Posted on: March 08, 2022
WI 902 | Rental Properties

 

Rental properties can lead you to massive profits when you invest correctly. But incomes and rewards aside, real estate can also be daunting for a first-time investor. The business can obliterate your returns if you don’t have a strategy to follow. That’s why it’s important to steer your gears, do some research and learn how the experts do it.

Speaking of experts, we’re bringing in the master of rental properties in the show! Jay Seifert is here to guide you to generate your legacy wealth faster. Whether you’re a newbie or a well-seasoned realtor, you’ll learn so much in this episode.

How A Real Estate Investing Newbie Acquired 8 Rental Properties In 2 Years While Working A Full-Time Job

We know that finding discounted properties is the most proven path to financial freedom. Let’s face it, we all want financial freedom and security, but few of us have been taught how to build long-term wealth while still earning an income. The truth is owning a rental property is the best and the most effective way to increase your income and build legacy wealth fast. 

On this show, you will discover how to take control of your finances and make your money start working for you. I’m here to show you how to build long-term wealth and cashflow while paying less in taxes through owning rental properties. Stop trading your time for money and get off of the transaction treadmill. I will be speaking with a friend and student, Jay Seifert, who was able to achieve awesome results using the BRRRR method to acquire rental properties and he has not even been doing it that long at all. Jay, welcome to the show.

Thanks for having me, Dave. I’m happy to be here.

Jay, you have been working with me to achieve more additional passive income by buying rental properties. How long have you been doing this?

It has been about a few two years at this point.

How many properties do you have at this point?

I have eleven. Three are rented and I’m working on eight others.

Here is the cool part about my friend Jay. He is a trainer. He owns a gym and has a successful business. That is his full-time gig. He has done eleven properties after hours while having a full-time job. If you work full-time, that does not mean that you can’t invest in real estate, that does not mean you can’t market to sellers, and that does not mean you can’t own rental properties and acquire rentals with little to none of your money. Jay, tell us about your journey.

I have been in the fitness industry for many years. I owned my studio for several years and it has always been a passion of mine. In the background, I have always had an interest in doing homes and getting involved with rentals and flips. I have got to the point where I wanted to make an effort to move towards doing that and reached out to our mutual friend, Justin. He connected us and it has been a great experience. I like it even more than I thought it would at the beginning.

Are your eleven properties under contract or purchased? What part are these through the phase?

I have three that are paying rent, four are being worked on, and the rest of them we settled on the agreement.

You have them in different stages of the BRRRR method. Let’s talk about the first three that are rented. How did you find these deals? Tell us a little bit about each of these.

I have a specific area that I’m trying to stay within.

Do you have a buy box?

I do. I’m within that area. I have found that by looking on Facebook Marketplace and Craigslist has proven to be pretty successful for me. What I’m looking for is for sale by owners and rehab homes for sale. Just like anything else, you probably have to go through a lot of them to find the right scenario and find somebody who is motivated and wants to sell at a discount. That is where I found most of them. Another thing is that you can’t underestimate relationships that you build with sellers, people who are wholesaling and stuff like that. There are a couple of people that I have developed relationships with that keep coming back to me. I will be one of the first ones that they wholesale to.

They are wholesaling to you and leaving meat on the bone.

I’m fine with that as long as it makes sense for me and my number.

How much money out of pocket have you spent?

WI 902 | Rental Properties

Rental Properties: You can’t underestimate the relationships that you build with sellers.

 

Zero.

You haven’t spent any money because you are buying deals at a discount. You’re getting them from wholesalers at a discount, and you’re getting them direct to seller at a discount. What is the next step?

I use my hard money lenders.

Where do you find those people?

It takes some time, especially when you are first getting started. Hard money lenders are not so interested in lending to somebody who does not have experience. The first one I used was a friend, a colleague and an investor with my studio. It is good to start with friends and colleagues. Once you start getting experience, what I have found is that people start coming to me.

Isn’t that funny how that happens? You start having some success and all of a sudden, they do not want you to give the money back. They are like, “I like this interest payment.” All of a sudden, you have a lot of money that you do not even have deals for.

I have a few people that are waiting for the next deal. I will call them and say, “Here is the deal.”

How are you getting a rental with no money out of pocket? You bought it at a discount in various ways. You borrowed it from a private or hard money lender. I assume you have to fix these things up. That’s probably one of the reasons that you are getting these at discounts. It’s because you are buying properties that typically are going to need some level of repairs, sometimes a lot of level of repairs.

That is how we add value. If we can add value, we can increase the appraisal once we finish the repairs.

You are not swinging a hammer. You are a perfect example of somebody that loves leverage like myself. I do not swing a hammer or use my money and resources in terms of fixing the property up, and neither are you. Do you hire a general contractor, several maybe or you’re working with a couple? 

I have one that I’m working with and I’m looking for some others. The most I ever do is landscaping or cleaning out if it is a hoarder-type house. I can see over time that I’m going to probably do less and less of that because the less of that I do, the more I can focus on finding more. I was taught a long time ago, “Only do what only you can do.” Other people can do landscaping. Just like my training career, I do not do a lot of training but my trainers can do training.

You own the gym at this point. You are the business owner. You have that same mindset when it comes to real estate. Here is the cool part. You have four rented. You went through the BRRRR method process, bought them at a discount, rehabbed these properties, made them safe and clean for the tenants. Who did the renting process?

I did.

Was it hard?

Not at all.

You just talk to people and make friends.

I have been using Zillow Rental Manager. It’s easy and free. They do a background check and financial check. They are ensuring that I’m getting good and responsible tenants in there. As far as promoting each property, I have been using Facebook Marketplace as well. I have been having around 60 to 70 people interested in every property.

There is a lot of people that are looking to rent no matter where you’re at.

Hard money lenders are not so interested in lending to somebody who doesn’t have experience. It’s good to start with friends and colleagues. Once you start getting experience, all of a sudden people wouldn’t want you to give their money back.

The way the housing market has been in the last couple of years, there is a lot of people who are not in a position to buy. That is the reason why.

Not only that but you are rehabbing the property first and providing them with a quality product, a clean, safe environment for them, their family and children.

There is a lot of different places you can rent from. What are you going to do that sets yourself apart? Why would somebody want to rent from you? They need to know that you are going to take care of them. It is going to be clean and everything is going to be in working condition. If it is not, they need to know that you are the person that is going to take care of it in a quick manner.

You get it rehabbed and then you go. You have a hard money loan with a tenant in a property that is nice, clean, fixed and updated. It also allows you to get top of the market rent because all of the other properties in the area that tenants are looking for or may rent, they’re going to pick the one that is going to be the nicest that they can afford. That is also going to give you top of market rent and a higher-quality tenant if they are willing to pay more. Those go without saying. What is the next step?

We financed with the bank.

Tell me about that process.

It is pretty easy. The appraiser came out. It has been a good experience for me and everyone so far. I’m always prepared to meet the appraiser and I have my comps.

Do you go to a local banker, credit union and say, “I would love to get a refinance.” You are not asking for a purchase because you own the home already. That is important. You are going there and asking them for a refinance. They then send the appraiser. They tell you when so you can go meet them there. You go out, meet them at the property and it is rented. You are coordinating with tenants. That is easy. If you are doing the management like you are, you just call them. You have their number and get them in.

It is important to showcase all of the repairs that you have done to the home to make it better. I come up with comps and every time I have done that, they appreciated that.

You are not telling them what it needs to appraise for but you are saying, “I know that your job is a lot of work. Let me help you and make it easier for you. If you do not want to look at what I can provide and help you with, don’t. Wouldn’t you like me to help you make your life easier?” They say, “Thanks for your input.”

I’m not trying to tell them what to do but this is how I see it. I refinance it, get the loan through the bank and start paying my monthly payments. The rental payment has always been significantly more.

Let’s talk about that. That is the cashflow. That’s the difference, what you bring in rent versus what you have to pay out on all of your expenses. You have a mortgage once you refi. You may or may not have your taxes and insurance escrowed in your mortgage. Do you or do you not on yours? I like to do it that way because then it’s less to come up with $65,000 at the end of a year. It hurts a little bit but if you have it escrowed in, it comes out every month.

You have your mortgage with taxes and insurance. If not, save money. Put that money aside to cover those bills later. You are going to have maintenance. If you had a property manager, you would have property management fees. You can also factor in vacancies and other things to help determine what that cashflow is. The more properties you have, the more things you can start to add in there. You have four rented already. What is your cashflow on those four?

All in, we are probably pulling in about $3,600 a month. Some of that is going towards the mortgage.

That is the principal pay down. What is the take-home in your pocket?

It’s $1,500 to $2,000 a month.

You are making $400 to 500 per property. If you have some maintenance, that is going to eat into that. That is why you are giving me a spread and that is okay. Mine has a big spread because, in some months, I might have to have a roof or an HVAC but that is okay because the rest of the properties pay for those items. $1,500 to $2,000 a month cashflow. You had mentioned, “I’m making $3,600.” How? Where is the difference coming from?

That is the equity I’m building from them paying down my mortgage. I like to look at that as I’m earning that whole amount.

WI 902 | Rental Properties

Rental Properties: It’s really important to showcase all of the repairs that you’ve done, everything that you’ve done to the home to make it better.

 

I’m not that great at saving money. I’m good at buying assets and that is okay. We don’t have to be. If we can get good at buying assets, look at it like this. I do not have my little pink piggy bank nearby but I love this little example. It is so dumb. When we buy a house, we have this little pink piggy bank and it got the $20 worth of nickels in it. You shake it, you can hear it and it sounds great. Every month somebody else is depositing $200, $300, $400 in that piggy bank for you on top of the $1,500 to $2,000 worth of cashflow. That is per property.

In your case, with four properties, you are getting $1,500 in cashflow a month and then another $2,000 a month of pay down on the debt. That piggy bank is great because you can’t get to it. We can if we go to the bank and refi but it is savings on autopilot. Guess what happens after ten years? That piggy bank is the size of a VW Beetle filled with $100 bills.

Not only have they been paying it down but that house has appreciated too.

You have been working with me for two years. You have four now, but you have eight that you are working on. What is going on with that? You have doubled under contract or in the project process from what you have. Why the sudden ramp-up? Was there a delay in the beginning? Let’s talk about that.

I’m discounting this one that you and I did together. That was a flip and it gave me the confidence to do it on my own.

We each made $40,000 on that deal.

My first one is in Valley Park in 2021. I was ready to start ramping up then but I’m having a tough time finding them. It had a lot of it had to do with the way the market was. Starting in the fall, I’ve switched a little bit.

You got excited about it. You started seeing money coming in. You said to yourself, “This is not that difficult.” When you first started, there wasn’t a deal right away because of a couple of things. You were learning, you were excited, and there was a lot of fear. Hopefully, I helped you with those problems.

I don’t have fear now. I feel like I can get through any scenario that I come across. That is part of it. I got a little bit more motivated and confident in my abilities to do it.

It is hard not to get motivated and confident when you are making money. That helps a ton.

Around that time, I discovered that Facebook was a great lead source.

Let’s talk about some of these lead sources that you have tried over the last few years to get you to twelve properties, maybe not all rented. Hopefully, a few months from now, all of those will be rented and you will have yourself a $3,000 to $4,000 of cashflow and debt paydown. That is $7,000 a month of additional income that you didn’t have before. Talk about some of the lead sources that you have tried and experienced. Maybe you did not even have success in some of them. That is okay.

I know a lot of people have success with driving for dollars. I have tried that. I can’t be driving all around all over the place. I even hire an assistant to reach out to these leads with minimal payback. I gave it quite a bit of time but the only house we have gotten from a drive for dollars is the flip that you and I did. We drove in that area together. Besides that, it has either been marketplace or referral.

Let’s talk about the marketplace. You’re saying they are online. They are Facebook, Craigslist or Zillow. When you say marketplace, you are talking about all these different online places where it is free.

I’m talking about the Facebook Marketplace, specifically.

People are going to the Marketplace. I would imagine you are seeing both property owners, like the seller themselves posting it as well as wholesalers.

I’m ideally looking for scenarios where it’s for sale by the owner. I’m not looking for properties that are listed by agents because we can generally get a better deal.

How are you getting a good deal when you find a property on the Marketplace?

You don’t need to know all the different sales tricks. You just need to know how to listen, ask the right questions, and get people to know, like and trust you.

They don’t have to pay agent fees.

I want you to tell the audience how you are having this conversation because some people are like, “I can do this.” You can do this but you have to pick up the phone and take action. Tell us what action you’ve taken. What does it look like?

I find a house and look at the area. I run the comps before I even call, just to see if it’s even a possibility. I come up with what I could offer for this house. I do not even know how much repair it will cost.

What are you discounting like the zestimate or whatever the number is that you can come up with? What are you discounting?

I have been using 70% right off the bat.

That might even be high. I would go a little lower. Go at 60% or 65%. Either way, it is working and you are doing this with no money. That is what matters.

I set a time to go take a look at it and run through it. I have some ways to estimate repairs myself that you have helped me with over the last couple of years. If I feel like it is a scenario that might work, I try to put an offer as soon as possible. I try to get my contractor out there as soon as possible so he can validate.

Tell me about the process of meeting them at the property. That is typically what you are going to go do. You get them on the phone and you make them a verbal offer. If they like the offer and you are in the ballpark, typically, the next step is to go meet them there. If you are virtual, you can get somebody else to go meet them there. That is not a roadblock. That does not mean you can’t do this. Anybody can do this. Are you doing much more than just making a friend?

No, I’m doing that. I’m trying to see how motivated they are.

By listening and asking questions?

Yes.

You do not need all these sales tricks. I’m terrible at sales. I bought 160plus houses. I do not know the first thing about sales but I know how to listen and ask the right questions. I know how to get people to know, like and trust. That is rapport.

People love to do business with people they like.

That is what you do. You go out and make a friend. This is so discounted. Nobody talks about this like, “You got to have this trick up your sleeve.” None of that makes a friend.

They understand that I’m taking a calculated risk and I need to make money for my risk. One thing you told me early on is that you shouldn’t be embarrassed by your offers. I’m not embarrassed by it now. If I offer something, I never had anybody say, “This is ridiculous.” They are like, “I understand.” The beauty is it’s going to work out or it’s not going to work out.

The beautiful thing is if it doesn’t work out, you say, “What is your number? You do not like my low number. Am I in the ballpark?” If your offer is $60,000, they come back and need $66,000, you are not that far away. If your offer is $60,000 and they need $140,000, that is too far out and that’s okay. If you do not get their number, how do you know? You got to ask. Don’t be afraid to make offers and eliminate that fear. Jay, you are doing awesome.

You got four rented, eight more you are working on, that is a total of twelve properties. You are going to have them all rented out in the next couple of months. You are going to be crushing it. Your cashflow is $1,500 to $2,000 a month on the four you have. You are also paying down debts of about $2,000 a month on top of that. How did you find your lenders? You started with your friends, people nearby and your network.

They started coming to me after that by talking, posting on social media and stuff people have seen.

WI 902 | Rental Properties

Rental Properties: When you go into a bank and ask for a loan, they should be excited to work with you. That’s how they’re going to get paid.

 

Where did you find your bankers for the long-term refinance side of the thing?

It’s through you.

I helped you but it is not hard at all because it is local people. You got to walk in and make relationships. It is so easy. Banks make money when they lend it. When I go to the bank and I give them $5,000, $10,000 or $20,000, that is a liability on their balance sheet. It is an asset of mine. They owe me that money back.

How do you think banks make money? If you don’t know, this is it. They make money by lending it. When you go into a bank and ask a bank for a loan, they should be excited to work with you. They are whenever we go in because that is how they are going to get paid. You went to the local banks and local credit unions.

It makes for an easier transaction because you can get John, Paul, Debbie or Brenda’s number who works at the local branch. You have one point of contact. We always recommend going local to start because then you are not bouncing between call centers and random people. Get one or two points of contact that you can drive to their office. It is going to make it way easier.

I have been a business owner for many years. I appreciate the relationships that you build with bankers. Something that I took in with this business as well is the relationship. They need to be able to trust you and your process.

It goes back to making a friend again. Making a friend is going to go a long way. Here are all the ways I can think of from the hip, finding private and hard money lenders. If you could make a friend with somebody that is in your market, that is already hard money lending. Maybe it is Aunt Sue or your cousin Darryl or whoever. Who cares? As long as they like, trust and know you, you can do business with them. It is the same with your contractor.

Make friends with your contractor when it comes to the rehab process. Make a friend with your seller so you can get a property under contract. Figure out their motivation. Make a friend with the tenant if you are doing the management yourself, or make a friend with a property manager to help with this process, and then make a friend with your banker. You do not need a bunch of tricks up your sleeve. Make friends with people and you will start having success in this business.

When these people see how you do business, you are responsible, you get back to them and you take care of things, when it comes a time that you mess up on something, which we all do, it is much easier for these people to accept because they are like, “He always tries. He messed up this one time. It is no big deal.”

Jay, one thing I admire about you is you know what you want. When you came to me, you wanted to learn how to wholesale and do some flips. You quickly learned that that wasn’t your thing. Your thing was buying rentals, creating wealth, as well as cashflow and passive income. You started doing some marketing and found some deals. We did a flip together but you knew what you wanted to do. That is where you focus your time and energy now.

Look where you are at. You have four rented. That’s amazing, good work. Eight more are on the way. I can’t wait to see where you go from here because once you get these other eight rented and your cashflow, wealth creation and passive income triples, it is going to be fun to watch you go from 12 to 20 to 40 to 50. We are going to be neck and neck in no time. I can’t wait. You are doing awesome. Let me ask you, Jay. Would you recommend my coaching? What do you think? Be honest.

Absolutely. I may have not told you this enough but it has been the best thing that I could have done as far as getting into this industry. If you are on the fence about coaching with David, he goes above and beyond to help you out. I would not be near where I am without you. I hope that feels with my training. You want to do work with people that you trust and like, but you want to do work with contagious people.

You want to keep coming back, learning new things, having success, discovering that it is not difficult, and eliminating the fear. What I try to do the most is help people eliminate the fear. What is the worst that can happen? You’re going to have to make a phone call, a hard one, and tell somebody that you can’t do a deal because the price was too high. You learn a lesson in the process.

Guess what happens often. They give you a better price or more time, but that is about the worst thing that can happen. You have been crushing it. Seeing you grow, creating this passive income, and creating this wealth has been amazing. Is there anything you could share that might be helpful for the newbie that is just getting started, especially somebody that might be full-time that owns a business or has a job and they don’t have a ton of time to go do a bunch of marketing?

I have a few things. The first one is to trust the process. We both use the BRRRR method, which always works if you are doing it right.

It allows you to do it with none of your money or little to none of your money. That is the best part.

You have to trust that process. A lot of people are hesitant, scared to jump in, and maybe a little weary of the BRRRR method.

They are wary of taking risks, disappointing people, and having to make that hard phone call if the deal does not work out. Failures plus a lot of hard work equals success. You have to embrace it.

Failure plus failure plus failure plus failure plus a lot of hard work equals success.

I have had a lot of people come to me since I started doing this who are interested in doing it as well. I have explained how it happens but none of them has taken a step. A lot of that was you pushing me to make those things.

Accountability is part of the coaching, “Where are you at? What have you done? I can’t only show you the door. You got to open it and walk through it. I will hold your hand even. We will go together. If you are not willing to walk through that door, nothing is going to get done.” Trust the process is a good one. What is the next one?

Do your homework, run your comps, run them again, and run them through more than one tool. We use PropStream.

Batch, Zillow, Trulia, Realtor.com, Redfin.

You can’t do too much homework. The next thing is something you told me early on. There is not any single house that you have to have. Be ready to do your homework and offer your deal, and be ready to walk away from it if it does not work out.

I’m usually walking out the door as I’m making my offer. You got to build rapport and make friends but there is no house that you must have.

When you first get started, you are like, “I got to get this house and this other house.” You do not have any. With any house, you are like, “I want this house.” You got to realize that there is a lot of houses out there and there’s got to be some that work with your scenario.

If they don’t, then they don’t move on. That is a great piece.

Another one is to use all these available tools. There are so many apps and web-based tools that we use. The ones I use most are PropStream. I run my comps through there, and also Rentometer.

It is great for determining the value that you are going to collect on it.

I use that every time I’m ready to start renting. Zillow Rental Manager has been great too. It is free. They do the background check and financial check. The tenant pays for it. You set up your lease on there. They sign the lease and take payments through their app too. I do not ever have to hassle for payments or anything like that. The Rental Manager will email me if somebody hasn’t paid their rent or stuff like that. I can contact them but it also reminds them.

All the tools that anybody would need, we have them at BRRRR Method Mastery, the course. Anything from purchase contracts, joint venture contracts, amendments, assignments, the scope of work, contractor agreements for your rehabbers or GC crew, leases and different items for checklists whenever you are renting a property or you are getting it back, and financial statements for your banks, we have all of it in the course. We love providing this because it is going to be the difference between people having analysis paralysis and taking action and jumping in. They have all the resources that they need. What’s the next one, Jay?

Be creative. Every scenario and every house that you do is going to be a little bit different. The first one I did, the Valley Park house, I did not give any money upfront. I signed my name onto the mortgage with the previous tenant. That is not going to work for everybody.

These were the creative deals like a subjectto type of play. It was short-term. You were going to pay the mortgage while you were rehabbing it. That is not that crazy and hard to do.

It is something outside of the norm.

You got all that back on the refi where you did not have to have any money in the deal. Get creative and be creative. Here is the thing. That does not go for getting into deals or getting out of deals. That is all the time. You can make money with no money if you are creative. The BRRRR method in itself is a creative strategy. If you are not willing to be creative, you are going to come across roadblocks and you’re going to quit. Don’t quit and be creative. It matters.

One more thing on that. I’m always of the opinion that in some way or another, we can make this work.

We will if we keep trying to find the solution together while we are strengthening the rapport we are building, which is becoming better friends with the seller, lender, GC or whoever.

That connects with my next one which is always to continue to learn. That goes with anything you are doing. As soon as you continue to learn, you start growing. You have to have a growth mindset. That helped me get into this in the first place. The growth mindset is where you believe you can do anything, given the right instruction and preparation. Knowing you, you never feel like I know it all. Every day, you are probably learning something new. The same goes with me, especially with this, but even with my studio. I have been in that industry for many years. I have the mindset that I still have things to learn every day.

Do not be closed-minded. Know that you don’t know it all and you are going to be constantly learning new things. When you make mistakes, those are lessons. Those are not failures. You win or learn. You do not lose. Jay, you nailed it. What would be one more thing that you would share that might be helpful to the newbie?

WI 902 | Rental Properties

Rental Properties: The BRRRR method always works if you’re doing it right. You just have to trust the process.

 

Get out there and make offers.

That is the most important thing. Offers lead to contracts, contracts lead to deals, and deals lead to rentals or wholesales. I love the rentals because they’re going to pay me every month with the cashflow. They’re going to build wealth and have that automated savings. You don’t have to have any of your money in the deal if you do it the right way.

You are getting an asset with little to no money. I like the no-money play. Last but not least, there are massive tax benefits by owning rentals. It is depreciation. You are going to get to have a phantom expense on your taxes for owning them, which means you keep more of the money you make and pay less in taxes. If you own these properties for the long haul, values are going up. It is only natural over time.

Jay, thank you so much for coming on and for sharing. You are crushing the game and you are an amazing student. I love working and continue to work with you. I hope you have enjoyed this show and found a ton of value in this episode. If you are interested in creating wealth through rental properties using the BRRRR method and achieving financial freedom in your life, go to WholesalingInc.com/rentals.

Check out what the program is all about and schedule a call with my team. On the call, we will discuss your real estate investing goals and how the BRRRR Method Mastery can help you get there. I would love to help you get started on your way to generating passive income and creating a legacy wealth with rentals. Every single one of you is capable of success. More importantly, you are worthy of it. Thanks for reading.

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