because we’re like not worried if the the roof is old. We’re not worried if Central or not No.

Quynh & Tri Vu: Of that stuff. Easier. Yeah. We’re selling one of our rentals and they’re like, Hey, how this list right now? And they’re asking, how old’s the roof again? What about the hvac? What year? I’m like, man, I haven’t heard about that in a while. Have to worry about that. You know? Is there power? No isity, no water. No.

Quynh & Tri Vu: You know, so.

Nate Hedrick: The, the one thing I’ll, I’ll ask then, what about like mineral rights? Does that come up or does it vary based on the property? Like if you know that it doesn’t matter for this property, you just kind of ignore that, or like how does that work for you guys?

Quynh & Tri Vu: That’s, that’s actually a really good question and that’s a common question that we actually get from clients that are, and many [00:28:00] times, like when you buy property, it’ll say something very vague, like if there’s.

Quynh & Tri Vu: It doesn’t say whether or not they actually have mineral rights and most of.

Nate Hedrick: Right.

Quynh & Tri Vu: And if you actually want to have mineral rights, you may have to go through a, like a separate search. Like there’s a specialized company who will kind of trace back through and similar to like title being transferred, mineral rights being transferred, and um, there’s like an hourly rate that they charge just to check.

Quynh & Tri Vu: And even if nothing comes up, you still have to pay that. So we haven’t really. Um, trying to get mineral rights in any area. We just tell people like, we, we don’t know if we have anything, and we just kind of leave it at that. But the other question people do ask though is, do you have water rights? And most of the properties that we do buy.

Quynh & Tri Vu: You know, they’re asking for water rights because they wanna have a well, and many times you can have a well without having any special water [00:29:00] rights. So it may not even be necessary, but they think it’s necessary to ask. So it’s just a good question that comes up pretty often.

Nate Hedrick: Yeah. Cool.

David Bright: I would imagine a lot of these are are like state dependent or area dependent, where there’s probably nuanced questions that exist in certain areas and not in others. Then as well.

Quynh & Tri Vu: Yeah, so we’re in, I think 11, 11 different states now for our land, and every county has different rules and regulations. Every state has regulations too. So depending upon the zoning where the property’s located, we have kind of like a little quick. Tip sheet sheet on each of the properties when people call, ask about it.

Quynh & Tri Vu: Um, our sales team, it.

David Bright: Okay. Um, we’re making so many comparisons to the single family space, one of the other things that I think about is, is the value add. Like, I think we’ve all done the, the thing where you buy an ugly house and you make it pretty and suddenly it’s worth more. Is there a lot [00:30:00] of value add potential with raw land, or is it even easier than that where you’re simply buying and selling without making any improvements or doing any direct added addition to value?

Quynh & Tri Vu: Yeah, there’s opportunities for sure. You get entitled. Subdivided, you could put in easements when they don’t have an easement, you talk to the neighbors to negotiate that kind of stuff. So there’s definitely opportunities to do all that stuff, just like residential, where you could just buy and just sell it to another wholesaler, to another flipper, and then just make the, you know, the margin and the sale or the assignment.

Quynh & Tri Vu: You could do literally the. And, um, because we are buying property from people who don’t want it anymore in, we’re buying it below market value substantially. So the value is.

Nate Hedrick: Hmm. And you mentioned earlier too, about owner financing. Are you, are you doing a lot of the, uh, those properties in that way where your, your finance. It through the owner because they’re [00:31:00] just, they’re looking to do anything with it, or are a lot of those being bought outright and then you’re financing them yourselves, or how does that work?

Quynh & Tri Vu: We started out by, um, when we wanted out a new market, we would get properties.

Nate Hedrick: Mm-hmm.

Quynh & Tri Vu: we weren’t like a lot money in a new area that we, uh, experienced in. And then after we started doing well. Those areas, then we would start buying and mailing out. That’s how we kind of break in by, um, buying owner finance properties.

Quynh & Tri Vu: And then, uh, we, when we acquired the properties, we would own it outright and sell it. A majority of ’em we would own outright and sell it, uh, on terms or sell our finance. That’s probably like 90% of, uh, the business initially. And, uh.

Nate Hedrick: Wow.

David Bright: Wow.

Nate Hedrick: That’s awesome.

Quynh & Tri Vu: Yeah, a lot of sales through, uh, owner finance. I think we sold like 30 last year, and I like, oh, we went crazy. That that was a little too much. Like [00:32:00] we didn’t mean to sell. We were like, man, that’s a lot of money. We just, you know, a little pocket of change right there. So we kind of got gungho selling notes.

Quynh & Tri Vu: And then, uh, we recently started buying notes as well. Um, this year we picked up, I don’t even know, 20.

Nate Hedrick: that’s great.

Quynh & Tri Vu: But yeah, the notes, um, we haven’t played too much in it. Like we’re just kind of winging it, literally. Like it works, let’s just do more of it. And, uh, yeah, so we like notes, but, um, it’s great for cash flow. You’re just getting passive, kind of like passive money, right? You just, you know, they’re just making payments on it.

Quynh & Tri Vu: Um, but the big liquidity events of, uh, if you do a flip or a cash, uh, those are nice too. So I think we’re, our new focus is to balance that out more with more cash flips and, uh, where, um, cash retail prices as well. Yeah. Um, I kind of wanted to mention that because of the space that we’re in, [00:33:00] most people, they cannot go to a bank.

Quynh & Tri Vu: To get a loan. So we’re, we’re lending to them and you know, we’re not doing very many checks on like their credit and their how worthy they are to be a buyer. However, we’re holding onto the deed, we’re selling to them on contract. So if they stop paying us, we still hold the deed and we have the ability to remarket that property.

Quynh & Tri Vu: And it’s now at a lower cost base. There’s no process because. Never had title.

Nate Hedrick: Yeah.

Quynh & Tri Vu: So it’s a nice, it’s a weird way. There’s a, there’s a few nuances that you’re gonna have to undo. Uh, think about residential, like re residential. Like you have when you buy the house, you get a loan, you have the title to the house, right?

Quynh & Tri Vu: Like it’s in your name. And then if you stop paying the bank with foreclosed to get it back, not like that land in our situation. And, uh, there’s a few other like weird things, [00:34:00] residential.

Nate Hedrick: I think it, it’s funny you mentioned that because like one of the things I think about with residential especially is like if you buy a house and like even if it. It goes really sideways, right? Things, things are way more expensive than you thought. Like at least you still have a property that you can sell.

Nate Hedrick: Like in my head, my first thought is like, I bought this raw farmland from this guy and now nobody wants to live here, and I’m stuck with this big parcel of land. Like, what do I do? Like, do you guys go through that? Is that ever, like, is that a problem? Or are you just like, no, we find perfect land every time.

Quynh & Tri Vu: So what do you usually do, right? You find markets that, uh, do well? How do you do that? You run comped. What has sold in last six months, 12 months compared to what has listed days on market? You literally do the same thing. Uh, the only caveat is if I own finance it. It’s not recorded. The title doesn’t change, so you don’t know I sewed it at all.

Quynh & Tri Vu: So when you run comps, you may have to run comps on what’s listed versus what’s been sewed because it hasn’t been like recorded yet. So it’s a little bit of a [00:35:00] twist. Like you, you know, I don’t know how long it’s been listed. It’s still listed like, you know, as it been sewed. So you’re gonna have to kind of play with other investors in that market to figure out if they’re really selling it, if they’re not selling it or financing it, or, you know, they just, they don’t sell.

Quynh & Tri Vu: So that’s the tricky part.

David Bright: I, I feel like another thing I would have to undo. From the, the residential side is, I feel like from everything I’ve done on the residential side, the purpose of land is to put a residential structure on it. You know? So, and it sounds like not everything would, even in this world, would even, like, the purpose would be to build anything on it, residential, commercial, anything. It sounds like some of the, the land uses. Outside of that, can you help people kind of get outta this box of residential and think about what other land uses may be where someone would want to rent or buy land for, for different purposes?

Quynh & Tri Vu: Yeah. No, that’s, that’s such a good point because when I first thought about land too, I was thinking like [00:36:00] beautiful farmland. Right, like really green rolling hills, we don’t have that. We have mostly a, a lot of land that’s like in the desert and people who want land. Um, in some of those areas it’s like high desert, like higher elevation.

Quynh & Tri Vu: So they may want the land to go camping. They may bring out their RV there for, you know, a weekend, a long, like a week trip or something like that. But they just want land for that purpose. Or maybe they have dirt bikes or atv. And they want a place to kind of like romp around without being bothered by people.

Quynh & Tri Vu: Um, other people want land as like for off-grid living. They may be planning to build like a tiny home. They do not want to be on any type of public utilities. Like they want to be on septics solar. They don’t want to be, um, subject increases in. Like increases in rates, like, you know, your water bill, your [00:37:00] electricity bill, like as those rates increase, like they don’t wanna be to deal with that kind of thing.

Quynh & Tri Vu: They wanna live off grid. Um, the other type of person that might wanna buy land is someone who is thinking about doing homesteading. They’re really worried about where their food comes from and what’s going into that food. So they may want to, you know, just have land just to know where their food is coming from.

Quynh & Tri Vu: And then other people want land for legacy. We have a lot of grandparents that are getting land just to pass on to their kids, and they don’t really care what you can do with the land. They just wanna say like, Hey, I’m giving this to you when I pass away. And the costs, you know, it, it would be hard for a grandparent to give like.

Quynh & Tri Vu: 20 pieces, 20 properties, 20 houses away. But because like some of the properties that we do have in the vacant land space, I mean, we have properties that are two, [00:38:00] 2000 as low as 2000. And some of them, you know, like around 20,000. So there’s a huge range in terms of the cost of like the land. So it’s, for a lot of families it may be more like, like reachable for them.

Nate Hedrick: So if you’re out there, and I guarantee there’s somebody listening right now that’s like, okay, this sounds like my thing. I don’t want to deal with leaky roofs and tenants and stuff. Like I’m in, like I, you guys have sold me. Like how do you get. on this. How do you get started? Is like, like you said earlier, like is it all just education or do we like where, where, where’s the first step?

Quynh & Tri Vu: I mean to school for it. Like I signed up for like a.

Nate Hedrick: Mm-hmm.

Quynh & Tri Vu: Program. We went through flight school and then we did, that was like a 12 week program where we learned like kind of the basics about land investing. And then after that we signed up for a one year coaching [00:39:00] program where we had like a land investment expert kind of walk us through as we grew our inventory and portfolio.

Quynh & Tri Vu: We just wanted like a double check and guidance as to like where we should buy.

Nate Hedrick: I love that. I think that’s so relevant to so many people. Listening is like, you don’t, it doesn’t just magically show up in your head like, you have to go out and, and learn this stuff. Like, I think that’s super important. Yeah, I love that. it. Alright, well we wanna take you guys. This has been great.

Nate Hedrick: I wanna take you to our, our final infusion questions, three questions we ask all of our guests that come on the show. So a bit, bit of rapid fire here. Um, but if you, uh, could each, each respond we’ll have, we’ll have Quinn go first on each one of these. Just kinda give you your response. Um, so the first one is, what’s one tangible strategy that you used to make sure that your investing was working hand in hand with your career?

Quynh & Tri Vu: I. It [00:40:00] should match your lifestyle, right? So if you are at the point where you’re so busy, right, like you’re driving kids around and you’re working a ton of hours, evenings, weekends, holidays, it might not be a good idea to start flipping houses, right? Because, you know, like you have to, there’s a lot of like management.

Quynh & Tri Vu: And you, it’s hard for you to physically be there if you’re like at your other job, or even if you decide you wanna take on property management and you’re working like at the hospital or at a community pharmacy, that’s probably not a good idea either, because you’re gonna keep getting interrupted. So I would say whatever you’re deciding to invest in, I would say to see if it aligns with your lifestyle.

Nate Hedrick: I like that.

Quynh & Tri Vu: Yeah, I, I would build on that and say, you gotta know yourself too. So if you’re anxious and you’re, uh, you get nervous, like, and you’re indecisive, right? And then you need like [00:41:00] the black or white answer, maybe not entrepreneurship right? Is a thing for you. Maybe give the money to do it passively. So know your, uh, know your personality.

Quynh & Tri Vu: And, uh, the second part is like, do it with, do it with the community or tribe, whatever that looks like to you. Right? So if you have a friend that’s doing it, or you could join a, a mastermind group, like do it, like, don’t, you don’t, you don’t have to suffer alone. Uh, if you’re still gonna make the plunge and decide to go that route anyhow, and, you know, start investing actively, like do it with some, some friends or NA community to, to help guide you along that journey.

Nate Hedrick: I like

David Bright: Yeah, I love the team sport mentality ’cause there’s so much of that in healthcare that we’re all used to and uh, as you mentioned on your IT team, like how much fun that can be to do this, to do whatever you do with a team. So finding that same in real estate, I think that’s powerful. second question is, what’s one resource that’s been most helpful to you in your [00:42:00] real estate journey, whether that’s a book, podcast person, author, website, whatever that would be?

Quynh & Tri Vu: Um, I would say for me. I think it was bigger pockets when I first, um, when TRI started listening to it, and then I started listening to it. I think the stories that really resonated the most with me were when someone was still working their regular job and they could still do something on the sides.

Quynh & Tri Vu: Like there were stories about bakers that were, you know, doing like rehabs and. I don’t know. The more similar that person was to me, like if they had a family, if they had kids and they were working and they could still invest in real estate, I felt like that really made me feel like it’s possible for a regular person to learn this, uh, for me and my latest craze is, um, podcast this guy.

Quynh & Tri Vu: He reads these fat [00:43:00] biographies of these greats, these legends, right? It could be, uh, new people like Elon and, and Bezos, but it could be like OGs, like old presidents and stuff. So he reads like a ton of these books and dissects it for you. So you’re getting like free mentorship cliff note version with a guy that knows a bunch of adjectives.

Quynh & Tri Vu: So it’s super like, you know, just fun and like, man, that, that wow me. So I.

Quynh & Tri Vu: All the little thing nuances. You know, in the classroom someone raises their hand, they have a question. Yeah, that’s a great question. That’s what’s doing.

David Bright: Yeah.

Nate Hedrick: That’s a great tip. We’ve not had that on the show, so that’s awesome. Alright, and then you guys have already dropped a bunch of this, but I’ll ask it anyway. What if you had to give one piece of advice to somebody just starting out in real estate investing, what would be that one piece of advice?

Quynh & Tri Vu: For me, it would be just learning. Like, don’t [00:44:00] feel like it’s too much to take on. Um, you know, it’s okay to be a beginner and just like, enjoy being a beginner part of, um, part of it’s just learning and making mistakes. Making mistakes, and I feel like, um. Being an expert is someone who has made the most mistakes in an area.

Quynh & Tri Vu: So learning about other people’s mistakes and you know, just learning, always keep learning. I feel like that’s the best way for you to feel better about what type of investment makes sense for you. Yeah, for me, um, you are the average of the five closest people you time with. Man, when you’re flipping the switch and you’re investing and you’re pulling out money outta your heat, like you’re taking a second loan and all that stuff, you’re gonna have family and friends that are like, you’re nuts.

Quynh & Tri Vu: So you gotta protect yourself and surround yourself with people that, you know what? I’ve done it and yeah, let me double check you. It looks good. So I wouldn’t say I had a lot of that in my [00:45:00] life. I was like, don’t. Um. Your target shouldn’t be, your goal shouldn’t be to avoid people like that. Your goal should be going towards people or doing what you wanna do, right?

Quynh & Tri Vu: So, um, you know, we were just looking forward towards like, man, this guy did like all these guests that you guys have on your show. Like, lemme talk to them and then next thing you know, you have a little local chapter meetup or something, or remote chapter meetup. And you get that inspiration, passion up early

Quynh & Tri Vu: versus avoiding, you know what away.

David Bright: I love it. I love it. If people wanna reach out, learn more about y’all, find you, where can they find you?

Quynh & Tri Vu: Okay, so they can, you guys can find us on Instagram. We’re secure Landco, we we’re also on YouTube at Secure Landco. Um, we’re also on Facebook, uh, or you can find [00:46:00] [email protected]. So we’re, if you start us, I think you’ll find us.

Nate Hedrick: Perfect. Well guys, thank you so much for coming on the show, sharing all your knowledge. I, uh, as usual when we have a really good guest, my head is spinning with new ideas and now I’m gonna like go out and send mailers to go buy raw land. Like I just, this has been great. So thank you guys so much for coming on and sharing all this with us.

Nate Hedrick: I.

Quynh & Tri Vu: Oh.

David Bright: Thanks so much.

 [END]

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YFP 251: Zero to One: How to Get Started in Real Estate Investing


Zero to One: How to Get Started in Real Estate Investing

On this episode, sponsored by Insuring Income, Nate Hedrick and David Bright, co-hosts of the YFP Real Estate Investing Podcast, share their top tips and strategies for getting started in real estate investing.

Episode Summary

The concept of real estate investment can be so broad, with many different avenues you can choose to take, that getting started can feel like a daunting task. One key concept to ensure that you can weather the storms that may come when investing in real estate is to, first and foremost, get your own financial house in order. By building a firm financial foundation, risk-averse pharmacist real estate investors can be more confident with the ups and downs in this ever-changing market. This week, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, welcomes David Bright and Nate Hedrick, co-hosts of the YFP Real Estate Investing Podcast, back to the show. Top moments from the episode include David discussing the main categories of real estate investing and why he and Nate have favored buy and hold investment strategies. You will also hear a frank discussion on the individuals you should consider surrounding yourself with as a part of your real estate investing team, plus a few strategies for finding and evaluating an investment property. Nate and David also take a few moments to answer some frequently asked questions about real estate investing for those getting started in their real estate investing journey.

Key Points From This Episode

  • An update from David and Nate regarding their coaching program.
  •  The importance of having a strong personal financial foundation.
  •  How to break down real estate investing.
  •  Categories best suited for first-time investors.
  •  Nate shares the team aspect of real estate investing to bring down the stress and reduce the barriers to entry.
  •  Where to find a good investment property: off-market.
  •  The importance of being able to define and state your criteria to a real estate agent.
  •  Using math to evaluate an investment and what that looks like; setting up categories.
  •  FAQs you’ll hear when starting in real estate investing.

Highlights

“Getting your [own] financial house in order, [is] such a critical first step before you go on that journey to invest in real estate.” — Tim Ulbrich, PharmD [0:05:34]

“Having a firm financial foundation beneath you means that you can weather some of those storms and deal with some of those ups and downs of real estate.” — David Bright, PharmD, MBA, BCACP, FAPhA, FCCP [0:07:13]

“We’re investing in houses that are far enough away that we’re not going there and we’re not in that day to day aspect of the investing, which is really helpful when you work a full-time pharmacist job and you don’t want to be distracted by your real estate investing.” — David Bright, PharmD, MBA, BCACP, FAPhA, FCCP [0:22:02]

“To be considered a good investment property, it needs to pay for itself every single year, year in and year out, and put money back in your pocket. Running [those] numbers is important and not just looking at the simple things but truly diving into the details.” — Nate Hedrick, PharmD [0:24:30]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00.4] TU: Hey everybody, Tim Ulbrich here and thank you for listening to The YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom.

This week, I had a chance to welcome back onto the show, David Bright and Nate Hedrick, co-hosts of the YFP Real Estate Investing Podcast. During the interview, David, Nate, and I talk through zero to one, how to get started in real estate investing and make the hardest move, which is that first move.

Some of my favorite moments from the show include David talking to the main categories of real estate investing and why he and Nate have favored buy and hold investment strategies, a discussion on individuals you may consider surrounding yourself as a part of your team as you begin your real estate investing journey and strategies for finding and evaluating an investment property.

Make sure to hang with us to the end of the show when I ask David and Nate frequently asked questions for those getting started in their real estate investing journey. Now, one of the things that we talk about on today’s episode is why getting the financial house in order is such an important and crucial first step before diving into real estate investing.

That is a great opportunity to highlight what I think many folks may not be aware of, which is the incredible work that the team at YFP planning does and working one-on-one with more than 240 household in 40 plus states.

YFP planning offers fee-only, high touch financial planning that is customized to the pharmacy professional. If you’re interested in learning more about working one-on-one with a certified financial planner may help you achieve your financial goals, you can book a free discovery call at yfpplanning.com.

Whether or not YFP Planning’s financial planning services are a good fit for you, know that we appreciate your support of this podcast and our mission to help pharmacists achieve financial freedom.

Okay, let’s hear from today’s sponsor, and then we’ll jump into my interview with David and Nate.

This week’s podcast episode is brought to you by Insuring Income. Insuring Income is your source for all things term life insurance and owned occupation, disability insurance. Insuring Income has a relationship with America’s top-rated term life insurance and disability insurance companies so pharmacists like you can easily find the best solutions for your personal situation.

To better serve you, Insuring Income reviews all applicable carriers in the marketplace for your desired coverage, supports clients in all 50 states and make sure all of your questions get answered. To get quotes and apply for term life or disability insurance, see sample contracts from disability carriers or learn more about these topics, visit insuringincome.com/yourfinancialpharmacist. Again, that’s insuringincome.com/yourfinancialpharmacist.

[INTERVIEW]

[0:02:40.9] TU: David and Nate, welcome back to the show.

[0:02:43.8] DB: Hey Tim, always great to be here.

[0:02:45.7] NH: Yeah, thanks so much.

[0:02:46.8] TU: First of all guys, congratulations on the work that you’ve been doing with the YFP Real Estate Investing Podcast. You’ve crossed the 50 episode threshold, which is really an incredible accomplishment and I think it just speaks volume to the commitment of time and energy and effort that you guys have put in so thank you so much for that and it’s been fun to see the reception among the pharmacist community in terms of the focus here on real estate investing and the community of pharmacist and I think that’s a good segue. 

I’d love to hear from you guys, just for a moment, an update on what you’ve been up to. When we talked last at the turn of the year, you guys were just getting started with the none to one group coaching program to help folks begin their journey in real estate investing. So, David, Nate, we’d love to hear the update of how that course has gone and what you’ve been seeing.

[0:03:34.7] NH: Yeah, we had a ton of success with that. It’s been really fun to bring together this group of pharmacist that are really eager to buy their first investment property. We actually ended up taking on 10 pharmacist and we are meeting every Sunday for the past two months now, David, and it’s been going really well. It’s a really cool class of individuals, it’s been a great time to talk to everybody and learn along with them, right?

We’re there to teach and kind of coach but at the same time, there’s always more that we can learn and so it’s been really interesting to have problems brought to us and we’re dealing with people all over the country, so it makes David and I expand our horizons a bit. It’s been really enjoyable.

[0:04:08.0] DB: Yeah, it’s also been a lot of fun to see the victories come out too, right? The problems are one thing and the problem solving is like inherent to pharmacist so we enjoy that, right? The victories are also a lot of fun seeing folks who get offers accepted and move through inspections and conquering that investing world has just been really inspiring to see other pharmacist jump into that and do that.

[0:04:27.0] TU: We’re excited to hopefully share more of those stories into the future and be able to offer that out to other pharmacists as well so we really appreciate you guys and the commitment you’re putting enough time, we’re recording here on a Monday, early morning, you guys are up last night with that group. I know it’s got energy and enthusiasm that you’re putting into it as well but it is an investment of time, so thank you guys so much for that work.

This is a follow-up to episode 241. We talked before and we’ll link to that in the show notes about some common objections and barriers to getting started in real estate investing and the idea with this episode is that for those that have worked through or are working through some of those objections and are ready to make the move, what should they be thinking about in terms of going from none to one, right? That hardest move that we often hear folks talk about in the real estate investing journey.

Let’s get started, I want to jump in and talk about the importance of having a strong personal financial foundation, it wouldn’t be a YFP podcast if we didn’t talk about that. Getting your financial house in order, such a critical first step before you go on that journey to invest in real estate. Let’s start there, Nate. Tell us more about why you and David emphasize this concept so often on the YFP Real Estate Investing Podcast as well as for your own personal journey why this has been so important.

[0:05:49.4] NH: Yeah, it’s something we reinforce all the time, right? Even the very speaking in the none to one, the very first half of the first class was all about, like, “Okay, you need to establish your own financial house and if you don’t then we need to take a pause and reset,” because without that, right? Nothing else can really track from there, right? We need to make sure that our own financial house is in a state where we can feel comfortable investing and that that investment decision is not going to be make or break, right?

We are very risk-averse, safety-oriented pharmacists as David and I like to say and with that, comes the concept that you need to be in a position where if things don’t work out perfectly, you’re going to be just fine financially. These are decisions we’re making not in a do or die situation, right? We’re trying to buy these properties or invest in a way that it supplements our financial plan, rather than, is the make or break piece of it.

[0:06:39.3] DB: Yeah, and there’s a lot of just potential instability or seeming instability in terms of real estate investing versus a lot of other types of investing. Kind of like in your personal budget, if you’re saving up for a car, you might be putting away money every month and eventually that car happens. There’s same kind of thing with the real estate investment if you may need to save monthly for a roof replacement or save monthly for furnace placement that’s coming at some point though those kind of things maybe a little harder to plan for. 

So those evictions, late rent, there’s just a lot more instability and so having a firm financial foundation beneath you, means that you can weather some of those storms and deal with some of those ups and downs of real estate, knowing that in no month is it ever coming out perfect, that all of the bills just perfectly line up but over time, hopefully, the average is added to something and ends up being a good investment.

[0:07:29.4] TU: There’s lots to dig into of course in that topic, in that umbrella, building a strong financial foundation, we’re not going to do that here today because that’s what we do every week on the show but I would point folks to episode 212 where I talk through some of the components of building a strong financial foundation, what does that exactly mean and why is that so important as you begin your real estate investing journey.

We know that real estate investing is such a broad umbrella and I think that’s one of the things that you guys have done such a nice job on the YFP Real Estate Investing Podcast is really introducing folks to the variety of different ways that they could invest in real estate but I think that because it’s so wide and because there’s so many options, that can be intimidating for a new investor. So David, tell the us more about how you and Nate break down real estate investing and what categories might be easier for first time investors as they get started?

[0:08:21.3] DB: Yeah, there are plenty of different avenues for real estate investing, kind of like the professional pharmacy, many different ways that you could practice pharmacy. As far as real estate investing goes, Nate and I like to break this down into buy and hold real estate investing where you just buy something, you rent it out long term, or flipping real estate where you buy it, you may fix it up and you may quickly then sell it.

You could apply those terms to single-family houses or multi-family apartment buildings or storage units or vacation properties or so many different categories. Just to make things pretty simple and to stay with areas of investing where people have some general familiarity often times just from buying their own primary residence, we talk a lot about the single-family, buy and hold, long-term rental where you’re simply buying a house, presumably a lot like what you live in and renting that out to someone else so that that simplicity and the clarity of buying a single-family house seems to be one way that people can make an easier jump into real estate investing.

It seems just a lot less intimidating to go buy a single-family, three bed, one and a half bath house than it is to buy an apartment building or buy a strip mall or buy a storage unit complex or something like that, there’s ways to dial back the intimidation factor that way.

[0:09:40.8] NH: Yeah, at the same time, we got a lot of people that come to us and say, “You know, Nate, I want to buy a vacation rental anyway, tell me about the short-term rental thing, you know? Can we do that?” And so there are other ways to get more adventurous with it if that’s what you want to go, where you can buy a property that you can use on the weekends here and there for the rest of vacation property and then rent it out the rest of the year.

We also see people and we’ve talked to individuals that are house flippers or even wholesalers where you’re taking basically, a great deal putting some capital into it or maybe very little capital into it and then flipping it to someone else. There are lots of options out there and just like David said, it’s just as diverse as pharmacy, you can – the term real estate investing is so broad, there’s so many different avenues you can walk down.

[0:10:18.0] TU: Yeah, for folks who haven’t yet listened to the many great stories on the real estate investing podcast, this is one of the areas that I love that you guys have done. I think really focused intently on the buy and hold strategy, David, for the reasons that you’d mentioned but you’ve also featured and then sprinkled some other areas to show the diversity that can be there, you know?

I’m thinking about the recent episode 46 where you had on Stuart and Elizabeth talking about motel hacking. I know you’ve had a couple of folks talking about short-term rentals so certainly, a lot of buy and hold, more of that traditional investing stories but other avenues that folks maybe thinking about as well. Now, I’ve heard you both talk a lot about the team aspect of real estate investing as a way to bring down the stress, reduce the barriers to entry. 

Nate, do you mean investing in partnerships when you talk about the team, finding a mentor or something else altogether?

[0:11:06.8] NH: Yeah, it’s kind of a little bit of everything right? There’s nothing wrong with a partnership or a mentor but a lot of times, we focus on just building this team around yourself that can help and it can be something as simple as the YFP community, right? As part of your team, you’ve got people that are helping you out, supporting you in those decisions, helping make things just a little bit less stressful but really, truly, that team that surrounds you, starts with a good real estate agent.

Someone that has your fiduciary interest and making sure that you’re going to be successful and really, as that starts to expand, then your team can expand as well. You know, when we talk about building a team, it sounds really intimidating and so we really try to focus more on starting with really good core individuals around you and then expanding from there and then as you build your confidence and as you start to expand what your kind of projects you’re able to take on.

[0:11:50.3] DB: Yeah, that’s absolutely how we guys started to, we started with the realtor from our own investing and that realtor helped us, the first property that we bought, we needed someone that new plumbing because there’s a plumbing issue so I asked the realtor for a contact for a plumber, the realtor offered us a few different contacts, we were able to find a plumber. From there, we needed someone that could do dry wall, we reached out to the realtor.

And so, our team grew very organically just in terms of reaching out to that realtor, even when it came to an insurance agent or a property manager, those connections all happened just from that initial networking through that initial realtor and then contacts from contacts and going from there.

Even like Nate mentioned on the Facebook group, online connections, online networking, other local real estate meetups, we were able to over time add a book keeper and a tax accountant an attorney and lenders and other folks from there so you know, absolutely, that can sound intimidating on the front end of this enormous team that feels like is necessary when you listen to podcast and read books but for us, it just started out with a realtor and one foot in front of the other. Finding one contractor at a time as we needed people on our team growing that organically.

[0:13:01.6] TU: Love the simplicity of that, David. I’ve heard you and Nate mentioned that before as I think folks often hear stories of investors that have been at this for several years and they’ve got that team, right? They’ve got contractors, they’ve got insurance agents, they’ve got property managers, they’ve got, on the financial side where there’s bookkeeping, individual financial planning, tax side, they got attorneys, they’ve got a team that has really been built over time but they didn’t start there and so I think that step of my team and having that team in place can often paralyze folks if that’s something that they don’g think — maybe I can start with one individual, what if I start with a really good realtor that can help me take that step forward, that’s feasible, that’s manageable and then I can build my team out over time.

If I’m listening and I’ve narrowed down the type of real estate investing, let’s say I’ve determined what type is a good fit for me at least to get started, I thought a little bit about the team or finding that agent who is going to help me overtime, build out that team. The next question I think that comes to mind, especially in the current market is, where does one find a good investment property? Am I leaning on my team here, am I doing my own search on Zillow? Nate, what are your thoughts here?

[0:14:11.2] NH: Yeah, I think it’s a common question we get and I think the misconception that comes to us often is, the only way to find a good investment property deal is off-market because especially if you listen to some of the bigger players, people that are doing this for a long time, they find some of their best deals off-market but that’s not the only place to find them and so I think, again, that’s another intimidation factor that David and I really focused on dispelling is that there are absolutely deals that you can find on Zillow on the MLS or your real estate agent, you can go off-market and there’s advantages and disadvantages to doing that but you don’t have to.

Even something as simple as connecting with a good agent, getting an MLS, auto email setup and what I mean by that is, you put your criteria and your budget into the system and every morning, you’re going to get an email that says, “Here are the houses that meet your criteria,” and starting to understand your market, you’d be surprised at how quickly you’ll start to find a deal because now, you know everything in that market and so when a property pops up, now all of a sudden, you know, “Yeah, that one’s worth looking at” or “No, we can skip it, that’s not worth our time.” It just makes that deal-finding so much easier. 

We were actually just talking about this last night on the none to one course about an individual that’s like, “I know there’s exactly 10 duplexes available in this particular area when the 11th one pops up, I know what to do in terms of whether or not it’s worth offering on” and that is how you really understand the market and when a good investment property comes along, you can really take action on it.

[0:15:29.4] DB: Yeah, I think that’s really important. One of the things that Nate, that you said there was the word criteria. I think that that makes it so helpful for a real estate agent that you’re working with when you define, we need to say, I’m looking for a great investment property, the realtor in the other side there is like, “What precisely do you mean? What am I looking out for you?” 

That can be really puzzling but if you’re saying that, “I’m looking for a duplex between this street and this street, around this school” when you can be that clear. “At this price point, I want one half to be vacant, one half to be tenanted because I want to move in and house hack.”

Whatever those criteria are, the more precise and specific that you can get for that real estate agent, the easier it will be to find a search, even if there are only 10 on the market right now in that example, it’s so much easier to identify that when it pops up and to jump quickly, which is a big thing in this market is not falling into analysis paralysis once you see that opportunity but being ready to jump on that when it shows it face.

[0:16:29.3] TU: Yeah, speaking of analysis paralysis, you know, I think that pharmacists, it’s safe to say are very numbers-oriented and so when I hear you guys talk about like criteria and is it worth it, I am sure that many would be relieved if there is a sure-fire way to run numbers, identify if an investment is a good one or not and so you guys just released episode 50 where you talked about a spreadsheet analysis. 

That brings comfort to me as a pharmacist, right? I can put numbers into the spreadsheet and that can at least help guide me. Tell me a little bit about how someone can use math to evaluate an investment and what that looks like? 

[0:17:02.7] DB: Yeah, the math I think sounds intimidating right? When we talk about math pharmacist think like amino glycosides and it gets really complex in a hurry but when we talk about math in the real estate standpoint, it is relatively simple compared to what we do in the pharmacy world. 

There is a common misconception that as long as the rent is higher than the mortgage payment, I will be making money and I feel like that is one of the key drivers behind the episode that we had to walk through the numbers and what are the other expenses that you may not be anticipating but they factor in. 

So things like paying a property manager, if you choose to not self-manage the property or paying for those repairs and those larger expenses like we mentioned the roof and the furnace and things like that that if you own the property long enough, you will have to replace those things and setting aside money for that. 

There are a lot of other smaller expenses that are easier to overlook and so again, that’s kind of the driver of setting up that spreadsheet and not just setting that up to make sure that those categories are captured but also setting that up with some notes in there to make sure that the information going in is good. 

If you have your estimates wrong on each of those categories, it’s going to be a garbage in garbage out kind of analysis and it will be hard to trust those numbers, so we try to spend some time in that episode to talk through what are those categories, how might you estimate those, how would you get a little more precise in that math so that you have a better idea of how you might expect that property to perform from an investing standpoint. 

[0:18:33.2] NH: Yeah, really good point David about the numbers and not getting too lost in the spreadsheet. It is important to use and it’s a great way to start using math to evaluate a property but you’d be surprised the amount of things that you can catch that don’t have to do with math, right? Maybe the property you’re looking at is on the same street as another one that you like or another one you are comparing it to but it just so happens to be right across the school district line. 

So now, it’s not the same school district, which means it affects the property value or it affects the rent rate and so there is all these little nuances that can go along with it, and again, that’s where your team can kind of come in and help you out. Again, relying on that real estate agent, relying on maybe a property manager to help with rent rates and just taking a double look at things, once you’ve done the analysis to make sure that it actually marches out in real life. 

If you are interested too, I don’t think we’ve dropped this here but I would mention in episode 50, we actually put together that spreadsheet that you can download yourself. If you head over to yourfinancialpharmacist.com/analysis, you can download that spreadsheet for free. A great way to again, run the numbers the same way that David and I do. 

[0:19:25.8] TU: Awesome, thank you guys so much for putting that together. Again, yourfinancialpharmacist.com/analysis, we’ll link to that in the show notes. All right, so we’ve talked about several things so far. We have talked about the importance of having a strong personal financial foundation before we jump into real estate investment. We’ve talked about the different categories, the aspect of forming the team, and how you potentially find and evaluate an investment property. 

Let’s transition to some common FAQs that you all hear from folks that are getting started in real estate investing. David, the first one here is, “Can I only invest close to where I live? Don’t I need to see the house before I buy and drive by the house regularly?” this concept of investing in my backyard or perhaps, is there an opportunity to invest at a distance? 

[0:20:11.5] DB: Yeah, it’s a great question, one that we hear often and it has come up quite a few times in the none to one course particularly when we are talking with pharmacists that live in really pricey markets where it just feels intimidating to try to buy in that area compared to for instance the Midwest where Nate and I live and where properties are much more affordable than something on one of the coast. 

I think the short answer is you don’t have to invest where you live. It may be less intimidating to invest or to go through your first investment process close to you and that is something that I did personally. We bought a house that was very close that I drove past on my way to work and so it was just very simple to keep an eye on that and to feel that kind of sense of security until I started doing that and realized like really not bringing a lot of value to this. 

When I walk a property compared to when a contractor or realtor walks a property, they see a lot more than I see. When I drive by that house, I’m like, “Well, it is still there, it hasn’t burned down” I mean, there’s not really a lot of value that I brought to that so we started overtime in an area about a 45-minute drive from where I live, which I know to a lot of people that’s a daily commute, right? 

That is not super far but it’s the point where we’ll buy a house, there have been houses that I have not been inside or driven by because we just value that team so much and the team perspective that if the contractor has walked it, if the realtors walked it, if the property manager is on board, there’s again, just not a lot of value that I bring to that equation. Again, even though it is not far away, we’re investing in houses that are far enough away that we’re not going there and we’re not in that day to day aspect of the investing, which is really helpful when you work a full-time pharmacist job and you don’t want to be distracted by your real estate investing. 

[0:22:04.2] NH: As someone that does both in state and out of state myself, I totally attest to that like the ones that are out of state are so nice because I don’t have to worry about them, and then the ones that are in-state, you end up doing what I did, which is spend pretty much my entire Saturday painting and demoing a basement this weekend, so you can fall into that trap pretty easily. 

[0:22:21.4] TU: You beat me to it Nate, before we hit record you are talking about your time spent this weekend and I was just thinking about that in terms of being in your backyard. David, one of the stories that I remember you telling early, I can’t remember if it was snow removal or mowing the lawn but you had mentioned that itch. That hey, I drive by this property, I see it all the time and I maybe have a tendency to think like, “Ah maybe I don’t have to depend on the team. I could save a little bit of money if I just shoveled the snow myself” right? 

Obviously as you build out a portfolio, as you have, and of course you’ve built out a team that has helped you but that risk, I guess if you call it that can be real when you see the property so often.

[0:22:56.2] DB: Oh absolutely, yeah. I have vivid terrible memories of like six in the morning standing there with a snow shovel because the house was halfway between where I live and where I work and I am like, “Oh, I could just do this real fast” and then my feet are soaking wet and freezing and all that kind of stuff, it’s like why did I just pay someone the five or ten dollars or whatever it would be to shovel this? 

Why did I feel like that was a good use of my time at six in the morning? So yeah, with some of this stuff there is some healthy separation when you’re investing just far enough out that you aren’t tempted to go run and do these things yourself. 

[0:23:30.3] TU: Nate, the second question here and David hit on this briefly but I want to come back to it is this idea of is it a good investment if the rent is more than the mortgage and what’s the potential trap in that and what are some things that folks could be looking for to help avoid that? 

[0:23:44.9] NH: Yeah, I think this actually goes back to that spreadsheet we talked about was it is not just simple numbers of, “Okay, the rent is 1,500 and the mortgage is 1,200 so cool, I am cash flowing 300 bucks a month” like that is not actually how the math works, right? We need to figure out a lot of the other factors that go into it because this is again, it is truly a business. It is an investment and so it has to run itself and by that, I mean that the repairs take care of themselves. 

In terms of cost, the capital expenditures, big things like a roof or a furnace that breaks, again, the investment should be paying for all of those, so when we run the math on what a good investment property is, it needs to pay for itself every single year, year in and year out and put money back in your pocket to be considered again, “a good investment property.” I think running those numbers is really important and not just looking at the simple things but truly diving into the details and even though it sounds complicated, you can do this in three minutes, right? 

Running the back of the napkin math and then getting into the nitty-gritty details if everything checks out. 

[0:24:40.1] DB: Yeah and we try to sneak into that spreadsheet a couple of things too like other rules of thumb that you can look at. For instance, you may expect that the overall rent about half of that rent may go to general expenses like your taxes, your insurance, your repairs, property management, some of those things and so again, if that rent starts looking pretty suspiciously close to the mortgage payment, I get nervous that that property is not going to create positive cash flow every month. 

[0:25:09.1] TU: Next question David is, do I have to do major renovations to a property? I think that is one of the fears I know I had, I suspect many have is how handy do I have to be and obviously some of the financial things that can come to this as well. So talk to us through this question. 

[0:25:24.9] DB: Yeah, it’s a great question because people that watch HGTV think that yeah, all of these investors that jump in and buy these houses, they spend hundreds of thousands of dollars on these extensive rehabs that take months and multiple crews and it just feels super intimidating. We bought a house late last year that already had a tenant in it. It had just been fixed up, it was a great house and we liked it for the simplicity of not having to do any kind of renovations to that property, so that’s definitely an option. 

We’ve also bought houses where all we had to do was go in and do paint and flooring and for a few thousand dollars it was done. So you can do no renovations, you can do minimal renovations or if you want to, if you want to do a pretty extensive rehab, there is potentially more money to be made and you could argue it is a potentially better investment but it may take more time. If time is scarce in your pharmacy world, don’t feel like you have to do major renovations to a property to have a solid real estate investment. 

[0:26:27.6] TU: Speaking of time Nate, you know I think one of the common questions that comes up is, do I have to work with a property manager? Could I save a little bit of money here and do this myself? Although recognizing that some time might be involved and invested here. Talk to us about that question of, do I have to work with a property manager? 

[0:26:43.8] NH: Yeah and again, I’ll bring in my own experience to kind of speak to this. I manage our local properties myself and then the out of state ones, I absolutely push off to a property manager. I have a foot in both worlds and there are advantages and disadvantages to both. I like doing some of the property management here locally one, because of the cost savings but two, it helps me be a better manager of my property manager. 

I know how I want things to operate. I am a very detail-oriented nerdy pharmacist, right? I know how I want it to run. I know what my expectations are and so I can put the same expectations on the property manager that I am hiring so it helps to do both but it is not for everybody. I think David and I talk to people all the time about individuals who quickly identify, “This is not for me” or “I always want to be have a hand in this, I want to be involved. I like talking to my tenants.” 

It is across the spectrum, there is no wrong answer to this. I think a lot of it pans down to what do you want to do and how do you want to operate. 

[0:27:35.0] DB: Yeah, even when it comes to the property manager I think one thing to consider is, what is your pharmacy job like? There are certain pharmacy jobs where you can be interrupted and take phone calls and manage things two minutes here, three minutes there and there is others where you just absolutely can’t and so for me, I didn’t want to be in a position where I had to take phone calls during the day, I wanted a property manager to create that separation but again, that’s not for everybody. 

If you do want to be a little more hands-on, you want to see those things, you want to be able to manage a little more closely, that is not necessarily something that you need to do and you could potentially save money if you are willing to take on those property management tasks yourself. 

[0:28:09.7] TU: David, last question I have here relates to financing. Nate and I recently did a home buying webinar. We also did a LinkedIn live session and it seems like one of the topics that has a lot of interest that relates to the pharmacist’s home loan products where there is either a low down payment or in some of the physician loan products are out there, a zero down payment. 

So often, I think folks might be wondering as we translate that from primary residence to real estate investment properties, are there zero down or close to zero down payment options for investment properties or what does that look like? 

[0:28:41.9] DB: The short answer is not really but kind of. So when it comes to real estate investing, if you are just going to go out and like I mentioned before, finding a property that already has a tenant in it that’s already fixed up, the lending options are mostly putting a pretty decent down payment, 20, 25% something like that down on a property like that. That is the most common type. 

If you are trying to get into real estate investing with less money down, there are options that just take a little bit more creativity or finding a loan product that aren’t quite as common. What we did in our first rental is we bought a property that we thought would be a good rental someday and we moved into it and we lived there for a period and then when we were done with that property and we were ready to move on to another personal residence, we kept that original property. 

So that is where if you’re buying a property to live in with a zero down payment or very low down payment mortgage, you can often times keep those properties as rentals when you move somewhere else. If you do zero down to move into it personally, two, three years later, you do zero down and move into something else and you retain that property, that can particular in the price of your market save you from that 20, 25% down payment that can feel kind of overwhelming to save up for, for a real estate investment standpoint. 

[0:29:59.2] TU: Great stuff guys. We’ve covered a lot of ground in a short period of time and I would highly encourage folks if they aren’t yet tuning in to the YFP Real Estate Investing Podcast, each and every Saturday morning a new episode goes live, please make sure to do so. We’ll link to that in the shownotes, you can find it on Apple podcast or wherever you listen to your podcast. 

Also, if you are not yet a part of the YFP Real Estate Investing Facebook group, we’ll link to that in the shownotes as well. A great opportunity to come together with a community of other pharmacists that are everywhere in the real estate investing journey from, “Hey, I wanting to learn more, I am thinking about it” to “I am actually pulling the trigger on the first property” to “I am beginning to build my real estate portfolio.” 

David and Nate, thank you so much for taking time to come on the show, I really appreciate it. 

[0:30:37.0] NH: Yeah, happy to be here.

[0:30:38.6] DB: Thanks so much. 

[END OF INTERVIEW]

[0:30:40.0] TU: Before we wrap up today’s show, let’s hear an important message from our sponsor, Insuring Income. If you are in the market to add own occupation disability insurance, term life insurance or both, Insuring Income would love to be your resource. Insuring Income has relationships with all of the high quality disability insurance and life insurance carrier you should be considering and can help you design coverage to best protect you and your family. 

Head over to Insuringincome.com/yourfinancialpharmacist or click on their link in the shownotes to request quotes, ask a question or start down your own path of learning more about this necessary protection. 

[DISCLAIMER]

As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of 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 post and podcast is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analysis 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 again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

[END] 

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YFP 182: How This New Practitioner is Leveraging a Team to Invest in Long-Distance Real Estate

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How This New Practitioner is Leveraging a Team to Invest in Long-Distance Real Estate

Young Park, new practitioner and real estate investor, joins Tim Ulbrich on this week’s podcast episode, sponsored by APhA, to talk about his portfolio, why he likes real estate investing, how he got started, what has worked, what hasn’t worked, and why and how he invests in Kansas City while living in Hawaii.

About Today’s Guest

Young Park currently serves as an Ambulatory Care Clinical Pharmacy Specialist at the VA Pacific Islands Health Care System in Hawaii. He moved to Hawaii for this specific position after completing a PGY1 residency at the VA Sierra Nevada Health Care System in Reno, NV. He completed his undergraduate study at the University of Georgia, then completed the Doctor of Pharmacy program at Philadelphia College of Osteopathic Medicine (PCOM) in Georgia.

Young started learning about financial independence and investing after making the far move to Hawaii. His big “why” is to help provide financially for his parents and to be able to spend more quality time with his family and loved ones. He’s working towards financial independence through investing in out-of-state cash-flowing rental properties using the BRRRR strategy.

When he’s not working, he serves at his church on the Sound Team, enjoys Hawaii’s beautiful beaches, and learns about personal growth and investing.

Summary

Young Park, a 2017 pharmacy school graduate, stumbled upon real estate investing on YouTube and quickly discovered how powerful of an investment vehicle it can be. Young was originally interested in investing with stocks but decided to move forward with real estate investing because he felt it has the best return on investment and because of the long-term benefits like appreciation, tax benefits, and mortgage pay down.

In less than 2 years, Young has acquired 3 rental properties in Kansas City, Missouri while living in Hawaii. He decided to invest in real estate thousands of miles away for a few reasons. To start, the cost of homes in Hawaii is extremely high and it’s difficult to find a good real estate investment deal. Additionally, he connected and began working with a mentor that invests in the Kansas City market and was able to lean on him for advice while also leveraging the team that was already in place until he could build his own.

Young also digs into how he’s using the BRRRR method on his investment properties, how he’s getting the capital to fund them, how he analyzes a potential deal, how he’s formed a team to support him, the challenges he’s faced along the way, and how real estate investing is supporting his financial why.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Young, welcome to the podcast.

Young Park: Hey, Tim, thanks for having me.

Tim Ulbrich: Super excited to have you on. When I learned about your story as a new practitioner, active in real estate investing, getting started, taking that first step, we’re going to talk about your journey, what’s worked, what hasn’t worked, why you’ve been doing what you’re doing, what your plans are going forward, and I think this episode is going to be incredibly valuable to our community that is interested in learning more about real estate investing or perhaps even for those that have started looking to build upon the portfolio and the work that they’ve done so far. So Young, before we jump into your real estate journey, tell us a little bit about your background into pharmacy, how you got into pharmacy, what interested you, where you went to school, and the work that you’ve been doing since graduating in 2017.

Young Park: Alright. Hey, first of all, thank you again for having me here on the show. I am so excited to share my story today. So man, about myself. I don’t know how far I need to go back. But yeah, as a child, I guess in high school, I actually wanted to go into music, like into music engineering and recording and playing in a band and stuff. However, my parents were definitely against it. We’re immigrants, so we moved from South Korea back in ‘98. And you know, my parents moved to the States so that we can have better opportunity for me and my sister and just kind of live that American dream that they were hoping for us. They just heard about pharmacy from their friend, how their sons and daughters went to pharmacy school and they graduated, got a awesome deal with a brand new car and a brand new BMW. So to them, this was the American Dream for us. Eventually, I kind of followed that step. I went to — I finished my undergraduate study at the University of Georgia, and then I went to the Philadelphia College of Osteopathic Medicine in Georgia campus for my pharmacy school. So I think one of my professors, Dr. Brett Rollins, was on the show before.

Tim Ulbrich: Yes, he was.

Young Park: Yeah. So yeah, I went to that school and then after that, I completed my PGY1 at VA Sierra Nevada Healthcare System in Reno, Nevada. And after that, I took this current position that I have with the VA Pacific Island Healthcare System in Hawaii as an ambulatory care pharmacist.

Tim Ulbrich: So Georgia, Nevada, and then Hawaii, right?

Young Park: Traveled quite a bit, yes.

Tim Ulbrich: That’s awesome. Well, cool. And so we’re going to talk in a little bit about how do you effectively invest as a real estate investor in Hawaii and why you’ve chosen to go out of area to do your investing in Kansas City, and we’ll talk about why that’s important as we may have many listeners that say, “Hey, I’d love to get started with real estate investing, but you know what, my market isn’t really conducive to that,” high cost of living area, whatever be the reason. Obviously you ran into that, and we’ll talk about how you selected the market that you did and what has been difficult and what has worked with doing some long distance investing. But before we get there, talk to us about for you, why you like real estate investing as an investing vehicle for you going forward and one that you want to build your plan around. Obviously our listeners know there’s lots of different ways to go about investing, traditional accounts, 401k’s, 403b’s, IRAs, obviously they could invest in brokerage accounts, they could start their own businesses, real estate and within real estate, many different ways that you can do this. Why, for you, is real estate an investment vehicle that peaked your interest?

Young Park: OK, so I started getting interested in investing initially into paper assets such as stock, like most people, because that’s the easy one to get into. And I was learning more about that while I was watching YouTube videos, honestly. And I accidentally stumbled upon YouTube videos on real estate investing like Bigger Pockets and some other YouTubers who invest in real estate. And it really got me interested in real estate investing because to me, that had one of the best return on investments, and it’s a hard asset where you can physically obtain the asset. You know, paper asset is great, but it’s almost like a made-up money in the computer space somewhere that determines like this is worth that much. So yeah, that’s why I really got into real estate investing.

Tim Ulbrich: And how do you as an investor — you know, one of the benefits people always talk about with real estate of course is long-term appreciation, tax advantages, you know, that you may not see in more traditional investing — how do those things factor into you wanting to prioritize real estate investing?

Young Park: Yeah, so to me, if I were to compare real estate investing to stock investing, it’s like getting a really high-yield monthly dividend while the tenants are paying down your mortgage. And like exactly what you said, you know, you’re getting the long-term appreciation of the property, you’re getting tax benefits through the appreciation, you’re getting the mortgage paid down, also you’re getting the cash flow — and your cash flow over the long term is going to increase year by year because your mortgage will stay the same and your rent will increase.

Tim Ulbrich: Yeah, and of course — and we’ll talk about your specific properties and how you crunch the numbers. Obviously, we’re talking here under the assumption of you do this in a way that works and is financially viable and of course being able to analyze properties, determine what is a good deal, what is not, is very important as we look at the benefits of real estate investing. Now, before we get into the x’s and o’s and specifics of the property, I like to ask folks such as yourself, what’s the motivation, what’s the purpose, what’s the why? Because we talk all the time on the show about our mission of wanting to help as many pharmacists as we possibly can achieve financial freedom, but I know that that word, “financial freedom,” can mean something different to everyone that’s listening here to this episode. So for you, Young, as you think of that concept of financial freedom and how real estate investing fits into that goal, tell us about what your purpose is, what your why is, what your vision is, and why real estate is really just a piece of being able to achieve that.

Young Park: Great question. So why is extremely important. For most people, they really break it down. The money is never the goal of achieving whatever you want to achieve. It’s actually the time and what you can do with the time that you’re able to obtain through building wealth. So for me, my biggest why is — I will say two things. First of all, I want to provide for my parents financially and also to achieve financial freedom for myself, the time freedom. So my parents moved our family of four to the States with the hopes and dreams of providing a better life and opportunity for me and my sister. Neither of them went to college, and they still don’t speak much English at all. And they did manual labor well into their 60s to provide for us so that we can complete our education. All they knew was to work really, really hard for paychecks and bring food to the table. And because of this, I’m extremely privileged. So because of what they’ve done for us, my main why on investing is for my parents, so that I can help them to retire and live comfortably. And my other why is to be financially independent for myself and for my soon-to-be wife Jamie and our family that we’re going to have so that we can live on our own terms and have options. You know, God forbid, but if something were to happen to my family, I want to be in a position where I can just drop everything and go and be with my family as long as I need to. And building that financial freedom and wealth allows you to have that option.

Tim Ulbrich: And Young, what I heard there, which I love — and I hope our listeners will take heart — is the conviction in which you share that to me tells you’ve No. 1, put thought behind that but No. 2, really likely then provides clarity when you’re making your financial decisions, you know within what context, what frame you’re making those decisions because you’ve thought about, reflected upon, that why. And what I heard from you there was wanting to be able to provide and care for your parents, wanting to get to a point of financial independence such that if you were to wake up tomorrow and for whatever reason, you weren’t able to earn the income that you currently earn, that you would be able to move on without stress and continuing to move on with the rest of your goals and the things that you like doing. And the third thing that I heard was time. And my follow-up question there — because I hear a lot of entrepreneurs talk about time, I hear a lot of real estate investors talk about time, but I very rarely hear people talk about why is that time important. What do they want to do with that time to have that option, to have that freedom, with their time or to gain back more of that time? So for you and your family, more time means what?

Young Park: So more time means spending time with your family and your loved ones. So you can do whatever you would like with whoever you want, you know, going wherever you want to be and how you want to spend your time. You know, for me, growing up, my parents were both working really hard, so they weren’t around home that much. We were still extremely grateful for them, but I want to be a parent that’s there for my children whenever they — let’s say they have a play or they’re playing sports or we get to just enjoy our weekend time or go on vacation together, and I just want to be able to do all those things. Working W2 jobs, it’s great. You get great benefits, and I love my job. But you know, you’re still restricted to certain schedules. You have to meet certain quota, and you know, your schedule can always change — yours and your wife, right? Your spouse, you have to line up our schedules together and all of that’s considering I think that financial freedom and being able to build more time to spend with the loved ones, that’s all I want.

Tim Ulbrich: That’s great. And here, we’re talking about real estate investing being one vehicle in which you can achieve that goal of financial freedom, which of course means being able to do the things that you just said were most important. And so let’s jump into July 2019, you purchase your first property. So two years out from school, I want our listeners to hear, you know, obviously you’re at a point where making that transition post-residency into your first job and you pick up on real estate investing as an opportunity to pursue. So July 2019, tell us about that first property, where it was, what the property was like, what you purchased for it, what you spent to kind of get it ready for tenants, and then ultimately, what it means for you from a rental income standpoint.

Young Park: Sure. July 2019 was when I purchased my first property in Kansas City, Missouri. So I have a whole story about getting into Kansas City market, right, from Hawaii. But just to talk more about the property itself and the investment itself, it was purchased off-market. I actually got it from a wholesaler on Craigslist, believe it or not. Yeah. I didn’t know that was a thing. I was looking into a bunch of wholesalers group on Facebook, you could find that. I spoke with a bunch of realtors to get on their list, and you know, I was also searching on Craigslist to see if there are other owners that wanted to sell their properties or potentially wholesalers. So I found that property on Craigslist from a wholesaler. He actually posted it for — are we allowed to talk about numbers?

Tim Ulbrich: Yeah, go ahead.

Young Park: OK. So he listed the property at $65,000. And I offered $50,000. Of course, I kind of lowballed him. But he got back to me saying, “Hey, if you have the ability to close within five days, all cash, we can do it at $55,000.” And for a new practitioner coming out of pharmacy school, a year of residency, and you have about a year of actual job under your belt, you don’t have $50,000 in addition to me having a ton of student debt. So getting the cash was a — is a whole other story that I need to talk about. But I was able to pull that off, I had $50 in cash, so I close on the property, and we actually negotiated the route crosses. He actually wanted to close out within five days because he had a family reunion coming up the following week, so he just wanted to be done with it. We actually renegotiated so that we got it for $53,000 instead of $55,000. So I got that property at $53,000. And I actually have my mentor, who that’s how I got into Kansas City market. And I used his contractor, who’s been vetted, and they’ve been working 3, 4, 5 years together. So that contractor knows exactly how to turn a property, how everything should look, and I had my mentor, CJ, to be the project manager so that he’s just kind of managing everything and I’m just giving the rehab costs, I guess, on weekly, biweekly withdrawals so that I’m just continually funding it. And once I get some photos saying oh yeah, these were done, then I send in my next draw.

Tim Ulbrich: OK.

Young Park: So I did all that, and everything ended up — the rehab costed about $42,000, I want to say.

Tim Ulbrich: OK.

Young Park: So I’m all in $95,000. So I got that rented out — that was a whole other story about getting it rented out because it was during the holiday season, right around this time actually, and in the Midwest, I’m sure over there, it’s freezing cold, snowing, and no one wants to move during the holiday season.

Tim Ulbrich: Not a great time to find a tenant.

Young Park: It’s not. It’s really not. But you know, right after the new year, so it took a couple months, stayed vacant for a couple months, but I was able to get it rented out in January for $1,000 plus $25 in pet fee.

Tim Ulbrich: So $1,025. So just to rehash these numbers, you purchased it with some negotiation from a wholesaler, $53,000. $42,000 on the rehab, so you’re all in for $95,000. And you’re renting it for just over $1,000. And I’m guessing mortgage, interest, taxes, insurance, probably little less than $800?

Young Park: Correct, correct. But at that time, I didn’t refi yet.

Tim Ulbrich: Right.

Young Park: So I didn’t have any mortgage payments at that time. So after I was able to rent it out — so the strategy I used is the BRRRR strategy, right? So I bought it, I renovated, I rent it out, so I was able to refinance out and it appraised at $142,000.

Tim Ulbrich: Oh, wow. OK.

Young Park: Yeah. So there was a pretty decent chunk of spread there. So I was actually able to pull all my cash out and then some. So it covered all my purchase, my rehab, and then I think I — after closing costs and everything, I think I pocketed about $5,000.

Tim Ulbrich: $5,000. And for our listeners, we’ve talked about the BRRRR method on the show before, and I’d reference our listeners back to other episodes on real estate investing that we’ve done as well as the Bigger Pockets website, podcast, lots of great resources. They’ve got a book solely on the topic of BRRRR. But you know, the goal here — which Young’s story is a great example of that — is to with the cash investment of the property, be able to pull all of that money out or all that plus some, I guess ideal, or if not all of that, as close as you can, so that you can move on and repeat the process into the future, which you did in a second property, which we’ll talk about here in a moment. But I want to break down this one with a little bit more detail and get into some of the weeds here. When our listeners hear $53,000 purchase, $42,000 in rehab, $95,000 all in, rent a little over $1,000, how did you analyze or evaluate as you were projecting not only purchase price but rehab, potential rent? Talk us through your analysis process and determining what was or was not potentially a good deal.

Young Park: So yes, so you want to start before you purchase it, you want to start with the end in mind. You need to start from the ARV, which means After Repair Value. So you want to know what the property would appraise at at the end of the day. So from that point on, you want to figure out what the rehab costs would be and then that gives you what your purchase price can be. So that would be your offer price. So once I do that, I kind of analyze it. So let’s just say for this property as an example, I actually estimated this property to appraise at about $120,000-130,000. So I actually got really lucky. And $120,000-130,000 is actually — you know, if I really think about it, it’s on the conservative side. I always calculate it in the worst case scenario. And if everything works — if it makes sense for me, even if I were to pay like $10,000, $20,000, $30,000 out of pocket, would I be OK with that? And if I am, then I go with it because that’s the worst case scenario, and you can only get better. Whatever you do better, that’s all extra sauce on it, you know what I mean?

Tim Ulbrich: Absolutely.

Young Park: And so yeah. So I do that. So I analyze the property by finding the ARV. And then I estimated the rehab with me and my mentor because he’s done it for so long that he could kind of look at the pictures and see what the estimate would be. And it actually aligned pretty much what we thought it was going to be. So we got that rehab, and we were OK with the purchase price because I was thinking $53,000 purchase, about $40,000 rehab, and appraise it for $120,000. So that’s roughly about 75% of that $120,000 for me to do a full BRRRR.

Tim Ulbrich: Got it.

Young Park: The rehab was a little bit more, but the ARV was a lot higher than I thought. So I was able to actually do a whole run deal on my first deal.

Tim Ulbrich: And that makes sense, Young, if you had projected your numbers at an ARV that was $120,000-125,000 and it came out at $142,000, it makes sense when our listeners hear that you were able to pull out all your cash plus some because of the higher ARV, what ultimately came in at the appraisal when you went to go do the refinance. The other thing I wanted to touch on here, if I had to pick what I think are probably the two most common objections to getting started with real estate investing, they would be that one, I don’t feel like I have the knowledge or experience and two, I don’t have the cash, right, because of whatever. I’ve got student loan debt, I’ve got all of these other priorities of which we talk about on the show all the time, and I can’t necessarily save up $50,000, $70,000, $100,000 to be able to put down on a property. So talk us through how you addressed those two things. You mentioned student loan debt, so I’m sure our listeners are curious, you know, how did you go down this path while you still had student loan debt and how did you reconcile that? But how did you address this knowledge piece? And you’ve talked a little bit about a mentor. And then how did you address the capital and being able to have enough money to get started with investing?

Young Park: First of all, the knowledge portion. So you can get a lot of education just from — and they’re all available online. You can go on YouTube, you can listen to podcasts like the Bigger Pockets. You can read books. I read at least three books from Bigger Pockets and other investment books. However, these to me are just knowledge. And knowledge is important. And people say knowledge is power, but I really think it’s knowledge is just a potential power. It’s only powerful if you are able to take actions and apply it, right? If you just learn, learn and learn, it’s just information. But that doesn’t really get you anywhere. So you have to be able to take that action. And for me, just taking that mentorship was the action step that I needed. Through that mentorship program with CJ, I learned a lot. I learned every week. It was like a weekly phone call. But the biggest thing is that he guided me so that I can actually take the action that if I didn’t take that mentorship and have all these knowledge, who knows if I’d even have a property under my belt right now? Or maybe I bought a turnkey product. But yeah, to me, just learning, keep learning and just taking that step, leap of faith, to get into that deal, get to that first deal, that’s the biggest hurdle.

Tim Ulbrich: And how did you find, Young, that mentor? Because I think a lot of our listeners would say, “Hey, I’d love to have a Yoda in my life on the real estate side.” What steps did you take to say, to move from ‘I’m interested in real estate investing. I’ve read this book, and I’m ready to act and I need to find some people that can help me.’ Talk us through that process.

Young Park: Yes. So I started attending meetups. So after learning, learning, learning and Bigger Pockets, they always talk about, “Oh, come to our meetups.” People are always hosting in different cities. So I actually went on their website, found a meetup there, so I went to one of those meetups, and I learned a lot. And one of the guys that I met there actually pointed out to CJ and Jasmine, telling me that, “Oh, there’s this couple from Hawaii that invests in Kansas City. You should go check them out.” So I went to their meetup, and CJ was actually giving a presentation on investing out-of-state versus locally in Hawaii and how the numbers make so much more sense going out of state. The housing price here is ridiculous. The median housing price here is about $780,000.

Tim Ulbrich: Sheesh.

Young Park: Yeah, and your rents probably won’t even be .5% Rule, if you were to call that.

Tim Ulbrich: Yeah.

Young Park: So it just made more sense to go out of state. And they were doing exactly what I wanted to do, so I went up to go talk to CJ one-on-one and told him like, “Hey, I’m in this position right now. I really want to invest in real estate out of state as well.”

Tim Ulbrich: OK.

Young Park: And then that kind of led to us working together.

Tim Ulbrich: So that’s the knowledge/mentor piece. And I think the meetups is a great idea. We’ve been featuring more stories on this show with the hopes that we can connect more investors that can serve as a supporting community for one another. So that’s the knowledge piece, which led to a mentor, which led to some execution. What about the capital piece? I think many pharmacists may be in your shoes, three years out, five years out, seven years out, “Hey, Tim, I’ve got a boat load of student loan debt. I’d love to do real estate investing,” or, “I don’t even have student loan debt, but I just can’t imagine being able to save up $50,000-100,000.” Here, if you’re buying a property for $53,000, you’re doing a rehab for $42,000, you’re all in for $95,000. And the BRRRR method means that you’re bringing $95,000 of cash to get that done. Was that your money? Did you partner with other folks? How did you manage that?

Young Park: Yes, so I definitely didn’t have money. I had some money that I was getting from a W2 job, but this was actually one of the challenges or action steps that I needed to take during the mentorship course so that I can raise capital. So I had to go out and ask family and friends. I honestly — I think I raised $90,000 — I used some of my money too — from family and friends. And I got a ton of rejections. I asked over 30 people. And just to kind of explain to them what I’m doing, but you know, to them, of course I got a ton of rejections because I had zero track record.

Tim Ulbrich: Sure.

Young Park: I had no track record. People who invested in me — invested with me, invested in me because of our personal relationship. They just know me personally and they know my character. So I was able to raise that. And I think another thing that — I keep coming back to the mentorship. Because I had that guidance to show them like, “Hey, I’m not just going there blindly. I have the people there. I have someone who’s guiding me through the whole step,” I think that helped as well. So I was able to raise $90,000.

Tim Ulbrich: That’s awesome. Which makes that deal possible.

Young Park: It does. It does.

Tim Ulbrich: So and before we talk about your second property, your most recent property — unless you’ve done more since we touched base last — I’m sure our listeners are as curious as I am when somebody hears, “Hey, Young’s living in Hawaii, he’s investing thousands of miles away in Kansas City,” you know, what challenges — we’ve talked about the opportunity, right, obviously you have a more affordable market, you’ve got a group there that has connections through your mentor, through contractors, so you’ve got some track record and experienced people that know the market. So the opportunities I think are obvious. But the challenges may be not so much, or folks may hear that and think, eh, it’s not for me. You know, I can’t see the property, per se, I don’t know it, I’ve got to trust people, this is my first time. Talk to us about some of those challenges with the out-of-area investing and how you were able to overcome those.

Young Park: Good question. Yeah, of course. I think the biggest challenges that people can’t get out of their head is not being able to see and feel, touch the property. I personally have not been to Kansas City yet. And I did get a third property recently, by the way.

Tim Ulbrich: Oh, cool.

Young Park: Yeah. So just working remotely and you have to be able to — at one point, just go with your gut so you can trust people. And I’m not just doing that blindly. I’m starting out with the people I know. So I start with let’s say a realtor or I start with my mentor CJ, and he’s giving me referrals so I try this other contractor, which I used for my second property and now again for my third property. I’m just slowly building a network, building relationships, building my team. And when you’re able to do that, you’re putting a lot of pressure off of you. Right? You have people that are doing the jobs for you. You know, really, at the end of the day, you really don’t have to see the property. Don’t attach your emotion to the property. It’s the numbers. But of course you still need to figure out how can you trust those people? And you just — at one point just have to trust them, right? They’re not intentionally trying to rip you off. They’re good people trying to make their living as well. And we’re giving them opportunity, they’re sharing their experience by working with us. So I think it’s almost the same. You just don’t see them face-to-face. But working remotely has been a good system for me.

Tim Ulbrich: Yeah, and that’s one thing, Young, that I think about, you know, one of the takeaways. And I’d recommend to our listeners Bigger Pockets, David Green has a book, “Long Distance Real Estate Investing: How to Buy, Rehab, Manage Out-of-State Rental Properties.” That was the takeaway I had from that book was it in part forces you to think about your systems and your processes because there’s certain things you just can’t do, right? You’re not getting on the plane often to go to Kansas City. Not happening.

Young Park: Nope.

Tim Ulbrich: So you’ve got to have a team there that you trust, that you have systems for communication, that you have systems for vetting contractors, for paying those invoices. Then obviously with more experience will come more of a track record, and I think that will become a magnet to other investors and other partners along the way as well. So tell us a little bit about your second property, which I knew of, April 2020. Didn’t know you added the third, so congratulations. Tell us a little bit more about those and the numbers as you’re willing to share.

Young Park: Sure. The second property, as you can imagine, was April 2020. Right in the start of COVID. So that deal was so — I was scared, honestly. I thought about backing out from the deal multiple times. But I’m so glad I went with it. So this property was actually listed on the MLS, Multiple Listings Service. I saw that on Zillow, and I spoke with the realtor who posted it. And it was actually a HUD property, which if I’m trying to define it, I think it’s a property that was purchased with an FHA loan. And the person who purchased it couldn’t make the payments, so it was like a foreclosure. So it was bank-owned property. And that property actually had some plumbing issues, so it wasn’t eligible for a bank- or like Fannie Mae-backed loans.

Tim Ulbrich: OK.

Young Park: So you only — you could only buy it cash. So that was actually an opportunity for investors like us because most people who are paying down payments wouldn’t be able to afford that. Right? So that property was listed at $79,000. And I used a current contractor that I have and I had to trust him. I had not used him before. We had some ups and downs, but at the end of the day, he did me right, and we are working on the third property together.

Tim Ulbrich: Awesome.

Young Park: Those are the things you actually have to work on as an investor or with anyone, in fact. You know, people have different expectations. Right? So you know, his expectation and my expectations were different. But we talked it out like, “Hey, this is kind of like the finished product that I would like.” He’s like, “Alright, let’s do that moving forward.” So anyways, going back to my second property, so it was about a $25,000 rehab. So $79,000, $25,000, what is that? Like $104,000?

Tim Ulbrich: Yep.

Young Park: So that was my all-in. And I actually got it rented out, and it was rented out in September, I believe. Or maybe before. Oh, I’m sorry. I think it actually rented out in July. And this one was a lot higher because it was during the summer, so I got a tenant in there for $1,100 plus two pets, so $1,150 per month for the rent. And then I was actually able to refi out of that last month, less than a month ago, and it appraised at $144,000.

Tim Ulbrich: You like that $140,000 range.

Young Park: I didn’t go for that one, but it just ends up being that way. And to me, like when I was doing that conservative analysis, I was expecting it to be somewhere between $120,000-130,000.

Tim Ulbrich: OK.

Young Park: So with this one, I was actually expecting to have some of my money left in the deal, which was totally OK with me. But I ended up doing another home run. Maybe I have a couple thousand dollars in the deal at the end of the day.

Tim Ulbrich: So after the second one, if I’m doing my math right here, you’ve got about $286,000 worth of appraised property, and monthly cash flow in rent of just over $2,100, almost $2,200.

Young Park: Right, the gross rent is that.

Tim Ulbrich: Great. And then break down the third one for us.

Young Park: Third one, so I just got it under contract maybe — ooh, maybe two days after I refi’ed out of the other one or before. Somewhere around the same time. And oh man, this was an interesting one. So it was listed on the MLS since March. And it was initially listed at $115,000.

Tim Ulbrich: OK.

Young Park: And no one — there was like absolutely no interest on that property because it was still available by the time I purchased it. So every month, they’re cutting down by maybe $10,000. And in November — or actually, toward the end of October — they listed it at $85,000.

Tim Ulbrich: Wow. OK.

Young Park: Yeah. And I offered $65,000.

Tim Ulbrich: OK.

Young Park: And they came back to me saying, “Hey, we could do it for about maybe $75,000.” And I said, “There’s no way I could, I’m going to do it.” And this one actually was not an owner that was selling. It’s a huge investment firm that’s just purchasing these properties from auction, and they just keep the ones they like and they sell off the ones they don’t. So this was obviously one of the ones they didn’t like. So they were selling it, and I told them, “Hey, it’s $70,000 or nothing.” And then we agreed into the deal. So we got it under contract at $70,000. And then I sent in my contractor and got the estimated bid for it, and it was a little bit higher than I thought because they had a really good photographer, I guess, taking really nice pictures that looked a lot better than what it actually was.

Tim Ulbrich: OK.

Young Park: So yeah, my bid came back a little higher. So I went back to them and said, “Hey, I want another $10,000 discount or else I can’t do it.” And eventually, after a couple negotiations, they did settle for $60,000.

Tim Ulbrich: Awesome.

Young Park: So I got it from $85,000 down to $60,000. And my estimated rehab is about $40,000 on it.

Tim Ulbrich: And you’re still doing the rehab right now or starting that?

Young Park: Just starting, uh huh. We just — I believe we just finished demo, and they’re buying materials. Yeah.

Tim Ulbrich: OK. And what’s your estimated After Repair Value on that one?

Young Park: Right around the same, $120,000-130,000.

Tim Ulbrich: OK. And we won’t jinx it, but likely it could come in the $140,000s. So.

Young Park: Right, right.

Tim Ulbrich: Well, that’s crazy. So you got it at $60,000 through negotiation after you got the estimated bid higher than you thought. You said that it was originally listed at what? $115,000?

Young Park: Right, back in March.

Tim Ulbrich: Wow.

Young Park: Yeah.

Tim Ulbrich: Crazy. You know, what I love about this too, Young, too, it’s just a methodical, steady approach to getting that first deal done, learning from it, building from it, developing the team, you know, that’s the value of the BRRRR method. You’re getting your cash back out or as much as you can. Obviously through the refinance, going onto the second, going onto the third. And I suggest you’re just getting started. You know, my next question, as I suspect if you and I were to talk in three years, it’s probably not three properties but maybe it’s 10 or 20 properties and you’re probably helping and coaching others along this as well, is I mentioned two objections that I often hear, which were, “Hey, I don’t have the money to get started,” and, “I don’t feel like I have the knowledge or the experience to get started.” The third one I would add to that would be time. So as I hear you kind of going through all this, I think, man, where are you finding time to do all this not only in getting the deals done but then also in managing them? Talk to us about your approach to saving time, especially once you have them rehabs done and then you’re obviously managing these properties longer term. What have you done to minimize your time that’s invested?

Young Park: Good question. So first of all, I live in Hawaii and invest in Kansas City. So we are four or five time zones behind, so I start really early in the day. I usually wake up around 5 a.m. and get started and spend maybe an hour or hour and a half either analyzing or talking to my property manager or realtor or wholesaler or sending out emails and working on that. So I do that. Some days I come home and then if I see some properties that came through the email, I analyze them. And the other portion as far as maximizing my time, I have my property manager, who is managing everything. I would not recommend anyone to get into managing their own properties because your time is important. Yeah, you might be saving 8-10% of the rent, but you know, if you’re analyzing everything correctly and have that number included into your analysis, hey, it all works out. Another thing is I think more recently, I found a realtor that I really like, who is willing to write these low offers because most realtors think it’s a waste of time with the offers that they don’t think it’s going to go through. And you know, most of the time, it doesn’t. They’re correct. But if they find an investor who can actually close on the property, even though they’re on the lower price point, we could do multiple deals with them over the years. So that’s like an incentive for them as well. But kind of going back to that, I have my realtor, I just tell him, “Hey, John, I want to offer $60,000 on this property.” And then he just sends me the documents, and I just sign it online and he forwards it. So that saves a lot of time for me.

Tim Ulbrich: And I’m seeing a theme here of team. You know, you mentioned the mentor, you mentioned the agent that is willing to work with you on that, you mentioned the property management piece, you mentioned the contractors that you’ve gotten comfortable with, so I sense the team here has been incredibly important. And my last question for you is if we were to fast forward five years, what does success look like for you as it relates to your real estate investing?

Young Park: You know, I have to put more thought into that. I definitely — so personally for me, I don’t have x number of properties that I want because you know, number of property doesn’t mean really much. It’s really how much cash flow you’re getting. I would like to have maybe $5,000 worth of cash flow and I would like to go part-time if I can to free up time a little more and spend more time with my family and my loved ones and also be able to help my parents. I think that’s where I would like to be within five years. Sooner the better. We’ll see.

Tim Ulbrich: That’s awesome. And I love how you brought that full circle. I think it’s easy, especially as you’re having some success, you know, you kind of keep going, keep going, but what’s the purpose? Again, back to why you are doing this in the first place. And I sense for you that the time was important, the financial independence was important, the being able to provide for family and making sure that you’re investing in good cash flowing, profitable properties that will allow you to achieve those goals. So Young, thank you so much for taking time to come onto the show to share your story as a new practitioner that’s been active in real estate investing out of the area, what’s worked, and I think your story is going to be an inspiration and perhaps a guide for some that are recent graduates or have been out for awhile and wanting to figure out how they can get started in real estate investing. So again, thank you for coming on the show.

Young Park: Yeah. Thank you so much for having me, Tim.

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YFP 178: 5 Lessons Learned from Nate’s First House Flip


5 Lessons Learned from Nate’s First House Flip

Nate Hedrick, the Real Estate RPH, joins Tim Ulbrich to recap the 5 lessons he learned from his first real estate investment flip. Nate digs into how he found the deal, how he ran the numbers, what went well and what didn’t and how he sees real estate investing fitting into his financial plan.

About Today’s Guest

Nate Hedrick is a 2013 graduate of Ohio Northern University. By day, he is a clinical pharmacist and program advisor for Medical Mutual. By night and weekend, he works with pharmacists to buy, sell, flip, or rent homes as a licensed real estate agent with Berkshire Hathaway in Cleveland, Ohio. He has helped dozens of pharmacists achieve their goal of owning a house and is the founder of www.RealEstateRPH.com, a real estate blog that covers everything from first-time home buying to real estate investing.

Summary

Nate Hedrick, the Real Estate RPh, got into real estate investing in 2016 after reading Rich Dad, Poor Dad by Robert Kiyosaki. This book inspired him to diversify his assets, so Nate pursued real estate investing as a way to do just that. He obtained his real estate license shortly after and started to work with and learn from real estate investors.

Nate has grown to love the BRRR method (buy, rehab, rent, refinance) which allows him and his wife, Kristin, to preserve their capital while continuing to grow their portfolio. Although Nate lives in Cleveland, Ohio, it’s difficult to find a BRRR property there. He connected with a partner in Michigan and was able to find a great deal. He purchased a 3 bedroom, 1 bathroom, 1,400 square foot single family home from a wholesaler for $8,000 that needed a lot of work done to it. Nate digs into the 5 key lessons he learned from flipping property:

  1. Run your numbers, carefully.
  2. Plan for something to go wrong.
  3. It’s not like HGTV.
  4. Prepare multiple exit strategies.
  5. Trust your team.

Nate digs into each lesson learned and explains why they are so important to remember if you are on your own real estate investment journey.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Nate, welcome back to the show.

Nate Hedrick: Thanks. Always great to be here.

Tim Ulbrich: So we had you on not too long ago, Episode 160 where you actually took over the mic, interviewed Shelby and Bryce about their home buying experiences and working with you through the Real Estate Concierge service. So time for me to take the mic back as we go into this next episode. But how have things been going for you?

Nate Hedrick: They’ve been great. It’s been great. You know, COVID’s made everything a little trickier on both the pharmacy and the real estate side, but it’s still been doing really well. And actually, Kristen and I are enjoying the extra time we’re getting with the girls here at home. So it’s been really great.

Tim Ulbrich: Absolutely. Definitely a silver lining I guess if there is one in the pandemic. You know, I’m guessing our listeners might be wondering how you as a opportunistic real estate investor are looking at real estate, the market, in terms of both what you’re seeing as an agent but also as an investor in the midst of the pandemic. So give us some insights from your viewpoint as both an agent and helping people get placed into homes as well as an investor. How is the pandemic impacting things on both sides?

Nate Hedrick: Yeah, it’s really interesting. There’s so many different aspects we could talk about. It could be its own show, quite honestly. But the highlights are that right as the pandemic hit, there was kind of a big lull. And then as we started to open things back up and the lockdowns started to end, we saw just a huge, huge seller’s market. Everybody wanted to buy, get into a home, and nobody was selling. And we’re still kind of fighting that, actually. The clients that I’m working with right now, I’ve got four houses under contract. And all of those were snap decisions. And it had to be very, very quick. So it’s still pretty much a seller’s market. I’m starting to see some slowdowns in some areas of the country. I was actually talking with a partner this week about some of the things that they’re seeing where a house that used to be sold within 24 hours is now sitting there for two weeks, which is — again, if you look back over the years, that’s nothing. But for what we’ve been experiencing, that’s kind of crazy. But I think the biggest thing to kind of watch for and where I’m taking a bit of a pause here for a little bit is just obviously the election results that are pending as we’re talking today and then where COVID’s going to progress over the course of winter. I think that will affect things in terms of renters being able to either buy or not or things like that. So there’s a number of factors that I think will be interesting to watch as we head into 2021.

Tim Ulbrich: Absolutely. And as our community already is — knows you and the work that you’ve been doing, and we’re going to continue that throughout the year into the new year, obviously going more into the spring and home buying season in 2021. So stay with us because there is a lot changing. You mentioned obviously the election. As we record right now two days post-election, results still not decided as we hit record. And then of course we’ve got the pandemic and everything else that may come at us that we don’t know at this point in time. So we’ll keep you updated. Hang with us whether somebody is looking to buy for the first time, whether they’re moving, whether they’re looking to jump into a real estate investing property or expand upon the portfolio that they have, we would love to be alongside of you in that journey. So Nate, I wanted to bring you on to today’s show because of a recent article you posted on your Real Estate RPH, and we’ll link to that in the show notes, called “5 Lessons Learned Flipping my First House.” And before we jump into those lessons, I’d love for you to first talk about how and why you got into real estate investing. So here, we’re talking about your first flip. But it’s not your first investment property. So why you got into real estate investing and ultimately, you know, why you decided to go this route in terms of flipping this home.

Nate Hedrick: Yeah, so that’s great. My whole real estate journey really started with the idea of wanting to be a real estate investor. If you go back, way back to 2016 when I first read “Rich Dad Poor Dad” and started getting into real estate investing books, I just — I caught the bug and was like, I’ve got to do this. And that led me to getting my real estate license for a number of various reasons. And I started working with investors to really start to learn the process and figure it out. But I’ve always wanted to do it. I think I look at it as a really great way to diversify our assets and to create passive income. And I think, again, when you change your mindset a bit from I want to work for 50 years and hopefully my retirement’s enough at the end to I want to work now to figure out how to make sure it’s enough at the end, it makes it very, very clear that real estate investing is almost necessary, in my opinion. So it really, it was kind of an inevitability. And then how I was going to do it really changed the more Kristen and I talked about our plan together and what opportunities were available to us. And so for us, one of the things that we read about early on and really liked was the idea of what’s called a BRRRR. And we’ve talked about this on the podcast before, but the idea is that you buy a place, you fix it up, you rent it out, and then it’s worth more, so you refinance it, do a cash-out refinance at the bank. And then you pull that cash out of the deal, and you can repeat the process. And the advantage of that method is that you preserve your capital. So if I saved up $50,000, let’s just say, and went and dropped that as a 25% down payment on an investment property, that’s great. And I’ve got a property in hand. But now I have no money to do the next deal. And I have to go start saving that all up again. And that’s actually what we did for our very first deal was we went out and we bought a basically a turnkey property for our very first investment property. And that was great except that, again, there was nowhere to go from there. We had $0 in the bank for the next one. And so it became a process of looking for a way to do the BRRRR method. And that way we could start preserving that capital. And so that was where this flip idea came from. And really, we’ve been following that process ever since.

Tim Ulbrich: That’s great. And I know one of the conversations you and I have had on more than one occasion is the balance between paying off student loans and investing. And as I’ve shared on the show before, this is probably the most common question I get if we’re doing a session where we’re speaking on various topics: “Hey, should I be paying off my student loans or should I be investing?” And here, we’re obviously talking about real estate investing, which is just one pathway, one route of investing. But I sense that many other listeners are weighing this same decision, whether it’s real estate investing or more traditional investing, you know, how do I find this balance between paying off my student loans and ultimately beginning to save and invest for the future in whatever way that looks like. So how did you and Kristen reconcile and decide to move forward with your real estate investing plans while still working through your student loan debt?

Nate Hedrick: Yeah. And like you said, I think you said it perfectly. It’s a balance. It’s all about finding that balance and finding the risk tolerance and the comfortability that works for you. I think it’s very easy to sit back and look at the $100,000-200,000 in debt that most of our pharmacy friends here have and say, ‘I can’t possibly think about anything else right now. I’ve got to tackle that.’ But what we basically have done is we’ve really worked on getting those loans refinanced down to a very, very low level. I think my loans today sit at just under 3% —

Tim Ulbrich: Wow.

Nate Hedrick: — which if you look at — yeah, it’s fantastic. And I’ve refinanced them I think five times through — actually, most of those times through YFP. So thank you for all of the bonuses.

Tim Ulbrich: You might beat Tim Church soon, yeah, on the refinance record.

Nate Hedrick: I’m close. I’m close. And the idea being that if you can get that interest rate, at least in my opinion, if you can get that interest rate down low enough, you’re basically matching inflation at some point. And so it’s not free money, but it’s about as close as you can get. And so what we feel comfortable doing was get those loans to a manageable amount, get them to a payoff monthly that we could really feel comfortable handling, and then once that interest rate was low enough, now you start to look at, OK, well if I put $1,000 onto that loan or I put $1,000 into an investment, whether that be an investment property, a stock, whatever, which of those two strategies builds your net worth faster and makes you feel better at the end of the day? Because a lot of it comes down to can you sleep at night if you have these outstanding loans? And so while we’re very aggressively working on paying down those loans, we just have different buckets of money that we’re allocating our extra resources to. And a lot of those happen to be on the investment property side.

Tim Ulbrich: That’s great. And I think we should, you know, put out there that when we talk about finding this right balance, you know, from my perspective, we’re doing it under the assumption that one is doing their homework, understanding the risk, understanding the upside. We’re obviously going to talk about an opportunity here that you’ve invested in and others that we have featured on the show that have had good outcomes. But that certainly can be good, cannot be good, depending on a lot of different factors. And so finding that balance, finding what you’re comfortable with, making sure you’re feeling confident in what you’ve learned in that process, finding good mentors, all things that we’ve talked about before on the show, are really important as you’re dabbling really in any part of your financial plan but here, as we talk about investing in real estate. So let’s dig into the flipping experience in more detail. So tell us about this particular opportunity. Where was the property? How much was the purchase price? Tell us about kind of the square footage, the bedrooms, and what you’re working with as you got that property under your name.

Nate Hedrick: Yeah, great. So we actually — so as many of our listeners know, I live in Cleveland, Ohio. And so we had previously been looking to purchase our investment properties here. Well, the market’s actually really good in Cleveland for investors. And so it’s actually been ticking up year over year. And so it’s becoming more difficult to find a good BRRRR property here. And again, that our goal, right? We could go out and buy a property with a big down payment and 25% down and so on, but we wanted to BRRRR a property. And so I started reaching out to some pharmacists around the country that I know were in the investing space, had a couple different conversations with a couple different partners — and actually, Tim, you and I were involved in some of those discussions, which was great.

Tim Ulbrich: Yep.

Nate Hedrick: And connected with a partner up in Michigan. And we were able to talk to them about, you know, the properties that are going on in Michigan and what they were doing from an investing perspective, and basically when I looked at it, it felt very much like Cleveland, but everything was half price. And this particular area was set up where it was still kind of hitting that resurgence, it’s still a bit early I think to call this area kind of up-and-coming. It’s on its way. But that actually made it a good target for us because we could get in on a much lower price point, we could fix the property up for a lot less and still accomplish that goal of achieving a BRRRR without needing to have $100,000 in the bank.

Tim Ulbrich: Right.

Nate Hedrick: So when we looked at that, we said, this kind of fits all of our criteria, we think that the upside is there from an appreciation standpoint, properties can cash flow, we looked at all the different parameters that I think are important in assessing a location for investment properties. And then we just happened to get kind of lucky on finding a good deal. We got this deal through a wholesaler. The — I don’t mind sharing we bought the house for $8,000.

Tim Ulbrich: Say what?

Nate Hedrick: If you had asked me before I started as a real estate investor if you could buy a house for that cheap, I would have said, “No, that’s like a car. You’re talking about a car.” But no, we bought this house for $8,000. And it’s a 3-bedroom, 1-bath. It’s about 1,400 square feet. Little single family with two bedrooms upstairs, one bedroom downstairs. And it was an absolute disaster, as you can probably imagine. And we can get into the details, but yeah. It was worth $8,000 when we bought it. It was pretty bad.

Tim Ulbrich: And Nate, you know, someone who is listening — and I know early on and I certainly still consider myself very much a newbie in this space. And I look at a property like that — and we’ll talk more about the numbers about what it’s currently valued at for rent and all those types of things. And our listeners will hear a huge margin between $8,000 and where it’s currently valued. And I think people might look at that number and be like, why would somebody even sell that if they saw the opportunity themselves? Why wouldn’t they do the rehab? Why wouldn’t they flip it or hold onto it and rent it? So tell us a little bit more about that wholesaling relationship and ultimately why a wholesaler would want to pass this on if you look at this as a good investment opportunity. Why wouldn’t they just keep it themselves?

Nate Hedrick: Yeah, yeah. Great question. I think it varies a lot depending on the individual. In some cases, you’ve got someone that either has paid — they can’t afford their mortgage any longer, they can’t afford their taxes anymore, they’re simply looking to offload that property so they can get their finances back under control. Or you’ve got someone that either a family member passes away and now you’ve got a different family member trying to take care of a property, and they’re just trying to settle the estate, they’re not interested in becoming a real estate investor, they just want to get rid of this property. This particular property had — the person had actually moved down with family down south and basically abandoned it. They had zero interest in taking care of it any longer. And I really don’t think they had the ability to do much with it, quite honestly. So it sat there for a long time. As we’ll talk about, it had some interesting problems inside. But it sat there for awhile. And basically, they just said, “I want to get rid of this. Here’s what I need to pay off my mortgage, and here’s where I’m at.” And that was it.

Tim Ulbrich: And I don’t want to miss too — and I know you can speak to the value of the relationships, of the networking, of the partnerships, but as you told the story — and I’m sure many people outside of Ohio would look at maybe even a Cleveland market and be like, please, can I get a deal at those prices. And obviously you’re looking at numbers a little bit differently and saying, OK, Cleveland is going up — and of course we’re talking about relative to other markets — Cleveland is going up, and here’s another opportunity out of area, out of state, which to some listening may feel very uncomfortable if they haven’t had experience with doing out-of-area, out-of-state investing. And one of the things that really jumps out to me with this example is the value of having good partnerships, having a good network of folks that can help not only identify some of these opportunities but also that may be an expert in that local area or market and can give you some assurance on other experience that they’ve had as it is perhaps an uncomfortable territory. So tell us about that part of the journey. Was that an uncomfortable pathway for you and Kristen in terms of out-of-area investing? And how did you ultimately say, hey, it’s worth it even if we can’t see it or put our finger on it. For me, I was surprised at how easy it was to invest out of state. I think one of the things that helped was that we had previously purchased an investment property. So I walked through it, understood what that looked like. It’s a very non-emotional decision. And so it’s much, much easier to look at the numbers, look at the math, talk to the contractors and kind of make a decision based on that. You don’t have to walk in it because you’re never going to be living there. And so that made it a bit easier. Again, it also really helped that we had awesome partners and boots on the ground that could really help with that. I think no matter where you’re investing, whether it’s two streets away from you or two states away from you, you need to have that awesome partnership and have those people that can actually give you the real information that you need unless you yourself are that expert. So again, if I’m buying a house here in Cleveland, I don’t even use a real estate agent. I represent myself because I can be that expert in this area. But if I was buying anywhere else, I’d have to have all those experts anyway. And so this wasn’t that different just having those people in place.

Tim Ulbrich: Yeah, and I would recommend too — we’ll link to it in the show notes — but Bigger Pockets, among the many resources they have, they have a book on out-of-area investing that I found very helpful and insightful just getting you to think about it but also the importance of some of the systems and the processes and how to ultimately be able to manage and invest in opportunities that may not necessarily be in your backyard. So let’s dig into the five key lessons that you learned along the way. And again, so we’ll link to this in the show notes your article that you published on this at Real Estate RPH so folks can read more and check out the other content that you also have out there, which is fantastic. So five key lessons that you learned along the way through this flipping experience: No. 1, run your numbers carefully. So tell us more about this and really why it’s so important and ultimately the strategies you used here for your first flip.

Nate Hedrick: Yeah. So just like we talked about, it’s a business decision when you’re buying investment property. This is not an emotional, ‘Oh, I don’t know if I like that kitchen,’ like, whatever. It doesn’t matter. You need to run your numbers and focus on those, which some people might really like because if you’re a data person, if you’re an analytical person, this actually makes it really easy. So like I mentioned, we were trying to use the BRRRR method to flip this property and then rent it out. And one of the things that the BRRRR method really focuses on is when you do that cash out refinance, the goal is to pull all of your investing money back out, right? You want to be able to recycle that capital. And so what most lenders will do is they’ll give you a loan at 75% loan-to-value or LTV. And that 75% loan is based on the after-repair value, or the ARV. Sorry, we’re throwing all these acronyms at you. But the idea is that you want to buy a property, fix it up, rent it out, and then it needs to be worth a certain amount of money so that 75% of that amount is more than or equal to the amount of money that you invested.

Tim Ulbrich: Right.

Nate Hedrick: So if you’re buying a property and let’s say it’s $100,000 when it’s all said and done, and you’re going to refinance that $100,000, getting $75,000 from the bank. You can’t spend more than $75,000 to buy that property, fix it all up, pass all your permitting, all that stuff needs to be done for under $75,000. So the numbers are actually fairly easy. We actually went out and had an appraiser come out to the house — actually before we bought it. And we said, “Look, if we did all of this work,” and we laid out really detailed notes about here are the things that we’re going to do in the kitchen, here’s how the bathroom’s going to look, here’s how the flooring. We actually provided pictures from other flips that my partner had done. And we said, “Look, if we do all of this work, what do you think it will be worth based on the market conditions, based on the property size and all that?” And once we had that number, we were able to start working backwards and say, “OK, 75% of that number is this. That’s how much we can spend. Let’s see if this deal makes sense.”

Tim Ulbrich: That’s great. So you mentioned, let’s get more specific about this deal. And obviously we’ll use round numbers, not a perfect calculation. But you mentioned buying it from the wholesaler for $8,000, you mentioned getting that up front estimated after-repair value, that appraisal, and then obviously you had the investment to actually do the work. And then of course there’s a reality of what that appraisal may come in and ultimately when you do that cash out refinance, which you’re not yet there, right? That six-month window, you’re still waiting on that?

Nate Hedrick: Yep, we’re getting close. So basically the end of December is when we’ll be eligible, so we’ll probably refinance around then or beginning of January.

Tim Ulbrich: Wow, that went quick.

Nate Hedrick: I know. I was thinking the same thing the other day. I’m almost behind at this point because I haven’t started the process yet. I’ve talked to some lenders, but it’s not there yet.

Tim Ulbrich: Yeah. So if you bought it for $8,000, talk us through then if your goal as the investor is to try to get as much or perhaps all of that cash back out so as you mentioned at the beginning of the show, you can go ahead and do this again — and we should clarify here, you mentioned the 75% loan-to-value. If you accomplish that and you get all of your cash back, you still essentially — obviously you have a mortgage on that property, but you have essentially 25% equity in that deal. So you know, we’re not talking about leveraging full tilt here. You still would have some margin if the market were to flip or go down. So you have a little bit of wiggle room. So talk us through the numbers here and whether or not you’re able to accomplish that or come close.

Nate Hedrick: Yeah, and I really like — that’s a good point because I think a lot of people look at this, and they go, oh, you’re overleveraging like crazy. But you’re right. We still have 25% equity in that house once that refinance is done. And so I feel really confident that that’s a comfortable place to be. That’s like buying a house with 25% down payment, which is more than most people do. So yeah. We’re going to feel good about that. So the house itself was $8,000. Then there was a wholesaler fee, a sizeable wholesaler fee. We’ll call that several thousand dollars. And so that’s basically a finder’s fee for the wholesaler. And these can vary anywhere from — I’ve seen them as low as $1,000. And I’ve seen them as high as $25,000 on some deals. Where basically that wholesaler is saying, “I found this deal for $8,000. And I’ll let you buy it for $8,000, but you’re going to pay me some amount to basically give you that great deal.” So we had to pay the wholesaler’s fee on top of that. And then once we got the appraisal done, they were looking at this, and they said, “We think that based on the level of rehab that you’re going to do and the properties in the area and so on, we think that the house will be worth around $75,000 when all was said and done.”

Tim Ulbrich: Wow. OK.

Nate Hedrick: Yeah, which is great. Now, again, this place was utter trash when we purchased it. So there’s a lot of work to be done, but what we looked at that and said, “OK. Well if we’ve got $75,000 of potential property value, 75% of that is about $56,000.”

Tim Ulbrich: Yep.

Nate Hedrick: So there’s a lot of room in there for us to start making some rehab decisions and finding a way to make ends meet.

Tim Ulbrich: So on this deal — and again, I’m oversimplifying a little bit here, Nate, but to follow the numbers — you buy is for $8,000, you have a wholesaler’s fee, a finder’s fee, and then you’re looking at that $8,000 plus the wholesaler’s fee and then any margin or really room up until that 75% number, $56,000, as your number of when you look at estimating rehab costs and other things, and obviously things could go better than you expect, things could go worse, you’re trying to anticipate where that may or may not go, making sure you have margin. But as long as you stay under that $56,000 number, if that appraisal holds around $75,000, and you do a cash-out refinance at 75% loan-to-value, you essentially that whole $56,000 back out of the deal and get all of the money back. Is that simple math? Am I following correctly?

Nate Hedrick: Yep. You’re spot on. That’s exactly the goal, and that’s how we went into it.

Tim Ulbrich: OK. So you know, one of the other things that I know I think about as I hear you talk about this, I’m sure our listeners are, is hey, Nate, I’m a pharmacist. Like I have no idea how to estimate rehab costs. So this is great as you’re talking, OK, I get the property for $8,000, I pay a wholesaler fee, I get all that. But I can look at a property, I can say, eh, good, not so good, maybe really bad, not as bad, really good, not so good, but that’s the — my Lichert scale ends there, right? I don’t have much differentiation of what I can define in terms of how much is needed or certainly things that may be seen versus unseen. So how do you as an investor either estimate those costs or make sure you’re working with the right people that can help you get a good estimate on what those costs will be?

Nate Hedrick: Yeah, I’ll be honest with you, I’m also fairly terrible at estimating rehab costs. I walk around with my clients as a regular real estate agent, and they say, “Nate, this looks broken. Any way — like what would it take do this?” I have no idea, we should ask a contractor. And that’s what we really did with this property is I trusted my team more than anything.

Tim Ulbrich: Yeah.

Nate Hedrick: And we built that, again, based on a lot of relationships and based on past experience. I was able to talk with the individuals that I work with and seen that they had done this work before. And so when we actually let our contractor walk that place, they were able to say, “Look, I think based on everything you’ve got going for you and all these unknowns that we still have, let’s start working out budget details.” And we really took it line item-by-line item to really break down everything that was going to go into those costs that we could feel good about our offer and feel good about how much we were going to be potentially spending.

Tim Ulbrich: Awesome. OK. Great stuff. So that’s No. 1, run your numbers carefully. And I just want to echo here too, you know, one of the things I know that really resonated with me early on with the very limited experience I have is the importance of really trusting and running your numbers. And I think it’s easy to look at something like a property that is $8,000 and then you look at wholesale fee and you’re like, what the heck? The deal’s only $8,000, why is the wholesale fee, you know, whatever that amount is? As you mentioned, there could be a big range. But run the numbers. I mean, ultimately, you’ve got to figure out like is that justified or not? And you know, obviously that person needs to be paid for the work that they’ve done in finding that deal. But if the numbers make sense, they make sense. If they don’t make sense, then you move on, you know? And I think that’s really part of the value of having a system to be able to run your numbers.

Nate Hedrick: Yeah, don’t get hung up on how much they’re making on the deal.

Tim Ulbrich: Exactly.

Nate Hedrick: I have seen deals with other investors where the wholesale fee is more than the purchase price of the property. And that feels like what the heck, this doesn’t make any sense. Why are they making more money than I’m buying the house for? But again, without them, you don’t have a deal to work on. So it’s not something to get hung up on. You’ve got to focus on the final numbers.

Tim Ulbrich: Alright. No. 2 is plan for something to go wrong. And oh boy, do you have some examples here with this property. So you know, tell us about why this is important for plan for something to go wrong both financially as well as maybe just your sanity. And you know, what went wrong with this deal? And how did you plan for it?

Nate Hedrick: Yeah, so this is something that, again, I really underestimated in my head what this was going to look like. I think we’ve all watched flipping shows on TV, and all like — again, I’ve read all the books, I thought I knew everything. And so when we walked into this property, I was like, OK, we’ve got to estimate all these rehab costs, and then we’ll set aside $2,000 for that thing that goes wrong. And really, again, really leaned into my partner on this one. And he said, “Look, with all of the unknowns that we have, we need to set aside a considerable amount of change for a potential problem to come up.” And so just to start giving you some real numbers, we originally budgeted I think around $25,000-30,000 for the full rehab. And then on top of that, we added an $8,000 contingency plan, which is a huge chunk. I mean, that’s like a third basically of our budget almost as a what-could-go-wrong factor. And to me, that felt really large and I was like, man, we’re never going to need that $8,000. That’s even bonus money as far as I’m concerned. But again, my partner was like, “Look, set it aside, put it in the numbers. Trust me. If we need it, you’re going to be so happy you did that up front.” And again, I learned a lot from that because I wouldn’t have set aside $8,000. And I’ll tell you, by the end of the deal, we ended up using about $6,000 of that entire contingency budget. So it’s a really good thing I listened to him and set that extra money aside when running the numbers. So we had a couple things that — a couple different things to go wrong. And actually one that I didn’t even get to put in the article because it happened early last month, so about a month ago. So I’ll tell you about that in a minute. But there was a number of issues, and I put them all in my article, but one of the biggest ones that I think was really surprising to me was that there was trash all over this house. I mean, like hoarder level trash up the walls and everywhere. And so there was a lot of unknowns what was under that garbage. And as we moved all that junk out and had actually the cleaning crews come in and take care of everything, realized that the walls and the floors themselves had been rotting underneath that stuff. There were entire areas where you could see from one room to another through the wall that had basically fallen apart. And so we did not anticipate that level of damage down that far. And so almost all the walls had to be removed, replaced, patched. We spent over $4,000 more on our budget for walls than we were anticipating. And again, that’s just one of those things that you don’t know it until you get in there, really. And that became kind of a bigger problem than we anticipated.

Tim Ulbrich: And if I remember correctly, that was the major thing. But you had other things that maybe folks here would be like, it is major, but obviously in the perspective of what you just mentioned, relative to that. So you had quite the issues with fleas.

Nate Hedrick: Yes.

Tim Ulbrich: And even some more minor things that may not be expected, which is having crews available to paint and the heat of the summer, not being able to stay as long as you thought they would, and that delayed some of the timeline, which of course time is money when you’re talking about these types of opportunities. So collectively, as you went through that as a first-time, were you shocked? Surprised? Was it a, ‘it is what it is’? Or did having that partner involved also help reassure of hey, I’ve been through these before and it stinks, but it’s not the end of the world?

Nate Hedrick: Yeah, I think, again, that’s the whole point of this kind of point 2 here is plan for those things to go wrong. That way you’re not going to be surprised. I think every time I got a call from my partner and said, “Hey, here’s what’s going on on the property this week,” it wasn’t like, oh no, now the whole deal is ruined. We really felt like, well, that’s awful. But we’ve planned for it, let’s move forward and get it fixed. The biggest, like the nagging — you mentioned the fleas. That problem drove me absolutely bonkers. I was so upset with that. It was one of those things where, again, I planned for a problem. But I didn’t plan for it to be so hard to fix, right? LIke everything else I can throw a little bit of money at it and it goes away. This took two different exterminators, four separate treatments, two weeks of no job time. We actually had a fifth treatment after all that was said and done to make sure that when the new tenants moved in, they felt really comfortable with the whole place and it was absolutely bug-free. It was only I think — all said and done, I think it was like $600 for all of that, which is not that big in the grand scheme of things, but it was the biggest hassle to get that fixed.

Tim Ulbrich: Sure.

Nate Hedrick: And it just, it was the problem that would not go away.

Tim Ulbrich: Yeah, and I think if I remember, I had a similar issue with another property, and it was not as much on the cost side but just the coordination and then the time where if they’re coming in to spray and that you’re coordinating with other people working in the home, there has to be some space there as they’re doing their work. So more of a nuance, right, then anything. And of course you want the new people to feel comfortable as well.

Nate Hedrick: Yeah. That was big for us too, right? Like we wanted to provide really nice housing for somebody. And I don’t know about you, but I am not moving into a place that has fleas. And so we wanted to be 100% certain that we had completely taken care of the problem and that we had something in place that if anything did come back, we had a very fast action plan to basically mitigate that going forward. So we did a lot of work to make sure that was taken care of. And again, it was just a pain to get it all done.

Tim Ulbrich: Alright. No. 3, it’s not like HGTV. So talk to us about what you mean here.

Nate Hedrick: Yeah, so again, I think it’s really for us to watch all the flipping shows and get this idea of you buy a property, you put in the highest end everything, you make it camera-ready, and then you make money and it’s easy. And I think when Kristen and I went into this, we were very quick to look at the kitchen, look at the bathroom, and say, “Oh yeah, we’ve got to do a tile backsplash, we really want to upgrade this to elevate this rental to be like the best in this area.” And again, talking to our partner, talking to our contractor, we quickly realized that if you follow the HGTV plan, you’re probably going to blow your budget. There are absolutely areas where it makes sense to do that and put in everything as high end as possible, but you’ve got to look at your market. Again, we bought an $8,000 house. I can’t spend $8,000 on tile for the backsplash. That doesn’t make any sense. So we really had to kind of reign ourselves in — and I think I put in the article, the goal is to make it the nicest house on the block, not the nicest house in the city. So really trying to kind of take off the HGTV lens and move it onto OK, what makes sense for a rental? What’s going to get us the best return on investment? And what’s going to make this a really comfortable, safe place for that person to live? One of the examples of this that I think kind of exemplifies what we were looking to do, we actually had bought — we wanted all stainless steel appliances, right? Kitchens and bathrooms sell, so that made sense for us. We wanted all stainless steel appliances, upgraded kitchen. And we actually went out and bought some of these through the 4th of July sale at Home Depot at the time. So we said, “Great. We got this deal.” Well, COVID shut the world down, obviously, over the summer. And that delayed pretty much everything coming overseas, which most of these appliances were. And there was a huge backlog on appliances basically all summer long. And we got to the point where we were at the end of July, we were trying to get this place rent-ready. And the appliances kept getting pushed back. I would get a phone call every other week, and they would delay them by another week and another week and another week, and it was just, it was getting so frustrating. And so we said, “Look, these are going to be things that don’t allow us to rent the house. We’re not going to have a kitchen for anyone to go into.” So we actually had to pivot and start looking for some local deals on some appliances. And unfortunately, we weren’t able to find the stainless steel that we wanted. Now, we got really nice, high end appliances that were in great condition, but they’re not that, again, HGTV look that I think we were going for. And we had to get over that. We had to get past that and say, “Look, this is a really nice, functional kitchen. And it probably doesn’t truly hurt our rent value, quite honestly.” It might hurt our refinance a little bit because it’s not nearly as nice as the house that has the stainless steel, but it’s still going to accomplish our goals, and we’ve got to be OK with that. And it took some time to be able to pivot and make that mindset change.

Tim Ulbrich: Good stuff. And No. 4 here is preparing multiple exit strategies. And I really appreciated this being able to be a fly on the wall with you and your partner in this deal, to hear this conversation, to hear the two of you talk about the importance of exit strategies and having options and why that is so important. So tell us about how you viewed the exit strategies and also how you think about this more broadly as you’re investing in a property.

Nate Hedrick: Yeah, so one of the things that’s been drilled into my head listening to Bigger Pockets and reading about investing strategy and so on is that you always want to go into an investment with multiple exit strategies, whatever that looks like. If you’re buying a place to flip it, you should make sure the numbers also work as a rental. Conversely, if you’re buying a place as a buy-and-hold, you should make sure that it works as an Airbnb or something else, right? You want to make sure that it has a secondary plan in case what you were intending goes wrong. And so when we got into this house, we said, well, we actually need to have at least two exit strategies. And we actually developed three throughout the course of this plan. And so when we walked into it, we say, we can either buy it and hold this place, do the BRRRR method like we intended to, or the market is so hot right now, we should look at this as a potential flip opportunity as well. And so we really went into the deal with those two mindsets. Like this is either going to be a flip or it’s going to be a buy-and-hold BRRRR. And up until — we were probably halfway through the rehab and we still hadn’t really decided what made more sense. And at that point, we said, we’ve got to talk about this and figure out the plan. And we developed another plan. We said, well, we’re halfway through. We’ve gotten done with all of the big, scary stuff, right? Like the roof had been looked at, the furnace, all the big, scary stuff had been taken care of, all the trash had been moved out and so on. And we said, this place is pretty ready to go. It’s not fixed up by any stretch, but it’s ready to go. And so we looked at the idea of potentially selling it as what I call a prehab.

Tim Ulbrich: Yep.

Nate Hedrick: Which is where you’ve gone in, you’ve bought it for a certain price, you’ve fixed it up to a point where it’s very saleable to somebody who wants to come in and finish the work. And so we thought, you know, if we can find an investor that’s interested in buying this at this stage, we might still be able to turn a pretty nice profit and then not have to worry about the inspections and the permitting and all the stuff that comes at the end. So we even at one point had three exit strategies. Obviously we eventually decided to follow the BRRRR method, and we have a renter in there right now and all that. But throughout the course, we allowed ourselves to have other strategies and exit opportunities just in case they made sense at some point. It really made sure that we limited our risk and opened up our potential for opportunities.

Tim Ulbrich: And what are you looking for, Nate, for if you’re considering, hey, am I going to flip this or am I going to hold this and follow kind of the BRRRR method we’ve been talking about? What are some of the factors that are helping you make that decision?

Nate Hedrick: Yeah, gosh, that’s a — there’s a lot, right? So for us —

Tim Ulbrich: Another episode?

Nate Hedrick: Yeah, it’s another episode. No, it’s a great question, though. For us, it came down to look, if we’re going to spend all this time, effort, risk, money, we have to get a significant amount of return on it. And so if I’m putting in — again, I talked about almost $40,000 on a rehab, that’s a sizable risk. And we took a lot of risk to get there, right? We bought an $8,000 trash property. It better be something that we get something out of at the end. And so when we were assessing it, we said, look, if we can get to a flipping profit that is significant enough to justify that risk, then maybe it’s worthwhile. The other thing that I looked at is that, again, this market, I really want to be involved in this market. I want to hold property there. We’re already starting to talk about our next deal in the area. And so I was very set on trying to retain this property if that made sense in any stretch. And so again, the process was simply evaluate the potential for return and weight that against the risk that was put in and the amount of capital that was put in up front to get to that level of return. And again, it just became a business decision, which made more sense?

Tim Ulbrich: Good stuff. And No. 5 here is trust your team. And this is something we’ve talked about on previous episodes, building a team that you can trust and obviously that being an important part of this discussion as you’re building your real estate investment portfolio. So tell us about your team, what did it look like, how did you find those people, and what’s your advice for people that are looking to create their own team?

Nate Hedrick: Yeah, and I think we’ve talked about this a bit as we’ve gone through. It really started with that partner and making sure that I had somebody that was boots on the ground that could help us get coordination. Because from that partner came the contractors, that came the real estate agent, actually. We worked with that partner as well to find property managers that they recommended, and so I was able to interview property managers based on their recommendations. And then that property manager, again, kind of bringing in the real estate agent piece, they were able to recommend some people along the way for various things from title to making sure that the permitting was done correctly. And then of course, we had — on kind of my end — we had the insurance agent, I had to make sure that we got this all properly insured and under umbrella policies and all that other stuff. We had to bring in our financial planner and our accountant. Actually, I got to call up Tim Baker and Paul over at YFP and say, look, guys, here’s what we’re doing. And Paul had to get his extra notebooks out for me because I always bug him with weird questions. But we said, look, this is what we’re trying to do. Help us work through this, make sure it’s going to make sense for our financial plan personally. So all those different people are really essential and finding each one varies based on where you’re doing this, what you’re doing specifically, and what your needs are. But a lot of it starts with kind of that one person on the ground. And again, in our case, it was that partner. In most cases, it’s usually going to be your real estate agent or your property manager. And so if you are looking for a place either out of state or even locally, I really recommend starting with that solid real estate agent, that person that understands investment property because they’re going to be the one that’s going to connect you with all the people that you need. And that’s really, really essential.

Tim Ulbrich: Yes, so important for the reasons you mentioned, having a good team in place, have the right people in your corner. I was just talking with a pharmacist real estate investor in North Carolina this past week, and one of the things he shared was as they are still relatively early in their journey — I think they’ve got 3 or 4 deals now under their belt — what they’re finding is as they have continued on that journey, they’ve identified other folks, and as they’ve identified other folks, one of whom had become a partner, that that had then brought other opportunities that were now coming to them. And you hear this all the time on Bigger Pockets where people say, you know, once you get momentum and you show that you’re a good investor and you do things the right way, ultimately, these relationships will start to take off and you often find that deals start coming your way, which really puts you in a different position, obviously, to be able to grow and scale the work that you are doing. So there you have it, five key lessons that Nate learned along the way of this investment property. No. 1, run your numbers carefully. No. 2, plan for something to go wrong. No. 3, it’s not like HGTV. No. 4, prepare multiple exit strategies. And No. 5, trust your team. And again, we’ll link to that article that he posted on his blog over at Real Estate RPH so you can check out the show notes at YourFinancialPharmacist.com/podcast, find this week’s episode, and you’ll see that information there. Nate, one of the notes I made as you were talking was there had to be a lot of time invested here. So talk to us about you’ve got a young family, you’ve got a full-time job. Like you’ve got other things going on. So give us a sense of the time commitment and ultimately how you justify that time as you looked at this opportunity.

Nate Hedrick: Yeah, just like most of my side hustle life, it’s a lot of early mornings and late nights. So again, it was funny. I think every morning early, I got up and had emails going out for all of the real estate activity that I’ve got going on. But this was one of them. And then every night kind of the same thing. And again, by having the proper people in place, the partner, the contractors, you know, all the people that are actually doing all the work, I mean, I’ll be honest, I’ve never — I have yet to set foot in this property. And I don’t know that I ever will. There’s no need to because I’ve got people on the ground that can do that kind of work. And so the time invested for me is actually not that extensive. It’s really just decision-making time and then letting those decisions play out through the professionals that we’ve put in place. So you know, it was decisions with Kristen and discussion with Kristen at night, sending out an email, sending a follow-up email in the morning, usually. And then that was pretty much the whole day. The worst thing was if I had a phone call over lunch or something to talk through an issue with our contractor or whatever. But that’s about as much as was necessary. I think if you put the right systems in place, you’d be surprised how much little time is actually required to do all this work.

Tim Ulbrich: Well good stuff as always, Nate. And we appreciate you having you back on the show. And I’m sure it won’t be the last time. And appreciate you giving us kind of the inside look into your own person journey and your willingness to be transparent with that and certainly to share that information to be able to help others that are evaluating this as an opportunity in their own personal financial plan. So what’s the best way for our listeners to connect with you if they want more information about your journey or perhaps they’re also interested in the Real Estate RPH-YFP concierge service.

Nate Hedrick: Yeah, absolutely. Head on over to RealEstateRPH.com. You can actually find me, I’m all over your site too, Tim, on YFP. But Real Estate RPH, you can find us. Get connected with our concierge service. That’s actually the best way to get in touch. You can schedule a 30-minute phone call with me. We can talk about investing, we can get you hooked up with an agent, whatever you might need. That’s the best way to reach out to me. And then of course I’m on Facebook, Instagram, LinkedIn. Just find me there.

Tim Ulbrich: Great stuff. And for those that are looking to buy a home, if you go to YourFinancialPharmacist.com, you’ll see a section at the top called “Buy or Refi a Home.” From there, you’ll see an option to connect with an agent. That will take you to Nate and the concierge service. So the whole intent of that is to really be able to utilize Nate’s experiences as both a pharmacist as well as an agent as well as an investor here as we’re talking about, really to be someone that can help you along that process, that can pair you up with a trusted local agent in your market, and ultimately be there alongside of you throughout the journey. And so I think that is an important aspect and value of that service. And again, you can learn more at YourFinancialPharmacist.com, click “Buy or Refi a Home,” and then “Find an Agent,” and you’ll get to Nate’s information there. As always, to our YFP community, if you liked what you heard on this week’s episode, please leave us a rating and review on Apple podcasts or wherever you listen to the show each and every week. And I hope you’ll join us if you haven’t already in the Your Financial Pharmacist Facebook group. Over 7,000 pharmacy professionals committed to helping one another on their path towards achieving financial freedom. So thank you again all for joining, and have a great rest of your week.

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