233: $1.1M in Real Estate at 21 WITHOUT a W2, Tax Return, or Degree! w/Logan Kohn

This is the Real estate rookie, episode 233.

Yeah, I think it was just, I think I saw the opportunity. So I looked, I kind of looked at the sales price history of that property and the surrounding properties in that area and I saw that they were on an upward trend. And of course, we probably couldn't have foreseen the appreciation that would have come in the year following, but I think I just kind of saw the trend and I saw those on the up and up and I just thought, you know, believe it or not is actually only about 30, 40 minutes from the Hamptons. So it's a very black and white scenario where you have like such a bad area and a very good area very close to it. So, you know, I took the chance. It was definitely a risk.

My name is Ashley Kerr and I'm here with my co host, Tony Robinson.

And welcome to the Real Estate Rookie podcast where every week, twice a week, we give you the inspiration, motivation and stories you need to hear to kickstart your investing journey. And I want to start today's episode by shouting out some very a very special listener who left us a five star review on Apple Podcasts. This week's review comes from Jess Haas and Jess says start here with like five exclamation marks. This is hands down the best place to start your real estate journey. From the minisodes on Saturdays to the guest, everything is pure gold. Jess, we appreciate you. And for all of you listening, if you haven't yet left us an honest rating review on Apple Podcast, please do. The more reviews we get, the more folks we can help. And that is our first, first and always biggest goal here at the Real Estate Rookie. So, Ashley Kerr, what's up? How you doing today?

Not much. Super excited today I submitted my final edits on my manuscript, so haven't really told a lot of people because I didn't know if I'd ever finish it, but yeah. So coming out January 2023 is going to be a new book that I wrote.

Congratulations, Ashley. Podcast host, published author and professional hula.

Hoo and bull rider, don't forget that.

And bull rider. But now, seriously, I'm super happy for you, Ashley. I'm excited to get my hands in the book and the world's gonna love it, I'm sure.

Yeah, thank you very much. What about you, Tony? What's new? You got your vacation coming up. Very well deserved. And what else?

We got vacation, but it's always weird before vacation because you're like scrambling to get everything done. So Ash And I were talking before we started recording how we both pulled like all nighters last night. It's like we're in college or something again, trying to study for a, for a final. But yeah, we're just, we're moving along. We, we on assistant. So she kind of started last month but this week was like her first like full week working with us. So you know, when you first hire a new team member, it almost there's like more work initially just getting them trained up and you know, eventually they'll, they'll kind of be off and running. So we've just been a little all over the place this week.

Well, we have a great episode for you guys today. The first thing is Tony once again finds a reason to talk about his street for tree for I still don't even know what the actual name of the city is in Louisiana. And we actually kind of go into a rabbit hole about insurance in this episode. But I think it's definitely worth listening, especially after we're hearing the impact of what has happened from Hurricane Ian down in Florida and just how your insurance can change and things you guys should be aware of and know as, you know, an investor for your properties. Things to be aware of. But we have Logan on the show today, so he is only 21 years old and he is so cool. I mean just listening to all things he's done already at the age of 21 I think is really remarkable.

Yeah, Logan's going to teach you how to in and not just do this anywhere, but how to do this in an expensive market. He's going to show you how you can buy properties with no W2 job, no tax returns and no car. So this kid's incredible, man. And I think regardless of what age you are, you will really get inspired and motivated by hearing his story.

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Yeah, so before we bring Logan onto the show, we would love for you guys to join the Real Estate Rookie Facebook group. We have over 50,000 members in the group right now and it's a great place to get your questions asked, to share your wins, but also to help other people and answer some questions too. So make sure you join the Facebook group if you guys haven't already. And of course subscribe to our YouTube channel so that you guys can watch the Real Estate Rookie podcast and also.

See see these beautiful faces.

Yeah, all of it. I think the tiredness of the all nighter. I mean that's the second joke that you pulled today, Tony.

But you guys could also get to watch our awesome contribut on the real estate rookie YouTube channel too.

Logan, welcome to the Real Estate Rookie podcast, brother. We're excited to have you, man. Before we get into the nitty gritty, why don't you tell us a little bit about who you are and kind of how you got started in real Estate investment, man.

Yep. So I think I was bit by the money entrepreneur bug pretty early on. I would say probably before I even reached the age of 10, 11, 12. And you know, as far as the real estate, that was something that I didn't think was going to happen this soon. And early in my life I really thought that was Going to come much later down the road, maybe five, ten years from now. It was really the pandemic that was kind of the impetus, the motivation to jump right into real estate. I had been studying it for a few years, you know, reading books, watching bigger podcasts, courses, videos. But I took a big hit with my income, mainly due to the pandemic, and that definitely put a dent in me. And, you know, I saw that interest rates were at an all time low. I thought, now is an opportune time, and I just decided to jump right in. And now I'm here with $1.1 million worth of real estate and going and growing even more.

And how old are you?

I'll be turning 22 next month.

Oh, my gosh. Congratulations, Logan. That is so cool. So when you decided, like, you're looking at, okay, interest rates are low, everything like that, was it like, I'm just going to buy a house to live in, or did you already know, like, I want to do an investment property?

It was definitely going to be an investment property, but I had no idea where to start. You know, there were so many looming fears and the unknown. Maybe I thought I would start with commercial, like a storefront. Maybe I would buy something a couple blocks away from me and just put all the money I had into it. I really didn't know where I was going to start. But mainly for me, I live on Long island in Nassau county, and obviously Long island is one of the most expensive markets in the nation. And so I saw there was an opportunity in the county next to mine, about an hour, hour and a half away. And I saw that prices were much lower there, mainly because it's not the best area. It has a bad reputation. And so that's where I started. I started in that specific city, and that was my first single family residence as my first property.

Logan.

What.

Before we go any further, what does your portfolio kind of look like right now?

So it consists of a duplex that's local, near me, just 10 minutes away, and then the two single families are in that area about an hour and a half away from me. So four units total, three properties.

Okay, let's just. Let's go back to the beginning a little bit. So you were an entrepreneur. Tell us a little bit about your first business before you even got into real estate. Then we can kind of go into as to what skills actually transferred over for you.

So for me, you know, and when.

Did you start a business? If you're 21, when did you start?

Can we talk really quick? Like, Ash, what were you doing at 21?

I was. I had just transferred colleges.

Mm.

Yeah, I mean, I definitely wasn't running a business. I was interning as an accountant, I guess while I was going to college.

Yeah, I think my 21st year, I think that's when I almost flunked out of college. I changed my majors like halfway through that year. And I still had aspiring dreams of. Of being a hip hop artist. So definitely not. Definitely not doing all the cool stuff you're doing, Logan. So, yeah, I was. Yeah.

Well, for me, I actually didn't go to college. But, you know, as far as the first money I ever made, I'm actually a magician. So that's really where I would say my money journey started was doing magic. Actually, as early as 9, 10 years old, I would do magic on the street and make a few dollars. I remember a $20 tip being the world at the time. And I would do gigs and, you know, I started approaching restaurants and that was sort of my first introduction to money. But obviously not having the literacy or knowing what to do with that money or budgeting it or managing it. That came a little bit later. But then I started getting into online business. You know, I saw it was possible just naturally through the Internet. So I started doing drop shipping, affiliate marketing, email marketing, and, you know, other various forms of selling items I had around the household. And you know, as far as trying to invest my money and actually grow it, I would say it really started with gambling. I tried gambling with horse racing.

You don't do that very often.

No, I know that's where it started really. For me, I try to get rich quick too many times. But long term investing came probably when I was like 17, 18 years old. I decided to start investing in stocks and have that long term mindset Logan did.

Do you have like family or a mentor or someone that kind of guided you towards real estate or like, where do you think this initial interest came.

From as far as real estate itself? No one in my family has ever done real estate. Not even anyone distant. It's never been in the family. The closest that I've ever gotten to, you know, money and managing and actually trying to do something with money was probably my father. You know, unfortunately he passed away last year. But he tried many things online just like myself. And I don't think he quite got anything to necessarily work in his lifetime. But I think that that bug definitely bit me and, you know, probably was passed on to me through, through, through him.

Yeah. Well, I'm sorry to hear about your father, but I'm, I guess we can take solace in knowing that some of those lessons that he, he pass on to your barren fruit man. So there's always a silver lining there. So you talked about, you know, the, the magician work earlier in your life and you're still doing that today. The kind of digital marketing experience that you had to. Ashley's question earlier, have any from those earlier businesses translate into the world of real estate investing?

You know, I would say that I've definitely made mistakes in both areas, real estate and the online business in itself. I would probably say that, you know, having that long term mindset, you know, when I first started to build my business, I probably tried too many ways to build it too quickly or you know, try to try to throw money in areas that probably weren't necessarily worthwhile. And I. So I think that sort of does translate into real estate having that long term mindset and looking many years down, down the road and also, you know, potentially moving and managing your money in certain areas that are definitely more necessary and more of a positive return on investment than other ways to put your money into a property.

Can we touch a little bit, Logan, on how you've been able to afford over a million dollars worth of real estate at, you know, at any age? It's an achievement, but I think especially at 21, almost 22 years old. So what, like, what did that process look like? Was this like your life savings? Were you working with other investors? Just kind of walk us through how someone is able to purch 4 units in such a short period of time.

So yeah, the units, you know, that was purchased in under one year, so the actual purchasing was definitely pretty expedited. But as far as the actual building of the money itself, you know, that came mostly from just stacking away my money and hoarding that money every single year. I really tried to be as frugal as possible. A little expenditures here and there, a little splurges. But I really was quite disciplined with investing my money and putting it all into stocks. I just put every nickel I had, tried to throw it away and really keep as little cash as possible. And that was really going to be the plan before real estate was just going to be putting my money in stocks or index funds and maybe in, you know, by the time I reach 40, 50 years old, I will have 7, 8 figures worth saved up. And real estate probably wouldn't have come for a very long time down the road. But yeah, it was all, it was all through just being disciplined with investing and paying yourself first and keeping low credit card debt. Open that first credit card after. Soon after I turned 18, so that definitely helped. But it was all just mainly through online business and life savings.

Logan, as a teenager earning this money, how were you disciplined to not go and spend it? So when I was a teenager, I worked as a waitress and a hostess. And I remember I'd go home with my wad of cash for my tips, and I'd count out my money and I'd put it in my save. Then when I went to college, I literally blew through all that money, probably in the first semester. How were you able to stay disciplined to not just go out and spend that money?

Yeah, no, I definitely have a few friends that, you know, same story. But as you. But I would probably say that I think I. I screwed up so many times early on, and I realized that, you know, I wanted to make that change and actually reach financial freedom, and I knew what it was going to take. And so I think I had that mindset pretty early on, and I think I sort of had that epiphany that in order to make this work and in order to, you know, create the lifestyle that I truly wanted, it wasn't going to happen through spending and wasting your money and having little left over after every month. So I think, you know, the dream and having that goal definitely helped in that. And I learned that very early on. I don't think it was luck. I think it was just probably, maybe just, you know, my influence and who was around me, and probably just what I learned, you know, despite learning so much at such a young age. I've been reading books and watching so many courses and etc. You know, for a very long time.

At the BiggerPockets conference this year, I felt like I heard so many people say the same thing, that if you want to really excel at life, if you want to take it to the next level, if you want to be successful, you need to change the people who are in the same room as you. You don't want to be hanging out with people who are going out partying instead of wanting to plan a business or things like that. Want to keep your friends around you that are doing the same thing as you or, you know, even higher and higher than you. And I think that's kind of what you're touching on there, is that you surrounded yourself with the right people to get your mindset right and to push you and to achieve you. Because being around people is contagious. You're gonna you know, get caught into what they're doing or, you know, it's just you're not gonna. You're gonna lose focus on what you really want just because. Because you're interacting with other people that don't have that same determination, that same focus to kind of reach and get to the next level. So I had talked, we had Pace Morby on an episode, and that should be coming out soon. And he talks about this too, as to how he actually had to, like, clean house on his circle friends. And he's like, yeah, that's like a hard thing to do. But, you know, I was really being held back. So I think that's really awesome that at an early age you surrounded yourself with people who were a good influence on you and who actually helped push you to kind of get to where you are today.

Can I add to that ash before we move on? Like, I'm so glad you brought that up because it's. I think at any point in your life, your social circle is so important, especially if you're a newer investor, because even outside of just like the support, the motivation, one of the things you get from your social circle is a new belief system. And I think that's a part that a lot of people overlook. Like, if you've never made a hundred thousand dollars in a single year before, when you start hanging around people who have made six figures, you somehow believe that it's possible. If you've never become a millionaire before, you start hanging around with other millionaires now, you suddenly believe that's possible. If you have friends that have yachts, right, or private jets, you start hanging around with them now you think that that's possible. So it's like, like even outside of the support and, you know, the social aspect of it, I think when you surround yourself with people who are on the same path as you or have achieved the things you want to achieve, one of the biggest benefits you get from that is just the belief system that you can actually follow in those footsteps.

Logan. So with this pile of cash that you have shoved under your mattress at a young age, did you use this for a down payment? How did you purchase that, that first property? Was it all cash? How did you work that deal?

Yeah, so that was all just accumulated in brokerage accounts, just sitting there growing on a monthly annual basis. And as far as the real estate, you know, that first deal, I wasn't necessarily exposed to, you know, different times, different types of financing, specifically, like a hard money or DSCR type of loan, or even if I was exposed to it. I probably would have done it. Wouldn't have done it. I'd probably but have been too fearful to do it. So I just started with a basic conventional loan, Fannie Mae, Freddie Mac. But the thing was that, you know, I was still being declaimed as a dependent on my parents tax returns. So I didn't necessarily have any tax returns. So I actually had to go out and file two years worth of tax returns which as you know, New York State, some of the highest income tax in the country in order to qualify and have you know, show sufficient income on paper to, to qualify for that conventional loan. So it was, you know, also the accumulation of tons of fees and penalties for paying late and everything like that.

So you went back actually.

And took your, and so your parents, did they amend their tax return to no longer have you as a dependent and then you went and filed for two years prior.

They didn't necessarily amend theirs. It was just my own like schedule C, you know, self employed income. And that was a hefty hit, you know, probably like 40, $50,000 worth of taxes. But in hindsight maybe I would have shown a little bit less income and just did a DSCR loan. Maybe I wouldn't have shown that much income on paper. But so yeah, that was, that was that first deal and conventional loan. 20% down for that single family house.

Cool. That's interesting. Like I never thought about that is you know, being at an young age, not having that income. So what income did you show on there, your income as being a magician or was this even. Did you pull money out of the stock market that hadn't been reported that you're reporting now?

So I would probably say it was magic income. It was also online business income, affiliate marketing, all that. And I don't think necessarily capital gains showed on that tax return just yet because the money was pulled out after. But yeah, so that was all the income that was shown on there. And you know, it was a big hit. But I think in hindsight it definitely was a good decision because I got two conventional mortgages and I might get another conventional mortgage out of it.

Awesome. And then so you did the 20% down. What did your terms kind of look like in that you had said you noticed interest rates were low. So did you get in at a good time?

Yep, that was a good rate. I would do anything to get that rate back. It was, it's only three and a quarter, believe it or not, on that first loan that was last year and I closed on the Property June of 2021, I locked in that rate probably a few months before, and so do anything to get that rate back. And also, you know, as far as the property itself, the price of that Property was only 213,000, which at the time, I thought I was overpaying for it. And especially in that area, which doesn't necessarily have the best reputation, it's considered like the armpit of Long Island. At the time, I thought I was overpaying for it. And if you asked other investors in the area, they probably wouldn't have even touched that area.

Go ahead. Name names. What's. What's the name of it?

Yeah, so it's Mastic. Shirley area, Mastic Beach. It's considered the dump of Long island, but it definitely is growing and appreciating at a high rate right now.

How did you kind of work up the courage to invest in an area that has a bad reputation? I feel like most investors want to go to a good area where there's appreciation and tenants.

Yeah, I think it was just. I think I saw the opportunity. So I looked. I kind of looked at the sales price history of that property and the surrounding properties in that area, and I saw that they were on an upward trend. And of course, we probably couldn't have foreseen the appreciation that would have come in the year following, but I think I just kind of saw the trend and I saw those on the up and up, and I just thought, you know, believe it or not, is actually only about 30, 40 minutes from the Hamptons. So it's a very black and white scenario where you have, like, such a bad area and a very good area very close to it. So, you know, I took the chance. It was definitely a risk. And as far as, by the way, on the income, you know, I've dispelled a couple notions so far. Number one, that if you're my age, you know, you can't invest in real estate. And then also, if you didn't go to college, you can't invest in real estate. If you're living on Long island, you can't invest in real estate. If you don't have any W2 income, you can't invest in real estate. So I've kind of broken all those barriers.

Logan, I want to ask a question, because you have. You have these four units right now. Are you. Are you living in any of your investments, or are you still living at home with the folks? What's the living situation look like right now?

Yeah, still living in the same apartment with my mother. We rent, we don't own. So, you know, I own everything else, though.

That's like such a unique thing. And I'm glad I asked this question because you obviously have the, like, financial ability to go out and purchase property, but instead of doing it for, like, your primary residence, you're doing it to build a portfolio. And I'm seeing this theme throughout the conversation, Logan, where you're able to exercise patience and discipline to kind of move towards your goals. And I think that's. That's something that a lot of people struggle with. And people have the maybe financial ability, they have the mental capacity, they have the technical know how to become real estate investors. But what they lack is the patience and the discipline to stick with it and execute and do the things they need to do. You're. You're staying at home with your mom while you're still building this real estate portfolio. You are super frugal with all this money you're making at a very young age, which most people can't do. There are just all these things that you're doing that show how disciplined and committed you are to your goals. So if there's something for our rookie audience to take away, it's that if you want to be successful, there has to be a certain level of sacrifice. You have to give up something if you want that, that bigger reward down the road. And I think you've just done a great job, Logan, of exemplifying that.

I appreciate that. And, you know, especially kids my age and, you know, my generation, I think I'm kind of going against the grain as far as what I'm investing in, because I would imagine that most of my generation is obviously playing around with cryptocurrency and the next hot thing, and so I could have easily done that. And, you know, I will obviously disclose that I do own a little bit of cryptocurrency, but it's definitely not the majority of my portfolio.

Logan, when you say your generation, you mean our generation.

Gen Z. Gen Z.

So, Logan, what do your expenses and your bills look like for yourself? So you're living at home. Do you help your mom, do pay a portion of the rent? Do you have a car payment? Are you paying insurance? What kind of monthly expenses do you have and what have you decided to kind of cut out of your life to, you know, live so frugally, to be able to invest more, not too.

Much besides the rent. So I actually don't even drive either. So that's another notion dispelled there, that if you don't have a car, you can't access real estate. So I usually just get a ride from my agent or, you know, via an Uber or whatever. But yeah, so I actually, I actually pay 100% of the rent here and obviously, you know, very expensive market on Long island, which is tough, but I make it work. You know, unfortunately, my mom, completely different situation, different scenario. She did not necessarily follow the same path or footsteps as I'm doing right now. And so I'm actually paying 100% of the rent. She helps out a little bit with like, you know, utilities, but other than that, no car payment, no student loans, no debt like that.

Logan, how awesome is that that you get to do that for your mom?

Appreciate that.

I think that is, you know, and like, really proud of you that you want to do that too for her. I mean, not many people at your age or, you know, even at any age can, you know, help their parents out in that sense. So I think that's really amazing that you're doing that and that's how you're choosing to spend the money. Like, really, that's your only expense that you have. So, yeah, that's really awesome and that's a huge thing. So congratulations on being able to do that. That's definitely a huge accomplishment.

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If I can ask one follow up question. Logan, you mentioned that when you, when you go visit some of these properties, you either catch an Uber or you have your agent pick you up. And it kind of, you know, it made me think like, okay, yeah, you're working with an agent and as a, as a younger investor, how did you kind of build that relationship with your agents so that they, they kind of took you seriously? I think a lot of new investors, regardless of age, struggle with this imposter syndrome around. Like, oh man, will this agent really take me seriously or will this contractor take me seriously or this property management company? So, so what was your approach to kind of building a good and getting that person to, as a 21, 20 years old maybe at the time, like actually, you know, them take the time to show you around and pick you up and do all these things.

So luckily I haven't run into anyone that's necessarily disowned me or anything like that. So luckily pretty good relationships all around. I haven't, you know, had anyone doubt me. So, you know, and the agent lives local, so that's not necessarily something that took too much convincing. They were happy to do it, but I've definitely gotten some eyeballs and some, you know, surprise looks and faces. When I show up to that closing table and they see who's closing on that property or the insurance agent, you know, maybe they, they see my birth date or something and they definitely make a comment on my age. So I definitely gotten those.

What about your, what about your tenants, Logan? Are you, are you self managing and like do you, do you have a relationship with them and what does that dynamic look like?

Yep. So all self managed right now? I don't know, maybe when I hit 10 units I'll probably move to a property manager. I can't quite make the decision yet. We'll see how much I can handle. But a few different stories as far as the tenants because on the first property I technically inherited that tenant, so there's a story there. And then the second property I did inherit a tenant for that duplex. So we definitely get into that as well.

Let's hear the stories, man.

Yeah, so the first, first property actually I would say I got pretty lucky. Interesting story. Believe it or not, the, the owner that sold it to me actually wanted to stay and live at that property. I think they had some sort of living arrangement set up that they were going to be moving out in six months or a year and they just wanted to rent the property from me actually until they move out. Still they have not moved out and it's been a year and a half and we're actually going to renew that lease next month but I will have to raise rent and so we'll see what happens there if they choose to renew or not. But yeah, so I did get pretty lucky there that I was pretty turnkey with a tenant set up and I, you know, get to screen them. But luckily they just closing that property and so they did have, you know, a boatload of funds from closing, from selling it to me. So I guess that was kind of a pre screen. So that's the first one and the second one, the duplex, one of the units was, was occupied, the other one vacant. So I did inherit a tenant there and that was definitely a risky tenant because I don't even think they're technically documented. So I, I don't even think they were able to provide a Social Security number. So I didn't get to screen them. So I've taken a lot of risk all around, you know, between the tenants not being screened and then also, you know, being all these properties are in flood zones. So that's definitely a risk as well. So I've definitely taken on some risky situations.

Logan, how did you show the vacant unit? Did you you know, set up one showing so you only had to get a ride there once. I figure without a car, it would be somewhat difficult to go there all the time to do showings. So how have you set up your leasing process so that you don't have to actually be at the property all the time?

I just went through my broker so that they. They show the property. But on that duplex, actually, specifically that one is just 10 minutes away from me. So it probably wouldn't have been a big deal anyways to show it. The train goes right there. But on the third one, that's like, you know, that. That I bought vacant that third house. So that was like an hour and a half away from me because it's in that same mastic area. And, you know, again, my broker just showed that one and now it's occupied. We got to occupy within a couple of weeks.

What was the fee that you paid your broker to do that? Because for. I had that before, and I think it was one month's rent that we actually paid the agent once they got a tenant in there.

Yeah, it was just the one month's rent that the. That the tenant pays. And you know, I will say for New York, they have some pretty strict laws in regards to how much you could charge as far as, you know, one month's rent upfront security. So in New York, you know, it's definitely a tough market with the laws and regulations.

No, I meant to the. The broker, the real estate agent. Did you pay them once they got a tenant in place, did you pay them?

Didn't come out of my pocket. That was. It was from the. From the tenant. Yeah, they paid. They paid the broker upfront in the one month. Month brokerage fee. Yeah, nothing out of my pocket.

Oh, interesting.

That's cool.

Yeah, I've only seen on the other side where the actual landlord pays the broker, but to have the breaking more rules.

Logan, I love it, man.

Okay, I didn't know that actually.

But yes, what you said too, is very true. In New York state, where you can only charge one month's rent for a security deposit or less, you can't charge more than that, and you also can't charge last month's rent. And I actually had somebody text me the other day asking me this because their daughter was trying to get a unit. And the landlord told them, like, you're gonna have to put, you know, a higher security deposit down. And they were thinking like, I don't think you're true. So of course I get on. I get all the government documents, I send it to them. Like they can't do that to you.

And also in regards to Section 8, there's also regulations with that. So. So believe it or I don't know if it's the same in all states, but in New York it's technically illegal to take over the voucher amount. So that's also legal. And I had some section eight people try to apply for the, for that third property.

So how are you finding out all of this information? What are some great resources that somebody who's getting into property management can go and find Everything that you've learned?

Facebook groups are great. I learned a lot of information from the real estate rookie group and the bigger, the Brrrr Invest group. Lots of, lots of groups in regards to real estate on Facebook. And then naturally there's also local meetups which I'm sure are great for people as well. There's a few on Long island and then also just naturally YouTube university, right this Google University. Endless research. But you know, you know the big thing is that you can get on, you can gain all this knowledge, do all of your analysis and have all this information, but it's until you actually do it and execute that, you know, some of these unknowns and fears won't go away.

Bigger Pockets.

Did you just crack a joke?

But you know I'm joking, but I'm also serious, right? Like I think for, for so many new investors like the forums on Bigger Pockets, it's like an encyclopedia of, it's like a PhD of real estate investing. Like almost any question that you can think about asking has probably already been asked and someone has answered it in very high detail somewhere on the forums. And honestly I think that's how I initially found biggerpockets. It's like I googled some super obscure real estate something and then I landed on one of the pages in the forums and then that kind of sent me down the rabbit hole. So I love all the resources you talked about Logan, but obviously just want to plug the forums. I think it's a great resource for new investors.

So Logan, do you have a deal that you kind of want to go through the numbers with us?

Sure thing. I think we can start with that first one because it's definitely the, the largest as far as cash flow and the return on investment. So I think we can definitely begin with that. You know, my first deal that was 20 down single family unit, quite a small two bedroom house. I think it's less than a thousand square feet. But again, you know 213,000. At the time I thought I was overpaying for it. It was at. That was after.

What was that? Is that the asking price?

215 was the. Actually it was 224 or 5. We got it down to like 215 and a two thousand dollar credit. 213 was the final price and 20% down. So all in, I think it was like 65, 70 grand all in with closing costs. And it didn't. It was pretty turnkey. Right. It only needed like replace the water heater and some minor tlc, but nothing, nothing too big. And you know, I can't necessarily speak for everyone, but I would say especially for someone like myself who's not necessarily majorly astute with, with handiwork and, and contracting, I would probably start with turnkey properties. You know, I probably wouldn't begin with a, with a major reh. That's just my opinion. But you know, everyone's different. So turnkey property. And like I said, you know, with that situation, the tenant that was pretty much built into it, the, the owner and I got it rented right away. It was occupied day one at closing and now it has appreciated like 30, 40% just in the last year, year and a half because of what's going on in the market there.

And what does the tenant pay for rent in that property right now?

2,200. But that's way below market value actually.

And that's the one where the. It's the owners living in there.

Correct, Sarge. $2,200 per month on a $213,000 house.

That's right. But that's way below market value.

Yeah.

Wow, that's amazing.

So you put 70 use 70, about $75,000.

Yeah, about 70 grand all in with closing costs and the down payment.

Tony, what's the cash on cash return on that?

Yeah. What are you netting on that? 22.

Yeah, that is. Insurance went up because the flood insurance is so high, especially in that area because it's such a risky flood zone. And that's the only caveat. But it's about like 600 bucks in cash flow a month. So that, that's a great deal. I would do anything to get that deal again and again. I would do it every day of the week, but the market has gone up so much and obviously interest rates on top of that, just not feasible anymore. But the percentage return is about like, like 12, 13% actually. The percentage.

Yeah. That's awesome, man. That's a, that's a great first deal. And I'M I'm like super impressed that you're able to get, get such a high monthly rent amount on, comparatively speaking, low purchase price. That's.

But you have to think about too, that the properties in New York State where the property taxes are a lot higher. So it's very easy to hit the 1% rule where the rent is 1% of the purchase price or even higher than the 1% rule. But it's very hard to meet the 50% rule where your expenses are 50% of the monthly rental income. So that's like a big thing to think too, is those property taxes kill you.

The flood insurance is a, is a big risk too. So I don't, I don't, I don't know if you heard my story, Logan, but I also bought my second investment property, was in a flood zone. And the first year we owned the property, the flood insurance premium was like super reasonable. The second year we owned the property, the flood insurance premium, like quadrupled. So it was like a thousand bucks a year and it went up to like 4,000 bucks a year. And we shopped it around to multiple different insurance brokers. They all came back with very similar quotes. I don't know what happened. I don't know if they're, you know, Mercury must have been in retrograde or something because there was some weird stuff happening, like, across the insurance industry, but that killed us on that deal. We ended up selling it at a loss, actually. So there is some risk with that. I'm trying to scare you, but, you.

Know, no, on this, on my second property, that actually just happened where a few months ago I got the, the renewal notice and it was double what I was paying just months before. And so I had to shop it around and got a little bit better of a rate. But yeah, it's definitely gone up.

So there's like, I learned a lot about flood insurance as we were going through that. And like, there's this, there's a way to challenge the, the flood insurance or I guess like the flood zone designation. It's a really lengthy process and, and we just didn't feel like going through it. But if you talk to like your insurance agent, there is a way to challenge that flood zone designation. Like if you can prove there hasn't been any major floods or something, something like that, or there's like a map you have to pull from the FEMA website. And. But there is a process. It's just, it is pretty lengthy and the chances of success are really slim. So something to look into if you got the time?

Yeah, I just got one of my bills yesterday, actually, that there's one property that's in a flood zone. I actually have it under contract to sell it right now, but it went up $400 for the year and went from 1400 to 1800.

And, you know, especially Long island got hit very badly by Hurricane Sandy in. In 2012. Everything was absolutely devastated. So that's. We're definitely in a bad, risky flood area.

Yeah. I did two of my bootcamp calls this week, and in both of them, the conversation came up as to how Hurricane Ian is changing Florida for insurance and how the premiums are just going to increase even more and just, like, there is a cap on how much it can actually increase. But it was really interesting listening to a couple investors who invest in Florida talk about how that is going to impact them and then also people who are homeowners, too, and it's not just investment property. So insurance is definitely a tricky. Yeah, yeah. I have my insurance license, and I hate it so much. I don't. I don't understand half of it anymore because I'm just like, don't stay on top of it. It's kind of like, you know, a cpa, like, if they don't stay up to date on the tax laws and.

Regulations, I would say definitely shop around. You know, shop around different agents and brokers and, you know, play around with the coverage, and I think you'll get a better rate. You know, that would just be my advice, especially the people in flooded areas to shop around, and I think you'll get a better rate than you originally got.

I think that's great advice to especially play around with the coverage as to look at what you actually have have on your policy. Is there, like, something in there that you don't think you would ever, ever use or ever come up that's, you know, even costing you 100 bucks extra a year for the premium? But, yeah, so I think that's interesting. And then especially with it being an investment property, look at what. What your coverage is to. To replace the property. And I usually try to get it as, like, low, because I actually might. If, you know, a duplex or something was to burn down, I don't even actually know if I would rebuild it or if I would just sell the lot or something like that, too. So where. If it was like my primary residence, like, yes, I'd have to rebuild.

That's so funny you mentioned that, Ashley, because Omid, my partner, I, and Sarah, we're literally just having this conversation about insurance yesterday, and we said the opposite. It's like our properties have appreciated so much since we purchased them that if one of them did burn down, we're like, undercovered right now. So Omi's going to do the work to like, increase that replacement coverage. So if they do burn down, you know, we're not caught holding the bag. A buddy of ours, he was building a cabin in the Smoky Mountains. He was like two weeks away from it being completed. Once the property was going to be done, he was going to have like $300,000 in equity just because of his build costs versus where the properties were appraising at. One of the workers flicked a cigarette butt that ended up catching, like some debris on fire. Burned down the entire cabin. And his coverage, he was under covered. So now Instead of having $300,000 in equity, he had to write a $50,000 check to cover that construction debt. So when, when we heard that story, we're like, oh, my God. Like, we're, you know, we got way too many properties to. To not be accurately covered.

And Tony, I think you have to compare properties to where my $50,000 duplexes are not appreciating $300,000.

That's true.

My $3,000 appreciation.

I can, you know, you could probably write that check.

But also, like, for me to have to write a check, it's like I always make sure I at least have coverage for more than what the mortgage is. And that's like the priority to me is if it did burn down, that I could pay off the mortgage on the property easily.

Good conversation about insurance. Let's go to the. To the rookie request line, Logan. So for all our rookies, if you're listening, you guys can leave us a voicemail at any time. Just give us a call at 8885 rookie to leave a voicemail. We love getting the voicemails, guys. We love the Facebook questions and we love the Instagram DMs. But the rookie voicemails are cool because we actually get to hear you guys. So if you want your voice featured on the Real Estate Rookie podcast, give us a call. 8885 rookie. Logan, are you ready for today's question?

I think so.

Hey, guys, this is Reed from Brennan, Mississippi. When my wife and I moved out of our previous home, we kept it as a rental and are currently looking to purchase our next rental unit. The first house was already in our names and we left it that way. Moving forward, at what point do we want to start Putting homes under a llc, or should we at all? Does the protection offered offset whatever pain there may be to purchasing a home under an llc? So just curious if and when we should move to llc. Loving the content. Keep up the good work.

So as far as my knowledge, an LLC doesn't necessarily prevent you from getting sued. Right? You know, there's still liability to be had there. But certainly, you know, I think a general rule of thumb, just from my analysis and what I've learned, I think, you know, once you reach that number of 10, I think you should start considering an LLC, maybe 20 units. But I think, you know, for me especially, and I don't know what the property values on his property are and what kind of issues he's dealing with, if it's a, you know, maybe it's a high crime area, you know, every circumstance would be different. Not an attorney, but I think probably magic number of 10. 10 units.

Yeah. So I, I think what you said there about the equity in the property too, because an LLC is to protect your assets so that if you are sued, they can't go after your personal assets. So really looking at the net worth that you're putting and the equity that you're putting in each llc. Llc. So if I have, you know, two properties in an llc, but they're both mortgage to the hill and there's only $10,000 in equity, somebody sues me, yeah, you know, my insurance can pay out, but there's only, you know, 10% of the equity in there. And that may say that's only $10,000, whatever. But if I have half a million dollars of equity of properties in there, and maybe that's only one property where I have half a million dollars in equity, I'm probably only going to, to put that one property in an llc. But I have a, if I have a bunch of little properties, those 10, and they don't have a ton of equity in each of them, then yeah, I'll throw those into one llc. So I think looking that just like what you said and, but adding in that component of how much do you want to risk putting into one LLC together? Okay, so, Logan, we are going to move on to our rookie exam.

Alrighty.

First question is, what is one actionable thing rookies should do after listening to this episode?

So the easiest thing I would, I would definitely say just start analyzing deals online and, you know, start really getting a concrete understanding of your market. And, you know, you don't necessarily have to look out of state. You know, at first I probably consider doing something in New Jersey or Connecticut or Pennsylvania because, you know, maybe I can get a much better deal there. But just start analyzing your local market and, and seeing how close you can get and certainly, you know, start playing around with those numbers, see what, what the cash on cash return looks like, see what you can get for rents and just kind of do a market analysis, a market sweep of the area. I think that's something, everything anyone could do right now.

Great answer, Logan. Next question. What's one tool app software system that you use in your business today?

I'm actually not much of a spreadsheet techie guy. It's, it's mostly just everything's just on paper or in the mind. I actually don't use too many apps or softwares, but as far as, you know, knowledge and learning, like you mentioned, bigger pockets for them is definitely something everyone can use.

I love that, man. See, I'm like, so the opposite. Like my brain, I need like, I need lots of structure and like things like documented and regimented. Whereas my wife, she's the opposite where like everything just like kind of swirling around in her brain. But that like gives me anxiety. So we're, we're yin ying and yang like that.

Logan, where do you plan on being in five years?

So I think I definitely want to experiment, you know, with, with larger complexes and 1031 exchanging into longer, larger apartment buildings, hopefully getting into commercial real estate. So five plus units, that's certainly going to be tough in this area, but I think I can make it happen and just basically doing everything I'm doing right now at scale, whether it's in business, whether it's my YouTube channel and doing content, branding and real estate, just everything, hopefully at a larger scale than exactly what I'm doing right now though.

Awesome. Well, great job, Logan, man, and I'm excited to see that journey take off, man. And the way you're crushing it, I'm sure you'll reach all those goals you've got. So before we close out today, I just want to give a quick shout out to our rookie rockstar. And if you'd like to get shout out to Ricky Rockstar, get active in the real estate rookie Facebook group on the Real estate Rookie forum section on bigger pockets. Or you can slide into my DMs or Ashley's DMs. But today's rookie rockstar is Isaiah Foster. And Isaiah says that his first business partner and he closed on their first house flip last week. They purchased it for $100,000. They were all in for about 160 and they sold it for $265,000. And what's crazy, this is what Isaiah says is we have literally used none of our own money from this flip. They use two lines of credit and then a hard money loan to cover the entire purchase in the rehab. So congratulations to you Isaiah for crushing it with that first house flip.

Well, Logan, thank you so much for joining us today. I have to be honest and tell you, I slept two hours last night. I've been working on this project. I just wanted to get it done and that's why I was even a couple minutes late because I was hitting submit on it to get it done and I was like, man, I'm exhausted. But I have to tell you, listening to your story and talking with you like I am all pumped up again, like I can pull another all nighter. So just thank you so much for coming on and sharing your story. You are super cool and I'm sure all of our listeners are going to appreciate hearing your story, getting tons of motivation like me. So can you tell everyone where they can reach out to you and find out some more information about you?

Sure thing. Mainly active on Instagram and YouTube. So Instagram is @ Logancon sounds like ice cream cone but spelled K O H n. And then YouTube is the same name. Logan cone that that is where I am mostly putting content and mostly.

Acting. Well, thank you so much for joining us, Logan. We really appreciate it. I'm Ashley at Wealth from Rentals and He's Tony at TonyJ. Robinson on Instagram. And we will be back on Saturday with a rookie.

Reply.

Honesty all this.

Time.

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Help someone else get their first.

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