Real Estate Progress: Transforming $10K on his 1st wholesale deal into a PadSplit

What is going on everybody? We are live right now on the Painless Flipping Podcast where I bring on people who are doing deals and we got— we try to learn from them. So right now I got Jared Morris on here. What is up my brother? How you doing today?

Nathan, what's up Man, good to see you as always.

Always, always a pleasure. So what we got going on for everyone today is we are talking Jared. Jared, you just did your first deal a couple months ago, right? In real estate. Is that correct?

Correct. Yeah.

$10,000 deal.

Yep.

And then it was over the summer and you did that and then you're like, hey, the buyer that you actually— that bought your deal, you're like, hey, let me work with this guy to get into pad splits. Is that kind of the the way it went?

Yeah, yeah, yeah, absolutely. So I connected with him before I signed the deal and just tried to build a good relationship with my buyers. And the first one I assigned to him, I realized what he was doing with that. And then I found another property and I was looking at it and I was like, okay, I could assign this again for whatever it is, $5K, $10K, or I could hold onto it, look for monthly cash flow, long-term appreciation, own the asset. And that was the route I wanted to take on the second one. But yeah, it all started with that first one and building that relationship with that buyer from the first wholesale deal.

That's powerful, man. I love it. I love it. So let's kind of bring it back for everybody again. If you're watching this, we're talking with Jared about how he did his first deal. And now because he knows what he wants, he went and he's starting to get into pad splits because he wants that long-term appreciation, that cash flow. So let's Let's talk about that first deal really quick for people. I know we've talked to— had you on another podcast before about that, but, um, let's talk about that first deal. And also, I want to let everyone know that's a new listener to the Painless Living Podcast that the purpose of this podcast is to help you understand that, uh, you know, you don't have to be an expert to get started in real estate. And if you surround yourself with the right people, this can be a painless process. I don't want to say completely painless because obviously you know and I know it takes It takes some pain to learn, but, uh, our goal is at least for you to listen and learn as much as you can so you don't make the mistakes that we have made. Right. Cause I know in that first one, it was kind of painful, right?

I mean the first one and the second one, you know, but it's all, it's all learning curves. Um, it's all experience. So, um, yeah.

So let's dive into that first one. So tell me a little bit of how you found that deal, how you found the buyer and, uh, how, you How are you able to make $10,000?

Yeah. So, um, I actually connected with the buyer through, uh, your community. So that's how I connected with the buyer originally. Um, stayed connected with him, got on a few calls, really tried to understand exactly what he was looking for. Um, joined a bunch of Facebook groups, um, for just real estate and wholesaling. And these other wholesalers had this deal. They were looking to dispo it. I thought it fit really well for what this buyer was looking for. So I kind of played the middleman of that and I connected the deal to the buyer. And then the original wholesalers made their assignment. I made my assignment, and then the buyer ended up with the property. So it was kind of a reverse engineering, reverse wholesale deal on that, kind of what you teach. So that's how I found that one.

And it didn't cost you any money to get the lead because you found it on a Facebook group. Is that right?

Correct. Yeah. Okay.

And that's kind of— that's exciting too. I know a lot of people when they do deals, like it takes some $10K, $15K, $20K in marketing spend to get a $10K or $15K assignment or $20K assignment. This, this way you were able to do it from Facebook groups, leveraging the relationships that you're building. And now on this pad split, you were able to leverage the relationship you had built with the same wholesaler you got the first deal from. Is that right?

Yeah. Actually, everyone's still connected one way or the other. So first one, wholesalers signed it to me. I signed it to my buyer. On the pad split, wholesalers locked the deal up, brought it to me. I said, "You know what? This looks really good. This looks like a market that I wanted to be in." So I ended up keeping I ended up keeping the property, but I partnered with the buyer for his experience, his network, everything that goes into renovating a project, hard money, everything that I probably wouldn't know how to do. So I tapped in, tapped into him to kind of get that side of the deal as well.

So tell everyone here what a pad split is for those that don't know what that is.

Yeah. So, so pad split, it's, it's room rentals. So you're renting the rooms by the week. So basically I bought this property, it's a 4-bedroom house. We're going to add 8 bedrooms or so. We're going to add 4 bedrooms to it to turn it into an 8-bedroom house. And how we do that is we just minimize the common living areas. So we'll minimize the living room, the dining room. We'll throw some partitions up to add some additional bedrooms, and then we'll rent those rooms by the week. Now, when I first heard about this, I was like, this doesn't make any sense. Like, who the heck is renting rooms by the week? But, you know, there's such an affordability issue across the country that your average American who's working at, you know, Walmart, the mall, the grocery store, wherever, they can't necessarily afford a $2,000 a month studio in Tampa, right? Yeah. So PadSplit manages all the people management, the background checks. So it's actually a very legitimate business model. And essentially what it's doing, it's doubling your cash flow, right? Because If I was to rent this property as a 4-bedroom home to one family, just call, you know, you get $3,000 a month. By renting it by the week, 8 bedrooms for $190, $200, $180 a week, you're essentially doubling that cash flow. And that's how you're able to make the numbers work in today's economic environment. Because, you know, I was looking for a while for a rental specifically in Florida, and just like where interest rates are and, you know, what you can get for a single-family home, nothing was panning out. So this is a really good alternative to, to make the numbers work and own that asset.

What does it cost to get something able to be rented as a pad split or set up as a pad split? What is your investment going to be in order to take this thing to the 8 rooms?

Yeah, so I bought the house for $240,000 and we're putting $50,000 into it. So we're all in for $290,000. The $50K is including the rehab. We had to put a new roof on there, updating bathroom, kitchen, exterior paint, interior paint. So that's my initial investment into it. I worked with a hard money lender who was able to fund 90% of the full rehab or for the full project. So I only needed to come to the table with 10% down on this deal. We'll refinance it after it's all done. I should get my money back. Back out of that and then, you know, we'll get it up and running and hopefully get this thing cash flowing as soon as possible.

Oh, wow.

Okay.

So that's awesome. So do you know what each room would rent for? I have no— I have no idea. I don't know anything about this.

Yeah. So it obviously depends on the market, right? And depends on how big the room is. Obviously in the house there'll be some rooms that are bigger than others, but we're looking at anywhere between $180 to $200 a week. Per room is what we're looking at for this property.

That's nice that you don't have to deal with that, the tenants or the background checks or anything, right?

Yeah. So PadSplit manages all the people, and then I have a great partner who's kind of my boots on the ground in Tampa who is operating as the property manager. He's in charge of all of the general contracting crews, making sure the rehab is coming along. So all in all, it's pretty hands-off for me. But at the same time, I want to make sure I'm involved. I just recently moved to South Florida, so I'm about like 3.5 hours from Tampa. So I definitely plan on hopping over there in the next few weeks, um, check the property out, you know, just show face, make sure everything's going along well. But, um, yeah, it's the, the team that we have set up to get this going I think is just a really critical part for me, because if I was doing this all by myself, it would be very, very challenging.

Yeah. So let's talk about partnerships. Obviously, you know, you could have the whole grape, right? Or you could have the whole, the whole slice of the pie. But you're willing in order to learn to partner up, right?

So absolutely.

Is this something that you've— have you been able to leverage other people throughout your life or is this something new to you where you're like, okay, I'm going to start partnering and trusting people? How's that been for you in your whole life?

Yeah. I mean, I think I always try to leverage people that have done what I'm looking to do, right, and have been successful. So if I think back to my, my first sales job out of college, right, I was— I wasn't great in the beginning by any means at all. I struggled, but I was fortunate enough that I was seated right next. And this was, you know, pre-COVID when people were actually in the office, right? Not this remote Zoom thing. But I was fortunate enough that I was seated next to the number one rep in the entire company. So what I did is I took my headset and I would just plug into his phone and listen to every single one of his pitches and closes and literally just mirror and match what he did to find success. And once I started doing that, it clicked. So I think just thinking all the way back to that, I'm always looking for people that have done what I'm looking to do, right? That have been successful and figure out what they're doing and how I can implement that as well. So I think, yeah, going back, I've always kind of looked for that, but absolutely leveraging the partnerships who have the experience, that have the network, that know what they're doing, that have the relationships with the lenders and the banks. And the rehab crews and all that. It's been very critical so far on this property, definitely.

I think it's so important. You don't have to figure it out all yourself. And that's kind of like why we have this podcast is if someone's going to try and figure it all out themselves, it's going to be difficult, but there's wealth of knowledge out there, right? There's people that want to help you. I mean, you were able to bring the deal. Now he brings his crews and what he brings to the table, and you're both able to succeed. And benefit, right?

Absolutely. Yeah.

So what's the goal long term? Is it to hold more of these PadSplits, more rentals? What are you looking to do in real estate?

Yeah, that's the long-term goal. The long-term goal has always been to acquire property and own assets. So for the time being, as of today, my focus is to get this rehab finished, get this thing live on PadSplit, get this thing cash flowing positively.. And as soon as that happens, just look to acquire another one. I don't want to necessarily over-leverage myself right now and continue more or continue to acquire properties right now today while this one's still in rehab. I just want to make sure that I can get that going to start. But for sure, the goal is to continue to acquire, continue to have cash flow and own assets down the line. But in the meantime, between now and then, Definitely looking to wholesale, have some active income coming in. But yeah, that's, that's kind of the goals right now.

You know, I think that's amazing that you say it because a lot of people do over-leverage themselves, right? They're like, well, let me get some more. Let me just take the equity out of this and get another one. And it's like, well, you can, you can get a rental and maybe make $10,000 in a year, 2 years, 3 years, or you can do a wholesale deal and make it in a month, 2 months. So you definitely— yeah, you want to keep the active income coming. You don't want to stop that to just you know, get more rentals if you don't— yeah, if you can invest in and build a business and create the active income, right? Yeah.

And I think for me also, like, it's definitely the market. So I went to school in Tampa. I went to the University of Tampa. And, you know, I've seen what's happened there since I've graduated. It's just blown up. You know, I wish I bought when I graduated back then. But the growth there is insane. It's not slowing down. So Um, would love to continue to acquire, um, in that market.

I love it, I love it. Well, hey man, I wanted to check in on you and see how you're doing and let people know that you can go from your first deal to a pad split. You don't have to wait years and years and years. You're definitely an inspiration to me, an inspiration to others of taking action. What, uh, advice would you give someone that's starting out new and, you know, doesn't really know what to do or just needs some advice to get into gear?

Yeah. I mean, I think the things that come to my mind in no specific order, but one is just leverage other people, right? I'm fortunate that I was able to connect with you and leverage your knowledge and kind of your expertise when it came to wholesaling. When it comes to this pad split, I'm able to leverage my buyer who's been doing this for a long time. And like you said, kind of tap into his network for the areas that I wouldn't have access to. So I think leveraging other people that have done what you're looking to do and have had success with it. And the other thing is just like discipline, right? Obviously, like being motivated, being committed, but being disciplined is a lot different than having motivation, right? Doing the things that you know you need to do when you don't want to do it at the end of the day. Right. So I think those are, those are two huge things that I think have helped me along the way.

No, I attest, I agree 100% with what you said because discipline, man, like, do we all, do any of us really want to make calls every day, like every day, every week. No, like it's not something that's exciting, but through discipline it does yield benefits, like, you know, does yield a lot of fruit in the future. But yeah, no, awesome discipline. So let me ask you this last thing before we wrap up. What keeps you disciplined to take the actions and do the things that are necessary to see the success in the long run?

Yeah, I mean, I don't want to get too, I don't want to get too deep here. Right. But I think like understanding like what is your why? Right. I think that's the first thing you need to figure out. Like, why are you doing what you're doing? If you don't know what your why is, I think it's going to be difficult to navigate and stay committed to the goal and have that motivation. Um, for me, the discipline is knowing what, just that you have to be disciplined in order to accomplish the goals that you're setting. Right. You could have commitment. You could have motivation. If you're not disciplined at the end of the day, you're never going to be able to stay consistent and do the daily activities that you need to do to ultimately accomplish whatever the goal is that you're setting out.

I love it. I love it. Yeah, there's tons of books on that, like The One Thing, The Slight Edge. It all talks about the small— it's the small, simple things that don't— you don't see the results of immediately that actually give you the result in the long run. It's kind of like rentals, right? Like, rental is not going to make you rich. Today or this year, right? But in 30 years or whenever, like through appreciation, tax benefits, rent, like it does. But a lot of people, they don't, they don't wait that long or they don't see that, right? They want the quick, they want the quick buck. But no, that's how it is in life. Well, Jared, awesome, man. I love to see your journey. And we're going to keep on bringing you on because I already know, bro, another 6 months, another year, you're going to be another step, another step, because that's just how your brain works, man. That's— you're a hard worker, right? You know, you're consistent, you're disciplined.

I appreciate it. It was good. And it was good to see you in person in Utah.

Yeah, that was fun. And unfortunately, that Zupas did not— that was— that wasn't that good.

It's all right, man. We could have hit Costco, but it's all good.

Yes.

Yes.

Hey, I got this new Costco sweater I got to send you. It's hilarious. It's got the Costco dog.

The branding. I've seen it. Yeah.

Oh, yeah. It's the dog, actually. It's a Costco dog. I'll send it to you, man.

It's good. Alright, cool. Alright, brother.

Well, it's good seeing you and everybody that's watching, you know, hit— give us a like wherever you're watching this or follow, and we'll see on the next Painless Flipping Podcast.

Peace out. Alright, see you, Nathan.

Later, brother. Thanks.