Buying 2 Rental Properties in the Middle of a Pandemic

In this episode, we have a Roofstock Academy member on to share his about his journey becoming a real estate investor.  --- Transcript   Michael: Hey everybody, welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by my co host,   Emil: Emil Shour.   Michael: And we have a very special guest today, Nathan Murith. He is a Roofstock Academy member as well as Roofstock, user and investor. And we're going to talk today with Nathan about his story, his investment journey, what he's done thus far, and what he's looking to do going forward. So let's jump into it.     So, I would like to put the, the batch beacon was they called the bat signal out for requests for ama's. We're gonna do another episode. So that's ask us anything asked me anything. If you have questions that you'd like to hear answered on the podcast, please feel free to send either a meal or myself an email, I am at [email protected]. And Emil is [email protected]. And we will tackle those questions on the episode live for you.   Nathan, thank you so much for being with us here today. Really appreciate you taking the time out of your busy schedule, man.   Nathan: Thanks. absolutely happy to be here.   Michael: So before we hit record, we were just chatting about what's going on in your world. But before we jump into all that craziness, I would love if you could give everybody listening a little bit of background on who you are, where you come from, and what you've been doing in real estate last couple years.   Nathan: Yeah, absolutely. So yes, my name is Nathan, right? I'm pretty new to real estate investing, originally from Europe, my wife and I moved over to New York, then the East Bay for work stuff. So my w two is technology. Like I think a lot of the listeners of the podcast, right? So basically, I think how I started was that, you know, is looking at ways to get better return on investment on some of the cash that we had in the family, you know, looking at online savings accounts, and other means to basically save, you know, save and kind of build for our future in retirement and no one basically after looking around for many, many days and hours and weeks, right, you can't find anything that even competes with inflation, right? So it's like, um, even if this money sits in a bank account, you know, so I started looking at different investments, you know, avenues, and I honestly can't remember, but I think it was something like just maybe a Facebook ad or something online that I read up about Roofstock, I started looking into that I was like, Oh, my, you know, like, the platform seems easy. And that's kind of what launched me. I'm intuitive. That was about six or seven months ago, I think. And I did six to seven months of just learning reading, you know, bigger pockets, roofstock Academy blogs, 100 different podcasts, there's so many out there, basically two months ago bought our first rental property through the roof stock marketplace. Last week, close on our second and looking to add a couple more, probably by January or February, something like that.   Michael: Right on. And I know you mentioned it briefly, I just want to highlight for everybody listening in full disclosure, so it doesn't feel like we're springing on people later, you are a member of the rootstock Academy, and you have purchased a couple of properties to rooFstock. Right?   Nathan: Absolutely. So I'm a member of the Roofstock Academy, right. And my intent there was really, you know, as I mentioned, I said, You know, I had this phase where I wanted to learn, not only did I want to learn, but it was also one very naively, you know, in hindsight, you know, 2020 very nicely, but I was one of those that thought that, you know, this whole pandemic and whatnot would have a pretty strong impacts to the real estate market. So there would be opportunities that would, you know, pop up, so it's trying to get ready and all that, I now understand more that even if there will, or if there might be an impact to the real estate market due to you know, market, you know, 100 year pandemics and whatnot. It doesn't happen overnight. It happens over many, many, many, many months, not years, right. So I spent six months or so studying. And part of that studying was the Roofstock Academy.   Michael: Awesome. And for everybody listening, don't worry, it is not going to be a plug in entire show through stock Academy. We wanted to get Nathan on talking about his experience as a newer investor as someone who has just closed a couple deals. And he also happened to be a member of the Academy. And Emil were you gonna say something   Emil: Before we get into some of this stuff about like details of properties you bought and all that. I feel like, one thing I want to address is a lot of people get stuck in that listening, educating themselves and then the move never happened. So you know, you spent a good amount of time I think like a lot of us, educating yourself learning what pushed you over to just say, I'm gonna make a move and get in real estate.   Nathan: So I think for me, it was two things I try very much to be an objective or goal oriented individual and one of my personal goals but of course, mine My wife's goals because she's my partner in all of this right was to get at least our first property done in 2020. So that's kind of what timebox did for us. And I think I got to a point as well where you know, doing all this reading all this studying all this research, like, you know, many stories that I've heard, you know, just started getting becoming more confusing than anything, it was just more and more and more different, different, different, but mostly all the same stuff, just with very slight variants that just are just enough to confuse a newbie, right? So I just started to get confused. And after it was like, we were in the fortunate we still are knock on wood and unfortunate, you know, situation where, you know, $100,000, you know, rental purchase, for example, would not break our bank, even if it went horribly wrong, right. And I do appreciate and understand that is not everybody's situation, right? That's very, you know, different than individual to each person in each situation.   But we got to a point where, like, we can't learn more from reading, we just, we have to do this. And we basically pulled the trigger, essentially, on some of the things we're looking at, and went from, you know, having none to having to and a couple months, basically.   Emil: Good on you, man. I think that's absolutely right, you get to a point where it's like, it's good to get educated and learn and stuff. But like, there's a point where you just have to jump in. And that's where the real learning comes in. And like you said, it's really fortunate to be in a spot where, you know, you're you're learning on the first couple, it's not going to be your make or break, especially if you plan on having a long investing career.   Nathan: Yeah, and, you know, first by no means are we you know, multimillionaires Far from it, right, by by no means do we want to waste money, you know, by any means, right? You're obviously talking here, because we're, you know, we at least have the investor mindset, I think we're starting to be more proactive, and active investors, but just looking at it purely through the lens of risk. We're like, even if this thing goes horribly wrong, and we saw a roof over our head, we can still provide for two young kids, etc, etc. So like, if you don't start and don't try not do it, we will never actually learn.   Michael: I forget the phrase, and I'm totally gonna butcher the saying here. But like, if lack of information was the ticket, like everybody would have six pack abs, or something like that, like, the information isn't lacking. It's the action that's lacking. Everybody knows how to go get six pack abs like workout and eat right. But it's actually doing and executing those things that get somebody six pack. So it sounds like you're well on your way to get your investor six pack.   Nathan: Yeah, again, hindsight is easy, and all that, right. But now the two deals plus the, you know, four deals total, if you will, with the two, you know, primary situations that we've done in the past, or that we're in the middle of right now, if I think about I think most of the things that we were trying to educate ourselves on actually didn't even really weren't as useful, I think I'm trying to say as I thought they would be in these first deals, in the sense that I think purchasing a home is much, much, much simpler than people make it out to be. It's really not complicated, you're buying a thing, and there's a process follow the process. It's really not complicated.   But at each step of that process, it's probably a, you know, 150, checklists, you know, process, but it's the same 150 items every time with the exception that each one of those can come with very slight variant, depending on the lender, depending on the insurance, depending on the state, depending on the property type, depending. So because that's such an enormous amount of information, it's not possible to capture all that. So even all the basics, that simple process of purchasing something, I understood the basics, right. And there's nothing that could have read or that we could have done differently that would have helped me, you know, learn or prepare for what I went through with these first two deals that were purchased solely for rental purposes. So…   Michael: Awesome. Nathan, I'm curious to, for you to share with everybody because I know you and I have talked at length about your investments and investing journey. But how did your maybe criteria change from what you thought you wanted your first investment property to look like to what you actually, I'm not gonna say settle down, but you actually purchased.   Nathan: The thing for me two things before I answered that, like specific investment criteria piece, I think it's part of it, right. But the the market aspect of real estate investment, I think, at least for us personally, for me, personally threw me off a little bit because almost regardless of where you read what podcasts you listen to what you watch online or whatnot, you know, I get the impression that everyone starts with find your market, and then just find your criteria and go and I was like, Well, okay, but how do I find my market? Right? It is easy to say find your market. So that bothered me a lot. I was like, how do I find my market? What does that mean? You start reading all these things, it's even worse, because now there's more input and more data to figure out what the market is. And again, this isn't hindsight, you know, 2020 type thing, but I'm almost willing to say the market actually doesn't matter at all pick one, you know, yes, there rule rules have you know, general guidelines, right, some are more appreciation, some are more pure cash flow. Sure. I also am willing to say if if I put extrapolate my situation to a lot of potential listeners this podcast right? I'm almost willing to say that for the most part, a large part of the large group of individuals that are you know, listening here are people that are looking for cash flow, not necessarily appreciation, right. So if you eliminate this all those markets, right, that are just pure appreciation plays, the market doesn't really matter, pick one, start to just understand how it works and then go so and that I know now, I didn't know that. And then it bothered me a whole time. I was like, Where Where do I go? Do I go here? Do I go there to go there? And that was pretty hard for me.   And now I'm like, actually, you know, I was stuck. But I'm not anymore. And I won't ever care really about the market. I know. It sounds very, there's a bit of hyperbole here. But yeah, so that was one. I think the other adjustment just to go back to your question around like property specifics, I accepted that or my wife and I, you know, accepted that this first purchase was not going to be more likely, I should say, not going to be you know, slam dunk home, run, whatever you want to call it, right? It's going to be what it is. And we start to view it as this is the cost of learning and practicing. So it won't maybe be all of the things that we're targeting, but we're going to gain from doing it. Right. That was one thing. And then the other thing, I think that, you know, our mindset got adjusted as well around is all of the things that one can read online or listen to in podcasts, or whatever it is, everybody talks about the flashy numbers, right? You know, I got 29% cash on cash, I, you know, I have $800, you know, free cash flow every month, so on and so forth. We actually don't really know what those numbers mean, and if they're even true, because yeah, you could say that part of the conservative or not they account for you know, reserves Do they not? So you really never really know. And it's very easy to get distracted by all these veterans of the industry that have, you know, crazy experience and crazy numbers.   And so, so if they got 800, you know, dollars free cash flow, you know, per month plus a 29% cash on cash, I should be able to find that right, maybe Sure, one day, but not for this first one. Right. And that's what changed a lot. And I mean, for us, I mean, typically I was prepping for the podcast, who was just looking at our numbers is purely looking at first deal cash on cash flow versus our second deal cash on cashing the first deal. cash on cash is around 7%. And our second is 17%.   Emil: Big difference. So what did you learn from the first one that you think helped in the second one, improve your cash on cash, which sounds like you had gone for?   Nathan: I don't know if there's anything specific that I learned between the first and the second, I think it was more about for the second deal, I knew the market better than the first deal. So the first one, I think I purchased the deal, without necessarily trying to understand everything else was I was, you know, early phase investors, I thought analyzing deals was the most important thing to do. So I spent a whole ton of time, you know, analyzing deals, analyzing deals, analyzing deals, found one that fits my criteria. So my wife and I like, yeah, cuz, Sure, let's go ahead, if it's our box, all that let's do it. And that was the extent of it. And our numbers worked. So happy, it's working all of that for the second property, I think it was more around, we've been monitoring this one market, and this one, you know, particular zip code of this one market and just looking at it every day. And then one day, I happened to see this listing, again, it was on roof stock, but I'm seeing them everywhere else, right. So it has nothing to do necessarily with the roof stock, you know, platform per se, because they happen, you know, Zillow, they happen everywhere. Those are places that we look at least right.   And because I knew what, you know, this typical type of home, you know, typically goes for in that zip code, I immediately saw that they had potential. So then we started looking into it a bit more, see what work it needed would make ready costs, we'd have to put in whether or not we wanted to do additional work to up the value a little bit. And it's because we knew, quote, the market, I still don't like to claim we know the markets. I think it takes many, many years. But we knew enough to be like there's something here. And then we weren't planning on purchasing anything at that point in time. But because there was something there. And then we started peeling the onion a little bit and we're like, oh, this thing is listed at 130 and the zestimates. You know, 165 and the last 90 day comparable sales are all 220. There's something here. So let's just go ahead and do it. And we pulled the trigger that way just because we knew the market and we weren't necessarily again, doing air quotes here. I don't know that we know the market yet. But getting there. I think that's the difference.   Michael: Yes. For everybody listening, go back, rewind, and listen to that last two and a half minutes. Again, what Nathan just said is like the epitome of what folks should be doing out there in order to pick up great deals. He knew what a good deal looked like only after having been in that market. Having done a decent deal. Now he identified what sounds like a great one. And I don't think he would have been able to identify that great one. Had you not done that first one, or had you not been spending the time to I don't like turn but I'm gonna say anyway, learn the market.   Nathan: Yep. 100%. For the first one, we bought a deal. We bought a property we bought a deal that we found on a marketplace, whereas the second one, we bought a solid investment and our first real I guess investment property that fits a process right that we're going to try to repeat and help grow from right instead of just shiny object syndrome looking all over every turnkey provider every this or that. Is that a deal? Yes. No, just picking one. We now know a lot more.   Michael: That's awesome. And how soon after you saw that property pop up the second one. Did you make an offer on it?   Nathan: I can't remember within 24 hours that I saw it because the only reason I say that because of the 24 hour open door Yeah, on RooFstock, right. So I know we were in that because I wanted us to be one of the first offers. So that's what we did. So we did pretty pretty quickly. It was, I think, maybe a couple hours of me just really doing my due diligence, you know, running it, you know, checking it with my wife and all that. And then we're like, yeah, we like this. Okay, let's go. Let's just go for it put in an offer. And that's how it happened.   Emil: Are you cool running through some of the details of your offer and everything?   Nathan: Yeah, yeah,   Emil: I think just giving people an idea of like, Alright, here's the list price, how did you do your due diligence? What did you submit it? Like? I think that kind of thinking is super, super valuable for people. So yeah, can you walk us through like, okay, you saw it listed? You said at 139?   Nathan: Yeah, so, you know, we're interested in single family rentals, single family residences, right. Typically, our kind of our, our criteria is, you're fairly standard Three, two, in a decent, you know, neighborhood slash School District, you know, we were looking for that fairly, you know, stereotypical, you know, trying to minimize any tenant turn, right. So, data opinions, all that say that, you know, three twos with potential for families, better school districts tend to have tendency to stay longer. So that was our, our starting point. So with that is when we started looking at the couple zip codes in this particular market that we invest in. And from looking at that, we saw that, you know, the standard price, you know, 160, 65 170,180, that's standard range for, you know, three twos this square footage in this particular zip code, primarily because of the good school district. And then we saw this one pop up, and I think it was listed at 139, I think we essentially went in at 131,935. And that was the Chris Voss never split the difference technique of just, you know, throwing out a very specific number that actually didn't mean anything to us, slower than the list price. And it was very specific. And there was a bit of back and forth with the sellers. I think we came up a bit, I can't remember exactly, but like 1000, or something like that, it didn't change much. Right. And that's, that's what we got it for us. I think we, we got it for 131 935 or something like that.   Right? Um, so that was the purchase price for 139 list price. To go back to a question you asked about due diligence and all that when I saw that list price for this particular property, that's when my alarm, you know, went off because like, that seems low for this type of house in this zip code. So I started looking into doing the due diligence, which started with kind of just inspection reports, right, all of the stuff that is provided to us online to the marketplace. And notice that there wasn't much to it. Right. So the OD seems like still a pretty good deal. It's not like it needs a new roof, a new foundation or anything like that. It's still seemed like that, you know, piqued my curiosity even more, it's like, Okay, great. It's not a ton of work, then I just, you know, and all this is within, you know, an hour or two of me seeing this thing pop up on on the marketplace. Right, check Zillow, you know, Zillow, first thing I see is Zillow estimate is already at 165. So 30,000 above, you know, the list price, or in this case that the purchase price. And then I went one step further, and I looked at, you know, comparable sales in that zip code over the last, you know, 90 days and even six months I looked in everything was at 2200 to 20. Above. So that was another one of those was like, Well, you know, even if we can't rent this, or even if our numbers don't work out, great, we have multiple exits, because it seems like these types of properties are flying off the shelf pretty quick, you know, given pandemic and all that that's I think, across the country, maybe across the globe, right.   But we're going in pretty low compared to what's been sold, you know, the similar homes in the last 90 to 60 days. So, we had that assurance, I guess,   Michael: And Nathan not to cut you off, but how did you look at comparable sales just for everybody listening?   Nathan: Yeah, so I you know, Zillow realtor Redfin, there's all of them we just happen to use Zillow because we know from previous primary residence, you know, transactions that Zillow is data, according to our realtor. So for what, what that's worth, right. But according to our realtor, Zillow data is more accurate to then you know, others, for example, such as why we're using sure as anyone, right, they're all more or less the same anyway.   Michael: And for those of you who aren't familiar, that's the yellow tab on Zillow, there's the red, which is for sale purple for red and yellow is pass previously sold. And so you can set the criteria just like you can on a filter for sale, you can see what's sold in the last 30, 60, 90 days, seven days in a given area. So I think that's what you're talking about. Right?   Nathan: Correct. Yeah. And we were even, you know, being very, very, you know, strict at first, like looking almost the exact same square footage, obviously the same number of rooms and bathrooms, right, same kind of year, same acreage, you know, kind of being as strict as possible. So they were really looking apples to apples and you know, a few things pop up. Sure. And that's where we see the numbers like, well, maybe this is not enough data, for it to be representative and for us to say yeah, this could potentially be resold for 220, whatever the comparables were, so that we just loosened that criteria a little bit, it's okay, let's look at your different square footage, different acreage, maybe, you know, wider range of your built sorry, right, and things like that, and everything still seem to kind of line up in those, those numbers, right. And that's essentially what we did. And at that point, we gained enough confidence that we should just go in and put in an offer, because at that point is like, we had actual data that showed many, many, many similar homes were sold for, you know, a certain, you know, price range over the last 90 days and over the last six months. So even if we were off by a factor of 10%, we're still not losing money. So we didn't have a reason to not do the deal. Basically,   Michael: That's so awesome. And what did the appraisal come back at? You recall?   Nathan: It came back at 135. So walked into it with a little bit of equity. And we're now just this morning actually was talking to the property manager on site there, but we're going to be doing a bit of work on the bathrooms, which need a bit of remodeling, and then that should hopefully, you know, up the property value, and the property manager there also, you know, is pretty confident we could get an additional 100 to $200 per month in rent, if we did do the bathrooms,   Michael: Wonder if the appraiser just didn't want to piss off the seller.   Nathan: That's what I thought when I saw the number. I mean, it's still equity. I'm not going to dismiss that. Right, right. But is it Yeah, you know, everything around here is going for way more. And this is like just a tad above the purchase price. But it is what it is.   Nathan: I've been seeing that and in stuff I've been buying as well. Like they're basically just doing it at the lowest price. It's funny because they pull comps and all the comps are way higher, but then they just go to the list price when they give their appraisals. I don't know if it's something to just protect them right now.   Michael: It's safer that way.   Emil: Exactly.   Nathan: It was the case on our first property as well. It came back literally $500 above the appraisal came back $500 above project price.   Michael: Yeah, yeah, exactly.   The fact that you're seeing things sell for way more. I mean, to me, that's more indicative than these funky appraisals, you asked me?   Michael: Absolutely. And if you went to sell it and the appraisal came back still low. I mean, you'd have pretty good justification to go and say, Look at absolutely your comps are garbage. Like these are the comps you should be using. Yep, Don't feel shy or bad about challenging appraisals, everybody out there was saying it can totally be done.   Nathan: Yeah. And that's something that, you know, while I've never done it, and while we understand that you can challenge an appraisal, right, and it's the know how to say this is the the formal or official way to get the value of a property for, you know, a lender for lending purposes, right. At the end of the day, it's what people are paying for the object. And that's the data that we could get from Zillow, so we know what people be willing to pay for it. So if we had to go in and challenge, we're pretty confident that we could probably get a successful exit from the challenge.   Michael: Right. And at the end of the day, for you on the purchase, it doesn't really matter, because the lender is only going to give you 80% of the loan to value or of the purchase price. And it's the lesser of the two correct even if appraised for 200. They're not going to increase your loan amount because of that.   Nathan: No, no, no, absolutely. But for us, because we knew all of this. Another reason why we wanted to, you know, pull the trigger on this particular property and do the work on it now to increase its value as much as we possibly can is to set ourselves up for doing a cash out refi as six months or a year, whatever it takes, right but because we already know there's that, you know, upside potential is another reason why no longer view thinking like even if this is not perfect. While So far everything is the numbers are and all of that we're like, it also gives us the opportunity to potentially pull out $30,000 in six months, a year, whatever it is, and buy another property. Right. So it's like maybe this is a two for one who knows.   Michael: Perfect, perfect.   Nathan: And that that was our thinking. So it was like all these Yeah, this seems like a pretty good deal. And you know, knock on wood so far it is.   Michael: Awesome.   Emil: Nathan, why do you think the you know if the comps and everything were 160? And then some 200? Plus? Yeah, this is something I always battle, I'm sure you always think it's like, why is the seller selling for so low? What are they not telling me? So? What was your thinking behind that?   Nathan: I try to not think like that, because that's a pretty rabbit hole rat hole, whichever the expression is, right? Who knows? Nobody knows. Right? It's impossible to know what the motivation of any given buyer or seller is. Right?   Emil: And when you ask, they never tell you the real rate, like you can ask but it's not.   Nathan: Yeah, they won't tell you they don't tell the listing agent, your agent when you're purchasing doesn't know either all of that. In this particular case, what I did also notice in doing our due diligence is the former at the time there were current Of course, but now the former owners of this property had not paid their property taxes in two years. So whether or not that means something I don't know, I kind of interpreted as there's a smell here. You know, maybe it's a seller in some sort of financial distress that, you know, that has been paid. There was also a if I remember correctly, I believe they had a tenant in the unit or in the property for two months. So sign a lease tenant moved in two months later tenant moves out. So those kind of two things right or wrong. I had no idea. I still have no idea, right? But it's like, yeah, there's a few smells here. bad smells, but bad in the sense opportunity, right? Bad for the seller. Good for us the buyers thing, maybe there's something so we'll try. And that's what we did. And we got that properties. hopefully everything will pan out as planned.   Michael: And Nathan, what's the rents on that? Are you estimated rent from your property manager on that property?   Nathan: So if we were to move someone into the property today, without doing any bathroom remodel, it would be between 14 and 1500 a month. With the bathroom remodel? It's somewhere between 16 and 1700. a month.   Michael: Love it. So when people say, Oh, you can't find any 1% properties out there. I think Nay, say you found it, as is added 1%. And you're gonna add some value and hopefully create a 1.2 1.3.   Nathan: Yeah, so our first property was a spot on 1%. The second one hopefully will result in more than that. And in fact, speaking of 1%, right, that is a rule of thumb that has helped us and helped me tremendously in kind of identifying your quickly identifying, should I spend more time investigating, investigating or analyzing sorry, this property or not? Because it pans out? It's pretty accurate as a first pass to see whether or not a property at least for our criteria, it's pretty, pretty close. Right? So you're like, Yeah, that's a good rule of thumb, just like look 1% if it's not then move on? Yep. Move on. Right.   Michael: Yeah. Yeah, we did an episode about that. How ironclad are are the rules, 1% 2% 50% 70% rule. And for in a lot of markets, the 1% rule for a lot of investors is pretty, pretty accurate.   Nathan: It's accurate enough to shorten the list and then say, if it's, you know, point nine and not 1%. Well, you know, what, if everything else lines up, I'm just gonna put in an offer and see if I can get it for lower and make it a one percenter, right? Or something like that.   Michael: That's it, oftentimes, it's not going to be off the shelf on percent, we can force it to be whether increasing the rent or lowering the purchase price, doing something to reduce our expenses on the property. So that we're kind of going to cram it into a 1% box, or 1% plus box, I always talk about my the best performing property, I own and I bought it like a point eight 2% rent to price ratio. But the seller had done several things that reduced a lot of the maintenance costs on a regular basis. And then also the rents were way under market. So when we combine those two things, it turned into like a 1.3% property almost overnight.   Emil: Nathan, which market? Did you buy these properties? I don't think we've touched on it yet.   Nathan: No, we didn't say I don't think so the first one is right outside of Chicago on the Indiana side of the border. Okay. And this second one that we've been talking about is in St. Louis, Missouri.   Emil: Nice.   Michael: Awesome. And so I kind of want to shift gears here a little bit. Before we started recording, you were telling us that you're in the process of moving out of your current primary, buying a new one and converting it to a rental. Right?   Nathan: Correct. So if all goes well, last day of the contingency on the potential new primary residence is today. So we're actually I was speaking to our agents before hopping on the podcast, get our counter in place, I guess. So we'll we'll know in a couple hours.   Michael: Yeah. Awesome. Awesome. So I'm curious to know, when you bought your current primary that you're in now, did you ever think that you'd be moving out and converting it into a rental?   Nathan: Yeah, we did simply because our current primary now is a condo kind of downtown San Francisco. That's where we're located. We were about to have our first child when we purchased, we now have two young children. And we knew like a two bedroom, one bath condo, downtown San Francisco was never going to be in the long term plans. And we knew, obviously, we didn't know about COVID. And that has changed everything. Right. But we knew that when we were purchasing this condo, primary residence in the neighborhood where, you know, the chase arena was being built up, you know, two blocks away. baseball stadiums two blocks away a bunch of you know, commercial and residential construction projects around us Uber headquarters close to us. So there's all these indicators. They're like, yeah, we're gonna do this so that we can hold on to it, and then rent it when we move out. So that was one way to say yes, yeah.   Michael: And so were you looking at the number like did you get so granular as to look at the numbers of Okay, this is our mortgage payment is we think we can get on it for rent and thinking about it or just, yeah, we'll convert it to a rental one day and worry about when we get to it?   Nathan: So when we're purchasing it was not how we looked at the particular purchase. It was another one of those where which I think we're I guess we're fortunate. It's the same with this particular primary that we're in contract on Now that may close early January. We were not back then in a position where we absolutely needed to move and needed to buy something. So we were shopping, we're being shoppers, not buyers. And we're just shopping around. And again, just doing the leveraging the people aspect of real estate, just talking to the listing agent and listening to what this individual was really saying, there might be an opportunity here. So we just went in lowball, which was unheard of, for the Bay Area, you know, three years ago, because everything was going three, five, I don't 10% even potentially, I have no idea above, you know, asking. And we went 7% below, asking, I think so it just happened to be a good deal. Because we, I mean, all things relative, right, it was a good deal for the Bay Area, because of, you know, US listening to what the listing agent was really saying. And it just meant a lot of things we can get into that if we have time and want to write, but I think that in addition to us, when we started thinking about purchasing a new primary residence, we're like, if we're going to rent this out, we got to make sure the numbers work.   So that's when we started doing the numbers game a bit more, but just quickly led us to that plus, you know, lowest mortgage rates they've ever been in history, right. Okay, but refi, lower monthly rate, so that we're just buying ourselves in a sense, this extra buffer for whatever we may end up renting it at. Right. And obviously, you know, rents in cities like San Francisco, New York, and other larger vertical cities like this, you know, have taken quite a dive since the pandemic, right. But if we were to rent it today, with the hope and expectation that things will eventually go back to normal, we would still break even and not lose money. Right. So I think that's only possible because we bought them low. Right, or we bought the property came in low. So that's where we bought the deal. Right. Or we came into the deal, I guess, I should say, and because we refied.   Michael: Yeah, yeah, perfect. It's such a unique time to be having primary refinances going on, because the rates are just like you said, unbelievably low. And so if this is something people are thinking about converting their primary into a rental, or maybe they're even not thinking about it, I would definitely evaluate it with these new numbers of, hey, if I did a refi, on my primary, could I convert it to a rental? And then have it make sense, because especially in a lot of those expensive homes, it might not make sense at your three and a half or 4%? Current mortgage, but at two and three quarters, or two and a half? Maybe it does. So I think it's it's great that you played with the numbers and great that you're able to make it work.   Nathan: Yeah. And again, hopefully, you know, we'll see that's the plan. You know, again, there's a lot of uncertainty, you know, understandably, with, you know, the pandemic and whatnot. And that's a big, unknown. Yeah, but we've done everything we can, that is in our control to secure the situation, I guess, for lack of a better term to make it not turn into a sink, money sink, right. But instead, you know, at least break even and maybe even, you know, some positive cash flow monthly, right?   Michael: Yeah. All right. We got to keep us posted on that one, too. Of course. Emil got anything else?   Emil: Yeah, before we wrap up curious what the future holds for you. What's next for you guys?   Nathan: So right now, obviously, and understandably, right, we're in the middle of this primary purchase, hopefully, that'll go go through, right. And if it does, we have quite a bit of work that we're planning on doing to the place, you know, right off the bat. So that's going to take up quite a bit of time. But once once we're past that, we'll have a clear picture of where we stand kind of financially and whatnot. And the plan is to go in and get at least four more rental properties in 2021, probably even more, you know, we've also started talking to different individuals to partner and get some additional deals that way needing less cash up front, just because we're, you know, partnering with other folks. So scaling, I guess, the short answer to your question Emil.   Emil: Nice.   Michael: And scaling in the same markets already enter and venturing out into new ones.   Nathan: No seeing the same market. I think that, you know, if one thing that I appreciate more now than even six or seven months ago, is I feel like most of the work and effort is put in or should be put in understanding the market, as we talked about, and building the team, you know, the people, they're local to that market, because that takes more time and energy to identify those things, then analyzing a deal does. analyzing a deal is easy, but if it's in a new market every time and then you have to spend, you know, an order of magnitude more hours, understanding that market, building the team, finding the people all that it just is counter skill productive, right? So.   Michael: Sure. All right. So.   Emil: I agree with you.   Michael: Yeah, me too. Me too. Having done it both ways. I definitely prefer going deep on a particular market. Yes. Okay. So two final things, Nick, before we get out of here one, what would you like to say to everybody listening out there that's was in his in your shoes six months ago, is doing research wants to get involved in real estate investing, but hasn't taken that first step yet? What do you recommend they do? What would you say to them?   Nathan: Yeah, I think you know, we touched on a lot of them already. Right. The market thing is a big one building the team. You know, good people, no good people. I think everything that has happened to us so far in terms of investment, especially for like, the second deal, it's turning out to be, you know, much better than the first is because of the people because the lender was referred to us because the property manager was referred to us because they knew the insurance broker and all that. And that was very little work to get to identify those people in that team Once you've found the first that are starting to refer individuals. And that that is hugely important. I guess the other thing as well, that helped us on all deals is just to ask people for what you want, basically, because in both cases, I think we couldn't get the numbers to be where we wanted them to be. So we just called our lender and the property manager says, Hey, this doesn't work for us. Here's what we're looking at. Is there any wiggle room? And for both properties? In all cases, like Yeah, sure. There you go. Here's what we could do. I was like, okay, and if I hadn't asked, then I would have probably passed. Right. So yeah, just asking the questions. I guess.   Michael: That's such a good takeaway, because I think so many people hear something and think, okay, that's what it is. And never think to ask because they might not know that there is any wiggle room. But I think that's a that's a really good takeaway is just Hey, ask the question, What I can say is no, and You're no better you're no worse off than you were previously. I guess the other thing that catch people off guard, or at least you caught me off guard with there's a lot of you know, planning tools, gurus, whatever that talk about, yeah, $100,000 home, all you need is $20,000. Right? Well, that's not really true, right? Because once you've added the, you know, closing costs, once you add your reserves, if you want to put money aside and all that, it's really closer to 30,000. So, you know, make sure you have that money set aside, right. And you're not going into every deal thing. Oh, all I need is 20%. I'll share for the down payment. And then there's all this other stuff, right? So the liquidities You know, one needs to have and it's more than just the down payment and that can be a surprise. If not, if not prepared.   Emil: Really good point.   Michael: Good point. Good point. All right. So Nathan, when the pandemic is over, where are you gonna go get your first meal when you eat out?   Nathan: I don't know. We cook a lot. I don't know. I think simple. A beer garden. Outdoors people. Yeah.   Michael: The bare necessities. Sounds awesome. Yeah. Anywhere where there's people.   Nathan: Yeah, and yeah, and contact and exchange. And yeah, I think I think that would be it.   Michael: Right on.   Emil: At the beginning of this, I felt some I feel like I was so introverted. Like I'm primarily an introvert to be an extrovert when I need to, but like now I'm just like, all I want to do is hang out with people all the time. You miss it, you miss it a lot. You take it for granted.   Nathan: We are social beings.  Right?   Emil: Yeah. Yeah, really take you for granted. I don't know maybe some introverts out there like this is the greatest the best.   Michael: That's great. Well, Nathan, thank you again, for hanging out with us and sharing your story. I hope I think there was a lot of really great stuff in there. You've been through a lot seen a lot that a lot. So thank you again for sharing. I look forward to seeing you and hearing updates from you as you continue on your journey.   Nathan: Absolutely. Um, thank you guys very much. Appreciate the time.   Michael: Already, everybody. That was our episode a big big, big thank you to Nathan for coming on sharing his story with us really looking forward to following up with him on how his scaling goes and how the purchase of his primary goes that he should be hearing back on today. If you liked the episode, please feel free to give us a rating or review. Wherever it is you listen to your podcasts. And as always, if there's anything in particular you want to hear us cover on episode, leave us a comment in the comments section. We look forward to seeing you on the next one. Happy investing.   Emil: Happy investing.