Ashley:
Our guest today started investing in real estate six years ago, and he has already snowballed his portfolio to seven properties. What sets him apart in a competitive market is a rinse and repeat strategy that is perfect for rookies. Listen on to find out what it is. Welcome back to the Real Estate Rookie podcast. I’m Ashley Kehr, and I’m joined with my co-host, Tony J Robinson.

Tony:
And this is the podcast to help you kickstart your real estate investing journey. And today we’re so excited to welcome to the show, Jefferson Calloway. Jefferson, welcome to the show, brother.

Jefferson:
Thanks very much, Tony. I really appreciate it. I’m happy to be here and thank you Ashley as well.

Ashley:
Yeah, Jefferson, welcome. Why don’t you start off with giving us a little snapshot of your life, where you’re based and what your career was when you started investing in real estate?

Jefferson:
Yeah, for sure. So right now I’m on the Eastern shore, so got, I work in Philadelphia. I have a home remodeling company there and then live back and forth between New Jersey, Delaware. So I’m way over on the east coast and right now when I’m not doing the home remodeling thing, we’re investing in real estate. I just use one to make money, one to place the money, and then just trying to build the portfolio. I’m sure everybody else is now.

Ashley:
And why did you decide on real estate?

Jefferson:
Well, I guess that’s the interesting part. I really didn’t, I was in the army when I first started investing. That’s kind of how the whole thing got started. I wasn’t a homeowner and I was 29 at the time, 30 right on the brink there. And I was looking for, this was down in Alabama. I was stationed at Fort Rucker as a military officer at flight school for helicopters. And the year before I got out, I was looking for a place to live, didn’t want to rent anymore. And a buddy of mine’s like I’m selling my house. And he turns out he was a real estate investor. I didn’t even know what that meant at the time, but he had one of these little townhouses. And in Alabama, the real estate is very cheap. The townhouse was maybe $70,000. I think that’s all he wanted for it.
And I was like, okay, well, I don’t know anything about buying houses, but that should be easy enough. So since I was in the Army, I just went and got my VA loan, bought it, moved in, and then when I got stationed back up in Maryland and had to leave and get out of the army, he was like, well, I don’t want to leave just yet, so why don’t you let me rent the place you just bought? I’ll pay you in rent more than what the mortgage is. And I was like, that sounds like a great deal to me. So same thing, I came up here to Maryland, bought another place, kept that, rented it out, and that’s how the whole thing kickstarted was I was in the army and that’s how it happened by accident.

Tony:
Yeah. So it sounds like you kind of stumbled into this Jefferson, I guess, what was your initial exit plan when you got that first townhouse? Were you thinking, let me build this into a real estate portfolio, or what was the initial strategy going into it?

Jefferson:
Yeah, I guess that’s the whole thing. There wasn’t one. So I just was going step by step and everything he was suggesting, I mean, I really owe this. I was my buddy Lenore, James Lenore, he offered to sell the property to me. He and I, we use any brokers. We just sat at his dining room table and just talked it out, negotiated agreed, bought it. So then when I moved out, he moved in and I was up in Maryland and he was still down there. That is what accidentally got me into remote investing. Like, all right, now I have to manage this property. But I got it really easy because I already knew him. It wasn’t a stranger. And so I accidentally got into remote investing. I was managing the property remotely. I didn’t have a property manager, but luckily he was very hands-on as a tenant.
He took care of everything himself. We had a bat infestation, I didn’t even know that existed. So that was 2,500 bucks to clear all the bats out of the attic and reinsulate and all that. So I learned a lot of good lessons that very first year. And then when he moved out, he first sent me the text, Hey, I have to move out. I’m going down south to Pensacola, Florida. That’s when I really, the panic started to set it. And he’s like, look, just go get a property management company. They’re all over the place. They’ll only charge eight to 10% and they’ll do everything for you. And I was like, it sounds too good to be true, but so I did it. And that is really when things started to blow up because I’m like, all right, I could do this anywhere. So that’s kind of how it started. It was by accident, but it was a very happy accident.

Tony:
I just want to ask one clarifying question. So the tenant that you had was also the person that sold you the house?

Jefferson:
Yep, yep.

Tony:
That’s got to be the world’s best tenant to have like, Hey, I’m going to sell you a house and I’m going to move into it and pay the rent and then I’m going to show you how to manage it once I move out of it. That’s got to be the world’s best first tenant.

Jefferson:
I’m telling you, he was a mentor, the world’s best tenant. I mean, it was really everything. I got very lucky that that’s how I got my start.

Tony:
Is he looking to rent any homes in Shreveport, Louisiana? If he is, I might go back into that market if I can get him as a tenant.

Jefferson:
He has actually gone on now to invest in big multifamily buildings and we still keep in touch to this day. So I don’t think he’ll ever be renting again personally.

Ashley:
So now that you’ve switched to property management, you’ve realized you can do this again, what was the next deal and how did that come about?

Jefferson:
So that was kind of the same thing. I moved up to Maryland and because I was still very, very new, I had only done this one time, so I rented a place when I first got to Maryland, but it was only about a year or so before I started having that same feeling again. I’m sure the same feeling a lot of people have, why am I renting? Why am I throwing away the money? And they’ll talk about interest and expenses and everything, but when you rent, that’s a hundred percent interest basically. So as soon as I got up there, just paid rent for about a year and then bought the place where I was living there and that turned into one of my second deal. And that actually happened to be a duplex, another happy accident. I just moved into the duplex because it was cheap rent and I was coming back to Maryland for the first time in many, many years. And so now I’m like, all right, now I know how to buy single family multifamily, small multifamily. And that same thing turned into a great, what I didn’t know at the time house hack because I just rented out the bottom and lived in the top. And then I actually rented out a bedroom in the top. So I was really house hacking that thing.

Tony:
I know Jefferson. So it sounds like you’re kind of using your primary residence to fuel your real estate investing, which I love as you mentioned, it’s a great way to kind of get in low cost. Just give us a quick snapshot. What does the portfolio look like today in total?

Jefferson:
So I have, it’s very recently got a seventh, so I personally would’ve had six now seven. And that’s properties. And they are a very eclectic mix. It’s single family multifamily, all small multifamily. I have one sixplex in Hagerstown that actually I bought as a small multifamily or residential multifamily, four units or less, but they didn’t know it had two units attached to it, a small commercial unit that you could barely even count. And then a nice garage conversion unit. So accidentally got into four units or above, five units are above, and then now it’s five or six different states now because it was Alabama was the start. And I’ve gotten a couple more there since then than Maryland. And then now I made my move up to this new company that I bought up in Philadelphia. So one there and then Jersey right next to Philadelphia. So all the house hacking, obviously if you’re living in it, they’re all in close proximity. But since then last year there was one in Ohio that we just actually, sorry, two in Ohio that we did. Now I’m like, that’s one of the best part parts about remote investing is that you can go anywhere if you’ve always got wholesalers sending you stuff. I’m not relegated to my local area. And I think that scares a lot of people, but once you do it a few times you realize it’s not scary, it’s very lucrative.

Ashley:
Yeah, Jefferson, we’re definitely going to have to get into building teams in all these markets, but I have another question for you as to how were you able to grow capital? Where did the funding the money come from to continuously keep buying these properties?

Jefferson:
I mean in the army, even as an officer and a pilot, you’re still not at the six figure mark. That’s not why we’re in it. Most of us are in there to serve our country. But once I got out, I became an X-ray engineer for a few years and that was a good living. So I was able to generate a lot of capital. I lived very frugally was I lived in a very, very less than a thousand square foot two bedroom in that first duplex I was telling you about. I’ve never had to live extravagantly. And so if at the X-ray company, it was not a killing, but I was making six figures there. So if I just save, save and live very, very frugally, you’re able to save up enough to buy one or two things a year. And the other thing is, as you’re aware, if you live in the property, you are offered such incredible terms, lower interest, lower down payments, and you can just get such incredible leverage. I always just wonder why is everybody not doing this? You cannot lose. And I’m not a smart guy. I’m not if anybody can do that. So that’s probably I guess why I fell right into it. It was such an easy strategy, it was a no brainer once I started doing it.

Ashley:
Stay tuned after a break. For more from Jefferson, if you’re hoping to invest out of state, you will need a team to help manage your properties. Go to bigger pockets.com/property manager to learn more.

Tony:
Alright, welcome back to the show. We’re joined by Jefferson Callaway. I was actually going to say I love what you said Jefferson, because I think it’s so unsexy and it’s funny as you were saying that our producers, this is going to be a great social clip, but I was thinking the opposite. I was like, this is not going to work on social because what you said is so unsexy yet so simple that people are just going to gloss over and like, oh man, it’s got to be some overnight get rich quick type thing that Jefferson’s been doing and you’re just like, dude, I made some decent money. I kept my living expenses low and I just saved money and put that into real estate. And when you break it down that way, it sounds so simple, right?

Jefferson:
And I couldn’t agree more. And that’s kind of I guess the anomaly of the whole thing. So I come from bodybuilding, power lifting, strongman, the strength sports, and it’s the same thing there. The stuff that works the best are the fundamentals. No, they’re not sexy. Nobody. When they say, Hey, they come up to me all the time, what’s the secret? What do you do for this? What do you do for that? I’m like, guys, eat a lot of food. Train really hard and heavy, it’s going to happen. So the simple stuff is not sexy, but I’m here to tell you it works even for not smart people.

Ashley:
So Jefferson, as you’re looking in these different markets, how are you staying competitive with your offers and where are most of your deals coming from? Are they even on market deals?

Jefferson:
Well, there’s a couple different strategies. If it’s on market, like I do a lot of MLS stuff, but that’s because I was only buying in markets where the purchase price to rent ratio makes sense. Alabama, Delaware, parts of Maryland, Ohio. And that’s exactly why I choose those markets because I can work with a local realtor. This is a nice hack that I found. If you work with a local realtor, then that’s one of the biggest concerns. Well, I don’t know that market. I don’t know that market. Okay, you don’t have to partner with a realtor, they do all the work for you. They know the markets. They’ll be able to tell you, yes, do this. No, don’t do that. They’re not allowed to tell you if a neighborhood’s good or bad, but they can give you all kinds of little hints. And so you just rely on their expertise.
They’re part of the team. Same thing with local contractors. There’s all types of Google reviews and recommendations and referrals. So I bought a lot of these on market because you get all this expertise, it’s easy to do. You work with a realtor, they take care of all the paperwork, you don’t have to know contracts, they have a title company. And then if you go off market, that’s pretty easy too because it’s almost all wholesalers. For me, I love working with wholesalers. They’re good at talking to sellers. I’m not. So I just let them do that and pay them their fee. It’s been a mix of both. But to stay competitive, I bought a lot of on market when interest rates were low and then as soon as they got up to where they are, I immediately was like, all right, this isn’t going to work. Now. I started looking into creative finance and the Pell Pace more movement now I’ve bought subject to and seller finance and combinations of both. And now I can still say competitive and I’ve got the one I just bought in Ohio is two and a quarter percent interest. Cash flow is beautifully.

Tony:
So let me ask because these are two different strategies. Jefferson, you have the on market, you have the off market and I think similar fundamentals, but slightly different skill sets in the way that you execute on those different channels. So when you’re going on market, I guess, what resource have you found to really find those good agents in those markets? How are you finding those folks and connecting with them?

Jefferson:
I mean, I wish the answer were again sexier, but it’s really about Google. So I just love that I can go on and find an agent in that market and then see what other people have said about ’em. And they don’t even necessarily have to be investor friendly, they really don’t. They’re just good at, they just know the market. All I need to know is how affluent is the area? Is the population growing? Are there Starbucks around all the same stuff we all investors are looking for? And then what will the units rent for? That’s the most important thing for I guess in my opinion, for a long-term, a rental portfolio and will it cashflow and how much will it cashflow? So I rely heavily on the agents for that. And the best part about it is I have no apprehension about doing that because the seller’s paying their commission. You get it all this for free. So another no-brainer in my opinion.

Tony:
And I’ll plug shameless plug here, the BiggerPockets agent finder. So if you guys go to biggerpockets.com/agent finder, there are tons of qualified real estate agents in cities all across the country who specialize in working with real estate investors like all of us here on this podcast. So if you’re looking for someone to go there, but I want to ask Jefferson about the off market side because I think for most people, the idea of going on market makes sense, open up Zillow, open up, Redfin, reach out to some folks there. There’s a built-in process for that, but off market there’s no equivalent for the off market. So what have you found as the way that you’re actually finding deals off market? Are you door knocking? Are you cold calling? What are you doing to find good deals off market?

Jefferson:
Absolutely. So with the new home remodeling company in Philadelphia, I have almost no time. It’s very, very busy. 800,000 homes and they’re all a hundred years old. So I stay very busy with that. I don’t have time to do that. So wholesalers, wholesalers, wholesalers, they’re another member of the team as I say. So you got your realtors and then the wholesalers, they are just happy as a clam to send you deal after deal after deal. My email, my Facebook messenger just full every day, what about this deal? It’s in this market and it’s this price and this house. And they’ll ask you your buy box. I tell them, I only want creative. Don’t send me anything that’s over 400,000 or that’s in Toledo, Ohio. You tell ’em whatever you want and they just flood your inbox, which is a good thing. Most people don’t want a bunch of sales solicitation, whatever I do because I used to buy an MLS like you said.
But now that I’m mostly off market, they do all the hard work, everything you said, door knocking, mailers, flyers, talking to sellers, they do all of it. I pay ’em their whatever, five, $10,000 fee and I get a beautiful property that’s already has all the heavy lifting done. So I always just try to find a wholesaler and then get on their buyer’s list and then just get constantly pitched and I take my pick about if one in a hundred is good, okay, that’s fine. I get about a hundred a week. So it’s easy to find deals that way in my opinion.

Ashley:
And Jefferson, how are you finding wholesalers in these markets?

Jefferson:
A lot of Facebook groups. So there are so many, as it turns out, every single market, a lot of nationwide Facebook groups and they’re spamming constantly. And what I actually like about the Facebook algorithm is, as you guys already know, whatever you click on, whatever you pay attention to, they give you more of that. So now every morning when I wake up inadvertently I’m just getting spam with deal after deal after deal after deal. And once you get in your head what your criteria is, I always just take gross monthly rent in total minus 30% for expenses and then subtract your projected PIT if you’re going to leverage it and then just go that route. So Facebook groups are, in my opinion, the best tool for having wholesalers send you stuff, meet more wholesalers, the whole nine. They’re really, really great.

Ashley:
Jefferson, you mentioned having a buy box that you’re giving out to these wholesalers. Can you give us an idea of what type of properties that you’re buying?

Jefferson:
Yeah, yeah. So I started a lot in single family and that was awesome. It served its purpose, especially with low interest rates, but I’ve just noticed that they’re a lot harder to make cashflow and even though the appreciation, you can make the argument that it’s better, the problem is I have found the security is a lot better with multifamily. If I have, let’s just keep it conservative, four units. If one or even two tenants are gone, okay, I’ve still got half the rent right there, so I’m not totally out. Whereas single family’s binary, you either have it or you don’t. You’re out of no rent for six months and then per door, let’s say you got four or six doors in one building, that’s one roof, a lot less HVAC, a lot less capital expenses and maintenance per door. So I have just started really moving more into the multifamily space, especially with interest rates where they are. And wholesalers will now only pitch me that, so I don’t even have any wasted time.

Tony:
Jefferson, you hit on something that was, I think a big decision point in my real estate portfolio this year was as we look to scale up, what actually makes the most sense for us, our niche is single family, short-term rentals, and most of the properties we had purchased the most expensive was probably like 600 K. And when we thought about scaling this business up, it’s like, okay, do we continue to buy more of these half million to $800,000 single family homes or do we maybe go bigger when we buy a $2 million mansion in Sedona or something? And the question that I asked myself was very similar to what you said, but it’s how do I really mitigate and reduce the risk? And I could buy one 8,000 square foot short-term rental mansion for 2 million bucks, or we could go out and buy maybe a small boutique hotel with 13 rooms for 2 million bucks. And now even if one of those rooms sit empty, I still have 12 others that are getting filled. And for me there was less risk associated with spreading that big mortgage out across 13 rooms under one roof as opposed to if I have one vacancy, I’m getting zero cashflow and that may be on such a big mortgage.

Jefferson:
Absolutely. Completely understand. Yeah, that’s exactly what it is. And not only that, I mean short-term versus long-term. I heard a rule a long time ago at one of the BP cons that it’s not necessarily a good idea to buy short-term rentals. That would not also work as long-term rentals because municipalities are changing so often. I’ve seen it happen twice now. Somebody tells me with the big rush of Airbnbs, Hey, I went to go buy one municipality changed its rules now they don’t allow ’em anymore. I just went through it. I have one in Maryland that duplex, the first one I bought, I made the bottom unit just to try it an Airbnb. Sure as heck, I get a letter from the local town saying, no, Airbnbs, it was the first one in the town, so they didn’t know how to handle it basically they just panicked and said No, I guess I had to go before the town council literally drove down from Philadelphia, came one night to one of the meetings and before the board I was like, guys, my guidebook has all the local businesses in it. This is a business. I have had artists, people from other countries come and spread their culture to this area. I really just pitched it and now they allow ’em. They made an exception for mine and it’s still the only one, but I’ll bet you more will come now. So the municipality changing, even though it worked out well in that situation, that’s another big risk. So yeah, I completely agree. Risk mitigation is a beautiful thing and it’s easy to handle.

Ashley:
We had Avery Carl on before who said that when she’s looking at short-term rentals, she’s looking at ones that already have strict laws in place so that you don’t have that risk of them being changed, but you’re pretty much setting the precedent of those laws in your market by being the very first one.

Tony:
I think you might be the first person I’ve met who launched the first short-term rental in a city. That’s kind of crazy.

Jefferson:
Yeah, well that was what I learned. I learned a lot of valuable lessons in addition to that, this is in a little town called Trap, which is not a big town. There’s farmland all around. It’s in the middle of nowhere and I was just like, well, I’m just going to try it. If it doesn’t work, it works as a long-term rental. Well sure as heck, it works beautifully. It might because it might be because it’s directly on the way to Ocean City, so you have to go right by it all Route 50, but in general you can make an Airbnb work if you make it unique enough anywhere and yeah, you’re exactly right. I think as of now there has been, I thought I saw one or two more pop up.

Ashley:
Well, are there any other places to stay? Because I have two Airbnbs and very small, very small town, but it works because there’s only one hotel that’s discussing and everybody hates. There’s nowhere else to stay if you’re coming to visit family, if you’re going to a wedding, if you’re visiting people that are in the nursing home or the hospital that’s there. So is that town kind of anything like that where there’s not other options?

Jefferson:
Yeah, a little bit, but on either side of it are Cambridge, Salisbury, and Easton and those two areas are very affluent. So I think probably more often what I’m getting is people that don’t want the hotels because there are a lot of them, but it’s highly populated. It’s a very affluent area. They have a lot of events like when Ironman, the big bike race comes through and there’s a lot of other stuff like that. I’m sure all those hotels are completely booked up. Plus we all know, myself included, I’ll always go to an before a hotel, I get to see a new place, get to see how somebody else runs their Airbnb. They’re so unique. It’s awesome. I don’t know why anybody would choose a hotel, so that could be part of it. Yeah,

Ashley:
Room service.

Jefferson:
That’s true. Good point, good point.

Ashley:
I mean I guess you have DoorDash now, so if True. Very true. Yeah, it’s really the same

Tony:
Guys. We have to jump for the final outbreak, but we’ll be back with more from Jefferson in just a moment.

Ashley:
Okay, let’s jump back in.

Tony:
Well Jefferson, one of the things you mentioned was that you started focusing on the small multifamily because the cashflow on the single families, it became a little bit more challenging as interest rates elevated things of that nature, and I think that is a kind of ongoing debate in the real estate investing community is what’s more important. Is it cashflow today or is it equity growth and appreciation for tomorrow? So as you’ve kind of built your portfolio out, how have you approached that decision of cashflow versus appreciation?

Jefferson:
That is the question. I go to B peon every year. It’s my favorite place in the whole wide world, and every time they have a workshop about it, people are talking about it. And I have seen investors try both things. I like listen to David Green all the time and he’s got all these high-end properties. He makes some Airbnbs. I’m sure you guys do that too, and that’s such a great, you’re guaranteed wealth in that case. The only challenge I guess, is how to make it cashflow. You have to either do something creative with it, get a really great deal, but I have noticed that all of the guys that do a lot of cashflow only plays low purchase price properties, low purchase price areas that cashflow really well, but have lower appreciation. The only way to make that really work is to just buy a whole slew of ’em.
I see Tom Cruise, not the actor, there’s a section eight guy that follow all the time for years. Tom Cruise, he does pitches section eight all the time, and it works for him with cashflow because he’s got 500 of them. But it is my opinion that balancing the two, and I can only speak for rookie investors, but balancing the two is really the way to go. You can find areas very easily in my opinion, like Maryland, Delaware, Alabama, have lots of markets that are one to 300,000 and the rents are still 1500 to 2000 per unit. So I think it’s easy to find both and I think that’s absolutely the play. My portfolio as of this year crossed a big milestone in equity and that’s because I didn’t choose the lower income areas, but it’s still cash flows relatively well, and I think that’s the perfect balance. I myself would never go for anything other than that. You want to build wealth, but you also want to eventually one day quit your job and retire on the cashflow. So

Ashley:
Yeah, I agree with you and it’s taken me a long time to make that realization. So kudos to you for knowing sooner than I did. But at first I was all about cashflow because I just wanted to reach that monthly goal that I was striving for of cashflow. But then I realized that wait, I could sell one of my properties and I could make based off of the appreciation and the equity pay down more. It’s just like that delayed gratification of like, okay, hold onto a property, hold it for three to five years and then go ahead and you can do a 10 31 exchange and do the stack method or you can just pull that capital right out and there’s your cashflow that you could have gotten on another property over time, just one chunk of change. And I think it’s a lot easier to invest right now in today’s market if you’re looking for a mix of both instead of just really striving for an extremely high cashflow, which is getting harder and harder to get. But as far as your equity milestone as to how much equity do you want to have that you’re going to reach and then maybe sell it all.

Jefferson:
So true. Yeah, I couldn’t agree more. I think it’s, and I’ve heard a lot of other higher level investors than myself talk about it, the whole cash flow within the first five to 10 years, I have found most degree quitting your job and living off the cashflow. It’s not realistic. I think you have to really build a certain size portfolio before you realize that’s not a thing. It’s just not. You can invest in something really creative, large and expensive maybe, but building the portfolio the way most people do equity is the play, the long-term, wealth and appreciation is the play. The cashflow may be in a decade or three, but that’s not really what it’s for. I have always said in the last couple of years now, make your money, find a way to make active income your job, own a company business. Real estate’s where you put the money to let it grow like a stock market or something. It’s not meant to make you money. It’s meant to be a store of value and a growth of value. Make the money here, put the money there. And that’s just my opinion, but I feel like a lot of the higher level guys, that’s what I’m hearing from them. So think

Ashley:
Well, I think too, when you look at a lot of people who are pitching that they just have rentals and they’re just a real estate investor and it’s like, wow, if they did it, I can do it. But also a lot of ’em have coaching programs, they have different income streams. Tony manages has a management company for all his short-term rentals. I have a property management company where I’m getting income off of that. So there are other ways to stay kind of in the realm of real estate and to be a full-time investor, but then have these little kind of not side hustles, but these comparable businesses that work along with being a real estate investor. And Jefferson, you mentioned in the beginning that you have a home remodeling business, and I’m sure that has come in handy in your real estate investing.

Jefferson:
Yeah, it absolutely did. And I actually didn’t even think about that. That’s a good point you just made because even if you can just do real estate, is that really the best thing? Is that really the fastest way to grow? Because if you can make a lot more with a business and an active income stream versus just living and reinvesting dividends and rent probably shouldn’t do that. So that’s a good point. But yeah, the synergy is crazy. I can walk a home now being a general contractor in general, it’s more of a marketing agency because we sub out a lot of HVAC and stuff that we can’t do. But the point is walking through a home and not having to rely on somebody else’s expertise and opinion for what needs to be done for value add type stuff. What problems are you going to run into? What maintenance and CapEx are you most likely to run into in the next few years? Hugely valuable. Plus it’s lucrative. It’s such a great business to be in. I wish I discovered it years ago because I could have gone a lot faster in the investing side if I had known how much these contractors are making out here. So it’s really been an awesome synergy to real estate.

Tony:
Yeah, I think finding that balance is super important. We interviewed Olivia Tati on the podcast a couple of years ago now, but she house hacked just like you did Jefferson, and she was able to keep her living expenses super low. She was an engineer working at Chevron with the six figure salary and with the money she was saving on the house hack, I think she had one or two other rentals that she had kind of like you moved around and turned her old primary residence into LTRs. But she then launched a design business where she was consulting on design for real estate investors. So she had the passive income from her portfolio plus the money she was saving from the house hack plus the active income from the design business. And when she added all of those things up, she’s like, well, hey, this is actually enough for me to sustain the lifestyle that I want to live. And then she made that leap so I couldn’t agree more. I think sometimes people put too much pressure on just the cashflow from real. It’s like, Hey, can we add some additional streams to make that leap a little bit easier for ourselves?

Jefferson:
Absolutely. I think if you have a portfolio that’s any significant kind of size and you just never have to come out of pocket for big expenses, unexpected stuff, roofs, HVAC systems, your cashflow covers all of it, then you’re doing pretty well on. You’re doing fine on cashflow. It does not need to just be a whole other separate large income stream. It doesn’t have to.

Ashley:
Jefferson, what are some tips that you have for somebody to manage actually having another job or another business that is really active and then taking on real estate investing?

Jefferson:
Sure. So I mean I’m nobody but just what I have found works for me is to just delegate as much as humanly possible. I mean, if you’re really running a business and it’s doing well and you’re really, really busy, you do not have the time and shouldn’t don’t have to manage very actively your real estate portfolio. I know they say there’s no such thing as positive and they’re right, but you can get pretty darn close, maybe over six or seven different states now. Get email a week from my property managers like, Hey, this ice maker went up. Hey, this range went out. And they don’t even require a response from me. Most of the time I’m just like, sounds good, let’s do it. So it’s super duper easy and that’s the way I’ve had it. I have it set up and I would encourage everybody to do that because if you’re serious about scaling, you really, if you think about it, don’t have a choice if you’re doing any more than a certain amount of management with each property as you grow, that’s more and more time.
So just delegate. You can trust these companies if you’ve picked the right one, which Google reviews and a lot of online tools help you do that. Just see what everybody else is saying about it. Pick a trustworthy one and a professional. And then you shouldn’t have to do really much of anything. They’ll take care of. I’ve had them take care of evictions and getting new tenants in. They do everything and it’s for 8%, it almost seems like a steal most of the time. You sometimes have to negotiate ’em down to that, but once you get it and they almost all will, you’re getting a huge, huge value. So just always factor in 8% is what I do. And then just assume you’re going to property manage and then pick a good one, and then you’ll be able to focus all your energy on making the money that way you can go buy real estate faster.

Ashley:
So Jefferson, how do you find a good property manager? How would you find these boots on the ground people to make it less scary, especially as a rookie investor, maybe they’ve never even purchased a property and they’re about to buy out of state. What are some of the tips that you have to tell them as to this will make it easier for you? These are the things you need to do to feel more secure about making your purchase?

Jefferson:
Sure, yeah. And I mean there’s no way you can ever a hundred percent be risk-free. It’s just not going to happen. But just to mitigate, I have found between Google referrals and the size of the company so that you have recourse, those are three things you can do right there to mitigate a ton of risk. So for example, Google’s a great thing. I mean, if you have a property management company that’s been around a long time, you can find that on Google and and I’m pretty sure even BiggerPockets probably has a tool for this by now, I would assume. And if you’re looking at what other landlords have said about them and you find a good one that’s been there a long time, great, that’s a great place to start. Then referrals most of the time, like I said, if you’re working with an agent or another landlord or somebody else in the area or a contractor and they can recommend one, that’s a great way too.
The third thing is the size. I have only done it one other time and I’ve heard a lot of horror stories about it, is getting just a property manager that’s like just a guy or two, and that’s where I’ve seen a lot of it go wrong. Not a lot of recourse with that. If they go take your rent money or whatever, what are you supposed to do about that? You can only sue somebody so long, especially if they don’t have anything to get. So if you do a company that you can, God forbid, I hate to even use the word, but if you have to sue, I’ve never had to do that. Or if you have to write ’em a bad review or they’re held to a standard, they have a reputation. So a big company or at least just a property management company that has a team, I haven’t gone wrong yet, just doing those three things and it’s worked really well.

Ashley:
I’ll throw in one red flag there as far as vetting the property management company. I didn’t realize this in the beginning, but when I had outsourced property management, they actually had in their contract that you could not talk bad about them, that you couldn’t say anything negative about them. And when things started to fall apart, they highlighted that clause and sent it back to me. Just so you know, this isn’t our contract. That should have been a big red flag. So even if you wanted to write a bad review on Google, you couldn’t. But yeah, so I think when you’re managing out of state, could you just give us a little, maybe by the month of what you actually doing, maybe as the asset manager or what are some of the tasks that you’re still taking on and maybe how many hours a week is that actually taking you with having these property managers in place?

Jefferson:
Very, very little. I mean, literally an hour or less per week. But I think that is a personal preference thing. Like I said, if your business is doing well and you’re very busy with it, there’s almost nothing I can think of that would happen from my neglect that would cause a big issue. I purposefully just delegate every single thing. If I have a tenant or the local township reach out to me because I’m the owner of the property, I immediately forward it directly to the property management, property manager, can you take care of this? Or at the upstairs unit at the trap property in Maryland, I had a tenant reach out to me, they got my number somehow, and Hey, there’s a couple of things we need to fix. I’m like, no problem. I’m on it. Took down a list, sent it right to the property manager. So I just literally on purpose, don’t do anything. And that’s just, I foresee if you keep growing this way, it’s not going to be possible to dedicate a lot of time per property. But I know a lot of people are not like that, maybe not comfortable with that, and that’s fine to each their own. If somebody wants to be more, it doesn’t make sense to me, but it doesn’t have to. Who am I? So just my 2 cents,

Tony:
I love the strategy Jefferson that you’ve taken to automate, I guess the majority of your long-term rental management. And we talked earlier about the whole debate of cashflow versus equity. So if you look at your portfolio, how much equity do you have currently? Just ballpark. And then how much cashflow do you think you’re producing on an annual basis or monthly? Whatever’s easier for you to calculate.

Jefferson:
Yeah, absolutely. So that was the big milestone I was talking about earlier. I probably put down an average of, I don’t know, I guess between some of the ones I have bought straight up from wholesalers and the ones that I’ve used owner occupied loans for like 15%, 20% maybe on average. But that back in March was when we crossed the million dollar mark for the total value of the portfolio in equity.

Tony:
Congratulations, man.

Jefferson:
Thank you very much. Appreciate that. But that’s the whole thing. Cashflow wise, I would say just as a ballpark, I haven’t looked at the account in a while, but it seems to be in mortgages and expenses somewhere in the vicinity of 12 to 14,000 a month. And then the actual income is 18 to 19,000 a month. So I usually am ended up netting four to $5,000 a month from the portfolio. And like I said, that’s not really anywhere near what the business side will do, and that’s why I don’t rely on that active income. It’s all just stays there in case I got to replace a roof and all this other stuff, which I have to do all the time. So don’t rely on the income or the cashflow. I mean, and you should be in good shape,

Tony:
But we’re still talking about almost 50 grand a year in cashflow from an hour or two a week of your time, which is a pretty incredible return for the amount of energy that you’re putting into it. Not to mention the fact that you’ve got seven figures worth of equity, which you can now potentially tap into to help you buy your next deal and your next deal and your next deal. And then this compounding starts to happen where each subsequent deal becomes easier because you’ve got the capital, right? You’ve got more access to debt to help you purchase these properties. It all starts to stack from there. So you say it with a common cool demeanor, Jefferson, but it’s an amazing accomplishment, man.

Ashley:
And then you will have to quit your job because you’re going to have to spend all your time trying to figure out how to save and tax.

Jefferson:
Yeah, no, that’s a great point. Luckily in my normal style, I’ve delegated that to the CPA and he did a great job with it last year, so even that gets tasked out.

Ashley:
Well, Jefferson, to kind of wrap us up here, tell us real quick about your latest deal and then what’s next for you.

Jefferson:
Yeah, for sure. And this is a really great one because I learned some very difficult lessons on it. I mean, that’s why I’m here. I’m still a rookie. I still learn all the time. That’s part of it. So this most recent deal, when I ran the numbers on it, I always check what hud, the local housing authority considers to be fair market rent. I just hud user.com, and it’ll show you with all their data that they research that they do what a fair market rent is. And I know that the housing authority for Section eight usually uses that. And so I don’t really ever go with section eight. I’ve done it a few times, but I always say, okay, if I can’t get this in rent from the general market, I always know I can call the local housing authority who has this enormous waiting list of section eight tenants.
I can always just fill out one of those and get exactly what that market rent says. Well, I bought it fully occupied except for the unit that I was living in, and it was a triplex in Jersey. And because Jersey is so tax heavy and expensive in general for a lot of reasons, the closing costs were almost double what I thought they were going to be. I thought I’d be 20 grand into this thing and that would be the end of it owner occupied. Well, it ended up being more 40 and some change. So that was a lot of liquidity at one time that I really wasn’t ready for, wasn’t happy about. And then as it turns out, the property was very low rent. I mean market rent in that area is about 1650 per unit. And I know my mortgage would’ve been about 2,900 or so, and I think it would’ve cashflow, or sorry, the total rents would’ve been like 4,600.
So it wouldn’t have been a home run in cashflow, but I know Jersey appreciates very well. The first duplex I ever bought there in 21 bought it for two 20 and it’s now worth like 360. And that was two years ago. So I know Jersey appreciates well, and I was like, fine, this will be an appreciation play. So I did it, and the rents are very low. You can’t increase ’em very much at a time. Not that I’d want to. I’m always trying to be fair, and I look out for people, and as of now I’ve gotten rents to where I think it’s a thousand and then 1250. So I think it brings in 32 50 on 2,900. And if you know anything about maintenance, CapEx expenses, stuff like that, that’s not cash flowing. I’m actually coming out of pocket a little bit. And so I just am over time going to bring them up to market rents and it will eventually be a good deal.
But I like it because I think this is a great testament to other people that are maybe considering getting into real estate but are sitting on the sidelines. That to me is a big mistake. That’s a wrong move. I probably shouldn’t have done that, all this liquidity blown just to be still coming out of pocket every month, but I’m making it work. And in a couple of years, probably my next year, it’ll be cash flowing. It’ll be a great appreciation play. It’ll turn out to be a great deal. And I think that’s the case with a lot of real estate time can turn any deal into a good deal. And it’s very forgiving this industry. So you shouldn’t be afraid to get in because even if you make a mistake, just whether the storm and you will be fine in the end. So that’s the gist on that one. I think it’s a good message.

Ashley:
Well, Jefferson, thank you so much for sharing your journey with us. We’ve really appreciated having you on and taking the time to share your story and also to give some great advice for others who are starting their Ricky journey and to real estate. So we’re going to link Jefferson’s information into our show notes, or if you’re watching on YouTube, our description, if you haven’t already, make sure you are subscribed to our YouTube channel because we are almost to 100,000 subscribers. Or as my 7-year-old would tell me they’re subs to call them is not the correct lingo. But we’ve really appreciated the rookie community and how you guys come together and connect in the real estate rookie Facebook group and on YouTube. Hopefully we’ll have some more exciting community ways that you guys can reach each other. I’m Ashley. And he’s Tony. And we’ll see you guys next time on Real Estate Rookie.