Ashley:
This is Real Estate Rookie, episode 303.

Tony:
So your whole seller, you met through a connection that basically came for your meetup. Your first buyer literally left your meetup with you to go view your house. And then that buyer’s agent is the one that had the buyer for your second home.

Spencer:
And my private money came from-

Ashley:
And his private money lender.

Spencer:
And his brother who was the first sub.

Tony:
And your first sub. So you got a wholesaler, two buyers, private money lenders, and subs all came from this meetup.

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

Tony:
Welcome to the Real Estate Rookie podcast where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And today we’ve got Spencer on the podcast. And I feel like I say this all the time, but just I love this episode because Spencer talks about the power of networking and how as a Rookie you can really use that to supercharge your business. This guy found literally everything he needed for his real estate business through networking.

Ashley:
And one of the things he talks about is how just buying pizza can add so much value to your life. And as he was talking about this, I thought of my own personal circumstance where this weekend at a conference, we all went to one of the parties, the event hosted and everything, and then everybody came back to the hotel lobby. It was later on, and so I door dashed a bunch of pizza to the hotel lobby. I was the most popular person in that lobby because the hotel was not serving food anymore. And so I got to meet so many people that were just hanging out, see if there’d be extra slices, then there’d be the people that would just come up and grab it and be like, thank you so much. I’m so and so by the way. So we have Spencer talking about how buying pizza has added so much value to his real estate investing and his networking.

Tony:
When I was in college, I was on the board for this engineering club, and we had meetings every Tuesday, and the best way to pack our meetings was we would buy a bunch of pizza from Little Caesars and we would give it away free to anyone who came to the meeting. It was always during the lunch hour, so people would just be lining up just to get free pizza, and that was our way to pull them in. So human nature, man. Free food, free drinks.

Ashley:
Free food works for me. But Spencer talks about his experience through 2008 with his mom, and then he goes into doing his own first real estate deal and not turning out so well. But then Spencer purchases two properties at once and he goes into how he sourced the deal, how he financed the deal, how he found contractors doing his rehab, and then also how he exited those deals and then gives us a little glimpse into what he’s doing now and working on.

Tony:
Overall really, really fantastic episode. Excited for all of our Rookie audience to hear it and get some value from it. But I also want to give a shout-out to someone that love to say five star review on Apple Podcasts. This one’s actually a funny one. So this is Kelsey Porter from Iowa. She titled her review, great for Rookie’s, gave us five stars. And then the actual body of the review says, as a full-time realtor, and that’s it. Just cuts off after that. There’s nothing else after that. So seems like Kelsey was about to go into those-

Ashley:
So she loves it as a full-time realtor. That’s awesome.

Tony:
Or she just loves the podcast so much she’s literally at a loss for words. She couldn’t even bring herself to write how impactful the Rookie podcast has been for her. So Kelsey, if you’re out there, if you’re listening, go back and finish your review so we can hear what else you got to say about us. But if you guys haven’t yet, please take a few minutes, leave us an honest rating review on Apple Podcast, Spotify, wherever it is that you’re listening, the more reviews we get, the more folks we reach, and the more folks we reach, the more folks we can help. And that is the entire goal of the Real Estate Rookie podcast.

Ashley:
Spencer, welcome to the podcast. Thank you so much for joining us today. Do you want to get started with telling us a little bit about yourself and how you got started in real estate?

Spencer:
I was in the music industry for 15 years, and if anybody knows anything about the music industry, it doesn’t pay very well. I was always doing stuff on the side. And my family was impacted by just some of the results of 2008. I’ve just always known I would have family that I would need to support a little bit in retirement. And so real estate, when I found things like Rich Dad Poor Dad and things of that nature, real estate just seemed a good way to be able to subsidize them financially, but also if nothing else, just have places to house people, family members if I needed to in the future. So it felt natural to me once I started learning about it.

Tony:
Spencer, you said something super, I think intriguing in your first sentence, man. I love it when the interviews get off to a good start like this. You said you, you’ve got family to support in retirement. We’ve had hundreds of guests on the show and every guest has a different reason as to why they’re looking to get started in real estate investing. Some people say, I hate my job, I want to quit and I need to do something else. Some people say, I just had a baby, I want to spend more time with my kids. But you said I have family to support in retirement. I guess, elaborate on what that is and why that’s so important to you.

Spencer:
My mum, her industry was affected in 2008. She had to liquidate her 401(k). My dad, I don’t think has ever set anything up for retirement. And then I have a brother that is high functioning special needs and he gets assistance from the government and stuff like that. But I’ve just always known that between all of these things, at some point someone’s probably going to need help. And I just want to be in a position where when I have a future family, they don’t have to be affected by helping my family. And again, whether you build a business that has a ton of cashflow, you have 100 units or not, if I can start now and have three homes that are mostly paid off or small multifamily, I could always house somebody even if I can’t afford to actually just pay for them. So it always seemed like there was a good backup plan there if nothing else, here’s a home for someone that needs it.

Tony:
I appreciate that transparency, Spencer, and I call that out, man, because I feel like for a lot of people when they think about building their real estate business, the motivation sometimes is superficial, where it’s just surface level and it’s hard to build the business, especially for those that are doing this while trying to juggle family responsibilities and maybe a full-time job. It’s hard to also build your real estate business on the side. And if your why, if your motivation is something that’s not super emotional, something that you can’t really connect with, then eventually you’re going to burn out and you’re not going to have the grit to really push through. But when you say something like, man, I’ve got a mom and a dad and a sibling that has special needs and I want to be able to take care of them, that’s something that’s emotional.
That’s something that’s going to really motivate you to push through when things get hard. I just wanted to call that out, man, because it’s something I think enough people don’t think about.

Spencer:
I appreciate that. I feel like everyone has always had to deal with, things always come up in life and people figure it out, but I just want to figure it out early. I don’t want to have it be something we have to figure out down the road.

Ashley:
That’s a great point as to you want to be proactive instead of reactive, and one of those things is that for your family is that you already want to know that you can help them in a situation instead of when something happens, scrambling to try to make something work for them. I think that goes in many aspects of life as to being proactive instead of reactive. So maybe it’s health, you want to invest in properties so that you have more time to hike and have better fitness because you want to be healthier instead of not, and then having to go to doctors and stuff.
I think there’s so many different aspects of life where this lesson can translate to throughout your life, and not even just money for your family and being able to help them, but maybe having the time freedom to help them too. And that’s what I love about real estate, is there’s so many aspects of the flexibility of being a real estate investor along with the income that can come along with it too, that time and money both can help you provide that security for yourself and your family.

Tony:
I just want to add one thing to that, Ashley, because, and now I’m going to try and get off my soapbox really quickly here, but there’s this concept that I’ve been trying to teach my son, he’s 15, almost 16 years old, and it’s about choosing your hard. I’ve heard this idea, this philosophy thrown around a lot of times, but you talked to Ashley, about being fit. And it’s being disciplined in your diet, being disciplined and working out consistently, that is hard. But being overweight and having diabetes and having high blood pressure, that’s hard also. Building a business while working a full-time job, while having family commitments, that’s hard. Seeing your parents go into retirement and not being able to provide for themselves, that’s also hard.
Worrying about, man, am I going to be able to cover my bills or man, I want to go on this vacation, we don’t have money to do it. All of those things are hard as well. And I think people get so focused on the short term hard that they lose sight of the long term hard. And it’s like, man, if I can just really focus in on the short term and do the things that are hard today, tomorrow becomes significantly easier. You mentioned that point, Ashley, it was just a thought.

Ashley:
So Spencer, let’s get into your first action step towards becoming a real estate investor. Walk us through where you’re like, okay, this is the day I’m taking action. What are some of the things you did to work towards that?

Spencer:
I had a friend that showed me BiggerPockets back in 2018, jumped in, listened to hundreds of episodes, and we did go ahead and buy a five unit in Harrisburg, Pennsylvania back in 2018. But lots of lessons were learned. It went way over budget, it went way over the amount of time it was supposed to take and it didn’t really set us up to have money to go and do more. And so again, I was in music for 15 years, I booked concerts, I ran record labels, stuff like that. But then when COVID hit, it obviously shut down my industry and so I decided to pivot and start a business that works with investors. And so I spent a few years working with a lot of investors, helping build their businesses more and realized I still haven’t bought another property myself and I’m not building my own business.
And so I went and joined the ascend of GoBundance or emerge of GoBundance so I could be around some people and really just said last year, I need to get another property. I know that the excuses before were I didn’t have money, well now I have a little bit of money and then the excuses were high interest rates, it’s a competitive market, all that stuff. But I just decided I needed to go do something. And so I positioned myself to be ready to hop on a wholesale deal when it came through and I was able to buy two properties to flip at the end of the year, and that’s what I’ve been working on recently.

Ashley:
Now you said you positioned yourself to be ready to wholesale a deal. What do you mean by that? What are some of the things you did to get yourself in that position?

Spencer:
To be clear, to buy from a wholesaler. I connected with a wholesaler. I just let him know who I was, where I wanted to buy that I’m serious even though I haven’t done many deals, obviously got some money lined up, I talked to some people in the area, just got a few people lined up so that I knew what I wanted to do. For a lot of people that inaction is not having confidence in what the next step is. And so I figured getting a lot of that stuff out of the way left it only on me to pull the trigger. And so I wanted to be ready to do that.

Ashley:
So let’s break that down. So you said that you reached out to wholesalers. So how did you find the wholesalers and then how did you reach out to them? Was this sending an email? Was this calling them? Did you give them your criteria?

Spencer:
I actually think I just asked some other people I knew in the area who they recommended and they put me in the direction of a few people. I reached out to all of them, I just got on their list. I wanted to see what they were pushing out. I also wanted to, it’s a good way to see what’s on the market, what’s available, what the pricing looks like, besides just what’s on the MLS. Because obviously with the MLS everyone’s trying to get as much as possible, but at least with a wholesaler you can see, you get a feel for what’s a good deal. And when I finally found the two properties I decided to flip, I’m not trying to build a flipping business. That’s just what they were good for. I didn’t think they would work as long-term rentals.
I knew that based on the acquisition price and what would need to go into it, that if I lost money, the amount of money I lost would be minimal. And I was okay with that for the learning experience of getting through it and making it known to the people in the community that I am actively doing deals. Obviously I wanted to make money, but I was prepared that at least if I’m going to lose, I lose small.

Ashley:
Okay, so you reach out to wholesalers, you got on their list where they’re sending you emails with properties you have available. That’s the first step. Second step, you said that you lined up your money. So what did you do? Did you have just cash saved? Did you have a private money lender? Give us an insight into that.

Spencer:
I had some of my own cash. My mom has been helping me, because, again, she knows my plan that I’m trying to help her in retirement, but she has some money saved. So she was able to provide me some cash. And then I lined up private money as well from someone I met at a meetup at that I host.

Ashley:
Okay, awesome. So you got yourself way to source deals from wholesalers, you have your funding ready, and then was there anything else? Did you build a team? Did you have a contractor ready or anything like that?

Spencer:
I knew who my painter was going to be. I had been working on some stuff around my own house. I know I could do at least LVP flooring. I knew who my electrician was going to be, and I had linked up with an agent at that point as well, even though this was a wholesale deal, I went to her and asked, I’m going to flip these, so you’re going to be selling them. What’s your input? And so she was willing to give insight as well. It was just a combination of getting everyone’s input, getting an idea of the painter was able to tell me here’s roughly what it’ll cost just based on the size without looking at it. So all those things were helpful in just, again, making the decision, not having a full rehab scope, but just being like, okay, I think I can make money with this and if I lose, I’ll lose small. Coming back to that idea.

Ashley:
Okay, so let’s say maybe there was four things that got you ready. So the first thing, your deal sourcing, you had found wholesalers and an agent, and then you got your financing lined up, you had some money, you found a private money lender, and then you also started building a team. You got your painter. And then the fourth thing is you gained confidence, you had confidence in yourself. You said to yourself, I don’t know everything, I’m not going to get this exact, but I think that I can move forward with this property to get you ready. I just want our listeners to take those four action items that you did and use those to make their way forward to getting their next deal too.

Tony:
So let me ask one follow question here, Spencer, because you mentioned this briefly before talking about the deals you got. And just to clarify, I guess let me zoom out to the 30,000 foot view. So in 2018 you had the one deal, which was a five unit. And then at the tail end of last year, you picked up two properties that you planned to flip. Is that a right overview of what your strategy looked like? Okay, cool. So the first one in 2018, you said it didn’t pan out the way that you wanted it to. Does that mean that you lost money on that deal? What exactly happened?
And the reason why I’m asking that question is because as you move into your deals this year, the flips you had this year, you talked about not being afraid of losing money, which is almost counterintuitive because if someone loses money in that first deal, they almost have this, I don’t know, anxiety about doing it again where it’s like, oh my God, I lost money in the first one, I don’t know if I want to do this again. I guess just walk me through what happened on the 2018 deal and then eventually I want to get into how that played into your mindset going into your most recent deals.

Spencer:
It was a five unit. It was going to be mostly full gut rehab. It was me and two partners. None of us had experience. We lined ourselves up with what seemed like a prominent property management company in the area that also had, at least they said, an arm of the business that could do rehabs. They really didn’t. So what we were told to be like a four-month rehab, took 14 months. It should have never been four. Either way it should have never been four months. It would’ve been a minimum of six to seven, now that I know more about this. But it took 14. We had to find a new hard money lender to get out the old one. We had to find a new property management company. We had to find a new GC, and just we couldn’t actually get our private money.
Our friend that lent us money, we couldn’t get his money out until actually this past year, three years of holding his private money at 15% and resetting his clock each year. Luckily he was understanding, but it was just that definitely gave me some information into what goes into this and how to vet people a little bit better, what to expect, at least timeline wise. These flips I just did were cosmetic flips. They couldn’t really be done in a couple of weeks, but it took six. It took six because that’s just how it goes. Painter’s got other things to paint, GCs got other things to GC, I don’t know. You’re not the only person. So what seems super simple quickly goes longer and you just anticipate that part.

Tony:
We had a recent episode with JP Desmond, I can’t recall which number he was, but if you go back a few episodes, you should find an episode with JP. And he lost a quarter million dollars over his first three deals. And even after those first three, he still moved forward and he ended up securing two deals that were just absolute home runs. And I think there’s something to be said about your first deal not being all that great, because it’s like, man, if you can get through that deal, you’ve learned so many lessons, now you can take that and apply it to your next one, which hopefully will be a better one. So my question to you, Spencer, is, how did you not lose motivation after that first deal that went way over budget, timeline, everything didn’t pan out, private money at 15% for three years?
Those are the makings of someone to say, real estate investing doesn’t work. And those guys at BiggerPockets are a lie. It doesn’t work the way that they tell you it does. So how did you get past that to still have the confidence to move on to the two deals you recently did?

Spencer:
Obviously listening to hundreds of episodes, I’ve heard exactly how to BRRRR correctly, how you can leave equity in the deal and just get out your initial money, how you can pull out extra money, all these ways that people use the BRRRR strategy. But there are plenty of times where I was just like, well, let’s say you come up $10,000 short. You’re saying you got a $200,000 asset for 10,000? That doesn’t seem like a terrible trade. If you somehow mess up a quarter million dollar asset and it still costs you $100,000, still doesn’t sound like a bad trade. You got it for 40% of what it would go for on the MLS if it was a primary residence. I definitely, maybe I think small by not wanting to swing for the fences, but I’ve always been more comfortable thinking more about what’s the worst case scenario.
And so again, back to these deals, they were too newer build. They were built in the last 10 or 15 years in a city where everything is 150 years old. And so I didn’t necessarily know how that would play into the comps, but I was very confident that there would be buyers that would rather pay for a building, pay more for something that was built 10 years ago than 150 years ago. And so that was some of my motivation. I don’t think I can lose money on this. And if I do, it’ll be small. I’m going cosmetic. Cosmetic allows me to be flexible with how much I put in. Whereas if you need new windows, you need new windows. If you need to do a whole new kitchen because it’s ruined or there’s water damage, you have to repair that.
But at least with a cosmetic flip, I could take a little more liberty with, all right, I’d like to be able to replace the laminate in this bathroom, but I don’t have to if I’m running out of money. And if it seems like it’s going to turn out well, then I can also make other decisions. If the market’s heating up, I can make decisions to spend a little bit more money on a nicer product at the end. And so those were things I definitely learned about along this way as well, is just how you can make decisions as you’re going along if you need to.

Ashley:
When I was at this conference last week, someone was talking about how a lot of real estate investors have addictive personalities. And all I could think about when you were telling this story and Tony was talking about JP, is that, okay, lost money but then decide to go because you think that you can get it back. And in real estate, that’s a great mindset of I’m not going to give up. Let’s send a real estate investor into a casino and they lose money and are they going to go, let’s keep gambling, I can win it back. I just thought it was funny, those two comparisons there. But it is so true, having that grit to keep going and obviously gambling is by chance and there are a lot more things you can control with real estate investing, but also there are things that you can’t control, like the market changes, interest rate, things like that.
Spencer, I’m curious as to what are some of the things, going forward, doing deals, that you are going to be proactive about? So with the scars from that first deal, what are things that you are doing different now to safeguard you? One thing that really caught my mind was you said that you had to refinance and find another hard money lender during that 14 months. So is there something you’re doing now to have some backup if a rehab was going wrong? Just give us a little insight of those things that you’re doing now to be proactive.

Spencer:
Well, that was a really unique situation. It wasn’t because the 12 months ran up on my loan. It was because my property manager said that things were accomplished, that were not. And our hard money lender, they were a Philadelphia based hard money lender. They decided to take a chance on us out in Harrisburg and they wanted to come see the progress. And we got there and then things that we told them were done, were not done. So they got spooked, including seeing just paint still in the basement, toxic materials, work not done, stuff like that. We had also, this is just a newbie thing, is that I didn’t really know that when I was doing the rehab draws, that they really cared how the money was being spent on what, in a particular order. And so we had a draw come in and then it was Labor Day or something like that where there are massive appliance sales.
So we impulsively went and bought five sets of appliances with that draw, and we didn’t think that was going to be a problem. We thought we were showing fiscal responsibility by taking advantage of a sale and said, they’re like, no, that money was for this and you didn’t do that. So just learning how to be more communicative with hard money has been helpful. On this cosmetic flip, I wasn’t really asked many questions. It was all moving along pretty easily and there was only so much to do. Actually I think they funded my closing costs, but they used as the rehab budget, and then I actually did the rehab with my cash. So there were no draws, no questions really asked there.

Ashley:
So on that hard money loan, did they call your loan due because you didn’t comply with the loan agreement of using the funds for what they’re supposed to be used for or how did they call the loan early?

Spencer:
I think it was that, but also they gave us a checklist of 20 things that needed to be done the next two weeks. We did them. And then they still said, we want out of this. Which was really frustrating because it was also the week that everyone went for Christmas for like three weeks, and they were just like, we don’t care, we’re going to foreclose if you do not get us our money. So we figured it out. I’ve never heard that. On one hand I could say like, wow, I really suck at this because I’ve listened to hundreds of episodes, never heard anyone say their hard money lender pulled out. But, again, that goes back to we were not told the correct things. I think they would’ve been okay with how we spent the money on the appliances. It was that they came to the project and saw that things that we told them were done were not done, and then they thought we were lying to them, which was not the case.
It goes back to bad property management, bad, I don’t even want to necessarily say vetting. I think we chose a company that least at the time was doing well. It was that we were in a market where it was hard to find good workers. I know that in time that that company has actually gotten much worse. So we were just at the front end of it, but I definitely could have learned more lessons from it. I could have been more thoughtful in how I vetted people the second time around as well. But I think vetting and getting referrals and references and stuff like that is always good. And so again, those steps you were pointing out, actually building my team. I use referrals from people I knew that were already doing stuff, so I felt a little more comfortable with it.
Whereas that last time I was just going off of someone I found on the BiggerPockets platform and I thought that was the vetting being done. That was a mistake of mine. Anybody can go make posts or make profiles, not just on BiggerPockets, but any platform. That was a mistake I made for sure.

Tony:
Ash, let me ask you a question because you’re in a more rural area. So for you, when you first got started, how did you find your crews initially in a city or in an area that maybe doesn’t have an overabundance of contracting crews?

Ashley:
The first contractors that I used were actually friends of my dad’s, or they worked for the investor that I was a property manager for. So anything that that owner needed, I was the contact to hire the vendors for his properties. I built the relationship that way. And then just like my dad has a lot of friends that are contractors or do different things. So that was another connection that I had. Some other ways that we have found contractors is just word of mouth, asking people, letting them know what we’re looking for. And then also yard signs. The mindset is if you see the yard sign in someone’s yard, most likely they did a good job. If someone does a bad job for me, I’m ripping that long sign out of my yard, not letting it be in there.
And then another way that I’ve heard is that some, and I’ve never done this because I’m an introvert, but stopping at, if you see construction going on at somebody’s house, you see the trucks there, whatever is stopping there and talking to the contractor and be like, oh, can I take a look at this concrete you’re putting in? But I’ve never done that way. I’ve just heard of other people finding contractors that way. One way we have talked about before is Facebook marketplace or Facebook groups. So if you’re in the Hamburg, be neighborly groups or whatever your town is, and people will post in there and be like, oh my gosh, you did a great job. Great job. Well, there was this one experience where everybody was posting about this one guy just like we used him, it was great, blah, blah, blah. And I don’t know if he got overworked or what happened, but slowly the post took a turn for the worst and after several months it was like, we hired this guy based on everyone’s recommendation.
He took our money. We haven’t seen him in a month. He barely answers our calls, hasn’t scheduled us, things like that. I just want to put out that word of caution that just because somebody refers someone now, doesn’t guarantee that they’re going to be great. There’s always going to be that little bit of risk. So I think that’s where having contracts and not paying things up front, maybe a little bit or having some safety net and not just word of mouth I think, or just an oral agreement, I think having something in writing and having different things that protect you, especially if it is going to be a big job and a lot of money.

Tony:
Ashley, I would not consider you an introvert by the way.

Ashley:
Oh, I definitely am.

Tony:
Maybe a little shy in some settings, but I wouldn’t say you’re an introvert. But I actually have used that strategy of just jumping out the car when I see a construction site. Actually, even in our own neighborhood, we were in an open house me and Sarah a few weeks ago, and there was a house around the corner from the open house that was clearly a construction site. And I hopped out the car, went over there, introduced myself. I got the guy’s number in my phone right now. But honestly, I think that’s a really good way because going into what you’re talking about, Spencer, where you’re able to vet people if you’re able to see their job site and you’re able to see their team actually in action when they’re working. Is it a bunch of dudes and just sitting around shooting the breeze or is everyone hustling and moving fast? Is the job site clean? Is it dirty?
Just what does it look like and the quality of their work? Man, this actually is a really good job. Then it incentivize you, maybe not incentivize you, but it just gives you that vote of confidence that they’re doing something right.

Spencer:
Well, I’ve heard so many people say ask for referrals, and I’m like, I feel like asking for referral is the same as writing about yourself on LinkedIn. You’re not going to say you suck and you’re not going to give referrals that say you suck either. And you could ask somebody for pictures. How many MLS pictures have you seen for a property that looked like it didn’t need much work and then you got there and you needed a lot more? So yeah, it’s definitely helpful to be able to see their work. The sub I used on this first flip, I chose because he came to my meetup. And I was like, well, he just showed his face to 20 investors, so I’d like to think he’s going to do a good job. And he did for the most part. There are certain things that could have been a little bit better, but again, referrals upon referrals upon referrals is going to be great.
The more people that you know in the market that can suggest people to you is going to be helpful, especially if it’s from a different investor, not just an agent, but an active investor that is willing to share with you someone. I did find a GC that recommended me a guy that they bring in for flooring when they are subbing out flooring and he’s done my carpet, he’s done my vinyl, he comes into the properties, he and his workers are loud and swear and listen to music and it’s fine, but they get the carpet done in a few hours and they leave. And it seemed like a reasonable price to me, so that’s fine with me.

Ashley:
I think it can go both ways too as to like you find somebody from referrals that’s amazing, great contractor that you can use, but also you can find a great contractor from a Google search, just kidding, a random person using them one time and oh my gosh, this person is amazing to work with. I have an example, today we needed to clean out a hoarder house, and so we just Googled junk removal companies. We called this one company. And so the guy came out, walked the property with us, and he was just like, I can get this done today. Here’s my estimate right now. Here’s everything that it will include. So the price was great. We’re like, yep, let’s go with him. And they did a great job and we continuously use them.
The property I’m sitting in right now, we texted the owner yesterday, he’s like, I’ll have a dumpster there this in the morning. And just an hour ago the dumpster was dropped off. I don’t want people to be hesitant as to just going off referrals, there’s definitely great companies you can find out there, but again, just date the contractor. Give them a little bit at one time, not be like to a painter, oh, you know what? I need you to do all of my properties, to paint the exterior over the next month. Maybe give them one house at a time or a shed or something like that and see how it goes.

Spencer:
I’ve also found there are a lot of people out there that like to be generalists and they can say they will do everything. And I have asked the question, yeah, but do you specialize in it? Please tell me if this is not really your specialty. I’m not going to take other work from you, but if you’re not a plumber, I don’t really want you replacing the hot water heater just because you mostly know how. I think you might still get lied to, but I always at least feel more comfortable asking the question, is this really something you know how to do?

Ashley:
That’s such a great point. And I think it can be a telltale sign as to who you’re dealing with, the person that says, I don’t do that. This is my specialty. This is what I stick to. That’s a great point, Spencer. I want to get into one of your deals. Do you have a deal in mind that you want to share with us the numbers, how you found out everything like that?

Spencer:
Sure. I could talk about the flips I just did. I bought them together and they’re closing three weeks apart and they were right next to each other. They both came from my wholesaler and I bought them for 152,500 a piece.

Ashley:
And were they by the same owner? It just happened these two deals came up the same time, same owner?

Spencer:
Okay. Yeah, same owner. They were one house apart from each other in a newer built community. I think the owner was the guy that constructed them or paid to have them constructed. And I guess he was just trying to get out of them before the end of the year. My wholesaler brought those to me and it was right around Christmas time. I think me and one other group actually came to look at it, no one else did. And I made an offer that day and was able to get them under contract and closed before the end of the year. And so my plan with them was, again, they were newer build in a city that has mostly older homes.
And back to the idea of how was it going to exit, whether I made money or lost money, I was like, there are lots of couples that were priced out of the market in the last two years. We have high interest rates right now. They might be going higher, but I think if I can present this two bed, one bath home that’s newer build in a volatile market, there’s still going to be couples that are willing to move on that, because it’s exactly the size they need, it’s not more, and they’ll deal with the higher interest rate because it’s a good start or home.

Ashley:
And then how did you finance these deals?

Spencer:
I put in a little bit of my cash, some of my mom’s cash, private money from a guy that I met at the meetup that I host, and then used hard money for the rest. And the hard money came from, well, I guess he is a hard money broker, but he was also referred by my wholesaler. And the hard money broker was actually someone that, he was the one that saved us on that deal back in 2018 when we needed a new hard money lender. He was the one that got it done for us.

Ashley:
And then what was your rehab estimate for it? And then did you stay on budget, go over budget? What was that number?

Spencer:
I was trying to stay around 8,500 to 10,000 per unit. I ended up going to 10,000 on the first one and around 9,000 on the second one. And the reason I went a little bit higher on the first one is actually because I used that sub that I found, and the second time I decided to do more of the work myself. I was able to save some money on that. But one was 200 square feet higher, bigger than the other, so it’s a little bit more expensive on the painting and flooring for each one of those.

Ashley:
So you’re in for about 162,000 each per se? Plus your holding cost, electric, insurance, your interest. So what did you end up selling them for?

Spencer:
I got a little bit spooked when another, there are about 30 townhouses in this little community, this guy built, and one of them went for 175 when I was in the middle of doing the rehabs. And so I got a little bit spooked. But I was at like, okay, what do I need to get out of these? And the first one that I was finishing was I needed 195 or so, and that was the smaller one. And so I was like, okay, if I get 195 for this first one, based on a square footage approach, my finishes are going to be the same on the second one. That gives me around 210 on the second one where I’d make 10,000 to 15,000 or something. And so I was at one of my meetups when a younger kid had come in for the second time, last time he was there to ask everybody about this triplex he was trying to get seller financing for.
Second time, he is just like, well, I’ve got a girlfriend and she’s pregnant and I just need a home now. And I was showing him pictures of the flip. He’s like, I want to see this. And I’m like, do you want to go right after this? And it was like nine o’clock at night. He’s like, yes. And so he got his mom and his sister, he lived right down the street. They all came over 9:30 at night and we looked at the flip. And he’s like, what do you need to take to not put this on the market? And I was like, I wanted to list it for 195, maybe get 205 or something, but if you’re willing to commit to this right now, I’ll sell to you for 195. So again, I knew that given how closing costs go, I’m like, I could either make 2,500 or I could lose a couple hundred here depending on how that goes, but it’ll set me up for that second one to go for 210.
And so I was, again, being spooked by that one that just went for 175, which now I know it needed some work to it. I was willing to make that decision and again, accomplish my goal of I learned, I got out of it. I was able to give it home to a young couple in the area. It was someone from my meetup. There are all these things that were coming together. I’m like, I’m willing to take this opportunity and not make a ton of money on this one.

Tony:
I just want to say I’m glad it worked out well in your situation, but just a word of caution to our Rookie audience. Maybe don’t leave the meetup at nine o’clock with a stranger and go to someone’s house.

Spencer:
Fair enough.

Tony:
But he brought some people with him. He brought some people with him, so at least he was covering himself.

Spencer:
That’s a fair point.

Ashley:
Okay. So Spencer, what did you end up selling the second one for?

Spencer:
We were going to list it for 210, and then the agent for that first buyer came to us and said, I’ve got another buyer. And my agent said, we just listed three properties this weekend, and they all went for 30,000 over asking before the end of the weekend. So she’s like, I don’t think we should just go with who he has, we should put on the market. And then he hit us up again. And I was like, all right, we’re going to list it for 210, tell them we’re listing it for 215 and we’ll let him know. And he start started trying to write an offer for 215, and I’m like, no, no, no, no, we’re listing it for 215. If you want to stop us, come in a little bit higher. And so they wrote an offer for 220. And so both of these I ended up selling before we even hit the market. We didn’t have to do staging photos, we didn’t list them or anything.
So yeah, on that second one, I’m going to make about 25,000. On that first one I lost about 500. And that’s partially because my wholesale fee was, it was like 15,000 for the two properties. They put 10,000 on one and 5,000 on the other. And so the 10,000 was on the one I sold for the least amount of money. So if you dollar cost average, I made like 2,500 on the first. I’ll make 25,000 on the second if you do it based on paper. I lost 500 on the first, but I’ll make like 27 on the second.

Ashley:
Congratulations. That’s awesome.

Spencer:
Thank you.

Tony:
It’s an amazing accomplishment, man. But I just want to paint the picture here for our listeners because there’s a couple things that happened here, right? So you said you met your wholesaler. Did you say you met him at your meetup?

Spencer:
I think he was a referral from somebody.

Tony:
Got it. Where did you meet that person that referred you?

Spencer:
I believe it was through the merge GoBundance. And so he was someone that I went to him and I said, do you want to host a meetup with me? Not because I really needed help, just because he was in the area and he knew people, and his wife is a realtor, and so she’s been my realtor.

Tony:
Got it. So that’s the person that you host the meetup with?

Spencer:
Yeah. Well, one of them has to take care of the kids, so they switch on and off. But yeah, we hosted with both of them essentially.

Tony:
I love that. Okay. So your whole seller you met through a connection that basically came for your meetup. Your first buyer literally left your meetup with you to go view your house, and then that buyer’s agent is the one that had the buyer for your second home.

Spencer:
And my private money came from-

Ashley:
And his private money lender.

Spencer:
And his brother who was the first sub.

Tony:
And your first sub. So you got a wholesaler, two buyers, private money lenders and subs all came from this meetup in one shape, form or another. Now, I’m so happy that you did this Spencer, or that you’re talking about this, because I think it’s something that a lot of people, they don’t understand the value and the power of starting your own meetup, because now you become the center of gathering for real estate investors in your local network. So a couple questions I want to ask you to just peel the layers back on this meetup here. I know one of the things that holds people back from starting their own meetup, two things really. First, I’m not experienced enough to host a real estate meetup. Second, who the heck is going to come to my meetup?
So how did you solve those two issues around, hey, I’ve only done this one deal. I don’t know if I’ve got enough experience. How am I going to get people to show up? How did you tackle those two things?

Spencer:
I really just implore people, don’t overthink it. If you can plan for 10 people to go to dinner, if you can make a reservation or you can plan a birthday party, a meetup is even easier than that. You just find a place, you get some food or don’t. Some people just say, come meet at this brewery. I’m not providing food. We’re going to get this back room on a Monday night because they have the space, because people don’t go out to eat as much on Monday nights. Restaurants will happily give that to you. I wasn’t going to charge a fee and I just made a meetup account and they actually do a really good job. I haven’t even found a way to spend money to advertise my meetup on Meetup. They just promote it.
And then that was the other reason I wanted to partner with somebody on the meetup, was so that they were in the market. They knew a few people. I wanted them to be pushing it to the people they knew and then try and grow it from there. The last couple minutes I wasn’t doing Facebook. I’ve started doing Facebook groups and pushing it to more other groups. Some groups are not happy when you post meetups, they just take it down, so it’s fine. No, no harm, no foul.

Tony:
Let me ask a question, Spencer. How many people came to your first meetup? Do you recall?

Spencer:
The first two we had about 20.

Tony:
That’s pretty good.

Spencer:
We haven’t had that many since. But that to me just shows it’s even more valuable. It’s not like I had got all of these things, all of these results because I had 100 person meetup. I’ve had these results from a collective of 100 people coming over the last six months, and most of them weren’t even from my network or my partner’s network. It was literally just people finding it. And it’s not just newbies. I’ve had people that showed up because they just say they want to buy a home. It’s not like they’re trying to invest. They just saw real estate and they came to the meetup. I’ve also had people from 30 miles away that own 100 units in Harrisburg, that were just, they’re like, I’m going to go see what this is about, see who’s there.
They’ll probably show up once a quarter or something like that, because they don’t really need to be at meetups every single month or something. But it’s been cool to see the variety that has come literally just from meetup promoting it themselves and just posting to strangers on Facebook groups and letting them come.

Tony:
So when you’re actually at the meetup, Spencer, obviously you made a lot of connections here. Are you just standing in front of the room saying, I need private money, I need a wholesaler, I need this? What is the dialogue like for you to actually build these relationships with people to the point where you are able to find all of these people on your team?

Spencer:
So the feedback I got from people when they came to the meetup was that they didn’t like how other ones always had a speaker that gave a presentation that was ultimately pitching at the end. And so ours so far have just been straight networking. And at the first place we hosted the meetup, it was a smaller space. So when there were 20 people, after about an hour, I was like, all right, let’s just all get in a circle and introduce ourselves. And the way I found that private money lender, is he just said like, I’m new, I work full-time, I want to learn to invest, but I’m also willing to lend, and I’ve got a $45,000 check I can write tomorrow. So two days later, that whole seller dealer came to me and I was actually just trying to find, I couldn’t believe nobody else had already hit him up and taken that money.
But I texted him and I was like, hey man, I got a deal that came in. I need just about 45,000. Do you want to invest? And he said, yeah. I actually have another two properties under contract, so he’s rolling that money into the next deal. It wasn’t even shameless plugging. It was just being in the room and asking people what they want, what they’re here for, was all it really took. And we are starting to, I’m trying to find, rather than having presenters, I want to have expert guests. So someone that you can promote their name, they’re known in the community, and you can say what they’re known for, but rather than putting them in the front of the room, just say they’re going to be here for you to ask questions.
And that person can then still say to the new person like, hey, I do have this course, but they’re not the front of the room, chilling it to everybody. And it’s not like if you only have three newbies showing up and everyone else is a little more experienced, you don’t need someone presenting on how to do the BRRRR strategy for those three people. Those three people can just go ask. So everyone I think has found that just being able to network, get to know people, move around the room, if that’s what they want to do, has been super valuable to them. So that’s how we’re going to continue doing it.

Ashley:
This might be one of the best breakdowns of how to start a meetup and how to do it, I think that we have had. We’ve had several guests on, and obviously they give tons of value too, but I think you given us a step-by-step handbook as to how you can do your meetup and how easy it actually can be to actually manage. And there’s so many different ways that you can do it too and create it. So thank you so much for sharing that, Spencer, with us.

Spencer:
Thank you. And I’ll also point out the two places we’ve done it so far have both been realtors offices. So the first one was a third person, I was like co-hosting it. He’s a little bit busy now. So someone came to me and said they want to be a sponsor and he owns the building. He used to own a Coldwell Banker realty office. He now just owns the building, but he has access to it. He is like, yeah, just come do it here. They’re happy to just, if they have a conference room, they’re happy to have it. If you want to have more access to a BRRRR or something, again, just plan for a Monday or Tuesday and find some place that isn’t tiny, that has more than enough space. They’ll happily give you the back room if you tell them at least 10 people are going to come and they’re going to order food and beer or whatever. I choose to provide food, sandwiches or pizza or whatever it is.

Ashley:
Well send me the next invite. Free food, I’m there. Okay, Spencer, I want to take us to our Rookie request line. So anyone can go to biggerpockets.com/reply and leave us a question there. So today’s question is from Jonathan Eloisa. What’s a better option to purchase a flip or long-term hold such as a rental, HELOC or hard money? I currently own my primary free and clear, but I’m scared to put it up as collateral or take out a mortgage on it. Can you give me any advice on using either HELOC or hard money for purchasing? Thank you very much. Spencer, what would be your advice on that? Give us your hard money side.

Spencer:
The great thing about hard money is just you’re not mortgaging up your house, you’re not really putting it up for a collateral. And if you buy into all the, there’s so many people out there talking about other people’s money and using that to buy real estate. Using a hard money lender is using other people’s money. If you don’t want to have to pay the higher interest rate, I don’t know what HELOCs go for. I’m sure it’s not the 12% or 13% that hard money lenders are trying to get right now. But I also believe that a lot of them have variable rates. So if it’s going to be a longer project, you have to be aware of that. But hard money is there for a reason. I also like that they’re an extra set of eyes. They’re going to let you know if they think it’s a bad deal. They don’t want to lose their money. So that’s just the route I’ve gone so far

Ashley:
For HELOC, you are putting up your primary as collateral. Where the hard money, the investment property, whether it’s a flip rental, is going to be the collateral. So if you default on the loan and it’s either going to be your primary residence are coming after for a HELOC, or it’s going to be the investment property that a hard money lender is coming after. So it’s really what you’re putting up for risk. So how much risk do you actually have in doing this deal that you think that there is a chance that you will default on the loan? A HELOC, you’re most likely going to get a better rate because it is your primary residence compared to hard money where it is going to be a higher interest rate. So you can save some on there, but it really, it’s like what helps you sleep at night as to is it worth paying a little bit more?
Are you still going to make a great number on that deal using hard money and not having to put your house up as collateral? Personally I’ve never used my primary residence for any kind of money to purchase investment property. I have HELOCs on other rental properties that I use, but it’s just a thing that helps me sleep at night, I guess. And even though if I would’ve went and got a HELOC on it, I probably would have way better rates. But if you can make the deal work with the higher interest rates, then maybe it is worth it for you to go with the hard money lender. And sometimes a hard money lender can be easier than having to go through a traditional bank and be like, here’s my grandma’s social security, here’s my dad’s bank accounts, here’s everything to get a loan on my primary residence.

Tony:
I’m actually doing a DSCR loan right now on a property. They always come back with these different conditions and this thing and that thing and it’s like, hey, what was this one deposit six months ago for $27.83? There’s a bunch of weird stuff. All right, let’s go to our Rookie exam. So these are the same three questions we ask every single guest, Spencer. Question number one, what’s one actionable thing a rookie should do after listening to your episode?

Spencer:
I’ve heard a lot of people say, go to a meetup. That is great advice, but if you can start one, that’s even better. Or if you can just be a part of someone else’s and go to them and say, how can I help you? That’s also a good foot in the door. If there’s already six meetups because you’re in a more metro area, you’re not hurting anybody’s feelings by starting your own. So don’t worry about that. If it’s a smaller market and you don’t want to worry about stepping on toes, just go try and be a part of the one that’s established. But the only other meetup I saw was actually run by someone I didn’t like. That’s kind of the reason I decided to do my own, was I didn’t really want to go to his meetup, so I figured I’d just find a location and buy some pizzas and promote it and see who showed up.
I said I was going to commit to it for six months. So it’s not overly complicated. Anybody can reach out and I can give you any advice if you would like on that.

Ashley:
Okay. What is one tool, software app or system in your business that you use?

Spencer:
I’ve mostly just used Google Docs so far. I use Rentometer sometimes to understand rents. I’ve Rehab Pro Estimator or something like that for just seeing if what I put on paper makes sense. But I definitely don’t have a full infrastructure of software just yet.

Tony:
All right, last question for you Spencer. Where do you plan on being five years from now?

Spencer:
Hopefully some combination of $10,000 a month, a monthly cashflow from stuff. I’m actually looking more at, while I want to build up assets through multifamily and that sort of thing and rentals, I’m also looking at land flipping right now, because the land flippers are typically the note holder and you can easily subdivide a piece of land and hold the note for where you’re getting 250 to 500 a month depending on what you sold it for. And there’s not many units right now that you can get where you’re getting 250 plus a unit. So in terms of trying to help with family’s retirement in the next two to three years, the land space looks good for that cashflow side of things, but obviously I want to be building assets as well long term.

Tony:
We’ll have to have you back on Spencer as you start to take down some of those land deals. Because I don’t think we’ve had anyone that’s talked about land from that perspective, like cash flowing from land. So yeah, it’s an interesting topic, man. But thanks for sharing that.

Spencer:
I have one note right now. I collect 305 a month for the next four years. I can’t find anything that at least pencils that’s going to give me 305 a month.

Tony: