Episode 045 - STRR - The ABC's of Acquisitions: How to Build Your STR Portfolio

This week, we are beginning our series on Property Acquisition or buying properties and adding them to your portfolio.  It's a part of your Short Term Rental Business Plan that every single STR Host should have.  You need to be thinking long-term and planning for your retirement, whether it's decades away or only a few months.  Holding Real Estate is something we all should seriously consider because RE is how the majority of millionaires BECOME millionaires.  In this episode, we talk about how to look and find properties to make offers on.  Where do you want to look and what should you look for, specifically.

 

Transcript of this Episode:

Hi, it's Michelle, the master of money, mind setting.

You are listening to B and B dash boss. And in today's episode, we're doing a short-term rental revenue replay because it's Friday. I love that, you know, every Friday when I was growing up, I lived in Chicago and the loop, which was one of the radio stations I listened to. I know I'm old and I'm dating myself massively, but they would have these songs that they played only on Friday.

And every Friday I cannot help, but think of these songs, cause it was a Friday song. It was like, okay, it's Friday, every Friday the loop would play the Kings and they would play this beat goes on and switching to glide, you know, those are two songs kind of slide into each other and it started your whole weekend off.

It was like, this is such a great song or two songs, but it's really one song. And it was awesome. There were a lot of songs like that when I was growing. I guess these poor kids, they don't even know what they missed. You know, when songs blended into another song and you're like, oh yeah, here comes the really good part.

Anyway, we're going into Friday and I'm excited to bring you a whole series of the ABCs of acquisitions. So for the next four Fridays, we're going to be going over the ABCs of acquisition. And revamping them. And I'm probably going to be adding some things in here too, taking things out, just tweaking them a little bit, but I want you to get the gist of acquisitions because why, because all this month we're going to be picking up properties, right?

Whether you're picking them up to rent them and do rental arbitrage, or whether you're picking up bump and actually buying. I want you to know what acquisitions is about because the whole goal of this is to be building your portfolio and your properties that you own, not just the properties that you manage, why, because properties that you manage and you do your BNB business.

This is not an investment. You are not on the BNI side of the cashflow quadrant. Why not? Because it doesn't run without you. You're basically an S and that's an ass as in the letter S and not S as in an animal that you think I said, that is a donkey. It's not, you are an S as in Superman, as in do it all yourself, as in your business, doesn't run without you.

And that's not a good thing to do. We want to be business owners and investors that we can walk away and have our business keep making money, even when we're sleeping, even when we're sick, even when we're on vacation, even when we pass away to leave as a legacy to our family members. So that's the end goal.

Okay. Okay. So let's take a listen to number one, the ABCs of acquisitions. And I'll talk to you about the. We're going to be talking about getting you started in your marketing plan to build your portfolio. Oh, the book that I've been reading this week. Absolutely. Fantastic. I think I talked a little bit about it last week, but it's clockwork now.

Clockwork was written by the same guy who wrote profit first. Now profit first is one of the books that I suggest everybody reads when they first get their business started, because it's about paying yourself. And a lot of people make that mistake. They'll be working in a business, especially as entrepreneurs and just not paying themselves.

And Mike has got this great system of paying yourself first and then paying everyone else. And that way you keep the business running and you build profits quickly. You set up several different bank accounts for different things. I love the way he does this. I absolutely suggest that you read Mike's books and get profit first, but the bomb is this new book that I'm reading.

Actually. I'm not sure how exactly new it is, but it's clockwork. I haven't read that. And he's got a ton of books, but I am loving clockwork. It has a lot of ways to scale your business and you are absolutely going to love it. And it's such a great book for this podcast because this episode is talking about scaling your business.

And it's really difficult to scale when you're freaking doing everything and going absolutely crazy. And you haven't. How to automate different things or how to save time and money and effort. There's a lot of things for bigger businesses, people with employees in the book, but literally entrepreneurs and people with less than 10 employees or no, employees can actually implement this stuff.

And if you implement it early enough or you implement it while you're still, you know, thinking about using VAs, which are virtual assistants, if you're thinking about doing. This is definitely the book for you. It can help you out a lot. So I absolutely recommend clockwork. You're going to love it, love it.

And you can get that book just by clicking on the link inside this episode. So now let's move on to getting started in building our marketing plan in order to acquire more properties. So this is going to be the very first step, the very first thing that you do. When you decide to scale your business, right?

You're going to have to sit down. And create a plan for yourself. How many properties do you want to get? Where do you want them located? And in what timeframe, these are like goals that you're going to set. Now, remember, goals are not set in stone. They can be flexible. They can change. What do they say?

That people underestimate what they can do in 10 years, but they overestimate what they can do in one. So I absolutely recommend setting, inspiring goals, goals that will really just freak people out. But if you don't strive for something, you don't get the result that you could possibly get, the more you try the better the result.

And if you don't have a big enough goal, then you don't try as hard. So it's like shooting for the stars and you hit the moon. You know that same. That is absolutely the truth. It's absolutely. What you want to do is you really want to always hustle your bustle. This is, we used to say hustle your bustle man, and just really work hard.

The, remember when you're an entrepreneur, this shit is up to you. You can buy a bunch of different courses. You can get a mentor, you can hire a coach, you can do a lot of things, but they are not going to build your business for you. Only, you can build your business, right? It's like smokey, the bear saying only you can prevent forest fires.

It's absolutely the truth. When it comes to entrepreneurship, no one cares about your business like you do, because it's not their business. No one will care about your business more than you and your family. So if you create your own business, you're going to work hard. But what you have to do as you build your business, create your business in such a way that your employees are part of something that they feel that they are a part of something.

So make sure that you're reading all the books that I throw your way as much as possible, right. That you're really opening your mind to a lot of education. The more you learn, the more ways you'll find to share opportunities with other people higher on the right people and get them to be as devoted to your business as you are, or at least close to it.

And, you know, you want to be generous too, so you want to make it profitable for them. You don't want to, you know, be a slave driver to your people and have them work and work and work for minimum wage. I mean, we get that a lot in Florida and that's one of the biggest reasons why we have the turnover that we do in.

With our cleaning companies, we have a huge turnover and the same with the management company is there. Most of them will come and go. I mean, now we've really found some great companies, but for a long time, they were few and far between. And the reason why is they're fricking minimum wage in that state $8 and 46 cents.

Are you kidding me? Like it's nuts. It's so low. Okay. So think about this here in Arizona, our minimum wage. Well, my son, when he got his first job, he went to work for Chick-fil-A and he was making 13, 50 an hour. That is $5 more an hour than the people are working for in Florida. $5 more an hour. And believe it or not, or housing is as expensive than Florida house.

In certain areas, it just depends on where you go. But for the most part, we're one of the least expensive. That's why most people come here from states like California, when they're fleeing the great state of California, what they've had about 5 million people, an Exodus of the state of California, huge Exodus.

Right. And the reason why is they can't afford to freaking live right. The median house price is so expensive, but they come here, they get a lot more bang for their buck. So they get a much nicer house, a much bigger house for a lot less money and they can work for the same amount of pay and sometimes a little bit more.

And so it's a great deal. And I've talked about that in previous episodes, and I really hope that you get the opportunity to go back and listen, because a lot of people will bitch and whine about what they get paid in states. And there are so many things that go with that. And you're going to have to think about those things.

When you're thinking about buying your properties and getting into property acquisition. This show is showing you how to build your assets. We're going to be talking about picking up these properties for yourself. Okay. Now obviously you can do this in a way where you're picking a properties to rent them, but literally now, The goal is to build your assets, build your portfolio.

And the only way you can do that is by picking up these properties. And there's a lot of great ways to do that, and we're going to talk about them. Okay. But I want you to realize that there are a lot of things in play here. Go back and listen to the previous episodes where we talked about the teachers.

And how much teachers get paid in certain states. And then they get all pissy when they come to Arizona and go, we don't get paid as much, but if you took the two people getting paid and what the price of housing and stuff is, their cost of living goes down so much here that it's like getting paid way more an hour than they do in states like California and other very expensive states to live in.

So you might not get paid as much. But your quality of life goes way, way up. You're going to have a nicer house, a bigger house for less money, and your groceries are going to be less. Your gas prices are going to be less mean everything's going to cost you less. So we have to look at those things, not just picking out a job, right.

When we're picking out properties. So a lot of people will say, well, here's the best properties. If you go on and you start looking at articles and you're saying, okay, here's the best properties that we can possibly pick up, you know, in an Airbnb, this is going to be great. Here's some of the great areas.

Woohoo. And, oh my gosh, they're getting three and $400 a night. And you're like, yeah, that's great. But. The daily rates might be high, but their occupancy can be really fairly low. And depending on what your property looks like, if you can't compete with those great properties, your occupancy could be slim to none.

Look at what the average income of those people in that area are because sometimes they're like 10 or $20,000 a year. And if you have to pick up a house that's six or 700,000, and you're only going to be making 10 or 20,000 a year. I mean, that's absolutely nuts. We pick up properties in Tucson for less than a hundred thousand dollars a unit.

They make us $30,000 a year. So think about that. What is that? That means that your return on your investment is so much better. I mean, we're talking between 25 and 30% of our return on our investment and that's when we pay all cash. Can you imagine if you were getting loans on that shit seriously. So let's talk what a return on your investment means.

Okay. So when somebody says ROI that's return on your investment, it means the amount of money that you put into your business, the amount of money that comes out of your pocket and goes out the door. That's your investment, the money that you put in. So the return on that investment, what you're going to have to look at is the return on the investment in one year's time.

Compared to the amount of money that you put in that came out of your pocket, then we're going to take the income that we made in that one year time. And then we're going to divide that by the amount of money we invested and that's going to give us a percentage. And that percentage is R R O Y our return on our investment and the higher that percentage is.

Money we make the better the investment. So when you put your money in a bank, let's say you put $10,000 in a bank and you're making 2% interest. That 2% is your ROI, right. It's 2% and that's a pretty low income. So if you are making 6%, that would be better, right? Because you'll be getting 6% back. Well, it's the same thing.

X amount of dollars into this property. You're getting X amount of dollars back from the property. That's your return on your investment? So what you're going to do is you're going to take the money that you made and then divide the money you put in, divide that, and you'll get a percentage point, whatever.

And that is your ROI, your return on your investment. So here is an example. We picked up a property for 70 put about 20 into it. That's $90,000. Right? As soon as we put that property live, we could see that our income was roughly 30,000 a year is going to be 30,000 a year. We are right on track for 33 35, but let's just say it's 30.

So that means this year, we're going to get $30,000 back out of this property. Now, what portion is 30,000 to the 90,000? We put in. It's about 33%. That's the return. Now, if you start taking out all your expenses and stuff, it's going to bring it down. Usually they'll bring it down to about 25 roughly for us, because our expenses aren't that much there, especially in the one, one properties.

Now, when you go up to Scottsdale, you're going to buy a much more expensive property because Scottsdale is the Scottsdale of Arizona. So basically. What that means is Scottsdale is the, uh, you don't want to say elite city is big because if you've lived in Arizona for any amount of time, he knows Scottsdale is not elite in any way, shape or form, but you know, to a lot of people, it is, there's a lot of people who think that it's a beetle end all.

And there's some great areas in Scottsdale. But if you live in the valley, you'll know that there's great areas everywhere. And if you really want to be elite, then you go over to PV because paradise valley. And those areas, their medium income is one of the highest in the country. And so to me, that's what elite would be were your median income is high.

Scottsdale still has some dive areas and some really, really nice areas. So you just have to know where to go in any area, but there are parts of Tempe that I like more than Scott's. And Tempe is if you know anything about the Phoenix valley, Tempe is where ASU is, but it's also where the spring training happens.

We get a lot of teams coming in. I'm not a big baseball person by any means, but the cubbies come in being from Chicago. I know who they are. I don't like them very much because we're from the south side plant. I'm definitely a white Sox fan. We used to be right there. I used to work. Little pizza joint in Chicago called Connie's pizza, right on 24th and canal and best pizza in Chicago bar, none.

And on Saturday nights you went to one of the games, the white Sox games, they would have fireworks Comiskey park. The original Comiskey was right there and you would get to watch the firework shows on the weekend nights. And it was so amazing. So when you first look at the comps for all the different cities here in Arizona, I'm talking about Arizona because I live in Arizona.

When we start making our plans where we are going to acquire properties, right? Where are we going to go? It's always better to start closer to home. I mean, if you possibly can, unless you've done this for a little while, unless you've been remote, start yourself off, easy with something close to home. Now, if you're in a city way, the hell out in the middle of Timbuktu, nowhere, what do they say?

BFE if you're in the middle of nowhere and you don't. Any BNB is by you, then obviously you're going to have to go somewhere else, but go someplace close because like investing in any real estate project, when you get started, you want to be within a close proximity. So you can go there. You know, when you send out mailers to people or you start marketing to people, you want to be somewhere where somebody calls you and says, yeah, you know what?

I'm interested in selling my property. Can you come over this afternoon? And you want to be able to say, yeah, Oh, sorry. I'm three states away from you or, oh, sorry. I'm five hour drive away from you. You want to be like, I'll be there. Right? So you want to make sure that when you first start investing, you do it in a place that's as close to your residence as you possibly can.

So we're going to be talking about Phoenix because it's my backyard. Obviously you're going to do your own homework and your own area. And I'm just giving you an example because there are some great places all around the state of Arizona, and I'm sure there are great places, all around you, whatever state you're in.

There are a few states that I avoid and I avoid those states for very good reason, because if your state does not have. Great landlord laws. So there's always, if you want to take a look at what your landlord laws are, just Google it or duck, duck go it. Right? Right. So, because we don't Google anything anymore.

We duck duck. Go ahead. So just duck, duck, go your state, your city, look up your landlord. Tenant asks for your state. Now you'll notice that in a state like Arizona, what's really great is if somebody doesn't pay their rent, normally when COVID, isn't going on. When somebody doesn't pay their rent, normally we can evict them rather quickly.

It doesn't take very long. Within three days of them not paying, we can go to the courthouse and start the proceedings. There'll be another three days after we serve. And like literally within a week, they're gone, we can have the sheriff at their door and we can evict them. But there are states like California, where you can see horror stories in different areas where you are stuck.

There are horror stories going on all over the country of people taking advantage of landlords and their short-term rental agreements in different places. If you ever want to freak out, you can watch the very, very old movie on this called Pacific Heights with Melanie Griffin and Michael Keaton and Michael Keaton plays this crazy guy who runs from these people.

Tara's their property part and sues them and gets the property. And I mean, it's, it's kind of a weird story, but they're up in San Francisco and just because in some states like California and some of their cities. Somebody can stop pain, but if something happened to them, they lost their job. Like it could take years to get people out of your place in different areas, like literally years.

And I'm not even joking. So imagine having to pay a mortgage when you're not collecting any rent. What happens most of the time is people end up losing their properties and everything they put into it. That doesn't happen in Arizona. And that's why I like the state of Arizona. You just have to know your state.

You have to know the laws, the local laws, the state laws, and know how it relates to you as a landlord. Now, obviously, The landlord tenant acts, the tenants have their rights as well. And you have to remember, you are by law required to, and you should, because you should be a good person. You are required to take care of your tenants.

So they deserve, you know, clean water and utilities and things to be fixed in a timely manner and no bugs and no floods and no mold and things like that. You are required to take care of your property and you'll see. A lot of places where they have a lot of what they call slumlords it's because they put these acts in place that they think are protecting the rights of tenants.

But in actuality, it's so bad for the landlords that they can't get out or around it. So let's say for instance, you're in New York city or now parts of California. And they put an act in that protects the tenants rights. You can't just raise the rent. You think that's really great, especially for the tenants are like, oh, well, great.

They can't keep raising my rent, but here's the deal. If they can't raise your rent, they can't maintain your property. A lot of times. So if a landlord's hands are tied and he's only making and the, and this is the truth, there's a lot of landlords, especially when they have multiunit properties where they're making 50 to a hundred dollars a unit, that's all they make.

Like that's literally all they make. And that has been true across the board for decades. They don't make very much money, but let's even give them the benefit of the doubt. Let's say they were making $500 a month on their property. How long would it take if the roof needed to be replaced for them to use up all the funds that they.

Like it wouldn't take very long. And for the most part, like I said, these landlords aren't making that much, but one major challenge, like a roof or heating or something happening to the electrical system, one major expense could break a landlord. And the only way that they usually will be able to make that up is by upping the rent a little bit on everybody else so that they can pay for those.

But they won't be able to do that. If their hands are tied with the amount of rent they control. And so what happens is over years and years and years, they're not able to keep up with all the expenses that they have, all the repairs that they have. And so they become, what's called a slum Lord and they just, you know, their hands are tied.

And after a while, they're just like, well, F it, I can't do anything about it. I can't put more of my money in, I'm not making any money off this place. So I'm kind of stuck. You've got to remember. Being the landlord is literally a business. You have to be able to make enough money that you can put some away so that if a major challenge comes up, you got enough money put away to fix it.

If some kind of something happens, you've got to do something about it. And make sure that you maintain livable and not just a livable property guys, you should be improving the value of your property all the time and the quality of life of your tenants. If you have long-term tenants, you know, there's, there's a lot of things to learn when it comes to real estate that take years and years, because believe me, especially being raised and a very Democrat city like Chicago, it took me a long time to realize it.

Why are these things bad? I mean, I always thought they were good and I was like, well, they're good for some people, but not for others. And here's the examples of why. And once you see it, you're like, holy cow. I never even thought about it that way. I only thought about it this way. And you'll rethink a lot of things that you thought were true.

It's very mind blowing mind expanding real estate is, but you'll absolutely love it. So, hopefully you are in a state that is friendly towards you as a landlord. Okay. Now, when we buy our property, you know, this is mine. Number one rule. When we buy our properties, we buy our properties, always thinking about a long-term tenant, just in case.

Okay. And the reason why we do that and not a short-term rental is because if a law changes, if something happens. That prevents us from doing a short-term rental in our unit. We've gotta be able to cashflow that property and maintain it. So we've got to make sure that we can cashflow the property and maintain it on a long-term rental income.

Let's say we're talking about my favorite down in Tucson or the one ones, one bedroom units over by the university. Go for about six, $700 per year. Let's just say, um, the majority of them are going closer to seven. The prices are definitely going up down there, but those are shitty little units. So, I mean, let's be honest.

Some of those places are crap, places in crap neighborhoods with, you know, I mean, they're close to the university and they are. They're not good, but the majority of people can't afford anything above and beyond that. So you'll see very few places by the university that are a thousand a month for a one bedroom place, unless it's a really nice place.

Maybe it's a guest house in a big old mansion, you know, kind of thing or something. And they've got their own private pool. Then you'll see it for a little bit more, but otherwise you really don't. You really don't see the prices that way. So you've got to know what you can pull in on the unit. If it were just renting out.

Long-term. That's kind of what saved our ass and the pandemic, knowing that we could cashflow these properties on a long-term basis without losing money was awesome because we immediately flipped it over and started marketing to nurses, traveling nurses, students who were stuck without housing and stuff.

So we immediately changed it all. And where you would have to discount your nights and stuff. It didn't really matter. We were still cash flowing. We still cash flowing because we had already planned for something bad to happen. Hopefully we weren't going to have anything bad happen. And I don't know if any of us saw this crap happening, but it definitely saved us.

It will save you too, because God forbid anything like this happens again, not just that. Anytime you think that everything is going sweet? All it takes is some, one person getting a bug up their ass and they go to a city council on next thing, you know, there's a whole big movement and your head's spinning because they're getting rid of short-term rentals in your area.

It's happened over night, practically. In a lot of places. So you could be making money, hand over fist. And then overnight somebody goes through the city council and it feels like a whirlwind thing occurs. And suddenly it's illegal to have BnBs in your area. A lot of people in Hawaii were stuck with that.

There were so many illegal BnBs out there and they were running like that for years, years, guys, they were running for years and years. Nobody thought they would ever do anything about it, but not only did they do something about it, but they're penalizing these people in going back years, collecting taxes and penalties and fines.

On that money that they earned for years. So these people will not just likely lose their businesses, but they will maybe even lose their properties. That's a big deal. That's big deal. You have no idea. So we always do everything we can on the up and up. And we always make sure that we have multiple exit strategies.

We also try to buy so that we've got enough of a cushion that if God forbid something happened, we'd be able to sell that property. And be able to make a little bit of money and not lose any money, selling it right away. So we always make sure we buy with a Kush. We never overpay for a property. If we can at all help it.

Now I know we've had Chris on this show and her dad, he doesn't, if he wants a property, he just buys it. He doesn't even really care. Chris is way more careful than that, but the point is know what you want, know what you're willing to pay for it? No, what you're willing to get out of it. No, your prices.

You've got to do your due diligence. Everything is about what you do trust no one to give you this information. Okay. Because you're going to be doing all this homework upfront when it comes to working on these projects. So now you've looked over your areas. You've chosen where you want to start out.

Hopefully it's close to home. Now, for those of you who have properties who have at least three properties already, let's talk to you about continuing building your portfolio. Because when you do, you can pretty much go anywhere. You kind of know what you're doing already by now, and you get to choose, but I want you to think of the variables that are.

Don't just look at Airbnb's best cities because the nightly rates are really great for those sure enough, they are. But remember. At their occupancy rates, remember to look at the cost of housing because those prices of those houses. Yeah. Breckenridge is fricking great. Right. Go ahead and try to buy a property there that fits all your stipulations for less than a million dollars.

Good luck with that. Right? Like you're, you're, you're going to be paying seven, 800,000 for something like that. And you're probably not even going to be close to downtown. Anywhere near where you want to be. Right. You've got to make sure that you're looking at the cost of the housing as well. So make sure you're taking all that into account.

How much am I going to be making? What's the income here? Not just the nightly rate, not just the occupancy rate, but what am I going to be making here? And what type of housing can I afford? And what is the rent? Why? Well, most likely in a place like Brecken. You're not going to just have a law change overnight that says you suddenly can't do short term rentals.

It's most likely not going to happen simply because they have a huge, huge number of people who do those short term rentals right now. So it's probably not going to happen. We are still going to purchase with that in mind. Why? Because if it works that way, it's a great deal. If it works with the numbers, running it as a long-term rental, you know, just in case a COVID comes along or the shit hits the fan one more time, who cares?

Right. Things happen. Things happen that you just don't know are going to happen. Bubbles. COVID pandemics began, things happen. And so you still run your numbers that way, just in case, because if you can get a good deal using those numbers, then it's a good deal all the time. Why overpay for a property, never overpay for a property, especially when you're building your portfolio.

You can't afford it. You can not afford to pay full price for everything and build a big booming business. You've got to look for the deals. Otherwise you just say next, just in case, because remember this COVID thing, it was pretty much like off the radar. But because we could turn it over because we knew what we could make.

We were able to stay on top of things and really switch over really quickly before most people even thought of it, because they were like, oh, it's going to end. It's going to end. And we're like, you know, switch it over, get a short-term rental in there. Right. Something to sustain it. So we were able to switch way more quickly than other people were.

So you want to do the same. You want to make sure that where you're buying you take all those things into account. Okay. And you're going to want to buy at least three properties in whatever new area you're going into, because you want to start making deals with people. Those people are going to be your suppliers, you know, maybe your maintenance people and your cleaning people, for sure.

And in order to get some really great rates, we've said, okay, we're purchasing one property here. The average turn rate is, you know, six times a month, seven times a month or whatever. So we need our cleaning feed to be this. And we're looking for three more properties, which means you on average are going to be making this.

So, if we can get your cleaning rate to this much per claim and this much for the laundry, then you're looking at this much in your pocket, this much for the laundry every single month. And once we have three properties, it'll be this much. And a lot of times when we can do that, we can negotiate much, much better rates.

Okay. So I want you to remember that. All right. So you picked your town, you know, what the prices of the housing are and you know what you're looking for? So, like I said in different areas have different amount of bedrooms that you're going to be looking for. When we are in our Florida properties, close to Disney, we're looking for minimum three bedrooms, and we're always looking for a pool or at least a community pool.

We love gated communities because people feel so secure in a gated community. I mean, we like things that are really. Neighborhoods that are awesome where people have food close by. I have my certain zip codes that I look in all the time and I actually do mailings to those. So if you know your area well enough and you know what people like where the action is, where they want to stay, definitely get yourself a map of those zip codes.

And even sometimes those addresses. And if you can get really specific into certain developments, we have communities out here like mystic rivers or whatever like that. Right. So you're, you're by mystic river or turtle bay. And you decide that, oh, I've already got one house in turtle bay. I want another house in turtle bay.

So you might take and write letters or postcards. I would write a letter directly. To everyone within turtle bay scene, if they wanted to sell their house, just saying you're willing to make an them offer. I also would be driving turtle bay. So drive through there and take a look it's called driving for dollars.

We do it in a lot of neighborhoods, especially in Arizona and in Florida. But have you ever driven through a neighborhood? And you look around and you can see like, oh, look at how nicely manicured this lawn is. And it's like, oh, nice house, nice house. And all of a sudden you get by somebody's house. And you're like, holy shit.

Look at the weeds in this yard. It's absolutely crazy. I mean, it looks like a scary. Decrepit lady would live there, who bribes young children in with candy and pushes them into an oven. You know? So it's just a scary looking plays. It's like, oh my gosh, this is the scary place. Those are the houses you're looking for.

It's called driving for dollars. And when you see houses that look like that, those are awesome. I love those type of houses, especially in places like Florida and Arizona, because we don't have the crawl spaces and the basements and things that they have in other parts of the country, everything is usually on a slab.

Because we do. I know that literally, as long as I've got a good foundation, I honestly don't even give a crap of what the inside of the place looks like, because I can take whatever condition it's in. And that includes molds and termites. And I can. It doesn't matter the scarier the better, because I can get the best price.

So there have been houses that I've bought in Florida, minimum three bedrooms, and I've paid, you know, in 20 and $30,000 for them. Sometimes I've fixed them up myself and sometimes I've just wholesaled them and flip them to other rehabbers and somebody who is working on. But you want to find properties that need little work.

And I know that probably scares the bejesus out of all your work. Why does it scare you? Because it shouldn't because the more work up property needs, the better price you can get it for. And the more equity you can put into it. So let's say the house that we were talking about in Arizona, those houses they're ARV, which is after repaired value, the value of what that house is after it's repaired and looking really good.

The ARV of that house is roughly around a hundred thousand dollars. And so if we could buy that house for $70,000, that's 30,000 under the ARV. That means we could put up to probably at least, you know, 15, 20,000 into it and still have a little cush be able to sell it for a little bit less. So I like to get as low as I can possibly get it.

Right. You want to make it as low as you can possibly get. Sometimes it's going to be dirt cheap because sometimes there's not going to be an AC in it. Somebody who'll have stolen that I've had places with no wiring because all the copper was pulled out, no plumbing. I mean, everything has been missing all the cabinets, you know, none of that scares me, honestly, it doesn't, I did have one property that was so crappy.

That one time that I bought it and I bought it unseen from a realtor. That realtor was, it was the person. Last time I used that realtor, usually you should know a realtor before you take their word, but literally the realtor had given me pictures of this place and I was like, oh, there's one wall with a hole in it.

So I'm going to have to do a little dry wall repair. No, literally every picture he took with a wall was the only walls in the house. The rest of the house had no freaking walls. I'm not even kidding. And all the electricity was gone. I walked in the house. Oh shit. What I thought was going to probably cost us about 10 grand to fix was probably more in the area of about 35 grand after everything that was missing and stuff, but it was okay because I had my dad with me back then and we had gotten it for such a great price that we turned it around and put everything in it and sold it for way above the ARV.

We just really, really did a great job on it. Fixed it up, but we could have actually done that and then pulled all our money out by refinancing. It pulled the money that we bought it for and the money we rehabbed it for and taken every penny and then some out and rented it. We had many, many exit strategies.

So I really encourage you to, I read books about the exit strategies that you have inside these properties. And another really great book for this is the burn method. I'm going to put that book in the link as well, because burn method is probably the best method to buy any properties with. And that is, you know, buying and rehabbing it.

You're building even more equity into it. So you can at the end, walk away and just have a property, right. Has so much equity that you can do what I just said, take it, rehab it, pull all your money out and then some, and have even more money that is literally tax-free in your pocket at the end, because it's a mortgage, right?

So as long as everything is paying for itself, that's a great way to do it. It really, really is. The burn method is a great book to pick up because that's going to help you get the mindset of picking up these properties. What kind of properties you really want to look. Going into these neighborhoods and finding where you want to buy and sending out letters to all the people in there and asking the neighbors to knock on some doors.

It's one of the best ways to find. So you knock on the neighbor's door and you say, hi, my name is Michelle. I just purchased a property over here on. And we just fixed it up and I absolutely love this neighborhood. I'm thinking of buying another property. Do you know anyone in here who is thinking of selling?

You're not asking them if they want to sell, they might say to you, well, actually I am, or they might know somebody or they might not know anybody, but whatever, when you start talking to people, you're going to get a lot of information because they'll start saying, oh yeah, you know, the couple down on the road, they're getting a divorce.

And I know they just they're, you know, they haven't put the sign up yet, but she was saying that she wanted to sell. You could go talk to these people and save them a ton of money because you can make an offer on that house before they even hired a realtor. And that's going to save them the 6% of a realtor.

No realtor is probably hate that, but guess what saves us that money too, so we can get the price even lower. So there's a lot of really great ways to find the areas that you like, right? When you find the areas that you like, there's a lot of great ways to market inside those areas. But what I really love is talking to the neighbors, talking to the neighbors is a lot of fun.

Now, believe it or not, one of the best kind of houses to find that needs a little fixing up might be a hoarder house. Yeah, I know that sounds so gross, right? It is gross. Um, we had a hoarder house. And I've told this story before I even told it on the podcast, my worst investment ever. I purchased a property that I actually owned once and had rented to these wonderful people who took very good care of it.

And then he was killed and it was extremely sad in order to help the widow. She really wanted the property. I helped her get alone. And then I kind of forgot about the property for about a year. And then she called me up and she wanted me to. Buy the house back, which was really weird because I had only sold it to her maybe a year before, but she said she had gotten behind on her payments.

She had lost her job and they had been good renters for a long time, for many years before that. So I knew she was a nurse. I was like, oh, she'll probably be a nurse again. Right. I mean, she just has this run of bad luck. And especially with her fiance, it was her fiance dying. And then. You know, losing her job and all this other stuff.

So I'm sure she was going through this bout of depression, but I made a huge mistake without one. When they cost me a lot of money and it took me years to make up that money. I did make up the money, but it took a long time. The house, once we bought it back was definitely, it had turned into a hoarder house.

She had really gone through this bout of depression. After the death of her fiance and the loss of her job, and she started hoarding animals and guys, it was disgusting. Like you can't even imagine how awful this was. I mean, it was. The place when we walked up to it, it just smelled like cat pee from the outside, like on the driveway, you can smell cat urine.

It was so bad. And the painters literally called it the cat pee house. When they were painting house, they would just write these jokes, jokes. They would draw pictures of the cat and put cat pee house. And we had to have the place cleaned by an emergency restoration crew. These are the guys who clean up after murder scenes, dead bodies.

Drug labs and stuff. Yeah. I mean, this place was so bad, so we paid a lot of money to get it cleaned out. Tons of stuff went into the garbage, tons of animal, urine and poop and just, I mean, it was really disgusting, but the crazy part is. You can pick up properties like this for pennies on the dollar, because no one wants to deal literally with this shit.

And you can, and I can tell you there's a lot of money in it. So just know what the prices of cleaning these things are beforehand. That emergency restoration, I believe at the time was close to 15,000. With the cat urine and the mold from the animals pee on the walls, because there was literally mold on the walls from how often the animals peed there and just growing and stuff.

Right. So there was, it was also in the air ducts. So we had to replace literally every light fixture, every electrical outlet. All the baseboards were pulled. All the flooring was pulled. We took it down to the concrete power, washed it and steam dead. We took all the dry wall up four feet so that we could just put new sheets of dry wall down some of the two by six construction.

So it was a custom home and it was two by six, not two by fours. And some of that was so soaked with urine that it had just swelled up and we had to change those out. I mean, it was just crazy, right. There was so much pet urine everywhere, but the thing was when you know what you're doing and you can get those costs down, you're going to be like, okay, I'm good.

Do this, this, this, and this, I mean, they steam clean through the air vents, but I mean, it was not so much this stuff costs. They had to treat all the drywall that was there and leave it and ozone it for days and tented. I mean, there was some crazy stuff, but once we all got it done that place appraised for, I believe it was 2 65 after we got it done.

And we had bought it for 1 35. So my bad, I only pulled out what I originally bought it for. And for some reason, I can't remember why. Oh, you know what? I do remember why? Because I think I was going to put my daughter in there and I wanted to leave the mortgage as low as I could. So I only took out what I had paid for it, not what I had paid for it and the money I put in extra afterwards.

Cause I paid cash for it. Right. Instead of doing the 180, which I should have done because at least I would have had every penny I put into there, what I had paid into it. If I had done that, I wouldn't have had to wait so long to sell it. But the whole thing point is when you know what the prices are of these things, they're not going to scare you.

You're guys are going to do it for you. You don't do it yourself. Honestly. There's no freaking way. I was pulling off dry wall with mold and stuff. These guys were wearing hazmat suits when they did it. You know? So the whole point is if you know the prices, it's not going to scare you. So if somebody says ARV of this house is 300,000, you can look at them and go, well, it might be worth 300,000 when it's all fixed up.

But number one, You need a whole new kitchen. That's going to be 30,000. You're going to need all new flooring. You need your HVAC. You need a new roof. If it's a quarter home, we've got to get all this crap out of here. We're probably going to have to clean all the walls in the inside of the air events.

That's another 15,000 and you can tell them exactly what it's going to cost and all those keep going down from the ARV. Boom, boom, boom, boom, boom, boom, boom. And here's your offer? Take it away. It's so weird too, that people are so afraid to make offers because they're afraid people are going to say, no, people are gonna say no.

And then you talk to them some more. Look for a no, because as everybody knows, what does Maria say? The kids are great negotiators because they don't take no for an answer. It's like, can we go to McDonald's? No, do your kids stop there? Oh, mama said, no, we can't. I got five kids and I don't think any of them ever took that.

No for no. Right. They come back at you. Well, I just cleaned my room. What if I cleaned my room? Can we go to McDonald's? It's like, did you clean your room? It's like, no, well, I'm almost done. It's like, okay. Maybe if you clean your room, then I'll think about taking you to McDonald's and it's like, then they come back out.

I cleaned my room. Well, your room is clean, but your sister's room. Isn't clean. Next thing you know, they'd go in there and they'd get everybody that because they take everything. Every excuse you have and they fix it. They're like, okay, why can't I do this? Well, you can't go out Thursday night because it's a school night.

We'll know we don't have school on Friday. Well, you've got soccer practice. Um, well, soccer practice did this, or, you know, we're all going to get up early. Anyway. We're going to make sure we're in bed by 10, every excuse you tell them they're going to find an answer or something for it. So it's okay to get nose guys.

Get the know and then come back. Why are you saying no? No, because I need more money because my mortgage is this much. Ah, that's a pretty frigging valid reason. Right. That's a really good reason. So you've got to know what your answers are going to be when somebody says that it's like, all right, how about this?

How about we take over your mortgage? Give you enough to move. And you don't have to worry about anything. We take over your mortgage with a seller, carry back, give you enough to move out. You're out of here. No more problems for you. And we've got you all caught up with everything with every single, no, be ready to ask them why.

Okay. Well, that's fair. Can I ask you why you're saying no? Well, I'm saying no because of this. And they're like, oh, well, what if I told you this? Be the teenager. Be the child. Take the no, and then find out the excuse that they have, and then answer that excuse with something else. It's really the best way to negotiate.

I like staying in different neighborhoods. Like I have certain neighborhoods I absolutely love. And what's really funny is all the realtors in that area will call me first when something is out there because they're like, oh, every time something opens in here, Michelle Russell picks it up. So they'll literally call me because they.

They know I'm serious. She's already got a few properties in there. She loves this place, call her up. But a lot of times they call me when it's all fixed up. I'm like call me before it's all fixed up because they want top dollar and I'm not willing to pay top dollar. I'm not willing to pay top dollar for almost anything just because that's the type of investor I am.

I need to get the equity in that place. Myself. I don't want to buy it and have no equity. It's not an investment then, unless it's raking in a shitload of money, then maybe I would think about it. But for the most part, I want to be able to build the equity. So, whoa, we have gone a little bit long on this, where I'm, we're going to cut this one off here and we're gonna come back and we'll finish this out in a few more.

I knew this was going to be longer episodes, but I want you to get a lot out of this. So I want you to really do those things for homework. Take a look like if you haven't picked up any properties or you're between one and three properties right now, look at the areas that you're buying in. Hopefully they're close to home.

If you bought a property, let's get some more about where you bought, if it's good. And if you haven't, let's get one closer to home so that we can start. But I want you to take a look at the areas that you know, you want to be in. You want to know what the rental prices are with ARV is you want to know what the average daily rates you can get that information on air D N.

Dot co okay. Air dna.co is a great place to go and get this information. So go there, get this information and then pull up your zip code for that area and pay for it. I don't give a crap if you don't have any money in the bank account, but the $39 for that area. Okay. Depending on where it is, it might be as low as $19 or as high as a hundred dollars 99 90.

If you're in Hawaii or some really good place, but the thing is, you're going to go for that area. And we're going to look at areas where we've got a great daily rate. We've got a really good occupancy rate, and we're going to make sure that the price of the housing is something that we can afford. And then we're going to start driving around that area.

Putting out our feelers driving for dollars, right? Looking for places that might need a little bit work talking to the neighbors, knocking on the doors, right. Talking to people, seeing who's got a house for sale or who might be thinking of selling. We're going to talk to everybody and then we're going to find some places.

And then let's talk next week about making the offers on those places. There you go, you get some info that you didn't have before and you have to wait till next weekend to get episode two of this. Now there's four episodes of these that go together. And if you absolutely cannot wait, then head your little heinie over to short term rental revenue.

You'll find them there. They're an episode 94, 95, 96 and 97. So the best of a short term rental revenue, obviously these are on there guys. If you can wait until next week, they're going to be on here for you. And I would greatly appreciate if you could head over subscribe and leave us a five-star review on iTunes, it would really do us a solid and make it.

So we rank in our business podcasting, which helps us get revenue by getting us new sponsors. We've had audible as a sponsor for a long time. Love audible. I'm not saying I don't. But, but boy, you think to yourself after three years of having the same sponsor that hopefully all your listeners already have that.

So let's get a new sponsor. Can we please? So if you guys could go and. Subscribe that makes a big difference and then leave us a five star review that helps out too, so we can get a new sponsor. I would love to have a new sponsor because there's other businesses out there. I would love to promote, obviously, though, if you don't have an audible account by now, you really need to get one, a lifelong journey of learning.

All right. Well, I'm going to leave you with that thought and talk to you on Monday with a brand new, fresh episode, we're going on our success path, and now we're taking actions. So make sure that you're doing those action items. Every single Monday. I will talk to you on Monday and continue this journey with you for now.

I want you to have a great day weekend. I hope you guys stay safe. God bless you. Have a great day. Go and grow.