The Hidden Property Damage That Could Ruin Your Home Renovation…

In this article Added home renovation costs can ruin your plans to own the perfect rental property. When this happens, how do you come up with the extra funds? More importantly, how do you prevent this from happening altogether? We’ve got plenty of answers for you in today’s episode! Welcome back to the Real Estate Rookie podcast! Jessica Bryant Walton owns several doors in Anchorage, Alaska. As you’re about to find out, investing where winters are long, water damage is common, and frozen pipes are everyday occurrences isn’t for the faint of heart. Jessica and her husband had just bought a duplex, only to find out that the previous owner had disguised a MAJOR leak and extensive damage with a second roof. What they anticipated would be a $40,000 rehab ended up costing over $130,000! Fortunately, Jessica and her husband came up with creative ways to fund their renovations, increase rents, and lower their overhead by self-managing the property. But there are valuable lessons to take away from their experience. You’ll learn why you should consider getting your real estate license, how to find the best contractors for your rehab projects, and the importance of always keeping a paper trail! Click here to listen on Apple Podcasts. Listen to the Podcast Here Read the Transcript Here Ashley:This is real estate rookie episode 394. Do rental properties need two roofs? We will get a horror story all the way from Alaska and why buying in the winter can create more issues than you would expect. I’m your investigative journalist, Ashley Care, and today we are going to break down a horror story. Welcome to the Rookie podcast. For three times a week we share the motivation, inspiration, and stories to get you started in real estate. Today we have a guest, Jessica Bryant Walton on as an investor from Florida, but calls Alaska home. We are going to hear what happened on their duplex renovation that took two and a half years. We’ll get to know Alaska as a rental market, some landlord maintenance tips and so much more. Just as a reminder, if you have a horror story you want to talk to me about, maybe you need a therapy session or you just need to vent, go to biggerpockets.com/reply and select horror story and our producers will review and reach out. Okay. So Jessica, welcome to the show. Thank you so much for being trusting with me and vulnerable to relive this horror story you’re about to get into with us. Jessica :Yeah, thanks for having me. Ashley:So let’s start out with your fixer upper rental. Tell us about Jessica :It. So it was your standard duplex. It was an upstairs, downstairs duplex in pretty rough shape, but the price reflected that. So we had been looking for a while and we were new investors, didn’t have a ton of cash, so we kind of were willing to do the sweat equity and get our hands dirty to find a good deal. Ashley:And was this your first or second purchase? Jessica :This was our second. So my husband lived in one previously and I kind of talked him into doing more deals and we’d been looking for a while and found this one. Ashley:Okay. So what made the deals stand out to you first approaching it? Why did you think it was a good deal at the time? The Jessica :Price definitely. It looked like it needed a lot of work, but nothing really structural. It was mostly cosmetic. It was just an older building. We found one in a good side of town that we had been looking for a while and the price was good. Ashley:As you’re making your offer on this property, what are some of the steps that you took to get the deal under contract? Jessica :We probably put a price in a little higher than we wanted just to kind of lock it in there. So there was a tenant downstairs and we had only viewed the top unit, so we went in and checked it out. We thought, yeah, this isn’t too bad, we can definitely do this work ourselves. And so we gave a pretty close to asking price offer. Ashley:And then what made this deal go horribly wrong? Jessica :Well, it was winter and it was covid, so there was some surprises that popped up after our initial walkthrough and after the inspection and everything had passed when we actually got in there and got our hands dirty and started finding things hidden. Ashley:So this was after you had already purchased the property. Did you do an inspection on this property at all? Jessica :We did do an inspection. We had used this inspector previously. He was great, but like I said, it was during Covid, so he was definitely super cautious. It was during winter so he could only see so much of the roof. He climbed up there and looked around, but the issues we found were more internal in the roof, so we didn’t find these until after we owned it and started tearing things apart. Ashley:So we kind of referenced this in the intro here, but there was two roofs on this house. So was this more protection that you are extra covered in case one blows off, you got another room? Yeah, Jessica :I wish. So when we first went and saw the property, like I said, there was nothing too structural, but when you first walked in, the entryway was kind of low. So that was kind of one of the things we wanted to lift up. There was space there. We knew we could lift the inside up the ceiling, so we thought maybe just that one little area we could kind of open up. Our contractor was about six four and it was pretty close to hitting his head when he walked in. So we thought maybe just a small little room. We can raise that up just a little bit. Ashley:And at the time your contractor said, this is no problem, we can go ahead and do this. Jessica :Yeah, he thought it wasn’t going to be a problem and then we started poking around and that’s when we really found the issues. Ashley:So as you’re poking around, is this you guys doing the demo yourselves or is your contractor doing it? Jessica :So we brought the contractor in and there was a little half wall I wanted removed and then I asked him about that lower ceiling portion in the entryway and he says, yeah, it shouldn’t be a problem. The rest of your ceiling is nice and high, so it’s not going to be an issue. We started poking in the drywall and things and that’s when we noticed a little bit of moisture. So we started poking more and more and then there was a lot of moisture and when we pulled that down and poked the vapor barrier, that’s when the real trouble started. There was literal water pouring out of the vapor barrier. Ashley:So this would’ve been in between the two roofs then the two roofs, is Jessica :That correct? So that lower portion of the ceiling was actually right above that was an old roof, and they must’ve had issues that they did not disclose and instead of ripping that down and replacing it, they just built another equally shoddy roof on top of that and hit it. So that’s what the contract or that’s what the inspector saw. Ashley:Oh my gosh. So you’re really not going to see evidence of that, especially in winter in Alaska when you can’t even really see the roof. I’m assuming that it had snow on top of it that there’s not a lot of access to that. Jessica :Yeah, the inspector got up there, he looked around and everything that he could see looked totally fine. You wouldn’t see it until you were inside the unit pulling drywall down, ripping through the vapor barrier that you really see the gallons and gallons of water that were just sitting there. Ashley:Oh my gosh. So basically at this point, this is water just pouring into this unit that you, you’re trying to renovate buckets Jessica :Full all over? Yeah, we had five gallon buckets throughout the whole unit. We just started poking holes and just letting ’em drain into it. It was a long, long process. Ashley:What is going through your mind at that moment as to obviously you finished the deal, but at any point in time were you just so discouraged you wanted to give up? Jessica :Yeah, we started freaking out. We ran downstairs because there were tenants living down there that came with the property and told them about the issues and they were kind of like, well, yeah, this place has been leaking for years. Did you not know that? And that’s when it really hit us that, oh my gosh, we were totally screwed over. These people lied about it on their form. She knew there was damage and leaking and she did not disclose it. Ashley:Wow. So was there any evidence of just any water stains on the ceiling at all when you had gone into the unit? Maybe did they even repaint over some of them if there had Jessica :Been? That’s the thing is it was very old and dated inside, but it did look like the paint was somewhat new. So yeah, we think that she probably covered it up. Ashley:Okay. So you have the water pouring in, you have the buckets, you finally get all the water out of the roof. What is the next step and is this your contractor kind of guiding you through the process as to here’s what we have to do, here’s our game plan. Jessica :So we hadn’t reached back out to the contractor yet. We were kind of in panic mode, so we immediately got on the roof with shovels and started scraping every bit of snow off we could to see if maybe it was something we could fix ourselves. We weren’t sure. And then we immediately contacted a lawyer and said, there’s something wrong here. This lady has clearly lied and not disclosed what she knew. And so we started moving forward with the lawyer process. Ashley:So at this time, what does your lawyer advise you? Do you have any recourse going after the seller for something that they didn’t disclose to you? Jessica :Especially with the tenant downstairs telling us that Yeah, we knew about this. It had leaked down into their unit before we contacted the lawyer, told them everything that happened, showed them the inspection and all, and they basically said the inspector couldn’t see anything, he’s not at fault. So we have to move forward from that and go towards a previous owner. The lawyer started looking into it and found that this person had sold the property. She really didn’t have any other assets other than that. So by the time we would chase her down, she had moved out of state. They pretty much told us that all the money we would spend in lawyer fees, we weren’t going to really make any money back after we went after her because there was no other assets to take from her, Ashley:Which at that point that has to feel pretty discouraging and frustrating, I’m sure. Yep. Jessica :We thought the whole unit inside would be about $40,000 to fix and then this whole roof issue on top of it just blew that out of the water. Obviously Ashley:We’re going to take a short break and when we get back I want to go into more of the numbers on this property on this house. So we’ll be right back after this break. Okay. We’re back from our short break with Jessica who’s just telling us her horror story of buying a rental property and all of a sudden just having water pour through the roof as they find out that there was shoddy roof work done and there was two roofs that were on the property which did not provide extra protection. So you just kind of mentioned how much you spent on the rehab, so you’re including this new cost for the roof. What did the total numbers end up being on this property? Well, Jessica :We had planned to spend about 40 in the rehab, but when we found this roof issue, we just stopped completely. We weren’t going to do anything until we took care of the roof. So we called the contractor back and told him we don’t want to have any more hidden surprises. So instead of just fixing this portion, let’s just take the whole thing off, starts from scratch and make sure we’ve got a good roof after this. So he gave us a quote of about $60,000 in addition to our 40,000 plan. So that was startling for sure, but we didn’t really have a choice. We said let’s just, I don’t want to worry about this for the next 10, 20 years, so let’s just take the whole thing off and rebuild it. And with that we really wanted to raise the roof up a little bit that inside where it was low. So we decided to add on an additional trust package and that was another 12,000. Ashley:So where did you come up with the money for this to pay for these renovations when you had only planned for doing 40,000? Jessica :Yeah, so luckily my husband has a W2 job, so we ended up taking out from his retirement from his 401k, some interest free loans essentially. And then he had a lot of saved PTO up, so we kind of cashed a good bit of that in to pay for this. Ashley:At the beginning of this episode you had mentioned, you said to your husband you wanted to keep doing this and it kind of seemed like this was your idea. At any point in time was there any frustration with him or did he say we never should have done this? What was kind of that balance between you two? As of now he’s having to pull out of his 401k and different things like that? Jessica :Yeah, I mean there was definitely a lot of frustration. We still go back and forth about this today, like, oh, we should have never done this. And then at the same time we say, no, it was such a good learning experience, I’m glad it happened at the beginning when it was manageable for us. So it’s worked out Ashley:And that’s the best thing about having a great partner, not even if it’s your spouse, but a partner on board that’s working with you through the project and is going to understand and see and be there to support you through these issues too. Jessica :Yeah, absolutely. He’s definitely the responsible one who’s always saved and he prepares for things like this. So we buckle down and we worked through it. Ashley:Okay. So what ended up being the outcome of this? You do the roof, you get that fixed, you raise the roof, and then how long before you actually dig into finishing the inside of the property? Jessica :So with Alaska, we have obviously a very long winter, so your window of construction is very short. So we had bought this place late winter planning to do our remodel through the summer, the roof issue happened and so we had to hire a contractor and some contractors, they’re not always on time. It ended up taking them the entire summer, calling them, chasing them down to finish the project. It got to a point where they had removed the entire roof, put the truss package up, and our house was essentially just an open shell at this point. Now we’re coming then to the fall end of summer, which is rainy season. So we went there and they had our entire duplex open with just a clear sheet over the top of the whole roof and it is dumping rain for days and days and days. And we’re calling them like, please can you get over here? They can’t do anything while it’s raining. So we were there at least three times a day with our sticks and our brooms pushing up the plastic sheeting to just shut off all of this water so that it didn’t collapse. The sheeting flood out the unit, flood the unit below them. So the Ashley:Water nightmare just keeps getting worse. It keeps Jessica :Going. Yeah. After they pulled off the roof, we’re just sitting there with it open and that’s when our rainy season comes. My gosh. So it’s just dumping and dumping. So at this point we are pretty overwhelmed thinking we’re running out of time for the roof to finish, then we still have to do the whole inside. And then also at the end of summer, that’s kind of when your touristy season stops, it’s going to be hard to get a renter in once winter hits. So we decided at that point we’re already paying for the contractor to do the roof, we’re just going to hire someone to finish the inside when they’re done because we can’t keep up with it when there’s no way we’ll finish it in time. So that was the additional $40,000 we had planned to spend for the inside. We ended up hiring a contractor to finish it out and that was 60 grand total. Ashley:And how was that experience with that contractor? Jessica :The inside contractor, a literal dream? He saved us. He was in and out in six weeks, just top quality work. He was so good, especially compared to the roofing contractors that we had hired. Ashley:So what were some lessons learned, especially comparing those two contractors? What are things you would do different in your experience of managing a contractor and hiring a contractor? Jessica :Definitely get references. My interior contractor, I’ll use him for the rest of my life. The roofing contractor, you’re going to have to see their work for sure. Talk to people, set a very strict schedule for them because once you pay them, they don’t have the incentive to come back. So split your payments up into little brackets as they do amount of work to make sure that they’re there on time, they’re finishing things and check everything in the winter way more than you think you’re going to. Ashley:So once this project is complete, you’ve got all your rehab done. What was next? Did you guys refinance at all and have it appraised or did you just keep your data on it and then just rent it out? Jessica :No, we did not refinance. We got it when it was still a pretty good rate. We got it at a 4.65%, so we were happy with that. We just were still paying on the loan for the contractor, the interest free loan, basically paying back into the retirement. After that was done, we finally decided to get the lower tenant out of there so we could remodel that unit. He had been there for about 10 years, I think way below market. He was with it when we got it and he had just been there for a long time. So it was time to get into that unit. Ashley:And this time period had been how long from the day you purchased it until the day that you were able to rent it out? Jessica :That was about 10 months. Yeah, we got it. We closed in January and I think they were finally done with everything in about October. Ashley:So after you’ve gotten that wrapped up, everything’s set, what is your feelings towards real estate? Are you continuing on or are you saying you’re throwing in the towel as to I am never going through that again. Jessica :Yeah, no, we definitely were continuing with it. So after we were done with that, we decided to do the remodel downstairs ourselves. So we just finished that up a year after. We had planned for about three to four months. And that remodel on our own took about a year for us total working after work weekends we’re done, we’ve recovered, we’ve rested, and we’re looking forward to the next project. Ashley:So two and a half years later Jessica :Essentially. Ashley:And it’s completely done. And then what ended up being the final numbers on that? Jessica :So when we bought it, our numbers that we had projected for rental at that time were about 1460 per unit. When we bought the property, we put 20% down and our mortgage total was about 1500. So it’s just over 1500 per month. After doing the upgraded remodel, a little bit nicer version than we wanted. We are now renting out for 2200 upstairs. That’s a furnished all inclusive rental. And then the downstairs is 1800 a month. Ashley:So Jessica :Much better than we expected. Ashley:Yeah. And what was the person paying downstairs? Were they paying 1460 when you first bought it or were they paying some different Jessica :He was paying 1200. Oh wow. 1200. Yeah. Ashley:So let’s go into that, a little bit of the market in Alaska. So what actual city is this in? Jessica :So we are in Anchorage, which is kind of the main city in Alaska. I think we’ve got a lot of tourists in the summer. It’s super, super busy in the summertime. We have a big military base in town here, so we’ve got a lot of that. And then just a lot of families living here. Ashley:And then what are some of the things that if someone is looking to invest in this market that they should be looking out for when purchasing a property in Anchorage? Jessica :Okay. Well pretty much every time we’ve bought any sort of real estate or things in Anchorage, we always buy in the winter, which is tough because there’s a lot of things you can miss, but you also get a better deal because nobody wants to move in the middle of winter, move in or out. So I would say check previous listing photos. If you can get up on the roof, check every little nook and cranny, make sure there’s no leaking because that’s a huge issue here is wintertime freezing and then pipes leak and obviously roof leaks like we experienced. Ashley:Okay. And as we were jumping onto this call, you did mention that there was a moose outside in your yard. So is there anything we need to know about the animals and the wildlife in Anchorage before investing there? One thing in my market is you can sometimes find wood bees that will literally, if there’s a house with wood siding and they can be literally infested with it where they’ve drilled holes into the siding. So is there any kind of wildlife that you need to be aware about? Jessica :Nothing that will really affect the houses. Maybe spruce beetles occasionally, but yeah, moose are everywhere. They’re all over the city. They are silent, but they’re huge. You can open your door and they’ll be there blocking your car and you can’t get to work for the day. They’re just moose are literally everywhere in Anchorage. Ashley:Okay. We’re going to take a short break and when we get back I want to touch on managing your properties and what advice you have for rookie investors. We’ll be right back and we are back with Jessica. So Jessica, are you self managing your properties? Jessica :We are. I manage them myself. I work from home usually, so we have four doors total that we manage right now. And then my husband’s kind of the handyman so to speak, or if we have to hire someone out for a plumber. But yeah, I manage them all myself. Ashley:And are you using any software or different things like that to manage it? Jessica :No, I mostly just use Excel spreadsheets and things like that and do it myself. Ashley:And what do you find easier to manage? Which strategy? Jessica :It’s a little bit of both. I mean I definitely kind of the short midterm rentals, they’re fun to go over there and flip and stay on top of it, but my ultimate goal is to become a snowbird. I’m originally from Florida. I’m not built for the Alaska winters, so I kind of like to have long-term people there during the winters. Ashley:So with doing yourself managing, do you have any horror stories of any communication with tenants that you can think of off the top of your head? So we went over a horror story of a contractor issue and also a buying issue of a property that had an issue. Do you have any horror stories of an experience as a property manager? I Jessica :Wouldn’t say we have any horror stories, nothing too terrible during Covid. We did have someone who sort of became a squatter, wasn’t paying their rent, refused to get out, but really I would much rather keep a unit empty and wait for a good tenant than I would to rush into the unit just to get that monthly rent. It definitely pays in the long run to wait for a good solid tenant. Ashley:And I think that’s so different than a lot of other markets where you can usually do a long-term rental the whole season or a short-term rental the whole season. But mixing it up, how does that complicate your vacancy and the amount of time and energy put into a property when you’re having to rent out the short-term rental for the busy season and then having to adjust during the winter months? Jessica :So we learned that the hard way everybody gets so excited by the short-term rental availability in Alaska summers because you can just charge an astronomical amount, which a lot of people do. And so we did a short-term furnished rental for the first time last summer and made amazing money. But then once September October came, there was nobody, it was hard to find a long-term tenant to go in there and it just sat empty for a long time. So I think it’s better in the long run to find someone with a median rent. It’s going to be their long-term and you don’t have to worry about Ashley:It. Yeah, I think that would be aggravating to me as to almost the scarcity mindset of like, okay, it’s getting to the end of the season. I’m going to be vacant for the next six months or something like that. Worried about having to rush to get a long-term tenant in place. There’s a ski town near us that is kind of similar where they put in a lot of short-term rental laws, stricter laws than what they had before where you can’t do a short-term rental anymore and you have to do long-term or at least 30 days or more. So people are getting strategic with giving discounts for having it rented over the winter months for a period of three months and then after that, turning it into a long-term rental over the summer for seasonal workers or things like that. So just the idea of the Anchorage model kind of reminds me of what they’re having to do there. But there is constantly four rent signs over the summer of them not being able to fill because there’s just not that much going on and everybody wants to be there in the winter months too. Jessica :Yeah, everyone wants to be here in the summer and our municipality recently passed a code stating that any residence is allowed to have an A DU in the backyard or adjacent to their property. So I think that’s really going to help with the summer rentals and legislature is trying to pass right now where Alaskans have to have only renting to Alaskans. You can only have one short-term rental because so many people kick their tenants out to try to get that summertime money. So it’s really hard for families to find long-term reasonable priced homes here. Ashley:Wow, that makes a lot of sense. I didn’t even think about that as far as you’re looking for units, but you can only find them from a certain amount of time and then you have to relocate for the summer months and then come back to find housing. That’s such a great point. How do you think that new law is going to be effective? Do you think that is going to help with only letting each person only have one short-term rental per person? Jessica :I do think it will help. There’s so many people that want to just have long-term affordable housing here, so I think having an A DU will be much better for the short-term summer tourist people just to stay in a little cabin or something at someone’s house. Ashley:And then my next question is when you do have the long-term tenants in place over the winter, are you giving them any kind of guidance or even if you still have it as a short-term rental over the winter, guidance as to how to deal with the elements of the weather there? Are you creating any kind of handbook or guide to assist your renters into caring for the property? I mean even just in Buffalo we have pipes freeze and things like that and I would think that there would be a lot more extreme circumstances in Alaska than here. Jessica :Yeah, definitely The pipe freezing is the number one issue. When we were just doing this last remodel, we were gone for about a week during really cold snap and we came back and the pipes were not turning on. We panicked. Luckily the water hoses at the end of the season because they will absolutely freeze, and if you’re going to go out of town for long periods, the best thing to do is to kind of those exterior walls that have plumbing is you need to leave it on a little bit of a drip so it doesn’t freeze up because it gets negative 30 here sometimes in the winter. And it doesn’t matter how long you’re gone or how well your house is insulated, those pipes will definitely freeze if they’re not used. Ashley:Do you have any other tips that you would give to rookie investors who are thinking of self-managing as far as what are the best ways to communicate with your tenants that you have found? Jessica :I don’t believe in phone calls. I won’t do phone calls with my tenants. I say, please text me or please email me because one, I have a bad memory, but two, I want everything in writing. I don’t want to ever confuse anything or have them come back and say, you told me this or you told me that. I want that proof in writing always, because you never know when you’re going to need it. I Ashley:100% agree with that. I do that with almost everything, attorneys, loan officers, everything. I had countertops installed one time at a property and they sent me the bill for it and they had included that there was going to be tile backsplash and I hadn’t even been to the property at all to look at it or not tile backsplash, but the countertop backsplash. And I was like, wait, no, I did not order this. And I went back and I found the email that said, I do not want this. And so they took it off because I had said I didn’t want it to their salesperson and they still had put it on and installed it, but they were nice enough to take it off, but I didn’t have that email. They’re probably not going to believe me that. I said, no, I didn’t want that. Please take that off. So having everything in writing I think is a great advice. Jessica :Yeah, I’ve just recently found through my phone on my text messages, there’s a little section where you can schedule text messages far in advance. I’m four hours away from my family, so I do that a lot for them. But I’ll go through when I have a new tenant and schedule a text message the first week of October, please remember to remove your hose at this time to plug in your car is here and leave your pipes open. Just every little thing they need to know, I just schedule it in advance so that I don’t forget. Ashley:That is another great tip. And you can do that by text email many different ways and any property management software too is schedule those reoccurring messages so that they happen at certain times throughout the year. For our property management company, we do build out almost like a timeline of here’s our maintenance that we have to do throughout the year. That’s always has to be done, such as cleaning out the gutters, cleaning up leaves, things like that. But we don’t really have any that go out to the tenants on a quarterly basis or whatever. When it starts to snow, we’ll send them a reminder, but that’s a great idea to pre-schedule all of that communication just so that every year it’s automated and not even having to push a button. Yeah. Do you do any of this with your contractors? So you seem to have great communication, keeping everything in writing with your tenants, learning from your experience with the bad contractor, working with the good contractor, are you doing the same technique with them where all communication is in writing too? Jessica :Definitely, yes. I text everything, email everything to them because I will forget. I have very bad short-term memory, so I have to text things. I even send reminders to myself to check back in with them if I forget something. But luckily we don’t need contractors that often. The number one we usually need is a plumber. And that’s another issue. I don’t know if this is Alaska or if you’re experiencing this in the lower 48, but trying to find a plumber lately has just been so hard. We’ll have to call five or six, and a lot of them don’t want to come because it’s a crawl space or there’s just not enough them to do the amount of work that’s needed Ashley:For ours. We basically have just been working with one plumber, and I think the fact that we’ve given him so much work over the past year that we were actually just talking about this the other day, is to how grateful we are that they make us a priority too. But that’s the advantage of being able to use them consistently and constantly, which it’s not a good thing for me. That means I’ve had a lot of plumbing Jessica :S it’s okay, they’re worth the weight and gold this contractors, Ashley:But one contractor that we don’t, well, one specialty that we don’t have a lot of use for and don’t use frequently as an electrician. And so we actually did just try out a new electrician recently and we ended up having to go with somebody who just started their business because that was the issue. It was very hard to find an electrician who was experienced in things like this. And we found this guy who just went out on his own left the company he had been working for and he was great. He was great. And so he really didn’t have any marketing. It was actually the girl that waxes my eyebrows, her husband. She had posted it on her Facebook that he was going out on his own and I screenshot it and saved it. And then when we couldn’t find anybody that we had used before that was able to come out, we ended up contacting him. It’s just amazing the different ways that you can find contractors. So how did you find both of your contractors? Jessica :Usually what I do with my contractors, and the same thing we did with the plumbing contractor is we were trying to DIY something. We went to the local plumbing supply store and I’m asking all these questions and that’s where we found our contractor. I asked him all the plumbers in town, do you have anybody you recommend? He was like, this is the best guy. He does the best work. He’s a good price. He is an honest person. So that I think is a really good place to get a good contractor. They know everything about all of them in town. Yeah, Ashley:That’s a great idea. A lot of people say you go into Lowe’s, you go into Home Depot, you see who’s there at 6:00 AM but going into the more specific niche is a great idea. When I built my house, my contractor got all of his plumbing stuff from an actual plumbing fixture store that had just plumbing materials there. And most likely if you have an experienced contractor, they’re going to be going to those kind of stores because they have credit there. They get discounts there. They want the best materials instead of going to Lowe’s and Home Depot too. Jessica :And usually if you find one good contractor that you can work with, ask them. They have other people in other realms that they reach out to and they work with. Ashley:Now what about your agent or your lender? Did you use an agent on any of your properties to purchase these? Jessica :Yeah, for this property, we had an agent. We had found a new agent. I didn’t realize that she was so new. I mean, she’s a great, wonderful person, but we went and put the property, we went and viewed the property and put an offer in, and we still thought there’s a little room for negotiation after we do the inspection and everything. And we put the offer in after only viewing the top unit. We hadn’t viewed the second unit. So once we put the offer in and then got the inspection back, we realized there were so many more issues. We said, okay. We talked to the agent and said, can you maybe renegotiate with the person selling and see if we can get a little money off of this? And she pretty much talked to her boss and came back and said, oh, I’m so sorry. You’re locked in on price. You filled out this form, that means you’re locked in. You can’t go back, which we didn’t have that much experience with real estate. I’m like, what? I didn’t know this was a thing. So we kind of got stuck with this offer that we had put in per the realtor’s recommendation, and we really couldn’t negotiate. We really had hoped to get at least maybe 20 grand more off towards the problems that we found after the inspection. Ashley:Yeah, that’s crazy. That really does not sound like that was supposed to happen at all. I Jessica :Think she just was so new and didn’t really know what she was talking about, and we didn’t know and lesson learned. Ashley:And we just had, on my rookie bootcamp, we had a guest on Angel Garcia and he was talking about continuously educating himself, and he talked about something similar where he had no, well, I guess not, kind of similar, but he had no idea the process of buying a car. And he was like, I don’t want to go in there and get duped. So he spent hours researching the process of buying a car and what happens when you go into the finance manager, all these different things. But his point to the rookies in the group was, you need to spend time learning a process because you’re not going to know. Not everybody is going to be able to assist you and to help you along the way and think about all the different steps that you’re taking throughout real estate. Not everyone is going to handhold you and be your best friend.Just like your example of the agent too. I had an agent that lost my earnest money deposit and tried to blame it. And the secretary of the admin that worked at his brokerage, and actually somebody else that worked at the office told me, no, he lied to you. It was not the admin. He just blamed it on her. And it was almost the deal almost fell through because of that. And there’s just all these different things that can come up. But if I would’ve known better as to, I need to track. So now every time the agent that I do have, that’s great. I take a picture of the envelope, I’m sending it in, I take a picture of the actual check and I mark what date I’m actually sending it out and everything like that, and track all of this from these lessons learned. And even if we watch a million YouTube videos on the process of getting a property under contract, working with a real estate agent, there’s still going to be things that come up. But I thought that was really interesting what Angel said as to continuously educating yourself on these processes. Jessica :So after I had this experience, I was so bummed about it. I actually went and started studying real estate. I went all the way through the process, got my license. I don’t actually plan on using it, but I just wanted to know every detail about it. So I got my license. Like I said, I don’t plan on using it, but I met so many good realtors that we’re going to use in the future, and now I know so much more about it, I won’t be caught off guard again. Ashley:And let me ask you this, how much was it to actually take the course? Jessica :Oh, I think in total and the license for about a year. So I think I spent about $3,000, which seems like a lot of money, but I think of it as an investment. That’s an education I took. It’s just like taking a class at college now. I know everything there is to know all the little details that we would’ve missed before Ashley:And New York State just to take the course. And if you don’t actually go for the exam or get your license just to take the course, it’s like $99. Oh, wow. So if you’re really intrigued and interested, I think it was Real Estate U because I’ve started to take it three or four times and I’ve just never completed it. So good for you. But it Jessica :Was worth it just to be able to have that access to go and view houses whenever we wanted to. I’m like, oh, I’ve got the license legally, let’s just go see a bunch of properties. So we learned so much just by doing that. Ashley:That is such a great advantage of not having to schedule a showing and coordinate with when the house is available to be seen when your agent is available and you being able to go to. So along with getting your real estate license, is there anything else that we need to know about you as far as things you have? Are you a licensed home inspector now Jessica :Too? No, no, not quite. My husband was pushing for me to become an appraiser. I’m like, no, that’s too much for me. I need something I can do from home. So I’ve kind of been studying more of different properties you’re allowed to have on different pieces of land, basically. So we’re looking to buy some acreage, see the different things that you’re allowed to set up as far as short-term rentals, farm stays, things like that. Ashley:Oh, awesome. I love the idea of generating multiple income streams off of a plot of land, a parcel of land. Jessica :So that’s really what I would love to do in the future is to kind of find a piece of land, do something like agritourism or eco lodging, something like that where people are visiting, they’re kind of connecting with nature, staying on the property with plants and animals. A farm, stay like that. Ashley:Yeah, that’s very awesome. Well, thank you so much for coming on today and sharing your story of what happened with your duplex, but also giving a ton of advice. I think the parts of communication with your tenants, how to find good contractors and just the lessons you have learned are very valuable to our rookie listeners. So thank you so much for taking the time, Jessica. Jessica :Yeah, I appreciate you having me. Ashley:We will include Jessica’s information into the show notes. Thank you guys so much for listening. And if you have your own horror story that you’d like to come and share with me, you can go to biggerpockets.com/reply. I would love to have you on as a guest so we can laugh together and we can cry together about the horror experience. I’m Ashley, and thank you so much for watching or listening. We’ll see you guys next time. 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 Jessica’s $40K renovation turned into a $130K+ “nightmare” rehab Self-management tips for long-term and short-term rentals The BEST way to source contractors for your renovation projects Why you shouldn’t speak with your tenants over the phone What you need to know before investing in an Alaska rental market Why you should get your real estate license (even if you don’t plan to use it!) And So Much More! Links from the Show Connect with Jessica: 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

Added home renovation costs can ruin your plans to own the perfect rental property. When this happens, how do you come up with the extra funds? More importantly, how do you prevent this from happening altogether? We’ve got plenty of answers for you in today’s episode!

Welcome back to the Real Estate Rookie podcast! Jessica Bryant Walton owns several doors in Anchorage, Alaska. As you’re about to find out, investing where winters are long, water damage is common, and frozen pipes are everyday occurrences isn’t for the faint of heart. Jessica and her husband had just bought a duplex, only to find out that the previous owner had disguised a MAJOR leak and extensive damage with a second roof. What they anticipated would be a $40,000 rehab ended up costing over $130,000!

Fortunately, Jessica and her husband came up with creative ways to fund their renovations, increase rents, and lower their overhead by self-managing the property. But there are valuable lessons to take away from their experience. You’ll learn why you should consider getting your real estate license, how to find the best contractors for your rehab projects, and the importance of always keeping a paper trail!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Ashley:
This is real estate rookie episode 394. Do rental properties need two roofs? We will get a horror story all the way from Alaska and why buying in the winter can create more issues than you would expect. I’m your investigative journalist, Ashley Care, and today we are going to break down a horror story. Welcome to the Rookie podcast. For three times a week we share the motivation, inspiration, and stories to get you started in real estate. Today we have a guest, Jessica Bryant Walton on as an investor from Florida, but calls Alaska home. We are going to hear what happened on their duplex renovation that took two and a half years. We’ll get to know Alaska as a rental market, some landlord maintenance tips and so much more. Just as a reminder, if you have a horror story you want to talk to me about, maybe you need a therapy session or you just need to vent, go to biggerpockets.com/reply and select horror story and our producers will review and reach out. Okay. So Jessica, welcome to the show. Thank you so much for being trusting with me and vulnerable to relive this horror story you’re about to get into with us.

Jessica :
Yeah, thanks for having me.

Ashley:
So let’s start out with your fixer upper rental. Tell us about

Jessica :
It. So it was your standard duplex. It was an upstairs, downstairs duplex in pretty rough shape, but the price reflected that. So we had been looking for a while and we were new investors, didn’t have a ton of cash, so we kind of were willing to do the sweat equity and get our hands dirty to find a good deal.

Ashley:
And was this your first or second purchase?

Jessica :
This was our second. So my husband lived in one previously and I kind of talked him into doing more deals and we’d been looking for a while and found this one.

Ashley:
Okay. So what made the deals stand out to you first approaching it? Why did you think it was a good deal at the time? The

Jessica :
Price definitely. It looked like it needed a lot of work, but nothing really structural. It was mostly cosmetic. It was just an older building. We found one in a good side of town that we had been looking for a while and the price was good.

Ashley:
As you’re making your offer on this property, what are some of the steps that you took to get the deal under contract?

Jessica :
We probably put a price in a little higher than we wanted just to kind of lock it in there. So there was a tenant downstairs and we had only viewed the top unit, so we went in and checked it out. We thought, yeah, this isn’t too bad, we can definitely do this work ourselves. And so we gave a pretty close to asking price offer.

Ashley:
And then what made this deal go horribly wrong?

Jessica :
Well, it was winter and it was covid, so there was some surprises that popped up after our initial walkthrough and after the inspection and everything had passed when we actually got in there and got our hands dirty and started finding things hidden.

Ashley:
So this was after you had already purchased the property. Did you do an inspection on this property at all?

Jessica :
We did do an inspection. We had used this inspector previously. He was great, but like I said, it was during Covid, so he was definitely super cautious. It was during winter so he could only see so much of the roof. He climbed up there and looked around, but the issues we found were more internal in the roof, so we didn’t find these until after we owned it and started tearing things apart.

Ashley:
So we kind of referenced this in the intro here, but there was two roofs on this house. So was this more protection that you are extra covered in case one blows off, you got another room? Yeah,

Jessica :
I wish. So when we first went and saw the property, like I said, there was nothing too structural, but when you first walked in, the entryway was kind of low. So that was kind of one of the things we wanted to lift up. There was space there. We knew we could lift the inside up the ceiling, so we thought maybe just that one little area we could kind of open up. Our contractor was about six four and it was pretty close to hitting his head when he walked in. So we thought maybe just a small little room. We can raise that up just a little bit.

Ashley:
And at the time your contractor said, this is no problem, we can go ahead and do this.

Jessica :
Yeah, he thought it wasn’t going to be a problem and then we started poking around and that’s when we really found the issues.

Ashley:
So as you’re poking around, is this you guys doing the demo yourselves or is your contractor doing it?

Jessica :
So we brought the contractor in and there was a little half wall I wanted removed and then I asked him about that lower ceiling portion in the entryway and he says, yeah, it shouldn’t be a problem. The rest of your ceiling is nice and high, so it’s not going to be an issue. We started poking in the drywall and things and that’s when we noticed a little bit of moisture. So we started poking more and more and then there was a lot of moisture and when we pulled that down and poked the vapor barrier, that’s when the real trouble started. There was literal water pouring out of the vapor barrier.

Ashley:
So this would’ve been in between the two roofs then the two roofs, is

Jessica :
That correct? So that lower portion of the ceiling was actually right above that was an old roof, and they must’ve had issues that they did not disclose and instead of ripping that down and replacing it, they just built another equally shoddy roof on top of that and hit it. So that’s what the contract or that’s what the inspector saw.

Ashley:
Oh my gosh. So you’re really not going to see evidence of that, especially in winter in Alaska when you can’t even really see the roof. I’m assuming that it had snow on top of it that there’s not a lot of access to that.

Jessica :
Yeah, the inspector got up there, he looked around and everything that he could see looked totally fine. You wouldn’t see it until you were inside the unit pulling drywall down, ripping through the vapor barrier that you really see the gallons and gallons of water that were just sitting there.

Ashley:
Oh my gosh. So basically at this point, this is water just pouring into this unit that you, you’re trying to renovate buckets

Jessica :
Full all over? Yeah, we had five gallon buckets throughout the whole unit. We just started poking holes and just letting ’em drain into it. It was a long, long process.

Ashley:
What is going through your mind at that moment as to obviously you finished the deal, but at any point in time were you just so discouraged you wanted to give up?

Jessica :
Yeah, we started freaking out. We ran downstairs because there were tenants living down there that came with the property and told them about the issues and they were kind of like, well, yeah, this place has been leaking for years. Did you not know that? And that’s when it really hit us that, oh my gosh, we were totally screwed over. These people lied about it on their form. She knew there was damage and leaking and she did not disclose it.

Ashley:
Wow. So was there any evidence of just any water stains on the ceiling at all when you had gone into the unit? Maybe did they even repaint over some of them if there had

Jessica :
Been? That’s the thing is it was very old and dated inside, but it did look like the paint was somewhat new. So yeah, we think that she probably covered it up.

Ashley:
Okay. So you have the water pouring in, you have the buckets, you finally get all the water out of the roof. What is the next step and is this your contractor kind of guiding you through the process as to here’s what we have to do, here’s our game plan.

Jessica :
So we hadn’t reached back out to the contractor yet. We were kind of in panic mode, so we immediately got on the roof with shovels and started scraping every bit of snow off we could to see if maybe it was something we could fix ourselves. We weren’t sure. And then we immediately contacted a lawyer and said, there’s something wrong here. This lady has clearly lied and not disclosed what she knew. And so we started moving forward with the lawyer process.

Ashley:
So at this time, what does your lawyer advise you? Do you have any recourse going after the seller for something that they didn’t disclose to you?

Jessica :
Especially with the tenant downstairs telling us that Yeah, we knew about this. It had leaked down into their unit before we contacted the lawyer, told them everything that happened, showed them the inspection and all, and they basically said the inspector couldn’t see anything, he’s not at fault. So we have to move forward from that and go towards a previous owner. The lawyer started looking into it and found that this person had sold the property. She really didn’t have any other assets other than that. So by the time we would chase her down, she had moved out of state. They pretty much told us that all the money we would spend in lawyer fees, we weren’t going to really make any money back after we went after her because there was no other assets to take from her,

Ashley:
Which at that point that has to feel pretty discouraging and frustrating, I’m sure. Yep.

Jessica :
We thought the whole unit inside would be about $40,000 to fix and then this whole roof issue on top of it just blew that out of the water. Obviously

Ashley:
We’re going to take a short break and when we get back I want to go into more of the numbers on this property on this house. So we’ll be right back after this break. Okay. We’re back from our short break with Jessica who’s just telling us her horror story of buying a rental property and all of a sudden just having water pour through the roof as they find out that there was shoddy roof work done and there was two roofs that were on the property which did not provide extra protection. So you just kind of mentioned how much you spent on the rehab, so you’re including this new cost for the roof. What did the total numbers end up being on this property? Well,

Jessica :
We had planned to spend about 40 in the rehab, but when we found this roof issue, we just stopped completely. We weren’t going to do anything until we took care of the roof. So we called the contractor back and told him we don’t want to have any more hidden surprises. So instead of just fixing this portion, let’s just take the whole thing off, starts from scratch and make sure we’ve got a good roof after this. So he gave us a quote of about $60,000 in addition to our 40,000 plan. So that was startling for sure, but we didn’t really have a choice. We said let’s just, I don’t want to worry about this for the next 10, 20 years, so let’s just take the whole thing off and rebuild it. And with that we really wanted to raise the roof up a little bit that inside where it was low. So we decided to add on an additional trust package and that was another 12,000.

Ashley:
So where did you come up with the money for this to pay for these renovations when you had only planned for doing 40,000?

Jessica :
Yeah, so luckily my husband has a W2 job, so we ended up taking out from his retirement from his 401k, some interest free loans essentially. And then he had a lot of saved PTO up, so we kind of cashed a good bit of that in to pay for this.

Ashley:
At the beginning of this episode you had mentioned, you said to your husband you wanted to keep doing this and it kind of seemed like this was your idea. At any point in time was there any frustration with him or did he say we never should have done this? What was kind of that balance between you two? As of now he’s having to pull out of his 401k and different things like that?

Jessica :
Yeah, I mean there was definitely a lot of frustration. We still go back and forth about this today, like, oh, we should have never done this. And then at the same time we say, no, it was such a good learning experience, I’m glad it happened at the beginning when it was manageable for us. So it’s worked out

Ashley:
And that’s the best thing about having a great partner, not even if it’s your spouse, but a partner on board that’s working with you through the project and is going to understand and see and be there to support you through these issues too.

Jessica :
Yeah, absolutely. He’s definitely the responsible one who’s always saved and he prepares for things like this. So we buckle down and we worked through it.

Ashley:
Okay. So what ended up being the outcome of this? You do the roof, you get that fixed, you raise the roof, and then how long before you actually dig into finishing the inside of the property?

Jessica :
So with Alaska, we have obviously a very long winter, so your window of construction is very short. So we had bought this place late winter planning to do our remodel through the summer, the roof issue happened and so we had to hire a contractor and some contractors, they’re not always on time. It ended up taking them the entire summer, calling them, chasing them down to finish the project. It got to a point where they had removed the entire roof, put the truss package up, and our house was essentially just an open shell at this point. Now we’re coming then to the fall end of summer, which is rainy season. So we went there and they had our entire duplex open with just a clear sheet over the top of the whole roof and it is dumping rain for days and days and days. And we’re calling them like, please can you get over here? They can’t do anything while it’s raining. So we were there at least three times a day with our sticks and our brooms pushing up the plastic sheeting to just shut off all of this water so that it didn’t collapse. The sheeting flood out the unit, flood the unit below them. So the

Ashley:
Water nightmare just keeps getting worse. It keeps

Jessica :
Going. Yeah. After they pulled off the roof, we’re just sitting there with it open and that’s when our rainy season comes. My gosh. So it’s just dumping and dumping. So at this point we are pretty overwhelmed thinking we’re running out of time for the roof to finish, then we still have to do the whole inside. And then also at the end of summer, that’s kind of when your touristy season stops, it’s going to be hard to get a renter in once winter hits. So we decided at that point we’re already paying for the contractor to do the roof, we’re just going to hire someone to finish the inside when they’re done because we can’t keep up with it when there’s no way we’ll finish it in time. So that was the additional $40,000 we had planned to spend for the inside. We ended up hiring a contractor to finish it out and that was 60 grand total.

Ashley:
And how was that experience with that contractor?

Jessica :
The inside contractor, a literal dream? He saved us. He was in and out in six weeks, just top quality work. He was so good, especially compared to the roofing contractors that we had hired.

Ashley:
So what were some lessons learned, especially comparing those two contractors? What are things you would do different in your experience of managing a contractor and hiring a contractor?

Jessica :
Definitely get references. My interior contractor, I’ll use him for the rest of my life. The roofing contractor, you’re going to have to see their work for sure. Talk to people, set a very strict schedule for them because once you pay them, they don’t have the incentive to come back. So split your payments up into little brackets as they do amount of work to make sure that they’re there on time, they’re finishing things and check everything in the winter way more than you think you’re going to.

Ashley:
So once this project is complete, you’ve got all your rehab done. What was next? Did you guys refinance at all and have it appraised or did you just keep your data on it and then just rent it out?

Jessica :
No, we did not refinance. We got it when it was still a pretty good rate. We got it at a 4.65%, so we were happy with that. We just were still paying on the loan for the contractor, the interest free loan, basically paying back into the retirement. After that was done, we finally decided to get the lower tenant out of there so we could remodel that unit. He had been there for about 10 years, I think way below market. He was with it when we got it and he had just been there for a long time. So it was time to get into that unit.

Ashley:
And this time period had been how long from the day you purchased it until the day that you were able to rent it out?

Jessica :
That was about 10 months. Yeah, we got it. We closed in January and I think they were finally done with everything in about October.

Ashley:
So after you’ve gotten that wrapped up, everything’s set, what is your feelings towards real estate? Are you continuing on or are you saying you’re throwing in the towel as to I am never going through that again.

Jessica :
Yeah, no, we definitely were continuing with it. So after we were done with that, we decided to do the remodel downstairs ourselves. So we just finished that up a year after. We had planned for about three to four months. And that remodel on our own took about a year for us total working after work weekends we’re done, we’ve recovered, we’ve rested, and we’re looking forward to the next project.

Ashley:
So two and a half years later

Jessica :
Essentially.

Ashley:
And it’s completely done. And then what ended up being the final numbers on that?

Jessica :
So when we bought it, our numbers that we had projected for rental at that time were about 1460 per unit. When we bought the property, we put 20% down and our mortgage total was about 1500. So it’s just over 1500 per month. After doing the upgraded remodel, a little bit nicer version than we wanted. We are now renting out for 2200 upstairs. That’s a furnished all inclusive rental. And then the downstairs is 1800 a month.

Ashley:
So

Jessica :
Much better than we expected.

Ashley:
Yeah. And what was the person paying downstairs? Were they paying 1460 when you first bought it or were they paying some different

Jessica :
He was paying 1200. Oh wow. 1200. Yeah.

Ashley:
So let’s go into that, a little bit of the market in Alaska. So what actual city is this in?

Jessica :
So we are in Anchorage, which is kind of the main city in Alaska. I think we’ve got a lot of tourists in the summer. It’s super, super busy in the summertime. We have a big military base in town here, so we’ve got a lot of that. And then just a lot of families living here.

Ashley:
And then what are some of the things that if someone is looking to invest in this market that they should be looking out for when purchasing a property in Anchorage?

Jessica :
Okay. Well pretty much every time we’ve bought any sort of real estate or things in Anchorage, we always buy in the winter, which is tough because there’s a lot of things you can miss, but you also get a better deal because nobody wants to move in the middle of winter, move in or out. So I would say check previous listing photos. If you can get up on the roof, check every little nook and cranny, make sure there’s no leaking because that’s a huge issue here is wintertime freezing and then pipes leak and obviously roof leaks like we experienced.

Ashley:
Okay. And as we were jumping onto this call, you did mention that there was a moose outside in your yard. So is there anything we need to know about the animals and the wildlife in Anchorage before investing there? One thing in my market is you can sometimes find wood bees that will literally, if there’s a house with wood siding and they can be literally infested with it where they’ve drilled holes into the siding. So is there any kind of wildlife that you need to be aware about?

Jessica :
Nothing that will really affect the houses. Maybe spruce beetles occasionally, but yeah, moose are everywhere. They’re all over the city. They are silent, but they’re huge. You can open your door and they’ll be there blocking your car and you can’t get to work for the day. They’re just moose are literally everywhere in Anchorage.

Ashley:
Okay. We’re going to take a short break and when we get back I want to touch on managing your properties and what advice you have for rookie investors. We’ll be right back and we are back with Jessica. So Jessica, are you self managing your properties?

Jessica :
We are. I manage them myself. I work from home usually, so we have four doors total that we manage right now. And then my husband’s kind of the handyman so to speak, or if we have to hire someone out for a plumber. But yeah, I manage them all myself.

Ashley:
And are you using any software or different things like that to manage it?

Jessica :
No, I mostly just use Excel spreadsheets and things like that and do it myself.

Ashley:
And what do you find easier to manage? Which strategy?

Jessica :
It’s a little bit of both. I mean I definitely kind of the short midterm rentals, they’re fun to go over there and flip and stay on top of it, but my ultimate goal is to become a snowbird. I’m originally from Florida. I’m not built for the Alaska winters, so I kind of like to have long-term people there during the winters.

Ashley:
So with doing yourself managing, do you have any horror stories of any communication with tenants that you can think of off the top of your head? So we went over a horror story of a contractor issue and also a buying issue of a property that had an issue. Do you have any horror stories of an experience as a property manager? I

Jessica :
Wouldn’t say we have any horror stories, nothing too terrible during Covid. We did have someone who sort of became a squatter, wasn’t paying their rent, refused to get out, but really I would much rather keep a unit empty and wait for a good tenant than I would to rush into the unit just to get that monthly rent. It definitely pays in the long run to wait for a good solid tenant.

Ashley:
And I think that’s so different than a lot of other markets where you can usually do a long-term rental the whole season or a short-term rental the whole season. But mixing it up, how does that complicate your vacancy and the amount of time and energy put into a property when you’re having to rent out the short-term rental for the busy season and then having to adjust during the winter months?

Jessica :
So we learned that the hard way everybody gets so excited by the short-term rental availability in Alaska summers because you can just charge an astronomical amount, which a lot of people do. And so we did a short-term furnished rental for the first time last summer and made amazing money. But then once September October came, there was nobody, it was hard to find a long-term tenant to go in there and it just sat empty for a long time. So I think it’s better in the long run to find someone with a median rent. It’s going to be their long-term and you don’t have to worry about

Ashley:
It. Yeah, I think that would be aggravating to me as to almost the scarcity mindset of like, okay, it’s getting to the end of the season. I’m going to be vacant for the next six months or something like that. Worried about having to rush to get a long-term tenant in place. There’s a ski town near us that is kind of similar where they put in a lot of short-term rental laws, stricter laws than what they had before where you can’t do a short-term rental anymore and you have to do long-term or at least 30 days or more. So people are getting strategic with giving discounts for having it rented over the winter months for a period of three months and then after that, turning it into a long-term rental over the summer for seasonal workers or things like that. So just the idea of the Anchorage model kind of reminds me of what they’re having to do there. But there is constantly four rent signs over the summer of them not being able to fill because there’s just not that much going on and everybody wants to be there in the winter months too.

Jessica :
Yeah, everyone wants to be here in the summer and our municipality recently passed a code stating that any residence is allowed to have an A DU in the backyard or adjacent to their property. So I think that’s really going to help with the summer rentals and legislature is trying to pass right now where Alaskans have to have only renting to Alaskans. You can only have one short-term rental because so many people kick their tenants out to try to get that summertime money. So it’s really hard for families to find long-term reasonable priced homes here.

Ashley:
Wow, that makes a lot of sense. I didn’t even think about that as far as you’re looking for units, but you can only find them from a certain amount of time and then you have to relocate for the summer months and then come back to find housing. That’s such a great point. How do you think that new law is going to be effective? Do you think that is going to help with only letting each person only have one short-term rental per person?

Jessica :
I do think it will help. There’s so many people that want to just have long-term affordable housing here, so I think having an A DU will be much better for the short-term summer tourist people just to stay in a little cabin or something at someone’s house.

Ashley:
And then my next question is when you do have the long-term tenants in place over the winter, are you giving them any kind of guidance or even if you still have it as a short-term rental over the winter, guidance as to how to deal with the elements of the weather there? Are you creating any kind of handbook or guide to assist your renters into caring for the property? I mean even just in Buffalo we have pipes freeze and things like that and I would think that there would be a lot more extreme circumstances in Alaska than here.

Jessica :
Yeah, definitely The pipe freezing is the number one issue. When we were just doing this last remodel, we were gone for about a week during really cold snap and we came back and the pipes were not turning on. We panicked. Luckily the water hoses at the end of the season because they will absolutely freeze, and if you’re going to go out of town for long periods, the best thing to do is to kind of those exterior walls that have plumbing is you need to leave it on a little bit of a drip so it doesn’t freeze up because it gets negative 30 here sometimes in the winter. And it doesn’t matter how long you’re gone or how well your house is insulated, those pipes will definitely freeze if they’re not used.

Ashley:
Do you have any other tips that you would give to rookie investors who are thinking of self-managing as far as what are the best ways to communicate with your tenants that you have found?

Jessica :
I don’t believe in phone calls. I won’t do phone calls with my tenants. I say, please text me or please email me because one, I have a bad memory, but two, I want everything in writing. I don’t want to ever confuse anything or have them come back and say, you told me this or you told me that. I want that proof in writing always, because you never know when you’re going to need it. I

Ashley:
100% agree with that. I do that with almost everything, attorneys, loan officers, everything. I had countertops installed one time at a property and they sent me the bill for it and they had included that there was going to be tile backsplash and I hadn’t even been to the property at all to look at it or not tile backsplash, but the countertop backsplash. And I was like, wait, no, I did not order this. And I went back and I found the email that said, I do not want this. And so they took it off because I had said I didn’t want it to their salesperson and they still had put it on and installed it, but they were nice enough to take it off, but I didn’t have that email. They’re probably not going to believe me that. I said, no, I didn’t want that. Please take that off. So having everything in writing I think is a great advice.

Jessica :
Yeah, I’ve just recently found through my phone on my text messages, there’s a little section where you can schedule text messages far in advance. I’m four hours away from my family, so I do that a lot for them. But I’ll go through when I have a new tenant and schedule a text message the first week of October, please remember to remove your hose at this time to plug in your car is here and leave your pipes open. Just every little thing they need to know, I just schedule it in advance so that I don’t forget.

Ashley:
That is another great tip. And you can do that by text email many different ways and any property management software too is schedule those reoccurring messages so that they happen at certain times throughout the year. For our property management company, we do build out almost like a timeline of here’s our maintenance that we have to do throughout the year. That’s always has to be done, such as cleaning out the gutters, cleaning up leaves, things like that. But we don’t really have any that go out to the tenants on a quarterly basis or whatever. When it starts to snow, we’ll send them a reminder, but that’s a great idea to pre-schedule all of that communication just so that every year it’s automated and not even having to push a button. Yeah. Do you do any of this with your contractors? So you seem to have great communication, keeping everything in writing with your tenants, learning from your experience with the bad contractor, working with the good contractor, are you doing the same technique with them where all communication is in writing too?

Jessica :
Definitely, yes. I text everything, email everything to them because I will forget. I have very bad short-term memory, so I have to text things. I even send reminders to myself to check back in with them if I forget something. But luckily we don’t need contractors that often. The number one we usually need is a plumber. And that’s another issue. I don’t know if this is Alaska or if you’re experiencing this in the lower 48, but trying to find a plumber lately has just been so hard. We’ll have to call five or six, and a lot of them don’t want to come because it’s a crawl space or there’s just not enough them to do the amount of work that’s needed

Ashley:
For ours. We basically have just been working with one plumber, and I think the fact that we’ve given him so much work over the past year that we were actually just talking about this the other day, is to how grateful we are that they make us a priority too. But that’s the advantage of being able to use them consistently and constantly, which it’s not a good thing for me. That means I’ve had a lot of plumbing

Jessica :
S it’s okay, they’re worth the weight and gold this contractors,

Ashley:
But one contractor that we don’t, well, one specialty that we don’t have a lot of use for and don’t use frequently as an electrician. And so we actually did just try out a new electrician recently and we ended up having to go with somebody who just started their business because that was the issue. It was very hard to find an electrician who was experienced in things like this. And we found this guy who just went out on his own left the company he had been working for and he was great. He was great. And so he really didn’t have any marketing. It was actually the girl that waxes my eyebrows, her husband. She had posted it on her Facebook that he was going out on his own and I screenshot it and saved it. And then when we couldn’t find anybody that we had used before that was able to come out, we ended up contacting him. It’s just amazing the different ways that you can find contractors. So how did you find both of your contractors?

Jessica :
Usually what I do with my contractors, and the same thing we did with the plumbing contractor is we were trying to DIY something. We went to the local plumbing supply store and I’m asking all these questions and that’s where we found our contractor. I asked him all the plumbers in town, do you have anybody you recommend? He was like, this is the best guy. He does the best work. He’s a good price. He is an honest person. So that I think is a really good place to get a good contractor. They know everything about all of them in town. Yeah,

Ashley:
That’s a great idea. A lot of people say you go into Lowe’s, you go into Home Depot, you see who’s there at 6:00 AM but going into the more specific niche is a great idea. When I built my house, my contractor got all of his plumbing stuff from an actual plumbing fixture store that had just plumbing materials there. And most likely if you have an experienced contractor, they’re going to be going to those kind of stores because they have credit there. They get discounts there. They want the best materials instead of going to Lowe’s and Home Depot too.

Jessica :
And usually if you find one good contractor that you can work with, ask them. They have other people in other realms that they reach out to and they work with.

Ashley:
Now what about your agent or your lender? Did you use an agent on any of your properties to purchase these?

Jessica :
Yeah, for this property, we had an agent. We had found a new agent. I didn’t realize that she was so new. I mean, she’s a great, wonderful person, but we went and put the property, we went and viewed the property and put an offer in, and we still thought there’s a little room for negotiation after we do the inspection and everything. And we put the offer in after only viewing the top unit. We hadn’t viewed the second unit. So once we put the offer in and then got the inspection back, we realized there were so many more issues. We said, okay. We talked to the agent and said, can you maybe renegotiate with the person selling and see if we can get a little money off of this? And she pretty much talked to her boss and came back and said, oh, I’m so sorry. You’re locked in on price. You filled out this form, that means you’re locked in. You can’t go back, which we didn’t have that much experience with real estate. I’m like, what? I didn’t know this was a thing. So we kind of got stuck with this offer that we had put in per the realtor’s recommendation, and we really couldn’t negotiate. We really had hoped to get at least maybe 20 grand more off towards the problems that we found after the inspection.

Ashley:
Yeah, that’s crazy. That really does not sound like that was supposed to happen at all. I

Jessica :
Think she just was so new and didn’t really know what she was talking about, and we didn’t know and lesson learned.

Ashley:
And we just had, on my rookie bootcamp, we had a guest on Angel Garcia and he was talking about continuously educating himself, and he talked about something similar where he had no, well, I guess not, kind of similar, but he had no idea the process of buying a car. And he was like, I don’t want to go in there and get duped. So he spent hours researching the process of buying a car and what happens when you go into the finance manager, all these different things. But his point to the rookies in the group was, you need to spend time learning a process because you’re not going to know. Not everybody is going to be able to assist you and to help you along the way and think about all the different steps that you’re taking throughout real estate. Not everyone is going to handhold you and be your best friend.
Just like your example of the agent too. I had an agent that lost my earnest money deposit and tried to blame it. And the secretary of the admin that worked at his brokerage, and actually somebody else that worked at the office told me, no, he lied to you. It was not the admin. He just blamed it on her. And it was almost the deal almost fell through because of that. And there’s just all these different things that can come up. But if I would’ve known better as to, I need to track. So now every time the agent that I do have, that’s great. I take a picture of the envelope, I’m sending it in, I take a picture of the actual check and I mark what date I’m actually sending it out and everything like that, and track all of this from these lessons learned. And even if we watch a million YouTube videos on the process of getting a property under contract, working with a real estate agent, there’s still going to be things that come up. But I thought that was really interesting what Angel said as to continuously educating yourself on these processes.

Jessica :
So after I had this experience, I was so bummed about it. I actually went and started studying real estate. I went all the way through the process, got my license. I don’t actually plan on using it, but I just wanted to know every detail about it. So I got my license. Like I said, I don’t plan on using it, but I met so many good realtors that we’re going to use in the future, and now I know so much more about it, I won’t be caught off guard again.

Ashley:
And let me ask you this, how much was it to actually take the course?

Jessica :
Oh, I think in total and the license for about a year. So I think I spent about $3,000, which seems like a lot of money, but I think of it as an investment. That’s an education I took. It’s just like taking a class at college now. I know everything there is to know all the little details that we would’ve missed before

Ashley:
And New York State just to take the course. And if you don’t actually go for the exam or get your license just to take the course, it’s like $99. Oh, wow. So if you’re really intrigued and interested, I think it was Real Estate U because I’ve started to take it three or four times and I’ve just never completed it. So good for you. But it

Jessica :
Was worth it just to be able to have that access to go and view houses whenever we wanted to. I’m like, oh, I’ve got the license legally, let’s just go see a bunch of properties. So we learned so much just by doing that.

Ashley:
That is such a great advantage of not having to schedule a showing and coordinate with when the house is available to be seen when your agent is available and you being able to go to. So along with getting your real estate license, is there anything else that we need to know about you as far as things you have? Are you a licensed home inspector now

Jessica :
Too? No, no, not quite. My husband was pushing for me to become an appraiser. I’m like, no, that’s too much for me. I need something I can do from home. So I’ve kind of been studying more of different properties you’re allowed to have on different pieces of land, basically. So we’re looking to buy some acreage, see the different things that you’re allowed to set up as far as short-term rentals, farm stays, things like that.

Ashley:
Oh, awesome. I love the idea of generating multiple income streams off of a plot of land, a parcel of land.

Jessica :
So that’s really what I would love to do in the future is to kind of find a piece of land, do something like agritourism or eco lodging, something like that where people are visiting, they’re kind of connecting with nature, staying on the property with plants and animals. A farm, stay like that.

Ashley:
Yeah, that’s very awesome. Well, thank you so much for coming on today and sharing your story of what happened with your duplex, but also giving a ton of advice. I think the parts of communication with your tenants, how to find good contractors and just the lessons you have learned are very valuable to our rookie listeners. So thank you so much for taking the time, Jessica.

Jessica :
Yeah, I appreciate you having me.

Ashley:
We will include Jessica’s information into the show notes. Thank you guys so much for listening. And if you have your own horror story that you’d like to come and share with me, you can go to biggerpockets.com/reply. I would love to have you on as a guest so we can laugh together and we can cry together about the horror experience. I’m Ashley, and thank you so much for watching or listening. We’ll see you guys next time.

Watch the Episode Here

https://youtube.com/watch?v=8DblRTTZQ9Q123

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In This Episode We Cover:

  • How Jessica’s $40K renovation turned into a $130K+ “nightmare” rehab
  • Self-management tips for long-term and short-term rentals
  • The BEST way to source contractors for your renovation projects
  • Why you shouldn’t speak with your tenants over the phone
  • What you need to know before investing in an Alaska rental market
  • Why you should get your real estate license (even if you don’t plan to use it!)
  • And So Much More!

Links from the Show

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

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