Real Estate

10 Units in Multiple States, All in Just Under 2 Years!


Tony Robinson has some great ideas, like creating a short-term rental empire in both Joshua Tree, California, and the Smoky Mountains over in Tennessee. Tony talked so highly of the latter investing region, that today’s guest, Cale Delaney decided to pack his whole family into the minivan and make the 10+ hour drive to check out the area. Shortly after, Cale was under contract for not one, not two, but three cabins!

This wasn’t Cale’s first experience with real estate investing. Back at the beginning of 2020, Cale had a mental shift where he realized that real estate could be the key to setting him financially free. He scoured homes all over his area of Florida until he came across a fourplex which rejected one offer from him but later accepted another. He made three of these units long-term rentals, and the other one a short-term rental.

Cale went from zero to ten units in only a year and a half or so, without a ton of management experience of extravagant funding. If he can do it, you can too!

Ashley:
This is Real Estate Rookie, episode 121.

Cale:
When we closed on that first one, immediately, we negotiated and went under contract off market on the two adjacent ones. And so we ended up getting three cabins and a cul-de-sac at the end of the road on five private acres, and it’s worked out really cool that way.

Ashley:
My name is Ashley Kehr, and I’m here with my co-host, Tony Robinson. Tony, I have some news. I’m not sure if it’s going to be good or bad.

Tony:
What’s going on? Do I need to sit down for this news?

Ashley:
Yeah, sit down. So my self-storage facility I have under contract, I did a phase one environmental study, and it’s recommended to go into a phase two environmental study. So after the phase two, they’ll find out if there’s environmental issues and if they need to be remediated. So I spent the whole weekend talking with other investors as to, “Okay, what’s your opinion? What should I do?” Blah, blah, blah, blah. I paid 3,000 for the phase one, and now I’ll have to pay another, I think it’s 8,000, the quote for the phase two. So if I pay this out and there’s environmental issues, I’m probably going to lose all that money and not get anything out of it.
So I think what I’m going to do is, what the consensus is from most of the other investors is that if there are environmental issues, even if the owner agrees to clean them up and take care of it, still walk away from the deal. So you don’t want touch anything that has had a history of environmental issues. Second thing is that I could ask the seller to pay for the phase two. So that’s what I’m working on right now, is seeing if they will actually pay for it, because if our deal falls apart, any other knowledgeable investor will ask to do an environmental study, so they’ll need to have it done. So at least they’d have it in hand already. So I don’t know.
But yeah, that’s what I’m struggling with, and that’s why I have only slept a couple hours every night, keeping me up at night.

Tony:
So these environmental credits are haunting your dreams?

Ashley:
I know. So, what’s new with you, Tony.

Tony:
Yeah. Well, I hope you figure that out. I’m sure it’ll work out for the best. What’s new with me? We have a property in Joshua Tree, this was supposed to be our first flip, like our first Joshua Tree flip, where we bought it solely with the purpose of flipping it, and it should be done hopefully, this week.

Ashley:
This is the one you’re rehabbing, right?

Tony:
Yeah. We have two rehabs. One’s going to be a hold for sure, we know that. But this second one, we bought specifically with the purpose of flipping it. But I walked it yesterday and I like this property so much now that it’s done. We’re debating on if we should actually sell it or not. I’ve mentioned this before, but I think one of the things we’re going to start testing out is just trying to see if there’s an appetite for turnkey Airbnbs in the different markets we invest in, and this one’s going to be a great case study to, I guess, see if we’re right. But man, it’s just such a nice place, it would fit so well in our portfolio. I don’t know, I guess once it’s all said and done this week, we’ll decide if we’re going to list it or not.

Ashley:
And I think that’s an awesome thing, is that you have multiple exit strategies as to where to take this property. You can hold it, you can sell it. So, that’s awesome that it will work both ways for you.

Tony:
I hope so. I hope so. And speaking of multiple exit strategies, today’s guest, I think, did a great job of exemplifying that. You liked that transition? That was a good one.

Ashley:
Yeah, I did. That was great. Before you make your transition though, I’m going to put a pin in it because I have to give a shout out. I met an investor at the Fixated On Real Estate conference. Met him, Jay. An episode had released just Wednesday before the conference, and we played his voicemail on the show. So it was so cool he had just been on the episode and then I got to meet him. So really cool.

Tony:
Shout out to you, Jay.

Ashley:
Okay, go ahead. I’m so sorry to interrupt that perfect transition. Please continue.

Tony:
Today’s guest, his name is Cale. Cale and I actually connected on Facebook, I think. He and I were in some of the same short-term rental related Facebook groups, and he and I have been chatting before he even bought his first one. He was a listener to the show, but he just took massive, massive action. This guy, he’s at 10 units after a year and a half of investing. So he just gives a really cool breakdown of how he started off in the long-term rental space with small multifamily, made his transition into buying cabins and didn’t buy one, but bought three to begin with. So he’s just really, really crushing it in that space.
His story talks about how he made that transition, but he also talks about how he balances self managing this portfolio of 10 units while also having a very busy W2, having a wife, having three kids, just so many really good stories and lessons I think from his story.

Ashley:
Yeah. And I think that a big thing that we didn’t dive too much into when we probably should have more was that he’s prepared himself to become a real estate investor. He’s been frugal all his life, he’s saved his money, he has different financing options. So I think that’s an important piece. Even if you’re not ready to start investing now, get your finances in order and be good with managing your money, because it really will set you up for success getting into real estate investing.
Okay. Let’s bring Cale onto the show. Cale, thank you so much for joining us today. Can you start with telling everyone a little bit about yourself and how you got started in real estate?

Cale:
Sure. I’m 37 years old. I grew up actually in the Northeast New Hampshire, so I know the feeling of the winter, Ashley, I feel your pain. But I moved down to South Florida when I was 18 for college and went to University of Miami, studied engineering. And when I was graduating, I realized at that time that I didn’t want to do any design engineering, that really wasn’t my passion. And I had started taking an interest in just investing in general, and a little specifically with real estate. And so, actually my senior year, I had started interning with a large commercial real estate investment firm. And after I graduated, I went full time with them.
I worked for a couple of years as a commercial real estate broker and sold both my family properties down in South Florida. And it was a good experience, just terrible timing. This was 2006 to 2008. And so come 2008, when things started drying up, I jumped ship on that. I didn’t really love the broker part of it, I liked the education part, but not being a broker. And so I jumped ship, and I didn’t really do anything with the knowledge at that time. I think I was just still too young and just more focused on, I need to make money, get a career, type thing.
And so I started working in construction management, which is what I’ve been doing for the past 13 years. And so that’s what I do now still as a senior project manager. I’m married, three kids. About a year and a half ago, I just had a mental switch go off that, “You know what, I need to start working for myself and building wealth for myself and my family and not just for somebody else.” I made that decision really in January, 2020, I just said, “You know what, I’ve got to pick something, I’m going to start investing, start building wealth.” And so I chose real estate, and I just really jumped all in.
That’s when I started devouring podcasts, BiggerPockets, reading everything I could possibly find, analyzing deals daily, walking the market, doing all the stuff that Brandon Turner recommends to get your first deal in 90 days. And lo and behold, it works. I literally did that. I picked the market, I walked it pushing a baby in a stroller, walked every street and put in offers, got one accepted, and we started off on the journey that way. It’s been a fast journey, a bunch of highs and lows. And we’ve been just cruising along since.

Ashley:
Cale, when you said that you had a mental switch, at first, I thought you said you were going to have a mental breakdown, and I went, “Oh yeah, I have those. I have those, I can relate.”

Tony:
Investing in real estate will do that to you.

Ashley:
But yours is way more positive.

Cale:
Well, it probably was more of a mental breakdown, or a quarter-Life crisis, mid-life crisis, whatever you want to call it.

Ashley:
Yeah. This is great. This is awesome. And I’m excited to dive more into your story. But can you just give us just a snapshot of what your portfolio looks like today?

Cale:
Yeah. Right now, I have 10 units total. I have five long-term rentals, which, one is a single-family home, three are part of a quadplex and one, I guess I’m calling it a unit, but it’s actually a primary, but we house hack as well. And then we have five short-term rentals, which for our cabins in the Smoky Mountains, and one unit of that quadplex that we converted to a short-term rental.

Tony:
Let’s break this down a little bit. All right. Well, first of all, congratulations on the growth, because you’re 1.5 years into this and you’re at 10 units, which is fantastic. I think that speaks volumes of the action taker that you are. Just to give the listeners some backstory, Cale and I were in some of the same Facebook groups around short-term rentals. And I think we had spoken, Cale, before you even got your first one, if I recall correctly. And then you started posting about, “I got my first one.” And then a couple of months, you said, “Hey, I got my second one. Then, I got my third.” I was like, “All right, we’ve got to get this down on the podcast so he can share a story.”
So just kudos to you for taking massive action. But walk us through that journey, so that very first deal, what was it? And what was it about that deal that made you say, “Okay, this is the right thing for me”?

Cale:
Yeah. So the first deal was a local one. I didn’t have the nerves to try the out-of-state right away, which I think most people have that, but I’d like to dispel that myth, honestly, the out-of-state ones are so much easier to manage than the ones 20 minutes down the road. It was actually a quadplex about a mile or so from the beach. I live in Palm Beach County, Florida. So I picked a market that was, like I said, it was close by and it was a an artsy beachy type community, lots of small multi-family. I didn’t want to do single family, I knew that, I wanted to at least do small multifamily. And the initial plan was scale it into larger multifamily and grow it that way.
And so I picked that market, did all the research, like I said, walked the market, scoured, Zillow and MLS daily, and just started submitting offers. I don’t know how many offers I submitted, they all got rejected. This one got rejected actually the first time, and then I circled back a month or so later and gave him an offer again, the same thing. And this time they accepted it. We’ve gotten it under contract. So it’s quadplex, it’s basically like two duplexes actually on the same lot. And it’s a cool building. It’s old, it’s 100 years old, which most of the properties in this area are.
It’s two, one bedrooms, a two bedroom and a studio unit. Yeah, that’s the first deal.

Tony:
So I don’t want this to get lost to the listeners, but you said that you submitted an offer initially on this first investment and it got rejected for whatever reason, but you followed up with him a month later, and lo and behold, it got accepted. There’s lesson to be learned there about consistency, about persistence, and just really knowing that just because your first offer is a no, that doesn’t mean that it’s always going to be no, because you never know what’s going to happen with that other person who had that property under contract. Cale, do you know what the story was? Did they have another offer and that person didn’t perform? Or did it just end up sitting longer than they wanted it to? Why did they reject you initially and then accept your offer after all?

Cale:
Yeah. So when I first submitted the offer, it was relatively new on the market. And so I think they were just holding out for something better, which didn’t come along. This was April, I think, 2020, so this was like right when the pandemic came crashing down. So I think that had a lot to do with it as well. They were an out-of-state owner, older, and they were just trying to free up some of their portfolio. And so I think the timing had a lot to do with it. I circled back, and this was, I forget where exactly I’d heard that tip, but it was from either a podcast or a book, where it was, “Hey, don’t just submit and forget, keep circling back.” So that’s what I did.

Tony:
That was actually me, Cale, I’m pretty sure. I’m pretty sure you got that from me.

Cale:
It might have been. You get a lot of credit in this one.

Tony:
But I love hearing that, man. And like I said, it’s something that happens often. I felt like I’ve heard Brandon say this on the other podcast too, that he’ll submit another offer for the exact same amount, everything’s exactly the same, but he just puts it in again and just getting in front of people, it jogs a memory. So you have this fourplex, you get this in the middle of the pandemic, which again, I think shows how much courage you have as an investor to start investing in such an uncertain time. How much time after that first investment do you roll on to the second one?

Cale:
W closed on the fourplex in June of 2020. And then the next one, which was the first cabin in the Smokies, we closed on in February. It was a decent amount of time, and I guess the reason is I had a little bit of the shiny object syndrome and started just looking into a lot of different things. I saw the cashflow from this, and it was good, but I just started thinking, “Oh man, it’s going to take a lot to get me to where I want to be in terms of the numbers.” And so I started looking at different things that had better returns.
Like I really started heavily looking into the residential assisted living, I even went out to a seminar in Phoenix with Gene Guarino’s team for the residential assisted living and got really interested in that. I got a little bit intimidated by it, honestly, just because of the business aspect of it more so than the real estate. I still really like the idea, I hope to get into it in the future. So yeah, I just was looking at a bunch of different things and I just wasn’t sure what direction to go. And then the serendipity happened when I heard your podcast, Tony.

Tony:
I actually do get credit for that word.

Cale:
You do get credit, yeah.

Tony:
That’s awesome. So what was it about the short-term rental space? I guess let me frame this right, a lot of people, I think, understand that short-term rentals typically are going to generate more revenue than a traditional long-term rental, there aren’t many people that argue that. But what I think shies a lot of people away from stepping into the short-term rental space is that it definitely is more management intensive than a traditional long-term rental. So what were you afraid about this really management-intensive asset class? And now you’re finally going out of state, this is long distance. So what were your thoughts around some of those obstacles, and how did you push past those?

Cale:
Honestly, this first one, this quadplex, the first few months of having it was a heck of a lot more work than I thought it was going to be. I had some trouble tenants and just a lot of challenges, and I was like, “Man, if this is what the long-term rentals is like, I don’t know if I want to be in this.” And when we bought this too, I had the long-term plan of I wanted to make it into Airbnb. So I had the short-term rental thing in the back of my mind, and then, when I heard your podcast talking about the Smokies and the cabins out there, from a personal standpoint, I was like, “Oh man, I’d love to have a cabin out in the mountains.” It’s a dream of a lot of people.
And if I can have something like that and it’s generating great returns, man, this sounds awesome. And just the description you were giving, the numbers, I was like, “Jesus, that sounds too good to be true, almost, really.” I didn’t even know where the Smoky Mountains were. So literally, after the podcast, I popped over in Google Maps on my phone and I’m like, “Oh, it’s only like 14 hours’ drive away.” This is the week before Thanksgiving, and I had already scheduled that week off from work and we didn’t have plans though. And so I was talking to my wife, I was like, “Hey, you want to take a trip to the mountains next week?” And so we packed up, we literally packed up a minivan, packed to the brim, seven people and luggage.
Drove out to the Smoky Mountains, and hooked up with the realtor that we use through the BiggerPockets forum on the way up, and scoped out properties, met with the realtor and just really got a feel for the area. When we came back, I was hooked on the market and the cabins, but I was definitely still had a lot of mental hurdles to overcome because, number one, the prices are way higher than anything else I’ve looked at, and the competition is crazy out there, as you know ,Tony. Just the thought of that offering over asking, for me, that’s like just a big mental hurdle. I’m Mr. Frugal, so just the thought of paying more than somebody is asking just hurts me.

Ashley:
Well, Cale, I just want to highlight one thing that you said there, and it was that you heard Tony talk about this market and his success there. The US is huge, there are so many neighborhoods, there are so many cities, it’s overwhelming for someone who wants to invest out of state as to where to even look, where to even start. And I love that you took an investor that is having success in a market and you went and you analyzed that yourself. For our listeners, for a rookie investors, look where other people are having success and then analyze from there and use that as your starting point.
Don’t invest somewhere just because somebody else is investing there, but at least you can start analyzing that market and see if it fits for you, instead of taking a whole map of the US and saying, “Okay, well, I’m going to start on the East Coast and analyze every city until I get to the West Coast.” So I think that’s awesome that you did that, because that was almost like a shortcut to you that you didn’t have to go and pull up a map, like, “Okay, I’m going to highlight all the great short-term rental markets that have different activities and different things to do, you just focused on that one, analyzed it, and it worked for you.

Tony:
Let me make one comment on that, because I think it’s a really good point that you made. I think the other side to that coin is that, I’m sure you get this too, people come to me and say, “What market should I invest in?” And they just like drop that question there. And it’s such a personal decision or like such a decision that’s unique to your own circumstances that I could never tell Ashley or Cale what’s the best market for them to invest in. So your point of using it as the starting point, I think is really good. But for all the rookies that are listening, you guys can’t look to someone else to tell you what’s the best market for you to invest in, you still have to do some of the homework yourself.
But success does leave clues, and if you see other people having success in those markets, it shows it might be a good starting point for you. Just on my mind, because I get that question all the time, I’m sure you do too, so I wanted to share that.

Ashley:
Yeah, yeah. That’s great how you clarified that. Cale, you said that you got your wife to pack up and drive to the Smoky Mountains. How did you get her interested in real estate investing from the beginning?

Cale:
Well, it’s still a work in progress, honestly. We had our hands full with the family and the W2 and everything. She’s still starting to get involved and starting to help out with the social media part more so, because I’m really bad with that. I’m big into like the Facebook forums for those specific items, but when it comes to like Instagram and stuff like that, I’m like non-existent, so she’s starting to get involved with that and helping out in that aspect. She’s not full in yet, but she starting to get there.

Ashley:
Yeah. But I think the thing is that she’s supportive of you.

Cale:
Yeah, yeah. She was willing to hop in and go up there and explore, for sure.

Ashley:
Right, yeah. And I think that sometimes people get hung up a little bit on, “Well, my significant other, they’re not doing any of it, they’re not into it yet.” My husband, he can’t even tell you where any of our properties are, probably. They don’t have to be involved in the business of it, but to have their support is the biggest thing. They don’t have to have an interest in it. You don’t see me out there milking cows every day, but I’m still supportive, it’s a farm business. So it goes both ways. But if anyone listening has a significant other, he doesn’t want to do the social media or doesn’t want to analyze deals or doesn’t want to go look at properties, that’s okay. But it’s very important to have their support and that they’re okay with you going onto this journey and doing that.

Cale:
Yeah. Especially when we started looking at the mountains and stuff, because just like me, there’s an emotional aspect to it too of that property or cabin in the mountains that appeals to her as well.

Ashley:
Let’s go on. So what happens next after the Smoky Mountains deal here? First one there?

Cale:
Yeah. So like I said, we came back. Again, this was right after Thanksgiving, and I started looking at properties on the MLS daily. And again, I had that real big mental roadblock of putting an offer in over list. And so I just started scouring listings that had been on the market for a couple of weeks or a few weeks, just thinking, “Hey, maybe I’ll have a better chance of finding a deal on that.” That was the strategy that I developed, and it worked for that first deal. I submitted an offer 50,000 below list and they accepted. I guess a lot of it is a bit of luck, in that when I got that one under contract, the seller, their family actually owned the two adjacent cabins and they were looking to sell those as well.
And so when we closed on that first one, immediately, we negotiated and went under contract off market on the two adjacent ones. And so we ended up getting a really cool three cabins and a cul-de-sac at the end of the road on five private acres and it worked out really cool

Ashley:
Cale, so now you have your family compounds for when you retire, bring the whole family, you got three houses on five acres. But I want to know how you knew that though they had these other properties, did you ask, did they tell you, and how did you do it as an off-market deal?

Cale:
Yeah. Well, when we went under contract, I guess my realtor, just through speaking with the listing agent, the listing agent had mentioned to him that they had the other two cabins and they were interested in selling those as well, so he brought that to my attention and we just started looking at them. Initially, I didn’t know if I was going to be able to handle it. Again, it was a lot of money, a lot to bite off. Again, I was a bit nervous and that’s why I didn’t lock them up right away, because I was like, “Man, let me do this one. Let me take a step by step.” I wish I’d done it, I probably would’ve gotten a better deal doing it all at once.
So he brought it to my attention. I just kept it in the back of my mind. So after we closed on it, that we opened up discussions with the seller on the other two. They had a price in mind, we negotiated a bit and got some negotiated bid on the price, a bit on some credits and ultimately came to an agreement and locked them in.

Ashley:
For your experience doing an off-market deal, how would you say that differed from using an agent and going through the sales process? And do you have any advice for rookies of things they should know when doing an off-market deal where they don’t have an agent representing them?

Cale:
Right. And actually to clarify, I still used my agent to do these. For me, it was pretty much a seamless process, No real difference. The only difference, I guess, was that-

Ashley:
So really it’s just that it wasn’t listed online? So the agents were still getting commissioned, but you didn’t have anybody bidding against you?

Cale:
Exactly, yeah. There was no competition. So it worked out really well that way being able to do that.

Ashley:
Yeah. And I think that’s just such a huge advantage of being able to ask sellers, or finding out from sellers that they have other properties, is that they have you as an easy buyer that you already closed one property with them, they know you can close the other two, why go through the hassle of even listing it. Yeah, that’s awesome.

Tony:
That’s such an important point, Ash, is that once you can… And you haven’t even really done this yet because you were still under contract, but once you can prove to someone that you have the ability to close, it makes it so much easier to get that next deal from them. And we see this in Joshua Tree where we invest at. We just got three more properties under contract from the guy that built the other four houses that we bought that he had built before. He’s coming to us first because he knows that we have the funding, we have the ability to close and move quickly, it’s a smooth process, he only has to do with one person. So when you can show that you have the ability to close, I think that’s what opens up so many more doors and opportunities for you to get more and more deals.
So congrats, Cale. That’s awesome, man. I actually didn’t know that that’s part of how you scaled so quickly, man. So you close on that first short-term rental in February, when do you close on the second two on numbers three and four?

Cale:
So yeah, but closed on the other two in beginning of May. Yeah, beginning of May.

Tony:
Okay. So a couple months later. And then from there, you guys continue to purchase, So when was the next acquisition after that?

Cale:
So we were under contract on the next one, I think within a few weeks after that, just the bug bites you. A few weeks of not getting a deal feels like an eternity.

Tony:
Crazy how that changes, right?

Cale:
Right. So, yeah, we just closed on that at the very end of July, so just a few weeks ago.

Tony:
Okay. So I think one of the questions that our listeners might be thinking is, Cale, you’re doing a great job and you are closing on these properties, how the heck are you affording all of these different purchases? Can you walk us through what the price points were for each of these purchases, both in the long-term and the short-term rental side? And then once we do that, just give us the idea of how you funded all of this.

Cale:
The very first one was the quadplex, again. So they were asking 488, I got it for 400, and I financed that one with 25% down, just an investment loan, like 3.6% interest. And actually, on that first one, an important point, I guess, also is that I actually partnered with my father on that very first one, that quadplex. Which was as a safety cushion, it’s a little more comfortable, obviously, doing something like that, where there’s somebody else a little more experienced to fall back on. So we did that. And then the first cabin was, they were asking 700, we got it for 650, and we actually ended up increasing the price while we were under contract to 660 and having them get back a $10,000 credit at closing, just to help with the closing cost of it.
And we did a 10% down, second home loan on that one, which I know you know all about those. And for rookies and getting into different markets, that’s huge, especially for your first one, my goodness, that’s an excellent bit of financing to take advantage of. And then the second, third and fourth cabins were all conventional investment loans with 15% down. And as far as how did I afford them? Like I said, the first one I did partner, so we split it 50/50. I had also right before COVID really lock things down, I had gotten a HELOC on the single-family home investment property that I had. So I was able to pull out $150,000 HELOC on that property.
And so the first cabin, I just did with my own funds, the second and third, I actually used the HELOC for pretty much the entire down payment on both of them. And then the fourth one was just from personal savings as well. So the second and third ones are pretty much, ultimately no money down in that aspect which is cool that the whole concept of infinite return. I guesses I mentioned before, I’m Mr. Frugal, just my whole life, I’ve been very, very intentional about my finances. I did very well on keeping track of my finances, and so I’ve saved for a long, long time, and it was just a matter of, “Now’s the time to pull the trigger on making some moves.”

Ashley:
Cale, I’ve seen this question a lot, actually I think when Tony and I were doing Rookie Replies that came up as a question not too long ago when we were going through them. Someone wanted to know, how does it work with the line of credit? So can you explain how you’re paying your line of credit back?

Cale:
Yeah. With the line of credit, again, this is on an investment property and honestly, this is fun, this was actually the last HELOC that they approved before they stopped offering HELOCs because of COVID. I literally got the application in two days, I think, before they cut it off for investment properties. And so we got the HELOC approved, and in terms of paying it off, it’s interest only for 10 years. So you of course can pay the principal down as you want, but otherwise, it’s just an interest-only loan. So it’s like a checkbook almost, you can write a check, you can wire money, you can use a debit card from the account, but it’s not like a cash out refi where you’re taking all those funds and you’re paying the interest and everything on those funds right away, you only pay for what you use.
And if when you pay it back, just like a credit card almost, you don’t pay interest on that, those funds anymore.

Ashley:
So those funds that you are using for down payments, you said you’ve used them for a down payment on a property?

Cale:
Yes. I maxed it out and used it for the down payment on two of the cabins.

Ashley:
Okay. And can you explain how you’re paying that back? How you work it into your numbers to pay that line of credit.

Cale:
Yeah. My analysis, I just factored in then additional interest cost for what I was going to be paying back on that HELOC from those cabins. So I added then into my analysis on the front end.

Ashley:
Yeah. And that’s great to use that as a tool because I think people get caught up on, “Well, I have a mortgage, so my properties paying that mortgage, well, I don’t want to have to personally pay back my line of credit.” Well you don’t, you work that into your numbers so that your property is paying back your mortgage and paying back your line of credit. So you run the numbers to make sure the deal will still work for you with both of those and loan payments. And as you grow and get into even commercial real estate, there’s so many different ways to do creative financing where you may have a mortgage, you may have a private money lender, you may have a HELOC, and you may have a partner.
All these different things, but really the best thing about real estate is that there’s so many different ways to actually purchase a deal, but you just have to make sure that everything still works when you run your numbers. Even with lenders like, “Oh my gosh, this hard money lender wants to charge me 10%, but a bank would give me 4%.” But if you can’t get bank financing and hard money lender is your only option, if the deal still works and the numbers are still great, then it’s worth paying that 10% than never getting the deal at all.
So thank you for explaining that Cale, the line of credit and how you put it into your numbers to pay it back.

Cale:
Yeah. And one thing I forgot to mention, actually two, is actually on the fourth one for the down payment, I actually took out a 401(k) loan it’s for that down payment. And I had the funds, but they were in a stock brokerage account and I didn’t want to realize those short term capital gains. So I took out the 401(k) loan, and that’s very similar to the HELOC almost, just in the sense of you have a set payment and in that regard, it comes directly out of your paycheck with your W2, but again, you just factor in those numbers into your analysis, so your property is paying for it.

Tony:
Awesome breakdown, Cale, of how you’re using these kinds of creative financing options because I think we have to remember that a lot of people in the audience are at varying stages of their real estate investing career. I was talking to someone the other day and he was telling you like, “If I want to go get a loan for a house, who do I even go talk to you? Do I call my accountants for that?” And it’s like there’s so many people who have this perception of real estate that they don’t understand that there are different ways to get the deal done. So I love that you’re using all these different kinds of creative approaches to make this happen.
Cale, you’re obviously killing it, you’re crushing it, you’re moving super-fast, but it’s like you put your head down, you look up and now you’ve got all these units that you have to manage. And you mentioned at the top of the show that you’re a family man, you’ve got a wife, children, you’ve got a W2. How the heck are you making time for all of these properties that you’re self-managing, but still keeping the rest of your life in somewhat of a balance?

Cale:
Yeah. I’m not going to say it’s easy, but for me, it all goes back to the discipline and intentionality. I touched on earlier that I’ve always been really disciplined and intentional with my finances, not necessarily without a set goal in mind, but just doing what seemed right, what was common sense of how to deal with your finances properly. And that’s just how I am with everything. When we had our youngest who he’s almost two, I had to just flip my schedule, literally 180 degrees to just manage things. I like going to the gym, I like staying fit, and when he was born, I couldn’t do that in the evenings anymore. So the only way to do it was I’d have to get up in the morning.
So I changed my schedule. I’m not a morning person, it’s still not, but by force of nature, I get up now at quarter to 5:00 in the morning and do some meditations and head up to the gym and come back before work, and get all that stuff cleared out. Then I do my W2 job, and then in the evenings and everything, that’s where we’re trying to take care of any of the things with the rentals. Even this week, we got a turnover of one of the long-term tenants at the local property. And so I’ve been meeting contractors out here to take care of some painting and stuff like that after work.
Again, it’s being disciplined with your time scheduling, time management is big for me as well. So I use a calendar, I set appointments and that’s how I really keep track of things. But if you want something bad enough, you’re going to make the time. That’s my motto on it. And so it takes some pain. Like I said, I don’t enjoy getting up that in the morning and going to the gym like that, but it’s what I have to do to be able to maintain that thing that I want to do in my life. So that’s really it, you just got to really set your goals and stick to it.

Ashley:
Cale, I want to follow up on this a little bit, figured time blocking your day. So you’re getting up, you’re doing the gym and then it’s work and then it’s family time. What do you want your life to look like? What is your why? What is driving you? What’s the angle? You said you don’t like to get up in the mornings, but you’re making time, why are you building out your day now for the future? What’s the future look like for you?

Cale:
The future is having time. That’s really the goal. I circle back to it again, and really because the life-changing, I think, moment for me was when our youngest was born, we have three kids, but the other two are from my wife’s separate marriage. So he was our first together. And so my first child has a baby as well. And so when he was born, it was really a life-changing event. And that was the trigger again, even just for wanting to start this real estate venture and really starting to think of the future a lot more. The goal ultimately is to have time to spend with the family more, to be able to travel.
I love travel, that’s a huge passion of mine. Before being married and the kids I used to travel a lot. So I really want to be able to get back to that with the family and to have a better balanced life because just being honest, it is tough the way things are right now, it is a struggle to try to maintain any type of balance and things. And so the ultimate goal is to have a much better work-life balance, have that freedom, buy back my time really, and being able to enjoy these things again with the family now.

Ashley:
Well, Cale, I think you are on definitely the right path to get there. You’re doing awesome. One last question on this, are you using any software to manage your long-term and short-term rental properties?

Cale:
Yeah. Mainly for the short term, I use Smartbnb, or I guess they just changed their name to Hospitality right now, as far as the property management software. And then I use PriceLabs for the dynamic pricing. And then for accounting, this is still an area I am not good at, but I have hazardly used Stessa. It’s a good program, I’m just not good on keeping up to date with it. So that’s an area for improvement for me, big time. But those are the three, the main ones that I use, but Hospitality and PriceLabs, I’m on those daily for the short terms.
For the long-term, I really don’t use anything else than Stessa for trying to keep track of things.

Tony:
Awesome, Cale. I love Stessa. Actually, all the software you use, I love all of those, man. Stessa worked great for us, I think, when we had one or two properties, but if we started to scale, it’s gotten a little more complex and we have partners on some of the deals. So we’ve recently started transitioning to QuickBooks Online, but yes, Stessa is great, and is free. All the Rookies that are listening, if you’re looking for like a really easy bookkeeping solution, Stessa is definitely the way to go. And if there are any executives from Stessa who do listen, you like a check or like Venmo or PayPal or something like that afterwards.
Cale, I want to deep dive into one of your deals. So you have a deal on mind that you can reverse engineer for us?

Cale:
Yeah. I was struggling and thinking of which one to do, the quadplex great as the Rookie learning experience, but the numbers are a heck lot more exciting with the cabins.

Ashley:
Let’s do the learning experience.

Cale:
All right. Let’s do that.

Ashley:
Yeah. Let’s do quadplex.

Tony:
Let me just set the table for the listeners here a little bit. So I’ll just ask you some quick hitting questions and then we’ll circle back and do a bit more of a deep dive into it. So what market was this property in?

Cale:
It’s a town called Lake Worth Beach in Florida.

Tony:
Lake Worth Beach, beautiful. And we are near the property type, this was a fourplex. What was the purchase price?

Cale:
400,000.

Tony:
Was there any rehab or anything that went into it also, or was it pretty much turnkey?

Cale:
It was pretty much turnkey.

Tony:
We’ll get into what it’s running for and what your profits are after that. But at least now we know it’s a fourplex in Florida, you got it for a little over 400, so beautiful. Tell us how you found this deal, Cale.

Cale:
I found it just actually on Zillow.

Tony:
Easy money. And it’s so funny because you hear so many people say, and it is true sometimes that it’s difficult to find a deal on the MLS. What was it about this property? Was it sitting for a long time? Was there something about it that maybe were turning off other potential investors? Or is that city that you’re in just not super competitive? Why were you able to find it so easily just off the MLS?

Cale:
I was scouring MLS daily, so I was really in tune with the market and what was coming online. And then I think the timing again was probably on my side, just in the fact that it came on the market right before COVID, and then of course COVID hits and I think that changed things a lot for the sellers. It was just again, being diligent about checking the MLS and Zillow, knowing the market, and a little bit of luck with the timing, I think.

Tony:
Got it. Was there any negotiation on the purchase price?

Cale:
No. I honestly wasn’t expecting them to accept the offer. It was one of those things where I was just going through the motion of sending out the offer again and they came back and said, “Okay.” So I was like, “All right.”

Tony:
So you find this deal on the MLS, you get it under contract for slightly less than asking whatever you go through your whole escrow period, everything’s getting tided up. But then the day comes, Cale, where you actually close. You sign up the paperwork, they hand you the keys, they say, “Cale, this building is now yours.” What the heck happens from there? You had never been a landlord before, you had never managed tenants before. What do you do to get yourself up and running?

Cale:
First thing I did actually was go in and meet the tenants. I went over there. We had some of the leases were going to be turning over in a short period as well. But to meet the tenants, take another look at the units and stuff like that see if they were going to renew their leases because, again, first time investor, I was panicked about vacancy. That just scared the daylights out of me of having even a day of vacancy. I was like, “Oh my gosh, we got leases turning over, I get this rented out.” So I went to see if they’re going to be ever going to renew their leases or not.
And then from there, it was just planning because like I said, I knew that some of those leases were going to turnover, and so I just started getting things ready to put them on the market, researching the rental rates more and getting things ready.

Tony:
Talk us through that process, Cale, of meeting your tenants for the first time. I’ve only had a small number of long-term rentals. I have no idea what those tendencies can look like because they’re out of state, I had a property manager. When you first get this property, what do you do? Do you say, “Hey, I’m Cale, if your toilet breaks, give me a call. What does that conversation look like?

Cale:
Well, the funny thing is actually is that I actually when I went over there to meet, and again, its four units, I only ended up actually getting to meet one, the other three weren’t home at the time. So I had actually prepared even like a little letter that I had just in case they weren’t home and I just typed out, “Hey I’m the new owner, just to summarize, here’s your current lease terms, let me know if you plan on renewing your lease.” Check yes or no type thing. And so I left that for the ones that weren’t home and the one guy that I did meet, he’s actually pretty cool guy, ended up staying there and chatting with him for quite a bit.
Actually I learned a lot about the property from him which was really interesting. That’s a little key takeaway there for people is, talk to your tenants, especially if they’ve been there for awhile, they’re going to tell you a heck of a lot more about your property than anybody else. Probably some things you don’t want to know too.

Tony:
So how many tenants ended up not renewing their lease?

Cale:
They’ve actually all turned over, which has worked out really well, rents were below market. And so we immediately were looking to raise the rent. Actually in that letter that I had, I put that, “If you aren’t going to renew your lease, this is what the new rent is going to be as well.” And they were pretty significant jumps? So I guess I’m not surprised that they didn’t renew them.

Tony:
Talk us through your journey, then Cale of marketing for new tenants, screening those sentence, get the units filled, this is your first time doing it, how are you educating yourself? What mistakes did you make along the way, what lessons were learned?

Cale:
Oh yeah. Well, the first one was the fun one. I marketed them on Facebook Marketplace and Craigslist, and I think I even used Zillow even to market them. Most of the hits came from Facebook Marketplace though, and that’s almost like exclusively what I use now whenever I have to rent out the long-terms. And so the first tenant that we ended up getting in, I had good intentions of doing the background checks and everything. And this tenant had a story of why the background check wasn’t working, wasn’t going through. And again, like I said, I was just like, “Man, I don’t want to have any vacancy. I don’t know, she seems nice.”
And so we broke the rule, which is red flag number one, never break your rules, you set them for a reason. And so we let it slide that the background check wasn’t coming through and she moved in and pay the rent, no issues for the first couple of months. And then I started getting complaints from the other tenants of they’re banging on their door at 3:00 AM, domestic disturbances police getting called to the property. She actually got arrested twice on the property. And so when I found out, and I didn’t find out about these arrests and all these things until most of it had already happened, and then I found out about this all and tried talking with her and said, “Hey we got to do something, this is not working.”
And she actually just disappeared for a couple of weeks, I couldn’t reach her, couldn’t do anything. And so I was like, “All right, we’re going to have to move forward with an eviction.” And so I put the notice on the door, still trying to reach her, couldn’t find out anything. And then like a week later, actually one of the other tenants called me and he’s like, “Hey, she just packed up her stuff and left and gave me the key.” “Okay.’ I was like, “All right. Well, good. Saved me a lot of trouble there.”

Tony:
But, Ashley, you talk about this all the time too, that sometimes just putting that notice up, there is enough to spur action to get them to leave on their own.

Ashley:
Or to pay, either one.

Cale:
She left and we rented it out actually like a couple of weeks later and still maintain the zero vacancy.

Tony:
Okay. Beautiful. So what are the units renting for now, Cale, and what kind of profits do you typically see from a cash flow perspective?

Cale:
The two one bedrooms, they were currently renting for 1,100. We’re actually turning one of them over right now and raising the rent to 1,150 on that one, the studio we rent for 900. The two bedroom when it was a long-term we were renting it for 1, 395, but we converted that to the short term in March of this year and now it is grossing four to 5,000 a month.

Ashley:
That is fantastic. That’s a fantastic business model. It’s so funny because I was literally looking at fourplexes in the Florida area last week with the goal of Airbnb being all of them out. What a tremendous way to take this property, this unit that would have been grossing, what like $1,300 and you’re 3Xing that by turning it into an Airbnb. That one unit by itself is doing as much as the whole thing was before.

Cale:
Exactly.

Tony:
Man, what a fantastic, fantastic first deal for you, Cale. I guess any other lessons learned that you just want to share with the rookies that might be helpful for those trying to get that first deal done?

Cale:
Yeah. Don’t stop with the education, and always look for cost saving strategies, especially with the long-term rentals where typically, the margins are a lot slimmer than with the short terms. When we first got this, I was digging into every little thing of how can I reduce expenses, shopping out, pest control, lawn care. We even added, the South Florida, hurricanes of course it’s a big thing and insurance is crazy expensive. So we even added some additional hurricane straps on the roof, which cut our insurance almost in half.
One key item I took away actually from an online real estate seminar I took, it’s called RUBS, Ratio Utility Billing System, where if you don’t have separate water meters or electric meters or whatever on your property, just the method of separating those expenses and still passing them onto the tenants, because before the owner was paying all the water, there’s only one water meter. And so when I saw that, I was like, “Oh, that’s beautiful.” And so as the leases were rolling over, I built it into each of the leases that they pay for a certain percentage of the water, and that $50 seminar saved us over 3,000 a year in water bill. So just keep educating, keep learning, and look for ways to cut costs.

Ashley:
What was the name of that program again, that website?

Cale:
This was actually through Brad Sumrok.

Ashley:
No, I meant like the utilities splitting.

Cale:
Oh, sorry. RUBS, R-U-B-S, Ratio Utility Billing System.

Ashley:
And we’ll put that into the show notes for you guys at biggerpockets.com/rookie121, if you guys want to check out that link. Well, thank you, Cale. Even just that, I’m sure there’s going to be somebody else that’s going to be saying, “Just from listening to that one podcast episode I got to learn about that.” So I’m going to take us to our Rookie Request Line. Anybody can call in at 18885-ROOKIE, and leave a voicemail for Tony and I, and we will pick your question to be on the show possibly. And today we have a question for Cale. Cale, are you ready?

Cale:
Yes, I am.

Ashley:
Okay. Today’s question comes from Mario.

Mario:
Hi, my name is Mario, I’m out in Nevada, and I’m trying to get a loan for a vacation rentals and having a hard plan finding a bank that will accept short-term rental income as income. If you could please help me out with that, that would be awesome. Thanks.

Cale:
That’s a very good question. It can be a couple of things and it depends where they’re at. I guess the first thing would be, find the right lender. So talk to lenders that are specifically into lending for the short-term rental market, because a lot of the conventional lenders who aren’t in tune with the short-term rentals are going to be a lot more risk averse, I think, when it comes to that, but there’s plenty of lenders out there too, who specialize in short-term rental financing. And of course, they’re going to be a lot more in tune with that.
The second thing would be how long have you had that income? And if it’s less than a year and you don’t have it on a tax return, then it is going to be harder because even those lenders who are specific short-term rental lenders, aren’t going to qualify that income either. You just got to really shop around for the lender. If you need to wait, you might have to wait until you can get it on a tax return. The third part I think really, it comes down to the appraisal as well. And this is where being in a really good vacation rental market can help because when they do the appraisal, they’re not only appraising the value of the property, they’re appraising the rental value of it as well as a long-term rental, so to speak.
So if the appraised rental income as a long term is sufficient, then that can help offset the expenses and help with your DTI as well.

Tony:
Yeah. Great advice, Cale. Like you said, there are companies that specialize in short-term rental lending, Host Financial is one, Visio Lending is another one. I think there’s one called LendSimpli. There’s a few more of these like STR specific lenders that are starting to pop up, which is really cool because if you look in the apartment space, there are lenders that specialize in big multifamily, but we haven’t quite seen that infrastructure being built out yet for short-term rentals, but we’re slowly starting to see more and more of those lenders coming online that can underwrite a property based on its projected short-term rental income, but not necessarily just the long-term rental. So awesome, man.

Cale:
Yeah. And just like you mentioned, the Host and Visio, those are great options too where they don’t necessarily factor in the debt to income. You may pay a higher percentage, but you have that benefit of not being tied into that DTI.

Tony:
And maybe you’ll pay a higher interest rate for a couple of years and you can refinance out later after you’ve shown that this property is producing a certain number of incomes. So lots of options there. Great advice though, Cale. I want to take us into our Rookie Rockstar, and today’s Rookie Rockstar is actually a previous guests of the Real Estate Rookie Podcast, Kevin Christianson, who is on episode 51 as our Rookie Rockstar for today. And Kevin, just for you all is super active in the Real Estate Rookie Facebook group.
He’s one of the guys that provide more value than anybody else in that group, he’s always giving back to that community. But Kevin met Micah in the Real Estate Rookie Facebook group, and they purchased their first deal together in Sunny, Florida. And their plan is to use that as a short-term rental. It’s a five bedroom, four and a half bath with a pool, 4,000 square feet. And they got it for $45,000 under asking price in today’s market. They’re saying that it only needs about 15 camera innovations for it to be ready to get furnished. So major shout out to you, Kevin, and to Micah as well.

Ashley:
That’s awesome. And I had seen Kevin post that, and he had put in there how many connections you have made into that group meeting with people, and I’m glad he found a partner out of it. Super awesome. So if you guys are now ready, join the Real Estate Rookie Facebook group and meet and connect with like-minded individuals. Well, Cale, thank you so much for joining us today. This has been really awesome. And congratulations on all of your success and more to come. Can you please tell everybody where they can reach out to you, find some more information about you?

Cale:
Yeah. I’m on Facebook as Cale Delaney. I guess in Instagram, I’m not that great on that, but we did just start a page for our properties as well, it’s a MTN, like mountain, [mtn_to_see_cabins_and_cottages 00:55:00], with a underscore between each word. So MTN, mountain, mtn_to_see_cabins_and_cottages with underscore. That’s our property or our business Instagram page. We’re working on getting a Facebook page for the properties and website and all that stuff, but like I said, I’m a little behind on the social media. So reach out to me on Facebook, the BiggerPockets Forum, Rookie Podcast Forum, I’m in there. So reach out, I’ll be happy to connect.

Tony:
And we’ll link all of that information of how to reach out to Cale in the show notes at biggerpockets.com/rookie121.

Cale:
One other thing I just wanted to mention too, and especially for people who say, “There’s not time,” or, “I have a family,” it’s easy to make excuses for a lot of things than not take action, but one thing I want to bring up is that I’m married, have three kids, but we still house hack. I have house hacked since college, I’ve actually never lived alone. And so it may seem weird to be a full family and still house hack, but we do it, it works out pretty well. And just that alone brings it in nine, $10,000 a year for doing almost nothing. So I just encourage people to think outside the box a little bit and maybe step outside your comfort zone even, and looking at ways to generate additional income and really help you in your investing journey.

Ashley:
Well, Cale, thank you so much. It’s really been great. My name is Ashley @wealthfromrentals and he’s Tony @tonyjrobinson on Instagram. And thank you guys for joining us today. We will have another episode on Saturday of Rookie Reply. We’ll see you guys then.

 

 





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