143: Quitting a 6-Figure Job to Go Full-Time in Real Estate with Nick Baldo

This is the BiggerPockets podcast show 143.

We did things as if a business that had 100 rentals would do it.

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What's going on, everybody? This is Josh Dworkin, host to the Bigger Pockets podcast, here with my co host, Mr. Brandon Turner. Hey, Brandon.

Josh. How are you today?

Oh, wow, that's really nice. You know, last week you didn't want to be cordial. You didn't want to ask me that. Yeah. And today you flipped.

I jumped right on it.

I feel. I feel good, man, you know, just knowing that you care.

I care a lot.

Yeah. That's just not true, is it?

You're not answering the question, though.

So what is the question? Brandon, how are you doing? I'm great, man. I'm doing really good. You know, it's finally. We're finally starting to get out of this crazy Indian summer here. I think today might actually be a day under 80, which. Which would be kind of nice, but, yeah, things are great, man. Fall is coming, leaves are changing. Denver is. Colorado is just gorgeous. So I don't know, I don't know about up there in Washington if you're starting to see.

Looks like the middle of, like, January. It's, like, rainy and cloudy and awesome.

Anyway, anyway, since you don't really matter, let's move on to the people that do.

Our audience, Our audience, they matter. So how are you guys doing today? Oh, they're not answering either.

Oh, wow. Nobody cares about you.

Nobody cares about me. My questions.

All right, guys. Well, today we got a really. We got a cool show with a young guy who's just kind of rocking it, and we're going to get into it for sure really quickly. What's going on with all these properties you got going on? I know there's some kind of deal. You're in the midst of something new.

Yeah, sort of. I mean, there's that one we talked about last week. I just wanted to give a quick update. So we only recorded last week's show a few days ago, so not much has changed. But I wanted to say, you know, I mentioned last week that I put in an offer, which, if you listen to last week's Show. Go back and listen to it. You will love it.

That was a great show.

Actionable tips, ton of actionable tips, 22 and a half of them. But anyway, on the beginning of the show, we talked about, I put an or I'm offering on this property. Anyway, I wanted to throw in today's quick tip and tie it into that. So when I offered on it. So today's quick tip, I offered with a letter of intent as well. And so what I did, I offered on the property just like normal through my agent. And then I sent my agent a PDF of just a simple one page. It had a picture of my wife and I and I've talked about this on webinars and on the podcast before, but it just works so well and hopefully it'll work this time. But we'll see. Anyway, picture of my wife and I and it just said, hi. You know, we're local investors. We love this property. It would fit perfectly with our portfolio. We are excited to fix it up and make it look just amazing. This is what we do for a business and we just love this community. We would be happy if you would accept our offer. And I offered full price on this property because it's such a good deal anyway. So, yeah, we'll see if that works. But anyway, that's my quick tip is submit a letter with your offer. Even if it's to a bank, there's always a person at the end of the receiving line that's going to accept or reject us. If you cannot send a submit an offer with a letter, do so. It's a great way to improve your chances.

And it doesn't always work. I mean, we've used that before and this might not work and, you know, tried that and you know, in past and have had, you know, responses from people who think that you look like they're, you know, angry, mean, you know, third cousin that they hate and they suddenly don't want to do business with you.

So maybe you're just not cute enough.

You know, I, you know, I don't.

You need me on your picture of me. If you put a picture of me on your letter, I mean, anybody can just take a picture of me and put it on your letter and you get your offer accepted, guaranteed.

I'm Brandon Turner, co host of the Bigger Pockets podcast. I'm looking for a loan.

Yeah, there you go. That's how you do it.

All right.

All right.

Anyway, that's my quick tip today, so I'll let you guys know next week if I got the offer accepted or not. So we'll see.

Fantastic. Fantastic.

All right, great.

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Let's get on with this show today. I'm super excited to introduce you guys to Nick Baldo. Nick is awesome.

Really, really really quick before Nick. Guys, you listen to the show. You love the show. Jump on iTunes, take three minutes out of your day and leave us a rating review. It Would be exceptionally beneficial to Bigger Pockets and the Bigger Pockets podcast if you did that. Just go to itunes and leave us BiggerPockets a rating and review. We so appreciate it.

Are you done?

Are you done?

You know what?

This is. This is important. This is how we get more listeners. This is how we help more people become successful. I agree. You can't rush this, Brandon.

I'm not knocking it. I am.

Just can't rush this. I know you're excited about Nick. I'm excited to introduce Nick, this bond together, and so why don't you bring him in? All right.

Can I really? So Nick is a. He's done house hacking, he's done flipping, he's done rental properties, and he's all. He's still under the age of 30 right now, and he's just crushing it. So with that, let's bring him into the show. Nick, welcome to the BiggerPockets podcast.

Now that just feels weird. Nick, welcome to the show, man. It's good to have you here.

It's great to be here. Thanks, guys.

Yeah, yeah, it should be fun. Today we're going to talk about a lot of stuff. I read a quick bio about you, and I know a little bit about your history. And you've. You've done a lot of what I've done, which is fun because now I get to kind of hear a different perspective. House hacking and a little bit of flipping, a little bit of rentals. We'll cover all that today. So why don't we start there at the beginning? How did you get into this game?

Well, it kind of spurred from a little bit of a dissatisfaction with a job, as it often does. Started working right out of undergraduate business school at IBM as a strategy consultant, and on the surface, was a great job as far as move to New York, traveled a bunch, got to meet with a lot of different clients and had exposure to a lot of different things. Learned a lot about business processes and all that, but I quickly realized that that lifestyle, the corporate lifestyle and being a prisoner to meetings and emails and all of that wasn't going to work long term. So I had a bit of an entrepreneurial spirit come up through me. Potentially spurned on growing up. My father was an entrepreneur, and I really admired things he did. So I just started to think, I know that this job is good for now, but what could I do in the future potentially to exit? Not sure exactly how it happened, but real estate hit my mind in flipping specifically, probably from the shows. HGTV shows, things like that as it Often does. But as I started to look into it and read up on it and to learn about it, it seemed very tangible to me. And something that I could wrap my head around is something I could potentially start as a project.

It was quantitative, which really fit some of my strength and some of the things I had learned. At the same time, I had a childhood friend who had gone to college and had trained to be a carpenter, and he had been also thinking of doing something similar with real estate. He's gotten really skilled with that. So we had talked and we said, hey, why don't we try to do this together? I eventually left New York, came back to Buffalo, kept my job because I was traveling so much, it didn't really matter where I lived, to be honest. But when I went back to Buffalo, him and I drummed up what our plan would be. And we eventually bought our first rehab property and did that flip. And from there it's gone in many different directions, which is exciting.

Cool question. Are you from Buffalo originally?

I'm from Buffalo originally, yes.

I love how you don't consider yourself from New York. I think it's great. I'm a real New Yorker from actual New York and you're from Buffalo.

I know, it's completely different. Yeah. A lot of people think it's a short one hour drive to get from Buffalo to New York, which is obviously not the case. So, yeah, definitely from Buffalo. Proud of it. And I'm glad to be back in the area.

Nice.

Is that where you do all your investing at is Buffalo now?

I do all my investing in Buffalo, yes. I actually live in Rochester, which is about an hour down the road.

My wife works here and that's why we live here. But all of my investing is in Buffalo currently.

Yes. So some context for those who don't know Buffalo, Rochester, upstate New York, pretty close to Canada. Definite Rust Belt. Definite. Economies are not in the greatest of places. And housing stock there is highly inexpensive relative to the rest of the country.

Yeah.

What's a typical house go for? I mean, what's the low end? What's high end?

The median price is about 150 for your typical house. The low end is as low as they go. Similar to Detroit and all that. You can get houses for 5,000. We don't invest in those areas. And then there's your nice neighborhoods that you can get up in the millions for sure. But 100 bucks per square foot is really your typical price point in Buffalo.

Okay, okay. Sounds pretty similar to where I'm at.

So you started you had this idea to flip. You got your carpenter friend. How old were you at the time?

21, 22. When we thought about it, I think we bought our first. We were 23 about a year later.

So let's talk about the first. Did you guys go in and buy it together? How much was the property? What did the whole process look like?

Yeah, we actually. We definitely ran before we walked in that. We started an entity right off the bat, started an llc. We're going to do this. We're going to conquer the world. So we went in together, 50, 50 partners on an LLC, and we purchased the first property for 80,000. We put in 35,000 and we eventually sold for 140. When we account for all of those other costs that a lot of people tend to forget, we pretty much broke even when we take out real estate commissions, holding costs, everything like that. So we broke even on that first one. And that was with us doing some of the work, quite a bit of the work. So not necessarily profitable by my standards today, for sure. But that first one to not lose money was really exciting.

And a lot of times I think that is a victory in itself on a first flip. I tell a lot of people that when you get into flipping, a lot of people lose money on their very first one. I mean, it's an education and it's expensive one. I mean, I don't think that's a bad thing at all. The fact that you jumped and you did it. You didn't pay somebody 50 grand or 70 grand to take a course to learn how to do it. You just went out and did it and you broke even, but you learned, right?

Yeah. And that was what we were so excited about. We, you know, of course we wanted to make 30, 40 grand and, oh, this is going to be it. But we came away so excited by the fact that we learned so much like you just said, and just the fact of the buying a house. If you think about where you're at when you're 22, 23, the idea of purchasing a property is a bit overwhelming. But to close on it on the front end and then again on the back end was just a relief off our shoulders to know we can do this. Now let's take our learnings and apply it to the next one and the next one.

I love that.

How'd you finance that first deal?

That was private lending. So that was definitely the biggest obstacle to get started. When we formed this llc, we made a split, beautiful business plan. Here's how we're Going to flip houses, conquer the world. And we just immediately started meeting with whomever we could, friends, family. This ended up being a friend of a friend of a family member who had a self directed IRA and didn't know what to do with it and pretty much trusted just us as you know, these guys will pay me back. We were able to get the lending for the purchase and the rehab of that property on an interest only loan at 12%.

Nice. So 12% interest only.

And obviously he got paid back.

Yeah, he did. It took a bit longer. We sat six months, it took eight or nine, but we just paid that extra interest and he was happy. He saw the house when it was complete, saw the pictures, was really excited about it. So he got his money and he's still one of our big time lenders. So very excited that that worked out.

Of course. Yeah.

That's awesome. I love private lending in that there are no specific rules. Right. Like yeah, you were just getting started, you know, but if you ask enough people, you talk to enough, you network enough, there's always people with extra money, not sure quite what to do with it.

I think that's great.

And that's, that's certainly the case. I mean, looking back at it now, the business plan we made is, must have been laughed at by many knowing that we've never done it before. But the fact that we went that step of putting it together, they should show at least that we were serious. But now what we're able to do of course is to take our portfolio and, and bring it to private lenders and the network continues to grow from there. So now we have lenders who are third, fourth, fifth degree people that we know and we're a lot more serious with. There's almost no limit to the funds that they're able to lend.

You know, you mentioned this idea that, you know, you guys didn't make a whole lot of money on the first property, but you know, holding that 12% interest loan for eight, nine months or whatever, the lender made a good chunk of money on that. So he made much more than you did or he or she, whatever, made a lot more.

Absolutely. And that, yeah, I've done that so.

Many times, but it's great.

Yeah. And that's what we put into like the one biggest point we put in our business plan that we made bold was we pride ourselves in making our lenders whole. And that is the key to this business. Because without that we can't get started unless we have a huge bankroll which we didn't and most people don't. It's impossible to get started without your character and your lenders seeing that and knowing that they're going to be paid back.

And it's amazing that, you know, at 22, 23, you were able to convince somebody to actually lend you the money in the first place. You know, we get so many people who come to us. I mean, not a day goes by where I don't get an email or a private message from somebody who's like, hey, I'm new, I'm broke. I don't know what to do. How do I get started?

How do I.

How do I finance this? What do I do? You know, I have no hope. And there's. There's options. I mean, a little. No offense, little kid at 21, 22, you're able to get, you know, get enough money to do this. That's. That's fantastic. And it's a testament to the fact that anyone can really do this. You just have to really work hard and utilize your capacity to find the resources.

Right? Absolutely. Yep. Yeah. Prepare. And honestly, the most important thing is to take that first step. Have that first meeting, even if it's with your uncle or with somebody you know doesn't have enough money or will never lend to you. Have that meeting, get feedback, and move on to the next. Because until you do, you're going to look like that little kid making that conversion to here's somebody who has no idea what they're doing, or here's somebody who I know I'm going to get my money back from, and they're going to work hard to make sure that happens. So I definitely think that's a solid piece of advice. A lot of people stop when they think I don't have the money. You should start at that point and just start talking to people.

Let me ask you a question about that. Kind of wrap up that first flip. You didn't make a lot of money. You did a lot of the work yourself. What went wrong? Why didn't you make a lot of money?

I think the biggest thing that. Well, we bought it for too much. Certainly our rehab budget wasn't too far off. Ended up spending that 35,000. We were close to that. I think what we did in our ARV analysis, we were naive to the qualitative factors. And this is something that I would say is a big pointer that we've learned. You can do a lot of quantitative analysis on what you're going to sell it for later. What's your price per Square foot. What are houses going for in the market? What we refused to acknowledge was this house is a 3 2. A great neighborhood. Everything was good about it, except it was a, you know, one and a half story. It didn't have any dormers on the second floor, so those bedrooms had ceilings coming into it. You know, you could. You're gonna knock your head if you walk to that side of the ceiling. So we ignored that. We said, it's a 3:2. It's 1500 square foot. It's gonna sell for $150,100 per square foot.

This is.

This is what the numbers tell us. We were naive, and we ignored the fact that, hey, nobody wants to be banging their head when they go to sleep every night. So I think that was one thing. We were so excited to get in. We ignored those things that were staring us right in the face, you know?

Yeah, yeah, I like that. I never heard anybody talk about it quite the way you just put the qualitative versus quantitative sort of numbers right.

And it definitely. We've seen it time and again. Getting rid of quirks is probably the biggest piece of advice I would have to anybody. Starting a flip in that you have a house and everything looks good on paper, but even the style of house can throw off your arv, you know, for example, we had a raised ranch we recently sold. That's something we learned that a raised ranch, same square footage as a colonial, not necessarily going to sell for the same amount. People don't really like that style of house. And you have to pay attention to those things, and you have to make sure your comps are as close as possible when it comes to those qualitative features.

I had a guy the other day send me an email from biggerpockets, and he just said, hey, I'm looking to start my first flip. I found the property I want. What do you think? And I looked at it, and I don't have to. To look at every flip, you know, like people send me, but I looked at this one, and the first thing I noticed, said the first line of the description said, one of a kind property. And I immediately emailed it back and said, no, don't do it. Like, I've been there. I've done that. One of a kind property. It was like some huge house that didn't belong in the neighborhood. And it was so great because it was like, you know, nine bedrooms or something. I'm like, you know, it might be a cool house, but I don't know. I like flipping boring houses. Now like I want, what does everybody in the neighborhood want to buy? That's what I want to flip. Like what's just a normal cookie cutter or whatever house anyway?

Hey, Nick, so you've got this one deal. You closed on it, you're done. Break even to potentially slightly down. Where are you guys now mentally and what kind of comes to follow?

Well, what happened almost simultaneously with that first flip? A month after that first flip, we actually bought our first rental. And the reason I don't talk about it as our first project in that I came back to Buffalo and the immediate thing was live with your parents because it's free and easy. So we needed to find a place to live. I did. He did. So we found a three unit house to buy. We thought, well, why don't we buy it, rent it out, the rest of it and we can kind of have it pay for itself, the whole house hacking thing. So that was our next deal. And I would say that that did more in spawning the rest of my career than the flip did and that it opened my eyes to this. I don't have to just stick to flipping houses. For one. The margins might not be that huge. In Buffalo, for example, where houses aren't going for millions of dollars, the margins aren't as big. So what is this whole rental thing? And I discovered that by buying that house again with my business partner. We're living as roommates, kind of like college again, and we're renting out the others. And that opened our eyes. So then from there we were both still working, but our idea was, let's keep doing more part time, let's buy another flip, let's do another flip, let's see if we can buy more rentals and we'll see how that goes. And we did that very sl over the years. We did about a flip per year for the next two, three years. We picked up a couple rental properties until 2014 hit when we started really getting serious about let's make this a full time thing and let's make this into a business that can sustain itself.

That's awesome. Well, let's go back and talk about that rental a little bit. You said, did you say that was a single family house and you rented their bedrooms or was it a multifamily?

No, it was a multifamily. It was a three family house. Okay. A really great first floor unit, an okay second floor and then a basement. Basement unit with the egress necessary. So we lived in the middle unit, if you will. So we kept the Best unit renting. And we actually did a very quick rehab on that basement unit to increase the rent a bit on that. And while living there, we came close to breaking even, which worked out really well. And like I said, that opened our eyes. We didn't know anything about property management. That was a great way for us to cut our teeth. We had really good tenants who understood that they needed to respect our time. And we started immediately, even though we lived right there, but we started immediately treating that whole thing as a business. We started invoicing as a business. Maintenance requests came in as a business. You knew us because you live near us, you know, same, same house. But you must treat us as a business of property managers. And I think that's what made that so successful as a, as a first rental property.

So how did you as a 23, 24 year old guy with, you know, with another guy living with you? I mean, like, how did you position yourself as the person in charge? Right. I struggled with that a lot early on.

Yeah.

Well, a lot of it was branding. So we had that LLC that we started. So we had our company, New York Home Solutions, and we worked hard to build up a website and build up a brand and a logo and we used QuickBooks and we did things as if a business that had 100 rentals would do it. And I think that that really helped. I don't know if our tenants really knew that this was our only rental. They might have, I'm not sure. But we sure put on the front that we knew what we were doing. We're professional about it. We dressed the part. That's another important thing. You dress like a professional and you act like professional, you're going to be treated like one. And that helped quite a bit with this first rental and then of course the subsequent ones after that as well.

Yeah, I think that's huge. I mean, I know that, like I tend to tell people, don't spend too much time on your business cards and your logos and stuff. But there is that case where that comes in really handy is when you look professional when you run your business. Like you have a hundred units. I love that you said that. Even if it's your very first one, run it like you have a hundred of them. Because then when you can scale to 100.

Yeah. And especially when you're young and you're doing this again, it keeps coming back for us. You get all these young folks on BP who are like, hey, I don't know, you know, I'm going to be taken seriously well, make them take you seriously. There's. There's lots of ways to do it. One of the ways is to be professional. Done. Easy.

Yeah, yeah, yeah, yeah.

We did kind of the same thing for a while. We didn't tell our tenants that we were the owners. We were, you know, we had a property management company and we were the managers of the property management company. That's all they ever knew. So most of our early tenants didn't even know that we were the ultimate owners. Or if they'd asked, I'd say, you know, yeah, I'm one of the partners in this company, but it's a, you know, LLC and there's other members and. And, you know, pretty soon it's just over their head and they don't bother to figure out what that actually means. Well, right. And I don't really want them to know what the intricacies of my business are. Right. So that helped a lot, being able to say, you know, like, well, you know, this is a business. I'm just part of it. I'm just one cog in this wheel, and this is why the rules are in place. And so that definitely helped me as well. Just treating your business like a business. I think that's great. So, yeah, house hacking, I love it.

Very, very cool. So we've got. We've got the rentals. We're starting to build this up. You know, you're doing the one flip a year. You talked about 2014. You started getting serious and turning it into something bigger and better. So, I mean, give us the quick overview. Where are you today? How many buy and holds? How many flips have you done? And then maybe we'll kind of cut back and dig in a little more.

Sure. Yeah. We've done about 10 flips. We have 20 rental units currently that we're managing. In addition to the flips we're working on right now, kind of a value add refi deal that we're flipping, then we're going to refi. That's where we're at today.

I'd say probably maybe half of that has happened in the last year since August of 2014 till now. So that's kind of the growth we've seen in the year.

Okay. Talked about the scaling. So one a year. One a year. One a year. And then boom, it's on. How do you transition to that?

Well, the biggest thing was we went full time. So we were doing everything up until that point as part time, I was traveling all over the country, all over the world. And it Was honestly not the way I like to run a business. My business partner Costa was working still as a carpenter full time. Anything we did was nights and weekends. So stepping away from our other jobs to go full time was huge because now we could establish our systems to take things on at scale. So what that means is our project management system.

Our system, our cloud based management of documents and our cloud based management of property management. All of that really came into play about a year ago when we said, here is how we're going to manage our maintenance request, for example, it's going to be completely online, we're going to manage our workflow using podio is what we do. And we honestly, that's just an example. We just established systems for everything. When it comes to marketing, when it comes to analyzing the leads that come in, here's the system, here's the script, here's how you enter it into the system, and here's how we go through our workflow. So that really helped us a lot to get going. And I must say I can't say that here we are churning on this business that just runs itself. We're still very much involved. We do a lot of work still. And that's by, you know, on purpose. The fact that we are on our own right now, we need some income. So I say the biggest thing we did when we went full time, if and when we were involved in rehabs of projects, it sounds crazy, but we paid ourselves. So if we were to budget, you know, say for my business partner Costa to put in cabinets $3,000, he would get that $3,000 check. So we are still involved a bit and we're playing that game of subbing out a lot, but we're still into it, but we're at least paying ourselves and that's huge change in how we run our business. So.

So this is something I talk to people a lot about, this idea of, you know, run your business like a business. And you know, some people will say you shouldn't do any work in your flipping or in your rentals. You should outsource everything and be the business owner. And I don't think that's the case. I think I like doing work a lot of times I don't have a lot of time to do it anymore. But you know, the key though, the difference is what you're doing is that you're treating yourself as almost like an employee of this business. So you are just one cog in the wheel of the business. So you could replace yourself with someone else and Your business wouldn't implode. And that's the difference.

Yeah. This is our point of transition. We are going from doing this part time. We're now doing it full time now. It's not enough. We can talk about it later. Our support systems, this is not enough. If I were doing this by myself, this would not support my lifestyle. So a way to mitigate that is to, okay, well, we pay other people to do work. Let's pay ourselves. This is the intermediate step before we go completely passive. And that's how we treat this right now. And we're going to slowly, slowly work ourselves out of it. And we've done that to this point. We sub out way more now than we did in the past. And we're getting to the point where Costa's role will not be putting in cabinets anymore, but it'll be bouncing around to different projects and making sure that the other carpenters that he manages are doing that.

Yeah, I like that. So would it be true to say, like, you generally run more of the. Is it the numbers, the finding deals, and he does more of the business side or the construction?

Yeah, that's definitely accurate. So I would say that I would do business development, finding new leads, negotiating deals. Although we are both in on what we pay for properties, what we sell properties for, and then the overall project management in the business system. So setting up our Google Drive, our Google apps for work, setting up podio, which we use a lot. Asana, we use a lot. And really managing our lenders is another big thing that I would do. And yes, Costa would be a technical project manager and that he is on site. He knows exactly what needs to be done, he knows how it should be done, and he can report to me on if that's happening on our projects.

So I've got a question. I mean, we've talked to lots and lots and lots of people over the years we've been doing this. I've seen lots of posts on biggerpockets. I've rarely heard somebody at your stage paying yourself a salary. Frankly, if I were a private investor, I wouldn't give you money to pay yourself.

I'm surprised that they do. So how has that conversation gone, at least with the folks that are lending you money? Because.

I get it from your perspective. I totally, totally get it. Yeah, it makes logical sense. I'm doing some work from the other side. It's. Yeah, I'm giving you the money. You do the work that's part of the package and you reap the rewards at the End of the day. So how does that kind of work out in the conversations for you?

Sure. It's all about focusing on the equity that's getting added to the house or the flip or whatever it is. So what our lenders are concerned with is a loan to purchase a property, agreeing that it's worth that much. And then we'll work out a draw schedule and that as work is completed, they'll provide other draws. And as long as there's the equity there, then they have no problem putting money into it. So in this example, so equity in that we're adding, let's say, a floor to the house. Right. So we put it into our construction budget. It's going to cost $3,000 labor and materials to put in this floor. Once it's complete, the property's equity will go up at least that much. Right. And the lender agrees that that makes sense. Once that floor is in, we'll give that money in that draw. They don't care who does it as long as the equity is there. They know that we do it and they know that we do it. Right. I think that's definitely another important point to your question. They know that we've done this before and that we're licensed insured contractors and we can do it as long as the equity is there and that their investment is protected should they need to foreclose or anything like that, they have no problem with it.

Yeah, and I think. I think that's where, like, if I were a private lender lending on it, I wouldn't have the as big of a deal because I know that you're gonna pay 3,000 for that floor no matter who does it. I would rather know that somebody I trust was doing the work. Even if it's gonna cost 3,000. No matter what you're. At least you're doing the work. I could trust you versus some Joe Schmo you're call off Craigslist to go do the work for three grand. I'd rather pay you the three grand. So it makes sense. But I get Josh's point too. It's a weird thing. Like, why are you making money?

I've never heard of that before. Have you heard? I mean, in all the years I've.

I mean, I. I've done that a number of times. Yeah, I paid myself. Like when I especially like hard money. Like they were all right with that because they said you're getting this much based on the arv. This is how much we're giving you. I don't Care how you spend it as long as the house gets done, you know, do what you want. It's kind of.

I've been somewhat treated and now the listeners have learned.

All right, I want.

I want to circle back a minute to something you mentioned. We just briefly covered it, but I love that you said this is the idea of you create system for everything that you do in terms of finding leads, in terms of all that stuff. You have systems and you use podio, which I've never used, but I hear a lot about. Can you talk a little bit more about that, what that looks like, and what do you mean by the systems in podio?

Yeah, podio is fantastic. Well, we use Google apps for work as our main, you know, here's our email, here's Google Drive. All our documents are digital. We pride ourselves on that podio. We've discovered, I don't know, six, seven months ago. What podio is, is pretty much a customizable database. And what you do is you create different databases and they talk to each other, and you can set up workflows within those databases to manage pretty much whatever you want. So in the example that you're asking about property management, what we do is we set up our units. They're connected to our properties, and our units are connected to our tenants. We can have vacancies connected to all of that and ultimately maintenance requests as well. So we create this relational database of units and tenants and maintenance requests and applications and information. They all talk to each other, and it's completely customizable, so we can add fields that we think are necessary. And then we create workflows and we give our tenants. Here's how you submit a maintenance request once it hits, we set up the workflow to email Costa, who gets it and says, I have new maintenance requests. He sets the status, an alert gets sent back to.

The tenant, and that's how we work the whole thing. The best thing about podio, when you compare it. So obviously there's AppFolio and Buildium. There's plenty of other solutions for this. What we love about it, one, it's cheap. It can be free or just a few bucks a month. But it also is the customizability of it. My property management database talks to my flipping database, and I can have them interact with each other. It talks to QuickBooks, it talks to my finances. And to be able to customize all that is really the value add we. We find in podio. And it's been fantastic for us. And we're trying to just use it more and more and find other ways to take paper away and use workflows in the digital cloud.

Very cool.

Right on. Very cool. That's great. That's great.

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Cool. So your part of the business is the running of the business. You know, you seem like a pretty, pretty serious and businessy kind of guy. Which, which is, which is good. I mean well, by the way. So you came from IBM like where'd you go to school? School?

I went to Carnegie Mellon University.

That's really funny. I was going to say Carnegie. You definitely went to one of the math schools. I don't know why. Yeah, definitely quantitative, right? Yeah, worked at IBM. You've got that mentality. How are you finding deals? Because I could see you crunching numbers and everything that you do. Let's kind of educate some of the folks who don't have that right. What's your path? It's your method.

Yeah. Well, immediately we talked about setting up the branding. I set up a website, you know, way before we should have, maybe we had no business having a website. We flip house, but we don't know how to yet.

Nice.

We have a website set up, decent traffic. We don't spend too much time on that. It looks great. We update it frequently. We have a lot there. I don't spend too much time on it really. We found our deals through the MLS here and there. We have a really strong agent who is connected to both listed properties and then some off market listings. He's got some good connections with investors that might not hit the market. We found a couple properties through him, so that helps quite a bit. Our website does receive some traffic. We get some leads through there and then there's so much word of mouth and networking. I say again and again to my business partner is don't stop talking about yourself and what you do. Because we found certainly our best deals this way and just deals that you would never have thought are going to come about. You know, somebody who knows somebody who knows somebody who wants to get rid of a property and that's how you find one. So we haven't spent too much on marketing yet. But I think that the networking has been our biggest, our biggest, you know, it's, it's led to the most deals.

For sure and that's cool because that's something that anybody can do if you're brand new, if you have no money to get started, if you're very like, you know, thrifty, here you. It doesn't cost anything to talk about yourself. I love that. So what are some good tips for getting started with the networking?

Well, obviously within your spheres of influence. So I was lucky enough. My father was a businessman connected to the community, a little suburb outside of Buffalo. So I immediately started talking to his immediate network and again, we might have been laughed at a bit. You know, here's my business plan, here's what I want to do, here's what I'm looking to do with my business. They probably don't care, but they're Going to tell somebody. That's where we started, that's for sure. And then that kind of spreads here and there, family and friends. Even though you're always going to have that uncle at Thanksgiving or Christmas who talks about why you should or shouldn't invest and how you should do it, you have to ignore that and move on and just nod your head because it's the other family member who didn't make the comment who's going to come to you in a year and say, here's a friend who wants to sell their house for really cheap. Right. It happens. It's a fact. You need to talk. Of course the Bigger pockets meetups are huge. I go to both in Buffalo and in Rochester, which is nice to be able to go to both of those. And then the last thing I would say is that, and you can't really do this till you have a property year two. But I have to say the marginal difference from having zero to one property is huge. Because when you're able to say I invest in real estate as opposed to I want to invest in real estate, it really turns a green light on. So I have to say getting that first property is huge. Even if like in our case we didn't make a ton of money, but we could say we've done it before and that really helped out a lot. So I think that's key for anybody wanting to get going, buy something. As long as, as long as you're not losing too much money, it's okay to lose a bit, break even, maybe you'll make some money and, and at least you can say that you've done it.

Yeah, I actually love that. I love that advice. Just get out there and take action. Start moving, start doing something. You know, it might, you might not make $50,000 on your first flip, but you know, just moving forward, taking those steps, you know, because the next one's gonna be better and you're gonna learn, you're gonna learn, you're gonna learn. Just obviously don't get yourself in trouble over it and you know, go bankrupt mom's, you know, 401k or something. But you know, but yeah, I mean like do what you got to do, take action, move forward. I love it. Alright, so let's see, you mentioned just in case people, because we touch on it real quickly there, the BP meetups. So what those are in case people aren't familiar. Basically bigger, they're unofficial, bigger pockets members just get together all across the country. I mean there's probably hundreds of them at this point that just happen spontaneously. Sometimes they're, you know, big, sometimes they're small. Sometimes there's 12 people in a room, sometimes it's 150 people in a room. You know, usually they're at, I don't know, anywhere from a local bar to a restaurant to a actual like networking place. You know, I've probably been to 30 of them or 40 of them in the past couple years. I mean they're fantastic. I mean there's no like generally not an agenda. There's not like a paid speaker usually that's coming in to sell something. It's just, let's get real, real investors just like the forums together talking about their business and networking. And I love it. If people want to know where theirs, their next I guess meetup is, make sure you guys set up keyword alerts on biggerpockets. Let's go to biggerpockets.com alerts and enter in your local city name all the big cities around, you know, within a 50 mile drive of you or 100 mile drive. Set up those as alerts and when any, anybody announces a meetup, you'll get a notification and yeah, good way to kind of connect with other people. I love them. There's actually one last night I wasn't able to go to last night, but there was one in my area last night that, you know, there's probably 60 people showed up there. So anyway, very cool.

That's great. That's great. So what, what's, what's the plan? I mean you guys, you've got my 20 rental units, you've done 10 flips. I mean you guys are full time in on this thing. Obviously it's not a side business. You quit your job, I mean you were working at a Fortune 100 business, probably making a nice, you know, pretty hefty salary that a lot of people would envy. And so to stop that and go full time into real estate, investing on these small rental, I'm assuming they're all houses, your rental houses?

Currently, yes.

Okay, so what's the plan? Where are you going? What's the next year, two years, five years look like? Yeah.

So our main plan is structured on we're both 27 and by 30, hopefully before that probably half of that is my real goal is we want to get all of our rentals up in cash flowing so that the percentage we take away as salary is enough to sustain comfortable living in Buffalo, which to be honest is not much. Right. And then from there we want to level set at that point and then from there continue building up the units. And we want to treat flips as bonuses, if that makes sense. So what I want our business to look like is our rental units are in. That's our salary for the year. That's our base salary. Every flip or every big time value add refi that we do something like that, cash influx, that could be treated as a bonus should we decide that's the best use of it for the business. So that's where we want to get in the next year and a half to three years. We see that being about 50 units. We could do that just based on the units we have now. So we're aggressively trying to get there. And I guess, Josh, to your point on leaving the job, it's true, leaving the job was tough because it was six figure income. It was great. The best thing about it is if we fail or if we don't get to where we need to be, I can always go back.

If those listening or people are thinking about it, leaving your job, just make sure you do it in a way that is amicable. People understand that you want to leave your job, you want to do something else, keep those relationships alive. Because if you fail, you can always go back. It's not an impossible thing.

Okay, so you want to go, you want to in the next three years or so have this sustainable income through 50 units. Then you get your little bonus flips and things like that. What about 10 years? I mean, do you see yourselves.

Building.

An even bigger portfolio or you want to just kind of kick back at that point and relax?

Well, I think at this point in time I can tell you what I see, but I can also tell you that it probably won't happen. What I see is continuing. We do have an apartment building that we're under contract for. So we are going from houses to apartment buildings, small apartment buildings. And we do want to continue to grow that into large apartment buildings. That's the current plan. When I say I can't really tell you what's going to happen in five years, it's just because everything is so iterative. When I started this, I thought we were going to flip houses and that was going to be the magical way to financial freedom. That was going to be it. And then a month later I got rentals. I said, whoa, what is this over here? So that's our plan right now. We're going to keep building up. We want to go bigger and bigger apartment buildings. We want to get up to 100, 200, 300 units. Sure. But we don't know where it'll go. We actually just had, we've been having many people ask us if we would renovate their houses just for cash, just as general contractors. Maybe that's something we want to explore. Maybe we'll get into custom home building, something like that. So we don't really know know where it's going to lead. But I can tell you the current trajectory is to continue building those units up into, you know, the higher volume apartment complexes.

Right on. And I love, I love the iterative plan. I think it's a smart approach. I think, you know, a lot of people find themselves, you know, hey, I'm going to be a flipper. I'm going to be a flipper because it's a great way to make all this money. And then they're like, oh my God, this is a job. This is like flipping is just tons of work. And that's okay. But I like having that mix where you're building the portfolio to pay for your lifestyle and then the flips kind of come in with this little extra cash influx whenever you do them and then you just keep building the lifestyle up. That's great.

Sure. Yeah. I think, I mean, you could attribute to this too. I mean, Biggerpockets, for example, when you started it, you probably didn't think about a publishing business and the podcast and all that stuff. And so many things changed and just the ability to adapt is what we're trying to stay focused on is that we don't know what we don't know yet. But being able to change is important.

Yeah, I love that. Love it. Well, cool. Hey, let's shift gears a little bit and head over to the world famous.

It's time for the fire round.

All right, the fire round. These questions come direct out of the BiggerPockets forums, which I hope every listener is engaging in on a daily basis because it only takes a few minutes.

Yeah, biggerpockets.com find you and make sure you do it.

I'm gonna. Or next time.

Yeah, I don't know. Real veiled threat right there, Brandon.

All right, fire on questions. These come from the forums that you can get to@biggerpockets.com forums. So number one, how do you get the funding? We kind of talked about this already, but we'll talk about it a little bit more, maybe have more thoughts on it. How do you get funding to do your first rehab deal if you've never done one before?

Yeah, it almost has to be family friends or friends of those family and Friends, it's hard to go straight hard money on your first deal. Even hard money lenders like to see experience. That's true. Most hard money lenders like to see money down. That's true. So it almost has to be family and friends. Now that doesn't mean you just think of your friends, your family and say, well, nobody I know has money. It expands from there and it has to. So start there, start talking to your parents, your grandparents, your aunts, your uncles, uncles, your friends, and that will lead to more. It's like a spider web that continues to expand. Just keep growing that network and eventually you'll get in front of that person who wants to gain 6, 7, 8, maybe 12% with somebody they can trust and a tangible asset, which real estate is.

Yeah. And one thing to add on that, it's. You know what I. When I first started, my very first flip was a live in flip, which that's also kind of part of. It's like the cousin of house hacking. Right. Like I got a normal lowdown mortgage, long term 30 year fixed mortgage on just a kind of a crappy house, you know, that was still okay, but it was just a kind of a crappy house. And I fixed it up and I sold it and I made some good money and that became my look, I've done this before, I have experience. Therefore, then the next flip, I was able to go get hard money because I saw the first one and that was. Yeah, the whole thing cost me, I think a few thousand dollars. And you know, if that's.

Yeah. Plus the potential tax benefits too.

If you live in a two years. Yeah, you can do it. Make some good money. Be able to roll that into the next floor.

Yeah.

So very cool. All right, number two, number two.

And I think you answered this, I think you mentioned QuickBooks, but do you use QuickBooks to track expenses during a flip?

Yeah, I do. The way that we do that is we set up our accounts as an asset account on the construction and the subcontracted services. So as we spend money on say buying, flooring or something, it goes as into our asset account so that our equity in that house increases as well as. Well, if that makes sense. So of course we use QuickBooks to track everything and that teams up with our analysis spreadsheet to see how profitable it is. But from an accounting perspective, as you put money into your house, it shouldn't really be tracked as an expense, but more of a capital improvement. So we keep it as an asset.

Interesting.

Cool. A lot of it went over my Head. But that's all right. I'm not a Quickbook fan.

I'm thinking about baseball right now.

No, I love that stuff. But I'm just really bad at Quickbooks and I wish I was better. I don't know, maybe you'll teach me something.

Yeah, I'm sure some of the CPAs will correct me. Me potentially. But all it is in basic terms is as you spend money on the house, the value of the house goes up. So we just account for it that way. Yep.

Cool.

Makes sense.

Cool.

Fair enough.

All right, number three, how would a beginner real estate investor go about starting a flip? What are some steps to take before closing on their very first deal?

Obviously, before you close, you have to get a lot of things in line, which you probably wouldn't be able to close unless you did. So property insurance is certainly one of those. But making sure that your scope. Scope is as accurate as you think it can be. Get into the house as much as possible.

And what does scope mean? What does scope mean for those?

Scope is the list of things that you'll perform during your rehab. So you're going to reconfigure the kitchen, you're going to buy new kitchen cabinets, you're going to tile the floors, all that. So be as detailed as you can be as far as what that scope looks like. Try to go room by room, floor by floor, interior versus exterior. There's a great book and I'll mention it later, the flip book puts together a really solid list to help you nail your scope. But just be prepared in establishing that scope and start finding some subs. If you can start thinking about who your electrician is going to be, who your plumber is going to be, we recommend that you call at least three vendors, especially if you're getting started, at least three vendors for each of your tasks. And you can do that before you close on the house. And you should, because once you close, you're going to want to get that flip done as soon as possible.

Possible. Perfect. Nice. Awesome. All right, last question. What happens if you get a property under contract and you realize you don't want it?

Well, hopefully we've built in some kind of out in our contract. So we always will set up a property inspection even if we don't intend to do one. It's just something that's common and nobody really thinks twice about us including a contingency on a property inspection. So that's always are out. Now, we'll usually use that to do a really thorough inspection. Sometimes we'll bring in a third party. Sometimes we won't, but that generally gives us a nice out. If you're in the spot where you've already passed that contingency, well, look at what your deposit is. Hopefully your attorney and your real estate agent help to keep that low. But it's not the end of the world to back out if you have a thousand dollar deposit. It's a lot better to lose that thousand dollar deposit than to get into a property that for whatever reason you're realizing is going to be a big time money back.

Yeah, good, good advice.

Love it. All right, let's move on and get to the last section of the show which we call lovingly our Famous Four. All right, the Famous Four. These are the questions we ask every guest. And I know you've heard the show before and you listen so you'll know what's coming. Number one, what is your favorite real estate related book?

Okay, there'll probably be a combo of two books in the same series if that's okay. The first that really when I said that flipping became tangible and quantitative to me, this book called Flip how to Sell or how to Find, Fix and Sell Houses for Profit. Is that the Keller? Oh, Clay Davis. Same series as that. And my next book would be that one, the Millionaire Real Estate Investor by Gary Keller. So those two in tandem are my favorite specifically for this show as we're talking about getting started, those really put things into perspective. Flip is very step by step and the Millionaire Real Estate Investor gives a comprehensive view of all the different strategies that can help make you successful.

Great. Right on. What about business books? Favorite business book?

Okay, again I'll give a tandem, but this time by the same author. So a lot of people know the book Think and Grow Rich by Napoleon Hill, which was a big game changer for me and I recommend everybody read it. As far as getting your psyche in the right mind to to pursue some kind of profitable venture. He also wrote another book that wasn't released until 2011. He wrote it in 1938. It's called Outwitting the Devil and it's really interesting. It's a conversation between Napoleon Hill and the devil and they really look at fear and how it stops those from taking action and specifically in this case, how Napoleon Hill was trying to get over that fear. So those two in tandem work really well for getting you to take the next step.

That's awesome.

Cool.

I've heard that's a good book. I haven't read that one yet though. I'll Add that.

What about hobbies? What do you do for fun?

I love to travel. My wife and I love to travel. We've been to many awesome places and we kind of have developed a bit of a bucket list of places we want to travel and go and experience before we think about starting a family. So if we're not on a trip of some sort, we're usually planning one and we get really excited about that. So that's great. Reading is also.

What's your favorite place you've been?

Been?

Well, I'd have to say, but somewhere I've been with her, that's for sure.

Santorini in Greece was fantastic. We went there and that was amazing. So I've been to South Africa for work and the Cape of Good Hope was amazing. But I'd like to bring her there. I think it'll be a bit better with non co workers. I think it could be a bit more fun.

So then reading you said before I cut you off.

Yeah, reading and a bit. The real estate books and the business books. As we all know, sometimes you read a bunch of them and it sounds like they're repeating themselves. So getting into fiction and philosophy has been really great to take a break from all that.

Yeah, fantastic. Cool. Very good.

Brandon, my final question. What do you believe sets apart successful real estate investors from those who give up, fail, or never get started?

Well, it'd have to be without question. It'd be fear. And I think specifically it's that focus on those potential negative outcomes. So when we think about deviating from society's norms, we are so caught up on, what if I fail? What if I get lost? What if things don't go as I want? We're so afraid to stumble. We don't think about the potential benefits. Right. The things we don't even know are possible with that first step. So, you know, my advice on that is you need to take action. Whether it means going out and getting a moleskin and taking notes on what you think your real estate investing might look like, maybe that's your first step or you're at the point where it's time to buy a property. Whatever it is, take action. And don't be afraid to fail because more times than not, you're going to succeed more than you'll fail.

So that would be it.

Cool.

I love it. Cool. All right, before we let you go, where can people find out more about you?

Certainly on biggerpockets, our company, nyhsolutions.com, new York Home Solutions, and also dabbling with blogging a bit. A blog called income digs. So incomedigs.com that can check out and. And see what I have to say as far as our experience goes with flipping and renting.

So. Fantastic.

Yeah.

Awesome.

Cool. All right, well, listen, Nick, it's. It's been a pleasure. It sounds like you're doing some really great stuff. Very impressive, and just want to thank you for being part of BiggerPockets and for, you know, come on. And joining us and sharing your story with us.

Thanks, guys. It's been a pleasure. Appreciate everything you guys do, of course, and very happy to be part of.

Awesome. Thanks. We'll see you around.

All right, guys, that was Nick Baldo crushing it at the tender young age of 27 years old, and he's got great plans, and he's off to change his own little world that is the enclave of Buffalo and improve that lowly.

I was gonna say you were very nice about Buffalo and Rochester.

And after the interview, Nick was like, I'm really glad you guys. Guys didn't bust my chops about Buffalo. And I'm like, oh, well, I'm totally going to bust your chops. Rochester.

Buffalo.

Come on. Come on now. I mean, I. Listen, we. We don't get a chance to talk about it too, too much anymore, but I want to see those places turn around. I mean, if Buffalo, Rochester, you know, Detroit and everything else are thriving, so too, is the United States. So, too, is our economy. So I. I really do hope things continue to improve across the Rust Belt, and guys like Nick are helping to make that happen. So. It's awesome.

Yeah.

Yeah.

Before we get out of here, did you see that article? I think it was on cnn, Josh, the other day that said it might have been CNN or maybe Fortune or Forbes. Anyway, it talked about how, like, the banks, the big bank. It was like the big banks. No, what was it? The big hedge funds. Adventure into real estate's not paying off for them. Did you see that?

I'm just.

Well, it's been happening. That has been happening for. For a few months now. Yeah. Well, these guys went and bought, like, trillions in real estate. I don't know how much they bought. They bought a hell of a lot of real estate across the country. And how do you manage it? I mean, how do you manage thousands of buildings across the country without an infrastructure? They came in with no infrastructure. They were bound to fail. It wasn't going to work. I think that's part of it. I think the other part of it is they kind of led to the market, market climbing. They led to this kind of housing boom and now they want to be the first ones out as the market starts to soften. And, you know, so, yeah, I've been waiting for this.

It would be interesting to know their numbers. I mean, I don't know their exact numbers, but by the way, the article is called I found it here. It's on Fortune. It's called Wall Street's big bet on Housing. And then of course, my page just changed. Not Paynoff. So anyway, you can check it out. It came out on 25th September 2015, if you want to go check that out.

I mean, how do you do that, Brandon? I mean, seriously, how do you buy property, thousands of properties across 50 states or even 13 states, you know, and manage that at scale?

Yeah, I mean, obviously they have property managers, but you got to manage. I mean, as we know, you have to manage your property managers really, really well. Because most property managers suck. And if they don't know how to do that. Additionally.

Additionally, you're rehabbing as well at scale, Right?

And you're rehabbing a scale.

Yeah.

And they're buying property at what was market rent or above Market Renter, you know, like. Because everybody knows that when they were competing against those companies, like, you know, the last few years have been tough because those companies come in, they're like, they just write a check, like they pay retail, they pay real tell, whatever. So it was so hard to find stuff. So now all these properties were bought at what market value was and it hasn't improved all that much. And now they're trying. Yeah, interesting. So it'll be interesting to see how that pans out here.

Well, how is it going to pan out? I mean, is housing going to keep climbing or is housing going to, you know, soften and turn down?

That could be a whole show right there. We should actually. That would be an interesting show. Bring on some economists and talk about what the environment's going to do.

So anyway, yeah, could be. All right, interesting conversation. All right, guys, well, listen. Thanks again for listening as always. We definitely appreciate it. As Brandon insinuated earlier, if you're not on our forums, you really need to be join BiggerPockets, create an account, it's free. And start networking with guys like Nick and get out there and do it@biggerpockets.com Otherwise, get out there, make moves, take actionable steps like we had talked about. Show 142. Take action every day to drive your business forward and keep us in the loop as you continue to be successful doing that. That's it. That's all I got for you. I'm Josh Dworkin. Signing off.

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