Ever wonder how real estate investors reach the summit of success? Our friend and regular Friday roundtable contributor, Paula Pant, joined Joe and Crystal Hammond on the most recent episode of our sister show, Stacking Deeds, Building a Strong Real Estate Foundation: Tips for Novice Investors with Paula Pant. Paula opens up to Joe to share her journey from the early days of starting in real estate investing to where she is today. All Stackers can learn valuable lessons about smart real estate investing by tuning into this special rewind episode.
Paula’s real estate investing course for beginners, Your First Rental Property, is now open for enrollment for a limited time! Take the first step in your real estate investing journey by signing up for Paula’s course through our exclusive link, stackingbenjamins.com/paula to get access to Joe’s special “Sherlock Holmes sheet,” which can help you find extra money in your budget.
Deeper dives with curated links, topics, and discussions are in our newsletter, The 201, available at https://www.stackingbenjamins.com/201
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Join us on Friday as our special “Best Of” Rewind Week comes to an end! We throw back to a roundtable episode from 2020, “5 Exercises To Improve Your Money Life (with Suzanne Lucas).”
Written by: Kevin Bailey
Miss our last show? Listen here: The Beauty of Relationships in Construction with Mark Ellison (Special Episode) SB 1404.
Live from the back of Ruth, the realtor’s car. It’s the Stacking Deed Show. I’m Ruth’s neighbor and part-time mechanic neighbor Doug, broadcasting from the spacious, luxurious trunk recording studio. Today we bring you a special episode of the Stacking Deeded Show. We’ll talk for nearly an hour about her real estate journey with our B F F from the Afford Anything Show, Paula Pant.
No surprise, she’s got a plan and now, Two peeps who are also BFFs. It’s C L H and J ass, whoever they are.
I don’t think it’s how it’s usually pronounced. Doug, we don’t usually makes sense logically. Use your context clues. That’s what I was always taught. Well, you can hear my co-host Crystal Hammond, who we don’t have in the backseat of the car today. I’ve got the spacious backseat all to myself. Doug’s in the trunk, and I got somebody else’s junk in my trunk.
Today I’ve been called Wars. That’s and from a remote location. From the Windy city, we’ve got Crystal Hammond joining us. How are you? Wonderful. I am staring at a big Trump sign in right behind. We don’t do video yet for the show. We actually are a meeting where we’re gonna start doing video. But you got upgraded to a room overlooking the Trump Tower.
Yes. They asked if I wanted to do the $50 upgrade and I was like, oh no thanks. And then the person starts typing like forever and then says, oh, we upgraded you for free. You get the beautiful lake view. And then that was the view. I was like, okay. It turns out it’s the tower view. It’s not the lake view, it’s the tower view.
This is like the hotel equivalent of when you have a little disagreement at a restaurant and you’re worried they might spit in your food. They’re like, oh, we upgraded you for free and. Their version is, we’ll give her a view. We’re gonna make Crystal great again. That’s what we’re gonna do. It’s still beautiful.
It’s still a beautiful view because you can’t, when you told me that the sign lights up super bright. I just pictured that Seinfeld episode when they put the Kenny Rogers roasters right out the neon sign right outside of Kramer’s apartment. It was so bright that gave him a sunburn. Oh my God. He shows up in Jerry’s.
It’s all red. So Crystal, what’s your middle initial mean then? What’s your middle name? It’s with an L C L H. Crystal Lynn? Nope. It’s luscious. Oh, luscious. Luscious lips.
Luscious Lisas. There we go. Luscious Lease. It’s Louise Chris Louise Hammond. And by the, by the way, Louise was one of my favorite characters. Remember Teen Witch. You’re gonna beat them. Ah, that was, sorry. They were not targeting my demographic with that show. That was a good movie. That was a good, somebody liked it.
That was a good, that was a good movie. A movie. See, no knows. We need to do videos. People could see the crystal dance with the song. Oh yeah. The show. Crystal, you might as well get this show rolling. We got a great show today. We’ve got Paula App pant joining us from Afford Anything. She’s gonna tell me her money story here in the backseat.
Oh yeah. Me and Paula, we all go way back. I sat by her parents when she won. We both won Plutus awards the same year. She’s won a whole bunch, but her parents are so cute. Yeah, we, we were sitting by each other during that, Hey, you figure out where Paula got her lack of height from when we met her parents in Orlando that year.
She comes by it, honestly, I think. Between them. They’re probably an M B A size. Like if you put them all on each other’s. Oh, okay. If you stack ’em up. Right. If you stack the three of them, you get somebody who’s six foot six. So you never told us what J ass stood for. Well, it’s an A. It’s an A and it’s not what you guys are inferring.
What’s the A Doug might know what that is. I know exactly what the A is. Austin, do you want this public? I don’t care. Yeah, your A was what? My first name was supposed to be. Originally, my parents fought over this. It’s not Austin, but Austin’s a good one. Fine. We almost named my son Austin, by the way. Yeah, that’s more current.
Well, more trendy, but he’s Andrew Crystal. Yeah, he’s Andrew. This is Andrew. Yeah. And my mom wanted that really badly for me to be my name. And my dad’s like, I’m not gonna have a son who’s gonna be called Andy. Andy gets beaten up on the playground. Oh, but bringing this back to, turns out Doug’s due too.
But Crystal, bringing this back to real estate, if we would’ve named our son Austin, those property values would’ve gone through the roof. Like now he’d be almost 30. And the property value on the name Austin, if it’s like the city of Austin, oh, would be worth a lot more than 30 years ago. You say, so you’re not a fan of Austin.
Have you been to Austin? I love Austin, but I don’t think naming your kid has anything to do with Uh oh. Well then let’s move on. Yeah, we got a great show. We got Paula Pant joining us. Very special episode. Crystal. We’re not going to have Doug’s trivia today. We’re not gonna have our call in. We’re not gonna do a headline.
We got 45 minutes of Paula Pant story and. Also we have Paula’s Real Estate Course. She’s a brand new real estate course Crystal called Your First Rental Property. And to get there, if you go to Stacking Benjamins dot com. Stacking Benjamins dot com. Not Stacking deeds, but Stacking Benjamins dot com slash Paula that will lead you to our, likewise.
She’s doing so much we’ll, we’ve affiliated with her, so if you wanna get yourself better at real estate and you wanna help the show, that’s gonna be the link. Joe, you blew it. Do you know anything about like self-promotion or getting in touch with our audience? At the beginning of that, you said no trivia.
We just lost most of the audience. They’re gone. They’re probably not even hearing me say this the minute you said, the second you said no trivia. Click next podcast. If we don’t get started, we’re gonna lose the rest of them. So let’s go
and the Paula Pant joins us. How are you? I’m great. How are you doing? Holy cow. Am I great? You’ve got some energy girlfriend today. Oh. I’m on my first cup of coffee, so it seems like you’re on cup three or four. Ha. No, I’m only halfway through Cup one, so it’s a good day. Don’t wanna know after three then I don’t wanna know.
I. Let’s start off going negative because these dieters of ours, Paula, you know, just need to know that this isn’t always easy. What’s the biggest mistake you ever made with real estate? First of all, dieters. Dieters. That is the best name. I thank you The dieters. All right, well, hello. Dieters biggest. Well, I mean, Joe, you probably didn’t expect the answer to go to.
I’ll talk about a few mistakes. The biggest mistake I ever made with the real estate is not getting a prenup, but that’s a whole different conversation for a different day. That is a whole different thing. I suppose technically the worst mistake I ever, well, yeah, but outside of. Marrying the wrong person.
The other biggest mistake that I ever made with real estate, geez, what was it? You know what it was? It was in the early days. I mistakenly thought that if I did the work myself, then that meant that my profits would go up, right? Sure. It’s the magical bull poop accounting of thinking, Hey, if I’m the person who’s.
Painting or installing floorboard demo. Yeah, exactly. If I’m the person who is doing the actual handy person work, which I’m not that good at doing and I don’t enjoy doing, but YouTube exists for a reason. You know, and so when I was in my twenties, I thought, if I’m the one who’s doing that, then I don’t have to pay for a contractor to do that, and that means that my quote unquote profits are higher.
And I even in the early days, went so far as to think, well, that’s my competitive advantage, right? Made the mistake of like taking a fancy sounding term competitive advantage and thinking that that necessarily, you know, meant something. So competitive advantage was that you are becoming a carpenter yourself.
Yeah, basically, you know, I was like, and not just a carpenter, I was trying to do every piece of it, like I got a real estate agent license so that that way if I ever went to sell any of my properties, I would be able to keep the commission on the buy side. I would get a bit of a commission. I. You know, like, well also it would help me find properties.
Yeah. By searching directly on the m l s. Right. So do you know how Tesla does this whole vertical integration thing where Yes. Every step of the car manufacturing process, they do themselves, right? SpaceX, same thing. They do this vertical integration thing. I was basically trying to take that vertical integration model and apply that to the way that I invested in real estate.
And by the way, for our teeters, what that means is that if Tesla. Decides that they want to upgrade something, they can do a system reset that’s electronic. And because Tesla owns the entire car, every single thing is gonna talk to that car. So frankly, they could just change the computer chip and the entire car will either respond or not respond to the computer chip because they control the whole process.
Where Ford is an example. Ford uses a bunch of outside manufacturers, so maybe the chassis doesn’t respond or the seat belts don’t respond, or whatever it is. Mm-hmm. And because of that, Ford has a more difficult time if you bring the car in, you know, putting these different systems together. Exactly.
Exactly. And just think of how it is, Joe, you and I in our own businesses, if we want to, we were just talking about this right before we hit record. Right. Anything that we wanna do related to video editing, right? Or just video recording. We’re dealing with outside third parties and we don’t quite know how their systems work.
And then there’s this whole step in the process where we’re like, all right, I. We need somebody on our team who can contact somebody from their team and figure out how all of these systems and processes can work together. Right? A company like Tesla doesn’t have to do that because they’ve done everything, you know, every piece of the process they own, so, so anyway, so far, none of your thinking sounds flawed, like you’re gonna cut your cost by knowing how to do.
Electrical. I mean, just to be completely ludicrous. Right. Shockingly good at it. Oh,
and that’s, but my plumbing skills are kind of shitty, but seriously. But she’s here all week and then you’re gonna become a realtor to cut out the real estate cost and to get a leg up. Mm-hmm. And when properties are just going on the m l s, you’re gonna see the hot new stuff and maybe get it before everybody else gets it.
And then, Third, you’re creating this just vertical integration system so that it’s all in-house. So if anything goes, whatever, you’ve got it. I’m surprised you’re calling this a mistake. Well, so what? That doesn’t leave any time for, number one, it doesn’t leave time for having any type of other job like afford anything, right?
Um, but number two, it also doesn’t leave time for growing the business, right? If you’re spending all of your time working inside of your business, Then you have no time to actually grow the business, which is buy more properties, you know, or raise more funds to buy more properties. Ultimately, what does the c e O of any company or the director of any nonprofit, what’s their primary job?
It’s make sure that you have enough money in order to continue growing as the leader of a company. That is your number one job, right? And depending on the type of company that you run or the type of nonprofit that you run. It could come from increased revenue. It could come from if you run a nonprofit that comes from donors.
If you run an early stage startup, it might come from venture capital funds, but no matter what your source of funding is, whether it’s revenue or donors or VC or whatever, your job as the leader of a company is, raise funds to grow. If you’re spending all of your time watching YouTube videos about how to pull up baseboard right then you’re not.
Raising funds to grow, but you might tell yourself that you are because you tell yourself the story that, oh, by virtue of pulling up the baseboard myself, I’m saving money, which is a form of raising funds, but it’s just not the most efficient way to do it. It’s almost like capping your budget or working on the spend side versus working on the income side.
Exactly. You can only, you can only shrink it so much by pulling up the baseboards yourself, where if you go out and find new business, that’s a blue sky. Exactly. Exactly. So you know, I think back to the amount of time that I spent in 20 12, 20 13, 20 14, working on painting the fence, right? Repainting the fence myself, rather than figuring out how to buy one extra property.
And if you think about it, and this, I don’t know, maybe this is taking the logic a little bit too far, but let’s go there. Let’s say, That all of the hours that I spent painting, fences, resealing, the flooring, things like that. Let’s say that if instead of spending those hours doing that, I could have spent those hours buying just one additional property.
Just one. And let’s say that that property, granted 2012 through 2023 is a very special time, and we shouldn’t expect that to repeat, but let’s just say, That that one property, had I bought it in 2012 or 2013, would have grown an extra $250,000 in equity in the last decade, right? You could make the argument that the time that I spent painting the fence actually cost me.
A quarter of a million dollars. Right? You could make the argument that that was the most expensive way of doing that work rather than the cheapest. Initially though, do you want to know, and painting the fence isn’t the right analogy, but let’s take the plumbing analogy or the baseboard analogy. Do you wanna know a little bit about how to do those things so that when you’re working with these, inevitably your team, that they’re not ripping you off, that you can at least speak the language?
Mm. So it’s funny that you say, speak the language. I’m a big believer that you need the vocabulary to be able to speak to your contractors. So you need to know with like your gutters, there’s the gutter and there’s the downspout, right? And it’s simple, but you need that vocabulary With a toilet. There’s a toilet flange, right?
You need to be able to talk about the flange, right? What’s the quote from? Movie. We don’t talk about Coco. Wait, are you about to quote a movie? I’m gonna be a movie reference. Yay. Who are you? Is it We don’t, Coco is is that No, we don’t talk about Bruno. Bruno. Bruno. We don’t talk about Bruno, right? Yes.
Right. We don’t talk about flange. Yeah, we don’t talk about flange. We need to talk about the toilet flange. Um, Paula, can I have a talk with you? We need to talk toilet flange. And the reason for that is a few fold. One is when you are having those conversations with contractors, having the right vocabulary just enables the conversation to take place.
You know, you’re not going to be able to actually have an intelligent conversation about, here’s the diagnosis, here is a menu of the potential types of treatments. Now let’s talk through which of these potential treatments we can give to this diagnosis. Right? You need the right vocabulary to be able to have that conversation.
And in addition to that, particularly when you’re working with a new contractor, you need to be able to signal to them, I am an informed consumer. Sure. Like I’m an informed client. Yeah. And having the right vocabulary creates that signal. So for both of those reasons, I think knowing the jargon is incredibly important.
So in this course on rental property investing, right, your first rental property, and we have a huge section in there about learning the jargon, and that’s entirely so that you can show up sounding like. An informed client, my son, Nick, who you know, actually took this Paula to the next level. Yeah, which I did not expect, and it’s worked out very, very well for him.
Not only did he make sure he was getting up to speed on the language, he literally found out that most of his houses are in Detroit and most of the people on the construction crews. Are Mexican or Central American and don’t speak much English at all, and when they talk to each other, they speak in Spanish to each other.
Nick, who’s a very quick learner, realized that he was getting from general contractors. He was working with some of the story, but he wanted to make sure he got all the story he learned Spanish. Wow. And even a lot of the general contractors now that he works with who are fantastic, are native Spanish speakers.
And when he speaks to them in their language, We were doing some help with him on one house, and one of the generals said, your son is one of the few landlords we work with who actually speaks Spanish, and it makes it so much easier to work with him. It makes it so much easier. And so he gets this respect as a.
28 year old buying houses, he gets a respect. I think a lot of guys in their twenties might not get because he’s coming to them to talk about the work. I thought that was pretty brilliant. I love that. That’s fantastic. Yeah, I absolutely love that. It was so wild. So let’s talk about that though, your first house, right?
And buying that first house, what’s the most important thing to get right on buying your first rental property? There is a particular formula. It’s this thing that you’re calculating for, it’s called the cap rate, and I wanna explain conceptually what this is. So, When you buy a stock, you are buying two things.
You are buying the potential for that stock to go up over time, and that’s called capital appreciation. But you’re also buying an income stream or a dividend that comes from that stock, right? When you buy a house for investment purposes, you’re doing the same thing. You are buying the potential for that house to go up over time, and you’re also buying an income stream from that house.
Now, when you buy a stock, Unless you are buying what on margin, which is just a fancy way of saying with debt, when you buy a stock, then most of the time as an ordinary. Mom and pop, individual investor, you’re buying it with cash. You’re not buying it with debt. So if we want to make a comparison between buying a stock and buying an investment property for the time being, let’s just take debt out of the equation and let’s look at what that house is going to return.
If you were to hold it free and clear now, we’re not saying that you will. Sure, like you’re almost certainly going to borrow for this home. But in order to evaluate whether or not this particular house is a good investment, we wanna ask ourselves the question, would I own this in cash? Because my philosophy, and there are many real estate investors who disagree with me, but my philosophy is if it’s not worth owning in cash, then it’s not worth owning with a loan.
There are some real estate investors who disagree and they basically say, well, cash this different metric called cash on cash return is more important because cash on cash return measures the return that you get relative to the amount of money that you put into the deal. My personal philosophy is that the cash on cash return formula is a formula that can make a house look good.
Only if you borrow. To buy it, but it’s not ultimately a house that you would ever want to own in cash because the returns, if you owned it in cash, wouldn’t actually be that good. Which means that your metric than it sounds like is more conservative. Yeah, it is. It’s a more conservative metric because my metric is cap rate.
It’s all about the cap rate. And the cap rate basically is a measure. I’m gonna use two big fancy words, unleveraged dividend. Right, which basically means what’s that dividend, what’s that income stream? If you own it in cash, if you didn’t borrow for that house, what would be your dividend, so to speak? And the way that you calculate that is you look at the gross, the total revenue that that house produces.
You subtract out the operating expenses, repairs, maintenance, major capital expenditures, property management fees. You subtract all of those operational expenses out. Then whatever’s left over, you divide that by the value of the property or the price that you paid for the property, and that is your cap rate.
And so if you have, for example, a 6% cap rate, that means that you have the equivalent of a 6% dividend that you are getting from that property. And so your total unleveraged return would be that 6% dividend plus, let’s just assume the property. Rises at an average rate of 3% or 4% annually, right? We’ll say 4% annually.
That 6% dividend, plus that 4% annual growth comes to a total of 10%. That 10% would be your unleveraged total return. In other words, that’s the return that the house is giving you if you held it in cash, and then the other metric that you mentioned then. Mm-hmm. Which is a true, because you are leveraging it.
Yeah. Means that you’re probably popping a much bigger number then once you look at it. Yes, yes, yes, yes. So there’s this other metric that most real estate investors absolutely love. Then this is where I become different from the average real estate investor, because I’m very cautious about it. So this metric is called cash on cash return, and the formula is basically how much money did you put into the deal?
Relative to how much money are you getting out of the deal? So if you go in and put in a tiny little down payment, right? If you go in and put, let’s say that you are buying a home with an f h a loan. Maybe you’re doing your first house hack. So you put 3.5% down, you borrow the other 96.5% of the money.
You buy a four unit property. You live in one of the units, you rent out the other three, right? You’ve put very, very little money into the deal. Let’s just say it’s a $300,000 loan. You’ve put about $10,000 into the deal. Given that you’ve put so little into the deal, and given that what you’re getting from that deal is a lot of money relative to the tiny amount that you’ve put in, I.
Your cash on cash returns, therefore are huge. I mean, I’ve seen cash on cash returns that are 25%, 30%, I mean, big, big, big return numbers. The reason that I’m cautious is hypothetically, if you put $0 into the deal, your returns would be infinity. Whenever you have a formula or a construct where your returns are infinity, that should be a red flag.
Well, the red flag for me is that that formula encourages you then to leverage even harder. Right? Right. The harder you leverage, the better it is. And we just know from past experience, maybe some people don’t know, 2007, 2008, and you know, the landscape might change. And if I’m super leveraged, To get that cash on cash return.
That unwinds a lot quicker. It gets ugly quicker, I think, for you. Exactly, and that’s what I wanna worry about. I mean, I always wanna worry about what if the worst happens? If the worst happens to me, I wanna make sure that I’ve got my downside covered. Exactly the way that I like to say it is leverage.
It’s a lever and a lever. If you think of a seesaw, it can rise you up into the air really quickly. Yeah. A seesaw can also plummet you back down. Have you ever been on a seesaw? And the person on the other end jumps off and boom, you like hit the ground really hard, right? That’s what a lever can do, you know?
So imagine just the bigger that end of the seesaw, right? It’s a tiny seesaw. Something designed for like little kids. I. You know the two sides of the seesaw, the lever is gonna be rather small if you are at Burning Man. Right? If you are at a festival and they’re making some ridiculous giant novelty seesaw for grownups, like that’s a type of seesaw that can hoist you really, really high into the air, and it’s also gonna really hurt.
Yeah. When you come crashing down. Josh Dorchen Uhhuh, who created BiggerPockets, our friend over there. Josh had a great quote that he said to me one time, which was that, you know, you see so many people offering real estate products because of the fact that leverage creates more quick winners. Yeah. But also when you go through times that are inevitable, like 2007, 2008, leverage also flushes out far more people.
Far more people. It’s funny because, you know, if people use leverage to buy stocks, you know, we call that options and a lot of most investors will go, are you crazy? Mm-hmm. What are you doing buying these options? Really you’re gonna leverage your stock portfolio. That’s crazy. In real estate we call it a mortgage.
Right? Everybody and everybody does it. Right? Exactly. Exactly. It just, it’s so wild when I hear some of these people just go, you know, leverage is your friend. Yes, it is. Yes it is. However, I. You know, it gets that knife’s got two sides. Yeah. You know, in the course I refer to them as debt loving weirdos,
and I talk about not drinking the cash on cash Kool-Aid. And you know, I’m not Dave Ramsey about this. I think that a very moderate amount of leverage is fine, right? It’s what gets you into the game. But it just needs to be taken with a giant, not just a grain of salt, but a giant salt shaker. Well, because the thing that you have, Paula, with real estate is you do have this income stream coming in.
That can pay that mortgage. So you do have, where with stocks, you know, finding a stock position that will give you a dividend high enough to make that option worth it is a lot less. So it’s truly isn’t tomato to tomato or orange to orange or whatever. I thought you were gonna say tomato to tomato. I, I suppose I should say apples to apples, which is what most people say, but I didn’t come up with the obvious one.
What I should have said was apples to apples. Comparison. Instead I go tomato, tomato for some stupid reason. But you know what I mean? It isn’t the same because you do have a much bigger quote dividend with that rental income coming in. But I think you also have to think about what if I go for an extended period of time in an ugly market where I can’t rent the house out for God knows what reason?
What if I go six months without renting the house for that reason? I know you keep a lot of cash on hand. Yes. So I am a big fan of cash reserves. I typically recommend to my students that they keep. Three months worth of gross rent at the time that they initially buy the property because. Ballpark, three months of gross rent will be roughly five to six months worth of operating expenses.
Yeah, so at the time that they initially buy the property, keep at least three months of gross rent. If you know you’re buying a fixer upper, then you wanna keep more on hand because you. You also have to fix up that property to get it rent ready for the first tenant. But assuming that you’re buying something that is move-in ready on day one, keep three months of gross rent minimum, and then as you hold the house, slowly build those coffers until you’ve got six months of gross rent.
So I think six months of rent per property is a good benchmark. Let’s talk about that rent check, because a lot of new investors get the finding a tenant piece wrong. What do people get wrong? You see more often than not with your students when it comes to going after a renter, when he comes to trying to identify and get that right person in the house.
Ooh. That’s a good question. I think people are maybe a little bit too metric driven. I know a lot of students who will say, if someone doesn’t, I thought you were gonna say the opposite. I thought you were gonna say they’re not metric driven and not Ah, no, no. I think my students are a little bit maybe too metric driven in that they, I.
They want a very specific credit score, right? Yeah. And they’re like, if someone doesn’t have at least X credit score, then I’m not gonna consider them. We had a guest recently that was exactly the opposite. Her problem was she had to have a property manager, not because she felt like she necessarily needed one all the time.
She’s like, I am a pushover and I will let the most homeless person that can’t pay anything. Into my property. Right, right, right. Yeah. Yeah. And that’s a good example of know yourself. Yeah, it’s true. Yeah. Yeah. But most people, I would guess when you’re right, swing the other way. If you don’t get a great credit score, then Yeah, exactly.
And the thing is, there are different reasons why a person might have a damaged credit score. And you can see when you run a credit check on a tenant, you can see their history. Do they have a history of lots and lots of late or missed payments on a lot of things, right? Basically, do they have just a history of not paying bills or paying bills late, or do they have a history where they’ve consistently always paid bills in full and on time?
But then they had one really major unfortunate gaff. I had a tenant like that where I looked at his credit history and it, he was very, very consistent at paying his bills. In full and on time, and this is like 2012, so this is in the aftermath of the great recession. He had owned his condo and his condo got foreclosed on, right?
So that foreclosure on his condo wrecked his credit score, but with the exception of that one foreclosure, he had a very clean credit history. So, you know, I was happy to rent to him and he was a great tenant. So people don’t dig into the credit score enough. Like they just take that number and boom.
Without really? Yeah. They take, they take the number without looking at the story. Right. Which makes sense to me because it’s gonna be hard to find that perfect credit person that doesn’t wanna just go buy their own house. Right, right. So much more difficult. Yeah, and that part, it depends, like I’ve had many tenants who are just not in a position where they would want to buy a house, like for example.
You know, well, a bunch of my tenants were med students, so they were in school. I’ve had tenants who are in their first couple of jobs out of college, and they don’t know exactly how long they’re gonna be living in Atlanta. Maybe it’ll just be for two or three years, you know, they’re not ready to settle down.
They want the flexibility to move around to move to another city. Like for a lot of people who do have. A good income and good credit scores. They’re just not in a place in their life where they wanna settle down and make this their home. And they, yeah. Yeah. My last tenant was a guy that just didn’t realize that he could buy a house.
I. Until I told him that I was selling the house and I would like to sell it to him. And he was shocked when he got a loan, he was shocked and I wasn’t shocked. I was, he just never done the math. Wow. It was like, yeah, you could be my renter forever. That would be fantastic. But I, for a variety of reasons, decided to sell it and I.
Ended up selling it to my tenant, which was Wow. Which was really cool. Let’s talk about the course. It’s your first rental property. You, I know not only put a lot of time into developing this course, Paula, but you this year went and put like, talk about painting the fence. You didn’t paint the fence, you like gutted the inside and have completely renovated the place.
Even though like from reviews I saw last year, people that were in it loved it, so. Talk about what do people get with your first rental property? Hmm. So your first rental property is a 10 week long course. We give it a cohort experience, so there’s a very specific enrollment window. If you want to be part of the course, you have to enroll during this, I.
Very limited time window. It’s a 10 day long window and once you enroll, everyone starts the course on the same day and then we go through it together as a cohort for 10 weeks. Now, if something comes up, and this more times than not, this usually happens to most people. Something comes up, you get a big project at work, your kid trips and falls and you know, sprains their ankle and ends up right, the life happens.
And so people oftentimes are not able to kind of move along with the cohort, but we’ve designed it to be a cohort experience so that you have accountability, you have peers that you can learn all of this with. We have study halls like, ’cause we give you homework assignments. So there are study halls where we cover how to do the worksheet or how to fill out the spreadsheet.
You know how to do the homework assignment for the week. We have accountability groups where if you are in the active stage where you’re actively making offers on properties and you need feedback from other people who are actively in that stage, right? We’ve got accountability groups for that. So it takes the loneliness and the throwing spaghetti at the wall trying to figure out what the hell you’re doing out of real estate investing because you’ve got a group to do this with.
You’ve got TAs, teacher’s assistants, who are all alumni of the course, and they’re all successful rental property investors who are there to guide you and help you through the process. And then the lessons that we walk through, we start with a module on how to analyze properties because that’s the most important piece.
So we spend two weeks. Covering how to do the math, how to analyze properties. There’s very, very detailed spreadsheet that’s part of that. Then we go into how to find properties, and it’s not just the m l s, you can use the M L Ss if you want to. That’s the multiple listing service, which is what the, where publicly listed properties are listed, and that’s one option, but we also tell you how to find off market deals, right?
That’s the finding module. After that, we go into the financing module where we talk about all the different types of loans and loan products that are out there. Then we go into renovating the property and it isn’t Bob Villa’s how to tear out the floorboards. It’s how to think through a renovation. How do you decide, I think of what’s the important parts?
Yeah, exactly. If you think of the spectrum, there’s feasible on one end of the spectrum, there’s optimal on the other end of the spectrum. Where within that spectrum do you wanna be? So we think the renovation module is, it’s a module where we teach you the jargon, but it’s also a module in which we teach you.
How to think through what scope of work you want that renovation to, uh, to hit. And then we go into how to find a tenant, how to advertise for tenants, how to screen tenants, how to manage your tenants if you are doing your own property management, how to process the move in and the move out. We talk about how to protect your properties, how to protect your assets, all of the administrative side of it.
So all of that together turns into a big 10 week long course. I love the idea of the pack hunt, which my early mentors told me like, if you wanna get good at something, do it with a group of people. ’cause that accountability piece that we all go, uh, I don’t know if I wanna be around a bunch of people. I really would rather do this by myself.
You won’t do it right. At least I know I won’t do it. When we moved to Texarkana, I had never run a marathon and I didn’t really care about running marathons. And then just based on the group of new friends I had, they were all marathon runners, Paula, and I’ve now run 11 marathons. Wow. And it is because of the fact that I hang out with these people.
You know what I mean? I would’ve never done any of this stuff I ran this morning, ’cause my buddy Troy wrote to me and goes, Hey, you wanna run at 6:00 AM Hell no, I don’t wanna run at 6:00 AM but if I get to hang out with Troy and go three miles and I know Troy’s waiting for me, you know? So I will get my ass out of bed at five 30 in the morning if I know.
So I love the idea of the cohort going through it together. Yeah. Versus not doing it with a group of people. And you know, you might finish it, you might not, and then that ends up being a waste of money. Right. It isn’t what you know, it’s what you do. Yeah, exactly. Exactly. One of the things that we offer to our alumni, and this is always available forever, is with every new cohort that goes through the course, If there’s an alumni who wants to be part of that new cohort and just ride along with that cohort experience, join that group.
They’re always welcome to do so. Every come back and repeat a module. You can repeat a module, you can repeat the entire course. It’s totally up to you. I. So we have a lot of alumni who do that. We always, at the beginning of each new cohort, we send out an email to all of our alumni. We have over 2000 alumni at this point and say, Hey, obviously you have lifetime access to the course, so you can go through at your own pace, at your own time.
Use it as a resource anytime you need, but. Given that we’re coming up on a new cohort, if you want the group, the comradery of being part of this new cohort, come join us. And we always have a really high opt-in from previous alumni who are like, yes, I do want to. That’s cool. That’s great. Yeah. Yeah. I mean, it keeps the saw sharp, right?
Yeah, exactly. Well, and a lot of ’em will say like the last time that I went through it, I was thinking about buying my first rental property, but I hadn’t yet saved for a down payment, and I was in the process of moving and I was switching jobs, and so I wanted to learn about it because I wanted to get the lay of the land.
But I knew at that time that this wasn’t going to be the right time for me to buy, that I would be ready to buy a, a property in maybe a year or two. So they’re like, so I went through it with a cohort in those early days while I was saving for a down payment while I was, you know, just laying the foundation.
And now fast forward, it’s been a year and a half, now I’m ready to buy a property. Now I wanna go through it with a cohort again. ’cause my mindset is very different now when I’m actually ready to make offers. Than it was a year and a half ago when I was still saving up from down payment. Yeah, yeah.
Right. Or I gotta imagine too, if you went through your first one, which never goes according to plan matter. Yeah. It just doesn’t. Yeah. And now you’ve got the experience of one under your belt and you can go through it again and go, oh, I, I should have done this. I should have stepped in that should not have stepped in that.
I feel like as you do it, that lesson becomes more almost like people that go back to grad school versus somebody who just does grad school right after. Right, right after their bachelor’s. And for people not watching us, Paul is just laying her Columbia class. It’s such a flex. Look at mine though. Ooh, what is that?
That’s the Ferrari logo. Oh, fasty. Mine’s Ferra. So I don’t know if I’d take your Columbia over my Ferrari, but maybe one produces the other. Maybe it’s, it’s a two thing. Do the Columbia, then you get the Ferrari. I don’t know. Oh, they cost about the same. Here is, yeah, one comes with an object. The other one you get to just talk about.
Here’s our link. We believe in Paula in this course, so much that we have partnered with Paula, and here’s what we’re gonna do for all of our Teeter listeners, and we’re playing this on Stacking Benjamins week as well. So, Our stackers out there. If you go to Stacking Benjamins dot com slash Paula, that’s Stacking Benjamins dot com slash Paula.
What we’re going to do if you buy it through us, because wait, there’s more, is that while people that know me know that property is not my expertise, but what is my expertise? Is that you wanna make sure that your budget is, in order to get that property finished, you wanna make sure your budget is airtight.
I put together from the time that I was a financial planner, What I used to call my Sherlock Holmes list, which is all the places where money is going, it’s in the sofa cushions behind me. You know, you find 20 bucks in your pocket, but it’s much more than that. Like there was money that I would reliably look and I would find money seeping outta my client’s budget.
And so we wanna make those airtight so that more money can go into being able to. Do the rental property and not have it blow up. Mm-hmm. So we will give you that sheet as well if you buy it through us. Joe Sherlock Holmes sheet. How about that Paula Sherlock Holmes sheet. I like that. That’s what I, that’s what I call it.
I don’t think the, but actually the little, I don’t think the official name is that, but that was always when Tina, who still works with us today, when she was my assistant in financial planning, she would always, if somebody brought in their homework, which is show me your budget, she’d set my Sherlock home sheet right on top of it.
And I would go through the Sherlock home sheet. I’m like, oh, we gotta look there. We gotta look there, we gotta look there. We gotta look there. And we would find thousands of dollars. It was really cool that people didn’t know that they had. So we will include that if you use our link. If you decide to enroll in Paula’s course, Stacking Benjamins dot com slash Paula.
That’s it. Anything we didn’t cover that we should have covered? Paul? Let’s see. Oh, you know what we should cover? 2023 because this is such a different time. Alright, there’s a few things that we should address related to the era that we live in. Deal, uh, sorry Joe, am I going long? Do we have a No, we are going long, but we specifically told everybody ahead of time, crystal and I, that this was gonna be a long discussion.
So, Oh, fantastic, fantastic. You know, you know me, I’m long form, right? We got like five more minutes, so we’re good. All right, so a few things that we should talk about. First of all, if you think, hey, property values, home prices are really expensive, am I too late? I want to reassure you, I have heard people say that literally every year since 20 13, 20 14, right?
Back in 2013, I heard people say, oh man, look, the prices have gone up so much since 2010. I’m too late. Right? And then 2015, they said the same thing. And you think to yourself, now, God, if I’d gotten in in 2013 where everybody was saying no. How great would it be, right? Yeah. Yeah. People in 2015 were like, look at how much the prices have gone up.
Just look at how much they’ve gone up between 2012 and 2015. Look at how much they’ve gone up in the last three years. I am way too late. Dammit. I’m too late. Alright. You know? And then 2017, I. Oh, look at, you know, and so consistently, year after year after year, I always hear this and so if I understand why you think this, but three years from now, do you think prices are going to be higher or lower?
Right? Three years. I’m telling you, we are in a housing supply crisis. We have far more demand than we have supply and. That’s a formula for home price increases. In addition to that, when interest rates drop, because interest rates are not gonna be seven or 8% forever when interest rates drop, do you think there will be more buyers or do you think there will be fewer buyers?
Right. I. Back in 2020 or in 2021, I just posted about this on Twitter earlier today, even in 2022, people kept saying, man, I’m trying to buy a home. But the moment a house comes on the market, it gets multiple offers on the day that it’s listed and you know, buy 5:00 PM on the day it’s listed, it’s under contract with five backup offers.
Right people in 2021 and 2022, when interest rates were low, were trying to buy a home, but there was so much competition. Everything was going for above asking price with like multiple offers. The average days on market, which is a measure of how long a home would sit on the market, was incredibly low.
Tiny, yeah. Yeah. It was teeny tiny. Right, and so a lot of home buyers were frustrated because of all the competition of everything going above asking price. That’s not a problem in 2023. Right. There’s not a lot of competition from home buyers, so the advantage of being in a higher interest rate environment is that you get to buy a home at a time when there’s not a lot of competition.
You can buy something for potentially below asking price rather than at or above it. You can ask for additional contingencies within your offer, which is just a fancy word for you can ask for more stuff, right? As a buyer. You want to be making offers at a time when there isn’t a lot of competition and when interest rates decline, which inevitably they will, we don’t know when, but at some point they will.
When interest rates decline, there’s a pretty good likelihood that there are gonna be more buyers. Well, and if you can afford to buy now Yeah. With the additional interest expense that you have now. That when that interest expense goes lower later, right when you refinance, it just becomes a more conservative deal.
So if you could conservatively buy today, then it only gets better from here. Exactly. Marry the property. Date the rate. Right. Barbara? Barbara Corkin. By the way, literally this morning before you and I hit record, I was watching Barbara Corkin say the same thing you just said. She goes, the idea that prices are gonna go down is ridiculous.
It’s not, prices are not going down. Yeah. Zillow, according to Fortune Magazine, Zillow is predicting that home prices nationwide will rise about 6.5% by next summer. Holy crap. Yeah. By summer 2024, still a big number. Yeah, so marry the property date, the rate. Yeah. Well, and even besides that, I think that if you’re going to buy knowledge, which is frankly what people are buying with this course, that knowledge helps you just ride the bike whenever you decide to buy, you’re gonna know how to ride the bike better.
You’re gonna know how to value. And certainly that doesn’t mean that I want people to procrastinate and wait, because I do think it’s what you do, not what you know, but still, you’re buying the knowledge to be able to pull the trigger whenever you want. Yeah, exactly. Stacking Benjamins dot com slash Paula, Paula pant.
Thank you so much my friend, for hanging out with us teaching our peers. Yeah, thank you. Big thanks to Paula for hanging out. Crystal. I like, I like this idea Crystal though, of being conservative with your real estate investing. I mean, Paula talked a lot to me about being conservative and I think especially when you start out.
Being a little more, I see people get in trouble with real estate, not because they’re too conservative, but because they’re too aggressive. Right. You never wanna bite off more than you can chew and that you can’t afford to screw up your first deal. You want people to take you seriously. And so you wanna take your time to learn the lingo, learn the ins and outs of everything like ’cause you don’t wanna cut corners.
And what do people do when they’re not prepared or run outta time? They cut corners. That’s the first thing you do. And so when you’re conservative, you’re taking the approach of, listen, this is gonna be, and we always talk about. Slow and steady. This is gonna be a slow and steady kind of deal. Then you ramp it up.
You know, she was happy to tell us about her biggest real estate mistake. What do you think yours was? Ooh. My biggest mistake was definitely not knowing what I was signing on that first deal. Oh, I just had a conversation yesterday that, what was the name of that old G M A C I used to get class action settlement lawsuit checks.
I’ve also gotten class action lawsuit, settlement checks from Wells Fargo too, because there were things that I was jumping into that I didn’t understand. Of course, they ended up working out, but. Thankfully the courts stepped in to say, Hey, you did some bad predatory actions towards this group of people.
You need to pay them back. But had I not been a part of those class action lawsuits, I wouldn’t have known I had any rights, and there’s still some things I probably got taken advantage of. So definitely just don’t do these things alone. Have somebody you trust or know. And at the very least, I think the big thing there is read the contract.
I was having a discussion with the wonderful comedian who writes for Stacking Benjamins, Lisa Curry, and she was talking about how many comedians don’t read the contracts that they’re given with these different, you know, production companies, or it’s the same thing in a real estate contract. Crystal, this is such a big transaction to not go through that contract.
Uh, it is. I think a lot of people also, they wanna rush into it and they feel like they don’t have negotiating power. It’s like, oh, well this is their contract and no, you’re the one that’s starting the transaction. So what you say goes, so if there’s something you don’t understand or you need clarification on, ask it.
’cause even for me, building these buildings now in Chicago, I was getting a hard money loan and I had to ask someone, Hey, what fees should I negotiate on? And I spoke to someone from FinCon Beach, you know, surrounding yourself with like-minded people. One of the guys there, he told me, oh, fees are the fees that you can negotiate on.
And he saved me a lot of money just because I was doing something new on my own. Fabulous. Yeah, so when they sent the contract I was like, hold on, give me a minute. And I pretended like I was parking my car or something, you know, I pretended like I had a bad connection and I just reached out to someone else to ask, you know, what can I negotiate?
I love that idea. I get coaching from a strategic coach and one of their big maxim is to ask who not how? Ask who knows this? And by the way, that’s why we partner with Paula is because clearly Paula knows. So it’s Stacking Benjamins dot com slash Paula and Crystal. I told everybody that if they use our link, we’re gonna throw in a bonus, which is my Sherlock home sheet that I used when I was a financial planner to find money hidden in your budget.
So we will throw that in. If you use our link, you can obviously not use our link then we don’t get any affiliate income. You can go right to Paula’s course, but we’re gonna give you a little extra if you do. I’m glad it wasn’t a Sherlock Holmes Monocle or a looking glass magnifying glass. I thought we’d save that for next time.
That’ll be Stacking. Double bonus. Double needs branded monocle. Yes. How cool will you look? Well, I’m sure all the cool kids have a monocle. Let’s, let’s. Let’s dive into the community calendar before we say goodbye. There’s only one real piece of news this week, crystal, and that is that this show, like all podcasts, needs to have a budget so that we can keep podcasting.
We need to actually find ways, you know, I don’t think either one of us are in podcasting to get rich. I always laugh when I see people do that. However, we do have to hire help. We got the amazing Ivy who does our editing for us. Doug needs a biscuit thrown his way once in a while. So we, we need that. So Crystal, while I was at the podcast movement conference, we signed up with our host that’s going to help us put some ads on the show.
And we don’t know what ads they are gonna have, so, you know, don’t be offended. Or if you are offended, reach out to us and call us on it. We love hearing from you guys. So definitely reach out to us. Call us on it. Be like, Hey, we heard an ad for. Dildos. We didn’t like it, so please let us know if they have something.
I’m awake now. What? Doug’s dildos. Whoa, . Anyway, but yeah, so let us know if you hear something that’s crazy or even if you hear something that you like. Think they just did the way that, the way that, just to pull back the curtain a little bit.
Your ability to control what the advertisements are on your podcast depends on the listenership. And because this is a smaller show than Stacking Benjamins, and because it’s in a niche and it’s a newer show, real estate shows have a smaller audience than just a general audience show. Has it Just like a personal finance show is a smaller audience than a comedy podcast?
We’ll generally have. So our ability to say, no, we don’t like that one. Yes, we do. We just don’t have the ability to do that. And certainly we could have gone with a Patreon model, but I think the easiest way for us to implement making sure that we’re able to keep podcasting was to do advertisements. So you’ll hear ’em for now.
They’ll be just at the beginning of the show just at the end. We will have still our read from time to time in the middle of Doug’s trivia, but those will be for the podcast. I think that’s it. I’m excited that we’re gonna get to keep podcasting. Yes, same. Same. Yeah. People think I get paid all this money for podcasting.
I’m like, no, it’s a lot of work for free. Those aren’t your smarter friends. That’s a great way to figure out who your smart friends are. Yeah. That’s been my thing. I learned something and I like to teach it. I was teaching sewing, teaching fitness. Now real estate. It’s like why Keep it to yourself. Let’s share.
I got a great thing for us to share, crystal. We’re ready. We’re on the edge of our seats. We can share what our top three takeaways are and say goodbye. I. Yes, we can. So, yes. How do people get the show notes? First of all, head to Stacking deeds.net/show notes. The show notes are written by yours truly. So even if you have feedback on any previous show notes, I’d love to hear it.
You know, tell me if I’m too wordy or not wordy enough, and that’s how you get your show notes delivered every week. Awesome. She’s Crystal. I’m Joe, and here comes Doug. Doug. What are our big three takeaways today?
Well, JSS and C L H first, take some advice from Paula. Get started on your journey with real estate. Now. It isn’t about just learning what to do. Success only happens when you make that leap. Second, what seems like a good idea isn’t always one. Success in real estate doesn’t always have to mean d i Y. You can often make more money finding deals and focusing on the big picture with your empire and let the experts handle the floorboards and the painting.
Put the big lesson. Make sure you tell someone to leave the trunk unlocked. During these special episodes, I could have gotten up and walked around, oh, there’s a cramp. Thanks to Paula Pan for joining us today. You can find out more about her your first realestate course at Stacking Benjamins dot com slash paula.
We’ll also include links in our show notes at Stacking deeds.net cramp cramp.