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Digital Nomad with 15 Units in 5 Different Areas with Michael Su

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While traveling throughout southeast Asia, Michael Su asked what he could be doing to protect himself if he ever didn’t have stable income. As a digital nomad, travelling from country to country, all while working at a startup, Michael was used to risk. He realized that the best way to mitigate and reduce the risk of him ever being in a dire financial situation was to make his own income. The best way to do that? Buy rental properties!

Michael had already been following some popular real estate influencers, and decided to do what they were doing. He even contacted BiggerPockets’ very own Craig Curelop and asked him to be his agent in Denver and help him house hack. From then on, Michael reached out to more investors in other areas of the United States and began using their strategies.

Now, only one year into real estate investing, Michael has over 15 homes, with two under contract, in five regions in the US! This doesn’t just happen by luck. Michael had a strong grasp on financing strategies, investment strategies, and real estate economies of scale. He even read the SEC filings for major REITs to see how they scaled their businesses and dealt with problems.

Now Michael can continue building his real estate portfolio, while traveling, and working at a job he loves. All possible through smart investing!

Ashley:
This is Real Estate Rookie, show number 61.

Michael:
You’re only getting like 5% cash on cash returns, that’s okay. That’s much better than the bank. And I think any real estate investor before getting in, make sure you’re ready for this for the long haul. Then in even one year, five years, 10 years, you’re going to be so much better of an investor that your returns are going to be unbelievable.

Ashley:
I am your host Ashley Kehr, and I’m here with Tony Robinson. Hey Tony, what’s going on?

Tony:
Hey, what’s up Ashley? How are you doing today?

Ashley:
Good, good. I really don’t have anything exciting to really share today. I was like, “Damn, what can me and Tony talk about?”

Tony:
Nothing too crazy. I felt we’ve got some good things coming in the pipeline. I guess one thing, so for the listeners, let me and Ashley know what you guys are thinking about the Saturday episodes. I want to hear the feedback. Let us know if you guys are enjoying it. If there’s specific topics you guys want us to answer, Facebook group, you can leave questions in there. Call us on the Rookie request line at 888-5-ROOKIE. Just shout us out wherever you can so we can get some more questions flowing in that way.

Ashley:
Yeah. And if you guys haven’t heard, Saturday’s the Rookie Reply, it’s a new episode we’re doing every Saturday, just short and sweet and to the point. We’re pulling questions from Instagram, Facebook, the Rookie request line, voicemails, and Tony and I are just going to answer your questions. So make sure you guys listen to that. We released the first one on February 6th, I think if that’s a Saturday.
So definitely leave a review on iTunes if you liked it or whatever platform you’re listening to podcasts, we’d really appreciate it. And definitely let us know in the Real Estate Rookie Facebook group too. So today, we have a great show with Michael where we learn everything you need to know about house hacking.

Tony:
Michael’s also a digital nomad. And if you don’t know what that is, you’re going to find out in today’s episode. But his story is really unique because he’s closed on 15 doors in a little over eight months. And obviously everyone’s not going to be able to scale that fast, but there’s definitely some nuggets in his story that I think people can pull from to help get started in their own real estate investing careers.

Ashley:
Especially because these are all in different markets, they’re not in one place. So he talks about how he actually follows people on Instagram, online and sees who are these successful people and what markets are they going to and then he’ll research the market from there. So some really great tips on how he networks with people and connects, and he also recommends a couple of different books, especially on house hacking. So this will be a great episode.

Tony:
I think the last thing to add to that I really liked about Michael was his perspective on risk. So somewhere throughout that conversation, just make sure you guys are listening for when he starts talking about that, because he’s got a unique perspective on how as a new investor, you can kind of mitigate that.

Ashley:
Michael, welcome to the show. Can you start off telling everyone a little bit about yourself and how you got started in real estate?

Michael:
Yeah, so I’m a software engineer. I work at a startup called Blueboard. And I’ve been a digital nomad pre COVID for about a year and I was traveling actually quite a bit before that too, before I was fully full-time a digital nomad. And I kind of got started in real estate, I think the story was… to be honest I actually was looking at BiggerPockets back in high school. I think it must’ve just started back then. I wasn’t on the forums, but I was reading them.
And then fast forward 12 years, didn’t do anything or 10 years, whatever it was. I was sitting at a hotel in Thailand kind of during my travels and I was just thinking about how do I want to live my life going forward? And I have a great gig now and I have a lot of opportunities, but this might not last forever, how do I set myself up to kind of have the freedom to choose to live the life that I want?
And I think the big thing for me is kind of the realization that I felt like while during my travels I had enough money, right? I’m traveling around, a lot of countries are a lot cheaper than America. And I was working in SF prior and it’s one of the most expensive cities in the world so I didn’t feel like I had a lack of money or needs, but what I really felt was I realize it’s scary to not have money coming in, to not have steady cash flow.
When you have a traditional retirement account and you’re just drawing down 4% per year, you feel like the water is sifting through your hands, right? I think with real estate, the whole idea for me was, hey, if I have an income that’s kind of like I’m paying myself a salary, that mental shift of, hey, I have an income coming in just changes that kind of fear factor so much.
And so for me, I started thinking, “Okay, well I want to go into real estate. I want to build out a portfolio, let me look into it and read more about it and see what it’s all about.” So I got started from there, started doing research, started learning more things. In June of last year I basically bought my first property and had my second one closed two weeks later. So within June I closed on a duplex in Indiana and then I closed on a quadplex in Denver and that was basically the start.

Ashley:
That’s great, and the two back to back. So what does your whole portfolio look like right now? Is it those two deals or do you have more?

Michael:
Yeah, yeah, I have more. Sorry, I’m going to go on a slight tangent because I think it might be interesting for some people to hear.

Ashley:
Yeah, sure.

Michael:
But basically I started my portfolio with the parameters of rather than creating a portfolio and then creating my life around my portfolio, I wanted to set boundaries of how do I want my life to look like and then create a portfolio based off that. So given that I want to travel and I might be abroad, I might be somewhere else, I don’t necessarily think I’ll be in a specific city for a long time, at least in the next 10 years.
And so I built my portfolio around the fact that I’m not going to be in a specific city. So that’s a disadvantage, right? But then because I’m assuming that as a truth, what are my advantages? Well, I can invest anywhere because it doesn’t really matter where I am. So now I’m in Upstate New York. So Ashley, not at Buffalo, but I’m in Syracuse.

Ashley:
Not very far at all.

Michael:
Yeah, not far at all. I actually have some coworkers in Buffalo too.

Ashley:
How cool.

Michael:
But yeah, in Syracuse I have I think it’s six units closing on a seventh, I think next week actually, and then I have one unit currently in North Carolina with I think currently one under contract there. Indianapolis I have three units, which is two properties and I have the quadplex in Denver. Oh, sorry. I also have a property in Georgia, but I’m selling it so I don’t consider that part of property.

Tony:
You forgot about that one.

Michael:
I was saying I felt like I could buy anywhere because it didn’t really matter. But there still is a lot of advantages to have some focus, to really build kind of some economies of scale for your portfolio too. Have the contractors ready to have a system built out to know who your go-tos are and who can respond for what kind of situation?
Like right now I’m trying to shrink the number of states I’m in a little bit and just keep certain states that kind of represent a different risk profile. So Syracuse, for those not familiar, it’s a really relatively cheap market. You can get a lot of properties, you can get duplexes under 60K, under 70K. But then in Denver it’s a totally opposite risk profile. So I kind of balance out my total risk profile with some more appreciating markets, something in the middle, like Indianapolis and then something like Syracuse, which is just pure cashflow.

Tony:
All right. So a couple of things I want to comment on about your portfolio, but before we dive into that, for people that don’t know what a digital nomad is, can you describe that for us? What the heck is that?

Michael:
Yeah, yeah. So basically it’s just traveling forever. A digital nomad, basically it’s a term, it’s kind of a fad term. Some people have some stigmas to it, but if we take out the stigmas, it just means that it’s someone who’s continuing to travel the world and there’s no two digital nomads who do it alike. For me, it’s usually a month to two to three months in a country at a time. I like to take it slow. I like to go deep. Some people go a new country every three to five days. So it’s all up to your style. But effectively, the only thing it really means is that you’re just traveling and you’re not at home.

Tony:
Got it. That’s awesome. It’s a beautiful lifestyle. And I’m sure there’s a lot of listeners that would love to spend time in other countries for a month or weeks at a time. So you’re setting the bar pretty high, man. So I want to go back to your portfolio because you kind of real nonchalantly ratted off multiple states that you’re investing in. So I just want to make sure that the listeners understand your portfolio. How many total units are you at today?

Michael:
Yeah, I’m currently at 15 units with 200 contract.

Tony:
Got it. So 15 plus two. And then what are the markets that those units are in? You don’t have to give us the numbers, but just what are the different cities that you’re investing in?

Michael:
Denver, Indianapolis, Syracuse, Fayetteville and Hinesville, which is more like Savannah Market.

Tony:
Got it. So you’re multiple different markets, which is really cool. So I want to get into how you’re identifying these different markets and like… I guess even before how you are identifying them, why go to so many different markets as a new investor? Some people think that whatever market they start in, they’re just going to go super heavy and deep, but it seems like you’ve kind of gone the opposite approach where you’ve really spread it out. So how are you identifying those markets and then what makes you feel comfortable to be in so many different markets as a relatively new investor?

Michael:
So I guess there’s a couple of different questions in there. I think one thing is me approaching it from a risk profile perspective just like different markets feel different, right? And it’s different type of cashflow or it’s just appreciation. Like in Denver, I don’t really feel comfortable just buying a single family and renting it out traditionally. And I want to make sure I’m optimizing on interest rates. So I don’t feel like I want to go too fast there if I don’t have things lined up properly.
Like I used FHA loan to buy a quadplex there. And so that’s very different than buying with an investment mortgage 25% down and trying to do a BRRRR, which is also really hard in expensive markets. People know their house is not worth necessarily that discount. Like if you’re trying to do a BRRRR in a cheaper market, you can get the forced appreciation up high enough through the rehab but the rehab as a percentage of the total value of the home is not as much in a market like Denver. And so it’s really hard to do what they call a full BRRRR, right?
And so instead, like with Denver, I just moved a little bit slower, I’m a little more careful. It’s also just bigger numbers, it’s a little scarier. But then in other markets it’s easier to do full BRRRR or it’s easier to get a discount that you want, especially in kind of the secondary markets for instance like Fayetteville or Syracuse, they’re not the first city you think of when you think of the state they’re in. You don’t have to directly go and bid over asking on every single offer. Whereas in Denver, that was what my agent told me. He was like, “Hey, you should just bid over asking every time.”
So how I found them, I’m going to use words that are a little bit influenced by one of the BiggerPockets podcasts that I watched recently, which was about Who Not How. I didn’t read the book back then, but I think it really embodies kind of how I found these markets. And the idea is as a newbie, the best way to move fast is to find someone who’s done it before that you have some trust in and find a way to work with them and find a way that they benefit and you benefit and you kind of like learn the ropes through them helping you.
So for Denver, I treated it as a house hack market. I was like, “Hey, I want to do a house hack, who’s an expert?” Well, Craig wrote a book and Craig should be an expert. And so I reached out to Craig and he’s an agent which makes it a lot easier to give him value because you just become a client, right? So I worked with him and he taught me a lot about how to think about using the FHA loan like I should use it on a multi because I can use it on a quad. And whereas a conventional, I could do a low down payment, but I can’t use it on a quad.
So I learned a lot with him and he kind of basically helped me with all his knowledge of the Denver market. And then from there you just kind of like, as you’re working with people who are investing, you start hearing about more things. So I actually was falling Ashley pretty early on in Instagram. And I don’t know if you guys still do this, but there was a group of women real estate investors that did monthly meetings for a while. And a lot of the ladies in that meeting were actually people that I followed. So I’ll just throw out some handles that-

Ashley:
Like Kara Walters because she does… Is that what you’re talking about?

Michael:
Yeah, [inaudible 00:11:51].

Ashley:
Kara Walters.

Michael:
Yeah.

Ashley:
She does it in-

Michael:
In Syracuse.

Ashley:
In Syracuse too, yeah. And she now lives in California, yeah.

Michael:
And Investing for Financial Freedom. I’m not in Tennessee, but I followed her, I think it’s Elyse and House Hustle. I’m blanking on names right now. But anyways, basically it wasn’t just through them too, it was also I noticed that Craig is investing in another state or I talked to another investor or I talked to a wholesaler and they were like, “Oh, well we also wholesale in this other state.” And I do some more research about the state or there’s some thesis that I also think is really interesting to explore.
I think with markets, there’s a lot of markets that look similar and have a similar profile. So what it comes down to like for a long distance investor is yeah, the markets matter, but at a certain point there’s enough markets that look the same where it comes down to the teams that you’re working with and the people that you work with.

Ashley:
So once you find these markets, so you’re finding them by watching people on Instagram, where are these people investing that are doing it successfully and sharing how they’re doing it? So is that your first lead on where you should research a market?

Michael:
It’s that or a podcast. Someone might be sharing numbers or a certain, I guess it’s the shape of their portfolio. It’s like, “Oh, this is what I’m achieving.” And I’m like, “Oh, I would love to have that.”

Ashley:
So after that happens, you identify that market. How do you start building your team in these places? How were you finding a realtor in that area? Are you using who that investor was using? Can you talk about building your team there once you know what market you want to go into?

Michael:
Yeah. I feel like every single market’s been built differently for me. So I mean, my first market was Indianapolis and that was because it was a high investor market or one of many, but I read David Green’s books. So it was like, David Green, while I didn’t work with him directly, but his book was kind of what started my whole thing about like, “Oh, I can actually do this from thousands of miles away.”
And so I used his book’s method, which is like, go through Zillow, get agents, interview them, talk about what you’re looking for and then get yourself set up with MLS mailer. So that was how I got my first agent, was just reaching out and interviewing investor agents. For Craig it was like, he wrote the book and I reached out to him directly. And then from there, a lot of it was just through just networking from investors.
I feel like once you have a network, you don’t go through the traditional means anymore because you got something even better, you got people you already know, that you already trust and they might introduce you to something else. So for instance, when Craig was investing in Fayetteville, he was posting some of that. And I kind of found Shelby who was I think on BiggerPockets recently and was reading about their team. And so I kind of explored, reached out and was talking to them about Fayetteville.
And they have a really tight operation there where the agents will work with the contractors and they’ll kind of help you coordinate the whole thing. It’s almost plug and play for out-of-state investor. You have to be comfortable with some things, but I don’t think it’s any harder than any other state, but they have a really, really nice process if you’re out-of-state investor for you to plug and play. And for Syracuse, I talked to Kata, she was gracious enough to share her agent with. I guess everyone just keeps introducing to the next person. So it’s like, maybe I get the agent-

Ashley:
So you need to build your network by talking to people and reaching out. So I just wanted to let everyone know that the Craig that you’re talking about is Craig Curelop, he wrote the book, The House Hacking Strategy and it’s also for sale on the BiggerPockets bookstore, if anyone wants to look into that. So let’s talk about how you are managing these, you’re moving all over the country, countries. And what does that look like for you? How is your property management? Are you outsourcing everything? Do you manage some yourself?

Michael:
Yeah. So I’m using Hemlane. That’s more self-service, it’s kind of a mix of self-service and it provided maintenance service. Then my property managers, it’s really up to them for what they use, but it’s Folio and Rent Manager right now. For Hemlane, the reason why I picked them, and I think there’s a couple other options now that are kind of starting with similar services, the great thing about them is they basically have the 24 hour on-call service.
And they also manage any maintenance, all you have to do as an owner is to approve or deny certain requests that are coming in or approve quotes or ask for another quote. But beyond that, you still have to take care of things like the lease or if there’s a noise complaint, they’ll still call the owner, right? Because technically I’m the property manager on file. But it handles the one thing I didn’t want to do in real estate and that was to pick up calls in the middle of the night and have to figure out how to deal with sewage backflow or something.

Tony:
And it’s a really interesting concept as well. So Steve Rosenberg and I were on the BiggerPockets’ Instagram and Facebook last week and we were talking a lot about what are the things that a real estate investors should be doing versus maybe they shouldn’t be doing. And this is even for me, right? I kind of struggled with the fact that I wasn’t replacing the flooring in my units or picking the cabinets or doing all these kinds of really tactical things.
But at the end of the day, being a real estate investor isn’t necessarily about doing the work, but it’s about finding the deals, putting them together, managing the properties and doing those things. And I think the benefit of managing remotely, of owning properties out of state is that you can’t go to them. You can’t be the one doing the work. So you have to set up the systems, you have to set up the teams to make it work.
And it kind of forces you into being more of a real estate investor than a real estate laborer, right? So I think your story really illustrates that. Now, you’ve got a decent sized portfolio now, and I want to talk a little bit about how you’re finding these. So are these all coming off the MLS, are you working with wholesalers? Just kind of walk us through your process of sourcing deals?

Michael:
Yeah. So back to that previous point really quick about the learning, I was like, “What is the next thing I need to learn or I want to learn to become more knowledgeable about real estate as a whole?” So I started with the MLS with just buying 25% down investment property, then the house hack, right? And then I was like, “Okay, what’s the next step? Wholesalers.” So I’ll do a wholesale and try to do a BRRR. So I did my first BRRR, there’s money left in it, but whatever, it’s all good, it’s still a good deal.
And for me I was kind of laddering down what’s the next step I can take to become a more advanced investor. So I did one deal with wholesale then did multiple deals at the same time and then I added a new state with a very different profile and it kind of went down that route. How I’m finding deals as a result has changed a lot over time. When I started, COVID just hit, there wasn’t these bidding wars we’re seeing now.
So I actually got my first deal under contract in Indianapolis I think 12K under asking, well, after all the inspection negotiation and whatnot, which I don’t think you can get now. I think it was a lot easier in the middle of COVID. And then afterwards I started doing wholesalers, which I would just go search the key terms that their websites are set up for. So they might be like, “We buy houses.” You have to realize what their intent is, right?
In real estate I think it’s a lot about aligning people’s incentives. And they’re looking for people who want to sell houses. So you look for the keywords that people would search in Google for wanting to sell their house if they were a distressed homeowner. And then you find basically the entire list of all the wholesalers in that city. Also your agent, if they’re an investor agent, a lot of times they all know wholesalers, especially if they have their own portfolio.
So I just started to get on more and more lists of wholesalers. And every morning people are sending tons of deals and you try to analyze it really quick because a lot of them are selling in like… the good ones are selling in like an hour or 10 minutes or less, which is hard with a full-time job. But that was how I was getting deals for a while with wholesalers and then I started to do direct to seller marketing myself.
I am pretty busy with my full-time job, so I ended up… closed the deal over Christmas while I was on break and then the first thing I did as holidays were ending was to hire a VA to do all the marketing for me. So now I have someone full-time in Philippines. They actually make offers too because I don’t have time to get on the phone during the day, especially in the East Coast hours.
We have a process where the VA has someone interested, try collect some information, then she’ll let them know that she’ll follow up, she needs to talk to me, I think she probably says investment team, but I’m just one person. But basically she’ll ask me what I’m comfortable with offering and then she can go make the offer and negotiate or whatever needs to be done there.

Tony:
So you’ve really built a team. And again, I think this goes back to you and the concept of Who Not How, what you talked about earlier. And really quick, for the listeners that are curious, if you want to go back to the OG podcast, it’s episode 423 with Dan Sullivan. He’s the author of the book, Who Not How, and he does a really good job of explaining what that whole theory and kind of methodology is.
But Michael, you’ve really internalized that and I love that you’ve kind of built the teams and the system to support that. So I think you mentioned a really important point though, right? Is that how you found your first deal and how you’re finding deals today is a very different process and you’ve kind of graduated as you’ve learned more and as you become a better real estate investor of how to source deals, right?
You went from working with agents and now you’re doing off-market stuff where you’ve hired a VA, right? Those are very different processes. But I think the point I want to make to the listeners is that all of those things take time and you start to kind of layer your experiences on top of each other. And once you try this, now you’re comfortable with this level, okay, let me try this out. Okay, cool. I’ve kind of mastered this, let me try this out. And every single deal kind of moves you one step further towards becoming a really cool ninja deal finder like Michael is today.

Michael:
Yeah. And I think the big thing for the first time investor is to realize that your numbers improve all across the board, every single metric improves as you go farther along. Actually my first property came back to bite me. I had a sewer problem, I had to replace most of the line, even though I got a sewer scope from the seller, but I should have done my own. So that was my learning from that one. But it comes back to bite you. And for me, it’s like, that was my tuition and that was what I was paying to become a better investor.
And those numbers are still good on the property, but it’s like the one thing about real estate versus the stock market is that we’re not all buying the same property and we don’t all look at the same deal. On the stock market we’re all buying the same piece of stock, right? It has the same performance, it has the same returns, we’re all buying the same thing. In real estate, you can just get better and better over time.
So if you buy a deal and you’re buying 25% down, you’re only getting 5% cash on cash returns, that’s okay. That’s much better than the bank. And we had to realize that if you’re in this for the long haul, and I think any real estate investor before getting in, you need to make sure you’re ready for this for the long haul. Then in even one year, five years, 10 years, you’re going to be so much better of an investor that your returns are going to be unbelievable.

Ashley:
So Michael, you haven’t even been doing this for a year. You’ve scaled your portfolio. How are you financing this? So you mentioned putting 25% down. Are you pulling money from your W-2 income? Did you have money saved up? How have you been able to finance this and continue to keep growing?

Michael:
Yeah, I think I mentioned to someone, I think on Instagram, it’s like claw, scratch and crawl your way to cash flow. So it’s like, whatever way you can, because the reality of it is like… But for me I do work in tech so my job pays pretty well, but I am also in startups and I’ve invested in my own startup ideas in Paso. I didn’t come in with a ton of savings depending on who I’m comparing to, but it’s just whatever way is possible.
And I did a lot of research into financing and what’s out there, what’s available. I’m not researching as much now, but I’ve done the 401k loan where you can basically get up to 50K out of your 401k or 50%, whichever one’s less. I’ve got some private money so it’s finding other people who are willing to lend you at a return. I’ve done conventional financing for a lot of deals, that was basically all my first few deals.
And then now I’m kind of building relationships with portfolio lenders, basically small credit unions. And some of them only serve certain states, some of them will serve you in one state and then they’ll follow you to the rest of the country. There’s so many different types of lenders. I guess they’re more like private lenders, more like a lending home or a dominion financial or a certain lending.
They’re not credit unions, so they won’t get as good rates, but they also offer different products with different speeds and different rates. And the structured product market, I feel like is very clear cut. But then I think private financing, seller financing is where it really allows you to scale further. In the beginning I didn’t worry about it too much at all because it’s like, “All right, I just need enough to get 25% down and I’m going to try to BRRR it out.”
And then BRRRs actually take a long time. When you first learn about it you’re like, “Oh yeah, I’ll buy a house and fix it up in 24 hours and I’ll get my refinance done, next 10 hours.” But that takes a long time. So with seller financing, subject to private money, things go so much faster or hard money, but there’s just a lot of interest on that.

Ashley:
Do you want to take us through one of your deals then we really break down into the financing, the purchase and what the numbers are? Do you have a deal in mind you’d like to really dive into?

Michael:
Yeah. So I was going to talk about my house hack, which was kind of my second deal. If you guys want afterwards, we can talk about something a little more creative because I think for a standard house hack, this is probably going to kind of not be as out there.

Tony:
Sorry, Michael, really quick, before you dive in, I just want to set the table for the listeners a little bit just so we can kind of wrap our heads around what the deal is that we’re getting into. So I’ll just ask you some quick questions. Just give me a quick response so we can set the table for folks, but what market was this property in?

Michael:
This one was in Denver.

Tony:
And what was the purchase price on it?

Michael:
745K.

Tony:
745, that’s a big purchase price.

Michael:
Yeah, different market.

Tony:
What was the building type? Single family, multifamily?

Michael:
It was a multifamily fourplex.

Tony:
Got it. A fourplex, awesome. And then you said your strategy on this was to house hack. House hack, correct?

Michael:
House hack, yeah.

Tony:
Got it. Okay. Awesome man. So, all right. Give us a story, man. How’d you find it? How’d you make it work? What’s the nitty gritty?

Michael:
Yeah. So I was waiting on this deal in Indianapolis to close and I found more time on my hands because we’re just waiting on the lender. They didn’t know what to do working from home, they were getting papers lost and a bunch of stuff was going wrong with that deal. I started like, “Okay, what else do I want to do? And what am I comfortable with?” So I reached out to Craig Curelop who wrote the house hacking book on BiggerPockets.
He started sending me listings and I started with making offers on non-conforming duplexes or single family, trying to do a traditional house hack in Denver, kind of rent by the room is what he does and what he kind of promotes the most. And then at some point he kind of was telling me how he thinks about the FHA loan versus conventional loan. And with the FHA, you should just buy a quadplex with it because it’s the only one out of all your conventional type of loans that can be used for that, unless you’re VA or something else.
And so I started making bids on quadplexes in addition to the single family. This one is kind of on the border of, I think it’s Montclair and East Colfax in Denver area. It’s an up and coming area, it’s kind of street by street. There’s a completely new development that encompasses a couple of blocks. But then on the other side of the street where mine is, it’s like kind of a lot of Section 8 tenants, a lot more run down, got a totally different vibe.
And so it’s kind of like a path to progress. It wasn’t one of the standard areas Craig kind of pushes properties, but he was saying there’s path of progress and he basically went in making an offer above asking, I think. I don’t remember what the asking price exactly was, but I remember we were making offers about asking for everything, including the single family and then basically try to promise a quick close.
I worked with his mortgage lender. I worked with… Basically any part of the system that he already had in place, I just went with that rather than going what I did for the Indiana property because I wanted everything to work smoothly and go as fast as possible. Now, if I lost some money, it’s okay because it’s all about the learning. So that one, I think there was a bunch of interests, but we’re the first one to kind of put in a hard fast offer above asking then we got it under contract, I guess, within 48 hours.
So nothing crazy there, we sent out inspector… To be honest, I think this one actually closed pretty smoothly, but one of the things I noticed is that in every single deal I’ve done, the closing itself, one of the professionals will miss something. And for this one, they missed the rents, they missed crediting all the closing costs properly back to me. So you got to always check your closing statement. So quadplex, 745 K. There was one Section 8 tenant.
There was a nonprofit in there that helps with families and transition. So a lot of really different, interesting time profiles and then one unit that was going to be vacant on close. So I worked with Hemlane. They set me up with their local property manager. Property manager helped me get a tenant there, it took like three weeks. We screened, a couple of candidates got in pretty quickly, signed contracts with Section 8 and nonprofit and-

Ashley:
Can you explain real quick what Section 8 is and how it works with the nonprofit and how they differ?

Michael:
Yeah, yeah. So Section 8 is a government program, subsidized housing. The nice part of it is that you’re getting the rent directly from the government or a portion of it, depending on the specific tenant. And the thing though is some people don’t like it because it’s generally someone with a lower income who might be struggling a little bit financially. My take is that people are people and you’re going to find good eggs and bad eggs no matter where you go. But I like the government part of it.
One thing that they won’t do though is Section 8s, they’re not going to add and fix the property themselves because they don’t have the budget to do so, which some standard tenants might do. But yeah, that’s basically Section 8. Other than that, you just got to deal with government entity, there’s usually a housing authority in every major city that handles it.
But beyond that, it’s pretty straightforward. They do have an annual inspection, which a normal tenant wouldn’t require, but the government requires, make sure you’re treating your tenant well. The non-profit is similar, but they basically have families in transition. So they might have an empty unit for a few weeks at a time, maybe a month at a time, then they will have a tenant there for like two weeks up to three months. So there’s different families kind of rolling through. And that adds a lot of risk, right?
But they basically also add their own insurance. So they pay for like 100K insurance on any damages in the property. And if there’s any damages beyond normal wear and tear, the non-profit’s actually responsible for it. So it’s not like triple net which is like a commercial term that says the tenants pay for all expenses and maintain the property, but they do do anything beyond normal wear and tear. So that’s why I was comfortable with it. It was like the insurance plus the additional maintenance they cover.

Tony:
This was the big purchase, right? I mean, at 745,000, you’re buying a four unit and you’re house hacking, and so you’re going to live in one of the units. What was the analysis that you ran Michael to say this deal is going to profit at such a higher purchase price?

Michael:
Yeah, yeah. Well, when I ran the numbers myself, actually before I went in tech in college, I was thinking about going into finance. So I’ve done a lot of case competitions for investing or for investment banking, DCF analysis, whatever. I haven’t done it a long time now, I’m not an expert. But I ran the numbers, everything looks good.

Tony:
That was my next question, I was going to ask for a crash course on DCF analysis, so I’m glad you had that in there.

Michael:
I ran my numbers though, it looked good. The comps, to be honest, this one’s in a worse area, so the price was lower, but that was… so it’s within range. It’s like, “Okay, well, it’s cheaper than the nice ones, but there should be a discount because it’s not as nice of an area.” So from my own analysis, everything worked well. Then as a beginning investor, you start doubting yourself. And I think that’s where it really helps to have someone that’s trustworthy and has incentives aligned.
So someone like Craig Curelop, he has more to lose in terms of reputation than to screw you over just to get a sale, right? And kind of I talked through it with him, he was telling me why he thinks it makes sense and why in the longterm this will be a good property, regardless of which way you slice and dice it. It’s going to cashflow right now based on what we’re looking at. You’ve got a low interest rate, you’re self managing, which you should take into account your own costs as a manager.
But basically it will cashflow now. It’s in a path of progress, it’s literally across the street from a new development where it’s many new builds. So everything seemed to be going for it. And I think at the time, right, I did have some analysis paralysis, but once you find a deal you want, when you’re under analysis process and you lose the deal, you realize you just got to go faster. So yeah, I think that’s kind of what made it comfortable. I wasn’t fully comfortable, but I pulled the trigger because everything was telling me that I should do it.

Ashley:
Michael, I think that you’ve already kind of leaded us into our next segment, but it’s the mindset segment. And I think we’re going to label this one, the Rookie Rear View. Looking back, how did your mindset change from getting that first deal to getting your latest deal? And did your expectations really match up with reality as to how you thought this whole process was going to go?

Michael:
No, no. The processes changed a lot. But one thing that hasn’t changed is that I have only a certain amount of time in the day. So whereas in the first few months I was just focused on the next one deal and trying to make offers and get something under contract, now that I have properties, I have to deal with the property management or I have to outsource it. And if I’m looking for deals in all these different states, I only have so much time in the day to do it.
And I think that’s one thing where I’ve noticed some people kind of slow down, is that they’ll go fast for the first four deals and then all of a sudden they’re dealing with tenant issues or dealing with rehab issues, then they’re managing the properties and they just don’t have as much time in the day. So for me what hasn’t changed is that I’m aware that I have so much time in the day, if I’m going to add something to my to-do list unless I want to work more, I need to subtract something else. So that’s been really big for me.
And then the other thing that hasn’t changed is the idea of learning from someone who’s where you’re at, now which is a lot easier in real estate than it is for startups. But how it’s changed then is I think today, I look a little bit more towards how I can do this into the future or what the step is of how to incorporate this into my portfolio. For instance, the idea of just taking one next step. My one next step now is very different from my one next step before.
I’m looking at Airbnbs now because I think they cashflow well and you can systematize it. But on my first Airbnb purchase I was thinking, “Oh, well maybe I do a BRRR, maybe I do all this other stuff.” But I’m okay with a lower return, that can be the cost of education, just a lower return, it’s not even a negative return. And I’ll buy a Airbnb rental in a good market by someone who’s done hundreds of Airbnb rentals, learn how it works and then from there I can think about how to incorporate it and build out a process around that portfolio.
Same with acquisitions. I did it during Christmas by myself, but that’s not scalable. I have a full-time job, I can’t be calling people during the day. So what’s the next step? How do I get someone on board who can represent me, who can make the offers, who can basically continuously market? Because once your pipeline disappears, you just have a dry spell for a long time.
So I guess for me, the mindset is always trying to think bigger. Here’s where I am today, where do I want to be? What do people who are there, how do they think? And in trying to talk to them or joining mentorships or masterminds or networking with people who were there and then trying to think back to, “Okay, your specific, unique situation, what pieces do you want to pull into your process? What can you do yourself? What do you need to get rid of as a result? And how do you just fit all of these Lego blocks together?” So I’m using masterminds mindset courses and all these other things.

Tony:
Little bit of everything, right? And it sounds like you’re going back to what you mentioned at the top of the show, Michael, where it’s the who not how, and really giving yourself someone that you can model. Now, something that a lot of new investors struggle with, and I’m curious what your thoughts are, is that they fear the risk associated with real estate investing. And if you could go back to Michael who was a newbie investor, what advice would you have for yourself about how to manage that risk or how to overcome the fear, I guess more so that’s associated with that risk?

Michael:
Yeah, yeah. I think one thing to realize is for the new investor is how many people have owned properties and they’ve gone through the process once and then to realize all you really need to do because this is a proven process, is to take one step in front of the other and just make sure that you’re not going over your head or going over what you’re able to be comfortable with.
So like for me, I just invested in a market that was at a lower price point where I felt like if I lose all the money that I put into it, it’s still less than college cost, a lot less than college costs. So then what’s my next step? Okay, I don’t know how to buy a house, I don’t know how to do a BRRR, but I know how to talk to an agent, I know how to go on Zillow. Okay, what do I do next? Okay, well, I’m talking to the agent, he’s telling me I got to look at these properties that he’s sending in this auto mailer and I got a look at BiggerPockets calculator or something, right?
Plug the numbers in and tell him what I think and I can ask questions. And then you just keep going, what’s the next step, what’s the next step? The only thing you need to worry about is what, in your financial situation or overall situation, is comfortable for you to lose and anything beyond that is gravy. So that’s what I would recommend, is just figure out what your next step is that you can do and make sure that you don’t have enough at risk, that you’re going to be catastrophically devastated if you lose it.

Ashley:
Michael, you’ve already given our listeners some really great advice, but let’s really put you to the test and let’s go to our Rookie request line. Anybody can call us at 1-888-5-ROOKIE and leave a voicemail for Tony and I. Actually, before we started recording this, I saw that I just got two more emailed to me. So thank you guys for calling in with your questions. Are you ready Michael for today’s question?

Michael:
Yeah, I’m ready.

Caleb LaBelle:
Hi, my name is Caleb LaBelle. I live in Denver, Colorado. I’m about to do my first house hack this September. And I plan the house hacks once a year for the next few years, but I’m trying to figure out what the next step should be for me in the meantime before my house hack next year. I’m just trying to figure out a good, practical step for my second deal, whether it be BRRR or anything else. So I would love some advice on that. Thank you so much. Bye-bye

Michael:
So I’m going to make an assumption that he doesn’t want to buy another deal in between. So if you don’t want to do that, then the things you can set up is depending on, I guess you said September, right? So he still has a couple more months. So making sure your credit’s going to be good when you actually purchase the property.
Make sure you’re not opening too many new credit lines, unless you’re already at 10 inquiries in which case it doesn’t make a difference anymore. So beyond credit, making sure that you have the down payment ready. So you probably already know since you did a house hack what you’re looking at. Additionally, making sure that going to have enough for the rehab too, if you’re going to do any rehabbing for that property. So that’s mostly a savings plan, so it’s relatively passive.
You want to make sure your agent’s aware of your goals ahead of time, because if you want to do your house hack in September, it takes multiple months, right? To get a property under contract, to get it to close, especially with conventional financing. So when I was talking to Craig about a very similar strategy early on, he was telling me you’re going to want to reach out three to four months in advance and get the process started, you should start looking at properties.
We can always set the contract to close on one year in one day, and that’s your goal, is to do one year in one day every year for 10 years. But to do that, you need to be making offers months in advance. So I think for September, probably by April or May you should be with your agents starting to think about making offers.

Tony:
No, that’s great advice. I love the idea of planning ahead, right? If you want to be out of that property in 12 months, then by month eight, nine, you should already be looking for that next deal. So I love the way that you’re kind of thinking from a big picture view. Now, Michael, I want to take us into the next segment here, which is our random question segment. And you’ve got so many different cool things that I think you’ve experienced. But I think my big question for you is if you could go back to the beginning and kind of start over, would you have invested in as many markets as you’re currently in or would you have maybe gone more narrow with your approach? There’s no wrong answer here. I’m just curious what your advice would be to a new investor.

Michael:
Yeah, I would go narrower to start. I actually still think I’ll end up in three or more markets, especially if I’m adding Airbnbs because vacation in big cities are not necessarily the same thing. But I think the thing you have to realize is there’s economies of scale for any company. And one thing I did early on was to read the SEC filings of really big REITs. How do they deal with not going bankrupt? How did they think about expanding markets and how they think about what enough density is for them to get cognitive scale?
I’m definitely not going to get to that scale and I don’t think my definition of cognitive scale is 200 homes in a single city before I can go to the next, but even your property manager, right? Will give you a 2% discount if you have five to 10 properties under them. And that makes a big difference. Your contractor list. You’re like, “Oh, well I just replaced the water heater, I’ll call the same guy. Oh wait, he’s in a different state.”
You have to build a completely new set of contacts and relationships and no two people are going to be the same. The way my agent runs in Syracuse, he’s great. But the way he runs his business is really different from the Five Pillars team in Fayetteville versus Craig who also runs it really differently. So you’re going to have to basically build a new business almost in every single city. So there’s definitely cons to expanding too quickly. Knowing what I know now, I would have focused in one city first for four or five properties, really get that going before exploring another city.

Ashley:
I think that kind of leads into my question, and it’s what would you have done differently starting out as a rookie? Is there something that you’ve changed your mind about? So you kind of mentioned maybe starting out in another market. Is there anything else that you thought in the beginning like, “Oh, I’m only doing BRRRs and now I want to switch to this strategy.” Did anything like that change for you?

Michael:
Yeah, things are changing all the time, I feel like. There is a little bit of shiny object syndrome for me where someone tells me like, “Oh, I’m doing commercial, I’m killing it.” Or, “I’m doing multi-family,” or, “I’m flipping 200 homes a year.” I’m like, “Wow, I want to do that.” But you got to figure out your own pace. So I don’t think I would necessarily change anything of how I started because hindsight’s 2020, right? And don’t think I made any big mistakes. Okay. I would have gone a sewer scope, my own sewer scope.
But generally speaking, I think my process, I wouldn’t have changed anything because I really did just do the next step I was comfortable with and then just keep learning and keep going down that path. Maybe I went a little too fast at one point, I went a little too slow at another point. But overall I’m pretty happy with my approach. Maybe not all the results, I might’ve changed the property I bought or something.
But in terms of changing what you want to do or how you’re investing, I think that changes all the time as you get more interested in real estate. And especially for new investors, you look at people who own $100 million in multifamily, right? And you’re like, “Oh, I’ll never get there.” But then as you get started and you get started networking, you start getting closer to those people, right? Craig was a guy in a book. I don’t even know his face is on the book, and then like I met him for lunch in Denver and he’s a real person and I’ve met him and we’ve talked, heard his story.
He’s not mythical, right? He’s a real person. And then even all the people I’m talking to on Instagram, they’re real people. Like Ashley, I followed you for a long time and now we’re talking. We’re talking face to face. And then you start to realize that what they’re doing, it’s beyond where you’re at, but you start to see more of what the next step is. So I think real estate as a journey has this giant staircase that goes to the clouds and you can see a hundred steps up.
But until you climb a hundred steps, you can’t see the guy at step 200. And as you climb higher, there’s also more paths, right? So it’s just like you start to learn what’s possible out there and the farther along you get, the more you realize what else you could do. For me, I’m doing everything right now because I feel like I don’t quite know what I would do in commercial or multi-family, I’m kind of looking at, I’m starting to put out fillers for deals.
But I’d love to know a little bit more about Airbnb because the cashflow is a lot higher. And it’s like I’m looking at my competitive advantage, I already have VAs, I already have systems built out for them to manage things. It’s a lot easier for me to hire a VA and have them manage my Airbnb process at a profit than for me to build out a commercial deal process which I have no idea what I’m doing yet. And so just taking the out, take that next step and see if you like it and continue on your real estate journey.

Tony:
Awesome. Awesome. So much good stuff, Michael. My head’s spinning with all the knowledge bombs you’re dropping on this brother. Before we wrap up, I just want to give one quick shout out to someone from our Rookie community. So for today’s Rookie rockstar, I’d like to shout out Michelle Bolanos-Barlow. So she posted in the Facebook group, the Rookie Real Estate Facebook group that she just closed on her first duplex and she’s super excited to get the next one. So Michelle, congrats to you. And if you guys want to get there you get… There you go, clap it up for Michelle.

Ashley:
Yay, yay Michelle.

Tony:
So if you guys want to get shouted out, just be active in the Rookie Facebook group, tag us on Instagram, let us know what you guys are doing, we’ll be sure to give you guys a shout out there as well.

Ashley:
Michael, thank you so much for joining us today. And if people want to reach out to you or follow your journey, where’s the best way that they can reach you?

Michael:
Yeah, I’m on Instagram as Michael Su. Su is just S-U. So I don’t have a lot of content yet, but I’ll try to post more before this show goes live. Also, if you go to michaelsu.tv, I’m thinking about starting a YouTube kind of about just like mindset and using real estate or finances to live the life you want to live in addition to talking about real estate too. So I’m hoping to put up some YouTube videos there.

Ashley:
Very awesome. We’ll link all of those in the show notes for everyone at biggerpockets.com/rookie61. I am Ashley Kehr, at wealthfromrentals and he’s Tony Robinson at tonyjrobinson. And thank you guys so much for joining us. Make sure you guys are listening to Wednesday and Saturday episodes, the new Rookie Reply.

 

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