How to Retire with “Turnkey” Rental Properties (as a COMPLETE Beginner)

In this article You can retire with rental properties faster than you think. That’s right, toss out the “wait until I’m sixty-five and HOPE I have enough” mentality. That might be okay for most Americans, but it’s NOT okay for YOU. You want passive income flowing in so you can spend time with your family and friends and live a life you love. If you’re going to get there, you better take advice from Sam Dolciné. A few years ago, Sam calculated his retirement savings and realized he wasn’t even CLOSE to what he would need in retirement. Even after the monthly contributions and employer match, Sam would run out of retirement savings in only ten years of retirement. So, he started looking up ways to boost his retirement income. Real estate investing popped up, and Sam began devouring all the investing content he could. Now, he’s managing a portfolio of out-of-state rental properties that bring in some serious cash flow. The best part about Sam’s portfolio? It’s “turnkey,” meaning Sam was able to buy the properties and immediately rent them out, giving him cash flow within WEEKS of closing on his first couple of deals. Now, Sam is on the hunt for even more passive income. Repeat his steps, and you could be counting cash flow, too! Click here to listen on Apple Podcasts. Listen to the Podcast Here Read the Transcript Here Ashley:This is Real Estate Rookie episode 325. Sam:I pictured my retirement, working till I was 60 something, and living off my retirement. And I realized very quickly that that wouldn’t be the case. And so, I kind of had a moment of panic and I realized, “You know what? I think real estate will be a great way to supplement whatever I’m putting aside.” Turnkey provider, pretty much the easiest way to explain is that they flip properties to investors. So, pretty much, they’ll buy a property under market value, they’ll put work into it, and they’ll sell it to an investor who’s looking for a property that pretty much needs no work. It might need a little bit, and you can ask them to do things that come in the inspection. And they usually come with property management included as well. Ashley:My name is Ashley Kehr and I’m here with my co-host, Tony J. Robinson. Tony:And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And we’ve got a great episode today. We’ve got Samuel Dolciné on the podcast, and Sam actually runs a podcast of his own called the Black Real Estate Dialogue. And as soon as he came on, I could tell that he had a little bit of experience behind the mic because he was just so smooth and he delivered his story so well. And I was like, “Man, this guy’s got a great story.” All right. So, you guys are going to love this conversation with Sam. He’s going to talk about red flags to look out for in potential tenants and how he almost got scammed by someone who wanted to rent his property. You’ll also get to hear Sam talk about red flags in a property, and you’ll hear why he pulled out of two potential deals that he already had under contract. Ashley:We start this podcast a little bit differently, talking about Sam’s idea of retirement. So, he actually went and pulled up his portfolio online for his 401(k) and played with the little tools and buttons they have on there to see what he would actually have at retirement. And to say it was not exactly what he wanted might be an understatement. But then, he makes one phone call, and this one phone call gets him his down payment on his first investment property. And one other thing I want to mention about Sam is this whole episode is you are going to learn all of the ways that he analyzed a market and did it so efficiently, and saved himself so much time during that process too. Tony:So, before we kick it over to Sam, I just got to give a shout-out to our amazing Rookie audience. And guys, Ash and I mean this from the bottom of our hearts, the Rookie Podcast would be absolutely nothing without our listeners, and we’re so incredibly grateful and thankful for you guys when you take time out of your busy schedules to leave those reviews on Apple Podcasts, wherever it is you’re listening. So, I want to give a shout-out today by someone of the username JRschmitt2012. And JR says, “The best information out there. Thank you for providing so much useful information. I haven’t made the first purchase yet, but I’m in the middle of moving to a new market and I don’t think I would be as confident as I am without this podcast. Keep it coming, guys.”So, if you are a Rookie listener, if you’re a dedicated Rookie listener, or even a new one, and you found some value in our podcast episodes, please do take just a few minutes out of your day and leave that review. Because the more reviews we get, the more folks we can inspire to start their investing journey as well. Ashley:And for today’s social media shadow, it goes to Drew Breneman, D-R-E-W B-R-E-N-E-M-A-N. You can find him on Instagram at his name. And he does a great job of showcasing different real estate strategies and methods. He also has a podcast called the Breneman Blueprint. So, go give him a follow and check out his page.I love that we do these social media shout-outs now, and it’s not to get the person followers, but it is for you to build your own network of like-minded investors. Being able to learn from them and also watch them grow. You will not believe that the motivation and inspiration and everything that you will learn just from filling your social media feed with actual real estate investors, especially Rookies, and being able to connect with them. Trust me, as entertaining as memes are, this will be way more beneficial to you. Okay, now let’s get into our show and we are going to bring Sam on.Sam, welcome to the show. Thank you so much for joining us today. Sam:It’s an honor, it’s a pleasure to have this opportunity and I’m excited to get into my story, and I really appreciate you two hosting me today. Ashley:I want to start this podcast off a little bit different today. And the first question I want to throw at you is, what did you picture for yourself for retirement? Sam:Yeah, so initially, I pictured my retirement working till I was 60 something and living off my retirement, my 401(k) primarily. At the time, I didn’t have any visions of owning real estate or using rental income. I just assumed that my putting away however much percentage at work would do the job. And I realized very quickly that that wouldn’t be the case. But initially, that’s what I thought. Ashley:So, are you on track now to get that type of retirement? Is what you pictured actually happening to you right now? Sam:What I pictured at that time? Absolutely not. I came to a realization at work, at my desk, that what I was saving, projecting out my raises and things of that nature, it wouldn’t last me that long based on the lifestyle that I envisioned living with my family in retirement. And so, I kind of had a moment of panic and I realized, “You know what? I think real estate will be a great way to supplement whatever I’m putting aside from my job or whatever it is I’m doing.” And honestly, I’m glad that I came to that realization because life is a lot more different now than it was five years ago when I came to that realization. Ashley:Can you expand on that a little bit more of what that realization was for you, that moment in time? Sam:Yeah, so I was at my desk at work, and for whatever reason I decided to go check my retirement account. And they have these calculators where you can project out, all right, if I put away, let’s say 5% and these are the raises I make over the next 30 years, how much will I have? And then, the second step was how much do you want to live off of? So, I put the number in and in less than 10 years the money would’ve been gone. So, I’m like, “You know what? I have to figure something out.” So, I started reading different things. And I’m like, “You know what? Maybe real estate is the way to go.” So, I live in LA, been here about seven years. And I tried to get pre-qualified and I spoke to a mortgage guy and he’s like, “Hey, you might be able to get a condo somewhere, but you can’t get anything right now.”And so I’m like, “All right, I don’t make enough money. What’s the next thing?” And so, I started looking online, are there other ways people are investing in real estate? And I came across some information about people investing out of state. And I’m like, “Wait a minute. I didn’t know you could invest out of state. I thought you had to live near where your properties are.” And my point of reference was the landlord where we lived at growing up, his house was right next to the building that we lived in, so I figured that’s just what it was. And so I spent about 12 months just learning everything I possibly could. BiggerPockets was very integral in that. Just learning everything I could about investing out of state. And 12 months later, I purchased my first out-of-state property. So, that moment of panic turned into research, and then that research turned into my first out-of-state property 12 months later. Ashley:I have to say, what a great moment of panic to create that realization. 12 months down the road, you have your first property. Tony:Yeah, I think a lot of new investors, they get stuck in that analysis paralysis, where they never really get to a point where they do pull the trigger. And 12 months turns to 18 months, turns to 24 months, turns to 36 months, turns to decades. So, Sam, this is a question that I always like to ask people because I think it’s super insightful for the listeners, but you have this realization sitting at your desk, realizing the money’s only going to last you a decade. You go on this journey of self-education. At what point did you realize that you were ready to actually take action? Do you remember that moment where it was like, “Okay, this is the moment where I’m actually going to submit that first offer,” or, “This is the moment where I’m signing that first purchase agreement”? How did you know that you were ready to move forward? Sam:Love that question. So, the first thing I did when I realized, “All right, I’m going to invest out of state,” the first thing I did was I put my student loans into forbearance, and I was paying hundreds of dollars. So, that helped me save about 6K. And so fast-forward, I’m researching, I’m trying to find markets, and I got introduced to some folks in Dayton, Ohio. And so, I went out for a visit, looked at the market, did market research, they sent me some reports. And I’m like, “All right, I need to speed up this timeline.” So, I get the bright idea to call my retirement plan. I’m like, “Hey, how can I get access to some of this money?” They’re like, “Well, you have a couple options. You can withdraw however much and pay the big tax penalty, or you can borrow up to 50% of the balance.”And I’m like, “Wait a minute. If I combine what I’ve been saving from not paying student loans, plus what I can borrow from my retirement plan, I’ll have enough for a down payment and I can get into this Dayton market much quicker.” And so, I did that the same summer that I went on that visit because I’m like, “I got to get into the game.” And so, once I had the money, I knew I was ready. And then a couple of months later, a property came on the market that fit my criteria and I just went for it. So, I think, for me, once I had the money, I’m like, “All right, I need to make this thing happen.” But all the while, I was preparing and then that moment came during the summer where I’m like, “Okay, I can add to what I’ve been saving already. Let’s do it.” Ashley:Sam, when you decided on this during your analysis, why did you pick Dayton, Ohio? Sam:Yeah, so it’s funny. So, I had a Google Doc with just a bunch of markets, most of them in the Midwest or some parts of the South. And I was listening to a podcast and they were like, “If you want to buy turnkey properties, reach out to us. We can introduce you to some folks.” I’m like, “Okay, let me just do this.” So, they introduced me via email to folks from Memphis and then from Dayton, Ohio. The only reference point I had of Dayton, Ohio was sometimes the NCAA tournament basketball was played there, but I didn’t know anything about the city. I didn’t know anyone there. And so, the folks from Memphis didn’t reply, the folks from Dayton did. They sent me information on the market, so just about infrastructure improvements, how much they’re investing in downtown, the percentage of renters, which was 60% renters, 40% owners at the time.And I took that information, I did my own research just on the market and things that they’re doing to improve the city. And I also noticed that it was situated geographically in a very interesting place. So, Dayton is in between Columbus and Cincinnati. So, Columbus to I think the north and then Cincinnati to the south. And so for me, I’m like, “You know what? There’s enough information here where I think this could be a good splash. Plus it’s not popular.”When I was on the BiggerPockets forums, there weren’t that many people talking about Dayton, even though a lot of my research was confirming that this is a good market to invest in. And so, once I went out there to visit, I got to see some properties, got to see the city and see all the things I was reading about. I’m like, “You know what? I think this is a good opportunity to make a splash.” I didn’t want to overthink it too much. I’m like, “You know what? I have the connections here. Let’s just make it happen here.” So, those are some of the reasons that I chose Dayton, and it’s paid off very well. It’s a great market and I definitely intend to invest there more. Ashley:What a great resource of information of getting the market data presented to you from the turnkey company that has saved you so much analysis right there. And then, you’re just going and verifying the data instead of starting from scratch. So, I think that’s a super useful tool is to someone, especially if you’re using turnkey, is to ask them for the market instead of saying, “Okay, I’m going to analyze these five markets. Do my deep dive. Okay, I’ve picked this one. Now, I’m going to go to the turnkey company and talk to them about the actual property itself. I already know I want that property.” You did an amazing thing and you went and wanted market data from a couple of them, and one got back to you and the data was great, but what a great resource and very efficient. Tony:Sam, actually, if you don’t mind, can you define what a turnkey provider is? What does that even mean, turnkey? Sam:Yeah. So, a turnkey provider, pretty much the easiest way to explain is that they flip properties to investors. So, pretty much they will buy a property under market value, they’ll put work into it and they’ll sell it to an investor who’s looking for a property that pretty much needs no work. It might need a little bit, and you can ask them to do things that come in the inspection. And they usually come with property management included as well. And so, for my first deal, I’m like, “You know what? Obviously, the downside is that you pay at the market pretty much. However,” I’m like, “this will get me into the game. This will help me to build up my confidence. And then, perhaps on my next deal I can take on a little more work and things of that nature.”So, for me, it was a good way to get into the game. I, by nature, am very risk averse, which is funny because I’m investing from thousands of miles away. But I’m like, “I need to get into the game. This seems like a relatively safe way to get into the game, just start making some money, build my confidence up, and then I’ll go from there.” So, I’m glad I went that route. I did learn thereafter that I could find turnkey properties on the MLS. But based on what I knew at that time, it made sense. And if I didn’t do that, we probably wouldn’t be sitting here today. Tony:Sam, let me ask a follow-up question. First, I appreciate you breaking down the pros and cons of the turnkey approach, because for some people that maybe don’t have the time, desire, or ability to find distressed assets, rehab them, get them placed with a tenant and do all that work, turnkeys do solve a need for a lot of those people. And I’ve met some investors who all they do is turnkey. They’ve got very busy day jobs, they got maybe a high salary, they’ve got a big shovel to dig with in terms of the income they have coming in. So, for them, it’s easy to take that money, dump it into a turnkey property, not have to think about it. But I would love just to get the 30,000 foot view. Like say that Tony and Ashley wanted to invest with the same company or a similar turnkey provider. What’s the step-by-step process? Do I just subscribe to an email list? Is there a Facebook group where they’re posting all their stuff? What does this look like to buy from a turnkey provider? Sam:Yeah, so typically, what’ll happen is you’ll reach out to them, share that you’re interested, and they’ll get you on an email list of different properties. They’ll do some back-of-the-envelope math for the cashflow and things of that nature. So, they will get you on an email list. A lot of times they give you the option of coming out and seeing properties in various stages of rehab, which is what I did. So, I got to see some stuff that was fully gutted and some stuff that was halfway done, some stuff that was done, just to get a good sense of their work. And typically, let’s say you find a property that you’re interested in, the price is the price.So, one of the cons is that there’s not any negotiation, like the price is the price because, of course, they have to make their profit. However, you can get your inspection and have them fix things that need to be fixed. But typically, that’ll be it. And if you decide to go with their property management, what I did was I went with their property management because I wouldn’t have to pay a lease up fee. And for those who don’t know what that is, pretty much a percentage of the first month’s rent is what you typically would pay to a property management company or to a leasing agent.So, I’m like, “You know what? Let me do that with them. I’ll try it and if they’re not that great, I’ll get rid of them,” which I eventually did, but at the time it made sense. So, that’s typically how the process will work. And then, they’ll just hand you over to their property management and you’ll get the statements of monthly, and they’ll place tenants and things of that nature. When I purchased mine, there was a tenant there in less than a month, so I think it closed on the 15th and a tenant moved in within two weeks. So, they did the tenant placement and things of that nature as well. That tenant was great. She stayed maybe a year or two years, maybe about two years. But that’s typically how it works, high level. Tony:Just a quick timeline perspective, from the moment that you said, “Hey, I’m interested,” until you actually closed on that property and owned it, what was the timeframe there? Sam:About 30 days. So, it was quick. It was quick. So, I did buy the property- Tony:30 days? Holy crap. Sam:Yeah, it was super quick. So, I had the financing, the lender I was going to go with and everything ready. The inspection took place. The repairs that I wanted them to do took place. They turned it around pretty quickly. So, we closed in about in about 30 days, which is crazy. So, I went from 30 days before not having any property, finding a property, closing, signing all the stuff. And 30 days later, I was a landlord. So, it was pretty crazy. Ashley:Do you think part of the reason you were able to do that so fast was because you felt more comfortable since you visited Dayton? Can you kind of give us your opinion on… First of all, what was the cost to actually go there? Did you fly there? Did you drive there? Did you have to stay overnight and going there? And was it worth it to go and actually be on the ground and visit the area and see their properties? Or do you think that you could have done just as great of a job of picking a property and having it being sight unseen? Sam:Love that question. So, I found a lot of value in going out there, and it’s not the easiest place to get to. I had to get a connecting flight, I think in Chicago, and then the next flight down to Dayton from LA. But for me, it was important to visit, because again, you got to think about it. I didn’t know anybody, investing long distance. I was taking a big chance. I didn’t know anybody who was doing that. And so, to me, it was great because I got to almost put my hands on it or check the city out for myself, drive around and see what’s happening around the city. And the person from the company, she drove me all around. I got to check out the city, go to different places. And to your point, as you mentioned earlier, verify a lot of my research.So, I verified a lot of what they sent me online, but then to see it in person, for me personally, it was great. It was great. And so, I definitely think I could have done it sight unseen. I know a lot of people do. I mean, I haven’t seen the last place I purchased yet. But for me for the first time, it was super important to go out there and see it myself. And I felt good. I felt good after I went there. I’m like, “You know what? I know 100% that this is where I want to be, this is what I want to do.” Tony:Sam, if I can ask, you mentioned that the turnkey, even though there were some cons to it, there were some pros as well. Getting that first base hit, building your confidence to be able to do this on your own. So, let me ask, even though you didn’t necessarily find the distressed property, manage the rehab, place the tenant yourself, I’m assuming that you probably still picked up some things along the way that kind of prepared you for that next deal. What were some of those initial lessons you learned on that turnkey property that you feel kind of prepped you for the next one? Sam:Yes. So, I think the first thing is to have more confidence. Because I eventually visited that particular property about 14 months later. I was like, “You know what? Let me just come back. Let me see how it’s going. Let me put my eyes on the house, see what it’s like.” And the management company was really acting like I was a nuisance. I was trying to get access to the property. And eventually, my boots on the ground, who I also met on BiggerPockets, she went with me to the house and we just checked in on the tenant. Just like, “Hey, we just want to make sure everything is cool.” And I had been debating letting go of the property manager and self-managing, and that was really confirmation that I should just try it, and if it doesn’t work out, I’ll just find another management company.So, that’s one thing I learned, just to follow my instincts because my instinct was to move on. But after that visit, I think I sent them a 30-day notice and we parted ways. So, that’s the first thing. And then, the second thing I would say I learned is that I could find turnkey properties on the MLS. So, the next deal, I’m sure we’ll get to that, I found a realtor and we went that way. So, again, I went based on what I knew at that time, and I always tell people, know enough to get to the finish line. You don’t need to know everything. Make your decisions based on what you know.And so, if I could do it again with what I know now, and obviously hindsight is always 20/20, I would just go with the realtor and you have more negotiating power that way, and there’s just more flexibility in what you can do and pricing and things of that nature. So, I would say those. And then, the last thing I would say is that just to get started, for me it was important to start, even if I made 300 bucks a month, at least I started and I can figure out how to get better deals over time, how to improve things over time, which is what I did. So, I would say those are the things that I learned. Tony:Sam, you said something, “Know enough just to get to the finish line.” And I like that saying, and I might even tweak it just a little bit to say, know enough just to take your next step because I think that’s where a lot of Rookies get stuck is that they sometimes do want to see every step straight to the finish line, but you oftentimes don’t really know what you don’t know. And as long as you have the confidence to put that one foot forward, then the next foot forward, that’s how you start to make progress. And it seems, Sam, that that’s kind how you navigated this situation. Sam:100%. That’s exactly what I did. Tony:So, I want to touch a little bit because you said that you got rid of the turnkey property management, and are you still currently self-managing that property? Sam:Yes. Yes. Tony:Okay. So, let’s talk about that because you’re in California, Ohio is thousands of miles away. So, how were you remotely managing this property given that you’ve never done it before? What were the steps you had to take to kind of cheat yourself with tools, automations? Just tell us the whole experience of self-managing from multiple states away. Sam:Absolutely. So, the first thing I had to do was find a platform to receive the rental payments. So, how the property management works is they just send you the money via ACH, so it’s in your bank account every month. And so, I switched the tenant over to apartments.com, and sent her an email letting her know, “Hey, I’ll actually be managing the property now.” And at that point, I had put her on a six-month lease. She had asked to be on a six-month lease, and that ended early, but I’m sure we’ll get to that. And so, from the logistics standpoint, that was pretty much all I had to do, and just make sure the payments were redirected and the management company sent me her security deposit and what I had in reserve. So, from that perspective, it was pretty seamless, and it was all pretty simple until she left. So, it wasn’t that much I had to do as far as switching her over. Ashley:As far as the maintenance request, I’m hoping that since it was turnkey, there wasn’t a ton of maintenance. But did you have almost like a Rolodex of vendors or handyman that maybe the other turnkey providers have used, or how did you handle maintenance requests? Sam:I’m glad you asked. I actually did not have a Rolodex. And shortly after I took over, there was an issue with the furnace. And so, I get a text or an email on Sunday night saying, “Hey…” And this is the winter, the middle of the winter in the Midwest. So, she’s like, “Hey, the heat is out and I’m just freaking out.” I’m like, “Oh, my gosh.” So, I start googling just like, “Who can fix a heater?” And I just start calling around, calling around. I finally found somebody to go out to the property on that night and figure the situation out. As a matter of fact, I think they had to come in the morning, so she didn’t have heat that night, but they came the next morning and fixed everything. And so, I did not have a Rolodex of anything at that time. I was really starting from zero. But thankfully, that was the only incident that took place while that particular tenant was there, and she probably stayed another five months after that. Tony:Ash, I want to get your insights on this piece too, because when you manage your properties yourself, at least when you first start, you oftentimes don’t have a Rolodex of HVAC, of plumbers, of electricians, of general handyman to do all these things. And you do have to scramble like you did, Sam, like, “Let me just open up Yelp and find as many as I can and see who works.” And that’s been our process too. We self-manage all of our short-term rentals. And I remember the first time we had a big maintenance issue in Joshua Tree that our handyman couldn’t fix. We had to source… I think it was an HVAC issue, similarly. And we had to call a bunch of different people. And the first one that we found, they were able to get it, but we didn’t really like working with them. And then, the next time we had an HVAC issue, we found someone else.But as these issues kind of continue to pop up in your business, you do start to build your own Rolodex. And now, we’ve got a list of all of our preferred vendors. So, now anytime something happens in our business, our VAs have a list of just who to call, who to text, who to email, et cetera. So, it does kind of build over time. But Ash, I guess I’m just curious for you on the property management side, was it similar for you as you kind of build things out or how did you manage the whole vendor piece? Ashley:Even today there’s different towns where a contractor will say like, “Oh, I don’t go that far,” or something like that. And then, you do have to find somebody else to fill that special skillset. Right now, my biggest tool is referrals from other investors or even just other contractors, just anybody that would use a maintenance person. My mom is actually great on Facebook. She’s in all the neighborhood Facebook groups and she’ll just send me a screenshot and be like, “Oh, this person recommended this person in this town to build their deck,” or whatever it may be. But we have the same thing. We use monday.com, and we keep just a list of people.Anytime that my one business partner, Daryl, he sees a truck, a van, anybody driving or we’ll go and get coffee and they have the big tack board with business cards, he will take pictures of that and then he will put it into our list of different vendors. A lot of these we’ve never even used, but we have them there in case we need to. And yes, it is cold calling them. Those types of people we don’t have any referral for, but at least sometimes it gives us a starting point as to who to contact. But I think another great way, if you don’t know anybody that’s investing is going into the BiggerPockets forums, going on to the neighborhood Facebook groups and ask in there, “I’m looking for a plumber in the area. Does anyone have a recommendation?” And you will get a ton of people just listing, listing, listing. One thing I would watch for is make sure it’s not only the wife of the plumber that’s making the recommendation, that it’s actually somebody that used their services. Tony:Yeah. Well, I guess let’s lead into this next piece because you hinted at it a little bit, Sam, but I’m curious, what was really the journey of that tenant turnover? So, after that first tenant leaves, what does that look like? What do you do next? Sam:To be honest, that was the toughest experience that I’ve had, and I’ll explain why. So, pretty much what happened was the tenant ran into some financial issues and she asked if she could end her lease early. And I’m like, “You know what? Cool, she’s paid on time, fine. Just make sure the place is clean.” And I didn’t charge her a fee or anything. 30 days later she left. And so my boots on the ground, who I mentioned before, her name is Courtney, shout out to Courtney. I met her on BiggerPockets and she’s like my aunt in the Midwest, she’s great. And so, she did the checkout process with the tenant, just made sure the place was in good condition, got the keys and everything. And she said, “Sam, there is a smell here. It smells like the dogs have been doing their business inside.”And at the time, there was carpet. And in the lease, the tenant was supposed to shampoo and wash the carpet, which they did, but there was a stench. And so, I was talking to an investor friend of mine, he’s like, “The first thing you want to do, rip that carpet up, get some vinyl plank flooring.” I’m like, “Okay, fine.” And of course, I had to paint the place. And I found somebody on Facebook inside of one of the Dayton investor groups who is a handy woman, she sent me some pictures of her work. She says she can paint. I’m like, “Cool, you can paint.” And so, the first mistake I made was, like I said, I have boots on the ground. She’s an investor there. She’s awesome. I didn’t leverage her enough.So, the handy woman, she was sending me pictures of different rooms painted and things of that nature. And at the very end when she said the job was complete, I had the boots on the ground go there and she’s like, “Hey, Sam. She missed this wall. She missed this room.” And what I should have done is had her going throughout the week. She could simply have gone on her way back from work to verify all the information that was being shared with me. And the next thing was the flooring. So, I had to rip the carpet up. And I was talking to her, she’s like, “Oh, I could do this too.” And I’m like, “All right, cool. Let’s do it.” So, we had an agreement on what I would pay her. I bought the materials, I paid her for the labor once the job was done. That took forever because I was not utilizing my boots on the ground. And it seems so obvious, but for whatever reason, I just wasn’t doing it.I don’t know if it was pride, or maybe being too timid, or whatever the case is. And eventually, she got that done and a couple other things, but the process took over a month. And quite honestly, it should have just taken a few weeks. And so, that period of time while there was a vacancy was very difficult and stressful because I wasn’t managing the person doing the work properly and wasn’t using my resources I had to get the job done quicker. So, eventually, we got it done and rent in the area went up like 50%, so that was great. But I fumbled big time just with how I managed that particular contractor. Ashley:Did you say the rent went up by 50%? Sam:Yes. If I calculated correctly. Let’s test my theory. So, the previous tenant was paying $900 plus $50 pet rent. And the next family that moved in, they were paying $1,395, including pet rent, $1,445. So, they’re paying $1,445. I think that’s 50%. You can check me on that. Ashley:Yeah, it’s close enough for me. Yeah, that’s quite a big… That’s awesome. Yeah. Sam:Yeah. So, that was crazy. So, that was the light at the end of the tunnel. Ashley:Right. Tony:It’s actually 52% just to be exact. So, you can [inaudible 00:31:23]. Ashley:Of course Tony had to do the math. And Tony is so smart, he did that in his head just so you know. Tony:Yeah, all in my head. Sam:You got a genius on our hands. Ashley:I know. So, let’s talk about that portion of it, as to changing that rent. Now, did you go in and did you list the apartment for this after pulling comparables in the area, what other things were listing for? Did you rely on your boots on the ground? What was that process of deciding what to list the unit for? Sam:You know what’s funny? I had listed it before everything was complete for like $1,200, and then I took it down after a week. And I’m like, “You know what? Let me actually make sure this person finishes everything and everything is good to go. It’s cleaned out and everything.” And I looked on the market. So, what I typically do is either look on Zillow or Redfin, look at homes for rent in the zip code that are three bed, one and a half or two bath. And then, I also go to Rentometer to verify everything. I saw a property, similar square footage, in the area that was like $1,395. I’m like, “Wait a minute, this has to be a joke.” And so, I looked and I’m like, “No, this is actually a real listing.” So, I’m like, “You know what? Let me try and see what I can get at this price.”And so, I put the price up at $1,395. And the way that I learned to do it… I used to do just individual appointments, which is a huge waste of time. So, what I do now, and what I eventually did was just open houses. “This is the day. This is the time. Come see the property.” That’s it. And so, I’m like, “You know what? Let me see if I can get this much rent.” And so, it was up on the market for maybe three or four weeks and I found the right people, after almost being scammed, and they were down to pay it. And so, I just tested the theory and that’s typically what I do.I try to go a little bit higher and see what type of results I get. And if I don’t get a lot of traction, I drop the rent a little bit and just see what the inquiries look like. But yeah, I just put it up there and I’m like, “Let’s test it for a few weeks and see if people will bite.” And so, I’ve had the same family in there since 2021, and I’m actually sending them a new lease this year. They’re going to stay there. And they’ve been great tenants. Ashley:Sam, you can’t use the word scam and not educate us on how we can not get scammed learning from you. Sam:Yeah, I’m happy to share. So, I use apartments.com for the management and also to receive applications. So, whether the leads come from Facebook, which is where most of them come from, they are directed to apartments.com to submit their application. And so, there was this one particular applicant, and I’m looking through the documentation and the IDs and the W2 or W9s, they’re not matching. The names are all different, but they’re all claiming to be one person. And so, I kind of followed up on it, and it was just like a weird vibe. I was trying to verify it and the person was kind of pestering me like, “Hey, I really want to rent this place,” and this, that, and the third. But I’m like, “The information is not matching.” There was a split second there where I almost kind of took the next step. I’m like, “Wait a minute, something’s not right. You know what? No, I can’t move forward with these folks.”And it’s important to, especially if you’re doing your own tenant placement, just to verify all the information. Even if you got to Google and look online. I go through everything with a fine-tooth comb just to make sure everything I’m looking at is correct. And so, basically the person tried to… I don’t know if they were putting up family members’ information or whatever the case is, but the documentation was not lining up and they were really persistent with me about their desire to rent the property, which was another red flag. So, I’m glad that at that decision point, I’m glad I decided to go in a different direction. But yeah, I mean some people will just try to do that. Ashley:Tony, I think we need to do an episode, maybe a Rookie Reply on tenant red flags instead of dating red flags- Tony:Or just tenent screening in general, right? Ashley:… go through tenant applicant red flags. Yeah. So, Sam, I think maybe this was probably the same in your situation, but a lot of times it’s better to have a longer vacancy than to rush and take a tenant just to fill the unit. So, anyone who’s going through that process right now, really think about that. And it’s better to wait for the right tenant than just to get somebody in there, where you do have that back of mind like, “Oh, I’m kind of taking a risk here. They really don’t meet what I want, but I want to get somebody in there.” And it’s not always the case. It’s not always somebody awful.I rented in a unit once to somebody who I was iffy about. They just barely met the screening criteria. And they lived there for two years. And when they moved out, the woman cried to me and said, “Thank you so much for taking a chance on us. We just bought our own house for the first time ever,” it was her and her two kids, “and we’re moving there.” So, that’s not always the case, but I think it would be good if we did an episode on red flags. Because there’s a lot of times I’ve looked back and been like, “Man, those red flags were there, but I didn’t see it.” Tony:And honestly, the message, Ashley, of patience, I think translates to a lot of different parts of being a real estate investor. Sometimes we get so focused on the money right now that we start to maybe make poor choices. Like I rushed and hired a contractor because my usual guy was like, “Hey, Tony, I can start it in four weeks.” And I was like, “I need someone to start today.” And I ended up having to pay two contractors because the first guy didn’t finish the job the right way. So, there’s a lot of instances. People who maybe pulled the trigger too soon on a deal because like, “Hey, I want a deal today.” Not realizing that a better deal might be right around the corner. So, I think that idea of just patience as a real estate investor is probably something we don’t talk about enough.But with that, Sam, I want to transition to deal number two, because we got through some of the trials and triumphs of your first deal. But how did that first deal then prepare you for the second deal, and what did that one kind of look like? Sam:Yeah, absolutely. So, I actually took a couple of years and sat out, just sat on the sidelines. And in the fall of 2022, my wife was like, “Hey, when are you going to get more properties?” I’m like, “Oh, all right. Well, I guess I should.” And at the time, of course, interest rates were going up. And I consider myself kind of a contrarian thinker, so I’m sure you guys know, people are on the sidelines right now. So, for me, I’m like, “This is the best time to get in. If I can find a deal that will pencil and cashflow regardless of the interest rate, we should buy something.” And so, I started my search. In September 2022, I found an investor-friendly realtor inside of a Facebook group, and I just started looking at deals. Tony:Is that also in Dayton, Sam? Sam:Also in Dayton. Yep, also in Dayton. And so, I was looking for about six months. I was under contract twice, backed out of those deals, and I finally closed on that next property in February of 2023. But yeah, I bought that next property and the interest rate is about 7% almost, but the cashflow is great. I think it rents for $1,370, the mortgage is $690, so the spread is pretty solid on it. And again, I decided to get in because everybody was going the other direction. So, for me, it’s perhaps less competition and perhaps sellers will be willing to do more and negotiate more. And so, it was a great opportunity and got that rented a couple months after. Had to do a little bit of work on it. But yeah, it is going well. It’s going well so far. And happy to dive a bit deeper into any part of the deal too. Tony:Yeah, first I’ll say 7% today, honestly, isn’t all that bad. I mean, I’ve got a short-term rental we just refinanced at like 8.7%, which pains me to say. So, I’d be happy to get 7. But just really quickly, you mentioned that you pulled out of two deals before you closed on this one. Can you just run down, what were the things you saw during that due diligence, or both of those due diligence periods, that made you want to pull out? Sam:Absolutely. Absolutely. So, it’s funny, the two deals that didn’t work out actually inspired me to create a pretty expansive walkthrough checklist for things that I missed while walking through my realtor. I usually get on FaceTime and I don’t care if it takes an hour. I have her go through every single thing on the list. But the reason I backed out of those properties is because structural issues, they both had structural issues. So, as my inspector… And I’ve worked with the same inspector since 2019. He’s actually helped me avoid multiple bad properties. And I was actually referred to him through BiggerPockets forum. But he called me on one of them. He’s like, “Hey, Sam, I’ll stop the inspection right now. Just pay me for my time. Do not buy this house.” He’s like, “As I’m going up the stairs, it’s leaning. There’s all type of structural issues in this property. This is not safe for somebody to live in.” And so, that was one of the properties. The other property- Tony:Wait, I just want to clarify. You said that the inspector called you and said that? Sam:Yeah, he called me. He said, “Hey, Sam, I’m going through this.” He’s like, “Just pay me for my time. I do not recommend buying this house because the structural issues in here are ridiculous.” Tony:I’ve never had that happen. Ashley, have you ever had an inspector call you and say, “Don’t buy this”? Ashley:No, they usually don’t give their opinion or they tread around it. Tony:Yeah, it must’ve been bad for an inspector to say, “Don’t buy this.” That’s crazy. Sam:Yeah, I mean, I respect him because of that. Because I mean, hey, if he did the whole inspection, he gets all his money, but I think I paid him a couple hundred bucks. I don’t even think I paid him 50% of what the full cost would’ve been. But he’s like, “Hey, Sam, I know you’re out of state. I don’t want you to get taken advantage of. This is not a good deal.” And on the other property that we backed out of, it also had structural issues, and the inspector recommended that they have a structural engineer go out and verify the findings, what he found. And so, they had someone do that. And I sent the inspector their assessment, and the structural engineer was pretty much like, “It’s fine.”And I called the inspector, I shared it with him. He was pissed. He’s like, “I can’t understand how somebody who’s licensed could make such an assessment because of X, Y, and Z. It’s very clear that this is a structurally-compromised home.” And he just felt like they were trying to just pass off the problem to somebody else. And so, I ended up backing out of that particular deal too. I mean, there were other things, but the main thing was the structural issues. And I’m like, “I’m not going to buy a property where I have to do all these things because of the structure and something that probably will end up being a money pit.” And in fact, on one of the deals, the seller discounted it by like 20, 25,000 after the inspection, which told me pretty much everything I needed to know. They’re willing to cut the price to pass on such a big problem to somebody else. And so, those two deals didn’t work out, but it led me to the final one, which did work out, thankfully. Ashley:And Sam, to clarify, this was an inspection from a third-party service that you hired to do this during your due diligence period. This wasn’t part of your bank financing or funding that they required you to do an inspection at all? Sam:Good question. Yeah. So, this was an independent third party, so I’ve used the same guy for four years, but on one of the properties… I’m glad you mentioned the bank financing. The bank let me know like, “Hey, we’re not going to finance this property with this structural issue.” And so, that’s what helped me get out of at least one of those deals, if not both. Just saying, “Hey, the bank is not going to finance this. I’m not moving forward unless you guys fix it,” and they didn’t want to fix it. Ashley:Let’s walk through that real quick. So, you must have notified the bank that there was the structural issue because or else they wouldn’t have known anything about your third-party independent inspection, correct? Sam:Exactly. Exactly. And I also was trying to find ways to get out. Ashley:Yeah, that’s a great strategy. Because in your contract, you must have had a contingency saying that if you did not get bank financing, that you could walk out of the deal. Sam:Exactly. Ashley:Yeah. And that’s why it’s so great to have these protections in place, and also finding ways to kind of get those protections to work for you. But yeah, that was a great strategy. Tony:Can we just expand on that really quick, the contingency piece? And for folks that maybe aren’t super familiar with that. So, when you sign a purchase agreement for real estate, typically there are multiple contingencies found inside of that purchase agreement. It’s going to vary from transaction to transaction. But some of the basic ones that you’ll find are, there’s typically a due diligence period and where you, as the buyer, have your opportunity to do your inspections, to walk the property, to gather additional information that you couldn’t before you submitted your offer. And if you find something that you feel is important, you can then either renegotiate with the seller or you have the ability to walk away if you guys can’t come to an agreement.So, that’s a big one that folks use. You have your appraisal contingency. So, if the property doesn’t appraise for what you have to under contract for, again, you can try and renegotiate. And if you guys can come to an agreement, then there’s an opportunity to step away as well. Then, you have your financing contingency as well where you can say, “Hey, if I can’t get a bank to give me money to buy this thing, then I have the option to walk away.” Which is why the, quote, unquote, cash buyers oftentimes are able to submit lower offers because there’s more certainty with a deal that’s cash, because it doesn’t have the appraisal contingency or the financing contingency that some of these debt-based offers do. So, I just wanted to clarify that because we were throwing around the word contingency, but just to break it down for folks. Ashley:Tony, I just made a note to make that an Instagram Reel. I’ll make sure to tag you because that was [inaudible 00:45:25]. I was like, “That’d be a great Instagram Reel idea.” Tony:We get at least one of those per episode. Ashley:Yeah. Well, Sam, I’m going to take us to our Rookie request line. And anyone can submit a question to us at biggerpockets.com/reply. And you can enter your question or you can send a DM to Tony or I, or leave it in the Real Estate Rookie Facebook group. So, today’s question is from Molly Alred. “This is a question for out-of-state investors. What tools or methods did you use to determine where to invest? We live in a ridiculously expensive area and would like to invest out of state, in an area without such a high barrier of entry. My husband and I are both from Michigan, but I don’t want to necessarily limit my search only to Michigan. We live in Colorado and are currently house hacking our primary residence.” Well, that’s exciting. Congratulations on the house hack. So, Sam, what would be your advice, or what are some of the tools or methods that you have used to determine where to invest out of state? Sam:Absolutely. So, the first thing is narrow down your region. So, I would say look in the Midwest and look in the South just to get started. And the next thing you want to do is what are the major cities? So if you’re looking at Michigan or Ohio, what are the major cities? And then, what are also the cities that are in between? So, what’s outside of Columbus? What’s outside of Cincinnati? Because you may not necessarily be able to afford inside the main city, but a lot of times they’re like, I don’t know if you call them maybe tertiary markets or secondary markets within a particular region, that can give you some more options. So, the third thing you want to do is when you find a couple cities you’re interested in or cities outside of the major cities you’re interested in, what is happening in that market? Is the city investing in itself? Are there employers coming there? Are they improving the infrastructure? Are they putting things in, like bike lanes? Are they putting in new parks or redoing the parks?And any city that’s investing in itself will always have a website about it or have… They’ll always want to publicize that. So, for example, in Dayton, I think the website is downtowndayton.com or.org. They show every single thing that they’re doing, all the investments that are being made. So, that’s the next thing that you want to do. Then of course, you want to see what are the prices of the homes? If you want to buy a multi-unit or if you want to buy a single family, what are the prices of the homes? Are those within your budget? And then, what are the rents? What is the cashflow that you can get? What’s the estimated cashflow that you can get based on the type of property you want to buy? And so, once you have that information, and if it looks good enough to you, then you want to build your team. You want to get an agent, or a wholesaler, or go direct to seller yourself, and then go from there. But as far as finding the city, those are the four or five things I would say that’ll help you get a good start. Ashley:I just Googled it and it is downtowndayton.org too. But yeah, just at a quick glance there’s, “Here’s a blueprint of what we’re doing to our city,” and things like that. Yeah. Tony:Sam, what a great breakdown of how to choose a city to invest in. I think just one thing I’d add to that is that typically when people invest in real estate, they’re balancing three different motivations. You have cashflow, you have tax benefits, and you have appreciation. And people will rank those three motivations differently depending on your unique situation. If your big focus is cashflow, then yeah, maybe going to the Midwest is a good play for you. If you want appreciation and tax benefit, then maybe some of the more expensive markets make more sense for you. So, I think before you can even try and whittle down of the 19,000 cities in the United States, which one is the right choice for me? It’s really getting clarity on what are my motivations, what are my goals as a real estate investor? And then, from there, you can start to make some more informed decisions.And I love listening to people that are smarter than me when it comes to data and economics. And like Dave Meyer, he runs the On The Market podcast, employee of BiggerPockets, wrote the book Real Estate by the Numbers, incredibly smart guy. And there’s tons of blog posts that he’s written on the BiggerPockets blog about different markets that investors should be looking into. He’s done YouTube videos about markets. There’s a lot of content out there about where should you look, that people who are smart, Dave Meyer, have already looked into you to give you a leg up. So, loved your answer, Sam, just wanted to add that for folks as well. Sam:Love that. Tony:All right. Well, let’s finish things off here with our Rookie Exam, Sam. So, you’ve killed this interview so far, but I’m sure you’ll crash it with the exam well. So, these are the three most important questions you’ll ever be asked in your life. So, Sam, are you ready for the Rookie Exam? Sam:I was born ready. Let’s do it. Tony:There you go. All right, man. Number one, what’s one actionable thing Rookies should do after listening to your episode? Sam:So, if you want to invest out of state, start looking for a market. Tony and I gave a couple tips. Start looking for a market as soon as you finish this episode. Ashley:I think that is a great piece of advice. And Sam gave you guys every possible way to actually take action on doing that. Okay. Next, what is one tool, software, app, or system in your business that you use? Sam:Apartments.com. It’s free. It’s pretty simple to use. Tenants pay their rent that way, and there’s no checks or anything like that, and it’s pretty seamless. So, that’s one tool that I use that I really like. Tony:Gotcha. And then, last question for you, Sam, where do you plan on being in five years? Sam:That’s a great question. So, in five years, I definitely want to have picked up a couple more properties. I love real estate. It’s a wonderful thing. And I also realized that I don’t necessarily want 20, 30 doors. I want the fewest number of doors with the highest amount of cashflow, so that’s my goal. And so hopefully, in five years I’m closer and have a handful more properties in my portfolio. Ashley:So, Sam, what are you most excited for in retirement? Now, that you have your blueprint to achieve it, because we started the episode out with what you thought retirement was going to be for you, and now that that’s changed and you’re kind of on a different path, what are you excited about most? Sam:Yeah, I’m excited to just relax and hang out with my family. Hopefully, my wife and I have some children, and maybe even some grandchildren by then. But I would say I want to use real estate to buy time. I think that’s the most important thing. That’s the most important thing we have. You can’t make more time. So, hopefully, my wife and I can retire earlier through real estate and other ventures. And I’m just looking forward to just enjoying life, doing what we want to do, traveling where we want to travel and living where we want to live. And I think it’s possible through real estate, especially if you look further down the line. I mean, rent’s only going to go up. We’ll pay down debt even more. So, that’s what I’m looking forward to. Tony:Awesome, Sam. Well, hey brother, we’re excited to see you go on that journey, man. And hopefully, we’ll get you back here on the Rookie Podcast When you’ve reached that retirement milestone and you can give us the update. But I want to finish things out by shouting out this week’s Rookie Rockstar. And this is actually a name you might remember from episode 297 of the Real Estate Rookie podcast, but it’s Olivia Tati. And Olivia says, “Just went live almost two weeks ago on our first out-of-state long distance real estate investment property, which we used private money to fund.” So, they had someone else fund this entire deal for them. “My best friend and I DIY renovated this property ourselves.” She said, “Two little ladies changing toilets, vanities, electrical receptacles. We had no clue what we were doing, but thankful to the BiggerPockets and Real Estate Rookie community, and the podcast for lighting this fire in us.” So, again, if you guys want to hear Olivia’s full podcast episode, head back to Rookie 297. Ashley:Well, Sam, thank you so much for joining us today. Can you let everyone know where they can reach out to you and find out some more information about you? Sam:Absolutely. It was a pleasure to be on the platform. Like I said, BiggerPockets was really integral in me getting started and building out my network, and boots on the ground and all those things. So, I just want to say thank you for the opportunity. And if anyone wants to keep up with me, you can find me on Instagram @blackrealestatedialogue. Send me a DM after you listen to this. Let me know what you think and would love to connect. And if I can answer any questions, would love to do that. And happy to come back at any point if I could be of service. So, really appreciate this opportunity, and thank you two for a great interview. Ashley:Thank you for listening to this week’s Rookie Podcast. I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson on Instagram, and we will be back on Saturday with a Rookie Reply. Speaker 4:(singing) Watch the Episode Here ?????????????????????????????????????? Help Us Out! Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here. Thanks! We really appreciate it! In This Episode We Cover: How to retire with rental properties and why “turnkey” rentals might be your best bet Out-of-state real estate investing and whether cheaper markets are worth buying in How to find the perfect real estate market for your cash flow goals Self-management vs. property management and why Sam chose to do it himself The tenant and property “red flags” you MUST look out for as a rookie Tools that Sam uses to run his real estate portfolio from multiple states away And So Much More! Links from the Show Book Mentioned in the Show Connect with Sam: Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected]. Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

This story was originally published at BiggerPockets.com

You can retire with rental properties faster than you think. That’s right, toss out the “wait until I’m sixty-five and HOPE I have enough” mentality. That might be okay for most Americans, but it’s NOT okay for YOU. You want passive income flowing in so you can spend time with your family and friends and live a life you love. If you’re going to get there, you better take advice from Sam Dolciné.

A few years ago, Sam calculated his retirement savings and realized he wasn’t even CLOSE to what he would need in retirement. Even after the monthly contributions and employer match, Sam would run out of retirement savings in only ten years of retirement. So, he started looking up ways to boost his retirement income. Real estate investing popped up, and Sam began devouring all the investing content he could.

Now, he’s managing a portfolio of out-of-state rental properties that bring in some serious cash flow. The best part about Sam’s portfolio? It’s “turnkey,” meaning Sam was able to buy the properties and immediately rent them out, giving him cash flow within WEEKS of closing on his first couple of deals. Now, Sam is on the hunt for even more passive income. Repeat his steps, and you could be counting cash flow, too!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Ashley:
This is Real Estate Rookie episode 325.

Sam:
I pictured my retirement, working till I was 60 something, and living off my retirement. And I realized very quickly that that wouldn’t be the case. And so, I kind of had a moment of panic and I realized, “You know what? I think real estate will be a great way to supplement whatever I’m putting aside.” Turnkey provider, pretty much the easiest way to explain is that they flip properties to investors. So, pretty much, they’ll buy a property under market value, they’ll put work into it, and they’ll sell it to an investor who’s looking for a property that pretty much needs no work. It might need a little bit, and you can ask them to do things that come in the inspection. And they usually come with property management included as well.

Ashley:
My name is Ashley Kehr and I’m here with my co-host, Tony J. Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And we’ve got a great episode today. We’ve got Samuel Dolciné on the podcast, and Sam actually runs a podcast of his own called the Black Real Estate Dialogue. And as soon as he came on, I could tell that he had a little bit of experience behind the mic because he was just so smooth and he delivered his story so well. And I was like, “Man, this guy’s got a great story.” All right. So, you guys are going to love this conversation with Sam. He’s going to talk about red flags to look out for in potential tenants and how he almost got scammed by someone who wanted to rent his property. You’ll also get to hear Sam talk about red flags in a property, and you’ll hear why he pulled out of two potential deals that he already had under contract.

Ashley:
We start this podcast a little bit differently, talking about Sam’s idea of retirement. So, he actually went and pulled up his portfolio online for his 401(k) and played with the little tools and buttons they have on there to see what he would actually have at retirement. And to say it was not exactly what he wanted might be an understatement. But then, he makes one phone call, and this one phone call gets him his down payment on his first investment property. And one other thing I want to mention about Sam is this whole episode is you are going to learn all of the ways that he analyzed a market and did it so efficiently, and saved himself so much time during that process too.

Tony:
So, before we kick it over to Sam, I just got to give a shout-out to our amazing Rookie audience. And guys, Ash and I mean this from the bottom of our hearts, the Rookie Podcast would be absolutely nothing without our listeners, and we’re so incredibly grateful and thankful for you guys when you take time out of your busy schedules to leave those reviews on Apple Podcasts, wherever it is you’re listening. So, I want to give a shout-out today by someone of the username JRschmitt2012. And JR says, “The best information out there. Thank you for providing so much useful information. I haven’t made the first purchase yet, but I’m in the middle of moving to a new market and I don’t think I would be as confident as I am without this podcast. Keep it coming, guys.”
So, if you are a Rookie listener, if you’re a dedicated Rookie listener, or even a new one, and you found some value in our podcast episodes, please do take just a few minutes out of your day and leave that review. Because the more reviews we get, the more folks we can inspire to start their investing journey as well.

Ashley:
And for today’s social media shadow, it goes to Drew Breneman, D-R-E-W B-R-E-N-E-M-A-N. You can find him on Instagram at his name. And he does a great job of showcasing different real estate strategies and methods. He also has a podcast called the Breneman Blueprint. So, go give him a follow and check out his page.
I love that we do these social media shout-outs now, and it’s not to get the person followers, but it is for you to build your own network of like-minded investors. Being able to learn from them and also watch them grow. You will not believe that the motivation and inspiration and everything that you will learn just from filling your social media feed with actual real estate investors, especially Rookies, and being able to connect with them. Trust me, as entertaining as memes are, this will be way more beneficial to you. Okay, now let’s get into our show and we are going to bring Sam on.
Sam, welcome to the show. Thank you so much for joining us today.

Sam:
It’s an honor, it’s a pleasure to have this opportunity and I’m excited to get into my story, and I really appreciate you two hosting me today.

Ashley:
I want to start this podcast off a little bit different today. And the first question I want to throw at you is, what did you picture for yourself for retirement?

Sam:
Yeah, so initially, I pictured my retirement working till I was 60 something and living off my retirement, my 401(k) primarily. At the time, I didn’t have any visions of owning real estate or using rental income. I just assumed that my putting away however much percentage at work would do the job. And I realized very quickly that that wouldn’t be the case. But initially, that’s what I thought.

Ashley:
So, are you on track now to get that type of retirement? Is what you pictured actually happening to you right now?

Sam:
What I pictured at that time? Absolutely not. I came to a realization at work, at my desk, that what I was saving, projecting out my raises and things of that nature, it wouldn’t last me that long based on the lifestyle that I envisioned living with my family in retirement. And so, I kind of had a moment of panic and I realized, “You know what? I think real estate will be a great way to supplement whatever I’m putting aside from my job or whatever it is I’m doing.” And honestly, I’m glad that I came to that realization because life is a lot more different now than it was five years ago when I came to that realization.

Ashley:
Can you expand on that a little bit more of what that realization was for you, that moment in time?

Sam:
Yeah, so I was at my desk at work, and for whatever reason I decided to go check my retirement account. And they have these calculators where you can project out, all right, if I put away, let’s say 5% and these are the raises I make over the next 30 years, how much will I have? And then, the second step was how much do you want to live off of? So, I put the number in and in less than 10 years the money would’ve been gone. So, I’m like, “You know what? I have to figure something out.” So, I started reading different things. And I’m like, “You know what? Maybe real estate is the way to go.” So, I live in LA, been here about seven years. And I tried to get pre-qualified and I spoke to a mortgage guy and he’s like, “Hey, you might be able to get a condo somewhere, but you can’t get anything right now.”
And so I’m like, “All right, I don’t make enough money. What’s the next thing?” And so, I started looking online, are there other ways people are investing in real estate? And I came across some information about people investing out of state. And I’m like, “Wait a minute. I didn’t know you could invest out of state. I thought you had to live near where your properties are.” And my point of reference was the landlord where we lived at growing up, his house was right next to the building that we lived in, so I figured that’s just what it was. And so I spent about 12 months just learning everything I possibly could. BiggerPockets was very integral in that. Just learning everything I could about investing out of state. And 12 months later, I purchased my first out-of-state property. So, that moment of panic turned into research, and then that research turned into my first out-of-state property 12 months later.

Ashley:
I have to say, what a great moment of panic to create that realization. 12 months down the road, you have your first property.

Tony:
Yeah, I think a lot of new investors, they get stuck in that analysis paralysis, where they never really get to a point where they do pull the trigger. And 12 months turns to 18 months, turns to 24 months, turns to 36 months, turns to decades. So, Sam, this is a question that I always like to ask people because I think it’s super insightful for the listeners, but you have this realization sitting at your desk, realizing the money’s only going to last you a decade. You go on this journey of self-education. At what point did you realize that you were ready to actually take action? Do you remember that moment where it was like, “Okay, this is the moment where I’m actually going to submit that first offer,” or, “This is the moment where I’m signing that first purchase agreement”? How did you know that you were ready to move forward?

Sam:
Love that question. So, the first thing I did when I realized, “All right, I’m going to invest out of state,” the first thing I did was I put my student loans into forbearance, and I was paying hundreds of dollars. So, that helped me save about 6K. And so fast-forward, I’m researching, I’m trying to find markets, and I got introduced to some folks in Dayton, Ohio. And so, I went out for a visit, looked at the market, did market research, they sent me some reports. And I’m like, “All right, I need to speed up this timeline.” So, I get the bright idea to call my retirement plan. I’m like, “Hey, how can I get access to some of this money?” They’re like, “Well, you have a couple options. You can withdraw however much and pay the big tax penalty, or you can borrow up to 50% of the balance.”
And I’m like, “Wait a minute. If I combine what I’ve been saving from not paying student loans, plus what I can borrow from my retirement plan, I’ll have enough for a down payment and I can get into this Dayton market much quicker.” And so, I did that the same summer that I went on that visit because I’m like, “I got to get into the game.” And so, once I had the money, I knew I was ready. And then a couple of months later, a property came on the market that fit my criteria and I just went for it. So, I think, for me, once I had the money, I’m like, “All right, I need to make this thing happen.” But all the while, I was preparing and then that moment came during the summer where I’m like, “Okay, I can add to what I’ve been saving already. Let’s do it.”

Ashley:
Sam, when you decided on this during your analysis, why did you pick Dayton, Ohio?

Sam:
Yeah, so it’s funny. So, I had a Google Doc with just a bunch of markets, most of them in the Midwest or some parts of the South. And I was listening to a podcast and they were like, “If you want to buy turnkey properties, reach out to us. We can introduce you to some folks.” I’m like, “Okay, let me just do this.” So, they introduced me via email to folks from Memphis and then from Dayton, Ohio. The only reference point I had of Dayton, Ohio was sometimes the NCAA tournament basketball was played there, but I didn’t know anything about the city. I didn’t know anyone there. And so, the folks from Memphis didn’t reply, the folks from Dayton did. They sent me information on the market, so just about infrastructure improvements, how much they’re investing in downtown, the percentage of renters, which was 60% renters, 40% owners at the time.
And I took that information, I did my own research just on the market and things that they’re doing to improve the city. And I also noticed that it was situated geographically in a very interesting place. So, Dayton is in between Columbus and Cincinnati. So, Columbus to I think the north and then Cincinnati to the south. And so for me, I’m like, “You know what? There’s enough information here where I think this could be a good splash. Plus it’s not popular.”
When I was on the BiggerPockets forums, there weren’t that many people talking about Dayton, even though a lot of my research was confirming that this is a good market to invest in. And so, once I went out there to visit, I got to see some properties, got to see the city and see all the things I was reading about. I’m like, “You know what? I think this is a good opportunity to make a splash.” I didn’t want to overthink it too much. I’m like, “You know what? I have the connections here. Let’s just make it happen here.” So, those are some of the reasons that I chose Dayton, and it’s paid off very well. It’s a great market and I definitely intend to invest there more.

Ashley:
What a great resource of information of getting the market data presented to you from the turnkey company that has saved you so much analysis right there. And then, you’re just going and verifying the data instead of starting from scratch. So, I think that’s a super useful tool is to someone, especially if you’re using turnkey, is to ask them for the market instead of saying, “Okay, I’m going to analyze these five markets. Do my deep dive. Okay, I’ve picked this one. Now, I’m going to go to the turnkey company and talk to them about the actual property itself. I already know I want that property.” You did an amazing thing and you went and wanted market data from a couple of them, and one got back to you and the data was great, but what a great resource and very efficient.

Tony:
Sam, actually, if you don’t mind, can you define what a turnkey provider is? What does that even mean, turnkey?

Sam:
Yeah. So, a turnkey provider, pretty much the easiest way to explain is that they flip properties to investors. So, pretty much they will buy a property under market value, they’ll put work into it and they’ll sell it to an investor who’s looking for a property that pretty much needs no work. It might need a little bit, and you can ask them to do things that come in the inspection. And they usually come with property management included as well. And so, for my first deal, I’m like, “You know what? Obviously, the downside is that you pay at the market pretty much. However,” I’m like, “this will get me into the game. This will help me to build up my confidence. And then, perhaps on my next deal I can take on a little more work and things of that nature.”
So, for me, it was a good way to get into the game. I, by nature, am very risk averse, which is funny because I’m investing from thousands of miles away. But I’m like, “I need to get into the game. This seems like a relatively safe way to get into the game, just start making some money, build my confidence up, and then I’ll go from there.” So, I’m glad I went that route. I did learn thereafter that I could find turnkey properties on the MLS. But based on what I knew at that time, it made sense. And if I didn’t do that, we probably wouldn’t be sitting here today.

Tony:
Sam, let me ask a follow-up question. First, I appreciate you breaking down the pros and cons of the turnkey approach, because for some people that maybe don’t have the time, desire, or ability to find distressed assets, rehab them, get them placed with a tenant and do all that work, turnkeys do solve a need for a lot of those people. And I’ve met some investors who all they do is turnkey. They’ve got very busy day jobs, they got maybe a high salary, they’ve got a big shovel to dig with in terms of the income they have coming in. So, for them, it’s easy to take that money, dump it into a turnkey property, not have to think about it. But I would love just to get the 30,000 foot view. Like say that Tony and Ashley wanted to invest with the same company or a similar turnkey provider. What’s the step-by-step process? Do I just subscribe to an email list? Is there a Facebook group where they’re posting all their stuff? What does this look like to buy from a turnkey provider?

Sam:
Yeah, so typically, what’ll happen is you’ll reach out to them, share that you’re interested, and they’ll get you on an email list of different properties. They’ll do some back-of-the-envelope math for the cashflow and things of that nature. So, they will get you on an email list. A lot of times they give you the option of coming out and seeing properties in various stages of rehab, which is what I did. So, I got to see some stuff that was fully gutted and some stuff that was halfway done, some stuff that was done, just to get a good sense of their work. And typically, let’s say you find a property that you’re interested in, the price is the price.
So, one of the cons is that there’s not any negotiation, like the price is the price because, of course, they have to make their profit. However, you can get your inspection and have them fix things that need to be fixed. But typically, that’ll be it. And if you decide to go with their property management, what I did was I went with their property management because I wouldn’t have to pay a lease up fee. And for those who don’t know what that is, pretty much a percentage of the first month’s rent is what you typically would pay to a property management company or to a leasing agent.
So, I’m like, “You know what? Let me do that with them. I’ll try it and if they’re not that great, I’ll get rid of them,” which I eventually did, but at the time it made sense. So, that’s typically how the process will work. And then, they’ll just hand you over to their property management and you’ll get the statements of monthly, and they’ll place tenants and things of that nature. When I purchased mine, there was a tenant there in less than a month, so I think it closed on the 15th and a tenant moved in within two weeks. So, they did the tenant placement and things of that nature as well. That tenant was great. She stayed maybe a year or two years, maybe about two years. But that’s typically how it works, high level.

Tony:
Just a quick timeline perspective, from the moment that you said, “Hey, I’m interested,” until you actually closed on that property and owned it, what was the timeframe there?

Sam:
About 30 days. So, it was quick. It was quick. So, I did buy the property-

Tony:
30 days? Holy crap.

Sam:
Yeah, it was super quick. So, I had the financing, the lender I was going to go with and everything ready. The inspection took place. The repairs that I wanted them to do took place. They turned it around pretty quickly. So, we closed in about in about 30 days, which is crazy. So, I went from 30 days before not having any property, finding a property, closing, signing all the stuff. And 30 days later, I was a landlord. So, it was pretty crazy.

Ashley:
Do you think part of the reason you were able to do that so fast was because you felt more comfortable since you visited Dayton? Can you kind of give us your opinion on… First of all, what was the cost to actually go there? Did you fly there? Did you drive there? Did you have to stay overnight and going there? And was it worth it to go and actually be on the ground and visit the area and see their properties? Or do you think that you could have done just as great of a job of picking a property and having it being sight unseen?

Sam:
Love that question. So, I found a lot of value in going out there, and it’s not the easiest place to get to. I had to get a connecting flight, I think in Chicago, and then the next flight down to Dayton from LA. But for me, it was important to visit, because again, you got to think about it. I didn’t know anybody, investing long distance. I was taking a big chance. I didn’t know anybody who was doing that. And so, to me, it was great because I got to almost put my hands on it or check the city out for myself, drive around and see what’s happening around the city. And the person from the company, she drove me all around. I got to check out the city, go to different places. And to your point, as you mentioned earlier, verify a lot of my research.
So, I verified a lot of what they sent me online, but then to see it in person, for me personally, it was great. It was great. And so, I definitely think I could have done it sight unseen. I know a lot of people do. I mean, I haven’t seen the last place I purchased yet. But for me for the first time, it was super important to go out there and see it myself. And I felt good. I felt good after I went there. I’m like, “You know what? I know 100% that this is where I want to be, this is what I want to do.”

Tony:
Sam, if I can ask, you mentioned that the turnkey, even though there were some cons to it, there were some pros as well. Getting that first base hit, building your confidence to be able to do this on your own. So, let me ask, even though you didn’t necessarily find the distressed property, manage the rehab, place the tenant yourself, I’m assuming that you probably still picked up some things along the way that kind of prepared you for that next deal. What were some of those initial lessons you learned on that turnkey property that you feel kind of prepped you for the next one?

Sam:
Yes. So, I think the first thing is to have more confidence. Because I eventually visited that particular property about 14 months later. I was like, “You know what? Let me just come back. Let me see how it’s going. Let me put my eyes on the house, see what it’s like.” And the management company was really acting like I was a nuisance. I was trying to get access to the property. And eventually, my boots on the ground, who I also met on BiggerPockets, she went with me to the house and we just checked in on the tenant. Just like, “Hey, we just want to make sure everything is cool.” And I had been debating letting go of the property manager and self-managing, and that was really confirmation that I should just try it, and if it doesn’t work out, I’ll just find another management company.
So, that’s one thing I learned, just to follow my instincts because my instinct was to move on. But after that visit, I think I sent them a 30-day notice and we parted ways. So, that’s the first thing. And then, the second thing I would say I learned is that I could find turnkey properties on the MLS. So, the next deal, I’m sure we’ll get to that, I found a realtor and we went that way. So, again, I went based on what I knew at that time, and I always tell people, know enough to get to the finish line. You don’t need to know everything. Make your decisions based on what you know.
And so, if I could do it again with what I know now, and obviously hindsight is always 20/20, I would just go with the realtor and you have more negotiating power that way, and there’s just more flexibility in what you can do and pricing and things of that nature. So, I would say those. And then, the last thing I would say is that just to get started, for me it was important to start, even if I made 300 bucks a month, at least I started and I can figure out how to get better deals over time, how to improve things over time, which is what I did. So, I would say those are the things that I learned.

Tony:
Sam, you said something, “Know enough just to get to the finish line.” And I like that saying, and I might even tweak it just a little bit to say, know enough just to take your next step because I think that’s where a lot of Rookies get stuck is that they sometimes do want to see every step straight to the finish line, but you oftentimes don’t really know what you don’t know. And as long as you have the confidence to put that one foot forward, then the next foot forward, that’s how you start to make progress. And it seems, Sam, that that’s kind how you navigated this situation.

Sam:
100%. That’s exactly what I did.

Tony:
So, I want to touch a little bit because you said that you got rid of the turnkey property management, and are you still currently self-managing that property?

Sam:
Yes. Yes.

Tony:
Okay. So, let’s talk about that because you’re in California, Ohio is thousands of miles away. So, how were you remotely managing this property given that you’ve never done it before? What were the steps you had to take to kind of cheat yourself with tools, automations? Just tell us the whole experience of self-managing from multiple states away.

Sam:
Absolutely. So, the first thing I had to do was find a platform to receive the rental payments. So, how the property management works is they just send you the money via ACH, so it’s in your bank account every month. And so, I switched the tenant over to apartments.com, and sent her an email letting her know, “Hey, I’ll actually be managing the property now.” And at that point, I had put her on a six-month lease. She had asked to be on a six-month lease, and that ended early, but I’m sure we’ll get to that. And so, from the logistics standpoint, that was pretty much all I had to do, and just make sure the payments were redirected and the management company sent me her security deposit and what I had in reserve. So, from that perspective, it was pretty seamless, and it was all pretty simple until she left. So, it wasn’t that much I had to do as far as switching her over.

Ashley:
As far as the maintenance request, I’m hoping that since it was turnkey, there wasn’t a ton of maintenance. But did you have almost like a Rolodex of vendors or handyman that maybe the other turnkey providers have used, or how did you handle maintenance requests?

Sam:
I’m glad you asked. I actually did not have a Rolodex. And shortly after I took over, there was an issue with the furnace. And so, I get a text or an email on Sunday night saying, “Hey…” And this is the winter, the middle of the winter in the Midwest. So, she’s like, “Hey, the heat is out and I’m just freaking out.” I’m like, “Oh, my gosh.” So, I start googling just like, “Who can fix a heater?” And I just start calling around, calling around. I finally found somebody to go out to the property on that night and figure the situation out. As a matter of fact, I think they had to come in the morning, so she didn’t have heat that night, but they came the next morning and fixed everything. And so, I did not have a Rolodex of anything at that time. I was really starting from zero. But thankfully, that was the only incident that took place while that particular tenant was there, and she probably stayed another five months after that.

Tony:
Ash, I want to get your insights on this piece too, because when you manage your properties yourself, at least when you first start, you oftentimes don’t have a Rolodex of HVAC, of plumbers, of electricians, of general handyman to do all these things. And you do have to scramble like you did, Sam, like, “Let me just open up Yelp and find as many as I can and see who works.” And that’s been our process too. We self-manage all of our short-term rentals. And I remember the first time we had a big maintenance issue in Joshua Tree that our handyman couldn’t fix. We had to source… I think it was an HVAC issue, similarly. And we had to call a bunch of different people. And the first one that we found, they were able to get it, but we didn’t really like working with them. And then, the next time we had an HVAC issue, we found someone else.
But as these issues kind of continue to pop up in your business, you do start to build your own Rolodex. And now, we’ve got a list of all of our preferred vendors. So, now anytime something happens in our business, our VAs have a list of just who to call, who to text, who to email, et cetera. So, it does kind of build over time. But Ash, I guess I’m just curious for you on the property management side, was it similar for you as you kind of build things out or how did you manage the whole vendor piece?

Ashley:
Even today there’s different towns where a contractor will say like, “Oh, I don’t go that far,” or something like that. And then, you do have to find somebody else to fill that special skillset. Right now, my biggest tool is referrals from other investors or even just other contractors, just anybody that would use a maintenance person. My mom is actually great on Facebook. She’s in all the neighborhood Facebook groups and she’ll just send me a screenshot and be like, “Oh, this person recommended this person in this town to build their deck,” or whatever it may be. But we have the same thing. We use monday.com, and we keep just a list of people.
Anytime that my one business partner, Daryl, he sees a truck, a van, anybody driving or we’ll go and get coffee and they have the big tack board with business cards, he will take pictures of that and then he will put it into our list of different vendors. A lot of these we’ve never even used, but we have them there in case we need to. And yes, it is cold calling them. Those types of people we don’t have any referral for, but at least sometimes it gives us a starting point as to who to contact. But I think another great way, if you don’t know anybody that’s investing is going into the BiggerPockets forums, going on to the neighborhood Facebook groups and ask in there, “I’m looking for a plumber in the area. Does anyone have a recommendation?” And you will get a ton of people just listing, listing, listing. One thing I would watch for is make sure it’s not only the wife of the plumber that’s making the recommendation, that it’s actually somebody that used their services.

Tony:
Yeah. Well, I guess let’s lead into this next piece because you hinted at it a little bit, Sam, but I’m curious, what was really the journey of that tenant turnover? So, after that first tenant leaves, what does that look like? What do you do next?

Sam:
To be honest, that was the toughest experience that I’ve had, and I’ll explain why. So, pretty much what happened was the tenant ran into some financial issues and she asked if she could end her lease early. And I’m like, “You know what? Cool, she’s paid on time, fine. Just make sure the place is clean.” And I didn’t charge her a fee or anything. 30 days later she left. And so my boots on the ground, who I mentioned before, her name is Courtney, shout out to Courtney. I met her on BiggerPockets and she’s like my aunt in the Midwest, she’s great. And so, she did the checkout process with the tenant, just made sure the place was in good condition, got the keys and everything. And she said, “Sam, there is a smell here. It smells like the dogs have been doing their business inside.”
And at the time, there was carpet. And in the lease, the tenant was supposed to shampoo and wash the carpet, which they did, but there was a stench. And so, I was talking to an investor friend of mine, he’s like, “The first thing you want to do, rip that carpet up, get some vinyl plank flooring.” I’m like, “Okay, fine.” And of course, I had to paint the place. And I found somebody on Facebook inside of one of the Dayton investor groups who is a handy woman, she sent me some pictures of her work. She says she can paint. I’m like, “Cool, you can paint.” And so, the first mistake I made was, like I said, I have boots on the ground. She’s an investor there. She’s awesome. I didn’t leverage her enough.
So, the handy woman, she was sending me pictures of different rooms painted and things of that nature. And at the very end when she said the job was complete, I had the boots on the ground go there and she’s like, “Hey, Sam. She missed this wall. She missed this room.” And what I should have done is had her going throughout the week. She could simply have gone on her way back from work to verify all the information that was being shared with me. And the next thing was the flooring. So, I had to rip the carpet up. And I was talking to her, she’s like, “Oh, I could do this too.” And I’m like, “All right, cool. Let’s do it.” So, we had an agreement on what I would pay her. I bought the materials, I paid her for the labor once the job was done. That took forever because I was not utilizing my boots on the ground. And it seems so obvious, but for whatever reason, I just wasn’t doing it.
I don’t know if it was pride, or maybe being too timid, or whatever the case is. And eventually, she got that done and a couple other things, but the process took over a month. And quite honestly, it should have just taken a few weeks. And so, that period of time while there was a vacancy was very difficult and stressful because I wasn’t managing the person doing the work properly and wasn’t using my resources I had to get the job done quicker. So, eventually, we got it done and rent in the area went up like 50%, so that was great. But I fumbled big time just with how I managed that particular contractor.

Ashley:
Did you say the rent went up by 50%?

Sam:
Yes. If I calculated correctly. Let’s test my theory. So, the previous tenant was paying $900 plus $50 pet rent. And the next family that moved in, they were paying $1,395, including pet rent, $1,445. So, they’re paying $1,445. I think that’s 50%. You can check me on that.

Ashley:
Yeah, it’s close enough for me. Yeah, that’s quite a big… That’s awesome. Yeah.

Sam:
Yeah. So, that was crazy. So, that was the light at the end of the tunnel.

Ashley:
Right.

Tony:
It’s actually 52% just to be exact. So, you can [inaudible 00:31:23].

Ashley:
Of course Tony had to do the math. And Tony is so smart, he did that in his head just so you know.

Tony:
Yeah, all in my head.

Sam:
You got a genius on our hands.

Ashley:
I know. So, let’s talk about that portion of it, as to changing that rent. Now, did you go in and did you list the apartment for this after pulling comparables in the area, what other things were listing for? Did you rely on your boots on the ground? What was that process of deciding what to list the unit for?

Sam:
You know what’s funny? I had listed it before everything was complete for like $1,200, and then I took it down after a week. And I’m like, “You know what? Let me actually make sure this person finishes everything and everything is good to go. It’s cleaned out and everything.” And I looked on the market. So, what I typically do is either look on Zillow or Redfin, look at homes for rent in the zip code that are three bed, one and a half or two bath. And then, I also go to Rentometer to verify everything. I saw a property, similar square footage, in the area that was like $1,395. I’m like, “Wait a minute, this has to be a joke.” And so, I looked and I’m like, “No, this is actually a real listing.” So, I’m like, “You know what? Let me try and see what I can get at this price.”
And so, I put the price up at $1,395. And the way that I learned to do it… I used to do just individual appointments, which is a huge waste of time. So, what I do now, and what I eventually did was just open houses. “This is the day. This is the time. Come see the property.” That’s it. And so, I’m like, “You know what? Let me see if I can get this much rent.” And so, it was up on the market for maybe three or four weeks and I found the right people, after almost being scammed, and they were down to pay it. And so, I just tested the theory and that’s typically what I do.
I try to go a little bit higher and see what type of results I get. And if I don’t get a lot of traction, I drop the rent a little bit and just see what the inquiries look like. But yeah, I just put it up there and I’m like, “Let’s test it for a few weeks and see if people will bite.” And so, I’ve had the same family in there since 2021, and I’m actually sending them a new lease this year. They’re going to stay there. And they’ve been great tenants.

Ashley:
Sam, you can’t use the word scam and not educate us on how we can not get scammed learning from you.

Sam:
Yeah, I’m happy to share. So, I use apartments.com for the management and also to receive applications. So, whether the leads come from Facebook, which is where most of them come from, they are directed to apartments.com to submit their application. And so, there was this one particular applicant, and I’m looking through the documentation and the IDs and the W2 or W9s, they’re not matching. The names are all different, but they’re all claiming to be one person. And so, I kind of followed up on it, and it was just like a weird vibe. I was trying to verify it and the person was kind of pestering me like, “Hey, I really want to rent this place,” and this, that, and the third. But I’m like, “The information is not matching.” There was a split second there where I almost kind of took the next step. I’m like, “Wait a minute, something’s not right. You know what? No, I can’t move forward with these folks.”
And it’s important to, especially if you’re doing your own tenant placement, just to verify all the information. Even if you got to Google and look online. I go through everything with a fine-tooth comb just to make sure everything I’m looking at is correct. And so, basically the person tried to… I don’t know if they were putting up family members’ information or whatever the case is, but the documentation was not lining up and they were really persistent with me about their desire to rent the property, which was another red flag. So, I’m glad that at that decision point, I’m glad I decided to go in a different direction. But yeah, I mean some people will just try to do that.

Ashley:
Tony, I think we need to do an episode, maybe a Rookie Reply on tenant red flags instead of dating red flags-

Tony:
Or just tenent screening in general, right?

Ashley:
… go through tenant applicant red flags. Yeah. So, Sam, I think maybe this was probably the same in your situation, but a lot of times it’s better to have a longer vacancy than to rush and take a tenant just to fill the unit. So, anyone who’s going through that process right now, really think about that. And it’s better to wait for the right tenant than just to get somebody in there, where you do have that back of mind like, “Oh, I’m kind of taking a risk here. They really don’t meet what I want, but I want to get somebody in there.” And it’s not always the case. It’s not always somebody awful.
I rented in a unit once to somebody who I was iffy about. They just barely met the screening criteria. And they lived there for two years. And when they moved out, the woman cried to me and said, “Thank you so much for taking a chance on us. We just bought our own house for the first time ever,” it was her and her two kids, “and we’re moving there.” So, that’s not always the case, but I think it would be good if we did an episode on red flags. Because there’s a lot of times I’ve looked back and been like, “Man, those red flags were there, but I didn’t see it.”

Tony:
And honestly, the message, Ashley, of patience, I think translates to a lot of different parts of being a real estate investor. Sometimes we get so focused on the money right now that we start to maybe make poor choices. Like I rushed and hired a contractor because my usual guy was like, “Hey, Tony, I can start it in four weeks.” And I was like, “I need someone to start today.” And I ended up having to pay two contractors because the first guy didn’t finish the job the right way. So, there’s a lot of instances. People who maybe pulled the trigger too soon on a deal because like, “Hey, I want a deal today.” Not realizing that a better deal might be right around the corner. So, I think that idea of just patience as a real estate investor is probably something we don’t talk about enough.
But with that, Sam, I want to transition to deal number two, because we got through some of the trials and triumphs of your first deal. But how did that first deal then prepare you for the second deal, and what did that one kind of look like?

Sam:
Yeah, absolutely. So, I actually took a couple of years and sat out, just sat on the sidelines. And in the fall of 2022, my wife was like, “Hey, when are you going to get more properties?” I’m like, “Oh, all right. Well, I guess I should.” And at the time, of course, interest rates were going up. And I consider myself kind of a contrarian thinker, so I’m sure you guys know, people are on the sidelines right now. So, for me, I’m like, “This is the best time to get in. If I can find a deal that will pencil and cashflow regardless of the interest rate, we should buy something.” And so, I started my search. In September 2022, I found an investor-friendly realtor inside of a Facebook group, and I just started looking at deals.

Tony:
Is that also in Dayton, Sam?

Sam:
Also in Dayton. Yep, also in Dayton. And so, I was looking for about six months. I was under contract twice, backed out of those deals, and I finally closed on that next property in February of 2023. But yeah, I bought that next property and the interest rate is about 7% almost, but the cashflow is great. I think it rents for $1,370, the mortgage is $690, so the spread is pretty solid on it. And again, I decided to get in because everybody was going the other direction. So, for me, it’s perhaps less competition and perhaps sellers will be willing to do more and negotiate more. And so, it was a great opportunity and got that rented a couple months after. Had to do a little bit of work on it. But yeah, it is going well. It’s going well so far. And happy to dive a bit deeper into any part of the deal too.

Tony:
Yeah, first I’ll say 7% today, honestly, isn’t all that bad. I mean, I’ve got a short-term rental we just refinanced at like 8.7%, which pains me to say. So, I’d be happy to get 7. But just really quickly, you mentioned that you pulled out of two deals before you closed on this one. Can you just run down, what were the things you saw during that due diligence, or both of those due diligence periods, that made you want to pull out?

Sam:
Absolutely. Absolutely. So, it’s funny, the two deals that didn’t work out actually inspired me to create a pretty expansive walkthrough checklist for things that I missed while walking through my realtor. I usually get on FaceTime and I don’t care if it takes an hour. I have her go through every single thing on the list. But the reason I backed out of those properties is because structural issues, they both had structural issues. So, as my inspector… And I’ve worked with the same inspector since 2019. He’s actually helped me avoid multiple bad properties. And I was actually referred to him through BiggerPockets forum. But he called me on one of them. He’s like, “Hey, Sam, I’ll stop the inspection right now. Just pay me for my time. Do not buy this house.” He’s like, “As I’m going up the stairs, it’s leaning. There’s all type of structural issues in this property. This is not safe for somebody to live in.” And so, that was one of the properties. The other property-

Tony:
Wait, I just want to clarify. You said that the inspector called you and said that?

Sam:
Yeah, he called me. He said, “Hey, Sam, I’m going through this.” He’s like, “Just pay me for my time. I do not recommend buying this house because the structural issues in here are ridiculous.”

Tony:
I’ve never had that happen. Ashley, have you ever had an inspector call you and say, “Don’t buy this”?

Ashley:
No, they usually don’t give their opinion or they tread around it.

Tony:
Yeah, it must’ve been bad for an inspector to say, “Don’t buy this.” That’s crazy.

Sam:
Yeah, I mean, I respect him because of that. Because I mean, hey, if he did the whole inspection, he gets all his money, but I think I paid him a couple hundred bucks. I don’t even think I paid him 50% of what the full cost would’ve been. But he’s like, “Hey, Sam, I know you’re out of state. I don’t want you to get taken advantage of. This is not a good deal.” And on the other property that we backed out of, it also had structural issues, and the inspector recommended that they have a structural engineer go out and verify the findings, what he found. And so, they had someone do that. And I sent the inspector their assessment, and the structural engineer was pretty much like, “It’s fine.”
And I called the inspector, I shared it with him. He was pissed. He’s like, “I can’t understand how somebody who’s licensed could make such an assessment because of X, Y, and Z. It’s very clear that this is a structurally-compromised home.” And he just felt like they were trying to just pass off the problem to somebody else. And so, I ended up backing out of that particular deal too. I mean, there were other things, but the main thing was the structural issues. And I’m like, “I’m not going to buy a property where I have to do all these things because of the structure and something that probably will end up being a money pit.” And in fact, on one of the deals, the seller discounted it by like 20, 25,000 after the inspection, which told me pretty much everything I needed to know. They’re willing to cut the price to pass on such a big problem to somebody else. And so, those two deals didn’t work out, but it led me to the final one, which did work out, thankfully.

Ashley:
And Sam, to clarify, this was an inspection from a third-party service that you hired to do this during your due diligence period. This wasn’t part of your bank financing or funding that they required you to do an inspection at all?

Sam:
Good question. Yeah. So, this was an independent third party, so I’ve used the same guy for four years, but on one of the properties… I’m glad you mentioned the bank financing. The bank let me know like, “Hey, we’re not going to finance this property with this structural issue.” And so, that’s what helped me get out of at least one of those deals, if not both. Just saying, “Hey, the bank is not going to finance this. I’m not moving forward unless you guys fix it,” and they didn’t want to fix it.

Ashley:
Let’s walk through that real quick. So, you must have notified the bank that there was the structural issue because or else they wouldn’t have known anything about your third-party independent inspection, correct?

Sam:
Exactly. Exactly. And I also was trying to find ways to get out.

Ashley:
Yeah, that’s a great strategy. Because in your contract, you must have had a contingency saying that if you did not get bank financing, that you could walk out of the deal.

Sam:
Exactly.

Ashley:
Yeah. And that’s why it’s so great to have these protections in place, and also finding ways to kind of get those protections to work for you. But yeah, that was a great strategy.

Tony:
Can we just expand on that really quick, the contingency piece? And for folks that maybe aren’t super familiar with that. So, when you sign a purchase agreement for real estate, typically there are multiple contingencies found inside of that purchase agreement. It’s going to vary from transaction to transaction. But some of the basic ones that you’ll find are, there’s typically a due diligence period and where you, as the buyer, have your opportunity to do your inspections, to walk the property, to gather additional information that you couldn’t before you submitted your offer. And if you find something that you feel is important, you can then either renegotiate with the seller or you have the ability to walk away if you guys can’t come to an agreement.
So, that’s a big one that folks use. You have your appraisal contingency. So, if the property doesn’t appraise for what you have to under contract for, again, you can try and renegotiate. And if you guys can come to an agreement, then there’s an opportunity to step away as well. Then, you have your financing contingency as well where you can say, “Hey, if I can’t get a bank to give me money to buy this thing, then I have the option to walk away.” Which is why the, quote, unquote, cash buyers oftentimes are able to submit lower offers because there’s more certainty with a deal that’s cash, because it doesn’t have the appraisal contingency or the financing contingency that some of these debt-based offers do. So, I just wanted to clarify that because we were throwing around the word contingency, but just to break it down for folks.

Ashley:
Tony, I just made a note to make that an Instagram Reel. I’ll make sure to tag you because that was [inaudible 00:45:25]. I was like, “That’d be a great Instagram Reel idea.”

Tony:
We get at least one of those per episode.

Ashley:
Yeah. Well, Sam, I’m going to take us to our Rookie request line. And anyone can submit a question to us at biggerpockets.com/reply. And you can enter your question or you can send a DM to Tony or I, or leave it in the Real Estate Rookie Facebook group. So, today’s question is from Molly Alred. “This is a question for out-of-state investors. What tools or methods did you use to determine where to invest? We live in a ridiculously expensive area and would like to invest out of state, in an area without such a high barrier of entry. My husband and I are both from Michigan, but I don’t want to necessarily limit my search only to Michigan. We live in Colorado and are currently house hacking our primary residence.” Well, that’s exciting. Congratulations on the house hack. So, Sam, what would be your advice, or what are some of the tools or methods that you have used to determine where to invest out of state?

Sam:
Absolutely. So, the first thing is narrow down your region. So, I would say look in the Midwest and look in the South just to get started. And the next thing you want to do is what are the major cities? So if you’re looking at Michigan or Ohio, what are the major cities? And then, what are also the cities that are in between? So, what’s outside of Columbus? What’s outside of Cincinnati? Because you may not necessarily be able to afford inside the main city, but a lot of times they’re like, I don’t know if you call them maybe tertiary markets or secondary markets within a particular region, that can give you some more options. So, the third thing you want to do is when you find a couple cities you’re interested in or cities outside of the major cities you’re interested in, what is happening in that market? Is the city investing in itself? Are there employers coming there? Are they improving the infrastructure? Are they putting things in, like bike lanes? Are they putting in new parks or redoing the parks?
And any city that’s investing in itself will always have a website about it or have… They’ll always want to publicize that. So, for example, in Dayton, I think the website is downtowndayton.com or.org. They show every single thing that they’re doing, all the investments that are being made. So, that’s the next thing that you want to do. Then of course, you want to see what are the prices of the homes? If you want to buy a multi-unit or if you want to buy a single family, what are the prices of the homes? Are those within your budget? And then, what are the rents? What is the cashflow that you can get? What’s the estimated cashflow that you can get based on the type of property you want to buy? And so, once you have that information, and if it looks good enough to you, then you want to build your team. You want to get an agent, or a wholesaler, or go direct to seller yourself, and then go from there. But as far as finding the city, those are the four or five things I would say that’ll help you get a good start.

Ashley:
I just Googled it and it is downtowndayton.org too. But yeah, just at a quick glance there’s, “Here’s a blueprint of what we’re doing to our city,” and things like that. Yeah.

Tony:
Sam, what a great breakdown of how to choose a city to invest in. I think just one thing I’d add to that is that typically when people invest in real estate, they’re balancing three different motivations. You have cashflow, you have tax benefits, and you have appreciation. And people will rank those three motivations differently depending on your unique situation. If your big focus is cashflow, then yeah, maybe going to the Midwest is a good play for you. If you want appreciation and tax benefit, then maybe some of the more expensive markets make more sense for you. So, I think before you can even try and whittle down of the 19,000 cities in the United States, which one is the right choice for me? It’s really getting clarity on what are my motivations, what are my goals as a real estate investor? And then, from there, you can start to make some more informed decisions.
And I love listening to people that are smarter than me when it comes to data and economics. And like Dave Meyer, he runs the On The Market podcast, employee of BiggerPockets, wrote the book Real Estate by the Numbers, incredibly smart guy. And there’s tons of blog posts that he’s written on the BiggerPockets blog about different markets that investors should be looking into. He’s done YouTube videos about markets. There’s a lot of content out there about where should you look, that people who are smart, Dave Meyer, have already looked into you to give you a leg up. So, loved your answer, Sam, just wanted to add that for folks as well.

Sam:
Love that.

Tony:
All right. Well, let’s finish things off here with our Rookie Exam, Sam. So, you’ve killed this interview so far, but I’m sure you’ll crash it with the exam well. So, these are the three most important questions you’ll ever be asked in your life. So, Sam, are you ready for the Rookie Exam?

Sam:
I was born ready. Let’s do it.

Tony:
There you go. All right, man. Number one, what’s one actionable thing Rookies should do after listening to your episode?

Sam:
So, if you want to invest out of state, start looking for a market. Tony and I gave a couple tips. Start looking for a market as soon as you finish this episode.

Ashley:
I think that is a great piece of advice. And Sam gave you guys every possible way to actually take action on doing that. Okay. Next, what is one tool, software, app, or system in your business that you use?

Sam:
Apartments.com. It’s free. It’s pretty simple to use. Tenants pay their rent that way, and there’s no checks or anything like that, and it’s pretty seamless. So, that’s one tool that I use that I really like.

Tony:
Gotcha. And then, last question for you, Sam, where do you plan on being in five years?

Sam:
That’s a great question. So, in five years, I definitely want to have picked up a couple more properties. I love real estate. It’s a wonderful thing. And I also realized that I don’t necessarily want 20, 30 doors. I want the fewest number of doors with the highest amount of cashflow, so that’s my goal. And so hopefully, in five years I’m closer and have a handful more properties in my portfolio.

Ashley:
So, Sam, what are you most excited for in retirement? Now, that you have your blueprint to achieve it, because we started the episode out with what you thought retirement was going to be for you, and now that that’s changed and you’re kind of on a different path, what are you excited about most?

Sam:
Yeah, I’m excited to just relax and hang out with my family. Hopefully, my wife and I have some children, and maybe even some grandchildren by then. But I would say I want to use real estate to buy time. I think that’s the most important thing. That’s the most important thing we have. You can’t make more time. So, hopefully, my wife and I can retire earlier through real estate and other ventures. And I’m just looking forward to just enjoying life, doing what we want to do, traveling where we want to travel and living where we want to live. And I think it’s possible through real estate, especially if you look further down the line. I mean, rent’s only going to go up. We’ll pay down debt even more. So, that’s what I’m looking forward to.

Tony:
Awesome, Sam. Well, hey brother, we’re excited to see you go on that journey, man. And hopefully, we’ll get you back here on the Rookie Podcast When you’ve reached that retirement milestone and you can give us the update. But I want to finish things out by shouting out this week’s Rookie Rockstar. And this is actually a name you might remember from episode 297 of the Real Estate Rookie podcast, but it’s Olivia Tati. And Olivia says, “Just went live almost two weeks ago on our first out-of-state long distance real estate investment property, which we used private money to fund.” So, they had someone else fund this entire deal for them. “My best friend and I DIY renovated this property ourselves.” She said, “Two little ladies changing toilets, vanities, electrical receptacles. We had no clue what we were doing, but thankful to the BiggerPockets and Real Estate Rookie community, and the podcast for lighting this fire in us.” So, again, if you guys want to hear Olivia’s full podcast episode, head back to Rookie 297.

Ashley:
Well, Sam, thank you so much for joining us today. Can you let everyone know where they can reach out to you and find out some more information about you?

Sam:
Absolutely. It was a pleasure to be on the platform. Like I said, BiggerPockets was really integral in me getting started and building out my network, and boots on the ground and all those things. So, I just want to say thank you for the opportunity. And if anyone wants to keep up with me, you can find me on Instagram @blackrealestatedialogue. Send me a DM after you listen to this. Let me know what you think and would love to connect. And if I can answer any questions, would love to do that. And happy to come back at any point if I could be of service. So, really appreciate this opportunity, and thank you two for a great interview.

Ashley:
Thank you for listening to this week’s Rookie Podcast. I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson on Instagram, and we will be back on Saturday with a Rookie Reply.

Speaker 4:
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In This Episode We Cover:

  • How to retire with rental properties and why “turnkey” rentals might be your best bet
  • Out-of-state real estate investing and whether cheaper markets are worth buying in
  • How to find the perfect real estate market for your cash flow goals
  • Self-management vs. property management and why Sam chose to do it himself
  • The tenant and property “red flags” you MUST look out for as a rookie
  • Tools that Sam uses to run his real estate portfolio from multiple states away
  • And So Much More!

Links from the Show

Book Mentioned in the Show

Connect with Sam:

Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected].

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

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