Ask Jen Series: Part 1

This blog is written by Jen Josey, Real Estate Investor, and REIGN Coach. She is not a professional writer and writes as she talks so put your red pen away.  Jen is extremely opinionated but reserves the right to change her opinion at any time because, well, that's the way she rolls.  She may also use colorful language so don't be offended.  Jen does not claim to be an expert, she is just sharing her personal thoughts and adding a perspective on investor topics that may benefit her readers.  Jen also finds it strange to write in the third person.  Enjoy!

My dad was a newspaper guy for his entire life. He held several positions during his 30+ years in journalism but his favorite was writing columns. He would mostly stick to the topic at hand but I can remember a handful of times when he would include embarrassing stories about me throughout my awkward childhood. I had asked him one time, why he enjoyed poking fun at his favorite daughter and he said that it helped his readers connect with his writing. This gave me the idea to connect with more of my own readers.

I reached out on social media and told my friends to ask me anything about real estate investing. I was surprised to find that the questions came to me via private message only. I got some great questions. I asked a few if I could use their name in my blog and they said, "no way...I don't want to look stupid." That was shocking to me! Many of the questions were the same so here we go...

How did you fund your first deal?

There's is nothing glamorous about our first deal except the house itself. We found our first "project" and I use that term lightly, on Craigslist. The house was in Rocky Mount, NC which is just over an hour from our home in Raleigh. It was built in 1920, was 4200 square feet, 6 bedrooms, and 2 baths. It was a gorgeous house with a lot of the original charm. Over the years, the area had suffered some economic downturns and home values dropped. We ended up buying it for $44,000. You read that right...$44,000.

We had never done a deal so we were too afraid to ask anyone for funding. We ended up purchasing it through our self-directed IRA. You should always seek professional advice when it comes to IRAs but for us, we could borrow half of our total balance but no more than $50k per year. When you borrow from your own self-directed IRA, you have to pay yourself interest. So basically, all we did was grow our retirement account...we can't touch that money until we retire.

Once we purchased the house, we found that it was very difficult to find licensed and insured contractors in that area. The contractors in Raleigh were too busy to drive over an hour to do any work. We did a few minor repairs ourselves, paid a neighbor to clean up the lawn for $30, and then just listed it on the MLS. We were able to sell it as-is for $67,000, 6 months later.

It seems like you flip everything. Why not keep some for rentals?

This is a great question! We actually have three rentals, two long-term rentals, and one short-term rental. Every time we acquire a new property, we always look at all the different exit strategies, one of which is "buy and hold." In our immediate area, there is a low inventory of houses for sale. Right now, it makes sense to flip those properties and list them because there are plenty of rentals available that drive the rent rates down.

Our two long-term rentals are 45 minutes outside of our general area where there is a tremendous need for rentals. Raleigh and Durham have apartment complexes all over the place which provide affordable housing for renters. If you head just 30 minutes outside of town, apartment buildings are practically non-existent. Both of our rentals are solid brick ranches with 3 bedrooms and 2 baths. One came from a Facebook ad and the other was a referral. We didn't over renovate either property so we could keep them affordable for those in need of a safe home with simple updates.

Our third rental is an AirBnB just outside of Boone, NC. While this one takes a bit more of our attention, it makes over twice as much profit as the long-term rentals. It's also nice to have at our disposal when we need a quick getaway!

Have you ever lost money on a deal?

We came very close! We had a property that sat on the market for months longer than we expected. The interest we were paying was around $3000 a month. At closing, we made a whopping $2500 but if it went any longer, we would have been in the red...

How do you find good contractors?

This is when your network is worth its weight in gold. 95% of the contractors we work with have been vetted by other investors. When you do multiple projects, you can negotiate lower labor costs because many contractors prefer steady work. It's also very important to used licensed and insured contractors so everyone is protected. When you have great contractors on your team, your rehabs run much smoother from start to finish.

Can you teach me how to flip houses?

Ha! I respectfully decline. I leave this to the professionals.

I put immense value on a proper education. Sure...some people have been successful without taking any courses, however, many more have lost way too much money over the wrong investment. Vance and I are always investing in our education by attending masterminds or working with coaches. If you are serious about becoming a real estate investor, there are several gurus out there with coaching programs. Most of them offer a free two-hour introductory meeting and then upsell you to a three-day event, typically in the $200 - $500 range. Some stop there but some will upsell you to their mastery program that can be tens of thousands of dollars. If they have good systems and you feel comfortable with their teaching style, you've found your people! Paying for an educational program serves two purposes. First, it provides access to one-on-one coaching with proven tools that will save you from making costly mistakes. Second, when you pay buckets of cash, you are more likely to bust your ass to make things happen.

While I don't want to become a realtor, would it be smart to get my license? Same question for a mortgage broker's license...

Mortgage broker license, I will start there.

The answer is no. As an investor, the only time you will be dealing with mortgages is when you decide to hold a property as a rental. Many investors use the BRRRR strategy to acquire rentals. You Buy, Rehab, Rent, Refinance, and Repeat. You buy a property under market value (that needs some work) using hard money or private money. Then you rehab the property. Next, you rent the property at a competitive rate because the tenant is getting several upgrades. A bank typically likes to see six months of rental income before they refinance an investment property. Because you added value by fixing it up, the property will now appraise at a higher value allowing you to borrow a larger amount which hopefully covers the cost of the rehab and the interest owed to your first lender. You will also have the previous six months of rent payments in your account as reserves. You refinance with a bank, pay off your original lenders, and the renters will continue to pay a large chunk of that mortgage payment, thus leaving you with a few hundred bucks in profit each month. Then repeat the whole process over and over again...

Getting a real estate license is very smart if you plan on doing several rehabs a year. You get access to the MLS (multiple listing service) which contains the most accurate data for determining comps. You also can save on commissions when you sell a completed rehab. You can gain access to listings for research purposes. Probably the most value of getting your real estate license is the education you receive.

Now, if you're going to buy one rental property every few years, don't waste your time. Find a good realtor that understands your needs and you are good to go!

When are you going to have your own HGTV Show?

I get asked this a LOT. While I never say never, this is just not a goal for us. Since I got into the renovation business, I rarely even watch HGTV anymore. After our first few projects, I quickly learned how ridiculous those shows are. The numbers are completely skewed, timelines are based on the filming crew's schedule, drama is required for each episode, and the before and afters are embellished. While we do large renovations here and there, we much prefer the lower price points which are not as exciting. We care about our community and believe that providing affordable and safe housing is much more rewarding than TV ratings.

So, thanks to everyone that submitted questions! If I have sparked YOUR curiosity, feel free to throw some questions at me via www.TheRealJenJosey.com or message me on Instagram @therealjenjosey.

To read more blogs by Jen Josey, please visit www.REIGNmastermind.com.