[0:00:14.0] MF: Welcome to the InvestFourMore Real Estate Podcast. My name is Mark Ferguson and I am your host. I am an active real estate investor. I flip 15 to 30 houses a year. I've got residential and commercial rental properties. I’m an agent with nine people on my real estate team who sold thousands of houses over the years, and I talk about what's going on in my career as well as interview other amazing agents, investors, landlords, flippers, wholesalers and companies who can help those people succeed. I want to give a quick shout out to my sponsor, Patch of Land. They funded a flip for me in six days. I emailed them on a Sunday afternoon. They responded in less than 15 minutes. They have rates below 8%, work in 45 states, will fund 85% of the deal and fund the repairs as well. Great company, who I love working with, Patch of Land.
For my podcast listeners, I've a special discount page for my products, investfourmore.com\discount. That's investfourmore.com\discount. We’ve got coupons on all my coaching programs. Some of those programs involve calls with me, consulting, video training, and much, much more. All right, let's get to the show.
[0:01:47.4] MF: Hey, we’re back with another episode. This week’s episode, we’ve got a great guest, Jason Downing, who is a real estate investor from Michigan. Also recently became an agent. So I’m really interested to hear Jason’s story on how he got into investing in real estate, getting his license. He’s gone down a path, I think, a lot of people would love to do. So I’m really excited to talk to him. He’s also a follower of InvestFourMore, my podcast, of course that is nice as well and give heads up in my book. But, Jason, thanks so much for being on the show. How are you?
[0:02:21.3] JD: Hey, Mark. I’m doing good. Thanks for the opportunity. I’m looking forward to it.
[0:02:23.0] MF: No! I appreciate you being on, and I’m looking forward to talking with you as well. As you know, you listen to my podcast, but I always like to start with how people first got into real estate. I mean, can you start what piqued your interest in the very beginning about the business?
[0:02:37.2] JD: Yeah. I think it kind of stems from what I do currently. I’ve worked from the fitness field and continue to do so for almost 10 years and I can kind of figured out early on that my income was directly reflective of how many hours I work in that field, as a personal trainer. There’s no — You can expect this raise every year, like some corporate jobs. Even though there was a bonus structure, you can kind of see your earning potential kind of becoming capped, from you, it’s kind of at a young age.
So I started looking at different avenues. I’ve always been interested in real estate. I didn’t have anybody close to me that was doing it, and kind of like we had talked and I stumbled across a very popular website. So I got involved in that and stumbled across some of your posts several years ago and kind of got funneled towards your website and some others and started diving in more into it as a way to, kind of like I said, supplement my income. I’m really glad I did. I didn’t think like everybody, I wish I started sooner. But I had some changes in my work that maybe we’ll talk about coming up, that really set me up with a better kind of living situation than I would have been had I not pursued real estate when I did.
Yeah, just kind of seeing the cap or the earning cap that I was kind of looking towards with my current job was what ultimately got me at least exploring the real estate opportunities.
[0:03:57.8] MF: How long do you think it took you from the time you first started getting into the real estate until you actually bought your first property?
[0:04:04.4] JD: Yeah. Probably it would be less than a year. I mean, I dove in pretty hard right when I started getting a little more knowledge about it and kind of could see what the possibilities were. That’s exciting. So I was doing more and more and reading as much as I could. My wife is a big reader, and actually when we went into our honeymoon I can remember her reading whatever book she was reading at the time, and I was reading like this real estate investing book on our honeymoon and I was ready to go.
Within probably — Yeah, shortly after that, maybe six months after that, we’ve bought our first property. I didn’t get the paralysis analysis necessarily. I tried to learn as much as I could, but knew fully well that there is no way I was going to be able to grasp everything until I just kind of jumped in and tried it.
[0:04:46.6] MF: No. That’s great. That’s really pretty quick for most — That’s faster than I took. I was an agent and in the business already. So that’s fantastic. What do you think were some of the most important things that you did to get involved so quickly? Was it like talking to a lender, just learning your market? What were some of the most important things that helped pushed you along?
[0:05:05.7] JD: Yeah. We had explored the option for a little longer than six months, I guess, because it did take me — It took me a while to save up some money too. I think that’s the biggest barrier for some people. You can get in without a huge investment, but you still have to have some of that capital to start with. So that was step one. Then obviously getting approved or talking to some lenders. I worked with an agent initially that I had kind of a relationship with through my job. That helped, and she started showing us some houses. She showed me a lot of stuff that I wouldn’t have thought of otherwise as far as what to think of as an investor, even though I don’t think she worked with a whole lot of them, but she showed me some things to take into account, getting set up with a good agent. Then she knew some lenders, then once we closed on our first property, when I needed some contractors and some concrete work done, she was a resource initially for that and then that kind of just expanded from there.
[0:05:59.2] MF: No. That’s fantastic, and I think — would you say she had — ;like was a super busy agent or maybe moderately busy. Did she have time to really work with you and help you out in the process?
[0:06:09.9] JD: She is a busy agent, and at the price point I was looking at, I didn’t realize it at the time. I guess it makes more sense to me now that my wife is an agent and I’m getting into that. It was a lot less that I’m sure she used to look in that and she did a great job kind of helping us along the way and never showed that she was too busy for us. I tried to do a lot of the up front work myself too so that I didn’t rely on her for everything. So I tried to analyze the deal and see if it even made sense before I dragged her out to the house.
At the time when we bought the first one, things weren’t moving quite as quickly as they were. So it took me a day, or a day and a half, or two days to actually get into the house once I realized maybe this is a good investment. It wasn’t gone. Where as now, I mean, you got to get out to the same day it seems like. So it was a little bit of both. She helps out quite a bit, but she was busy with kind of bigger fish at the same time but helped us out all the same.
[0:07:03.4] MF: No. That’s great. I just asked that question because sometimes I think having an agent who has time for you is often more important than being super experienced. But it sounds like you got the best of both worlds, which is awesome.
[0:07:15.3] JD: Yeah, we got lucky for sure.
[0:07:16.5] MF: Oh, that’s great. Then I think you said a really important thing too as well about doing leg work, analyzing your own deals. It’s so important when you’re looking at rentals or flips or whatever it is that you know yourself if it’s a good deal, because 90% of agents aren’t going to know if it’s a good deal even if they are helping you. You just want to make sure that you’re the one who knows if the numbers work, if the deal works. It’s great to have an agent who can help, but really, yeah, if you can do that yourself, you’re going to be so much better off in the long run.
[0:07:46.0] JD: Yeah, and I think we did run into that. But I think how I was looking at deals and how she was or how other agent I’ve talked to since then do. I think it was definitely different. I think as an investor you have a better understanding of all the expenses that go into it or could potentially go into it. Deferred maintenance on certain houses and things beyond just looking at, “Oh, yeah. This is hvac system looks somewhat recent.” She didn’t dive into the numbers a whole lot, and I think that was more of, “Your rent it this, your mortgage is this, you should have X-amount dollars left,” and not really accounting for everything else. She helps us a ton, but I’m glad I knew enough at the time to kind of calculate my own expenses or projected expenses so I had an idea of what realistically we could see as a return on that house.
[0:08:32.2] MF: Yeah. No. Great point. I also see the same thing with many agents. They’ll tell you can flip a house and they don’t calculate the selling cost or the carrying cost or all kinds of stuff. Yeah, it’s very important you can do that yourself. Tell me a little bit, what was the first property that you bought like?
[0:08:49.7] JD: So it’s an up-down duplex. In the area I invest in, all of these houses are, I mean, early 1900s houses. So not new by any means, but up-down duplex and pretty nice area of town, I would working class area. When I first started looking, it was because of the limited money I had saved. It was largely driven by price, and it took me a couple of houses to figure out that probably wasn’t the best qualifying thing to look at this house and say, “Oh, this is a cheap house. I can afford this,” because we saw a lot of bad houses. Initially, in this one that we got though, it says the duplex is fully rented out. They had just increased rent on one tenant and once we got the tenants that were in place, we’re pretty good, and over time or the first two summer actually that we owned it, we redid both apartments during turnover and we had kind of set aside money for that. We got both of them remodeled and some other projects done around the house and just recently did a refi on that. Obviously, the timing of the market was great. We’ve had a lot of appreciation with that. So we’re able to pull out all of our initial money, all of our initial capital, all the costs, the improvements and a little bit more that we are looking to put in to the next deal. So we did pretty well on that first one for not knowing exactly what we’re doing.
[0:10:06.7] MF: No. That’s great. Do you mind telling us what you paid for and what it rented for?
[0:10:11.1] JD: Yeah. I paid $62,000 for it and it was listed, I think, at 69, something like that. Paid 62 and at the time it was just been bumped from 550 to 600 in the upstairs and it was renting for 650 on the downstairs. That was the summer of 2014, so not that long ago — Or 13. Since then, as I said, we dig both up and down. It now rents for 840 and 800 a month, between those two. When we did the refi, it appraised at 129. So, I mean, it went up with the stuff that we had done, but appraised for double what we paid for and we’re able to, like I said, get all that money back out as a result.
[0:10:53.3] MF: No. That’s awesome. You said it was listed for 69. Do you still think that was a pretty good deal at that time or is that what most properties were selling for?
[0:11:00.7] JD: It seemed like a lot of the stuff that we were looking at was around there. I think I had seen a lot that were listed at 70 or right in that area that were way more shaped than the one that we got. So from that standpoint, I thought it was a pretty good deal once we went into it. It didn’t have, in Michigan, basements or something, especially houses that old. Foundations and basements are something that I look at, and this one doesn’t [inaudible 0:11:22.2] foundation doesn’t have. So any basement [inaudible 0:11:25.7] leaking necessarily. All the mechanicals are in the unit. I kind of liked that compared to some of the other ones that I had seen. Really, as far as what was needed immediately was a lot of new flooring paint, fixtures, things like that. It was not any huge ticket items. So for those few reasons I felt like that was a pretty good deal. I don’t even remember how we got the 62. I think that’s just what our agent said, “Well start here,” and we might have even started at 60 and finished on 62, something like that, but those duplex now in that area for something very similar, it’s really hard to find one under a hundred right now, if you do, you’re going to be looking at something the same, some deferred maintenance that you’re looking at, some upgrading that needs to be done. So for just four years, I think we got a pretty good deal.
[0:12:06.6] MF: Right, and there still have great numbers for the rent versus what you’re paying for.
[0:12:11.0] JD: Yeah, absolutely.
[0:12:12.9] MF: That’s a great market. How did your investing progress after buying that first one?
[0:12:17.3] JD: Yeah. So people I come in contact with, I said I’m a trainer at a gym, so I have contact with a lot of people throughout the day. A guy that I had trained for quite a while knew what I was doing, that I was investing and that I was looking for more. He texted me one Saturday and said he owns a small business. So there was a woman that was in his store and just a conversation they had. She was looking to sell some properties she owns, because her son was taking care of him or something along those lines. So he got her information for me and texted me the number and I called her that same afternoon and we kind of went from there.
She had two duplexes and a three unit she was looking to sell, and after talking with her and going and seeing the properties I was able to get one of the duplexes and the three units. She worked out a land contract or something like that with a tenant that she had in the other duplex. So I tried to get that one as well, but that one was kind of already progressing a little bit. So the next five units through that off market from this older woman who was just ready to retire and be done with it.
[0:13:14.2] MF: Awesome. No. It never hurts to network. That’s for sure. I’ve gotten quite a few deals myself from networking and you never know who or what people know.
[0:13:22.8] JD: Absolutely. I think that’s a testament to that for just letting people know what you’re doing, because you never know where that leads. One of those things, I forgot what it’s called, but it’s like when you buy a yellow car, then you see yellow cars all over the place. Once I got involved in investing and telling people and actually looking for more properties and things like that, it seems like then I would start hearing conversations at the gym or at the store like, “Oh, yeah. This duplex I’m looking to sell, or this four unit that my neighbor is looking to get rid of.” It just seems like you’re attracted to that conversation or you pick that up more. So I think letting people know what you’re doing, what you’re looking for can only help in the long run.
[0:13:57.5] MF: Right, for sure. Tell us, how many more properties have you bought along the way? How has real estate affected your life?
[0:14:04.3] JD: Yeah. So kind of back to the work thing, when I got started in investing and, like I said, about the income and feeling it was kind of capped. During that same time I kind of had a little bit of a job scare at work where I was in a management position, and even though I’m largely commissioned, I had a little bit of a salary that went along with that. One day I came in and heard from a coworker that they’re going to get rid of that position, so that salary was going to be gone, so my pay was going to be cut by a third or, if not more. That was pretty nerving for me. We’re getting ready to get married and things like that.
I end up working out where there was another position that opened up and I kind of slid into that, same salary, things like that, but once I got the 7 units up and running, which is what we have currently. Right after we’re on a contract for those five units that were off market, they did get rid of that new management position that I was then in and they gave me — At least this time they gave me a heads up, but it worked out almost perfect. The cash flow from those properties almost matched just to a little bit more than I was getting paid from a salary position. So I had not pursued this a couple of years prior, had I not taken action on what I thought might help our financial situation, then I would have been in a really tough spot. Having, at that point, I was married and had a young kid at home and instead of feeling that effect of losing a big part of your income, I was in an okay enough position because of the passive income we were getting from our properties to kind of weather that.
Always looking to grow and to add properties, we’re still putting bids on properties all the time. But it’s really hard — and like in a lot of markets, it’s hard right now for us to get anything under contract, on a lot of properties that we thought made sense. So we’re always looking to grow, but I’m not going to just jump in to a property right now because I’m getting the itch, which I am. But I want to make sure that it obviously makes sense, long term.
[0:15:54.0] MF: No. That makes a lot of sense, because, I mean, I stopped buying from the middle of 2015 all the way to 2017, I didn’t buy any rentals, because prices were too high. It didn’t have cash flow. It just didn’t make sense. I found myself pushing the envelope buying stuff that didn’t quite meet my criteria and I’m like, “I need to reevaluate what I’m doing,” and then, of course, found commercial stuff. But no, I know exactly what you mean as far as finding those deals and cash flow. It’s much tougher now in most markets than it was a few years ago.
[0:16:21.4] JD: Yeah. Last year we’re looking at a lot of properties, but we had just a ton of capital expenses last year that necessarily we couldn’t have saw coming, but having them all doing the same — It was almost like a six months period, like water heaters, furnaces, bed bugs, roofs. You name it. We had to take care of it last year. So from a capital standpoint, that really hurt a little bit for most of 2017, but we’ve got everything pretty stabilized now and all those big ticket items taken care of. Really looking to — We’ve looked at a couple of properties already in 2018 and put some offers and just looking to turn that around a little bit this year.
[0:16:58.2] MF: No. That’s great. You mentioned too that you’ve got your real estate license now right as well.
[0:17:03.1] JD: Yes. My wife is an agent and it seemed like a great progression for me to be involved to help her out but also be involved with being able go out to properties myself and being able to network with other agents and landlords and potential sellers and things like that. So I’m getting into it the last couple of months. I’m working with a couple out of state investors. They’re looking to purchase in the West Michigan area, but it’s on a bunch of different lists; Forbes list, and this, and that about best places to raise a family and invest. I’ve been in contact with a couple. I’m helping a couple of people, like I said, try to get into the market. That’s fun.
I don’t see myself using it as a high volume agent necessarily. I want to use it to help other people, to help us grow our business and maybe as another revenue stream. But I like the helping component more than relying on being an agent to feed my family and pay my bills, I guess. Yeah, I’m just starting out and kind of getting a feel for what that might look like long term, but I’m enjoying it so far.
[0:18:07.1] MF: No. That’s great. I have a question too. I know you’ve worked with another agent before when buying your properties and it doesn’t sound like you’ve bought any properties yet since you’ve had your license. But how different is the process? Is it much easier now that you have your license to look at properties to make offers?
[0:18:23.6] JD: Yeah. I mean, I was having my wife do a little bit of it, but I can do it all on my own pretty quickly now. Obviously, MLS access is nice. Being able to go — If I’m in town or the area that we invest in, then I can get in and see a house without having to coordinate it with anybody else. That’s pretty nice.
I think maybe the amount, potentially save on maybe a sales price if you’re not claiming a commission. I don’t know big of a deciding factor that is for some people. So far, what I’ve done, I like being able to have a little bit more control than relying on somebody else even if it was my wife or another agent that we trust and did a great job. It’s just nice to be able to do that if you choose and decide how much you utilize that license.
[0:19:06.3] MF: No. That makes sense. One thing I’ve always done since I’m an agent as well and buy a lot of properties and sell a lot of properties. Once in a while, in the past, I would kind of reduce my commission and lower the price. But it usually — sometimes it confuses the sellers. They don’t quite understand what’s going on, and I found it was just easier just to leave my commission the same and just offer more money assuming I would get that money back in cash.
The other nice thing about that too is I get more cash out on the deal that way, because I can finance it based on the higher price, but then I’m getting cash back as the agent. So it actually reduces how much money you have into the deal.
[0:19:44.5] JD: Yeah, that’s a great tip. I could see how that could be confusing for the potential sellers, I think. Yeah, just taking that cash back is a great point.
[0:19:52.8] MF: Right. Sometimes, depending on what kind of deal you’re doing, you might have to pay taxes on that as earned income versus the investment property side paying less. Maybe you pay a little bit more taxes. To me, the ease of the deal in the cash back is well worth the little extra in taxes you pay.
[0:20:10.0] JD: Yeah, absolutely.
[0:20:10.9] MF: What big goals do you have for the future right now? I mean, do you have a certain amount of properties you want to buy, or what’s your next year or two look like?
[0:20:19.9] JD: Yeah. We want to continue to grow. I don’t have — It’s funny how that changes when we first got started. A little extra money seemed like a great idea per month and thought maybe we could throw it at kids college fund and things like that or maybe we’d pay it off quickly and then sell it. Now that I’m more involved and, I guess, more knowledgeable with different strategies. I have zero interest in selling any of our properties at this point.
But the close goal is to try to replace my income, and I think we’re pretty close to being comfortable — If I were to lose my job for some reason, being able to at least cover that part of our income. So we’re close to that. I think 5 years we would like to be at that position for both of us and continue to grow. I have a dollar amount in mind if that take me 10 more doors or 20 more doors. I’d like to get there with, I guess, less inventory, of less potential headaches. Good cash flowing properties. But the ultimate goal is to be able to work because we wanted to and not because we have to, which I think is a lot of people’s — One of their driving forces for getting into real estate anyway.
I don’t have — I don’t desire to be a huge high volume agent necessarily, and I don’t have a huge desire to own 10,000 units, but enough to have some free time and do what it is that I want to do when I want to do it and be able to not have to stress about being at a job for a set time or anything like that, I think is the long term goal.
[0:21:43.1] MF: Cool. No. Very good. Kind of that financial freedom number where you can replace — You can pay all your expenses, everything you want to do without having to work. But then if you want to work, hey, that’s just bonus on top of it.
[0:21:54.8] JD: Absolutely.
[0:21:56.5] MF: Very cool. I think those are all the questions I had. I know you’ve got some other things going on. Anything else you want to add, tell us about that’s going on in your investing world?
[0:22:05.6] JD: No. It’s a little bit different from some of the guests on your podcast. I haven’t done a thousand deals or anything like that. But I think I came from a place where I wasn’t making six figures a year and I was able to get started and roll on that cash flow along with savings. I was able to get into more properties. I think sometimes, at least from my standpoint when I’m listening to some podcasts, you see people that are doing hundreds of wholesale deals a year and 20 flips and they’re selling x-amount of houses. It seems overwhelming from someone who is starting out or at least the position that I was in.
Hopefully people can gather a little bit of — someone who wasn’t making a bunch of money was able to do this and how we’ve done it and how we plan to continue to grow and just recycle that cash flow as best as we can into properties. I love talking about it, so if anybody that listens wants to chat, and I don’t claim to know everything obviously, but I’ve started from not a whole lot and try to grow it as organically as we can without a bunch of private money or stuff at our disposal. I’m always more than happy to help somebody if I can.
[0:23:09.3] MF: Cool. What’s the best way for people to contact you?
[0:23:12.6] JD: Yeah. We’re Downing Properties on Facebook and Instagram, and [email protected] is my email and those are all pretty easy ways. I’m also on Bigger Pockets, and those are all pretty easy ways to contact me and ways I check regularly to communicate with anybody who looks to learn more.
[0:23:31.8] MF: Cool. That’s awesome. You made a really good point about, on my podcast too, we’ve had a mix of different people, but when you have someone who’s bought a thousand units or, like you said, is wholesaling 20 deals a month, it’s tough to say, “Okay. I’ve never done a deal in my life. I don’t know how much it helps me to learn how to wholesale 20 houses a month or buy a thousand unit apartment building,” whereas if you can just start with, “Hey, this is how I bought one property. This is how I got started with making $500 a month, not like $50,000 a month.” That’s really helpful for people.
[0:24:06.3] JD: Yeah. I think sometimes it can deter people. It feels overwhelming if you see somebody that’s there and you’re not really sure the intermediate steps to take to get going. So I think I always found value and still do listen to those podcasts of people that are a little bit more relatable to either my situation or where I want to be that seems more short term, short term goals, can kind of keep the process moving. Hopefully I was able to relate out a little bit today.
[0:24:34.4] MF: No. Great information. Actually, it reminds me, it was probably a year and a half, two years ago, we did a string of podcasts with guests similar to yourself where we kind of — they’re up and coming investors or had done investing for just a couple of years. We talked to them and found their story and the plan was to follow up with and see how they did, and we never did do that. I need to go check into that and maybe reach back and talk to some of those investors and see how they’ve done and maybe revisit their lives.
[0:25:02.3] JD: Yeah, I think that’d be great. Especially someone who’s been listening to your podcast for a while, so maybe this is self-fulfilling for myself, but to hear where they’re at and if they’re still doing it, first of all, or how they’ve grown or what struggles they’ve had, I think those types of episodes are pretty relatable for people, again, kind of starting out new to it or early into their career and kind of how they can take that information and progress with it.
[0:25:26.9] MF: Yeah. No. Great information. One last point is just time goes so fast. So for people who look at investing and think, “Oh, man! It took two years or three years to get to a point where they are. That seems like it’s such a long time.” It goes really fast. So that two or three years -
[0:25:42.1] JD: Absolutely.
[0:25:43.1] MF: Once you get started, it’s a blink of an eye and all of a sudden it’s like, “Holy cow! I’ve been doing this for 15 years. Don’t let that hurt you.
[0:25:50.0] JD: Yeah. I look at the 3-1/2 or 4 years since we’ve been doing it and we’ve grown as quickly as our financial situation and the market has allowed, again, without a bunch of money sitting on a silo that we can tap into. I think if I could do the same three years I did, by the time I’m 40 I would probably be in a pretty good position that a lot of 40-year-old, former moderate income earners would love to be in. So that’s how I try to think about it when I hear some of these stories of people that, I like I said, on 10 apartment complexes or 900 units and things like that, try not to compare yourselves to them and try to figure out what works for you and then just stick to it.
[0:26:32.1] MF: Yeah. No. Great advice. It’s tough sometimes to keep grounded and realize that you can do that too, it just takes some time and you have to start somewhere.
[0:26:40.7] JD: Absolutely.
[0:26:41.3] MF: All right. Jason, I think that’s all I’ve got. If you don’t have anything to add, fantastic job. Thank you for being on the show. I really appreciate it. I think it does really help people a lot to get perspective from an investor like yourself and learn what you’re doing and what you’re up to and maybe we will revisit with you in a year or two and see how you’re going as well.
[0:27:00.0] JD: Awesome. I really appreciate the opportunity. It was a lot of fun. Hopefully, like I said, people got something from the show.
[0:27:04.7] MF: No. Great job, and we’ll have to keep in touch. Yup, thanks again for doing it.
[0:27:09.9] JD: All right. Thanks, bud. I appreciate it.