Making $92,000 (Tax-Free) from One Real Estate Deal

Today's guest spun a $0 downed starter home into a surprise 50k profit. Then turned those funds into a $92,000 tax free payday.

But then almost nearly lost everything to a nightmare flip. So stick around to learn the exact moves and the mistakes that can launch or sink a rookie investor.

This is the Real Estate Rookie Podcast. I'm Ashley Kerr.

And I'm Tony J. Robinson. And today we are joined by another Tony. Tony, thanks for joining us today, brother.

Thanks so much for having me. Appreciate it.

Okay, so let's start off. When you first walked into that 1950s Jacksonville Fixer upper, what hit your nose? What did the walls look like? Tell us about this property and how broke you were feeling right when you walked in.

Yeah, absolutely. So this is a handful of years back. My wife and I were, you know, young, early in our care and decided it was time to try to buy a property. So this was every bit of, every bit of house we could afford. Probably a little bit that we didn't. And yeah, the place was in rough shape. We got it from a guy going through a rough divorce and so it was like, you know, grimy. Just needed a lot of, a lot of TLC and a lot of love. So nothing super major. It was pretty cosmetic, but it just, it just needed a lot of tlc.

So how did you purchase this property? What did the, the funding look like for it?

Yeah, so like I said, I mean we were young and broke. We actually didn't even put any money into the down payment on this one. We did a three and a half percent down loan but we actually borrowed that three and a half percent from our, my father in law. So we had, you know, $0 into the deal. Like I said, you know, the mortgage payment was everything we could afford. So it was, it was scary.

So after you've got this property, tell us about you and your wife walking through it. You said that it was in somewhat disrepair, kind of describe it for us.

Yeah, I mean it had really good bones and cool character. You know, 1950s House and Jacksonville were kind of, you know, outdoorsy kind of people that had a big yard with really cool, big trees on it. And so we really kind of fell in love with what it could be. But it had a lot of work to be done to, to get there. Really. You know, the other thing about this house was, you know, part of us being able to kind of just barely afford it was this house was actually right on the fringe of a pretty rough area, Jacksonville. So that was kind of another curveball of this house that, you know, made us feel a little uneasy.

Yeah. So you had location as one potential challenge. But you also mentioned, you know, several times already that you probably couldn't afford this house when you bought it. So on the day that you guys actually closed, what, maybe disaster scenarios were running through your mind, and did any of those actually happen?

Yeah, great question. So it's, you know, when you buy your first house, there's all kinds of unknowns. You don't know what you don't know. And it's kind of just the overall, the overarching what could happen. You know, as an example, one thing that we really struggled with at that property was it was on a well pump providing all the water to the house. And that pump gave us all kinds of problems, that whole system. And, you know, whenever it went out, we didn't have water to the whole house, you know, and no money to get the plumber out there. So those are kind of the times where, you know, you really had to grit your teeth and get through it.

I had a similar situation at a property where I had, and this was lucky enough, it was my business partner, and he was going to move into one of the houses on the property and he was going to rehab it while he lived there. The day he moved in, we had no water, and it ended up the well was dry, which is not very common, things that happen around us. And so he lived between there in an Airbnb. He'd go and shower and stuff. And he actually bought a Lowe's bucket with a toilet seat, and that was his bathroom for a couple days while all of this was being repaired. So, like, I can understand your frustration of not having the. The water. And then, you know, once they kind of figured things out, they'd take the bucket of water from the pond and then dump it into the back of the toilet and stuff. You know, got really crafty with it and it's like, you know, thank you for taking the sacrifice for our business.

Where's the social content with this Home Depot's toilets?

You know what? I'm going to find a picture, because I know there's a picture of it somewhere.

Yeah, that's the stuff. You don't see much. Yeah.

Talk about a tricky situation. Well, Tony, I know you spent a lot of, like, nights and weekends DIYing, right. You had the paint roller, obviously dealing with the well issues. Was there any project that almost made you quit, like to just say, like, hey, this real estate investing thing, it's not going to work out for Us. And if so, what kept you pushing when you were getting close to that point of giving up?

Yeah, good question. Honestly, it was kind of the opposite. Thankfully for me, doing this work at that first house made me realize kind of how much I enjoyed it. It's not something for everyone. It's not something everyone can do or has the time to do, but I really did enjoy it. And so that went a long way. You know, you work your 9 to 5 all day, and then you come home and you work six more hours painting your house. You know, that's not easy to do if, if you don't like what you're doing. So I, I, that is something that I realized during that first house was that, hey, I actually do like doing this, and it doesn't really feel like work to me. But with that question, it brings up kind of a funny story. I wouldn't say a repair that almost broke us, but, you know, we were talking about how we could barely afford this house. Something that we did while we lived there was actually what I now know as house hacking, but I didn't know at the time, but we had rented out a room and we actually ended up having to evict the roommate, which I don't know if I've heard that on a house hack before.

That's an awkward living situation.

Oh, yeah. Oh, yeah.

Tony, I'm just curious how, how do you deliver the eviction notice when they're in the same house as you? Do you just, like, tape it on the door to their bedroom or, like, literally?

Yeah, yeah, exactly. Yeah.

That is insane. What led to you wanting to evict that person? Because honestly, I think that's, that's almost like a nightmare scenario for a lot of folks who think about the rent by the room or like, house hacking strategy where they're in the same unit as you. What were the signs that made you say, okay, this, this is not going to work out, having you live under our roof?

Yeah, it just kind of slowly deteriorated. You know, it started with late rent, then no rent, multiple months with no rent. You know, again, we're living together, so I can see what you're doing. It's clear you're not really trying to go get a new job or anything. So it was just like, obviously this isn't going to work out.

That, like, almost makes it worse that, like, you can see like, oh, they just door dashed a, you know, that could have been put to the rent payment and they could have been eating raisin beans or whatever.

Yeah, it's Frustrating. Yeah.

There was this time that I did an eviction with a tenant and it was the worst eviction I did because her grandfather lived with her. And when I showed up with the cops to actually do the eviction, he had a garbage bag around him used as a, a diaper. Like it was so awful and sad and just the way she had her actually was her grandpa, her grandpa living with her like that. I just lost all respect for her in that aspect besides the whole not paying rent thing. But I saw her a couple weeks later after the eviction at my gym and I was like, you know what? Like, good for her, she's going to work out, maybe she's getting her life together, whatever. No, she was beelining it right to the tanning. And then I was like, are you going to be. You can afford to go to but not pay your rent or buy a diaper for your grandpa, but yeah. So I can't even understand your frustration.

So Tony, this project just in general, quickly, how long did it take you from the day that you guys moved in until all of your renovations were complete?

Yeah, so we ended up being in that house for almost three years actually when we bought it. It wasn't our plan to kind of do a living and live and flip, but we were kind of held to that geographic area through work. Those situations end up ended up changing so we were able to kind of move on from there and that's when we decided to go ahead and sell it. So it was about three years that.

We lived there and, and I want to talk about once the house hit the market because it sold in or at least went under contract in two days. Right. You know, the, the wire shows up and I guess how much did you make from that sale and how did that compare to the nights when you had that non paying tenant living in your, in your spare bedroom to try and make the mortgage?

Yeah, absolutely. So honestly, as we went through the process of, okay, we're getting ready to sell, we're going to keep on, you know, make these renovations before we do it. I was really projecting us to just get out of it alive, break even essentially. And so as it came together, you know, we met with our realtor, he came up with a list price that honestly I, I thought was too high and thank. Thankful for him, for him talking me into it because obviously it wasn't too high. It went under contract really quickly. But yeah, it all just happened so fast and, and really kind of hit us in the face of like, wow, this is powerful stuff.

And how much did you guys make on the sale?

Yeah, so we made. We cleared 50,000 on that sale.

And how long did you live in the property?

Three years.

Three years. Yeah.

So, you know, again, we didn't put any money down on the property. We kind of just worked on it as we had little money over time, so really didn't have much into it. And then to. To walk away with a $50,000 payday really, really kind of latched us onto this real estate thing.

And how much was your mortgage payment every month?

I think it was only about 1100 there.

And then you had your tenant paying some of that.

Yep. Yeah.

So basically you lived in that house for free. You got the mortgage payments back, the principal, the interest.

Yeah, yeah. And then on to the next one.

Yeah. So for, I guess, for anyone eyeing their first live and flip, which upgrade do you think, like, made that resale value so high? What would you recommend that someone should be doing for cosmetic or a big repair to really add value?

Yeah, it's funny because looking into that is actually when I first doubled, stumbled upon bigger pockets, you know, the big things you typically hear about kitchen and bathroom, which we did certainly work on. But something I've kind of realized in my experience so far is I really think that there's potentially a lot of weight behind lower upgrades, but more kind of character items. So, like, a couple of the things we did at that house was I put some new planter boxes outside and we had a nice fire pit area, for example. Those are pretty inexpensive things. But as people come onto the property, they can kind of see themselves living there, you know. So I really think those kind of homey characteristics go a long way and don't really get talked about that much.

When it comes to owning a car or truck these days, it's hard to beat Toyota. From reliability to resale value, Toyota has the field covered. And as the official automotive partner of the NFL, the strength of Toyota is on full display. With a legendary selection of gas, hybrid and electric vehicles, Toyota has options for any lifestyle and the affordability to fit your budget. Plus great deals with special financing and lease payments available to qualified customers. And Toyota is the best resale value brand for 2025, according to Kelley Blue Books kbb.com, so you can feel confident that your Toyota will hold its value. So check out the popular Camry and Corolla adventurous RAV4 spacious Grand Highlander, or the rugged Tacoma and tundra. Visit buyatoyota.com for a great deal and drive home a Toyota that's right for you. The vehicle's projected resale value is specific to the 2025 model year. For more information, visit KellyBlueBooksKBB.com Toyota Lets.

Go Places I always felt I was some kind of superhero watching over my house, ready to jump in if anything went wrong. But one night I heard a noise. I woke up, totally didn't trip over my shoes in the dark wearing my boxers, and then realized maybe I'm not really the crime fighting vigilante type. I might need something else to keep me safe. Like maybe an alarm system. But here's the thing. Most alarms, they're really reactive. They only go off after someone's already broken into your house. That's like locking the barn door after the horse has already escaped. That's why I switched to SimpliSafe. Their system is different because it's proactive. They have a feature called Active Guard Outdoor Protection where AI powered cameras don't just detect motion, they recognize when someone suspicious is lurking. Then real human agents get alerted right away and they can talk through a speaker. They can flash lights, they can set off a siren, basically scare off the bad guys before anything happens. And if needed, they can even call the police right away. And with Simplisafe, there are no long contracts or hidden fees. Plus you can try it out risk free for 60 days. And one other thing. SimpliSafe's been named the best home security system five years running by U.S. news and World Report. Check them out@simplisafe.com pockets Again, that's simplisafe.com pockets there's no safe like Simplisafe. Let's talk about a real estate backed investment with major tax advantages. Car washes PBR's Opportunity Fund offers accredited investors access to a high margin, recession resistant industry with passive income, tax efficiency and significant upside potential. With operations in prime locations using best in class technology, managed via a vertically integrated team, this fund is designed to deliver strong, stable returns. Backed by over $1 billion in assets under management, PPR has provided passive returns to thousands of investors since 2007. Don't miss out. Learn more today@biggerpockets.com PPR Car that's biggerpockets.com.

PPRCar Today's show is sponsored by Baselane. They say real estate investing is passive.

But let's get real.

Chasing rents, drowning in receipts and getting buried in spreadsheets feels anything but passive. If you're tired of losing valuable hours on financial busywork, I've found a solution that Will transform your business. It's Baselane, a trusted BP Pro partner. Baselane is an all in one platform that can help you automate the day to day. It automates your rent collection and uses AI powered bookkeeping to auto tag transactions for instant cash flow visibility and reporting. Plus they have tons of other features like recurring payments, multi user access and free wires to save you more time and money, spend less managing your money and more time growing your portfolio. Ready to automate the busy work and get back to investing. Basically is giving BiggerPockets listeners an exclusive $100 bonus when you sign up@baselane.com BiggerPockets.

All right, Toni, so after you did that first live and flip, you rolled that first 50k straight into house number two. Why'd you decide to fix up house number two before you even moved into the property? And how was this different than flip number one?

Yeah, so something we learned on that first house was we didn't finish all of the work, you know, making the house nice and pretty until right before we sold it. So we didn't really personally get to enjoy the fruits of that, you know, obviously aside from the payday. But so as we were looking into this next live in Flip, it was, you know, top of mind that let's, you know, let's do the work first and actually enjoy the niceness of the product when it's done. So we actually ended up just renting a place, a small place, month to month after we sold that first house and then worked on this, this next house for a couple months before we moved in.

So Tony, break down the numbers for us. Right? You renovated this house and you said it took a couple of months, but you, you made the decision to refinance this property after you guys made those renovations. So break down those refinance numbers for us. Like how much did you actually spend on the rehab? What did that property appraise for and how did you turn that into again that $92,000 tax free?

Check this property, we paid 292,004. We put about 7,000 into the renovations. So we were about 339 into it. And then went into the refinance process and had the Property appraised for 500,000. So we were able to get a new loan of 400,000 and still have 20% equity in the property.

Tony, that is amazing. I want to. So there's a few terms I want to break down there, but before we even do that, how did you get this property at such a, such a steal because to get a property at 292 that with only $40,000 in rehab appraised for 500, that's a really, really strong margin. How did you find such a good deal?

So I gotta give a little credit to the COVID pandemic, right? So we, you know, we. We got some lift from that certainly. But honestly, this was. I guess this is my MO but this was another divorcee house had fallen out of contract a couple of times in a. You know, this was a great example of worst house in the nicest neighborhood. It's a mile from the ocean, Great schools, just a great area, and a house that just needed some love again. And I think the combination of how long it had been on the market and how. How many times it had fallen out of contract, the sellers were just ready to get rid of it. So it was definitely a. A steal for sure.

So it was just on the MLS.

It was on the MLS, yep.

What was it originally listed for?

I think like 320.

Yeah, and then you got it down to 292.

292. And we even got a full 3% seller credit. So that covered all the closing costs on that one.

So I, I just want to. I want to break down the math here for the rookies that are listening. So Tony bought this house at $292,000. He then invested another $40,000 or he said $47,000 into the rehab. Right? So, so you're all in for 339 on this deal, and it appraises for $500,000. Okay? So now the difference between Tony's all in costs, the 339 and the 500, was that $161,000 spread between those two figures. Right? So, Tony, the bank was willing to give you the 400k. Your initial mortgage balance was somewhere south of, you know, 300. And that's how we land on that. That $92,000 tax free. And guys, for all of our Rickies that are listening, when we talk about the brrrr strategy, this is the brrrr. You buy a property undervalued, you put money in to increase the value, and then you get to keep the difference tax free because it's a loan. It's not. It's not income. It's a loan. You get to keep that difference tax free. And we've seen many, many people build their portfolio time and time and time again. Tony, last question for me on the, on the refi piece. Oftentimes there's what's called A seasoning period where after you purchase a property, a bank wants you to wait a certain time period before you do the refinance. Were you subject to that seasoning period and if so, how long was it?

Not that I am aware of, probably because it was our primary. But we did purchase this property with the intent of selling after, you know, the two years so we could avoid capital gains. So we had waited that long, but at that point loved the house so much, decided we were going to stay and just do the refi instead.

Okay, so you'd. Are you. You'd waited two years before you did the refinance?

Yeah. Right.

Gotcha. Gotcha. Ash. I think most banks, you know, at least what I saw was like a six month minimum.

Yeah, six to 12 months. Okay, so now that that money has hit, did you feel like freedom or was this like a $90,000 wait on you? And what kind of stuff stopped you from adding any lifestyle?

Creeping.

Great question. I think it just comes down to what your goals are and what you're working towards. Super important to, you know, whether you're doing this on your own or with your spouse. In my case, my wife and I do this together and you know, we do annual meetings together to talk about kind of what we're working towards, where we're going. And I think just that alignment of understanding we're working towards something bigger. It's not about this $90,000, let's go spend it. This is, you know, so it wasn't money we felt like we now had. It was like, okay, here's for the next one.

Well, congratulations on not feeding into that lifestyle creep. I guess now that you've done this deal, what was kind of next for you after that when you decided to stay in this property and not sell it?

At this point we're really ready to get into kind of purely investment property. You know, up to this point, we're doing kind of quasi live and flip kind of things. So really wanted to get into more of just an investment property. Wanted to start building a rental portfolio. So, you know, our next step from getting this $90,000 windfall was looking for a rental property.

And where did you guys go, Tony? To find that deal?

So just about 45 minutes away from where we live is a little bit of a. More of a B.C. class area, working class and just a lot more affordable. Prices and numbers that worked for rentals.

And for, for all of our listeners. Tony, what market are you in?

Yeah, so I am in St. Augustine, Florida, which is kind of part of the greater Jacksonville area. So I'm in St. Augustine, and then our rental is in Paka, Florida.

So on this Paka rental, you take the. The funds from this refinance. How much did you put down, and how did your initial underwriting compare to what actually happened?

Yeah, so we did a traditional investment loan on this. So they wanted 25% down. So we did 25% down. I think the purchase price on this one was 165,000. And we also did some repairs on this property. You know, one quick tip I would say in that regard is, you know, looking back on how I manage that, it was definitely a very inefficient use of cash. Combining the 25% down and a property that needs work, that's just a lot of cash to use on a single property. Had I done it again, I probably would have just bought turnkey rentals, maybe, for example, I could have bought a few of those. So definitely a learning lesson there. But in terms of how the numbers worked out, this one penciled out to where we were expecting about 200 in cash flow a month. This rents for 1550 after. After accounting for repair expenses, property management, taxes, we were expecting about $200 in cash flow. The curve ball that got hit with us here on this one, though, was the tax increase on the property that got assessed after we purchased it. So I'm not looking at the numbers right now, but the. The original tax amount that I had projected based on the county records was call it $150 a month, and it, I think, think almost tripled per month. So it essentially wiped out that cash flow that we had.

Yeah, and I want to talk about that because we've heard that multiple times on the podcast here, where the property taxes end up changing significantly from, hey, when you underwrote it, and then what it actually is when you take ownership of the property. And, you know, I'm no property tax expert. Right. So, you know, take this with a grain of salt. But typically the way that it works is that counties will assess, you know, like, if you look up a property's address and like your county assessor's website, there's. There's like an assessed value of that property, typically not directly related to the. The market value. Like they have their own assessment process, but they'll have an assessed value. And sometimes they'll assess that on some regular cadence. And it could be annually, it could be, you know, every five years. Whatever that cadence is, it varies from place to place, but it also often gets re triggered on the Sale of the property. So if the property hadn't been assessed in quite some time, maybe it hadn't changed hands in quite some time, that assessed value might have been incredibly low. And then once the sale happened, it triggered a reassessment which increases those, those property taxes. So one of the things that I like to do when I'm looking at properties is try and understand when was the last year that was assessed. And that'll give you a better sense of, okay, well, what should I expect going into next year? And sometimes you can call the county and say, hey, what is your calculation for. For property taxes? Like, when we bought our hotel, that's what we did. Like, we weren't sure how the property taxes were going to change. We just called them and said, hey, we're looking at buying this property. Walk us through the math behind what the property tax will be if we buy it. X price. And we were able to back into it in that way. So I've heard it many, many times that the taxes have hit folks. Ash, have you ever had like a similar jump like that in your portfolio?

Not anything crazy like that. Not huge, significant, just like small increases. But you get the letter ahead of time letting you know what, you know, your current assessment is and what it's going to change to. I've actually had it where the tax rate changes. So even though my assessment went up a little bit, the tax rate decreased. So, like, I actually was paying a little bit less in taxes. So, like, it could go the other way. I have to say that's probably pretty, pretty rare. And it was a very insignificant amount of money. But even though it was a sesame, because I'm always looking like, should I dispute this? And. But then I looked and I was like, oh, it's actually less. I'm going to be paying this year.

Another thing I would mention, just while we're on that topic, is to make sure you look out for any kind of like, homestead exemptions as well. If you know the current owner has a homestead exemption, you're not going to have that exemption when you turn it into a rental.

That is such a great point. There's also, like, in New York, we have like a star savings. We have a VA discount, which is probably across the country. And then there's also like a senior citizen discount too. I don't know what they called that, but that could be on there too. And you're right. That is, you have to actually read the tax bills. Just don't go what it says on Zillow or What the owner is telling you actually look up the physical tax bill which would be on the county website. Sometimes, like if you're paying school taxes, they're on the school website and get those physical copies or just ask the seller of the property for the physical copies of them.

So Tony, if you were underwriting that same deal today, I guess, what line items would you look at? And just like, as you think about your next deal, like what is the one thing that you're like, okay, I'm always going to check for this. And I'll give you like a quick example. In our portfolio because we, we had a rehab that we did that we turned into a short term rental and we had the sewage smell that like we couldn't fix in one of the bathrooms and we did all this stuff and turns out that my contractor, when they did the rehab and didn't put a P trap. And now anytime we do a rehab, we say it's a P trap there. Did you do the P trap? You know, there's a million other things that are happening in the rehab that we're obviously checking, but one of the questions we always ask now is, is there a P trap? So what is your P trap for property taxes as you look at your next deals?

Yeah, I mean, I think it comes down to being conservative. You don't want to, you know, I think we all get into, you know, can get into a place of where you kind of number yourself out of a deal. So you don't want to get too conservative, but you always want to be conservative with your numbers. Certainly, obviously in my case, next rental I buy in Palaca, Florida, I'm literally just going to triple the rate. And you know, the reality is, worst case scenario, it doesn't go up that much and I've just got that much more cash flow. Right. The other thing is something I don't hear a lot of people do when they're starting out is the whole, you know, going with property management. That's something I would definitely recommend and do again myself. But from a budgeting standpoint, I think that that also gives you a little bit of a cushion. I'm still using property manager on that property. I think it's worth it to me. But in the event that cash flow goes down even more, I still have kind of a break glass option of doing the property management management myself and, and getting that cash flow back.

All right, guys, stick around because up Next is the $2,000 tuition flip. There were ghosted contractors, flea bombs, and a nine day fire. Sale exit so we'll hear what happened right after a quick word from today's show sponsors.

If you own a short term rental, here's something worth knowing. Not all landlord policies are built for your type of property, and with holiday bookings, chilly weather and higher guest turnover, having the right coverage is more important than ever. Steadily offers insurance designed specifically for short term rentals, covering property damage, liability, lost rental income and even unexpected issues like bed bugs. Steadily works exclusively with real estate investors so they understand the details that make short term rentals unique and they build coverage to match it. A quick review of your rates and coverage every year can help you protect your property and your cash flow. Get a quote in minutes@biggerpockets.com landlordinsurance steadily rental property insurance for the modern Investor.

When it comes to owning a car or truck these days, it's hard to beat Toyota from reliability to resale value Toyota has the field covered and as the official automotive partner of the NFL, the strength of Toyota is on full display. With a legendary selection of gas, hybrid and electric vehicles, Toyota has options for any lifestyle and the affordability to fit your budget, plus great deals with special financing and lease payments available to qualified customers. And Toyota is the best resale value brand for 2025, according to Kelley Blue Books kbb.com, so you can feel confident that your Toyota will hold its value. So check out the popular Camry and Corolla adventurous RAV4 spacious Grand Highlander or the rugged Tacoma and tundra. Visit buyatoyota.com for a great deal and drive home a Toyota that's right for you. Vehicle's projected resale value is specific to the 2025 model year. For more information, visit Kelley Blue Books kbb.com toyota let's go places.

Hey everyone, Dave here, host of the Bigger Pockets podcast. And my favorite event of the year is almost here, the Bigger Pockets conference. And I'm here with some exciting news that we just added. Two new sessions that you do not want to miss. First we have Doug Bryan, super bowl champion turned real estate strategist who's gonna share his playbook that he used after 2008 to scale to 17,000 single family units. And we have Andy Gill, full time investor and tech pro who's going to share the exact AI prompts he uses to save hours on contracts, deal analysis and operations. Said it before, but it's worth repeating. The next wave of opportunity in real estate is already forming and I believe that the investors who get ahead won't be the luckiest they're going to be the ones who are the most prepared. That's why I want to see you at bpcon. With over 40 sessions packed with real tactics for today's market, you'll leave ready to act. But the real magic? It happens in the hallways. Connecting with other investors, swapping ideas and building relationships that last long after Vegas October 5th is right around the corner. So if you've been on the fence, now is the time to get your ticket. You can grab it@biggerpockets.com Vegas that's biggerpockets.com.

Vegas starting your own business can be intimidating because of all the hats you suddenly have to wear. There's the marketing hat for emails and social posts, the web designer hat for your storefront, the copywriter Ha. The logistics hat, and of course the hat hat just for tracking all the other hats. It's a lot, but the right tool to simplify it all. Total game changer for millions of businesses. That tool is Shopify. Shopify powers millions of businesses worldwide, including 10% of all US E commerce. From brands like Mattel and Gymshark to ones just starting out. Launch your store fast with beautiful templates that match your brand. Shopify's built in AI helps with content too, writing descriptions and headlines, and even enhancing photos. Want to market like a pro? Create campaigns wherever your customers scroll. Best of all, Shopify is your expert partner partner handling everything from inventory to shipping and returns. If you're ready to sell, you're ready for Shopify. Turn your big ideas into you. Get it. Sign up for your 1 month $1 per month trial period and start selling today at shopify.com bprookie go to shopify.com bprookIe shopify.com bprookiE you just realized your.

Business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other job sites. Indeed Sponsored job posts help you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on indeed get 45% more applications than non sponsored post. The best part? No monthly subscriptions or long term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you. 23 people just got hired through Indeed worldwide. There's no need to wait any longer. Speed up your hiring right now with Indeed and listeners of the show will get a $75 sponsored job credit to get your jobs more visibility@inneed.com rookie just go to indeed.com rookie right now and support our show by saying you heard about Indeed on this podcast. That's indeed.com rookie terms and conditions apply. Hiring indeed is all you need.

All right, Tony, up next, you grab a $60,000 house that looked like a steal, but I guess it kind of quickly went off the rails. So give us the kind of quick and dirty. What were the kind of blinking red signs that maybe you missed before you signed the deal?

Yeah, so now we're coming into, like this past year. So obviously with interest rates, the rental market isn't as great or buying rentals, the numbers aren't as great. So I was looking into more of a flip in the meantime to kind of generate some funds. So I've, you know, been getting deals from wholesalers. This is one I got from a wholesaler, went and looked through it. I actually ended up originally going under contract on it at 80,000 and got cold feet after kind of walking the property some more and kind of as it set in to me of how much work this place really needed. So we actually fell out of contract originally, and then the seller contacted me again a few weeks later and. And said, do you want for 60? And at that point, having already kind of gone through the motions and trying to make it work at 80, I was like, oh, at 60, I. I can definitely do this. Let's. Let's do it. So, yeah, I mean, just to kind of paint a picture, this is a, you know, a 1940s concrete block house. You walk into the house, and there's no ceilings, no drywall, no floor, no electric. I mean, it's about as far gone of a place as you can get. So.

So, Tony, let me. Let me ask. Right, because you.

You.

You had done a few rehabs already with the living flips, some minor cosmetic improvements on the rental property as you walked this one. What gave you the confidence, whether justified or unjustified?

What.

What gave you the confidence to walk into a house in such disrepair and say, I think this is a good next step for us? And let me ask some concepts here. The reason why I asked that is because I do think that there's. I do think that it's important for investors to maybe challenge themselves to take on projects that are a little bit more challenging than what they've done before, because I think that's how you get better as a real estate investor. But I also think that maybe there's a point where you step too far outside of your existing skill set and knowledge base, where you end up jumping into maybe a deal that could be dangerous for you. So how do you gauge when you're in that growth opportunity versus a dangerous opportunity? So as you were walking the deal, what was going through your mind to say, okay, I think this is a good next step for us?

Yeah, I think my big blunder, to be honest with you, is that I did not as. As far gone as the property was, the whole structure was still there. And so I was originally thinking that it was still work that I could do myself, which I was used to doing. I. I know I'll put in the hours, it'll get done as fast as I can do it kind of thing. But after getting into the nitty gritty walking with a couple contractors, realized that it needed some significant structural work, which needed a, you know, a licensed contractor, permits, the whole shebang. So that's. That was really the big hiccup was, you know, all of a sudden my reliance on an outside contractor to get the work done.

When did you start to realize that you're going to lose money and you need to exit this property?

It was really kind of just as the timeline kept getting pushed out. Just kind of based on my W2 work, I've done a lot of project management. So from a, you know, rehab project management, I'm really organized. I have a whole timeline out. So as I continued to struggle with contractor after contractor and the house was sitting, you know, I'm now projecting a finish date out into the fall, you know, getting into the holidays when you don't want to be trying to sell a house. So that's when I really started to think I might. I might want to get a different exit here.

Can you tell us really quickly, Tony, about, I guess, some of those challenges? I know that there was like a. A Mercedes driving pitbull breeder. Yeah. GCS ghosting you, you know, flea infested inspections, I guess. How did each of those obstacles impact and adjust both the budget and the calendar?

Yeah, you know, from a contractor perspective, it's rough out there, and I think we've all heard that, but I didn't realize quite how rough. So, yeah, one of the examples I had a contractor out, you know, showed up in a nice Mercedes, kind of said the right things, you know, got down to the nitty gritty of, you know, asking what paint colors I wanted in the finish. Ended up sending me a formal bid online asking for a deposit. But I, you know, one of the Things you can obviously do, and I would recommend is to look these people up on social media. So this guy, for example, you go to his Facebook page and it says he's a dog breeder. Nothing about contracting. There's no pictures of work he's done. So I, you know, got a bad vibe from him and just, and just told him I was going to go a different route. A couple months later, I saw in our local investing Facebook group that somebody had in fact paid him a deposit and he disappeared. So I dodged a bullet on that one. But I went through, I think, seven different contractors on this house. None of them actually ended up swinging a hammer.

So, Tony, let me, let me, let me ask, right, because that, that's a lot, you know, and I think that there's a lesson in there. So what do you think was the common denominator amongst all seven of those folks that you now know to look out for before you hire someone else?

I think part of the challenge with the sourcing a contractor is the reality is the good contractors don't need work, right? So when you kind of, you know, put a post on Facebook, in the investment group or whatever the case may be, you're trying to find a contractor on your job. The guys that are, you know, coming out and saying, yeah, I'll be right there, you know, there's probably a reason that they don't already have work going on, at least in, in our market. From what I see, the good contractors are just going from job to job and they don't need to market or look for new work. So, you know, ideally, I think the best way to get a good contractor is through word of mouth. Somebody, you know, use them and, you know, hopefully just doesn't happen to need them right at this time so you can use them kind of thing. But I would say once you do find the good contractor, make sure you take care of them.

So let's talk through how you eventually walked away from this deal, right? Because I mean, honestly Tony, you have two, really three successful deals, right? You had the first live and flip, then at 50k, the second live and flip. You refinance and get, you know, almost 100 grand. You get the, the, the long term rental, which even though it's not giving the cash flow you want, there's still some upset there in terms of equity and depreciation and all those different aspects. And then you, you kind of get your, like, you know, your, your face punched in on this last deal. So how did you, how did you walk away from it? Did you see it all the way through? What was your actual exit strategy?

Like I said, kind of as I kept looking at the schedule and it getting pushed out and, you know, another contractor falling out, I decided it was time to at least try to sell it. Just for sale by owner. Put a sign out front, put a QR code on there with some information sheet and just put it up for cash. I listed it for 85,000 cash. And my thought there was I can still work towards what I'm doing, I can still try to get this property done, but in the meantime, if somebody's willing to just take a off my hands for 80, 85k, then maybe it's better for me to just walk away at this point, you know, And I'll say it's one, you know, positive about the whole kind of working a W2 and doing investing on the side. I didn't need to make money from this flip. I wasn't dependent on it. It wasn't paying my bills or anything. And so I was perfectly okay with this just being a learning lesson in the end.

But Tony, I think it also illustrates how critical it was that you didn't buy that deal originally at the 80K and that you got it at the 60K because had you bought at 80 instead of losing, you know, 2 grand on the deal, you would have lost 22,000, you know, $22,000 on the deal. So I think it goes back to if you can buy at a really good price that oftentimes can offset other things that go wrong on the deal. And, and this is like a perfect example of that.

Absolutely. Yep. Agree.

Well, Tony, thank you so much for joining us today. Can you let everyone know where they can reach out to you and find out more information?

Yeah, absolutely. Instagram is probably the best spot. You can just look Tony Borman, my name and feel free to reach out if, if you're in the area or you're investing from out of state, I'm happy to connect.

Well, thank you so much. We really appreciate you taking the time to share your story with us today and to give some lessons learned. I'm Ashley. He's Tony. And we'll see you guys on the next episode of Real Estate Rookie.

If you own a short term rental, here's something worth knowing. Not all landlord policies are built for your type of property. And with holiday bookings, chilly weather and higher guest turnover, having the right coverage is more important than ever. Steadily offers insurance designed specifically for short term rentals, covering property damage, liability, lost rental income and even unexpected issues like bed bugs. Steadily works exclusively with real estate investors, so they understand the details that make short term rentals unique, and they build coverage to match it. A quick review of your rates and coverage every year can help you protect your property and your cash flow. Get a quote in minutes@biggerpockets.com landlordinsurance steadily rental property insurance for the modern investor.