$900/Month Cash Flow from His FIRST Rental ($0 Down!)

0:00Today's guest, Joe Pozzuoli, watched colleagues lose their jobs overnight, pushing him to dive headfirst into real estate.

0:08Real Estate Rookie:Joe's gone from a cautious high earner to building a thriving portfolio that pays him even while he sleeps. And today he's breaking down every step he took to get there.

0:23This is the Real Estate Rookie Podcast. I'm Ashley Kerr.

0:26Real Estate Rookie:And I'm Tony J. Robinson. Joe, welcome to the Real Estate Rookie Podcast. Super excited to have you with us today. Yeah, welcome. It's an honor to be here. I was very surprised to get the call, but happy to be here and be on with you too. Well, Joe, you're making great money and your career seems secure, but then your friends suddenly start losing their jobs. Take us into that moment when you first felt really vulnerable and realized everything could change overnight for you as well. Yeah. So the timeframe was March, April, May, 2020, small little thing going on across the world called COVID, right?

1:04Real Estate Rookie:And at that beginning, you know, everything's just kind of spinning out of control for a lot of people in those early stages. So obviously a lot of stress and uncertainty, not just for me, but, you know, again, for so many people worldwide. And one of the things that started happening in my circle was I started to see friends and colleagues and people that I respected being furloughed or being let go, being downsized, you know, being asked to take massive pay cuts. And the thing that struck me with that is, you know, from the, you know, coming from the corporate world, like you always hear a term like hypo, high potential, somebody who, you know, they're doing great at their job.

1:41Real Estate Rookie:They're also going to be able to do more, take, take additional steps. Like a lot of these people, they were hypos, you know, they were tagged by their organization as top performers going to do more. And then all of a sudden, like through no fault of their own, like they're being asked to take pay cuts or to go on a furlough or be like, go. And so it was really just a wake up call for me where I just knew that, OK, like something outside of my control can actually now impact my ability to support my family. And so it was just something I never thought was possible before. And so it really opened my eyes and made me think that, you know, I have to do something else on the side to make sure that if that does happen, me and my family would be okay.

2:30Real Estate Rookie:Joe, what a relatable moment, because I think a lot of folks experienced that during COVID as well. So much so that it became like the great resignation, right? Where so many people had these wake up calls around like, am I actually doing what it is that I want to be doing? And you said something that was really interesting where you said you realized that your income could be taken away due to no fault of your own, due to things completely out of your control. And a very similar thing happened with me. Christmas Eve 2020, I ended up losing my job, that I had climbed the corporate ladder, definitely had that high potential flag on my name as well.

3:09Real Estate Rookie:And you wake up one day and now you're unemployed. So how do you go from that realization to maybe starting down the path of financial freedom? I know you dabbled in a few side hustles first, but something clicked late at night that made you realize that real estate was away. So what were some of those frustrations you felt with those other side hustles and what eventually made you realize that real estate was the right path? Yeah, I did. I researched and I explored a bunch of different things. And ultimately what I landed on was e-commerce, which that was kind of the rage coming out of COVID, right?

3:43Real Estate Rookie:And so, you know, I did some things and moderate level of success, but nothing really game changing. And so we had this e-commerce store and had a product that was selling pretty well. And then all of a sudden, like one day, like the Facebook ad just crashed, right? And like sales tanked and there was like nothing else coming in. And so one night late at night, it was like 11, 1130. That's late for my wife and I. We go to bed early. She's sleeping next to me in the bed. I'm sitting up with the laptop open, Googling, and just trying to research what happened and how to fix it. And then it just kind of dawned on me.

4:24Real Estate Rookie:I just kind of had this moment of clarity right there. It's like some people, they might be making$70 ,000,$80 ,000,$90 ,000,$100 ,000, whatever it is. And then they're trying to create an income on the side for freedom, flexibility. And they're trying to generate 30, 40, 50K on the side. And that provides them the ability to go out and do something else or that freedom they're looking for. And it just kind of dawned on me like, wait, what am I doing? Why am I trying to be like a Facebook marketer now? I can actually just like jump into real estate now because I had always in the back of my mind thought about real estate and getting into real estate.

5:00Real Estate Rookie:Even when I was a young kid, I always thought I would just own a bunch of rental properties. And then for whatever reason, it just didn't happen. I just never got into it. And so at that point, I was just like, I've got the income now. I don't really need to go be an online marketer. I don't need to build websites. I can just kind of pivot the way that we're structuring our spend and our investing. And we can just jump right into real estate now. And so that was probably, I don't know, September, October, somewhere around there in 2021. and I'm an action taker. Yes, I do research, but I've always got a bent towards action.

5:39Real Estate Rookie:And so by January 2022, we had closed on our first deal. Joe, for someone listening that maybe has just decided today they want to do real estate, and this is the first episode they're listening to of Rookie, what are the first steps they should be taking right when they decide the moment I want to invest in real estate. And maybe it's things that you did or maybe things that you look back and think would have helped you if you would have done them. Yeah. I think like research, right? Understanding a little bit about real estate, knowing what you're looking for, what you want to accomplish, and then talking to agents or brokers and letting other people know that you're looking to get into real estate.

6:24Real Estate Rookie:That was really important for me. I immediately started going to our local real estate meetup and meeting other investors locally. And then we just started walking properties. But it was really that knowing that this is what I wanted, then talking to people who were in it, and then just jumping in and doing the steps necessary, which is researching deals and walking properties. And Joe, all of that action, as you said, led you eventually to that first deal. But I also know that your first property felt a little intimidating at first glance, which is fair for most rookies. So what exactly shifted inside of you moving from overwhelmed to saying I can actually do this?

7:05Real Estate Rookie:Yeah, there was a triplex. It was listed on the market and I walked through it with my realtor. And so it was like an old big house that had been converted at some point over time. And the downstairs was one really large unit that like somebody started a renovation, but then you could tell they just kind of thought better of it at some point. There was one unit upstairs that was occupied with a squatter, which I didn't know. In fairness, I didn't know that she was squatting at the time, but I learned that out quickly after closing. And then the third unit was just crazy, right? So if you can picture Dorito bags, bush light cans, some empty, some not empty, cigarette butts, old electricity bills, phone bills, and tons of pennies.

7:54Real Estate Rookie:I don't know what it was with the pennies, but there was like hundreds of pennies. scattered throughout this unit. And so when we got into that unit, I literally, like my head exploded, right? I was just like, oh my goodness, what is like, this is going to take two years and a hundred thousand dollars, right? Like I just, I just didn't know anything. And so I walked away from there just thinking like, no way there's, there's no way that I can do this deal and make this work. And so I was talking to my realtor, like the next day, a couple of days later, and And he's a friend of mine. And he's like, you know, Joe, like, I think you can probably turn that property around for$25 ,000 or$30 ,000.

8:31Real Estate Rookie:And I was like, I just didn't, I didn't buy that. And he said, look, just, you know, take Aaron through. And Aaron is another friend of ours and he's a contractor. And so the three of us walked through together and we're just kind of walking through and our contractor is just telling us, yeah, you know, you can do this and this and we can just do this and we can save here. And so it just kind of opened my eyes. And at the end of the walk, I just asked him, I said, hey, do you really think that we can do this for$25 ,000,$30 ,000? And he did. And so, you know, at that point, when I knew that, I just kind of took a step back and said, all right, like, I mean, I can have three units for about$100 ,000.

9:12Real Estate Rookie:That's a great price per unit. And we made an offer literally at the end of that day and pulled the trigger on the deal. Well, Joe, I think that is a great example of building your team and surrounding yourself with people who are knowledgeable in different aspects, especially in your local market. Your agent knew what a contractor would charge or what the material cost would be or whatever for a property like that. And that is just such a huge advantage of finding team members that are able to give you referrals or give you advice. And I say that because we always say like find an investor friendly agent, find an investor, you know, friendly lender.

9:55And like those are key, but there's you really have to decide for yourself. What do you need an agent for? Is it just to show you properties? You already know everything about the market. You already know your buy box. You already know how to estimate a rehab. Is it that you need them to refer contractors because you don't know any in the area? their agents can provide so much value. And I think that initial conversation when vetting an agent, just letting them know what you're looking for and what you need help with too can be really beneficial.

10:29Real Estate Rookie:Yeah. Yeah. And I still work with both of those guys pretty consistently today. So it is a nice team environment that we have going on. Coming up, Joe's surprising discovery about financing that flipped his stress into massive cash flow. We'll cover that right after a quick word from today's show sponsor. Are you looking for a simpler way to find your next investment property? Lenar Investor Marketplace is a free platform built for real estate investors. Create an account and get access to investor-ready new construction homes, plus real-time data on projected rents, returns, and neighborhood insights.

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13:12With ReSimply, you can connect with motivated sellers through calls, texts, emails, or direct mail. Plus, enjoy free skip tracing, cash buyer searches, customizable websites, and automated drip campaigns that turn cold leads into successful deals. Head over to resimply.com slash biggerpockets now to start your free trial and get 50 % off your first month. Once again, that's resimply.com forward slash biggerpockets. Okay, let's get into the video. Okay, well, Joe actually turned his fears into a financial breakthrough that changed everything. Let's dive deep into that pivotal moment. So Joe, describe for us that feeling when your banker casually mentioned you needed zero dollars to actually purchase this property.

14:05Real Estate Rookie:Yeah, it was a good feeling. I got connected with a local bank, just a small community bank, two branches. And when I contacted them about the property, I did ask, like, can I put some of the renovations into the loan. But even though they told me, yeah, yeah, we can do that. I didn't really ask a lot more questions after that. And I had about$25 ,000 set aside that there was like just earmarked. I was like, okay, this is what I'm okay spending on this deal. Now I can tap into more if I need it. However, I don't really want to go over that with the money that I brought to the table because that's just kind of what I set it aside for.

14:43Real Estate Rookie:And so as we're progressing through the timeline, we do the inspection, everything's good. We do the appraisal, everything's good. And we're getting closer and closer to the closing date. And I literally have zero information. And most of that is just, I just didn't know what I didn't know. And I didn't know what to ask. But finally, I called the bank because I'm like, hey, what do you need from me? How much do I need to bring? Can I bring a check? Do you need a cashier's check? Do I need to put money in escrow? I kind of need to know. And she said, oh, you're good. I just kind of stopped and said, wait, what do you mean I'm good?

15:19Real Estate Rookie:She said, you don't need to bring anything. I said, what? I literally just shocked value said, what? And so she walked me through it. And so the way they were structuring these deals at the time was they would loan 85 % of the ARV and the way the property, the way we walked through and with the appraiser and explain what we were going to do, It appraised at like$150 ,000. Well, the purchase price was 74. I was asking for 27. So I was well under the 85 % threshold, even with the closing cost. So I literally walked away with that property with nothing up front out of pocket. Now, I did have some holding costs and we went a little bit over our budget, but not much.

16:05Real Estate Rookie:So in the end, I had a little bit in it. But in terms of just that upfront coming to closing, my first deal literally walked in with nothing in my pocket, closed with three units. And that property has averaged$900 plus cash flow since the time that I bought it, including vacancy and CapEx. Oh, my goodness. What an amazing first deal, man. And like the parallels between our stories just get even stronger because the very first deal I ever purchased, I also went to a local bank that was in that town and they funded 100 % of my purchase and my renovation. And I had zero dollars out of pocket to buy that deal.

16:45Real Estate Rookie:But what's crazy is that you didn't even ask for that. They just they just gave it to you. Um, but I, I think it, it reinforces a point that Ashley and I make all the time of the power of working with the smaller local banks who know the area who maybe even know the property. Like, oh yeah, we've actually lent on that deal before. You know, we'd love to get another mortgage on that deal. So Joe, you, you, you find this amazing loan product and I want to talk about your, your future deals, but just out of curiosity, did you do multiple deals with that same bank? Yeah, yeah. So we have several buy and holds and then we've done a couple of flips through them as well.

17:22Real Estate Rookie:And were all of them with that same structure? Most of them were. There was one that was a little bit different. I actually bought the property with my HELOC and then I did an immediate cash out refi for more than I paid. So they gave me money at the closing table when I did that deal. That's even better almost, you know? Yeah. So all good, all good, good deals with that bank so far. So Joe, it seems like you've had great success, especially on the funding of each of these properties. Was there at any moment where there was kind of a pitfall or a challenge that you had to overcome? Yeah. I would say when we bought a six unit property.

18:09Real Estate Rookie:Now the way this unit was, There was three units that were active and then there were three unit, there was like a two, a three story kind of shell that was, that just needed a complete gut job. And so this was one where nobody else saw the vision of the property other than me. And so coming to the right terms with the seller on the price was a little bit of challenge. We actually tried to lock that property up like in July and we couldn't come to terms. And then we ended up circling back and getting it in December. And at that point, interest rates had gone up quite a bit. So it cost me some cost me a decent amount by not closing that deal in July.

18:52Real Estate Rookie:But also because the renovations were so drastic, like it just took a little more thorough detail and planning to really make sure that the appraiser saw what we were doing. and that the value came back high enough for the bank to loan what I wanted them to loan. But it was a similar structured deal in that most of those renovations were covered by the bank. We did go about$20 ,000 over on that. But again, it's a six-unit property that's bringing in almost$6 ,000 gross a month because it's a mixture of midterm furnished and just regular long-term buying holds. So I was definitely okay with that.

19:34Real Estate Rookie:But it just took a little more planning and detail to get that one over the goal line. So your first triplex deal was almost too good to be true. Like what an amazing first deal. But how did that early success, because it can happen, did it influence the way that you approach your next investments and did it work in your favor? Was it more of an impediment having such a great first deal? Yeah. So the million dollar question is, was it a great first deal or was it a terrible first deal? Right. Because it was a great first deal from numbers, but it completely skewed my perception of what a deal should be.

20:04Real Estate Rookie:And so I would say that that hurt me actually a little bit because in those early months, I actually walked away for some really good deals because I didn't want to put any money in. And so looking back, right, these were actually good deals. And I killed them over, you know, a few thousand dollars. And we live in a small town. So I drive by those properties quite a bit. And they're ones that like kind of I kick myself because in our market, it's it's super competitive with investors because, you know, our our median home value is one hundred seventy thousand dollars. The median income is forty thousand.

20:41Real Estate Rookie:So there's a high renting population. There's a lot of investors. And so, you know, now what market is this? This is Zanesville, Ohio. Just so it can get more populated with investors by announcing it. Yeah, I was going to say, I don't want anybody else coming here. We got enough competition. But it's small town Ohio. We're about an hour east of Columbus. Which Columbus is a hot market people talk about. Very, very hot, but they do not have the low prices that we have. And so the market is super competitive now. And so the prices that those homes hit for, this is just not going to come up again.

21:16Real Estate Rookie:And so that first year, even though we closed on four deals, I probably could have closed another three or four more that I didn't because that first deal was so good that I had this standard in my head that just really wasn't necessarily always achievable. I know a little bit better now. And I've also seen here that you've actually not just bought properties off the MLS, but you've actually used auctions, found probate properties, and even converted single family homes into duplexes. So what was different about these deals from just buying a standard rental property on the MLS? Were there any valuable lessons that you learned along the way?

22:04Real Estate Rookie:Yeah. So there was actually one property that almost encompassed all of those strategies and And it started off on market and it was on market for like 68. And when I walked it, if you can just kind of think of like a house that a smoker lived in, poor ventilation, poor lighting, yeah, dark carpet, dark walls, right? You can not only picture, you can probably feel the atmosphere of that property. And so it sat on the market for a little while. We offered 45. They didn't accept it. I came up to 50 and said, look, that's the highest and best. They came back and said, we only want 68. We're just going to let it go to foreclosure if we don't get it.

22:46Real Estate Rookie:And so I thought that our offer was pretty fair though. And so I went through the recorder site because we found out that this was, it was in an estate and I don't know the whole backstory, but the gentleman who was living there ended up in a nursing home and passing away. And so he had like a brother who was several hours away and a lawyer that were kind of handling this. And so on the recorder site, I found the bank that had the note, which is another bank here that I have a relationship with. And I called my broker there and I said, hey, I know that based on what I could tell that my offer was more than what the note was left on that.

23:25Real Estate Rookie:And I said, look, they're saying they're going to let this go to foreclosure. Is there anything you can do to force their hand? And so he gave me the number of somebody to talk to and I talked to them. And I don't know the legalities of it. I don't know what exactly was the situation. I just know they told us that they couldn't force their hand. And so to me, it just seemed like that deal was dead. We completely walked away from it. And I just really didn't think about it a lot after that. But a few months later, I don't know if it's four, five, six months later, I saw it on an auction site. And so my initial offer on that property was$45.

23:59Real Estate Rookie:I ended up getting it at auction for 42. And so I got it for less than I actually wanted to get it for at first, which was just a slam dunk. And then that property was a single family that we converted to an up and down duplex because it just made sense in terms of what the money that I was going to need to put in to get it up to speed. It made sense to make it a duplex and essentially double the rent that I was going to get. And then that property also had another strategy because the way that the timing worked out of it, when I bought it, we were still renovating our six-unit building, which was a massive renovation that took almost six months.

24:41Real Estate Rookie:And then we had some other timing back up. So by the time we got those units renovated and rented out, my year of seasoning was up. And so I immediately bird out and got almost all of my money back out from the renovation and the purchase price. I think that like one of the big takeaways here is like just the patience of the deal, but also like that actually was a really interesting idea, even though it didn't pan out was to contact the bank and say, Hey, I know you, you hold the note on this property to see if there was anything that they could do. That was definitely a great first step to take to getting the ownership of this property.