July 29, 2025 • 22 mins
Scott lives in an area where the average rental property costs around $600,000, making it tough to find anything that cash flows.
Instead of giving up, Scott got creative.
On this episode, Scott shares how he’s been able to pick up properties way below market value, and how he’s been able to make money on deals, even if they don’t work as long-term rentals.
We break down the numbers on one of his recent deals, and talk through the different strategies he’s using to make investing work in a high-priced market.
https://rentalincomepodcast.com/episode532
Thanks To Our Sponsors:
MidSouth HomeBuyers – Turnkey Rentals In Memphis & Little Rock. Instant Cash Flow On Day One. (Priced between $100,000 to low $200's)
Ridge Lending Group - Making investment Mortgage process simple and stress-free.
Instead of giving up, Scott got creative.
On this episode, Scott shares how he’s been able to pick up properties way below market value, and how he’s been able to make money on deals, even if they don’t work as long-term rentals.
We break down the numbers on one of his recent deals, and talk through the different strategies he’s using to make investing work in a high-priced market.
https://rentalincomepodcast.com/episode532
Thanks To Our Sponsors:
MidSouth HomeBuyers – Turnkey Rentals In Memphis & Little Rock. Instant Cash Flow On Day One. (Priced between $100,000 to low $200's)
Ridge Lending Group - Making investment Mortgage process simple and stress-free.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Inspiring interviews with Today is Top Landlord, This is the
Rental Income Podcast and now damnly Scott.
Speaker 2 (00:10):
You live in a pretty expensive market where it's hard
to make the numbers work. It's hard to find a
property that's going to cash flow. How are you doing it?
Speaker 1 (00:18):
Yeah, Dan, that's a great point. I mean our average
price is about six hundred thousand dollars, so we have
to get a little bit creative. But I found in
any market that if you're willing to put in the
work and again get a little bit creative, that there
are deals and there's money to be made.
Speaker 2 (00:34):
It can be hard to invest in rental properties in
an expensive area, but it's not impossible. And Scott has
figured out some creative ways to find really good deals,
and on the show today he's going to share how
he's making money in an expensive area. Joining us on
the podcast today from Reno is Scott Durham. We'll take
a quick break to thank our sponsors. We'll come right
(00:57):
back and we'll talk to Scott. Are you thinking about
it investing in rental properties? But maybe you don't know
where to start. My friends at Mid South home Buyers
make it simple for over twenty three years. They've been
selling fully renovated, turnkey rental properties in Memphis and Little Rock.
We're talking new roofs, plumbing, electric, kitchens, bathrooms. Everything is
(01:20):
brand new and done right. And here's the best part.
Every property comes with a well qualified tenant in place
before you close. That means you get cash flow from
day one. Plus mid South continues to professionally manage the
property for you after the sale, and they back it
up with two powerful guarantees. You get a one year
(01:42):
total maintenance warranty and a lifetime occupancy guarantee. Personally, I've
bought five properties from them and I couldn't be happier.
If you want to talk to someone that's been through
the process, feel free to reach out to me. I'm
happy to answer any questions, or if you're ready to
get started, just go to midsouthhome Buyers dot com. That's
(02:03):
midsouthhome Buyers dot com. It's a lot of work to
find a really good rental property, and when you actually
find that property, you want to make sure you're working
with a lender that can get that loan closed. The
lender that I recommend is jay Ley Ridge from Ridge
Lending Group. She's a nationwide lender and her specialty is
helping investors finance rental properties. She has a ton of
(02:25):
loan programs and she can find something customized to you
for your situation. If you want to find out more
or you're ready to get started today, just go to
Ridge Lendinggroup dot com. That's our Idge Lendinggroup dot com
n MLS four two zero five six Scott, the price
point in your market for a rental property that you
(02:47):
want to buy is six hundred thousand dollars.
Speaker 1 (02:50):
Yeah, our average point price point is about six hundred thousand.
We find that our rental properties that we buy are
underneath what the average is. So for an example, you know,
I've got a house it's worth about five hundred twenty
five thousand dollars today. We purchased it actually, I mean,
that's what we specialize in as finding deals, right, So
we purchased this property for three hundred thousand using some
(03:12):
of our techniques that we do to find properties, and
we put about forty thousand dollars into it and it's
worth about five twenty five today. Wow.
Speaker 2 (03:21):
So the only reason that you're able to make this
work is finding you're able to find deals way under
market value. Like, if you had paid five twenty five
for this house, you're probably not going to be able
to rent it for five thousand a month to meet
the one percent rule.
Speaker 1 (03:41):
Yeah, it's going to be a lot more difficult unless
you get real creative with the strategies and how you're
renting them outs. You certainly couldn't rent it out to
a long term tenant and do that.
Speaker 2 (03:51):
So how do you find, like someone that's willing to
sell their property at such a big discount.
Speaker 1 (03:58):
Yeah, that's a great question. So, well, we find about
half of our properties that we purchase on the market,
believe it or not, they're right on the MLS or
on zillo, and then about the other half we purchase
off market, whether they're through wholesalers that will go do
direct to seller marketing, whether it be online or other
channels that we use. So we purchase properties at a
discount from motivated sellers that are either on the market
(04:22):
or off the market.
Speaker 2 (04:23):
Wow, okay, so someone, So is it just because the
property is in such bad shape that it's selling for
such a low price?
Speaker 1 (04:33):
Exactly exactly. And sometimes the property is in really bad shape,
or other times it's just a seller. They need to
sell it fast. They don't want to have to deal
with real estate agents and showings. Oftentimes they'll inherit a
property and just want it sold quickly, or they just
don't have the funds to fix it up. So we'll
walk in there and we'll see the house, and we
(04:54):
can see past what's there right now and see what
it can be. And that's where the opportunity is.
Speaker 2 (05:00):
So it sounds like you're really making money in three
different ways that you're you're finding a good deal. So
you're buying a property below market value, so you've got
some equity in there, and then you're fixing it up
and that's increasing the value of property. But then you've
also got cash flow.
Speaker 1 (05:19):
Yes, indeed, it's kind of the trifecta of forced appreciation
instead equity and then of course cash flow.
Speaker 2 (05:26):
Yeah. I think that's a winning formula. You know, this
is definitely working for you in an expensive area, expensive area,
but I feel like that formula would work anywhere. Like,
if you're buying one hundred thousand dollars houses, if you
can buy them cheap and then fix them up, you're
still going to make money.
Speaker 1 (05:45):
Absolutely, absolutely, sometimes I wish I lived in a little
bit less expensive area because you know, we'll hear these
investors that have all these crazy amounts of properties. I'm thinking, well,
as far as a number of properties go, my portfolio
is pretty small, but we're able to generate outsizer turns
because of the equity and because of the cash flow
that we're getting. But this could work anywhere.
Speaker 2 (06:06):
Right, So tell me the situation that sellers are in where,
Because like say, if I'm looking to sell a property,
I could sell it at three hundred thousand dollars and
maybe it's in bad shape, or if I put some
money into it and fix it up, I could get
five twenty five. So why would somebody sell at such
(06:30):
a big discount.
Speaker 1 (06:32):
Well, the reality is about ninety five percent of the
population won't. And we always try to do what's best
for the people that we work with. So we tell them, hey,
you could absolutely get more money for this house if
you were to list it on the market with the
real estate agent. And that's perfectly fine. But about five
percent of the people out there, they just they don't
have the time, they don't have the money, they don't
have the patience, they don't have the expertise, and really
(06:55):
what it comes down to is that they value speed
and convenience. We're squeezing every last dollar out of.
Speaker 2 (07:01):
The property, right, Okay, so you're able to gie him
a quick close, and then as far as actually getting
the property fixed up, like, how are you doing that?
Are you doing the work yourself? Or do you have contractors?
Speaker 1 (07:15):
No? Oh my goodness, I am an apt I can't
do anything when it comes to construction. So I've been blast.
I've got a great crew of people that I've been
working with for a number of years. You've got sub contractor,
You've got handyman, electricians, plumbers, painters, everything, and we put
the project plan together and then just let them let
them run with it.
Speaker 2 (07:33):
How did you initially find your crew?
Speaker 1 (07:36):
The handyman that I have, I actually met him through
my church. It was just a personal connection. So he's
got a great business. I could rely on him. He's trustworthy.
As far as the electrician and the plumber, I just
I'm also a real estate agent, so I'm plugged into
a network of about two hundred agents at my company here,
and we all kind of share the referrals the of
the contractors that we get So I think for anybody
(07:59):
that's in this, it's really important to have that network,
and a good real estate agent can be an incredible
source of source of opportunities for referrals for contractors.
Speaker 2 (08:10):
Yeah, so is that helping you find deals? Like being
that you're an agent and you're in the MLS all
the time and you're talking to sellers, is that helping
you find deals?
Speaker 1 (08:20):
Absolutely? That's how I got started because I kept once
or twice a year, I just come across a deal
that was just like, Wow, this is too good to
be true. I should be buying this. And I passed
up on a couple of them, and I just took
a commission. I said, hey, this is really this is
really kind of silly. Why aren't I purchasing these rather
than just making a commission and helping the client just
the same. So, if someone is actively paying attention on
(08:44):
a consistent basis, whether you're a real estate agent or not,
there and I don't care what market you are in,
they're absolutely deals that will come across your desk.
Speaker 2 (08:53):
When you talk to a seller. Then is are you
saying to them, all, right, look, I can list the
house for you at this price or if you want
to quick and easy sale, I can buy it for
you at this lower price.
Speaker 1 (09:08):
Exactly. Yeah, it's transparency, right, So we don't try to
manipulate them or try to convince them to go one
way or another. We present both options and then they decide.
But because of the marketing that we do that you know,
most people are going to want the cash offer if
if it's at a price that they can they that
they can stomach.
Speaker 2 (09:26):
Right, And then how are you finding these sellers?
Speaker 1 (09:31):
Yeah? So, like I said, so we have a lot
of times they're listed on the market. So if you
see a house that that's on the MLS and we
do specific keyword chers and anyone can do this, whether
it be on Zilo. They can put in keywords so
that anytime a listing pops up that has a specific
keyword in the description that they'll get immediately notified. So
that could be handyman, TLC needs work fix or upper.
(09:54):
So that's one way, and if you act quickly and
you can be one of the among one of the
first people to jump on those deals, there's a lot
of opportunity there. Another way that we do is there's
wholesalers that we purchased from. These are the guys that
go and to the director of the sellers directly and
they'll negotiate. So they're not on the market, but we've
built up relationships with them. Well, they'll tie it up
(10:14):
at a certain price, they'll mark it up where it's
still at a good discount and a good price for us,
and they do all the heavy lifting as far as
dealing with the sellers. The third way that we do
it is going off market, and I have had the
most success doing online marketing. You can do Google pay
per click searches where someone will type in, hey, I
need to sell my house fast, and then our website
(10:36):
will show up before the rest and then you make
a media contact with them, and the conversion rate on
those leads is just incredible. It's better than any lead
source I've ever dealt with in my career.
Speaker 2 (10:47):
Do you come across deals sometimes that maybe don't necessarily
make sense as a property you want to keep, but
maybe you can fix it up and flip it yourself.
Like do you do you ever do flips your cell?
Speaker 1 (11:00):
Oh? Absolutely, we do about ten to twelve flips a year.
Speaker 2 (11:03):
Okay, So that's.
Speaker 1 (11:05):
Really how we raise the cash to buy to buy
the rentals for the for the passive income. So we're
generating the money and the income as a business on
the flipping side and then finding long term investments to
put that money to work.
Speaker 2 (11:18):
Now, as far as actually renting out the property, because
you're at such a high price point, are you able
to make the numbers work on a traditional rental like
a long term tenant or are you doing midterm or Airbnb? Like,
how are you actually generating revenue?
Speaker 1 (11:36):
Yeah, out here on the West Coast, just about anywhere,
you cannot get a one percent rule to work unless
you've got the deal of the century. So what we
do is we the ones the properties that we hold
on to are in strategic locations where they work really
really well on Airbnb or on a short term rental.
Speaker 2 (11:54):
Hi, Well, let's take a look at one of your
deals and kind of break down the numbers a little bit.
So the property we're going to be talking about, did
you find this on the MLS or was this a
direct to sell or deal?
Speaker 1 (12:09):
I'm so proud of this deal. I found it right
on the MLS. I didn't have to spend any money
on marketing to get it. It was just right right
on the MLS or ZLO for anyone to grab.
Speaker 2 (12:19):
Was it competitive, like we're you know, when there's a
deal on the MLS, there's so many investors and just
regular home buyers that want to buy the deal. Was
it competitive on this one?
Speaker 1 (12:32):
It really was? And I was able to get it
for well below what the asking price was. And I
find that oftentimes, you know, many deals that I am
definitely in a competitive market. However, even in a competitive market,
there will be deals that pop up that just for
whatever reason, fly under the radar. And if you're consistent
with it, not just do it once a month, but
(12:53):
if you're consistent with it every day and follow up
with these deals that come up, you will absolutely find
deals awesome.
Speaker 2 (13:01):
Awesome, all right, So what was the property you listed for?
Speaker 1 (13:06):
So the property was listed for about three hundred and fifty.
Speaker 2 (13:08):
Thousand, okay, and then what did you end up buying
it for?
Speaker 1 (13:12):
I bought it for three hundred thousand even and because
I'm an agent, I got a commission on it. So
it was you know, to nineties.
Speaker 2 (13:18):
Yeah, and then I think, how does how does that work?
Speaker 1 (13:21):
Like?
Speaker 2 (13:22):
Was the property sitting there for a really long time
to be able to get that big of a discount.
Speaker 1 (13:28):
Yeah, it was sitting there for a little bit, and
it was actually getting towards the end of the year,
so the snow was on the ground, and the sellers,
come to find out, really wanted to be done and
have the property sold before the end of the year
for tax purposes. So we kind of got lucky from
that standpoint. And I think if they were again, if
they were willing to wait on the market longer, they
(13:50):
could have got more money. But this was a deal
and they just wanted the sure thing that it was
going to close, and rather than wait around for some
more money, they just wanted to be to.
Speaker 2 (13:59):
Be done, okay, and then what work needed to be
done to the property.
Speaker 1 (14:04):
So it looked like a Grandma house, and it kind
of smelled like one too, with maybe a little bit
of a cat smell in there also, But I always
say that that cat smell is the smell of opportunity.
That's what we want to see. So we did new flooring,
we painted it on the inside and the outside. We
refreshed the kitchen, we refreshed the bathrooms. We did a
(14:25):
little bit of work to the roof, had some landscaping
work to be done. But this is actually a pretty
crazy story because we wanted to be able We bought
this right at the end of the year. Was actually
towards late December when we closed, it was around December
twenty first or so, and we really wanted to be
able to utilize bonus appreciation on this property so this year.
(14:45):
So we actually got the rehab done in nine days
and had it rent ready for the before the end
of the year. So we were super proud and grateful
for a crew to be able to get the rehab
done in such a short amount of time, because that
is not the norm. Right.
Speaker 2 (14:59):
How much did cost to fix the property up?
Speaker 1 (15:03):
Rehab costs of selfers about forty one thousand.
Speaker 2 (15:05):
Okay, And then you said this as an airbnb, so
how much did you spend to furnish the property and
get it rented, get it ready to be rented.
Speaker 1 (15:14):
Yeah, we spent about ten thousand dollars on furniture and
TVs and sheets and everything to get it nice and
ready for guests.
Speaker 2 (15:20):
All right, so you're all in with the purchase price
the rehab furnishing the property three point fifty one, yeah, exactly.
And you said it was worth five twenty five when
it was it's worth five five yes, wow, all right?
So then how did you actually purchase the property?
Speaker 1 (15:37):
Like?
Speaker 2 (15:37):
Did you finance it? Did cash? Line of credit? Like
what did you do.
Speaker 1 (15:41):
On this one? In particularly? We paid cash for it?
Speaker 2 (15:43):
Okay? And then did you refinance it once it was
fixed up?
Speaker 1 (15:48):
After it was fixed up? Yes, we refinanced it. We
actually were able to pull out because we had so
much equity, and then we're able to pull out the
entire three hundred thousand dollars, so we had put in
to purchase the whole Okay.
Speaker 2 (15:59):
So then you're just out the rehab money and the
furnishing costs, but you got all your money back to
buy the property, to buy.
Speaker 1 (16:08):
The house, so we're only in the house. You know,
forty or fifty thousand bucks.
Speaker 2 (16:11):
Now that's great. So then you know, I guess looking
at it, now you've got your three hundred thousand dollars back.
You can do this.
Speaker 1 (16:18):
Again exactly, that's the idea and we have.
Speaker 2 (16:21):
Yeah, awesome, all right, So then you put a thirty
year loan on the property, I assume, right, correct, Okay,
and then what is your mortgage payment now? Like taxes
and insurance all in.
Speaker 1 (16:37):
Yeah, it's eighteen ninety six per month.
Speaker 2 (16:40):
And then how much, like, say, on an average month,
I'm sure the airbnb revenue probably varies a little bit
month to month, right.
Speaker 1 (16:50):
It does very month to month. We tend to do
a little bit better in the summertime, and it's just
going to depend on what market people are in a
little bit different for everybody, but on average it's pretty good.
So last year we did about fifty nine thousand dollars
in gross gross revetu on this property.
Speaker 2 (17:04):
Wow. Okay, so the mortgage is eighteen ninety six, and
then what about expenses, utilities, repairs, anything else that might
come up. How much do you spend on say a
typical month.
Speaker 1 (17:19):
Yeah, I pulled up the quick books this morning. On
an average last year it was about thirteen fifty eight
per month expenses.
Speaker 2 (17:26):
So then on a over the year, how much how
much did this property make you?
Speaker 1 (17:33):
Yeah, after the mortgage was paid off and all the expenses,
that makes seventeen thousand, five huntred ninety two dollars last year.
Speaker 2 (17:40):
Wow, I mean, and that is really incredible when you
look at your cash on cash return that you invested
fifty thousand dollars in this property and you're getting that
back in like two years.
Speaker 1 (17:56):
Yeah, that's pretty incredible. And that's why, you know, we've
done it a couple more times now now and it
continues working like this. I mean, there's no reason to
not just keep going us and we don't that way,
we don't need to have, you know, a thousand properties
to you know, pay a living expell you. It's a
relatively small number of homes.
Speaker 2 (18:13):
Yeah, I mean you figure if each property is making
you twenty thousand dollars a year, like, you really don't
need that many to cover all your expenses. Now, talk
to me about management, is does it take a lot
of time to manage the airbnbs?
Speaker 1 (18:29):
Honestly, no, that was one of the biggest things I
was worried about when I got started, because I'm busy.
I mean, we're flipping homes, We're we've got a real
estate business, so I don't want to be spending a
bunch of time taking out the trash of these properties.
So we've actually got it figured out a way that
I mean ninety nine percent of the time, I'd say
I spend less than an hour a week managing these properties.
(18:49):
We've got a good cleaner, we've got a good handyman.
We've got systems in place that automate the messaging when
it's time, that notifies the cleaners when they have to
go and clean the homes. We've got pricing software that
changes the pricing of the daily rates based on what
the market demand is. So a lot of it's pretty
(19:10):
well automated and it's pretty low key. We have key
list entry systems where the system generates a code for
each guest so we don't have to go meet them
and let them and the property. It's all electronics, so
most of the time it's pretty darn simple.
Speaker 2 (19:25):
Yeah, is there one software program you use that does
the pricing and help you manage your team members? So
what is that? What software?
Speaker 1 (19:35):
Yeah, So the software use for the pricing is called
price Labs and it's pretty well known within the industry
and it's great. You go in there. And I actually
improved on these numbers a little bit because I recently
went in there and had a support call with one
of the people there and they said, hey, if you
change this and you change that, it may improve the booking.
So we're thinking that this year's numbers maybe even better
than last year because we went in there and messed
(19:56):
around with the settings a little bit. But Price Labs
is the company that we're working with on that.
Speaker 2 (20:01):
Now, what about furnishing the property? Because I feel like
I wouldn't do a good job of kicking out the furniture.
Speaker 1 (20:08):
And neither would I.
Speaker 2 (20:10):
How do you do that?
Speaker 1 (20:12):
Yeah, So we have a stager that we work with,
a home stager that works with us when we sell
listings or when we'll sell our flips, and we just
basically hire her and she buys all the furniture. She's
able to get discounts on Wayfair and Amazon and second
hand stores, and these places look really nice. And I
think that's a key differentiator because there's a lot of
(20:32):
airbnbs out there, so you've got to do something that's
going to make your property stand out. And having someone
with that eye and that expertise to furnish it and
make it look like a modern home versus just any
old place makes all the difference.
Speaker 2 (20:46):
Now, one thing that always scares me a little bit
with Airbnb is just legislation changing that maybe a community
outlaws Airbnb. What would you do if all of a
sudden you couldn't do short term rentals.
Speaker 1 (21:00):
Yeah, that's a great question. So these properties happen to
be close to a major university here locally, so we
would probably do a rent by the room or some
sort of a midterm rental, or worst case scenario, it's
in a neighborhood that always has rented out extremely well,
so even if we weren't making the cash flow that
we are able to now, we would be able to
(21:23):
cover our monthly payments and maintain the properties.
Speaker 2 (21:27):
As Scott mentioned earlier, he is a realtor in the
Reno area. If anyone is interested in investing in that
area or you want to connect with Scott, he'd be
happy to talk to you about airbnbs. I've got his
contact information on the website. You can find it at
Rental Income Podcast dot com slash episode five thirty two.
(21:48):
I'd like to thank jay Lee Ridge from Ridge Lending
Group for sponsoring today's episode. If you're looking to buy
a rental property, whether you're just getting started or you
want to add to your portfolio, so definitely reach out
to Chailey. You can track her down at Ridgelendinggroup dot com.
NMLS four two zero five six. Thank you, so much
(22:11):
for checking out the podcast today. Make sure you hit
that follow button. I put out a new episode every
single Tuesday, and if you're following the show, you'll get
notified when the next episode comes out. My name is
Dan Lane and this has been the Rental Income podcast
Inspiring interviews with Today is Top Landlord, This is the
Rental Income Podcast and now damnly Scott.
Speaker 2 (00:10):
You live in a pretty expensive market where it's hard
to make the numbers work. It's hard to find a
property that's going to cash flow. How are you doing it?
Speaker 1 (00:18):
Yeah, Dan, that's a great point. I mean our average
price is about six hundred thousand dollars, so we have
to get a little bit creative. But I found in
any market that if you're willing to put in the
work and again get a little bit creative, that there
are deals and there's money to be made.
Speaker 2 (00:34):
It can be hard to invest in rental properties in
an expensive area, but it's not impossible. And Scott has
figured out some creative ways to find really good deals,
and on the show today he's going to share how
he's making money in an expensive area. Joining us on
the podcast today from Reno is Scott Durham. We'll take
a quick break to thank our sponsors. We'll come right
(00:57):
back and we'll talk to Scott. Are you thinking about
it investing in rental properties? But maybe you don't know
where to start. My friends at Mid South home Buyers
make it simple for over twenty three years. They've been
selling fully renovated, turnkey rental properties in Memphis and Little Rock.
We're talking new roofs, plumbing, electric, kitchens, bathrooms. Everything is
(01:20):
brand new and done right. And here's the best part.
Every property comes with a well qualified tenant in place
before you close. That means you get cash flow from
day one. Plus mid South continues to professionally manage the
property for you after the sale, and they back it
up with two powerful guarantees. You get a one year
(01:42):
total maintenance warranty and a lifetime occupancy guarantee. Personally, I've
bought five properties from them and I couldn't be happier.
If you want to talk to someone that's been through
the process, feel free to reach out to me. I'm
happy to answer any questions, or if you're ready to
get started, just go to midsouthhome Buyers dot com. That's
(02:03):
midsouthhome Buyers dot com. It's a lot of work to
find a really good rental property, and when you actually
find that property, you want to make sure you're working
with a lender that can get that loan closed. The
lender that I recommend is jay Ley Ridge from Ridge
Lending Group. She's a nationwide lender and her specialty is
helping investors finance rental properties. She has a ton of
(02:25):
loan programs and she can find something customized to you
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n MLS four two zero five six Scott, the price
point in your market for a rental property that you
(02:47):
want to buy is six hundred thousand dollars.
Speaker 1 (02:50):
Yeah, our average point price point is about six hundred thousand.
We find that our rental properties that we buy are
underneath what the average is. So for an example, you know,
I've got a house it's worth about five hundred twenty
five thousand dollars today. We purchased it actually, I mean,
that's what we specialize in as finding deals, right, So
we purchased this property for three hundred thousand using some
(03:12):
of our techniques that we do to find properties, and
we put about forty thousand dollars into it and it's
worth about five twenty five today. Wow.
Speaker 2 (03:21):
So the only reason that you're able to make this
work is finding you're able to find deals way under
market value. Like, if you had paid five twenty five
for this house, you're probably not going to be able
to rent it for five thousand a month to meet
the one percent rule.
Speaker 1 (03:41):
Yeah, it's going to be a lot more difficult unless
you get real creative with the strategies and how you're
renting them outs. You certainly couldn't rent it out to
a long term tenant and do that.
Speaker 2 (03:51):
So how do you find, like someone that's willing to
sell their property at such a big discount.
Speaker 1 (03:58):
Yeah, that's a great question. So, well, we find about
half of our properties that we purchase on the market,
believe it or not, they're right on the MLS or
on zillo, and then about the other half we purchase
off market, whether they're through wholesalers that will go do
direct to seller marketing, whether it be online or other
channels that we use. So we purchase properties at a
discount from motivated sellers that are either on the market
(04:22):
or off the market.
Speaker 2 (04:23):
Wow, okay, so someone, So is it just because the
property is in such bad shape that it's selling for
such a low price?
Speaker 1 (04:33):
Exactly exactly. And sometimes the property is in really bad shape,
or other times it's just a seller. They need to
sell it fast. They don't want to have to deal
with real estate agents and showings. Oftentimes they'll inherit a
property and just want it sold quickly, or they just
don't have the funds to fix it up. So we'll
walk in there and we'll see the house, and we
(04:54):
can see past what's there right now and see what
it can be. And that's where the opportunity is.
Speaker 2 (05:00):
So it sounds like you're really making money in three
different ways that you're you're finding a good deal. So
you're buying a property below market value, so you've got
some equity in there, and then you're fixing it up
and that's increasing the value of property. But then you've
also got cash flow.
Speaker 1 (05:19):
Yes, indeed, it's kind of the trifecta of forced appreciation
instead equity and then of course cash flow.
Speaker 2 (05:26):
Yeah. I think that's a winning formula. You know, this
is definitely working for you in an expensive area, expensive area,
but I feel like that formula would work anywhere. Like,
if you're buying one hundred thousand dollars houses, if you
can buy them cheap and then fix them up, you're
still going to make money.
Speaker 1 (05:45):
Absolutely, absolutely, sometimes I wish I lived in a little
bit less expensive area because you know, we'll hear these
investors that have all these crazy amounts of properties. I'm thinking, well,
as far as a number of properties go, my portfolio
is pretty small, but we're able to generate outsizer turns
because of the equity and because of the cash flow
that we're getting. But this could work anywhere.
Speaker 2 (06:06):
Right, So tell me the situation that sellers are in where,
Because like say, if I'm looking to sell a property,
I could sell it at three hundred thousand dollars and
maybe it's in bad shape, or if I put some
money into it and fix it up, I could get
five twenty five. So why would somebody sell at such
(06:30):
a big discount.
Speaker 1 (06:32):
Well, the reality is about ninety five percent of the
population won't. And we always try to do what's best
for the people that we work with. So we tell them, hey,
you could absolutely get more money for this house if
you were to list it on the market with the
real estate agent. And that's perfectly fine. But about five
percent of the people out there, they just they don't
have the time, they don't have the money, they don't
have the patience, they don't have the expertise, and really
(06:55):
what it comes down to is that they value speed
and convenience. We're squeezing every last dollar out of.
Speaker 2 (07:01):
The property, right, Okay, so you're able to gie him
a quick close, and then as far as actually getting
the property fixed up, like, how are you doing that?
Are you doing the work yourself? Or do you have contractors?
Speaker 1 (07:15):
No? Oh my goodness, I am an apt I can't
do anything when it comes to construction. So I've been blast.
I've got a great crew of people that I've been
working with for a number of years. You've got sub contractor,
You've got handyman, electricians, plumbers, painters, everything, and we put
the project plan together and then just let them let
them run with it.
Speaker 2 (07:33):
How did you initially find your crew?
Speaker 1 (07:36):
The handyman that I have, I actually met him through
my church. It was just a personal connection. So he's
got a great business. I could rely on him. He's trustworthy.
As far as the electrician and the plumber, I just
I'm also a real estate agent, so I'm plugged into
a network of about two hundred agents at my company here,
and we all kind of share the referrals the of
the contractors that we get So I think for anybody
(07:59):
that's in this, it's really important to have that network,
and a good real estate agent can be an incredible
source of source of opportunities for referrals for contractors.
Speaker 2 (08:10):
Yeah, so is that helping you find deals? Like being
that you're an agent and you're in the MLS all
the time and you're talking to sellers, is that helping
you find deals?
Speaker 1 (08:20):
Absolutely? That's how I got started because I kept once
or twice a year, I just come across a deal
that was just like, Wow, this is too good to
be true. I should be buying this. And I passed
up on a couple of them, and I just took
a commission. I said, hey, this is really this is
really kind of silly. Why aren't I purchasing these rather
than just making a commission and helping the client just
the same. So, if someone is actively paying attention on
(08:44):
a consistent basis, whether you're a real estate agent or not,
there and I don't care what market you are in,
they're absolutely deals that will come across your desk.
Speaker 2 (08:53):
When you talk to a seller. Then is are you
saying to them, all, right, look, I can list the
house for you at this price or if you want
to quick and easy sale, I can buy it for
you at this lower price.
Speaker 1 (09:08):
Exactly. Yeah, it's transparency, right, So we don't try to
manipulate them or try to convince them to go one
way or another. We present both options and then they decide.
But because of the marketing that we do that you know,
most people are going to want the cash offer if
if it's at a price that they can they that
they can stomach.
Speaker 2 (09:26):
Right, And then how are you finding these sellers?
Speaker 1 (09:31):
Yeah? So, like I said, so we have a lot
of times they're listed on the market. So if you
see a house that that's on the MLS and we
do specific keyword chers and anyone can do this, whether
it be on Zilo. They can put in keywords so
that anytime a listing pops up that has a specific
keyword in the description that they'll get immediately notified. So
that could be handyman, TLC needs work fix or upper.
(09:54):
So that's one way, and if you act quickly and
you can be one of the among one of the
first people to jump on those deals, there's a lot
of opportunity there. Another way that we do is there's
wholesalers that we purchased from. These are the guys that
go and to the director of the sellers directly and
they'll negotiate. So they're not on the market, but we've
built up relationships with them. Well, they'll tie it up
(10:14):
at a certain price, they'll mark it up where it's
still at a good discount and a good price for us,
and they do all the heavy lifting as far as
dealing with the sellers. The third way that we do
it is going off market, and I have had the
most success doing online marketing. You can do Google pay
per click searches where someone will type in, hey, I
need to sell my house fast, and then our website
(10:36):
will show up before the rest and then you make
a media contact with them, and the conversion rate on
those leads is just incredible. It's better than any lead
source I've ever dealt with in my career.
Speaker 2 (10:47):
Do you come across deals sometimes that maybe don't necessarily
make sense as a property you want to keep, but
maybe you can fix it up and flip it yourself.
Like do you do you ever do flips your cell?
Speaker 1 (11:00):
Oh? Absolutely, we do about ten to twelve flips a year.
Speaker 2 (11:03):
Okay, So that's.
Speaker 1 (11:05):
Really how we raise the cash to buy to buy
the rentals for the for the passive income. So we're
generating the money and the income as a business on
the flipping side and then finding long term investments to
put that money to work.
Speaker 2 (11:18):
Now, as far as actually renting out the property, because
you're at such a high price point, are you able
to make the numbers work on a traditional rental like
a long term tenant or are you doing midterm or Airbnb? Like,
how are you actually generating revenue?
Speaker 1 (11:36):
Yeah, out here on the West Coast, just about anywhere,
you cannot get a one percent rule to work unless
you've got the deal of the century. So what we
do is we the ones the properties that we hold
on to are in strategic locations where they work really
really well on Airbnb or on a short term rental.
Speaker 2 (11:54):
Hi, Well, let's take a look at one of your
deals and kind of break down the numbers a little bit.
So the property we're going to be talking about, did
you find this on the MLS or was this a
direct to sell or deal?
Speaker 1 (12:09):
I'm so proud of this deal. I found it right
on the MLS. I didn't have to spend any money
on marketing to get it. It was just right right
on the MLS or ZLO for anyone to grab.
Speaker 2 (12:19):
Was it competitive, like we're you know, when there's a
deal on the MLS, there's so many investors and just
regular home buyers that want to buy the deal. Was
it competitive on this one?
Speaker 1 (12:32):
It really was? And I was able to get it
for well below what the asking price was. And I
find that oftentimes, you know, many deals that I am
definitely in a competitive market. However, even in a competitive market,
there will be deals that pop up that just for
whatever reason, fly under the radar. And if you're consistent
with it, not just do it once a month, but
(12:53):
if you're consistent with it every day and follow up
with these deals that come up, you will absolutely find
deals awesome.
Speaker 2 (13:01):
Awesome, all right, So what was the property you listed for?
Speaker 1 (13:06):
So the property was listed for about three hundred and fifty.
Speaker 2 (13:08):
Thousand, okay, and then what did you end up buying
it for?
Speaker 1 (13:12):
I bought it for three hundred thousand even and because
I'm an agent, I got a commission on it. So
it was you know, to nineties.
Speaker 2 (13:18):
Yeah, and then I think, how does how does that work?
Speaker 1 (13:21):
Like?
Speaker 2 (13:22):
Was the property sitting there for a really long time
to be able to get that big of a discount.
Speaker 1 (13:28):
Yeah, it was sitting there for a little bit, and
it was actually getting towards the end of the year,
so the snow was on the ground, and the sellers,
come to find out, really wanted to be done and
have the property sold before the end of the year
for tax purposes. So we kind of got lucky from
that standpoint. And I think if they were again, if
they were willing to wait on the market longer, they
(13:50):
could have got more money. But this was a deal
and they just wanted the sure thing that it was
going to close, and rather than wait around for some
more money, they just wanted to be to.
Speaker 2 (13:59):
Be done, okay, and then what work needed to be
done to the property.
Speaker 1 (14:04):
So it looked like a Grandma house, and it kind
of smelled like one too, with maybe a little bit
of a cat smell in there also, But I always
say that that cat smell is the smell of opportunity.
That's what we want to see. So we did new flooring,
we painted it on the inside and the outside. We
refreshed the kitchen, we refreshed the bathrooms. We did a
(14:25):
little bit of work to the roof, had some landscaping
work to be done. But this is actually a pretty
crazy story because we wanted to be able We bought
this right at the end of the year. Was actually
towards late December when we closed, it was around December
twenty first or so, and we really wanted to be
able to utilize bonus appreciation on this property so this year.
(14:45):
So we actually got the rehab done in nine days
and had it rent ready for the before the end
of the year. So we were super proud and grateful
for a crew to be able to get the rehab
done in such a short amount of time, because that
is not the norm. Right.
Speaker 2 (14:59):
How much did cost to fix the property up?
Speaker 1 (15:03):
Rehab costs of selfers about forty one thousand.
Speaker 2 (15:05):
Okay, And then you said this as an airbnb, so
how much did you spend to furnish the property and
get it rented, get it ready to be rented.
Speaker 1 (15:14):
Yeah, we spent about ten thousand dollars on furniture and
TVs and sheets and everything to get it nice and
ready for guests.
Speaker 2 (15:20):
All right, so you're all in with the purchase price
the rehab furnishing the property three point fifty one, yeah, exactly.
And you said it was worth five twenty five when
it was it's worth five five yes, wow, all right?
So then how did you actually purchase the property?
Speaker 1 (15:37):
Like?
Speaker 2 (15:37):
Did you finance it? Did cash? Line of credit? Like
what did you do.
Speaker 1 (15:41):
On this one? In particularly? We paid cash for it?
Speaker 2 (15:43):
Okay? And then did you refinance it once it was
fixed up?
Speaker 1 (15:48):
After it was fixed up? Yes, we refinanced it. We
actually were able to pull out because we had so
much equity, and then we're able to pull out the
entire three hundred thousand dollars, so we had put in
to purchase the whole Okay.
Speaker 2 (15:59):
So then you're just out the rehab money and the
furnishing costs, but you got all your money back to
buy the property, to buy.
Speaker 1 (16:08):
The house, so we're only in the house. You know,
forty or fifty thousand bucks.
Speaker 2 (16:11):
Now that's great. So then you know, I guess looking
at it, now you've got your three hundred thousand dollars back.
You can do this.
Speaker 1 (16:18):
Again exactly, that's the idea and we have.
Speaker 2 (16:21):
Yeah, awesome, all right, So then you put a thirty
year loan on the property, I assume, right, correct, Okay,
and then what is your mortgage payment now? Like taxes
and insurance all in.
Speaker 1 (16:37):
Yeah, it's eighteen ninety six per month.
Speaker 2 (16:40):
And then how much, like, say, on an average month,
I'm sure the airbnb revenue probably varies a little bit
month to month, right.
Speaker 1 (16:50):
It does very month to month. We tend to do
a little bit better in the summertime, and it's just
going to depend on what market people are in a
little bit different for everybody, but on average it's pretty good.
So last year we did about fifty nine thousand dollars
in gross gross revetu on this property.
Speaker 2 (17:04):
Wow. Okay, so the mortgage is eighteen ninety six, and
then what about expenses, utilities, repairs, anything else that might
come up. How much do you spend on say a
typical month.
Speaker 1 (17:19):
Yeah, I pulled up the quick books this morning. On
an average last year it was about thirteen fifty eight
per month expenses.
Speaker 2 (17:26):
So then on a over the year, how much how
much did this property make you?
Speaker 1 (17:33):
Yeah, after the mortgage was paid off and all the expenses,
that makes seventeen thousand, five huntred ninety two dollars last year.
Speaker 2 (17:40):
Wow, I mean, and that is really incredible when you
look at your cash on cash return that you invested
fifty thousand dollars in this property and you're getting that
back in like two years.
Speaker 1 (17:56):
Yeah, that's pretty incredible. And that's why, you know, we've
done it a couple more times now now and it
continues working like this. I mean, there's no reason to
not just keep going us and we don't that way,
we don't need to have, you know, a thousand properties
to you know, pay a living expell you. It's a
relatively small number of homes.
Speaker 2 (18:13):
Yeah, I mean you figure if each property is making
you twenty thousand dollars a year, like, you really don't
need that many to cover all your expenses. Now, talk
to me about management, is does it take a lot
of time to manage the airbnbs?
Speaker 1 (18:29):
Honestly, no, that was one of the biggest things I
was worried about when I got started, because I'm busy.
I mean, we're flipping homes, We're we've got a real
estate business, so I don't want to be spending a
bunch of time taking out the trash of these properties.
So we've actually got it figured out a way that
I mean ninety nine percent of the time, I'd say
I spend less than an hour a week managing these properties.
(18:49):
We've got a good cleaner, we've got a good handyman.
We've got systems in place that automate the messaging when
it's time, that notifies the cleaners when they have to
go and clean the homes. We've got pricing software that
changes the pricing of the daily rates based on what
the market demand is. So a lot of it's pretty
(19:10):
well automated and it's pretty low key. We have key
list entry systems where the system generates a code for
each guest so we don't have to go meet them
and let them and the property. It's all electronics, so
most of the time it's pretty darn simple.
Speaker 2 (19:25):
Yeah, is there one software program you use that does
the pricing and help you manage your team members? So
what is that? What software?
Speaker 1 (19:35):
Yeah, So the software use for the pricing is called
price Labs and it's pretty well known within the industry
and it's great. You go in there. And I actually
improved on these numbers a little bit because I recently
went in there and had a support call with one
of the people there and they said, hey, if you
change this and you change that, it may improve the booking.
So we're thinking that this year's numbers maybe even better
than last year because we went in there and messed
(19:56):
around with the settings a little bit. But Price Labs
is the company that we're working with on that.
Speaker 2 (20:01):
Now, what about furnishing the property? Because I feel like
I wouldn't do a good job of kicking out the furniture.
Speaker 1 (20:08):
And neither would I.
Speaker 2 (20:10):
How do you do that?
Speaker 1 (20:12):
Yeah, So we have a stager that we work with,
a home stager that works with us when we sell
listings or when we'll sell our flips, and we just
basically hire her and she buys all the furniture. She's
able to get discounts on Wayfair and Amazon and second
hand stores, and these places look really nice. And I
think that's a key differentiator because there's a lot of
(20:32):
airbnbs out there, so you've got to do something that's
going to make your property stand out. And having someone
with that eye and that expertise to furnish it and
make it look like a modern home versus just any
old place makes all the difference.
Speaker 2 (20:46):
Now, one thing that always scares me a little bit
with Airbnb is just legislation changing that maybe a community
outlaws Airbnb. What would you do if all of a
sudden you couldn't do short term rentals.
Speaker 1 (21:00):
Yeah, that's a great question. So these properties happen to
be close to a major university here locally, so we
would probably do a rent by the room or some
sort of a midterm rental, or worst case scenario, it's
in a neighborhood that always has rented out extremely well,
so even if we weren't making the cash flow that
we are able to now, we would be able to
(21:23):
cover our monthly payments and maintain the properties.
Speaker 2 (21:27):
As Scott mentioned earlier, he is a realtor in the
Reno area. If anyone is interested in investing in that
area or you want to connect with Scott, he'd be
happy to talk to you about airbnbs. I've got his
contact information on the website. You can find it at
Rental Income Podcast dot com slash episode five thirty two.
(21:48):
I'd like to thank jay Lee Ridge from Ridge Lending
Group for sponsoring today's episode. If you're looking to buy
a rental property, whether you're just getting started or you
want to add to your portfolio, so definitely reach out
to Chailey. You can track her down at Ridgelendinggroup dot com.
NMLS four two zero five six. Thank you, so much
(22:11):
for checking out the podcast today. Make sure you hit
that follow button. I put out a new episode every
single Tuesday, and if you're following the show, you'll get
notified when the next episode comes out. My name is
Dan Lane and this has been the Rental Income podcast
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