Using Systems to Automate Real Estate Investing
Ryan Chaw, pharmacist and real estate investor, joins Tim Ulbrich to talk about how he built a six-figure rental portfolio, red flags to look out for as an investor, and the method he uses to find good tenants.
About Today’s Guest
Ryan graduated with his Doctor of Pharmacy in 2015 at age 23
He was inspired by his grandpa who bought 3 properties in the Bay and achieved financial independence for himself and was able to help cover college tuition for his grandchildren.
Ryan bought his first property in 2016. It was a single family home at his local college. He rented out the house per bedroom and renovated to add extra bedrooms to increase rental profit.
He repeated the same process for each property, buying 1 property each year. He then created a system for getting consistent high quality tenants, managing the tenants, and decreasing expenses through preventative maintenance. He now makes $10,755 per month in rental income.
Three of the properties are on 15 year mortgages and one is on a 10 year mortgage. Ryan took a HELOC out on the first house to help buy the 4th house. He paid off his first property in 2020.
Ryan is now teaching others his system: how to find a college town to invest near, analyzing a deal, generating tenant leads through strong marketing, and how to self-manage college tenants so everything is hands off and automated.
In his free time Ryan travels to many foreign countries to just absorb the culture and life outside of California. So far he has been to China, Japan, Taiwan, the Bahamas, Canada, Paris, London, Germany, and Mexico.
Summary
Ryan Chaw joins Tim Ulbrich to talk about his why and motivation behind real estate investing, how he built his portfolio so quickly, how he balances a full-time pharmacist career with real estate investing, red flags to watch out for when purchasing a rental property and Ryan’s unique method for finding high quality tenants.
Since graduating pharmacy school in 2015, Ryan has purchased four single family homes with 18 tenants and brings in $10,755 a month. Although he hasn’t been able to purchase a property this year, Ryan paid off his first property in full which brings in about $2,500 in rental income monthly. He also now has a large HELOC that he can access to fund a future deal if needed.
Ryan shares that despite being a full-time pharmacist and real estate investor, he does in fact have a work/life balance. Ryan set up systems and standard protocols in place so that he can run things on autopilot. He has systems created for maintenance issues and advertising which allows him to only have to spend an hour a week on his properties. Because of these systems he doesn’t feel the need to hire a property management company which would cut into his cash flow.
Ryan shares several red flags to watch out for when purchasing real estate like: water stains, mold, dry rot, strange odors, uneven flooring and if the property is being sold as is. He also explains his process for finding high quality tenants which he refers to as his PRIME method which stands for:
P – placement of advertisements
R – review of social media
I – identifying type of tenant
M – measuring responsiveness
E – ensuring proof of income
Mentioned on the Show
- PolicyGenius: Shop for Life and Disability Insurance
- YFP 140: How Ryan is Bringing in $11,000 a Month Through College Town Real Estate Investing
- Bigger Pockets
- Real Estate Rookie Podcast
- Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert T. Kiyosaki
- The Millionaire Real Estate Investor by Gary Keller with Dave Jenks and Jay Papasan
- High Performance Habits: How Extraordinary People Become That Way by Brendon Burchard
- Newbie Real Estate Investing
- Join the YFP Facebook Group
Episode Transcript
Tim Ulbrich: Ryan, thank you so much for coming back on the show. How are things going?
Ryan Chaw: Things are good. I’m excited to be on the show again.
Tim Ulbrich: Happy to have you back. Appreciate you reaching out to give me an update on kind of where you’re at, and we’re going to talk all about your portfolio, what you’re working on on the real estate side, how in the world do you manage that given your competing responsibilities also as a pharmacist. And you know, I’ve been wondering, Ryan, so last time we talked, you had mentioned your love for international travel. So here we are, obviously in the midst of a global pandemic, travel hasn’t been what it was. So how are you spending your time and really finding that release from work without travel as an option?
Ryan Chaw: That’s a great question. Yeah, I’ve been going on a lot of hikes nowadays, kind of just get clarity and work on my mindset and see where I want to go with my real estate business and everything. So yeah, I’ve been doing that. Also just spending time with friends, either outdoor dining or sometimes just online, we play this game that’s kind of like Mafia, it’s called Among Us. But yeah, it just kind of is chilling.
Tim Ulbrich: Awesome. And I’m glad you mentioned mindset because I have found also, you know, I think 2020 is going to be a year for many of us that we look back in five or 10 years, and there’s a lot of reflection going on. I know for me in 2020, I think just the midst of everything that’s going on, perhaps more time, less activities, whatever be the reason, but a great time to develop, to set mindset, to reflect on where things have been, to reset if you need to reset, and to look ahead into the future. And so today, we continue our focus for the YFP community, as we mentioned, in 2020, we want to bring you more real estate investing content. And so again, Ryan, we had you on the show, Episode 140. We talked all about how you’re bringing in almost $11,000 a month through college town real estate investing, such an awesome conversation, great story. I personally think it was really inspirational to a lot of people that are itching to get into real estate investing while still working full-time as a pharmacist but maybe aren’t quite sure as to where to start. And so I hope folks will go back and take a listen to that episode, Episode 140, if they haven’t yet done so. And we’ll link to that in the show notes. And so Ryan, I want to chat with you about a few different aspects of your real estate investing journey, including your strategy behind building the portfolio that you’ve built, especially in an expensive market, some red flags that ended up costing you quite a bit of money on your first deal — and we’ll break that down — as well as your unique prime method that you use to find great tenants at your properties, which as we know obviously can be the difference in terms of not only headaches but also in terms of cash flow. So let’s hit the stage and talk about your portfolio and recap some of your journey for perhaps those that didn’t join us on Episode 140. Take us back. Remind us when you got into real estate, why you got into real estate, and what your current portfolio is made up of.
Ryan Chaw: Yeah, sure. Let’s start with why I got into real estate because it really was an inspirational journey for me. I got started from my grandpa, actually. He bought a couple properties back in the ‘50s before Silicon Valley was even a thing. And as we know, all those properties went up in price like crazy, and he became a multimillionaire and was able to retire early. Not only that, he was able to cover part of my college tuition and that of my brother’s. So it really showed me that real estate is one of the best ways to create generational wealth, not just for yourself but for your children and future generations as well. Unfortunately, I wasn’t able to ask him how he did it before he passed away, but you know, I wanted to get started as soon as possible. So I got my pharmacy degree in 2015, I graduated as a RPH or PharmD, and I just wanted to get started as soon as possible. So I worked a lot of long hours. I actually had two jobs. I worked as a retail pharmacist and as a hospital pharmacist and really grinded it out because I had this dream and vision for myself, right? So I wanted to get started in real estate as soon as possible because I knew that the prices will go up over time, rent will go up, all of that. And so real estate’s really a time game, and you’ve got to get started as soon as possible. So I bought my first house in 2016. It was a $262,000, three-bed, two-bath house. And I bought it in my local college town because I figured if I rent out per bedroom, I could get a lot more rental income than if I rented out the whole house to like a family or something like that. And so I bought one house every year by reinvesting the cashflow, investing my W2 income, and I actually took out something called a HELOC, which we can talk about later, it’s called a Home Equity Line of Credit. Because my first house went up in price by about $60,000, I was able to access the equity, take it out, and put it onto my fourth property. So now I have four single-family homes with 18 tenants that makes $10,755 per month at max capacity.
Tim Ulbrich: I love it. Thanks for the recap. I mean, I love the energy in your voice, kind of the why. We talked about that on Episode 140, what’s the why, what’s the purpose beyond making money, but what’s the vision as it relates to your financial plan? I love the focus on a desire for generational wealth. And you know, while you weren’t able to ask your grandpa what the playbook was, you know, here we are, recording this, right? So this is going to be available not only to others in the community but as I’m sure you’re already thinking, how you can pass this down in information to your kids and their kids and how important that is to be able to teach others the principles that we learn along the way. And so Ryan, in 2020, here we are. I know you had mentioned a goal of acquiring one property each year, but this year has been different — let’s be kind and say it was different, right? It’s been a challenging year, we’ve got a global pandemic, you live in an expensive market, so I’m guessing your plans and visions for 2020 may not have panned out exactly as you had thought they would before especially the pandemic hit. So tell us a little bit more about what has happened in 2020 as it relates to your portfolio?
Ryan Chaw: Yeah, definitely. So coronavirus hit and unfortunately, the college that I invest near did shut down and went to online classes only. There are a few classes that are still on campus, and so I was kind of like worried. Like am I still going to get tenants, right? So I contacted my existing tenants and asked them all, you know, ‘Do you guys want to extend your lease? Do you still want to stay or not? Because you guys have the option to cancel your lease because I can’t — obviously this was unprecedented, we didn’t expect this. So I’m giving you the option to cancel.’ So you know, just kind of working with the current tenants and saying, ‘Hey, I can go around your budget as well if there’s budgeting concerns.’ I basically made that connection with them, and that’s how I was able to actually keep a lot of the current tenants. And not only that, when I advertised, I advertised in Facebook groups, and I offer them to give me a call so I can talk to them to see if this is a good fit for them, right? So I would basically on the call go through any of the concerns about the house. A lot of the concerns are like security, is this a good neighborhood, what are the other tenants like, and all of that. But because I took that extra step to get on a call with them, I was able to basically fill up almost all of my bedrooms during this year. So I have 17 bedrooms, and I filled 15 of them so far.
Tim Ulbrich: That’s awesome. And I think that speaks to your focus on relationships, not only finding good tenants but also maintaining those relationships. And before we hit record, you also mentioned this year, you were able to pay off one of your properties in full, correct? Tell us more about that.
Ryan Chaw: Yeah, I was actually able to pay off the first property. It’s kind of like for peace of mind, honestly. There’s definitely this debate between should I just leverage my money to the max and basically just buy as much property as I can with the money I have? Or should I pay off some of them so I don’t have to worry about not being able to pay the mortgage? If there’s a huge recession or something like, I’m not underwater. So for me, I kind of wanted a little bit of peace of mind, so I paid off my first property. And it doesn’t mean I can’t touch that money. I can still access it through my HELOC, right, my Home Equity Line of Credit. But it does give me that peace of mind and that extra cash flow. The first property was making around $2,500 per month in rental income, so I have that $2,500 per month in just passive income basically, minus some expenses, obviously. But yeah. I mean, that kind of was one of my goals is to pay them off, right? So I was definitely happy for that.
Tim Ulbrich: Congratulations. And you know, $2,500 a month of rental income, no mortgage payment, that’s a great position. And I think I appreciate your comment about, you know, even though you paid that off doesn’t mean you don’t have access to the equity if you wanted to tap into that. But obviously you’re weathering a little bit of an unprecedented situation here I’m sure and will be on the offensive going into the future. So tell us more about the financing of those four properties. Did you approach the financing the same in all of those? And tell us about how you were able — you mentioned the HELOC, but in terms of the mortgage structures, and I think that will help give folks an understanding of what options may be available to them.
Ryan Chaw: Yeah, definitely, especially with pharmacists having such a high salary, a lot of them making a good six-figure income or a little bit less than that, we have options to purchase these houses, we have that opportunity that a lot of people may or may not have, right? Especially as an employee, you actually get pretty good financing options. What I did is a conventional mortgage through Fannie Mae/Freddie Mac, those are just two government-sponsored enterprises out there that basically set the rules for how the loan can be done or what loans are given out, right? And so I just did the conventional financing and was able to reinvest my cash flow every time to purchase a property sooner and sooner each year.
Tim Ulbrich: OK. And if I recall from our conversation before, majority of those you had on a 15-year mortgage, maybe one that was shorter than that. Obviously you’ve paid one off since then. But is that correct?
Ryan Chaw: Yeah. They’re all on 15-year mortgages. I kind of that, again, with the peace of mind idea, I want to pay them off as soon as I can. If I were to pay them all off, it would take me until I had around 31, and then I would have that six-figure, that $10,755 per month just coming in in passive income. And so then at that point, I could retire, basically live life on my own terms, be able to do what I want where I want with whomever I want to do it with and have that choice whether I want to go on to work or not.
Tim Ulbrich: Yeah, financial independence by definition, right, right there. So tell me more, tell our listeners more — you know, I’m guessing some folks are thinking, my gosh, rates are at the lowest we’ve seen in who knows how long, it probably doesn’t get any better than they’re at right now. And so as you were kind of reconciling paying these off early — and you’ve alluded to this a little bit with peace of mind versus it’s a low interest rate debt, I can free up some monthly cash flow, whether that be for purchasing properties, maybe contributing into other retirement funds or other investments or ventures. How have you reconciled this balance between peace of mind/aggressive repayment versus you know what, it’s pretty cheap debt and I might be able to do something else with that money?
Ryan Chaw: Yeah, definitely. I mean, I’ve definitely been looking at the current market. And it’s kind of like as Bruce Lee says, you have to be like water. You want to definitely have a plan but be flexible with your plan, right? Water takes the form of the container it’s in, which means like you have to be able to pivot. Like if there’s a — maybe let’s say the housing market crashes, right? All of these houses are on sale. Well then you do want to start leveraging your money. You do want to buy as many properties as possible. So that’s why I have that HELOC. You want to be in that position where you can go either way. So right now, the market’s very hot. Houses are actually being bought in cash for over asking price. So I’ve been definitely having trouble finding a house to purchase this year. But I’m definitely always looking, and if I can find a good deal and an opportunity add where I can add extra bedrooms like turn a three-bed to a five-bed house, then I will jump on it right away. So yeah, I guess that’s my best advice, just what Bruce Lee said, be like water.
Tim Ulbrich: I love that. I mean, be flexible, be nimble, and put yourself in a position, right, so when the time is right — it doesn’t mean you’re always on the offensive, but you’ve got yourself in a position, whether that’s cash, whether that’s a HELOC that you have ability to access some equity, but you’re in a position, ready to go, when that time does make sense and obviously when that deal presents itself. So Ryan, you’ve built a six-figure rental portfolio in a matter of four years. I want our listeners to remember you’re a 2015 PharmD grad, bought your first property in 2016, which is really impressive in and of itself, but you’re also working full-time as a pharmacist. And so the obvious question here is, how are you doing that? What’s the work-life balance like? Or is there even one?
Ryan Chaw: Yeah, that’s a great question. So there’s definitely a work-life balance. So the thing is, if you have systems in place to go to protocols, standard protocols in place for when something goes wrong, then you can automate everything and be able to do this while you’re working as a full-time pharmacist because I did it, right? I have four properties. I have 18 tenants. And I’m able to do this on the side simply because I have these systems in place for when something goes wrong. So for a quick example, let’s just say a toilet broke down, right, or there’s a toilet leak. So I teach my tenants, I empower my tenants and give them responsibilities, if this happens then you should call this number, bill it to this contractor. So I kind of have like a list of numbers of contractors that they can go to for that. Or if they were to like text message me, I would just forward that text message to the proper contractor because I have this contractor team that takes care of issues for me. And I know what the strengths and weaknesses of each contractor, so I know where to put whom.
Tim Ulbrich: And so when it comes to that contractor team, you know, I’m wondering as somebody who’s at the very beginning of this journey, how do you build that contractor team that you trust, right? So I’ve talked to several folks who are like, I’ve got this contractor, I trust him, I know that it’s good work, it’s a fair price. But you know, as somebody who’s new into this space, you’re like, I don’t know. I might Google search, I might ask some people on Bigger Pockets or whatever, so how did you build that team? Was it through experience? Was it through referrals? Tell us more about that.
Ryan Chaw: No, real estate’s all about connections. And going back to what we were talking about earlier where I connected with the tenant on the phone, right, and really give that human touch, it’s really all about connections. So what I did is I actually talked to my neighbors, and my neighbor’s friend was actually a contractor in the area, and he did a lot of projects. So I just had him kind of, just tested him out, had him do some smaller projects, and then eventually some larger projects. He did a great job, and you know, he charged a fair price and all of that. Right? But if you’re kind of just starting out, I would say just talk to your real estate agent. Your real estate agent will likely know some contractors in the area. Talk to your neighbors, talk to people around the area, build those connections. Also when you talk to contractors, make sure you talk to — if it’s a major project especially — talk to at least three. Get like — they’re called bids. Get three bids, and choose the one that seems to know what they’re doing, is able to explain what they’re going to do, and is a good price point. So the point of getting the three bids is so you can compare. Also, you can ask for something called an itemized bid, and this is just like another tip. An itemized bid is where they separate out the cost of materials and the cost of labor. And so the cost of labor shouldn’t be too much, like it shouldn’t be over $100 per hour most times. And then the cost of the materials, you can just look that up on Google or you can even pay for the materials yourself, ship them over to the contractor and have them give you a bid for labor.
Tim Ulbrich: Great advice and input. And one of the other things I was wondering that I suspect our listeners are as well, you mentioned that when an issue comes up with a tenant, you’ve kind of educated them or given them information on where to go, ideally take yourself out of it, but if they reach out to you, you can then just work with that one contractor, forward their information. So does that remove the need for working with a property management company? Or is that in addition to working with a property management company?
Ryan Chaw: To me, it actually removes the need for a property management company. I feel like I do like even a better job than most property management companies out there because I have these systems in place. If you do want to hire a property management company, they can take anywhere from like 8-12% of your rental income, right? And that, to me, wasn’t necessary because I have systems in place for advertising my properties, vetting and finding high quality tenants, I have systems for if issues come up, if tenants complain about other tenants, right? And because I have all that in place right now, that’s all automated, I really don’t have to do much work other than just keeping track of the finances.
Tim Ulbrich: That’s great. That’s awesome. I think the investment you’ve made there, I can tell it’s something you have a strength in, you know? And for some folks, they may build that system, others may factor in the property management into their deal analysis but making sure you’re accounting for that piece of it is really important. So you’ve got these four units, obviously you sat tight here in 2020. What are your future plans? Do you plan to continue with single-family homes where you’re renting out the rooms, this model that you’ve been doing? Or are you looking to branch out into other property types?
Ryan Chaw: Yeah, that kind of goes back to the being flexible part, right?
Tim Ulbrich: Yeah, yeah.
Ryan Chaw: I would say first, I will diversify, definitely invest in different college towns, not just my own. Maybe go to 7-10 houses, somewhere around there would be kind of like my end portfolio. You really don’t need that much to achieve financial freedom, honestly. And like I said, I’m able to do it by the time I’m 31 or so. And I started this when I was 24. So that’s like 7-8 years or so. Any pharmacist could really achieve financial freedom, especially if they use these strategies of renting out per bedroom because you’re basically doubling your cash flow on the property.
Tim Ulbrich: That’s great. So let’s talk about your first deal. And you know, one of the things I mentioned — and I feel like we probably don’t even do enough of — is that real estate investing isn’t always rainbows and butterflies, right? Sometimes you walk into a bad deal, issues come up with tenants, you’re faced with a major maintenance, unforeseen rehab costs, I mean, really, the list can go on. So talk to us about the red flags that cost you big on your first real estate deal and how you learned from that and what you’ve then applied to future investment properties that you’ve evaluated.
Ryan Chaw: Oh yeah, definitely. So my first deal was a 100-year-old house, so you can imagine it already had a lot of problems on it. So I got this call at 11 p.m. on a weekend from one of my tenants. He said, “Dude, man, there’s sewage shooting out the kitchen sink, and it’s all over the kitchen floor right now.” So I was like calling up a cleaning crew, plumbers, at like midnight on this weekend. And of course I had to pay premium pricing because it was on the weekend at midnight. And so the plumber stuck down a camera down the pipe, and he found that the sewage pipe whole line was rusted over and there were roots sticking into it, and it was broken, basically. So it had to be replaced. It cost $9,000 just to replace that line with like PVC and everything and to clean up the mess and everything too. So I was like, oh man, I’m $9,000 under, right? Not only that, there was a lot of these openings around the outside of the house where rats got in and feral cats actually brought fleas in. So I had a flea and a rat infestation at the same house in the same year.
Tim Ulbrich: Lovely.
Ryan Chaw: I know, right? It’s like, come on, man. There’s so much stuff. And then last thing that I didn’t notice was the house actually had no A/C. So I had to — and this was in Stockton, so it gets up to 100 degrees there. So the tenants were complaining like crazy. I ended up having to install a mini-split system that cost me $15,000. Yeah. So like you know, don’t make the same mistakes I’ve made. Obviously I could have easily figured out if there was an updated HVAC system on this house. I was also really terrible at advertising, so I had put up a sign on the lawn, a “For Rent” sign. That didn’t work very well because I ended up getting a lot of calls, but the calls were from people who weren’t very qualified to live at the property. Yeah, it was just from random people. And most of them couldn’t even afford it. And most of them weren’t even students. Lesson learned, get a sewage line inspection during the escrow phase because you can tell if a pipe is broken, and you can use that as a negotiation point at the point of sale, so the seller either cuts you a check at closing or they pay for some of the closing costs to make up for the broken pipe or for a rusted-over pipe with roots sticking into it. Other red flags, look for any signs of water stains or mold because water honestly is one of the worst forces of nature that can totally destroy a house and its structure, especially if untreated. So usually when I go through a house, I kind of have this red flag checklist I look through. Is there water stains? Any signs of mold? Is there any dry rot? You guys can look up dry rot on Google. It’s basically a fungal infection of the wood that can destroy the structural integrity of a house. Are there any strange odors in the house? That can mean poor ventilation. Is the house — do they have uneven flooring? That could be a foundation issue. When the property is listed, is it sold as is? That means the seller is not going to be willing to pay for any fixes that come up during the inspection. So there’s a lot of things I look for on the house definitely.
Tim Ulbrich: Yeah, and what I hear there, Ryan, I guess there’s a couple ways to kind of implement solutions going forward. One is you live the mistake and then you make sure it never happens again or you hear from other folks such as people listening to you and they’re like, OK, got it, checklist system now that I need to have in place. But I think what I hear you really trying to describe — of course there’s going to be maintenance, things that are going to go wrong from time to time, tenant turnover and so forth — but what are those “catastrophic” things that are really going to eat into either your cash flow, returns, your emergency funds, or cause significant issues that you can try to identify and advance. And what process do you have in place to make sure you’re going to do everything that you can to identify what those things would be before you obviously close on the property. Or I guess if the deal is good enough, you account for it in the financials to make sure that you can take on that repair. So that’s helpful. And I really want to spend a few moments here as we wrap up learning about your process for finding high quality tenants because I think, you know, second maybe to fleas or rehab costs or things going wrong, second to that, a common objection is I just don’t want to deal with tenants and multiple tenants and turnover of tenants and what that means. And so I think finding high quality tenants is really an important process. So you have a PRIME process to do that, PRIME. So give us an overview of that method and how and why you created it. And then we can talk further about that.
Ryan Chaw: Yeah, for sure. And this is one of my systems I use to basically automate the whole process. And once you automate everything, honestly I spend less than an hour per week on my properties in general. So creating this system is really key to creating a profitable, successful real estate investment. And so that’s why I’m kind of going through each system and checklist that I have in this interview. So let’s start with the PRIME method. P stands for Placement of advertisements, R stand for Review of social media, I stands for Identifying the type of tenant they are, M stands for Measuring responsiveness, E stands for Ensuring proof of income. So let’s start with the P first. P is Placement of advertisements. You need to place you ads where your target tenants hang out. I made the mistake of just putting a sign on the lawn, right? But putting ads up where your target tenants don’t hang out, it’s like fishing in an empty pool. You’re not going to catch anything, right? Or catch anything that you want, at least.
Tim Ulbrich: Sure, yep.
Ryan Chaw: So what I do is I actually go onto these Facebook groups, Class of 2022, Off-Campus Housing, Rooms for Rent, basically these Facebook groups where the students, college students, will hang out and look for housing. I also contact — last year, I contacted the student government and asked them, can they put some of my ads or fliers up in the school buildings where the college tenants hang out? And so that really actually got me quite a few tenant leads through that. So that’s very important, just placing advertisements, thinking about where your target market hangs out, it’s very important. R stands for Reviewing social media. So that means I go through their Facebook profile, social media, to screen for are they like a party type of tenant? Are they smoking, doing drugs or alcohol in their pictures? Right? Or are they going to a bunch of raves and all that? Are they like more of a studious type tenant who is very focused on their studies, they’re maybe in a professional school like a pharmacy, dentist, medical student, right? A third- or fourth-year student usually are more mature than first- and second-years. They’ve usually got their party life out and all that as well. Just because if I can get one or two studious students in that house, they kind of stop the other students from throwing a wild party because they’re like, “Dude man, I’ve got a midterm tomorrow. I’m not going to stand for us having a drinking party right now.” Right? So that’s important. I stands for Identifying the type of tenant they are. So there’s different types of people out there. There’s ones who will look for the cheapest deal, right? They’ll go for the Motel 6 rather than the Ritz Carlton. But there’s others out there who will go for the Ritz Carlton, right, because they want the best quality deal that’s out there.
Tim Ulbrich: Sure.
Ryan Chaw: So the one who wants the best quality, obviously I would put them in the master bedroom versus the one who wants the cheapest deal, I’ll put them in a smaller bedroom but also the cheapest price bedroom. Sometimes, I have so many tenants that I don’t even have to — the tenants always asking for a discount or a cheaper deal, I could just find another tenant who doesn’t care so much about the price of the rent. But honestly, my houses are half the price of on-campus housing. On-campus housing is around $1,200 a month. And I charge only around $600 a month. So really, it’s a really great market out there. We are providing affordable housing for a lot of students.
Tim Ulbrich: Yes.
Ryan Chaw: M stands for Measuring responsiveness. So that’s the more responsive a tenant is, usually the more responsible they are, the more mature and professional they are, because would you rather have like let’s say you contact a tenant for rent, late rent. Would you rather have them take three weeks to get back to you and say, “Oh, I didn’t see this message,” or something or someone who gets back to you right away. So you measure the responsiveness of the tenant based off of how fast they get back to you on the paperwork you send them or anything you ask of them, right? And then E stands for Ensuring proof of income. So that means you ensure that the parents make enough money to afford the rent. Usually, it’s the parents paying, which is great because what parent is not going to pay for their child’s — you know? And risk their child being evicted from where they’re staying in college, right? Parents are also great because they help clean up after their children too, believe it or not. They’ll vacuum the whole house. I’ll go like, wow, OK, I didn’t have to do anything.
Tim Ulbrich: And easier to communicate with, right? You’ve got a second option if need be.
Ryan Chaw: Yeah. Exactly, exactly. Yeah. And I have like an authority figure I could go to if there are issues with that current tenant too. But I haven’t had to do — I only had to do that once in my whole five years of renting out to students. So yeah, I usually ask for the last two monthly bank statements and FICO score or credit score. The kids also will give me student loan documents or financial aid documents to prove that you can afford the rent, that type of stuff. It’s important to ensure proof of income, especially during COVID if you guys are investing during this time. There are people who have lost their jobs, right? So you do want to make sure that they have a good amount in the bank and that they’re not going to ever have trouble affording the rent because that’s not good for both of you, right?
Tim Ulbrich: Absolutely. So again, that’s the PRIME method for finding high quality tenants. P is for Placement of advertisements, R: Review social media, I: Identify type of tenant, M: Measure responsiveness, and E: Ensure proof of income. So Ryan, one of the things I was thinking about as you were talking, just by the nature of who you’re often recruiting as a tenant, obviously a college town, health profession types of students, I would assume that would almost refer themselves, that you — the advertisement may be important up front and perhaps if you have a vacancy, but I could see where P4s, P3s, P2s, even if they’re in a medical school, M4s, M3s, where they are often talking among themselves. And it’s like, if there’s a good deal and it’s a nice property and they feel like you’re a good landlord, then they’re going to refer that to their peers. So is that something that you find to be true?
Ryan Chaw: Oh yeah, definitely. Nowadays, I get about 50% of my tenants just through referrals, basically guys that say like, “Hey, I have this friend who also wants to stay at the property because I enjoy staying here. And I was wondering if I could bring some of my friends in.” And I’m like, “Yeah, totally fine. Just have them shoot me a message.” And so I’m able to actually get a lot through referrals. So it’s kind of like one of those businesses — at the beginning, you do have to put in a lot of work to establish your reputation. But then, if you treat your tenants right, you treat them with respect, then it really snowballs to a point where it’s pretty much all automated. The tenants start looking for you instead of you having to do that push and advertise and look for them.
Tim Ulbrich: That’s great. And thank you for sharing that input in both the method for finding tenants, some of the red flags that you look for when you’re acquiring a property, looking at properties, as well as your current status of your portfolio. So great to have you back on the show. And I want to wrap up by — I always like to ask guests, you know, what resources would you recommend to those that are looking to get started or even continue their journey in real estate investing?
Ryan Chaw: Oh yeah. So I would say Bigger Pockets does provide a lot of resources. I actually went on their podcast yesterday. So keep an eye out for that episode.
Tim Ulbrich: Hey, no way!
Ryan Chaw: I talked about student housing. Yeah, I did. On the Rookie podcast.
Tim Ulbrich: Yeah.
Ryan Chaw: On the Rookie podcast that they just started out. Yeah. And then there’s some books you guys can definitely pick up. “Rich Dad Poor Dad” is definitely a go-to. There’s “Millionaire Real Estate Investor” by Gary Keller. Gary Keller is one of the big names. He actually owns Keller Williams realty company. There’s also — let’s see — there’s some mindset books I can recommend. There’s the “High Performance Habits” by Brendon Burchard. That one’s a great one. Oh man, there’s a lot out there.
Tim Ulbrich: But those are good. Those are good recommendations. And we will — I subscribe to the Real Estate Rookie podcast, so when we see that go live, we’ll link to that in our show notes as well. So.
Ryan Chaw: Oh, that’s awesome.
Tim Ulbrich: Yeah. No, that’s awesome to see a pharmacist investor featured on the Bigger Pockets site. And what’s the best way for our listeners to contact you and follow the journey that you’re on?
Ryan Chaw: Yeah, definitely. So I have this free PDF for anyone just trying to get started in real estate investing, especially the student housing market and some about the strategy that I use. You can actually get that at my homepage at www.NewbieRealEstateInvesting.com. That’s www.NewbieRealEstateInvesting.com.
Tim Ulbrich: Very cool. So just logged on there, we’ll link to that in the show notes, “The unique and highly profitable strategy I use to go from newbie real estate investor building a portfolio that generates just under $11,000 every month.” So we’ll link to that in the show notes. Ryan, thank you so much for coming back on the show, for sharing your journey, and I’m sure this won’t be the last time. So I appreciate your time.
Ryan Chaw: Oh yeah, for sure. Thanks again, Tim. I appreciate being on the show, and I hope your audience got a lot of good tips there. And you know, real estate’s all about connections, guys.
Tim Ulbrich: Absolutely. And to the YFP community, as always, if you liked what you heard on this week’s episode, please go and leave us a rating and review on Apple podcasts, wherever you listen to the show each and every week. And if you haven’t yet done so, make sure to join us in the Your Financial Pharmacist Facebook group, over 6,000 pharmacy professionals that are committed to helping one another on their path towards achieving financial freedom. Have a great rest of your day.
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