Real Estate

Buying Your Next Home with Often Overlooked 0% Down Loan


When most people think of USDA loans, they tend to think of farmland or some very, very rural house in the middle of nowhere. While this can be the case for many USDA loans, it isn’t the standard for all of them. As today’s guest Holly Barrett describes, USDA-applicable properties can be outside city centers and just a bit rural.

Not only that, these loans provide homeowners with the chance to get a 0% down loan! This is exactly what Holly did with her first home, later turning it into a rental and finally selling it to make room for some higher cash-flowing properties. She’s also used SBA loans to purchase a commercial property, which has helped her lower the upfront costs needed for acquisition.

Now, Holly has properties close to Chattanooga, centered around a “cool area” as she likes to call it. She’s making her transition from long-term rentals to short-term rentals and is excited to see what her new profit margins are like once her properties go live on Airbnb.

Ashley:
This is Real Estate Rookie episode 95.

Holly:
I look for the cool factor. I want cool properties in cool places so that I can feel cool. I mean, really, that’s what I want. And so I look for things like I like to see other houses being renovated.

Ashley:
My name is Ashley Kehr, and I am here with Tony Robinson. Today, Tony, is in beautiful sunny, California as usual, but I am here in a 100 degree weather in Las Vegas.

Tony:
Well, we got to tell them why you’re there, Ashley. You’re there trying to gamble off the sadness and despair that you felt from losing out on that deal last week.

Ashley:
Oh my gosh! You guys, I put in my biggest offer ever on a property and there was me and one other person, they actually stopped all showings, because they said the offers were good enough. And the seller had me running around getting different financing, because he didn’t like certain loan I got. So then I had to go find another one. And finally, after a week, they decided to accept the other offer. It was actually in the newspaper while he was considering the offers that this… It was a campground, that this campground had two offers on it. And the sellers were deciding and one was a local investor, me, and one was an investment group from Los Angeles. So I am convinced that it is Tony who knew about this deal, got [crosstalk 00:01:29] together and bought this property site unseen.

Tony:
I didn’t want to tell you here. I don’t want to break it to you like that, Ashley, that was me.

Ashley:
And you know what? Until I started telling the story right now, I didn’t even make that connection before what we’ve talked about this deal so many other times. So it was Tony.

Tony:
Well, more deals to come. If this one didn’t work out, I’m sure there’ll be others. And maybe it’s outside of Buffalo. Maybe it’s somewhere a little bit further out. And you finally get that out of state or out of Buffalo deal done.

Ashley:
Yeah, it would be nice to get out of New York State for investing. What about you, Tony? What deals are you working on?

Tony:
Yeah, we closed on a property last week. So this will be our first BRRRR short-term rental in Joshua Tree. So we got a three bedroom, two baths out there that we picked up, going to take like eight to 10 weeks to get the rehab done. Hopefully we can refinance, get all of our capital back. And I think that’ll probably be our more normal model moving forward as opposed to buying turnkey. But we also did something unexpected, but we made the decision to sell the first Joshua Tree property that we bought. The market’s heated up quite a bit since we purchased there last year. We’ve literally only owned it for eight and a half months. Hasn’t even been a full year yet. And the plan is to use those proceeds to go out and buy a couple more cabins in the Smoky Mountains. So I would say, Hey guys, come take a look at the listing, but I’m assuming by the time this airs it’ll probably be sold already without crazy to the Joshua Tree market. So I’ll post some pictures and you guys can see what it looked like.

Ashley:
Well, that is awesome. I hope it does sell very quickly and for a very high price.

Tony:
Fingers crossed.

Ashley:
Yeah. Today, we have a guest on, Holly, who is going to talk to us about right off the bat, USDA loans, which we’ve never had anybody on talking about that. Then we’re going to talk about SBA loans. And then she also goes into how to find an investor friendly agent. So there’s a ton more value in this episode, but those were the top three.

Tony:
I think the thing that stood out to me the most, what I really want listeners to focus on is when she talked about her transition from the single family investments into the duplexes and commercial properties that she purchased, I think it’s a really insightful part of the podcast that a lot of the rookies will hopefully resonate with. So yeah, lots of good stuff throughout this entire episode.

Ashley:
And let’s bring Holly on.

Tony:
Holly, welcome to the podcast. Super excited to have you on today.

Holly:
I’m so glad to be here and I’m honored. I’m such a big BiggerPockets fan. So thanks for having me.

Tony:
Absolutely. So Holly, we’ll get into your story, your real estate investing journey, but I guess tell us how you got started. What led you down this path to becoming a real estate investor?

Holly:
So first property I bought with a USDA loan actually before my now husband asked me to marry him. So we got into that property and a couple years into it, we ended up turning it into a rental. And so just I joke that you get one, it’s like getting a tattoo, you get one and you just can’t stop. You just want more.

Ashley:
Holly, can you just tell everyone real quick what a USDA loan is, because a lot of times we hear FHA for your first time loan. So can you tell us about that please?

Holly:
So I was never really good at saving my money. So I didn’t have a lot of money to buy anything, even the 3% down at that time would have been probably not feasible for an FHA. So I had to do USDA. It’s like 0% down loan. And surprisingly, it’s rural property, but if you look at the USDA map for the properties, they’re typically not as far out as you might think, and they don’t update those maps very often. So a lot of the USDA zones are really not as rural as I think people think. So yeah, that’s what’s the USDA loan is. It’s really a government backed loan to incentivize folks to buy property on rural land.

Ashley:
And you guys listening, we will blink the USDA maps too in the show notes at biggerpockets.com/rookie95. And you guys can check those out to see if maybe it’s an option for you.

Tony:
I want to dig a little bit deeper on the USDA before we keep going, Holly, if that’s okay. So is this USDA available anywhere or is it just certain parts, like certain states that offer this thing? And then as the buyer, are there any requirements that I need to have to be qualified? Do I need to be like a farmer or something to get qualified for this? I guess, what are the requirements?

Holly:
That’s a good questions. So first question location wise, I think, it’s nationwide. So you just take a look at that map and see how close it might be to where you live. I’ll give you an example here in Atlanta. Northern Forsyth County, Cumming, which really is a very commutable area to Atlanta, many people who live there, if not most, commute into the city. So it’s really not too far out. And then the second question about stipulations. There is a maximum income, I believe, and I don’t know them off hand, but I’m sure the link to that map, you can see what some of the requirements are. So you can’t make too much money. And then I believe there are some maximums as far as the amount that the property purchase. So there are some rules just like with FHA.

Ashley:
Yeah. And with that income limitation, I believe, it varies by state and even by county too. So you can actually go onto the website and figure that out. And then your income is based on how many people are in your household. So it really varies. So for Holly to give us an answer, really hard to give us that exact number.

Tony:
I guess one other question about the USDA, and Ashley, maybe you know this too, but, I guess, is it only owner occupied properties or can you do this for an investment purpose as well?

Holly:
Owner occupied.

Tony:
Got it.

Holly:
It’s really a lot like the FHA with that. I believe you only have to live there for a year just like FHA. And then now you can’t have two USDA loans out. So yeah, there are some rules like that, but it is owner occupied. You’re right.

Tony:
I just like digging a little bit deeper on that, because it’s another financing source that we really don’t talk a lot about on this show. And it just proves that there’s so many different ways to get the financing that people need in order to get that first investment deal done. Like for you instead of just saying, “Hey, I don’t have a big pile of cash sitting around to go out and buy my first investment property, well, what options do I have at my disposal that I can go out and use to leverage?” So we’re like five minutes in and you’re dropping like a really great tactic for new working investors to get started.

Holly:
Awesome. Good.

Ashley:
Yeah, I don’t think we’ve had anyone on that has talked about USDA loans before, so this is great.

Holly:
Yeah, it is interesting. I don’t know why it’s not more talked about. I know right now is a competitive market, so a lot of realtors are trying to pull away from FHA and get their buyers doing conventional, but USDA is a great loan and I don’t hear a lot of lenders or realtors really educating their clients on it as an option even when they are in those USDA zones. So that’s great. I’m glad I could help.

Ashley:
Holly, before we go any further, can you give us a breakdown of what your portfolio looks like today?

Holly:
Sure. My husband and I have two duplexes and a commercial property.

Ashley:
So let’s go back to the very beginning. So you did the USDA on this first house, then what happened after that? And when you really realize that you wanted to be a real estate investor and keep pursuing this?

Holly:
Probably, thanks to BiggerPockets. I’ve been listening to BiggerPockets for many years now. And so I’m sure I owe it all to BiggerPockets, really. BiggerPockets is the life changing platform and podcasts and I love what you guys are doing as well with the Rookie Podcast.

Ashley:
That was a perfect answer. [crosstalk 00:09:18].

Tony:
Yeah, what was in your payments afterwards [crosstalk 00:09:21].

Holly:
Yeah, good. Great. So to answer the question, the trajectory really went like this. We wanted to upgrade our house. So we decided to keep our house as a rental. And that was really the beginning, the baby step into being landlords. The cashflow about 100 bucks a month on that property. We went and bought another house, which we did like a mini flip. So we lived there for a year. I actually got pregnant and hated the smell of that house and I had to leave. So we ended up buying a brand new house so that I had no smells to deal with. We built a house up to that. So anyway. So we inadvertently flipped the second house, because I had to get out.
And then I started thinking, what are we really making on this single family house? And when I really crunched the numbers, we’re only making about 100 bucks a month, so that’s not enough. And in that period of time, the market had increased. So we were able to sell that first house that I had bought. And with the proceeds of that home, we went and bought two duplexes with them.

Tony:
Holly, I want to point out, because you just hit on something that I think is really important for rookie investors to understand. You bought this single family residence, you were able to turn that into your first rental, but you then realized that, “Okay, this approach doesn’t align with my longterm goals, the amount of cashflow that I’m getting from this one single family residence doesn’t align with my goals as a real estate investor.” And you were able to sell that property and use that to get into a property that was more closely aligned with the goals that you had for yourself.
I think sometimes as real estate investors or as rookie real estate investors, especially the folks that haven’t done this yet, they put so much pressure on themselves to make that first deal this big home run where the numbers have to be crazy good and they need 30% cash on cash and they want to make $1,000 a door. But it’s like your first deal, you’re making 100 bucks and maybe it wasn’t a home run, but it gave you the confidence that you needed to keep going and then gave you the capital once you sold that to transition into something else. And I think that’s the thing that rookie real estate investors need to focus on is that the purpose of the first deal is to give you the confidence, the skills, the knowledge, the ability to keep scaling and keep growing. So I love that you guys had that realization and you made that change.

Ashley:
Yeah, I think just to add on to what Tony said was that you took something that wasn’t working as a rental and you found a way for it to work for a different real estate strategy. So if you’re a new investor, think about if you purchase a property, do you have multiple exit strategies that you can use on that property? And obviously when you first bought it as primary residence, you weren’t thinking of all these things, but ended up working for you. And now you have that skill and you have that knowledge that going forward, you have multiple options if a deal doesn’t end up working out how you thought it would. Let’s go back to the mini flip on that second house. What do you mean a mini flip? Give us the details on that.

Holly:
I guess in retrospect, it was a year long flip. I just don’t classify it as a true flip, because it’s just not what I went into, it’s not what we bought it for specifically, but it ended up becoming one, because we lived in it while we did the renovations, minimal renovations, really was a small renovation project. And then we did make some money off it. So that’s why I call it a mini flip.

Ashley:
It was a live in flip.

Holly:
It was. And with the money that we earned on that, that really helped us put the down payment on our new construction home that we now lived in. So definitely, those three steps helped us to get into a home that we’re much more comfortable in that doesn’t smell.

Ashley:
So not only did you take your first primary residence and use it to get the four more units, the two duplexes, but you also used your second primary residence to get yourself a brand new build. Using that to scale and to step up is really awesome and that is a great thing about real estate is that you can start out small, but use those small properties to continue to grow and scale. And sometimes that’s how people get into these big apartment complexes. They start out with a couple of single family homes or a couple duplexes. Well, then those appreciate, those cashflow and they do a 1031 exchange into the 16 unit. And then they do a 1031 exchange into a 40 unit and keep growing. So if you have a dream of buying a huge multi-family apartment building, you can start out small and you can definitely get yourself there and look into 1031 exchange. Hopefully, that does not go away soon. There has been some talk and some rumors about that. But did you guys use a 1031 exchange at all?

Holly:
It’s funny you bring that up, because that was one mistake that I made. I used a 1031 and halfway through I’m like, “Wait a minute, did I actually have to use a 1031?” Because I lived in the place to two out of the five years and I was like, “Oh my gosh!” And this was a good lesson for me, because I paid, let’s say, eight or 900 bucks for the 1031 that I didn’t actually need to use, because we qualified for the rule. And correct me if I’m wrong, I think, it’s two out of the last five years. If you lived in it two out of the last five years, then you do not have capital gains tax. You don’t have to use a 1031 basically.
So anyway, I did. And my realtor who is investor savvy at the time, now I’m a realtor, but I had a realtor then, and my 1031 guy, nobody stopped and asked me that question. And you know what? I had known the answer. I remember learning that before, but it was just a good lesson to me to really slow down, because things move so fast when you’re going through these transactions. It’s so easy to forget what you know. And just now going forward, I try to slow myself down and make sure I ask if it’s a tax question, I should’ve called a CPA instead of relying upon my realtor and the 1031 intermediary to have all those answers or to slow down themselves and ask me all the right questions. So that was a good learning lesson.

Ashley:
That is such great advice right there is that it is so easy to forget things that you already know, something so simple as that, and that can save you money. How much did you spend on the 1031 exchange to have it done? Do you remember?

Holly:
I think it was eight or 900.

Ashley:
So you could have saved eight or $900 and still none have had to pay taxes on that income. So just to recap real quick, 1031 exchange is actually part of the IRS’s tax code. And some call it a loophole where what you can do is you can take a property and you can take the proceeds from the sale of that property and put it into another investment property and you will not have to pay capital gains tax on the proceeds of that sale. So basically it’s deferred income. So your taxes are deferred on that. So eventually if you can keep 1031 exchanging and deferring those taxes, you would pay on that income. What would trigger it is you decide not to 1031 exchange anymore and you sell a property. And then also if you pass away, it would trigger it to. Is that right, Tony?

Tony:
Yeah, but I think there’s also a way, when you do pass that there’s a way for the people that inherited.

Ashley:
Inheritance. Yeah.

Tony:
Yeah. And the further [crosstalk 00:17:15].

Ashley:
So that they don’t have to pay it either. Yeah.

Tony:
So it’s a really powerful tool. A lot of really savvy real estate investors use, like Ashley said, to just keep scaling up the size of their portfolio. So Holly, you’re like a little real estate ninja already using these really cool tax. You’ve got the USDA loan, you’ve got the 1031 exchange, you’re pulling out a lot of cool things that I think a lot of folks haven’t heard of yet.

Ashley:
Just think that $800 was a learning experience on the process of doing a 1031 exchange. There is a timeline too. So you have to identify the new property you’re going to purchase within a certain amount of time and you have to close on the new property within a certain amount of time. So it’s not like you can go and sell your property and then just hold on to the cash for three years, then buy another one. And the purpose of that 1031 intermediary is they actually hold the cash until you close on the newest property too. So you don’t even get to see it.

Tony:
Yeah. Well, I guess one other thing to add on, we haven’t done a 1031 yet. I don’t think I’ve told you this yet, Ashley, but we just listed one of our properties in Joshua Tree. And we’re looking to do that.

Ashley:
No, you didn’t.

Tony:
Yeah, we’re looking at 1031, one of those into a cabin in the Smoky Mountains, but I always thought it was black or white, where either you use all of the proceeds and it got taxed or you put it all into the 1031 exchange, but you can actually decide how much of the gains you want to pull out. And then you can 1031 the rest of it. So say you have net proceeds of 50 grand, you want to take out 10,000, you pay the taxes on that. The remaining 50,000, you can still put it into a 1031 and use that tax free to go buy something else. So lots of really cool things around the 1031 that I’m still learning as we go through this process.

Ashley:
And we will put a link in the show notes for Tony’s property for sale.

Tony:
For both of them, the one in Shreveport. But if you buy my Joshua Tree Airbnb, you also have to buy my house in Shreveport that I’ve been trying to sell for six months now. So a package deal.

Ashley:
It’s a package deal.

Tony:
Yeah.

Ashley:
So Holly, you invest in Tennessee. Tell us about your property there, because we were talking how Tony has a property in Tennessee, which he is not selling those properties yet, but go ahead and tell us about your Tennessee property.

Holly:
So the duplex in Tennessee. It’s actually technically on the Georgia side, so it’s Chattanooga, but it’s on the Georgia side in a town called Rossville, which is 10 minutes from Downtown Chattanooga, but not as known on a national scale, I think with investors. So maybe a little overlooked. So the numbers are really good there. Whereas in Chattanooga proper, it’s becoming quite a bit more competitive and the numbers are a little harder and tighter. But yeah, that’s a good property. It was $125,000 purchase price for a duplex, didn’t really need any work, great renters. That was only a year ago, a little more than a year and a half. And the rent has gone up 200 bucks on each side. So each side is now $900 for long term rent. But not to get too ahead of myself here, but I am in the process of converting these to short term rentals.

Ashley:
Holly, how did you find that market? You said that it’s not as well known by investors. How did you find it and how did you analyze it?

Holly:
I feel like that’s one of my strengths, actually. I really try to think outside the box and come at things a little bit differently. And I’m not super savvy when it comes to analytics and numbers. I use the BiggerPockets calculator religiously and thank goodness for it. But beyond that, I’m really not that sophisticated when it comes to marketing analysis. And I don’t think I look at a lot of the traditional things people look at, I look for the cool factor. I want cool properties in cool places so that I can feel cool. I mean, really, that’s what I want. That’s what I want. And so I look for things like I like to see other houses being renovated. I look for tattoos and hipsters. Again, that cool factor. I want to see art galleries and local coffee shops, local bars, just that vibe.
So that’s how I narrowed down my markets to where I want to offer potential. So I wanted places where there was a value add and I just didn’t want to compete with everybody else. So I really like to look for a little under the radar spots that aren’t quite as talked about on the national stage, especially with COVID. Gosh! Now that we can work anywhere, I will also like a little outdoor quality, because I feel that a lot of people who work remotely, they like to have that outdoor lifestyle. So someplace that has that to offer as well. So those are the things that I look forward to market.

Tony:
Well, you just gave away your secret market right now, because all the real estate rookies are going to move in on your market right now.

Holly:
That’s cool, they’ll increase my property value.

Tony:
Yeah, that’s not a bad thing. I want to talk a little bit about, you said transitioning some of these long term rentals into short term rentals. I guess, talk us through your thought process on making that transition, because you said you were able to raise the rents $200 in a relatively short period of time, which is pretty good for a long term rental. What’s driving the desire to change these to short term?

Holly:
I used to work in hotels when I was younger in Florida. I’m originally from St. Pete, Florida. And working in hotel front desk was always my favorite job ever. And then my career was sales, but I just really missed working in hotels. I’ve always wanted to own a hotel. That’s like the dream job, a hotel and a bar where I could just karaoke every night. So Airbnb is my chance to almost own a hotel. I think I hope I’ll be good at it. I have like, let’s see, two more days before my deadline to launch two of them live. So it’s all happening. That’s one thing I tell my clients, I’m in the trenches with you. I’m doing it. I’m getting my hands dirty. So this is all happening and unfolding. But yeah, I’m transitioning. Long term rentals are great, but short term rentals are exciting and the cash flow is two to three times more. Now that’s self managing, but even if you outsource it, it’s still a little bit more on the cashflow. So it’s just exciting.

Tony:
One follow up question. What made you confident that, that city was a good city for short term rentals? I know what you said, you looked for on the long term rental side, but just because a property can do well as a long term rental doesn’t always mean that it will succeed as a short term rental. So I guess what were some of the signs you saw that made you say, “Okay, I feel confident that this property will still do well once I make that transition?”

Holly:
Well, our other duplex is a true tourist town. So that was an easy answer for me. And then, of course, I ordered the AirDNA reports for both of them and hopefully that all pans out, but the data looks really good for both. And then the Chattanooga one, even though initially I wasn’t thinking Airbnb for that one, but then when I pulled the report, I couldn’t believe my eyes. And Chattanooga can be tricky with their ordinances, but Rossville where this particular duplex is in… Yeah, you’re right. I’m giving away all my secrets. They have not figured out their ordinances yet, which is a whole nother topic, the ordinance topic. But yeah, so Airbnb is fair game there. And again, being 10 minutes from Downtown Chattanooga. Chattanooga is a popular vacation destination as well.

Ashley:
Tony just had to leave the podcast so that he could go put in an offer [crosstalk 00:24:39].

Tony:
I’m literally on Airbnb right now, typing in Rossville to see what’s on there. That’s so funny.

Holly:
Not a lot of competition.

Ashley:
So I have one short term rental and it’s in a very small town and I think there’s three other short term rental properties in there. So there’s not a lot of Airbnb or short term rental data in that market for me to go out and pay for software. So can you explain what AirDNA is and what exactly it does and if it’s worth paying for, and how much does it cost?

Holly:
I think it’s totally worth it. AirDNA polls from Vrbo and Airbnb. So it sounds like pretty reliable data to me. It’ll show you the year round average occupancy. Again, I don’t go too deep. I look at a couple of things. I look at year round occupancy. I don’t worry that much about seasonality. I just want to know the averages and figure it out from there. And then look at your average nightly rentals. So you can get an idea of what that particular unit would bring in. You can drill down into your competition if you want to call it that, but you can drill down into the other Airbnbs in that area to see how they look and what occupancy they have. You can even see if they are available. So some rentals will only be available. They only open it to rent for a certain period of time during the year. So you can compare the ones that are full year round rentals, and it’ll show you how much revenue they’re bringing in. So I think it’s a great resource.
Now, what I do, it’s a subscription. So I don’t want to pay for that year round. So I just buy it for a month. And then I put a reminder on my calendar to cancel in a month, but sometimes I forget, but yeah.

Tony:
One other things, AirDNA is great for doing research for sure, but I’ve noticed that the data, like any piece of software, it’s not always super accurate. One of the ways that I really like to do research on a potential market is literally just opening up Airbnb and seeing comparable property to the one that I’m looking to purchase and seeing what their rates are for the next 30, 60, 90, 180 days, seeing what their occupancy looks like for the next 30, 60, 90, 180 days. And once you do that for 10, 15, somewhere around there, listings, you have a really good idea on what the going rate is for Airbnbs in your markets. So AirDNA can get expensive if you’re looking for multiple markets, like I know where I invest, I think it’s like 99, 95 per month per market. So if we’re trying to do that for a lot of the places it can get expensive. So that’s the ninja trick if you want to do it the freeway.

Ashley:
Holly, I want to know how are you finding your deals? Are you getting them off the MLS? Are you doing direct mail? What’s working for you?

Holly:
I’m really boring with that. It’s just MLS realtors. Now, I am a realtor, so that helps, I guess, in the Georgia markets. But I try to align myself with investor savvy realtors wherever I’m going and share with them my parameters. But yeah, it’s just really your good old fashioned on-market. I really have not had a whole lot of luck with off market. I am on some lists and email lists and that thing, but I have helped my clients with a couple off market, but no, mine were just regular old MLS.

Tony:
Can you just give us a quick rundown of what that purchase was? And was it on the MLS? Did you find it on Zillow or some other platform?

Holly:
That one’s probably LoopNet. So full disclosure that my husband owns a swimming pool service company and he was leasing space and they were outgrowing it. And so it was time to buy a place. It made more sense financially to buy. So we use the SBA loan actually for that and transferred it into our real estate LLC out of his business LLC. So essentially his business is my tenant. So they still pay us rent.

Ashley:
That’s how I do it for my commercial property too. I have a business in it and the business pays my property LLC rent. And I think that’s great for liability protection too. So if someone goes after the business, the property is in its own separate LLC or vice versa instead of having all your eggs in one basket, the business and the property in one LLC. So I really liked that technique too that you’re doing that. Is it just one commercial space in that building or do you have other tenants in there?

Holly:
It’s just one. Yeah, it’s a warehouse office warehouse.

Ashley:
And then you used an SBA loan to purchase the property. What was that like? How did that differ? Because I know a lot of people do SBA loans for their business, but I’m not very familiar with the actually using it to purchase property.

Holly:
My husband can answer that one a little bit better, because he worked really hard on that. I know. So for anyone out there that owns a business and wants to look into this, there are the Small Business Development Center, SBDC, I believe. It’s actually in with, I believe, the Chamber of Commerce, the US Chamber of Commerce. It is a free program that if you Google it, you should be able to find one relatively close to you. A lot of times they’re located on university campuses, but they are separate and they are open to the public and they’re completely free. Again, the Small Business Development Center, we both have used that actually, my husband and I for different purposes, but they essentially give free consulting.
And he worked with someone that really coached him on how to apply for the small SBA loan, because it’s not that easy to get and several others were denied and he was really fortunate to get that. Also, with COVID there were some pretty incredible programs going on where basically we got free rent or free financing for six months. So pretty amazing.

Ashley:
Wow, that’s awesome. One of the reasons I asked about that is because I recently put an offer in on a commercial property and it was a business too. And I went and got a letter from the bank. The seller requested with my offer that I had a letter from the bank saying they would provide financing. And I didn’t even realize this, but in the letter, the loan officer had written in there, contingent upon SBA approval and guidelines. And the seller said, “My brokers have advised me not to accept an SBA loan, because they’re so hard to get and there are so many problems that come up.” And I had to go to another bank and get a letter from another bank saying they would do the loan in house and wouldn’t use the SBA to do it. But that was my first run in with using SBA for property. And long story short, I didn’t get the property either anyways, so it didn’t even matter. And I’m still crying about it.

Tony:
That’s why she’s in Vegas. She had to go [crosstalk 00:31:34] to get past the loss of that.

Ashley:
Yeah.

Tony:
Well, Holly, I want to switch gears a little bit because you’re now a real estate agent, correct? Were you an agent when you first got started? What prompted the transition into the world of becoming a realtor?

Holly:
No, I wasn’t. So my background was sales and then I got so burnt out on just corporate life. So I ended up switching over to still selling insurance, but as a 1099. And then I got pregnant. And so I was stay at home mom for a while. I have two little ones, so that’s still a pretty big part of my day. But yeah, I was so immersed with the real estate investing side and just so obsessed with it. Finally, I said, “You know what? Let me just go ahead and get my license, because I already have the sales background, I really love.” I have four younger brothers and I’m always talking to them about real estate. And I thought, “You know what? I’m pretty good at this. I think I can help other people.”
So looking in all these different markets, I met with a lot of realtors, a lot of them, states that they are really investor savvy. Bless their hearts, but they’re just not. So either they don’t invest in sales, which is fine, you’ve got to start somewhere or they just didn’t get the lingo. They’re just little things that really help when you work with an investor focused agent. So I just felt like, “Man, it’s amazing how few agents there really are that work with investors.” Now that I am a realtor, I focus 100% of my marketing efforts on… I’m full disclosure, I only use BiggerPockets as a realtor. And I have more buyers than I can handle, which is a common thing right now. But I send a lot of referrals and I really struggle to find investor friendly agents across the country, which I understand, there are reasons for that, but yeah, I love it. I just love being a realtor and I love working with investors.

Tony:
Thank you for breaking that down for us. We just had David Green on the Rookie show on episode 81 and he broke down his thought process on why an investor should or shouldn’t become a realtor. And your reason of why you became a realtor aligns with what David Green suggested. He said, “If you have a desire to actually become an agent and become a really good agent, then you should become an agent. But if your goal is just to close on the one or two deals that you buy a year and just represent yourself, isn’t really worth the time and the effort to become an agent.” So I feel like we get that question a lot in the rookie groups and people message me, and I’m sure Ashley gets it as well as do you think I need to get my license to become a real estate investor? I think the answer to that is no, but if your goal is to build a side business of also being a realtor, then obviously that’s the path that you want to go down. So your experience was just a good example of that.

Holly:
Yeah, I totally agree with that. It’s hard to determine where to put my time every day. I’ve had to really be careful and not say yes to too many people and to too many things when it comes to being a realtor. And I’m really trying to leverage my network and build a network of other investor savvy agents, because I just can’t do it all. I’ve got a two month old, I’ve got these Airbnbs launching, I’ve got an insane two year old, just literally insane. So you just can’t do everything and being a realtor is a job. And so I think it’s easy to get very distracted from your goals. I have to remind myself my goals as a realtor are probably not the same as a traditional real estate agent who doesn’t have any interest in investing or building an empire. I want to build an empire over here. You can’t do it. Well, maybe some people can do it all, but not me.

Ashley:
Holly, what are some of the questions that you ask these other agents when you are vetting them to see if they are investor friendly? What are you looking for? Could you give some advice to our listeners if they are looking to hire an agent, what are some things they should look for and ask for?

Holly:
Do you have any properties yourself? Do you work with other investors? And specifically, I get a lot of leads for North Georgia these days. It’s pretty hot for Airbnbs now. And I can tell you, I’ve really struggled to find a partner up there that even knows what Airbnb stands for, I kid, but it’s a very old school vacation rental market. So it’s hard to find agents that are at least somewhat Airbnb savvy. I think a savvy Airbnb agent will know something about the ordinances, at least, in their local market or how to find them out for someone. So understanding that’s important. Someone who can give you a quick gut check, if you send them a property. I guess, I’m looking for someone that’s not just immediately their knee jerk reaction is, “Oh, you need cash, it’s a crazy market,” basically just negative Nancy.
You need somebody who’s going to think outside the box, encourage you and say, “Look, we’re going to find something,” whether it’s, have you considered this market right next door? Okay. Same returns, but not as hot on the national market. Just thinking outside the box. And so many times I think investors, especially if they’re newer, a realtor just scares them away with a, you can’t compete, just forget it. Well, that’s not true. There’s plenty of ways to skin the cat. And just think outside the box just a little bit. And the biggest thing is that they ask you some questions, trying to understand your goals, slow down for one moment, maybe not just having a quick five minute phone call, but actually I try to do a face to face video call, a 30 minute. And I have all my questions that I need answered and I’m prepared. And so those are the things that I would look for in an agent.

Tony:
That’s a great breakdown of what to look for. And like I said, I think what you just talked through really echoes what David Green talked about a few episodes ago, how they want to take us to our next segment, which is the mindset segment of the show. This is my favorite part, because I feel like what holds a lot of rookie investors back isn’t so much the lack of technical knowledge, it’s the lack of the right mental courage to move forward. So if you think back to, Holly, before she became an investor, before she became an agent, what were some of the misconceptions you had about real estate investing that caused some fear, but turned out to be unfounded?

Holly:
Even still, I have to fight back my thought process of I can’t do that, I’m not ready yet for that when I don’t have all the information. Financing is, of course, a big one. It’s intimidating. I think I had a notion that we didn’t have enough money and even still it’s like, “Well, we don’t have enough money for that.” But I think just picking up the phone and calling, whether it’s a short term specific lender and getting information on how to fund some of these short term rentals specifically, I’m still learning about that. I missed out on a deal recently, because we ran into a financing hiccup. Well, I didn’t even realize until after I lost that deal, that I could have gotten funding and bought that property with a short term rental specific direct lender.
So I think just being ignorant about things, I don’t mean that in a bad way, but just not understanding something, it’s easy to be intimidated by it. But once you just pick up the phone, talk with someone, let them educate you a little bit and just take one little baby step towards it, it starts to become less and less intimidating and more tangible. And it’s so doable. You just start to realize that you’re not that different from all these other people. There’s nothing, it’s not magic. You’re not that far away.
And I had a realtor before I was a realtor, our realtor at the time, he really helped us after we had closed on our house. We were having lunch and I’m sure I was talking about wanting to invest, thinking, “Oh, we’re six months, we’re a year out. We have to get the…” He said, “I don’t think you’re that far. Why don’t you just take it, just lean into it? I think you’re there actually. I think you guys are there.” And we did. Sometimes you just need that person to really push you off the edge, I think.

Ashley:
It’s funny you should say that. While I’m in Vegas, I want to do the bungee jump thing off the Stratosphere Tower or whatever, but I have to have somebody go do it with me, because I’m going to need them to push me off the edge, because I won’t be able to jump myself. So I understand having that person to hold you accountable and that’s going to support you and push you and help you do things, because a lot of times it is just a little mindset thing and you are 100% capable and able to do something, but it really helps having a supportive partner too.
Okay. So let’s move on to our rookie requests line. You guys can give us a call at 18885, rookie and leave Tony and I a voicemail. Leave us a question and we’ll play it for our guests on an episode.

Landon:
Hey guys, this is Landon from Anchorage, Alaska. And I just had a question regarding accounting for every dollar on an investment property. After I’ve done all my analysis, I’m looking at a property and I’m going to be cash-flowing about four to $500 a month on that full flex. And I just really want to make sure I’m putting a purpose to each dollar and sectioning out the 10% I have for CapEx. So the 10% I have for vacancies and just setting those aside in different pools of money. I just wanted to see if there’s different methods or different softwares or things like that, where you can separate all of that money out into those individual sections or accounts or whatnot. And then what the best methods are for that. So that was it. Thanks so much.

Ashley:
Okay, so let’s sum up Landon’s this month. So he’s questioning about his variable expenses. So the CapEx, the property management, maybe he’s self managing now, but wants to account for having property management later on, and then also saving for vacancies. So in the BiggerPockets calculator reports, there is a section where you can put the percentage you want to save for each of those categories and even repairs and maintenance. What would be your advice as to how he should actually save for that money? Put it into different bank accounts every month, keep an Excel spreadsheet, what do you think about that?

Holly:
That’s a good question. I think that’s probably smart that he would do that, but I keep it all in the same operating account. Yes, I do, do what he’s doing. And although I think those sound a little high to me, but the percentages anyway, but I don’t know about you guys. I keep it all in the same operating account.

Ashley:
Yeah, once I get to a certain amount has been saved, then I don’t go beyond that.

Tony:
Yeah. I forgot to just one thing to add onto here. So this is for Landon. Landon read the book Profit First by Mike Michalowicz. He’s got a really simple process for managing your cashflow in whatever business it is. The way that we’ve set up our business for our short term rentals is that a certain percentage of our income goes into an operating expense account. All of our income, all of our expenses flow out of that account. We have a separate account for profit distributions, we have a separate account for taxes, and then we have a separate account for reserves as well. And those different accounts, pretty much once a month, we just distributed whatever the available balances in that bank account, redistributed to these other sub accounts based on whatever percentages we’ve set up. So it sounds complicated, but if you guys read the book, it was really a life-changing book for me in terms of how we manage cashflow in our business. And Landon, I think that’s what you’re looking for as well.
And then one last plug, there is a bank, it’s an online bank called Relay Financial. And I’m actually in the process of moving all of our big accounts over to this new bank, but they can automate the transactions of moving money from your main income account into all of these sub accounts on whatever date and whatever percentages you choose. So if you’re looking for a software recommendation line, I’d say, Relay Bank might be a good place to start.

Ashley:
Yeah, my local bank does that too. I have an online banking that I actually can put all of my LLC bank accounts into one dashboard. And then you can set the automatic transfers every month too. So yeah, that’s a great advice. You don’t even need software, you can just use the online banking and almost every single bank allows you to open a free checking account and even more. And you can do your Christmas shopping, open 10 bank accounts during Christmas, you’ll get a folding chair, you’ll get a mug, you’ll get cookware, you’ll get Tupperware containers, all those free things that the local banks give out [crosstalk 00:44:25].

Tony:
If you get a folding chair from Ashley during Christmas time, you know where it came from.

Ashley:
Yeah. Actually, what’s really funny is I don’t even get the guests anymore.

Tony:
Yeah, because you’ve opened up so many. You’ve been around so long.

Ashley:
They probably just don’t think that I care. I don’t know. But the last time I opened one, I actually rode my motorcycle there. And I emailed them all the information beforehand, and then I just go in and sign and I completely forgot about the folder with the starter checks and everything like that. Nice. I said, “Do you think I could come back and pick this up another time?” I know, because I didn’t have a bag or anything with me and they actually mailed it to me, which I thought was really nice. But yeah, it’s a nice little plug to community bank in Buffalo.
Okay, Holly, let’s go to our random questions. So my question today is we haven’t asked this one in a while, but what is a bucket list item that you want to cross off? It can be something in your personal life, something with family or it could be something to do with real estate investing that you want to accomplish or achieve.

Holly:
I really want 40 by 40. So I want 40 doors by 40. And the only reason I made that goal is because I heard Scott McGilvery… Am I saying that right? He said he did 25 by 25.

Ashley:
Don’t laugh because I did the goal of 30 by 30. And I was like, I think, three weeks shy of it. I was closing on a triplex. So when I actually turned 30, I was two doors short and then close on it three weeks later. But yeah, don’t laugh at that. It’s a fun goal, it’s motivating, as long as you remember that you’re not just trying to accumulate units and that they’re actually cash-flowing units, because I think a lot of times people get caught up and I want 100 units. Okay. Well, sometimes you can have 30 units that cashflow the same as somebody that has 100 units. So don’t ever get caught up in how many units, but yeah, I will be cheering for your 40 by 40.

Tony:
Yeah.

Holly:
I was just with a bunch of family in Florida this past weekend and I was like, “Wait, how old am I?” I asked my step mom, “Do you know how old I am?” She said, “Oh no.” So I’m going to move fast, but no, I’m going to try, I’m going to do my best.

Tony:
So my question Holly is what does your family think about your real estate investing? And what do they think about you making the transition into the role of real estate sales as an agent?

Holly:
I think everyone was really supportive of that. I think I should’ve done that a long time ago actually. It’s a really good fit for me. But as far as the real estate investing, there’s definitely some haters in my family. I shouldn’t say haters, but yeah, there’s some nay saying, there’s some you’re crazy for trying to do it so long distance. That one’s pretty common. But overall I think my younger brothers, I think they think it’s pretty awesome. So I think they all want to do it as well. This seems like the younger generation is a little different than the older when it comes to real estate investing. It’s probably because of BiggerPockets.

Tony:
Yeah, I’d agree. But I guess one thing to add on to that. I think it’s easy for family members to be skeptics and to, like you said, be the naysayers. But the thing we have to remember as real estate investors and especially for the rookies that haven’t done their first deal, is that just because your uncle Joe or your aunt Jane or whoever, just because they say the market is about to crash and now is a terrible time to buy a house, you got to ask yourself, “Okay, how many units do you have? How many units does that person have that’s giving me that advice?” And if it’s a zero, then you’ve got to learn how to filter that information out. Now, if uncle Joe’s got 1,000 doors, then maybe you want to take his advice a little bit more seriously, but you’ve got to have the courage to filter that advice based on who’s giving it to you, “I still love you, uncle Joe, but I’m going to put your advice to the side for now.” So great advice, Holly.

Holly:
Yeah. And just smile and move on. Don’t try to argue. But the other thing beyond that, another point is there’s a lot of cool technology out there that wasn’t there. When my grandparents had a rental property, that was a nightmare for them and they hated it. Well, now there’s some phenomenal prescreening software and there’s a lot that we have now at our disposal to help us do remote investing where maybe even five years ago would have been a much more challenging proposition.

Tony:
Yeah, technology has been a great asset for everyone in this day and age. I love it. So Holly, we’re getting to the end here. I want to give one quick shout out to one of our rookie rockstars. So for the listeners rookies, if you guys want to be shouted out on the show, make sure you’re active in the real estate rookie Facebook group. I think we’re up to… I don’t even know how many members now, 30 something around there. We’re growing at a rapid clip and the group is super, super active. But today’s rookie rockstar is Randy Rangulos. So Randy just finished his first BRRRR, they’re closing the refinance.
So I’ll run through the numbers really quickly. They bought the house for about 100 grand, put about another 23,000 into the rehab. They were all in for about 134, once you factor in other holding costs and things like that, the property appraised for 168 and they were able to pull out exactly 134 that they invested. So a perfect BRRRR in every sense of the word. And now they’re looking to cashflow about 212 bucks per month with zero money left in the deal. So Randy, congratulations, that is the exact BRRRR deal that we want to celebrate.

Holly:
Woo. Awesome. Good job, Randy.

Ashley:
Holly, can you tell everybody where they can find out some more information about you and possibly reach out to you to connect?

Holly:
Hey, get on Clubhouse. If you’re not on there, definitely get on there and follow me there. By the way, I’ve learned a ton when it comes to short term rentals on there. So highly recommend that. But Holly N, as in Nicole, I’m in Liam Barrett, I think that’s my handle on Instagram. Follow me on Facebook and Instagram and Clubhouse. Those are the main ways.

Ashley:
Awesome. Thank you so much. I haven’t been on Clubhouse in a while. Actually, when it first came out, I was pretty active, but I haven’t been in a while. Have you Tony?

Tony:
I was just on yesterday actually.

Ashley:
Yeah. I had it set to get notifications. I don’t even think I’m getting. I must’ve turned notifications off, because I keep forgetting that it’s even there. But yeah, that is a great app and I have to be invited anymore, right? Is it open to everybody now?

Tony:
I think it’s still invites, but they open it up to Android now. I think was the most recent change.

Ashley:
So you guys take Holly’s advice, check out Clubhouse and connect with other investors.
Hey, well, thank you so much for joining us. This was great learning about USDA loans, SBA loans, and definitely the questions of how to find an investor friendly agent too. So thank you very much for coming on today.





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