426: Using the “Sunflower Method” To Buy 18 Properties in Just a Few Years with Teacher Jon Wooten
BiggerPockets Real Estate Podcast- 1,348 views
- 17 Dec 2020
Many new investors find excuses for why they can’t buy properties. Either they don’t have the money, the deals, or the experience. Our guest today, Jon Wooten, had none of these three, but found a way to acquire 18 units (and become financially free) in only a few years.By asking questions and sticking out to the local real estate investors, Jon was able to acquire valuable experience, all while gaining equity in his rental properties. Jon has his own method for finding deals and acquiring wealth, called the “Sunflower Method”, which has helped him get to the point he is at.Now, financially free at 28, Jon has the ability to choose whether he wants to work, which projects to go after, and how he wants to spend his time. This isn’t a far away goal that only the rich and well connected can get to, it’s available for all real estate investors!You may be working a minimum wage job, stuck in a career you want out of, or have debt. Jon shows that all of these can’t stop you from acquiring wealth!How do you find houses? How do you find a mentor? What’s the best way to find a quality handyman? How can you make sure a house is being inspected properly. All these questions and more are answered in this episode!In This Episode We Cover:How to find a mentor AND get your first rentalWhy you should make it an effort to get to know your local real estate investors Why self-managing is a great way to gain experienceHow to get seller financing on a rental (and who to ask for it)Why you should call “for rent” signsWhat the “Sunflower Method” is and how it builds wealthThe best way to find a quality (and inexpensive) handyman Fake cash flow vs Pure cash flowHow to properly inspect a house before you make an offerAnd SO much more!Links from the ShowBiggerPockets ForumsDavid's InstagramBrandon's InstagramBiggerPockets PodcastBiggerPockets StoreBiggerPockets Podcast 050: Getting Started and No Money Down House Flipping with Mike SimmonsBiggerPockets Podcast 200: A Step-by-Step Guide to Buying Your First Real Estate InvestmentBiggerPockets Podcast 180: 58 Deals by Age Twenty-Three with Devan McClishBiggerPockets Podcast 355: From Small-Time Landlord to 1,000+ Units Under Contract with Ryan “The Mercenary” MurdockOpen Door CapitalTony RobbinsCheck the full show notes here: https://www.biggerpockets.com/show426
This is a bigger pockets podcast show for twenty six, but if you just stick with it and keep following the process, it gets easier and easier. So you're one you might make to 15 months. Your TUJ, you might buy three or four houses and now you're at a thousand a month. You're three. You got tired of waiting and buying just two or three at a time and you might buy 10 at a time. And who knows, by year three, four or five you're going to make making ten, fifteen thousand dollars a month just by snowballing that process.
You're listening to Bigger Pocket's radio, simplifying real estate for investors, large and small. If you're here looking to learn about real estate investing without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from bigger pockets. Dotcom, your home for real estate, investing online.
What's going on?
I want to bring in our host to the Bigger Pocket's podcast here with my co-host, Mr. David Greene.
David Greene, what's up, Mr. Long Distance real estate himself? What's been going on with you? Well, end of the year.
So I'm looking to buy a couple more properties that I have to do before twenty, twenty one comes. So I'm kind of on the hunt, which is funny because I'm looking primarily in Tennessee, mostly because I believe a lot of Californians are going to leave California and they're going to go to places like Tennessee as our property taxes and our income tax are set to increase. And today's guest was from Tennessee. Lucky me. So we got to learn a little bit about that market.
Yeah, today's guest is phenomenal today. Like our guest today is John Wooten. He is a biology teacher out of. Yeah, Chattanooga, Tennessee, has some high school there. And the guy is like legit in terms of like understanding real estate, buying stuff, overcoming fear, finding deals. I mean, if there's like one thing you, Paula, today show, it's like listen to his strategy for finding off market deals. It's so simple, yet it's so powerful.
And like if you did nothing but implement that one thing and going into the twenty, twenty one, you will buy multiple deals next year. If you just did this, like this thing, you're going to love it. He bought a 10 unit, a really creative way. He bought his second deal was that strategy. He talks about all sorts of good stuff like the Sunflower method today. We talk about that. We talk about the car accident method.
Today you can learn about what those two methods are and a whole lot more. So today's show is just phenomenal, full of great tips and ideas about getting started with real estate and building a portfolio of rental properties. And now, before we get to that, though, let's get to today's quick tip. All right. So today's quick tip is very simple.
At bigger pockets. We are constantly learning by constantly I mean, like every month or two months or maybe three months, we are releasing new books like we have a publishing company really thought of books. And sometimes we bring on the author here on the podcast, sometimes we don't. So go to bigger pockets that come such a store. It's been redesigned. It looks really pretty. And you can check out what books maybe you haven't gotten your portfolio yet, your bookshelf portfolio, that is, and you can pick them up and add to your collection because there's some books you're missing out on.
You can also preorder future books like David's upcoming book Sold, which if you are interested in being a real estate agent, you definitely want to or be in a better real estate agent or becoming one you don't want to pick that up. So get all that a bigger pockets dot com slash store. All right. That Brandon. You're welcome, Mr. David Greene.
Well, today on the show, we actually talked a little bit about my future book, but it's way too early to preorder. So you don't have to do that right now. But we talked about that. It comes out next summer, but cool.
Well, should we get in today's show? Before we do, let's get to today's show sponsor.
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And if you want to add no, John's got an awesome story and just I want to highlight maybe so there is something I want to add. This is a biology teacher in a state where teachers probably don't get paid super great. So if John could do it, listen to what the guy's got to say. Right. Are there other states where teachers get paid? Great. I'm sure they get paid a little better in California than they would in Tennessee.
Teachers, teachers in general don't get paid really well. So he didn't let that stop him at all from building up, what, his 18 units over five years or something?
Yeah, yeah. And he's got like four four hundred thousand dollars in equity in those properties now. Teacher salary. Yeah. All right.
Well, with that said, let's get to the interview with John Wooten, John Wooten or Wu Tang, as they say.
Welcome to the bigger Fagots five question. How are you doing, man? Glad to be here. So tell me about yourself. You are a biology teacher, is that right? My least favorite class in high school.
Yeah, I'm a biology teacher. I teach physical science and a little bit of environmental science to have been doing that for three years.
So, you know, I didn't like biology. Well, because it's not the class they made you cut up in a frog like that. Yeah, OK. Yeah, I had to cut something open and that's just that weird to me. Out to you know what, it's OK. I still like you. I think you get your good real estate investor. So, you know, it's. Yeah, yeah. We're going get into that today.
So I'm going to dig into frogs in my classroom, but they're hard to get. Yeah. Are they going to be like there.
Yeah. There's no there's high demand in the frog industry right now for. Yeah well you ask everybody, you're like hey where can I get some frogs to dissect and everyone just stares at you.
Yeah. OK, what's funny here, if this guy is listening right now, I'm like Tennessee or Georgia and he's like, I get you some frogs. He's going to like send you a box of like just like hundreds of dead frogs in a box as rodhe like this.
Should we make we asked for should we make that what this shows about like how to find frogs in a rough market. Yeah, yeah.
I think they have a frog in it and they'll stab frogs with a little fork like a prong thing. Well, oh that is a big it's horrible. My mom saw that when she was a little girl. They came home with all the frogs on a string. And to this day she has a phobia about frogs. She can't see one without throwing up or even hearing the word frog. It definitely affects her. This took a grim turn. Well, I got I'm going to make it even more grim.
Thought I was a kid.
We had not a more grim when we when I was a kid, we had this, like, window in the basement. Right. In order to have a window, it was for an egress window in the basement of our house. In order to do that, you had to, like, drop like this, like, you know, like see shaped metal, six foot hole basically on the side of your house. Right. So that way you could climb out the window and then climb out of this hole and be safe.
Right. That's how they make it safe.
So this like a culvert, is that the word I'm looking for? I don't know what it's like this hole in the ground next to your house that allows for a window in a basement. Anyway, frogs would jump in there. And I'm not talking about like a frog or two. I'm talking like hundreds of frogs. And the only way to get them out is to drop the nine year old, which was me, into the hole with the frog.
And it's like the snakes on Indiana Jones and they're like climbing over each other and just this mess. And I had to pull them all out. So that was one of my jobs. That explains why you hate frogs. Just probably. Yes, that's why bond over that.
Yes. Later on, we figured out you could put a lid on the little hole and then the frogs wouldn't jump in.
But that took a long time because sometimes problems creep up on you slowly over time. You don't realize it's a problem that you could just easily fix that, which is what we're talking about today. But real estate, because problems creep up slowly like that transition. So thank you. Let's get into your story and talk about the the properties you buy, the real estate that you do. So biology teacher, Mr. Wooten, that what they call you? Oh, yeah, they call me Wooten.
Some of my Hispanic kids say Mr. Meester.
OK, all right. I just call you. Wouldn't Mr. Watson tell us about yourself? How'd you get into real estate investing from being a biology teacher?
So it started before biology, before I taught biology. I was working at Starbucks actually way back when I was seventeen. Eighteen years old. And I would sit there and I would hear people talk about real estate. I'd have a lot of people come in and talk about real estate. So it started peaking my interest. And then I had a buddy. He went and bought two houses and I was like, well, how can I do this? I'm eighteen years old.
And it first thing he said was, build your credit. I didn't love that answer, but that's the next three years of my life, like three, four years. Just build my credit, because if you don't have credit, no one is going to lend to you. So the first thing I learned so fast forward a few years I discovered you guys on my way to my first real job. I was working at a bank, BB&T, as a teller.
And on my way to work is about 30 minutes.
I would listen to bigger pockets religiously and I got to the point to where I was like, I know that this is an investment vehicle of some sort. I know people make money in it. So I'm just gonna try to figure it out. And I probably listen to episode fifty up to Episode two hundred. I contacted Devin Mukhlis. She was on Episode one seventy something. I contacted I think one of the guys you're working with in Maine or Maryland.
Yeah. And I mean like Ryan Murdock maybe I don't know.
They ran me through some some numbers too. I've talked to him and I just started calling all these people, just picking their brain about, you know, how they got into it. So I was listening to these podcasts and I was making maybe twelve dollars an hour and I just sort listening to it and it got me interested. And then I would go back to Starbucks at night and I would sit down and watch your videos and I would work it out and you say, all right, take 30 minutes, go find a deal and practice a deal every day.
And I would practice on my computer, see if it made sense and one thing led to another. And I started talking to people about actually getting deals that was going to the first deal then.
I mean, first of all, did you decide you obviously you're in Chattanooga at this point. I mean, you're there now, but are you still that were you there then?
Yeah, all this started in Chattanooga. OK, I love Chattanooga, but so you decided to invest there. What was the first property like that? You started practicing. Started running the numbers?
I think the first deal. So a few things I started doing, I would go to the MLS and I would try to find deals. I would go walk around at houses, even though I knew I couldn't even buy them at that point just to kind of dip my feet in. And my wife, my now wife, she was babysitting for somebody who had a few rental properties. And I had met with them before, just kind of asked them about it.
But I went and talked to them a little bit later on. I said, are you still into rentals? They said, yeah. You still looking for something? I said, absolutely. He said he has ten units for unit in a six unit right beside of each other. And if I wanted to, we could work out a deal to where will owner financing it won't cost me that much out of my pocket. And that way will let me get started.
And ten units to start out scared. The scared me pretty bad. Yeah. So he said, go drop by and see what you think. I go I drop by and when they're rough I mean there's nothing like to pretty about them when I first get there. But I thought he should be an eviction. What it looks like we walked into one house and I mean you could tell someone was mad. They had holes all up in the wall.
There was furniture thrown everywhere. And he said, this is what it is. Sometimes if someone gets evicted, they get mad. Sometimes they'll just leave it and sometimes they'll clean it up and be cool about it. And I told him I was like, I'm in. So I ran my numbers and after everything, I was going to be making eight hundred a month. So like plugging it in only calculators. And I thought to myself that that'll do it.
If I can take eight hundred dollars a month and somehow save that over the course of a year and start to snowball it, that's what I would do. So that was my first deal. So we did an owner finance and I managed them for a year and a half. I would give him a check at the beginning of every month for how much he required, which he needed. Seven percent of the seven percent on a 30 year loan is what we agreed to.
And once we decided those numbers, I would just go and write him a check for that, I would go and pay the utilities, I pay the utilities and the rest was my profit. Oh, the first five months, that was what he wanted from me. He wanted to see that I had skin in the game. So he just said, give me a thousand dollars a month for the first five months. I was like, OK, so every profit I had, I just gave it right back to him.
Interesting.
So, you know, that was almost like your down payment was the first the first five months you said to him, yeah. You just gave him the profit.
That was like your down payments and you had something to live with.
That's I just like similar. My very first apartment I bought, I did seller financing and I didn't have the money for it. So they let me like lease option, like master lease option, which is where I rented it from them basically paid them the rent that they wanted. Yeah, the same thing. And then I didn't actually buy it.
So at this point for you, did you own the property legally or was it it was still in their name.
You were basically doing what I did. Like you're renting to own it? Almost exactly. So for a year and a half I'm making payments to this dude. It was really nice because any time I had a problem, I could call him because he doesn't want his properties to go under or fall apart either in the event that I foreclosed and stop paying him. Yep. So I'd say, hey, I've got somebody open their door. They moved out and they said, and I'm like, I don't have a key.
We'll go kick it in. OK, so I'll go figure that out and then, hey, I've got an eviction to do. Have you ever like what do I need to do. He said meet me at court on Wednesday at nine. OK, so everything felt trial by fire any time. But any time I had an issue I would call him. He was a really good mentor to have through this whole transition process.
Yeah, this is this is such a neat it's such a neat topic because I mean, one how shockingly similar it is to mine. If I worked at a bank and my wife worked a Starbucks actually, but that worked to the bank and then I bought this twenty four unit from the same sort of situation, I bought it on that kind of lease option E thing for a while until I had enough money saved up from the cash flow to be able to use that as my down payment essentially.
But more importantly, it was the mentorship of that person because here's what's so cool about the strategy. Now, some people listen, this might go well, you know, why would somebody do that to you? Why would they work with you on that like that? Like, that's something lot work for them.
It's because, like, they don't like you said, they don't want the property back. They don't want to sell it to you. And then seller finance, they want monthly passive income forever. So it's in their best interest to train you over time to be good at this so that they don't ever get the property back. I love that idea and it's low risk for them. They don't go through a foreclosure if it didn't work out the first few months because you just hand the keys back to them like, well, it didn't work.
And, you know, they say bye bye. Yep, that's the cool.
Very similar to how businesses work. When a business is sold from one person to the next, it is somewhat big. The new buyer makes some of the old people stay on for a period of time to help them get the thing off the ground. And it's a great strategy is why businesses use it. It works with real estate, just like David. David, are you saying that real estate is like business?
Oddly enough, how is this associated with multifamily? Because multifamily is especially made for like people treated it that way, more often treated real estate the way that you would if you were to go buy McDonald's, like that's basically what you're doing here. So you could go and work at the McDonald's for a while as the as the general manager to learn how to do a good job at it, when in fact, it's exactly right.
Sort of let me just buy a McDonald's, tell me everything that there is to know about running a McDonald's. And I expect that I can walk in there on day one and do it super good. And if I can't, well, the real estate's a scam.
Yeah. Oh, gosh, I am Tyler Johnson. I'm sure you've heard that yourself, so. Oh, yeah.
One of the things that I've noticed is like if I go and explain to my parent, like I told my parents, it's like this is what I'm doing. I'm buying this ten unit. I'm going to manage it for a year and a half. And they said, why are you doing that? Why would they sell you? That sounds like that's what they said. It sounds like a scam. It doesn't like what would you and they like you're not going to own it.
But I think what I've come to learn, and I guess this is I used to think that nobody would ever tell somebody their secrets in real estate because you would just feed your competition. That's what I used to think. And now the more you get into it, there's so much property for everybody that they want to, in a weird way, give back to you right now. You do have some people who don't.
But, yeah, by by and large, most people I've ever met, the older investors they like because their kids and their grandkids and their nephews and nieces, they don't care anything about real estate.
So you show up to one of those people and you're interested in what they they're doing and you're excited and you're passionate like they almost everyone I've ever known and will want to do you.
So people complain, I'm young, I can't invest because, you know, like, why would somebody take me seriously? I'm young. I'm twenty years old. Twenty to twenty five. That's your greatest asset. Go use that. That's, that's what you have like. Yeah.
So I would kill for somebody to come up to me like twenty to twenty three and say, hey can I manage your property. Yeah I'll pay you. What do you please. Yeah. A hundred percent. Yeah. I think when I, when I started I had, Kyle was like his name is Kyle and he was like my mentor but it was. Like an official thing, it was like we became friends and I started managing or quote unquote, managing his properties, he don't want to deal with the problems anymore.
So I did all his maintenance, all his work for my turnover's units for him. I'd show units when he didn't want to show them. And like, I took all that work off his plate and he paid me.
I hope he's not listening to this, but he paid me almost nothing like. But who cares? Like I mean, looking back now, it took me actually way too long that I got so much experience and it was I had no risk, zero risk because it was his property. So if I didn't get it rented and I did, I did a really good job. And so later, like, he's helped me a ton.
Now he's like lent money. And we've been good friends since then. But like from both sides of that equation, it was an awesome relationship.
So, John, how did you find the guy? You might have mentioned that I might have missed it, but how did you find that guy that you bought that from the ten units?
Yeah, so was my wife. She was babysitting for this lawyer in town. And I know and his lawyer and the guy who I bought it from our partners. OK, so I had been talking to the lawyer. Anything the lawyer says to me, I jotted down it's gold and his partner owns an insurance company here in town and his partner is the one who I mostly dealt with the lawyer. He kind of stays out of the real estate management side of things.
But, you know, so far about that, I just said how how similar we were.
I got out of the paint job. My Kyle, my guy, his partner was a lawyer and he was like, my lawyer guy is like, exactly. I'm pretty sure, like, you and I just have identical stories. You need a lawyer. We heard the same thing. We're on the same wavelength. And Devin MacLeish is that's what got him. That guy who was a lawyer, he managed some Home Depot. But yeah, lawyers seem to get into it.
Yeah, crazy.
Awesome, man. All right. So you bought the twelve. The ten, the ten units. They're managing it yourself. What did you have? Like what did you learn? I want to know from that experience. In other words, like as you're going into that, was it harder than you thought to manage all these tenants going from zero to I mean, going from zero to 10 is pretty awesome.
I'll say some might say crazy, but what was that like? What did you learn? What was easier than you thought? What was harder than you thought?
Terrifying is absolutely terrifying because it's easy now when you look back at it, you go, oh, you just get another TENNET. Oh, you just did this back then. If I had a tenant call me, you know, not ten o'clock at night and they said, hey, my toilet's not working this that the third. Well, they just moved in two weeks ago. They're doing this. They're going to bail on me. I'm going to have to I'm going to lose five hundred dollars this whole month.
And it never you kind of think yourself into a storm. And the thing that I learned is that if there's a problem, there's a solution. And it's never as bad as you think it is. I've had water line breaks. I've had heaters go out. I've broken windows, doors, cops. I've had somebody die at my properties once. I didn't know that person. But there's always something that gets handled and it's never quite as crazy as whenever, you know, when your mind makes it.
That's one of those clips I'm going to take and throw my Instagram later. Are you saying that because that's so good, like I want everyone to listen to that.
Like there are. Yeah, there are problems like they do come up, but they're never as bad as you think. You talk yourself into this drama. You think it's going to be much worse. And, oh, you don't want to manage properties like Uncle this. Uncle John had properties and he lost everything.
Like everyone's got like the story. And so you get scared going into real estate. It's terrifying. But then there's an answer to everything.
I mean, every single thing I can relate this going back to biology, your prefrontal cortex is going to allow you to see things in the future. We're just so good at it that we make it worse than it is in the minute that you can just kind of shut that off. And, yeah, there's there's a reason that you don't hear that many people going out of business with real estate and you hear a lot of wealthy people who are in real estate.
That's that's a good point.
Yeah. What are they saying? 90 percent of businesses fail in the first five years. I've never heard that quote about real estate. I'm never too busy. Like, yeah, 90 percent of all people who buy rental properties lose their properties in the first five years.
Look, that's not a thing, you know, but it also you rarely hear about someone that steps into it in the first year becomes a millionaire.
True to correct. It's like an inverse relationship. So I think that's why a lot of people don't get into it, because it's a get rich, slow game. You're committing to the long term when you get into real estate investing. A lot of people don't like it. Another area where I've seen a lot of people that were really good at this start was they were a CPA or some form of accountants, and they were looking at their wealthy clients and seeing they all owned real estate.
That was another, like light bulb moment, like your guys. Just lawyer thing.
I'm sure Brandon probably saw this when he was at the bank. You have some wealthy clients come in and if you talk to them, you find out who owns businesses, what kind of checks they're dropping off, and you find out real quick. Yeah, yeah, very much that there were a few I mean, a few people I knew are real estate investors and they were like they were doing.
Well, interesting enough, actually, one of the people I was closest to at the bank, like the one customers that I became friends with, sort of he had a golf business. He sold golf supplies online. And this is before I knew anything about Internet marketing or about working on like people made money online.
And that blew my mind. I would say that is probably what got got me to even start a blog originally, which led me to start this podcast with Josh back in the day. It's because, like this guy, his biggest problem was he. Couldn't pay off his credit card fast enough because he had like a fifty thousand dollar line on his credit card, but he would buy fifty thousand with the material and then he would sell that right away. But he didn't he couldn't do it fast enough.
So his card kept getting maxed out. And I'm like it. He was coming in. Yeah. I was like, that's a good problem to have. So we had like three cards and like I was as a as the guy trying to help them as a banker at the bank, like trying to get a more cards and try to get him a bigger line of credit. And I was like, I want those kind of problems. Like, that's the kind of problem I like.
My problem was like my tire my car blew out on the way to work today. Like, those are the problems that I'm saying, like wealthy people have different types of problems. Right. And so I want the kind of problem that says I can't pay my credit card bill fast enough because like, you know, I'm making so much money and spending so much on supply. That's like, oh, that was so cool. And I remember just thinking time, like, how amazing that was.
And I never got into necessarily like the Internet e-commerce business, but just just entrepreneurship and business in general. Yeah. You learn a lot from those kind of people.
It's a revelation in a very strange way.
And like because you find out you'll talk to people and they say, hey, I make X amount of X amount of dollars or whatever salary. And then you might talk to somebody who they've never had any bit of education. And you might you know, you can tell by talking to somebody, but then they might own a multimillion dollar multimillion dollar business.
And that's how they did it.
Yeah. What do you actually think? That always encourages me. And I don't want this to sound mean, but it probably will come out that way is I know a lot of people in my life, even before I got into real estate who were not that intelligent. I mean, like my friend Kyle, he's super smart. He's a pilot and was like, wicked smart. But then there were other guys that I know even today like that. I'm just like you're like a few.
What what's the girl like you crans short of a Crayola box, whatever. Like, yeah, but they are like, oh, like six million dollars of real estate. And it's always like just reassuring to know, like, OK, like you don't have to be the top five percent or the top one percent of intelligence to figure this stuff out.
You just have to not give up on it in that period. Yeah, that's so good. So what, you did not give up and I'm assuming so after the ten, you know what happened.
So before I even closed on the ten unit. So we have this time frame of between now and eighteen months, probably around the 13, 14 month mark. I meet another guy. I'm working at FedEx at this point and I'm managing the properties. And I meet this other guy who I saw his phone or his phone number on a rental property outside of a house. And I said, OK, we're going to talk to him and start putting another one in the pipeline, as it were.
And I ended up buying a house from him for sixty five thousand before I closed on the ten unit. So not three months later, I go and close on the ten units after buying the sole sixty five thousand and that sixty five thousand dollar house doesn't make eighty dollars a month right now. The guy's been in it for years. He, he's actually my handyman but I don't go up on his rent. I leave it there and it just does this thing that, that was my first official one and then three months later I closed on the ten.
OK, so tell me about that.
You say for rent sign and you called it that. He said, oh yeah. So that's a cool strategy. I if I see and I tell my friends this because I have friends in Charlotte, North Carolina right now and they asked me, like, what about what about this? What about this? And all I keep telling them, I say, go make phone calls. Just tell them you want to pick their brain. Tell them you you want to ask them how you can get started.
This, that and the third. And at the end of your conversation, just ask them, do you have anything, any problem properties that you want to get rid of, any headaches? And you might not find anybody, but I'd say probably three out of ten times you're going to find somebody who wants to sell something and then they know the game. They know how much it's worth. They know that you need to make your money on it.
So they're not ridiculous with it. But yeah, that's how I called him. And I started asking him, just like I'm talking to you now about real estate, as much as I could get, like filter feeding as much. So we call a phone number any time I see a phone number, I would call it. That's such a good tip. If people did nothing but that just that one thing and made that their whole thing for the year, like you will buy property that way.
Every landlord, pretty much every land that I've ever known has properties that if you know, if they were asked and Pusztai they'd like. Yeah. Sell that one. I really like that one or I've already maximize my return on that one. Have those conversations. In other words, I said this is the end of the show when I tied in a terrible analogy to this. But this is a much better analogy, right. There's frogs creeping in these holes in these in these investors lives, like these properties, like just continually causing them a headache.
And they don't realize that that that their hole is getting filled up with frogs until you're like, hey, do you have any like you know, you have any holes with frogs in it that I can go and jump in and clear out for you?
And they're like as a matter of fact, I do. And then they're like, you know, let's talk about it.
And like you said, they're not going to be crazy as much as like I feel like homeowners are almost sometimes more irritating to work with because they have these completely unrealistic expectations of what their house is worth.
But yeah, I've got a few people's doors. I'll knock on their door and hey, do you wanna sell your house? Come on in. Come on in and we'll start talking about the house. It's a two or three bedroom. I'll do my numbers and I'll call them and give them my price. And I've had two people just get mad at me on the phone. I'm like, I mean, it has to make money. I'm sorry, lady.
Like, that's the way it is. But you're right. This is different.
Yeah. You're looking for the homeowner that's in pain, which is why you're calling landlords. You're looking for the one that's like, I don't want to own this. This is very intriguing. What do we have to do? And when they're not in pain, that's the first sign I have. Just don't invest into it. That's a mistake. A lot of newbies make with off market deals is they take someone who loves their house, who cherishes it and wants to show you the hue of paint that they chose because it fits the accent wall just right.
And they're trying to convince that person to sell their house for half of what it's worth. Yeah. And they get frustrated. They're like, why? How do I get them to sell me their house for cheap? And the answer is you don't you just move on from that person. You go look for the one who doesn't want to own their house and is looking for you. And that's the one you put the time into and that's where you really leverage.
So is that something you found like have you noticed in your strategy to acquire new properties that you found a niche where you can find people that are in pain?
Oh, yeah. Especially that the type of owner who might have fifty to one hundred and fifty units is usually the guy I'm trying to talk to. They always have a forty, fifty, sixty thousand dollar house they want to get rid of. It's always within the same area. I mean at least what I'm targeting for is in the same area. I will even ask if it's in. I have a house on Berry Street and I'm asking why do you have anything near Berry Street?
Because I'm trying to buy up this whole little section part of my town and not have to also drive to go collect my rent all the time, too. And yeah, what you're saying, if you meet somebody and they have all this invested time in their house and it's their baby, they're not going to let it go for what's reasonable. It's not happening.
Yeah, I love what you said is you're looking for a bigger investor who's got a lot of properties. They're busy and you're asking them basically like, hey, I see you got a classroom full of forty students. Which ones causing you all the trouble? I'd love to take them into my class, you know, as a school teacher, because when they've got two properties that that problem house is still a cherished part of their portfolio when they've got fifty to one hundred fifty units and the same address is popping up in their inbox.
Trust me, I know what that feeling is. I will sell it at a loss just to be done with the problem. But that's what you want, is you want some of these problems. So that is incredible advice. Everybody, please take that seriously. When you meet that investor who's like, I've got two hundred units, don't think, oh, I'll never be able to talk to them. The next question should be, are there any that you don't want any more?
I could pick off your hands.
They will always say yes. Yeah, yeah, yeah. That's a good tip.
I hope you're enjoying this episode of The Bigger Pockets Real Estate podcast. We'll be right back after this quick break.
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So what came next? You bought the you then bought the house the fifty five. Got that.
Yeah I got the sixty five one and then I bought two other houses from the same guy, not the lawyer friend. This is the guy who I called, I bought two houses at once from him. I think I paid ninety four total ninety for those two houses, one rents for five seventy five and the other one rents for six fifty. So about those two that was fifteen percent down. Also as I'm talking just if, if you guys are listening, just make sure you find a bank that you're comfortable with because it's weird realizing this.
You think everything's so set in stone, everything's so paper, you have to do it, have to do it this way and you find out that certain banks can work with you. I pay fifteen percent and everybody told me I'll never get below twenty. I had other banks and they'll go and talk to their loan officer and say, hey, this Wootten goes back again. What can we do? Because like let's say you want to buy a property and they have to approve that.
You can even pay for that loan. Well, now they might have a meeting, the people at the bank in a decide on if they want, if they can even bypass their rules to give you that loan. And if you have a good relationship with them, they'll work with you. So, yeah, I bought those two and then. Yeah, those are working. So what do you have now, total? Tell us what your total portfolio.
I have eighteen units total and I've got eleven that I'm purchasing within the next nine months. So I'll have what. Well what do you mean under contract.
Are you doing the same kind of lease option thing or like what are you doing for those. So these 11 units, they're under contract and there's this guy, he's a he almost looks like a biker. He's big, he's bald, he's tattoos everywhere, nice as can be. But he owns, I think, three or four hundred units out here. And I bought four units from him about five months ago. And he said, hey, I've got eleven more if you want them.
I was like, yeah, so I drive over. He told me the price and. They need a little bit of work that people there rented, it makes money all day, so I told them I'll I'll take it. He said he wrote it on a little piece of paper. John Wooten, by this address, I will by this address by September 1st. Twenty twenty one for no more than this amount. Here's a thousand dollars down and that's the entire contract.
Wow. And so I take that to my bank and we start lock and lock and everything in. And my goal here is to not use any money that I've saved. I use a little bit, but I'd rather start to use the equity from my previous properties that will help me pay for this 11 unit. It'll be the biggest one I've bought so far. So try not to dig too deep on my cash.
That's an example Brandon and I often give where when you do well, buying the first couple of properties that grows and then those buy you the next wave or the next round and then now you've got more cash flow coming in from that one that was bought for with the equity from the first ones. So now you can say faster to get the third, which is why real estate investing goes really well when you take time. Like, for sure, it's something you have to.
You want to comment on that? Yeah, I do.
The first to the first year to three years, it's going to be slow. I mean, I know that I in a weird way was lucky, but just like what you guys say, everybody's lucky in their own right. And that first ten, I was like, any money I take is going to go straight into the next property in any money that I make from my other houses are going to go straight into the next property. And so your first couple of years, you might make a couple of single families or quod you make five hundred a month, maybe a thousand a month, maybe only two hundred fifty on your first house.
But if you just stick with it and keep following the process, it gets easier and easier. So you're one you might make two fifty months, you're two, you might buy three or four houses and now you're at a thousand a month with everything. You're three. You got tired of waiting and buying just two or three at a time and you might buy ten at a time. And who knows by year three, four or five you're going to make making ten, fifteen thousand dollars a month just by snowballing that process.
And to compound that, I found when you're buying single family houses, which just where the majority of people get their start, they don't crush it with cash flow. And I'm going to ask you in a minute why you feel single family houses don't like what expenses come up there, but they don't. However, they're much easier, in my opinion, to build equity with. You can get fixer uppers, you can make them nicer. Now they're worth more.
So really, the best strategy I found for pushing your way into the market and building cash flow is to start with some fixer upper. Single families use the method to kind of keep the capital going and build your equity, then exchange that equity into something that will cash flow better. That's one hundred times better than just saving your money and going right after the cash flow because it takes so long to buy those bigger properties. Is that similar to what you found?
I saw you smile. Oh, yeah.
Because have you there's a game called Plants versus zombies.
Have you ever heard. Yes.
So the whole point of the game, you want to get as many sunflowers as you can so that you can start generating because the sun points basically give you more weaponry plants. I know I'm going off on a tangent now.
Trust me, there's a lot of first responders out there working three shifts that are very familiar there. I've been with your example.
Well, my whole thing is I'm just going to play life like a video game. And if I can keep saving up my sunflowers, I can go eventually by the living unit. That's going to make me three thousand whatever dollars a month. But I couldn't do that in the beginning because it just sucks. You have to just take it slow in the beginning, but then you realize that time that you went into is not that bad. Do you really want to learn how to solve thirty units worth of problems in a year?
I don't think you do because it's a lot. It's a great point. Yeah, that's such. You have a great perspective on this, John. I love it and I love the sunflower method. Sum that up for us again for everyone that heard that so they can walk away seeing how you look at it.
So the sunflower method, call it, they're going to write a book called The Sunflower Method.
If you heard it here first, folks, the sunflower method, plants vs. zombies. Imagine zombies are coming into your mind. I'm going to ruin it. Sunflower method. Just save a whole bunch of sunflowers. So they're always producing for you. You always want to have something producing for you.
The zombies in this example would be the things you're tempted to spend money on. That's not real estate. Yeah, that's what I meant to steal your wealth. Yeah, exactly.
And that's going to be three hundred dollars a month that the zombie coming up. Instead of just taking the three hundred dollars a month I got from a promotion, why not take that money, buy a house that makes me three hundred a month for the rest of my life. Also pays down a loan also allows me to dip into the equity of the home and then do the same things with it. That's exactly right. And let those weaponry plants that you said attacked debt, which would be zombies to now they're making money for you.
So you're not just working. I think that's brilliant. So let's stay on this theme. When it comes to owning like usually smaller properties, what do you find are the zombies that will attack your profit with real estate investing when you're kind of dealing with, like the single family or two to four unit space? It's always the tiny things.
It's it's a. I think it's it's a bathroom device, like a bath tub device, it's the the spicket on the actual shower might go out and those are things if you don't grow up and see them all the time, those are the ones that will surprise you because you might go one month and spend a hundred dollars, just a little hundred dollars on your plumber to come out there and for him to fix whatever's on the back of your commode. And then the next month comes and says, hey, I've got an issue.
My my think leaking, you spend another hundred dollars. So then you either start deciding, OK, what's worth my time? Do I need to go out there and learn how to fix the sink or do I need to go out there and learn how to fix the toilet? I'm going to go fix the sink and then have somebody else do that. But it's always eating into it's always there. You almost have to plan for it, but there's always going to be a problem that's within the properties themselves.
So when it comes to that spigot, in your in your experience, what would you say those spigots typically cost for just the part? Oh, just something like that, I mean that just the part you're looking at, fifty to sixty dollars on a cheap one, just getting that piece out there and then when you got to call a plumber out there to go install it.
Now, what's your total bill usually going to be if you don't know you're looking at two hundred, if you do know him, he might be out there and charging 50 bucks. So you're under 50.
Well, if the parts 50 plus the two fifty, you got to pay for the plumber. Now you're at three hundred dollars for a fifty dollar part and there goes the entire month. That's exactly right. And tennants, never think of it when they call in to complain about something. What they see is I'm paying nine hundred bucks a month. He can afford 50 bucks for this part. They don't realize out of that nine hundred, only one hundred of it was cash flow.
You just spent two hundred fifty on that part. You just lost three months of cash flow from that one unit because of that one call. So.
Yeah, and that's the part that might, that might bother somebody who's new, like let's say you go buy your first property for months and you're like, hey, I finally saved a little bit of money. Something like that happens. Well, now you start to get in that mentality of owner might give up. Maybe this isn't worth it. But in reality, once you have five or six units, those start to offset each other. But I want to make sure nobody gives up just from.
No, no, no. But there is a way that you what I what I was getting at is it's usually the labor that cost more than the part. Oh yeah. We just look at the bill. Three hundred bucks to fix that thing. But there's a way that I mean, you really can't get the part a lot cheaper. Maybe if you design some way to import it directly from China, you can save yourself nine dollars or something, but you can go after the labor.
And I wanted to hear from your experience running a tight ship like you do. What are some strategies you've put together so that you don't have to call a licensed plumber every single time and spend three hundred dollars for that spigot?
So some of the things what I first started doing is I tried to if I can, I'm going to learn how to fix that one because it's a it's a it's a game. You have to want to some reason to solve a problem if you don't. Anyway, I want to first. Can I fix it. And then too, if I can't, can I get somebody who does it regularly for me at a better price, like getting a good handyman or along those lines.
But I, I still replace my windows. I will go out, I'll find the things that someone might cost or might charge me a lot of money to do for a doorjamb. Like I've said, I've kicked in a few doors and I know it cost me one hundred and thirty dollars for my guy part and him to go out and fix that door. I don't go to Lowe's right now and get the whole thing done for twenty five bucks. I'll go pick it up.
I'll tear it out with my hammer, I'll tap it in. Now obviously there are some problems that I don't want to tackle because they start to get too complex or they start to get a different level of skill. So that's where you want to have a good handyman who you've developed a relationship with. Maybe you've talked to a few different people. You've looked online, you've tested few out. I've had a lot of bad handyman, too.
OK, what are some advice that you have for listeners for what you can do to find the right handyman?
Facebook's great asking around is great. Honestly, going into Lowe's, I will find people all the time like this app with my outlets. I was going to pick up about fifteen outlets the other day for one of the units. I wanted to replace all of this unit and I saw one guy. He had some electrical boots on and he was sitting there looking at some of the outlets and I said, Hey, are you an electrician? They said, Yeah, I am.
And I started talking to him. I got his phone number. And then he ended up I talked to him and we made a deal. He went out and replaced all the outlets for me, for the one hundred dollars for the entire unit. So just always asking around, always trying to find that relationship.
So you're sort of generating for handyman, so to speak. Yeah, yeah. Yeah. Which is great because that's your biggest expense when you're owning these properties this year. And what have you found? You've got a similar sized portfolio of smaller units are a large portfolio of similar type properties when it comes to this whole question of like how much does it really cost to manage them? What's been your experience? Yeah, it's expensive.
This is the this is my problem with a lot of turnkey companies, like there are some good turnkey companies out there. But the biggest problem I have with like the companies that are and those who don't know a turnkey is there are companies that will sell you a completely fixed up property with a tenant in place. They'll manage it for you. And they claim you're going to make all this money from owning this rental. And sometimes they're right. Sometimes there again, there are good companies out that I want to.
There's not. But a lot of the companies have looked at their numbers. They're like, oh, yeah, we already fixed the property, you won't have any repairs. And I'm like, oh, yes, you will. And you're not going to have to replace anything for like four, ten years. And we know now you will. You have to always be replacing things. You're always fixing things. You're always. So a couple of points on this one.
I got a new book coming out next year. It's on Multifamily. I wrote with Brian Murray and we talk about a lot in this book. There's a thing called like fake cash flow and then there's pure cash flow, just like there's like gold and then pure gold. Purified gold has gone through the fire. It's gone through a tremendous amount of like fire to release all the impurities. And what you're left with is purified gold. The same thing is true with pure cash flow is like this is your actual cash flow.
Like like not you're lying. Cash flow, your fake cash flow out, your optimistic cash flow. What we all think it's like this has gone through the fire. So my encouragement to people is when they're running their numbers. Don't do it, some turkey providers do, and just like, oh, yeah, you won't. You'll never have repairs. You want to fix things ever like I assume. And again, this completely depends on the age of the property, the condition of the property, the area you live in.
But I typically assume between five and 10 percent of whatever money I collect is going to go out and repairs and another five or 10 percent I'm going to set aside for future replacements, which is what we call capex. So if it's an older house, I might set aside a total of 20 percent every month just from just for those two things, repairs and capex. And if it's a newer house, I might go more like 10 percent total. But don't kid yourself, anybody, and think that you're going to get away with not having repairs ever.
You might get lucky.
I have a property of five unit that I think I've had three calls on in the last seven years. The House is the five plex was built in 1870 or something like that. Everything about that property says it should have a lot of problems. It just doesn't. I don't know why it's it's been well taken care of over the years. But I have a new house built in the 70s that I have a problem every single month.
There's something breaking on it. So you just never know. But it's across your portfolio. I just know that I'm going to lose between 10 and 20 percent to repairs and capex, only two percent.
And then you keep even on when I look at my Excel spreadsheet and I'm plugging things in, I don't even collect. If I'm at a hundred percent occupancy, I still don't collect one hundred percent of that money. Yeah, you might catch somebody who's missing twenty bucks one month. And are you going to kick somebody over twenty bucks. It keeps happening. You have to discipline but you don't want to kill, you don't want to kick somebody out over 20 dollars.
And then what you're saying and it goes back to the videos you used to put on YouTube how to analyze a deal. Yeah, you do have to factor that in, because one house I bought, I had a roof my first year. The roof had to be replaced. Cost me ten thousand. Yeah. With that. And it you do want to have that implemented in or not. If, if your rent's three or if you're making seven hundred dollars a month or if you're charging seven hundred a month and let's say your total expenses are four hundred, your total expenses are more like five hundred, like just go ahead and assume that there's something you can't see that's going to happen.
Yeah.
And even if you go you might go six months without anything and then you get hit with something bigger than six months worth.
And so I was going to say it all comes in waves. I didn't have an eviction for a year. The past year. Didn't have an eviction. No, no. We had three. And yeah, it happens.
And so if you don't assume for those things, if you if you're not calculating pure cash flow, if you're trying to do fake cash flow, which is like mortgage rent minus mortgage, it's it's not going to work out. You've got to get it through the fire. It's actually one of the reasons why I chose mobile home parks. Not that the end all be all those other asset classes, too, that avoid repairs, but all the mobile home parks that I buy, the tenant owns her own home.
And the reason I went for more than every probably more than every other feature about mobile home parks. The reason I chose them is because tenants own their own home, which means I don't have that nit picking repair cost every single month. That just drove me nuts. And I like how do I avoid that? Like self-storage, mobile home parks, like land, those kind of avoid the repair stuff. And now there's other things that we have to fix and repair.
And there was a lot of things I didn't expect. I'm not saying there are no expenses with mobile home parks. There's a ton of them. But anyway, that's why I that's why I built the whole open-air capital like my whole fund is, because I'm like I just got tired of dealing with the nit picking of little repairs.
And I've heard so many people switching into self-storage.
That's been what breaks in self storage. You don't have any you know, no toilets. Concrete, metal. Yep.
Concrete and metal. It's an amazing thing. All right. So we talked about, you know, you got the handyman stuff. You're still doing some of the work yourself. It's the plan eventually. Are you trying to like are you desperately trying to get out of your job? Like, I had to quit this teaching thing as soon as possible, so I got to built my cash flow.
I mean, could you leave or do you make like could you leave soon with the cash flow you're getting in right now? Where are you at with that? And what's your mentality behind quitting your job and financial freedom?
So financial freedom? I have financial freedom technically. I guess a year ago, like, I could quit my job right now and be fine. But I after going through covid and everything, just sitting there for five months, I'm good. I don't ever want to retire. I think I like what I do. I like I like having something that's not just real estate on the side now. I still like doing real estate. And I've noticed if anything, I want to hire somebody to start managing my real estate so that I can specialize and just keep buying it.
So if I can set up a system to where somebody manages my 18 units and then manages my twenty nine units, I can keep buying ten, eleven units every couple of months or whatever, every couple of years, whatever it may be. And I can still do whatever job I like on the side. Like teaching for me is fun. I get along with people so I don't really have an exit strategy for teaching, but it also wouldn't be it wouldn't be the end of the world if somebody walked up to me was like, John, you're fired.
Oh, okay. So you have a good day. That's the way at FedEx they got me, man. There was there was one day I walked in and I had I was used to doing about 60, 70 stops and I had to drive about two hundred and fifty miles total for the day. And my. Told me that somebody called out and I'm going to have to do one hundred plus stops job. Maybe three hundred whatever, Miles, that I had a rough day and he said, well, are you going to do because I just I sat down, I was like, man, I'm going to quit.
He said, What are you going to do? He didn't care if I quit. So I still needed to make a paycheck. And I decided right there I was like, I'm not having anybody have their thumb on me ever again, because that moment of it feels like they got, you know, your boss has you and that freedom of not having like I still respect my boss. I love my boss now. But as far as someone coming in trying to threaten me over a job, not see, I don't have time for it.
That point is so like resonates so strong in my soul, because when I talk about financial freedom, I'm not talking about sitting on a beach like drinking margaritas all day long, even though, yes, I live in Maui. But like, that's not what I mean. Like, because I still want to work for the rest of my life. I love working. I love building, being creative growth. Yeah, it's growth. We love that stuff.
Right.
It's I don't want anyone having their thumb on me saying I have to do this or else like that, that that trap kills me. Like it just kills me. Yeah.
So yeah the freedom to be able to do stuff is more important than the freedom itself for me and felt like you.
So that was the first step I noticed. I noticed that there was a freedom in that. And then what you're talking about I, I can take my wife on dinners now a little bit more than I used to. My son had I have a brand new son. He's five months old and I pay for child care with thank you. I pay for child care with rental property. And I mean, it's it's a blessing for sure.
So if anyone know what you said, something that sort of illuminated this like a lot of clarity in my mind about entrepreneurship or working for someone else, when you were saying if I could find someone to manage my properties, I could go on to grow more, I realized that you were highlighting what every entrepreneur, which every business owner does, is they're constantly solving a new problem. That's all that business is. Here's a problem. Can you figure out how to solve it?
Sometimes it's leverage. Sometimes it's a system, sometimes it's knowledge. All the stuff Brandon and I are talking about are just tools we use to solve problems. That's what you sign up for when you become an entrepreneur. The opposite end of that is working for someone else driving their truck and you become the solution for someone else's problem. Hey, someone called in sick. It's your problem. You're now doubling the work you're going to do. There's nothing you could do about it because you're the solution for my problem.
So what? What the people who want to get into real estate investing have to understand is that while you are getting away from someone telling you what to do, you are voluntarily walking into a lot of problems that you have to solve. And if you bring the mentality of I want all the security that comes from having a job where I'm solving someone else's problem, and you also want all the freedom, you're going to be disappointed. Yeah, you have to understand both sides have merits in their own way and you have to pick the road that's best for what you want your life to look like.
Brandon does not mind solving problems. He doesn't like a thumb on him. John, it sounds like you're the same way. So what you guys have done really well for the people that are listening that can't get going or they constantly say, well, what about this? Well, what about that? And that's the reason to not start. That's just indicative of a mindset that comes from a W2 job where you're not the person that has to solve the problem.
You are someone else's solution. So if if what about this is stopping you, that's what you need to let go of.
You have chosen to walk into a scenario where what about this is your job and it is so hard, like on the other end of that is so hard when you don't have rental property and you don't see the numbers and you just hear about people doing it and you're so you need to save up ten thousand dollars to buy a house in your head. It seems hard. I was I get it. I was there not a year or two ago. Like, it seems impossible to just get to the barrier, but once you do, it's almost I don't know, it's very clear feeling what happens is and you let go of fear.
I think people when they say that. What about this? What about that?
I think that's the fear because I can get through my phone right now and show you the messages from I keep bringing them up. Devin MacLeish, I was messaging him. I said, what about this? What about this? This is not going to work. Direct mail is not going to work. He says is working for me. Wasn't going to work for you. Can you not in this. Twenty five hundred dollars do not have twenty five. I was like yeah.
And he goes OK invest it. And then I still wouldn't because I was afraid it didn't work. But I mean that's what it really boils down to is you one anybody who's out there who wants to jump in, you do have to in a weird way, let go of that fear. And I know it's hard, but once you do, the results are incredible. Permitted, it's done right, and I mean, you can listen to anything Brandon and David have anything on YouTube, you can find any problem you have, you can find a solution to it.
And it's not so scary.
Yeah, I've told this story before, but I'll say it again real quick now is like that's how I found bigger pockets originally, as I had told my parents that I was not going to go to law school. I was going to go and buy rental properties instead and go be a real estate guy. And they were like, are you crazy? Like, what are you doing?
My dad I remember my dad saying, well, what are you going to do if tenants don't pay rent? You won't be able to pay the mortgage. You'll end up like living under a bridge. Like, you know, you can't you can't pay the whole mortgage yourself, your makeup.
Yeah. And I was like, you're right.
I can't pay a 12 month mortgage.
I don't have my job. I'm making nine dollars an hour. What am I going to do? And like but rather than allowing that fear to dictate my decision, I instead I allowed that fear to guide me to asking the better question of what do I do if I typed into Google what to do if tenants don't pay rent? And I found an article on a little tiny forum at the time, it was just a forum called Bigger Pockets and Weird Name and didn't know what it was about.
And the article was about, look what to do, intendant don't pay rent. It was like, I do this and then I send this and then I do this.
And I was like, whoa, yeah. There's answers. Like there's there's things people do. And then I jumped into the Bigger Pockets forum and started like realizing there was thousands of conversations about, like, what do I do in this situation? So people are listening right now going like they have that fear.
But what if this happens? What if this happens? I can almost guarantee you there are hundreds of threads in the bigger pockets, forums that address that specific thing.
You know, like a lot of people are like, well, what are you going to do if you get more than ten properties? You know, banks won't lend you. I'm like, oh, come on, everyone figures that out because I have an issue. Right. Or what are you going to do if the bank says, Nela, what are you going to do if you don't have good credit?
What are you going to do if you don't have enough down payment that everything has an answer? Yeah. And then another thing, just no. In the back of your head, if somebody else is doing it, I mean, I'm doing it. Brian is doing it. Dave is doing it. If somebody else can do it, surely you can do it. You just follow the process.
You know, that was one of my favorite points in the book, The Ten Rule from Grant Cardone. I read that before we ever had in on the podcast. Yeah, he was a cool guy in the tax role was so good because they made this point in that book. He said when somebody is doing something incredible in their life, like amazing, the natural reaction is to get jealous, like to be jealous of them, then buying a bunch of real estate.
They just called in a big property. They just crossed the whatever the threshold in their life. He's like instead look at that is if they could do it, then I can do it. Like it's not like they have more time in the day. They have some twenty four hours. We all do.
So if anybody's ever doing anything, it means that you can do that thing as well. And so we should be looking at other people's success as motivation and encouragement of our own life. And that's made a huge impact on me. I mean, now years later, after reading that, it's still I think about that all the time.
And I bet you changed your perspective, too. Very much. So very much.
If you embrace that, what they did was they said, hey, there's going to be problems and I got to solve them. If we all take that same attitude, yes, we can do the same thing. I think that, John, you just made a really, really good point, that you naturally, when you walked into this new well, I got to figure out how to manage this property. I got a problem. Hey, can you help me do it?
Yeah, I'll spend the first six months or five months or whatever it is, teaching you how to run it. And then the down payment from the first five months will come from the work that came in from the rent. Problem solved. Thank you. You brought you were brought into this world understanding there's a way to solve problems. And that's what I'm really doing. And when you approach real estate from that perspective, it doesn't feel that hard.
And I think it's fun to yeah, that's a good point to solving problems is fun for you. This might be a great way to get into. Yeah, if not, maybe you like being a biology teacher and don't feel bad about that either. That's there's definitely a role for for everybody to go in.
Yeah. This is awesome. I want to deep dive here in a second. But before we do, I'm curious, like are there things that our audience can bring value to you, anything you're looking for right now, anything that would help you out in your business?
Nothing. On my end of the I've got not much of a social media presence. I pretty much just kind of living the life, going to collect some money. Yeah. And get some more rental properties and try to teach students everything's good online. And I guess if anybody's listening, you want to help me just to help yourself go out there, listen to listen to some bigger pockets, listen to Tony Robbins, listen to get your mind right. I don't know.
Let's make sure you go after your dreams. And it sounds cheesy, but you you get one life. Enjoy it. That's awesome, man. Very cool. Well, with that said, let's move over to the next segment of the show today. We'll do a deep dive.
Hey, hope you're enjoying this episode of The Bigger Pockets Real Estate podcast. Let's take a quick break to hear from our show sponsors. And we'll be right back.
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This is the part of the show where we dive deep into one particular property you've bought to get the dirty details on it. So you've got that in mind that we can dig in.
Do I do? All right.
Well, I'm going to just throw a bunch of women, throw a bunch of questions at you.
Number one is, first of all, what kind of property is that and where the located?
So this is a single family and it is two hundred yards away from my ten units. This is what I'll say. And also very street. Yep. Chattanooga. OK, how did you find it. Funny story. How I found it. I was at Starbucks again. I guess I don't really do much. So I went, I was at Starbucks, I was hanging out with all my buddies and I watched Mercedes back in to another car, a really nice car backed into this Honda Civic, and they grounded the entire side of it as they backed in.
And I saw the guy who got out and I have heard of him and he's after you call so many people looking for phone numbers of people in real estate, you start to get familiar with names. And I've seen his face before and I've met his uncle. He'd never met me, though, when he came back out like we saw his car. Wait, he asked to his car he hit and I told him it was one of the workers inside.
And he came back out and I was like, Are you are you David? Because. Yeah. And I said, if you have a little just out of nowhere, I was like, do you have any properties you'd be willing to sell? I've heard your family's name, this, that and the third. I know it's weird coming out of left base. They said, yeah. He said, take down my phone number. There's a property.
I've got a few of them. So he texted me and we found this one, this one we're talking about. And I bought it for sixty. And that that's how I found him. He I watched him back into somebody's car at Starbucks and then, hey, sorry you did that. Do you have any houses?
So that's really funny.
That's exactly what people do that are good at this stuff. They don't ask. You have to be. We are a little bit you would just embrace it. That's what you're doing, is you're constantly asking that question of everyone you meet. That's an awesome story. Yeah. All right. So now we're going to call that the car accident method. We've got the sunflower method in the car accident.
One, you have to plant the the car is slightly off so they can just fill a parking lot up with debit cards that are correct. Make it your own way. OK, how much was this deal that.
Sixty thousand. Well, sixty two after after everything, but, yes, 62. How did you negotiate that?
So I have I'm trying to think I don't actually think I've negotiated someone on their price down at all. The entire time I've been buying a house is my home I'm in right now. I paid five thousand dollars more than what they were asking. The market was going crazy. The rental properties that I've bought from people, they always give me a good deal. And when I've run my numbers, if it makes me my goal number, then I don't try to talk them down because I feel like one.
They're already give me a good deal, too. Are they going to give me more deals in the future if I'm always trying to chip at them? So I bought it for 60. Didn't really have to negotiate that one. Rents for seven fifty a month.
Question. Side question for you. Approximately how much equity do you have in your whole portfolio right now?
I looked at it and this was surprised last time I went to the bank and they did all the numbers and it shows your net worth on one of the papers. It's like four hundred thousand. And I looked at it. I looked at it and I was like, oh, my God, I did not come from a lot. But whenever you're saying four hundred thousand twenty eight, if I sold all my property, it was just a really good feeling.
So point I want to make here is how to how to have a four hundred thousand dollar net worth, always paying over, asking price for everything for real because you'll all.
Yeah. Right.
That's that real estate work. OK, all right. How did you fund this deal.
So that one I saved up fifteen percent. So on a sixty thousand dollar house I think it was fifteen percent down to about nine ninety five hundred. Now you have closing costs that are associated with that. But I don't I try to negotiate out of getting closing costs. So we made the price two thousand dollars higher and then had him pay for the closing cost. So that way he got his sixty thousand dollars and I got that house. Also side note, I do this in my business all the time at four percent interest rate or so.
You probably increase your expenses by eight dollars a month by borrowing another two thousand dollars. But that two thousand dollars you saved, how many hours do you think that it takes you to do that? So in general, when rates are this low, it is so much smarter to pay more for the house and get closing costs covered, keep the cash. You're going to get a much better return on that two grand than the four percent that you would have saved on the interest rate or the three and a half whatever people are paying.
So that's also very smart.
Yeah. Also on a side note, I mean, good for people who pay off their college loans. But if you go through if there's one thing I learned in college, it's always apply your money to the highest interest rate thing. And I'll watch people say up fifty thousand dollars and pay off or pay off fifty thousand dollars worth of debt on their college loans, which is incredible. Good for them. But those loans are the four to five percent interest rate.
Why wouldn't you take that at forty to fifty thousand dollars, buy a house, make those payments on the college loans using the house, and then you have an asset that you never have to get rid of ever.
Or else they're spending twelve hundred dollars on rent. That is a much higher return. If they could have got themselves a property and reduced that from twelve hundred three hundred, that nine hundred dollars was way more than whatever their student loan was and that fifty grand was the down payment on a house or two they could have done instead of. Yes that's a great point.
Yeah. Just pay down that, that interest rate the highest one. All right. Well what did you do with the deal then. You ended up renting it out. A misdemeanor.
Yeah. So I actually I bought that one. He had it rented out the worst part about that one. And if anybody is listening, I had taken a few of those home inspector classes and I wanted to start my own business doing home inspection for a little bit or at least do it on the side. So I had a rough idea I was going to the house, OK, looking for the stepping cracks. Don't see any of those looking at the window sills, looking for water intrusion.
Well, my dumb dumb self didn't go on top of the roof. I looked at the roof visually from the road. I was like, OK, look square. So a couple of months later, Tenet takes me and they're like, hey, my roof leaking. So I said, my guy out there and he climbs up on the roof and he shows me first thing they do is they pull up what's on top of the the roof to the porch just rot, just rotted.
And I was like, oh my God, wait. Ended up costing out as the ten thousand dollar roof on that house. So even though that was that house is a good deal. Seven fifty a month it I think the mortgage to it's three fifty ish a month and then taxes and insurance brings it up another hundred. So the house makes three hundred a month and that's now depending on which petrification level we're looking at. But it's still made money so I'll take it.
But then right now a ten thousand dollar check was no fun either. So now that house, any time that they give me rent, like, just go back to paying that.
Yeah, that makes sense. And that's the thing we just talked about, about you got like a frog. I jump. Yeah. The frogs are fell in the film The Window Hole, but yes, they inspect. So what was the outcome? I mean, like what was the like where you at today. What kind of equity do you have. Where do you see this.
I still have it. That house I could sell for now. Ninety thousand dollars right now. It's great tenants. Wonderful. She calls me the third of every month. There's a. 754, you know, awesome, that's a it's working and she just part too many cars in the yard. So we're working on that. All right.
Nothing's perfect unless you get someone to run into those cars, in which case that can also get it.
Kind of like where your head's that way to bring that back. David. All right. What lessons did you learn from this deal? So that one always is.
If you think that you know how to inspect the house, make sure that, I mean, really go through and inspect it. You don't have to worry as much as you might think you have to. But still go up on the roof. Look at the big expenses. If you see if you see double layered shingles or if you go up and you see water up in the ceiling, definitely check that out. That's worth that's worth an ask from the buyer.
And don't be afraid to to ask the buyer. A lot of people get too aggressive. Let's say they found that house for sixty thousand. They say, oh, let me get it for 50. You might start off a little too strong. But then on the other side of things like you want to scare away your your seller, but you also don't want to buy a bad deal. So always, always, always do your due diligence. Make sure that the house isn't falling apart.
Make sure the roof's good. Always go back to your fundamentals. Make sure the house makes money that seven fifty on a sixty thousand dollar house makes money all day. So make sure it hits your rules. Yeah, do your math homework and do it right for real and do it to where it's ingrained to where you don't have to think about it. You know that one hundred thousand dollar loans about this a month or fifty thousand loans about this a month.
Yeah. I always tell people like you may have to analyze one hundred properties in your market before you feel comfortable knowing that market really well and knowing what properties like the cost of these things are going to be because it takes practice.
People expect to like just like Kobe Bryant shot a thousand shots like he didn't stop shooting. You still go out, you make your repetitions and that's why you're the greatest. Yeah, yeah. It's practice, practice, practice, practice. And of people think real estate any different.
But it's not. All right, man. Well, that's awesome. Good stuff. Let's have it in the last segment of the show. It's our famous for. All right.
Time for the famous. For the part of the show, we ask the same four questions. Every got the first question, what is your current favorite real estate related book?
I'm going to go with what everybody says is Robert Kiyosaki. I rich that poor, dead rich dad, poor and maybe and I haven't heard a lot of people say the reason why it's so good. But in this, it changes your mind. Your you look at real estate, you look at business, you look at money one way. You look at debt. One way I grew up, we didn't have a ton. And my dad always said, get out of debt as fast as you can, get out of debt.
So my whole life it was I got really good at saving money and I got really good at not getting into debt. And that book, whenever he talks about going into debt, I'm almost I'm I don't know, I'm close to a million dollars in debt now, but that money makes its it makes profit. So that's a healthy debt. So seeing that change was huge for me and then just seeing him talk about what you would have to do, like little subtle things he said he would do, run his neighborhood and look at houses for sale.
And I said, OK, if he does that, that's what I need to do. That's what I was a teenager still. So that's the best business book, I think, a real estate book. So for Michael, we're a big proponent of mindset.
That's why we pointed out every single time mindset's the soil and the knowledge we give is the seed. Having all the knowledge in the world doesn't matter if your soil is not ready to receive that. OK, on the topic of books, what's one of your favorite business books?
The best business book you can get is I was think about this in the car How to win friends and Influence People. It is my Bible. If you can't talk to people. I mean, there's nothing bad about that. I know some people are awkward and there's nothing you could do, but you can always relate to somebody in some way. But if you don't get it around your head that if people don't like you, they're not going to do business with you, period.
And if you and that's all business is, is you're you're reacting and interacting with people who in some weird way do you see the same viewpoints on certain things. And that book tells you exactly how to do it. And it doesn't feel fake or contrived. It really teaches you to actually listen to the other person to to make it authentic. So, yeah, great business book. All right, any hobbies? Yeah, I've got I've been doing Spanish now, so my students, a lot of us speak Spanish day three hundred and forty days in a row.
I haven't missed that. I like shooting. I like going out with my bow. I don't think basketball and working out and running. I just ran my second half marathon. I got an hour and thirty five minutes for my pace and crushed it. I love it.
I don't know about that marathon but everything else we might have just become best friends. That's also come on it.
Yeah. And I don't think I would mind not paying the California state income tax. And there's a lot of Californians that are coming out that way. I'm sorry.
I'm sorry. How much you have to pay. Yeah. Yeah.
Brad and I were just talking about that. We're looking to buy some property out there in Tennessee. Exactly. For that reason. So if you guys know any great commercial brokers or people that are willing to help, we're looking so similar to ours.
Out for commercial brokers. Thank you. All right. Last question. I mean, what's that? A successful real estate investors for those who give up, fail or never get started?
My favorite question, because I would like pretend in my head here in this question, I was pulling up to the bank. It'd be seven thirty in the morning and I would be finishing up the podcast, listening to you guys talking. I would always I would always wait to hear whatever this person had to say. And I mean, it's nothing gold, but it literally is do not give up. And every time I heard someone say that, like if I was having a rough day, I couldn't find a house I could like, my boss was giving me a hard time.
I didn't think that like it was so far out in the future of having real estate. Just know that. I mean, if you don't give up and you chip away at it, even if it's two minutes a day, you can find two minutes a day, no matter what to to hone your skill in some way, to learn a new vocabulary word, to learn the Balmaceda, to do anything. Don't give up. You'll hit it one day.
So that's really good, man. Really good stuff. Well, this has been a fascinating conversation and I think there's a ton of value here, John. You're very good at this in case no one's ever told you that you should do it more often for people that want to continue the conversation. How can they find out more about you?
I have an Instagram account. I don't remember the name of it. Let me pull it up. But if you want to look at me, try to solve any problems on Instagram, I'll try to post a video of me doing it, like replacing my window. I'll do a little fast forward and just. Yeah, not do a little construction stuff. What is my name. John Wooten. Jaylyn in Underscore. You can follow me on Instagram there and I posted only videos.
I post informative videos, but that's pretty much it. If you ever have any questions, you can reach out to me on the direct messenger piece. I'll, I'll try to help as much as I can in the same way that everybody who I've gotten in touch with has. So I hope I can get back to knowledge. Coleman, John Wooten, I'm following you. Hey, we even we even chatted via messenger today and realized that I told you, man, I've been I've been keeping up with you for a while, I thought as a man.
Well, thank you very much. This has been amazing. Appreciate you being here. We'll follow John right now on Instagram.
And with that said, David Greene, once again, thank you very much. This is David Greenhaven. Brandon, thank you. Is our pleasure.
This is David Greene for John Wu Tang Clan. And Brandon didn't know what was in his DM's Turner.
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