4 Properties in 4 Years and Saving $40K on ONE Deal by Doing This

Ashley:
Welcome back to the Real Estate Rookie podcast. I’m Ashley Care and I’m here with Tony Jay Robinson.

Tony:
And welcome to the Real Estate Rookie podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Now today we’re bringing on Joe Schmidt and he got started just four years ago and has grown his portfolio to four properties. Now. Joe has successfully leveraged the equity in his properties and the power of adu. So today we’re going to discuss the power of ADUs to increase rental income. The biggest key to unlock when you’re doing your market research and ways to use chat GPT for analysis and negotiation. Joe, thank you so much for being here, brother. Welcome to the podcast.

Joe :
Thank you. Super appreciate being here.

Ashley:
Joe, four years ago, how did you actually get your initial start into real estate investing?

Joe :
Yeah, I think a lot of people, I had this vision of, hey, real estate sounds like a really interesting path to go down. Going on the internet, you can find so much information and essentially pulled the trigger and bought my first home in Woodland Hills in Los Angeles with the vision that I was going to just update the visual aspects of the house.

Ashley:
Now, once you did this, did you have any knowledge that what real estate investing can do for you? Had you done any kind of research at that point?

Joe :
Yeah, so most of my research that I did was pretty much looking on the internet, landing on sites like BiggerPockets, following people on Instagram where you heard these ideas and these theories on how people are going about doing house hacking or doing flips and rentals. And that really kicked off the curiosity of my journey. But historically, before getting into real estate had zero idea how it worked, watch my dad update stuff, go with him to Home Depot, totally wish I paid attention way more back in the day I had to pay people to do all this stuff, but that was kind of my intro, but not necessarily understanding the inner workings of it.

Ashley:
Tell us a little more about this house. Was it turnkey? You could move right in. Did you have to do any rehab and what was kind of that process for you?

Joe :
Yeah, definitely. I was on the energy of find the worst house in the nice neighborhood. I took that to heart and found this great home and it really just needed more cosmetic updates, so things like paint and windows and roofing. The inside was super solid, but it just needed updating. So from a taking on a level of effort, I was like, I can paint some stuff or I can update some items. And really the mission was to just take the house back to its original state. It was already pretty, it just had a bunch of paint on it and that was my first step into saying, Hey, I could update a house.

Tony:
So Joe, were you self performing all of that work then and if, so you said you weren’t paying attention at the Home Depot trips, so how were you educating yourself as you were going through that process?

Joe :
Yeah, definitely. So as I started, I think I had bigger visions of what I could actually do, and then when I’d start doing projects, I was like, oh, maybe this might be a little too much. And so then I essentially started learning how to interact with contractors and anyone that is hiring anyone to do work in their house, working with contractors is a little bit of wild, wild west. And so that’s where I started putting a process in place of a three quote process and really just started reaching out to people based on doing individual projects. So essentially I was trying to be subcontracting everything out, hired someone to do Windows, hired someone to do painting, which at the beginning allowed me to control how much I was spending because it wasn’t just a overall project approach.

Ashley:
So what was the thing that you did to this property to actually make it an investment for yourself?

Joe :
So what I pretty much did was I did curb appeal was the first thing. The inside was pretty solid, had good bones on it, it was terrible color, terrible windows. So essentially went in and updated the basics of the exterior of it. The inside was just more of updating like basic paint and whatnot. And one of the things that I think was partially clever of doing it, not necessarily planned, but an accident, was I went in the house with putting 7% down just because I didn’t have enough money to purchase or put the full 20% down. And what happened was I was able to update the house enough and get it reappraised six months later to essentially drop my PMI off. So then I was financially set up in a way better situation and that was a complete accident.

Ashley:
Can you explain real quick what PMI is?

Joe :
Yeah, so pretty much if you’re not putting a full 20% down on a property, a bank is going to assume you’re a higher risk. So you essentially have to pay a mortgage insurance on your monthly payments. And that’s again, something typically what I’ve seen on all my properties is around like 150 to $200. But if you’re trying to make something cashflow, that $200 is very important on that. And so if you’re able to essentially purchase a home at a lower less than 20%, you could essentially force equity into house to get to that actual 20%.

Tony:
Joe, one follow up question there, because you said that you were able to increase the value, get rid of the PMI in a relatively short period of time. So what all did you actually end up doing to this property to increase the value enough?

Joe :
Yeah, so again, it was the exterior. So new paint, new windows, new roof. The interior of it was primarily just fixing or finishes, just so updated hardware. The house actually had an amazing IKEA kitchen, which I was able to just pop off the cabinet doors and just do a quick refresh. I was trying to do everything as least expensive as possible, so I was buying stuff off Craigslist, I was getting really creative of how I could spend the least amount of money possible. But then I essentially realized with that house what I was sitting on was a piece of land that could essentially be developed into build an additional unit onto it. And that’s how I got into the whole path of the whole A DU, so the accessory dwelling unit part of my journey, and that was my second next experiment.

Tony:
Gotcha. So you did the initial cosmetic rehabs that kind of lit the fire and said, man, we’ve got a bigger opportunity here, and then you moved into the A DU. So we’re going to take an ad break here shortly, Joe, but before we jump into that, can you let us know what is an A DU? What does that mean exactly?

Joe :
Yeah, so it’s an accessory dwelling unit, so essentially an additional living area on your property. It can be attached to your actual house, it could be a detach. Some people in Nashville call it a dadoo, which is funny. But essentially it is another unit that is a living quarters. And so for my property, actually it has its own unique address. It has certain utilities that go to it. So essentially its own little apartment. The way I look at it,

Ashley:
We’re going to take a short break right now, but when we come back I want to find out how that A DU was actually able to add value to your property. So we’ll be right back. Okay. Thank you guys so much for joining us. Again, we’re here with Joe and we’re talking about his A DU that he added to bring some value to his property. And stay tuned because we’re also going to be talking about the market that Joe did decide to invest in. So Joe, this a DU, was this done before you had your property reappraised to do the get rid of the PMI or was this after?

Joe :
Yeah, so actually it was part of the overall process. So I started doing research and what really changed it is Los Angeles adjusted their regulations on where you could build an A DU, allowing people to build a little bit more frequently to help with the housing crisis. From there, there was actually a post that I did and must have been in 20 20, 20 21 where I went on BiggerPockets and I put all the numbers down. I said, Hey, I just bought a house, I just renovated it. This is the after renovation value of it. I think I can build an A DU, and I put all of my numbers out there, I just put all my financial information out there and I had a bunch of people respond back. And so what that then triggered was how do I fund this? I didn’t have $130,000 of cash just laying around.
I was like, this is an opportunity and I need to figure out a way to fund it. And so what I did is actually listening to this podcast, there was a refi ad and a company that essentially helps you do an after renovation loan on your property. And so with improving the value of the main house, I built equity within that front unit. And so I went to Reify and they essentially helped me figure out, okay, if you build this accessory dwelling unit on your property, then how much really your house be after that? Then they funded me the $130,000 to then go ahead and build that accessory dwelling unit on the property.

Tony:
You hear of this company and it sounds like they’re using the equity and the existing structure to fund the construction of the A DU. So a couple of questions around that loan product. First question, did you have to come out of pocket with any cash or was it all fully funded using the equity and the primary residence?

Joe :
Yeah, so it was all funded through the actual, it turned out it was the heloc right at the end of the day, this organization got me connected with a credit union that gave me a HELOC on my property. Their product was, they helped you organize yourself to present and get qualify for it. So pretty much I pulled a HELOC out to fund it.

Ashley:
And what was the cost of using this company? Was there a fee associated for their services?

Joe :
So there was definitely fees within them working. I think it was more of a referral partnership for them for referencing these credit unions and helping fund the different products of it. So it was more for me, I looked at them as a service provider of setting you up and then I pulled the HELOC out and then there was your standard fees that went along with utilizing that type of funding.

Ashley:
Joe, can you explain what a HELOC is and how you were actually able to use it, how a HELOC works?

Joe :
So pretty much the way that it worked is I was able to pull out the $130,000 of equity out. They used the equity in the house to fund it, and pretty much I had a set cash reserve that I was essentially pulling draws from to actually pay the contractor there. One thing that I will say that I did learn in this, and this is probably my biggest loss in my real estate journey so far, is that at the time that I pulled the HELOC out, I didn’t know that I was signing up for a variable rate. And so as the pandemic happened, things started shifting. It was a good learning. You need to double check that type of stuff.

Ashley:
Joe, real quick, explain why that actually made an impact on you. What can happen if you do have a variable rate and why do you need to understand what type of interest rate you have for your loan product?

Joe :
So for me, when I was running the numbers on this IDU and building it, I was looking at it from the lens of I think that I can generate X amount of money per month and then my mortgage cost is going to be an X amount. And so for the first six months of that loan product, that is actually what I forecasted. And then one week I got a notice that it was a hundred dollars more and I was like, oh no, how did that happen? It’s important because if you run your numbers and then you are essentially paying more than you’re expecting, you could easily throw off yourself and potentially put yourself where you’re not actually cash flowing. Now, luckily enough for me, that variable rate maxes out at a certain percentage. So at this point now I know the highest it will ever be and I’m still able to cash flow the property and thank gosh for those types of regulations in place that it can’t just balloon up to something unbelievable now these days, but still fluctuates month to month.

Tony:
So Drew, I want to talk about actually getting the exit strategy, I guess here with the HELOC and this A DU. So I guess first, is the HELOC still open or is the HELOC as your plan to get the property so you can then pay that HELOC off? So what is the exit strategy with the heloc?

Joe :
Yeah, the original exit strategy was to essentially refinance the property and get rid of it, but interest rates, timing, interest rates rocketed, right? So right now it makes more sense for me to keep it where it’s at versus try to refinance the entire property and to put it into one. So with this one, again, I’m still cash flowing the property. I’m just planning on riding out this storm until it essentially makes sense.

Ashley:
Joe, real quick, let’s explain why that makes sense because I’m assuming that on the mortgage you currently have, you have a good interest rate on it.

Joe :
Yes, exactly.

Ashley:
Okay, so you don’t want to give that up when you go and refinance. So it is worth it to you to keep your original mortgage with the low interest rate and then to have the line of credit, which has a balance on it, the remainder of what you owe on your house at the variable rate, because if you went and refinance, that whole thing would go to the higher rate.

Joe :
Exactly, 100% because the front unit that I have, I was definitely in the pandemic refinance era and I got a 2.99, so

Ashley:
I can’t get rid of that.

Joe :
The math just doesn’t math if I was to refinance entire property to do it in one. So that’s where again, it hurts my heart when I see it fluctuate. But actually the A DU is my main money driver on that property. The front house, the way that it works is I’ll cashflow $200 a month after my property management fees are out, but most of my money comes from that back unit. So as long as the numbers keep making sense, I’ll just wait. So I don’t make a drastic decision. And then for me, it’s a premium property, so I do plan on holding it for 10 more years just because the amount of equity that it’s just increasing from just year over year just makes the most sense to hold it.

Ashley:
So with doing this new build, your previous construction experience was doing cosmetic updates in your property, how did you have the confidence to go and just build an A DU on the property, and what was the experience like finding a contractor to actually do that for you?

Joe :
Yeah, I think with most projects I underestimate what I’m actually getting myself into, which is probably good, so I don’t overthink it, but what gave me a lot of confidence, and not to keep referencing BiggerPockets, but posting that initial rundown of my numbers and somebody in this space being like, Hey, that actually makes sense, or you can make that work. And then also then talking to the finance company of being like, Hey, this idea that you have is not outlandish, gave me the confidence to then unlock the next step. And for me, most of my ideas, they start off as an idea. The moment that I have to put money into it, it then becomes very, very real. So there’s a moment where I was about to pay for permitting and blueprints and put actual $5,000 down, and to me I was like, oh my gosh, this is going to be huge.
And that’s when it actually started getting really real. Now as far as finding a contractor goes, like I mentioned before, I have a three quote process where my mission is to always understand what past work have you done and can I speak to a reference? Obviously dollars are very important, but actually again, on BiggerPockets going through forums, I found someone that actually built an A DU in Los Angeles and reference the builder, and I was able to then contact that person and have them come out and scope the workout for me. So that was a big thing. So just having confidence in that I was doing the right thing and then finding the contractor.

Tony:
So Joe, just one follow up question to that. So say you’re brand new or maybe you are advising someone else, what would your recommendation be to them to find at least three potential places to go get that quote?

Joe :
Yeah, so I think first, if you are working with a broker, someone in the mortgage or real estate space, asking people for their contacts I found is the best. It’s a lot easier if you can trust someone and someone else has worked with them versus just Googling somebody and I can still Google and look at reviews and do all that activity, but if you can get a reference that is the most ideal situation for someone that previously worked with them.

Ashley:
So Joe, after this property, the A DU is built, what is next for you and how did this property help you propel your investing journey?

Joe :
Yeah, for sure. I think the biggest thing, it gave me confidence that I was like, this could possibly work. And as I was wrapping up the A DU, the A DU got to a point where I was actually able to live in it. So I moved out of the front unit, moved into the A DU, and it was a 450 square foot house. So I was definitely tiny living it up, and then I placed the tenant in the front unit. And so as I was wrapping up the back a DU with things like hardscape and kind of fine touches, I was itching for my next project, it gave me confidence. I was like, oh, holy moly, I could do this. And so again, I was listening to BiggerPockets and this ad came on for, I think it was Memphis Investment Properties or something along those lines. And it was talking about all about out of state investing. And I realized really quickly that this property in LA is probably, I peaked in Los Angeles as far as house buying just because it’s so expensive. And I was like, if I want to keep doing this, I’m not going to be able to do it in Los Angeles. So I started looking outward first. I started in Bakersfield, California. I was like, that’s kind of close.

Tony:
I’m laughing, Joe, because if you’re not in California, you probably don’t know Bakersfield, but there’s not a lot going on out there. But I have a lot of family in Bakersfield, and actually every single Memorial Day I’m in Bakersfield for our family reunion, so I know Bakersfield probably better than most.

Joe :
Yeah, it’s like agriculture land out in California. There’s not a lot going on. There’s some cheap houses. So yeah, I started that journey and then I heard the Memphis sponsorship ad and I reached out to them just to get again information. My number one thing is I ask people questions and you’ll find a lot of people are passionate about what they do and they’ll be willing to give you the information for free or brokers or real estate agents. And so reached out to them very educational and they said, Hey, this is how it works. Essentially, we have people that are investing out of states, we can find you a house for $120,000. Well, 10% down $120,000 is not a lot when you’re comparing things to Los Angeles. And I was like, this is super interesting. So that put me on this path of exploring out of state, which eventually led me to buying a house in Memphis about eight months later after I finished up the A DU project.

Tony:
Joe, as you were doing your research into Memphis, I guess what did that actual research look like? I know that you were working with this company who specializes in helping folks invest out of state, but what did you specifically see in Memphis to say, Hey, whatever, two, 3000 miles away, I feel confident going into this new city?

Joe :
Yeah, I think the first thing that kind of just stuck out as a green flag to me was the cost of the houses there, right? You’re talking about a city that there’s houses that are a hundred, $150,000. And so to me, at first I was like, okay, that’s super interesting that there are less expensive homes. And then I started doing research on how can you tell if an area is good for rentals? And the one thing that what kept popping up in my research was job growth rates. And so Memphis has a super interesting micro economy where they have a lot of distribution. It’s very much a blue collared city. There’s number of new organizations coming in to Memphis, and the big one that stuck out to me was the Ford Blue Oval factory that they’re essentially mentioning that’s going to bring in a large volume of jobs, which then means a larger volume of renters, which means that I directionally then everyone should be buying more and renting more houses there.
And so that kind of kicked it all off. And then the other thing, and this might be silly because this isn’t necessarily a rule of thumb, you hear too much anymore. The 1% rule, essentially saying the price that you purchased at the house is 1%. If you can achieve 1% rent, then you most likely will cash flow. And just doing napkin math, I found a house and I was like, whoa, this actually works. Now, I didn’t actually end up going through the sponsor, the Memphis Investment Group because one of the things that I also realized as well is buying turnkey houses, there’s essentially a premium on those houses. You’re paying for somebody to already flip that house, which for me not putting down cash only or having unlimited funds, I still had to be really strategic where I couldn’t buy that house just because it wasn’t worth what they were selling it for.
I then found, I literally went on Trulia and then just found an agent and I flew to Memphis. I met this guy, Billy, coolest guy in the entire world, and he was like, Hey, I’m going to show you a bunch of houses in Memphis. He was like, I think I can find you a turnkey one that doesn’t necessarily need an actual flip, and then you can just put a renter in there. And so I’ve always framed everything that I do all these new houses as experiments because if it fails then that’s okay. I was just testing it out first.

Tony:
Joe, I want to pause there quickly because you said something that I don’t want our listeners to just gloss over, but not only did you do all the initial research, but then you hopped on a flight, you flew out there, you shook hands, and you started building that network as best as you could. And I think that’s some of the hard work that a lot of folks aren’t willing to do is to, it’s one thing to sta at a computer screen. It’s another thing to go shake hands and really be there. So for the folks that are listening, those little steps really start to give you the confidence because Joe, I’m sure once you actually touch down in Memphis, you could see the different streets and you could see how the neighborhoods changed and shifted. It gave you a little bit more confidence that you look for that next deal.

Joe :
100%.

Ashley:
How much was your plane ticket?

Joe :
I was just going to say that literally $450. I stayed at a Holiday Inn for a night and I was there, this guy, and I looked at 12 houses in five hours and I just blitzed it. But Tony, to your point, that then unlocked me because on the plane ride home, I was so gassed up, I was like, I’m figuring this out.

Ashley:
And the cost of that plane ticket in the hotel relative to what you’re going to be investing is usually most of the time worth it, unless your plane ticket is $10,000, but usually it is worth it to actually go and fly. And I know there’s lots of people that say, you don’t have to, and yeah, you don’t have to go. You can definitely invest out of state with actually going there, touching ground. But if you’re just starting out and you’re in a new market and it would make you feel more comfortable, go ahead and do it. You’re not going to be a bad investor, you’re not going to be good at what you’re doing because you actually go and visit the property, go and take a look if that’s going to make you feel more confident or like Joe said, gets you jazzed up, gets you excited, gets you motivated to actually make it happen. So Joe, another thing I want to mention too is the value in that real estate agent that they were able to schedule those 12 showings for you back to back. Think about the amount of work that takes for an agent to have to schedule showings like that, to coordinate a full day of going to so many showings, especially someone that just met you, that they’ve never done a deal with you before and they’re willing to put in the work and the effort to make that happen for you.

Joe :
100%. I think I lucked out because the gentleman Billy that I was working with, he was like, you know what? I actually primarily work with investors. So he understood the mission of what I was trying to accomplish, which was really helpful because as we were going through houses, he wasn’t trying to catch me on this is a beautiful house emotionally, he is from a numbers perspective, this makes sense. And so that also helped me out. So I think really aligning with somebody that has the same mindset as you is very beneficial.

Ashley:
And if anyone else is looking for a great agent, go to biggerpockets.com/agent so you can find an agent Joe’s.

Tony:
So Joe, have you continued to invest out of state? You start off in your own backyard, literally, then you move over a few thousand miles away. So I guess do you continue the trend of going out of state?

Joe :
Yeah, so once I bought that Memphis house and I quickly realized the strategy that other investors were doing, they were essentially purchasing homes at really low values. Going in, flipping them and then holding them. Those numbers made more sense than going again and buying a turnkey property and going in and financing it. So after I purchased that house, I said, if I’m going to be serious about doubling down on Memphis, my a mission was I want to have a bunch of rental units in the same area so I can have all of my resources consolidated, one property manager, one person to do my handy work and have everything centralized. The original mission was to go and build or buy houses there, flip them, and then go ahead and rent them out. And so with that, I was like that I could definitely not do across the US because there was just super interesting things with purchasing the house.
You had to have your HVAC system boarded up while there weren’t tenants in there. And all these interesting things of just investing in Memphis that I was like flipping a house probably would be difficult across the us. So I said, if I’m serious about this real estate life, then I’m going to move to Nashville and then I’m going to keep buying houses in Memphis. And three hour drive from Nashville to Memphis is not that far. So I essentially finished up the A DU project, bought the house in Memphis, moved out of the A DU, rented that unit out, and then I moved to Nashville back in August of last year. And so as I was going through the whole experience of having a rental unit in Memphis, I quickly learned that in order for that to work from a numbers perspective, I need a lot of units, like 15, 20, 30 units just because they’re lower income homes and lower rents. And so again, I was like, what kind of experiment could I do to potentially keep adding to the portfolio unsure about Memphis? And I essentially found a house here in Nashville and did a full flip of gutting the house to the studs. And that kind of changed my trajectory of what I was thinking about investing in Memphis.

Ashley:
Okay, so we’re going to take another short break, but when we come back with Joe, we’re going to find out how he actually saved 40 K on a deal. So more after this quick break, everybody, welcome back. Thank you so much for taking the time to check out our show sponsors. So investing out of state kind of sounds like it was a turning point for your real estate investing, Joe, but tell us a little bit about how your portfolio takes a turn once you have moved to Nashville.

Joe :
100%. So as I said, my original game plan was keep going into Memphis, quickly learn. I don’t think that was going to scale for me. So I wanted to keep making progress in my portfolio, and I went and started looking at houses in East Nashville where there’s still opportunity for houses to be updated that are a little bit older. And so back in April, I found a beautiful home and it was on the market for $400,000. Well, the house needed to be fully remodeled, and so the agent that I was working with was a little bit newer, and again, just hit someone up on Flia, found them, and they started engaging and they were very responsive. And so as we were going through the deal, I asked the agent, I said, what should we go in at? And she made a suggestion where she was like, I think it’s priced properly.
And I was like, ah, I don’t know if I believe that. And so I went on chat GPT, and I essentially wrote a prompt that said, take this house. And I put the address in and I said, understanding that the after renovation value potential in the neighborhood could be 550,000. What were other comps that sold in the neighborhood and what would be an approach for me to ask the seller to adjust the numbers? This thing came up with six comps in the whole entire neighborhood, broke down by square footage of what these houses were versus what mine was. And then came in and said, I suggest that you go in at X number. And I wrote it all. I had it write it all up, and I gave it to my agent. I said, Hey, read this to the seller. And then that’s how the negotiation started with this chat, GPT and this house. Yeah.

Tony:
Ashley, have you ever used chat GPT in a real estate negotiation before?

Ashley:
No, I have not. Even for comps really either. I thought that was a great idea

Tony:
Too. I think it really is a tool that we’re probably not leveraging enough as real estate investors to cut down a lot of that research work that we’re doing. And while you were talking, Joe, I opened up chat GBT really quickly. I just wanted to see what could I do? And I just want to share with you guys what I wrote. I said, provide me a list of all the MSAs and the United States that have I median home price of $250,000 or less, and then put those MSAs into a table that includes job growth and population growth. And I’ve got I think 20 different MSAs here with all of that information. It’s crazy how quick it can spit those things out.

Joe :
It’s absolutely crazy. And the cool thing that they started doing as well is on the paid version, which is only like 20 bucks a month, just like the Apple App store, other companies like Zillow, Trulia have started building apps on top of chat GBT that are very specific and in real time. So you can go to the Trulia app in the chat GBT store and then go even deeper in asking questions and it just pulls it up. I even had it, I pulled a total HGTV card here and I wrote a letter to the sellers about why I wanted to buy their house. And here in Nashville, they buy houses and knock them down. And so I wrote them a letter and I said, Hey, I’m not going to knock your house down. I’m just going to remodel it fully. And I had chat BT write it for me. And it was deep. It was a fantastic letter to the seller.

Ashley:
And now they’re listening to this episode and now this heartfelt letter they have framed in their new house review.
No, it wasn’t review. And that’s a great point too about linking it to another app that has the updated data because you have to be careful when using different AI software as to the date that it is valid. And that’s something else too, especially if you’re investing out of state, is doing a Google map. Street view is make sure you’re looking at the date on that data too, because a street can change even in a year, two years, three years, whenever was the last time they got that view too, as far as the conditions of homes. Okay. So what did the negotiation actually turn out to be for this property with the final numbers?

Joe :
So pretty much they listed the house at 400,000 and eventually ended up getting it for, I believe it was like 3 53. And most of the negotiation came down from the initial ask of where the house actually aligned compared to other comps in the area. But then also during the inspection side of the house, there was a lot of things that were called out. And in my backend, I knew I was going to gut the house and kind of do it, so I didn’t necessarily worry about it. But again, I had uploaded the inspection reports, so you can upload files in chat. BT and I uploaded the inspection report and it essentially asks out of all the items that were listed, what would be the cost to get these resolved? And so then I went back to the sellers and I said, Hey, based on my research, this is where I think we could potentially actually spend more money. So I’m going to ask for that off. And that was my approach of helping me prioritize what to ask for and then a ballpark of how much I should assume that is going to cost me to fix that.

Tony:
So Joe, after you gave all this information in, were they willing to negotiate or was there some more back and forth? And dude, I love how you view chat GPT through this whole process here, but I guess were they receptive to those changes and were you able to get an additional discount?

Joe :
Yeah, so we went back and forth a little bit on it. And so I’m always the big believer of Shoot for the stars and then we’ll come and meet in the middle somewhere. And that was the energy that I had around it. And again, I came to it with not just asking for a discount, I came with reasons why and why I thought it justified a discount. So I think using data, it was less of an emotional conversation with the sellers than it was. It was just of saying, Hey, this is how much it’s going to cost me to fix this. So it was easier to have those conversations and they were pretty receptive to it. They pushed back, but at the end I was able to get it less than what they were originally wanting for it.

Tony:
Yeah, Joe, so many tactical things I think Ricks can take out of this episode. We don’t talk a lot about the ADU as an investment strategy, but you’ve clearly shown how impactful that can be and how you can build one of these with almost no money out of pocket, which is great. And like I said, I love the creative use of artificial intelligence to be a more effective real estate investor. So what advice would you give to someone, Joe, who’s just starting out in real estate investing today?

Joe :
Yeah, 100%. I think anytime that I feel like I pulled the trigger on purchasing a property, one of the biggest things was getting pre-approved to understand where I actually landed as far as my financial capabilities of purchasing the property. Because once I understood that, that put me in a pretty good direction. And there were times that I’ve went and I got pre-approved, and I think a pre-approval is probably good for six months that I didn’t execute on it because I didn’t find a property that aligned with it, but it gave me the motivation to be able to go and pull the trigger. I think the second thing, and I’ve mentioned this a few times, I think for me it’s more of gut checking myself and then having confidence on pulling the trigger on it. So talking to people like the mortgage brokers, the real estate agents, those are the people that do this day in and day out.
And again, what you’ll find is most people are very passionate about the work that they do every day, so they’re willing to talk about it. You’ll obviously come across the gurus of the world that want money be before releasing information, but buying houses has been going on forever. So all the information’s out there, you just have to ask questions. And so that was very helpful for me. A lot of stuff from a terminology perspective, I just had no idea the things that you read. So getting people to clarify it was very helpful. And then I’d say the third thing I had this saying I say at work all the time is key to success is being positive and Googling everything. Now it’s be positive use chat, bt, but literally utilizing the internet because everything’s already out there. And so the great thing with systems like chat, chat, BT, is that it’s now surfacing you answers versus you trying to go find them. So that has also helped me unlock and just understand the inner workings of doing real estate.

Ashley:
Well, Joe, thank you so much for coming on today and providing so much knowledge and sharing your story with the listeners today. We are so happy to have you and you provided so much value talking about your rehabs, talking about taking the jump to outstate investing building and a DU, so much value provided today. Thank you. Thank you. If you want to get involved in the community like Joe did and all these other real estate investors are, you can go to biggerpockets.com/forums, do what Joe did, post about your deal post about what you are trying to do so you can connect with other real estate investors and maybe even a contractor. Thank you guys so much for listening. If you want to learn more about Joe, we’ll link his information into the show notes. If you’re watching on YouTube, make sure you subscribe to our channel so you don’t miss out on other episodes like this. I’m Ashley. And he’s Tony. Thank you guys for listening and we’ll see you on the next episode.

Tony:
This BiggerPockets podcast is produced by Daniel Zarate, edited by Exodus Media Copywriting by Calico content.

Ashley:
I’m Ashley. He’s Tony, and you have been listening to Real Estate Rookie.

Tony:
And if you want to be a guest on a BiggerPockets show, apply at biggerpockets.com/guest.