From a Foreclosure & 200 Credit Score to Building Wealth with “Grandma” Houses

27:20That you were doing the renovation. Yeah. But eventually you ended up renting out this property. So tell us about that experience. Well, 2020 then happened. I've lived through so many things already. But yeah, when 2020 occurred, you know, times were crazy. I'm from Maine originally, and my kids had spent a couple summers when I was digging the French drain, they spent a summer in Maine. And we're like, you know, let's send the kids to Maine. They had two cases of COVID when St. Pete alone had 2000, something like that. So we sent the kids to Maine to do remote school at the time. And I was living in still living and working remotely, struggling a little bit in Florida.

28:05And I was like, you know what, I'm going to try to get employment up there in Maine. And I did. I'm a natural resources scientist. I do a lot of permitting and things like that. So I found a company in Bangor, Maine, and moved up here. And I was like, I'm just going to rent the property, finally replace the trim on the house. and listed it. Well, I was going to list. I didn't even list it. My friend knew a real, she's actually a realtor who was going to rent the property. And I said, okay. And I was not interested in making money at the time. To me, in my mind, I was just going to rent this to cover the mortgage, maybe a hundred dollars extra in case something happened.

28:46And also rent was really unaffordable for the average person in St. Pete at this time. So I felt like I was doing, you know, a service providing this property and someone's going to help me pay the mortgage while I go up to Maine and wait this whole COVID thing out. So I did that and lived and worked in up in Maine here in the Bangor area. And it seemed like maybe I, I was going to stay up here, but also renting was, I don't know how you long-term rent, Ashley like it is exhausting people are just the dryer we went through three dryers I don't even know how that's possible I'm cursed with dryers that's my curse it's probably the difference is I had that problem too and I don't supply appliances anymore because that is a headache we have like one vendor in our town that does like the repairs for appliances and so yeah I don't supply appliances anymore in my units because that was like such a big headache for me.

29:49I should have written that into the deal for sure. This was my first lease that I had, you know, a friend gave me, here's a lease you could use, you know, and I did have my lawyer friend up here look at it and I was like, I hope this is good. And then the microwave went out. She replaced that. The dog kind of tore up all that native landscaping that I had put in and the orchids, the orchids are dead. And I was just like, but I'm looking on Zillow and I'm like, man, the property value of this house, I paid 110 and now it's worth double at least. So what year is this in now? Is this still 2020 or is this 2021 now?

30:33This is 2020, the end. We're 2021 now. We're in 2021 now. The great year to sell. oh i just i'm partially lucky or just really lucky person my realtor though i said she pulled comps for the area and she's like i think you could easily get 235 and this is when people are bidding bid warring over properties so and i i was like you know i don't know i love that house i have an emotional attachment to it um this is my win no more wah wah i did good you know like part of me wants to keep this property forever. And maybe we'll go back to Florida, but we also had gotten really established up here in Maine, which is my home state after all.

31:18And, you know, in the end, I remember talking to my friend, she's like, well, you know what the market's doing right now. You don't know what it's going to do in the future. And I was like, truth. So, you know, let's sell it. And I did a little research. When's the best time to sell? And it's like, I think it's March and April. You're going to get the best. I'm like, okay, let's plan for that. And also how am I going to get this lady out? And I learned about cash for keys. Um, and I'm like, okay, we've got a plan. Meanwhile, my bestie down in Florida has been kind of property managing for me. I use that term loosely, neither her nor I had done this before, but she's over there helping get dryers on repeat.

32:02So, but she said, Sarah, I want to buy the house. I know this house and I love this house and I love this area. You know, we were on the south side of St. Pete and it was just a beautiful up and coming kind of area. And I said, well, you could, I would love for you to buy my house. And we decided my bestie would buy the house and we wouldn't pay realtor fees. Sorry, realtor friend. We're going to do this between us. And we didn't really tell the tenant too much about that because she also wanted to buy it. She said, oh, you're selling it. I, what if I bought it? Maybe we could work out an owner financing.

32:36I'm like, no, I'm good. So my Bessie ended up buying it for the$235. We had no realtor fees. And she knew the state of the plants and everything, which by the way, the native landscaping has come back. When I go down there, I stay in my old house with my Bessie. And I still feel like it's like, you know, mine in a way. So that's pretty great that she took the cash for keys and left and then my bestie bought the house. So what did you end up netting on that deal after your friend bought it from you? I, you know, I wasn't like not even super keeping track of, you know, what's my ROI and my who knew, but I did know I had spent 11k on those things and did most of the other things myself.

33:27and it was$110 plus I had paid the mortgage now for three years. In the end, I just checked my bank account today. I was like, how much money did I make exactly? It was$132 ,554 into my bank account. And I was just like, I feel as though someone's going to catch me. What have I done? This is too much money. I was scared of that much money. Had you ever gotten a deposit that big in your life before? No, goodness, no. I think probably this lady's deposit and, you know, maybe a tax refund, maybe a tax refund was my biggest amount of money at that point in my life. So and then I did give 2K back to the bestie.

34:15I wrote her a check for 2K to cover some of the things. And she had wanted me to replace the fans, I think. And I was like, sure. So I had done a few things. So really, maybe I netted 130k minus my 11 that I put in. And this was tax free, correct? You had lived in the property for at least two years. Yeah. And this was tax free. And so I my my first thought was like, oh, no, I'm gonna have to pay. So what do I do about the taxes? And I started doing research after the fact and found out that if you've lived in the house for two out of the last five years, you do not pay capital gains tax. So this money was gifted to me tax free.

34:53And I did my own taxes, TurboTax at the end of the year. And I put that I think there was a question like, have you lived there two out of the last five years? Yes. And that was it. So then you went out and bought your first Ferrari, I'm assuming. It's a RAV4, actually.

35:13Close enough. Yeah, we talk about I know you guys talk about lifestyle creep a lot. And, you know, I was raised to be very frugal. And, you know, I had all that money. It was a scary amount of money. Like, what am I going to do with this money? And my first thought was a car, actually. But that's because I just moved to Florida, you know, for to Maine from Florida. And I'm like, I kind of should have all wheel drive at this point. So I did get I did upgrade the vehicle. And, you know, actually I bought it in Florida, made a little road trip up to Maine with the bestie. It was we were both going to celebrate this money.

35:52And so a little bit went into the car. A lot of it went into the stock market. My dad had recommended Vanguard's total stock market index fund that he had been a big fan of. And I had learned that that, you know, gives you maybe an 8 % return over all the time. And so I had put most of the money in there, put some into 529 college savings accounts for my kids, my two kids. And then, yeah, the rest of it, just put in the stock market. We'll figure out what to do with that later. Well, Sarah, what a phenomenal deal. And congratulations to you for not only having the resilience to bounce back after that first deal that didn't go as planned, but to have such a successful second deal.

36:32It's got to be one of the greatest comebacks in the history of the Real Estate Rookie podcast. So after the break, Sarah's going to break down how she scaled into midterm rentals, house hacking, bird deals, and how she handles things when rentals don't go according to plan. We'll be right back after a quick word from today's show sponsors. The rise of the tech savvy investors here. You don't need a huge team or tons of overhead to manage rental properties, just the right tools. So I want to tell you about how I use rent ready to get ahead. For landlords who treat their time like capital and recognize the cost of sweat equity, This tool gives you everything you need to scale.

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40:03Start your business with Shopify. Sign up for your$1 per month trial today at shopify.com slash rookie. Go to shopify.com slash rookie. That's shopify.com slash rookie. All right, let's jump back in. So we're here with Sarah and you basically have taken, you know, a bad deal, a womp womp deal, and then you had a very successful deal. So after that, after that successful deal, what are your next steps in Maine? Did you end up buying another property there? Are you investing any more into any other real estate? So, yeah, I did actually think like, well, I'm going to buy a property up here in Maine.

40:46I had been staying with my mom, which, you know, if you've ever moved back in with your mom, you know that that's not a long term solution. uh so i very quickly was like we're gonna buy and i i you know i'm just on zillow man i'm just on zillow all the time and i and i was like man you can get a whole lot of house up here for way less than floridast p prices and um a lot more area you know more land and i had already been looking and actually before i sold the florida house i bought a house up here in the bangor area it's Brewer and a big old 1900 colonial house, another grandma house. This time it was wallpaper and horsehair plaster and that house, but it just, we loved it.

41:37It spoke to us. It was also really big for the bedroom bathroom count. And so I saw an opportunity there and I think we paid 175 K for that. And it was a pretty big lot. It wasn't super rural, which was going to be a good transition from St. Pete for me and my kids. So we, we bought that house. And I remember owning two houses for a minute and was like, Hmm, that's cool. And, but you know, had sold the other house. So I actually had, because I was staying with my mom during COVID, I did also have another down payment saved up. So I didn't have to, but I remember not wanting to put down 3.5 % because I was negotiating a better rate.

42:28And I know, Ash, you're going to love this. I got a 3.3 % interest rate on that one. Yeah. Yeah. Oh, it's like, so we, we lived there. I renovated, I figured out how to take down wallpaper from horsehair plaster. It's very crumb. I don't know if you know horsehair, it's literally made of horsehair and plaster. I had to actually Google that when you said it, I was like, I've never heard of horsehair plaster before. Were you familiar with that? With that, Ash? Did you know horsehair plaster? No. Yeah. Florida, we have just, it was like concrete block home. Cool. It's not made of wood. So the termites won't eat it.

43:08That was pretty much what I was thinking in Florida. When I came up here, you know, now you can have a timber frame house, not really a big concern for termites. And then I did not know it was horsehair plaster until after I bought it. And I started taking down the wallpaper. And someone said horsehair plaster to me. I'm like, what's that? And I also Googled it and figured it out, took down the wallpaper and primed it, or there's a special kind of, it's not, it's like primer to prepare a surface after wallpaper has been taken down because the glue can make your paint not stick. So I did that and I primed it and I painted it.

43:45I had to learn how to repair with sheetrock mud, figured all that out myself. There was an old vintage tin ceiling, which I kind of restored. And what else did I do? Oh, added a second half bathroom. A very unsexy renovation was replacing a rotten framing, like important board underneath the front door that my dad observed was almost rotten through. It was, you know, maybe four grand of, and it was not, I call it not a sexy renovation because it didn't improve the value, the face value, the curb appeal or, you know, anything really. But we knew the house wouldn't fall down. So that was good. And then there was a third floor and they had painted the floors, which is a normal thing to do in a kind of attic third floor space here in Maine.

44:39But I sanded it off. I listened to so much Crime Junkie podcast. And I just I rented a floor sander and sanded the floor and varnished it. I added a heat pump, two heat pumps, They call them heat pumps here in Florida. They call them mini splits or they do both AC and heat. So now I have this third floor, which is a heated and cooled space with a beautiful hardwood floor and a second half bathroom. So it's one point five, a four bedroom, one point five bath. And I was kind of like, you know, kind of bored. Like, what else do I do? I'm done. After I renovated, I thought, what else can I do? I'm getting a little bit bored.

45:24And actually, I was out west, I remember very distinctly, this was like September 2023. And I was out west for work. And I re-listened to Rich Dad, Poor Dad, which I had listened to a long, long time ago, but it really hit different this time. And I thought, you know, I'm working for this big tech company. I'm managing projects. Maybe I could manage my own projects. And I'm remembering the most money I've ever made was on real estate, selling that house in Florida. And I should repeat this. We should do this. And also what really hit home was thinking if something happened to me, you know, I'm a single mom with my kids.

46:09Like if anything happened to me, this all falls apart. if I can't work, if I get sick, you know, and I wanted something that could keep us all sustained if I got sick. Me too, you know, and I was thinking the Rich Dad Poor Dad led me to the loopholes of real estate, which was a really great book for me to learning about. He talks about living in a house two out of the last five years and not paying capital gains. Also, I learned about 1031 exchanges and all these different tactics, the loopholes, the tax advantages. And I just, like this light bulb went off that, I mean, and I love this. I also love this.

46:50I love the joy of renovating a house and restoring it to its glory and making it beautiful. And I could do this and I could do my regular job. So I came back with that epiphany and I was like, we're going to rent this house and get a new one. And my kids, God bless them, they were on board. And I said, well, what if we get a house somewhere in another town? You'll have to go to a new school. And they're like, that's cool. It's Aura, mom. We're going to do it. So we found, at first I wasn't sure. I didn't, I didn't, my goals were not set maybe super concrete. I didn't have a buy box. It was like, I'm going to find another grandma house.

47:32I'm going to find another good deal. Um, and we'll either move into it or, or we'll stay here and rent that. I don't know. I just love the primary owner financing, you know, that interest rate and the money you have to put down. It's just such a good deal. And I loved my house. The only thing I wish I have was a view of the water. So I ended up finding a house in Hamden, Maine, just across the river and it's on the river. And I was like, Ooh, this one. And this was my next, I'm really, you know, I was really nervous because this was quite a renovation. I didn't know how big of a renovation it was until after the inspection.

48:16And I realized this is like a camp. I don't know if you guys know in Maine, everybody's got a camp. Your camp is basically seasonal and you only go there during the good months of the summer, unless it's an ice fishing camp. But this was not, this was no insulation. The walls were made of cardboard. I say it was built with cardboard and sticks. Literally the lumber was, you could see bark on some of the timbers in there, which is actually good as it turns out. It's dimensional lumber. It's like it holds up over time. But the cardboard walls and the lack of insulation was a problem. So we they had asked$199.

48:59I offered$195. And then after inspection, Tony, you say this all the time, like you have a list. And here's the math, right? And I did that. I was like, here's the math. By the way, we didn't know about the suspected asbestos tiles. we didn't know there's no insulation in the walls and you know this this this and this because the roof had been leaking into one of the bedrooms and you could see that but you didn't know it was because there's no insulation and the roof is you know anyways so I had this 20k that I wanted them to take off I wanted 175 my realtor and I joke this is my magic number is 175 no and um She asked, she sent them this counter offer and they said, no, we do not accept.

49:51And I wrote to my realtor at the time and I said, I'm so sorry. You know, the math just doesn't math. We'll find another deal. You know, I was really disheartened. I was like, I remember being in bed texting with her like, we're so close. We've looked at so many houses. And then maybe it wasn't even an hour later, a half hour later, she said, they accept it. So we called their bluff or they called my, someone's bluff was called and they accepted it. And my realtors say, congratulations on getting$20 ,000 off the price. I just, I love the resilience right now. I think it goes back to that same mindset you had after the foreclosure of like, Hey, either things are going to work out or things aren't going to work out, but either way I'm still moving forward.

50:38And I love that you didn't get emotionally attached to the deal because I think that's where we see a lot of rookies kind of go off the rails is that they they spend all this time hunting and searching and they find something they're under contract it feels like they're so close then the inspection happens and big things pop up they're trying to negotiate negotiations break down and they just still want to move forward for the sake of all the time they've put into it but kudos to you for being willing to walk away and as you said someone's bluff got called right and the deal worked out in your favor I want to fast forward though a little bit because I know you've got a crazy story about bats, like actual bats.

51:10And I think that a lot of rookies have this fear about like crazy things happening to them inside of their rentals. And bats might be one of the more crazier things to happen. I've also had an experience with bats in my rentals, but what happened to you and how did you handle that as a landlord? Yeah, everyone's always worried about toilets. It's the bats that we don't talk about nearly enough. I want to hear your bat story too, though. But yeah, that Brewer house, man, we knew there were bats because I heard squeakety squeaking upstairs. And I was like, oh, we've got mice. And I remember my dad putting out mouse traps and we never caught a mouse.

51:48And I could hear a little squeaking in the walls. And then I, and I think it was the summer, we had a bat come in the house and it's flying around in the middle of the night, which is a bit horrifying. You know, you're not expecting that, but also I'm a natural resources scientist. I'm like, Oh, it's a little bat. You know, we caught it and released it. No big deal. And I didn't even think of that when I rented the house, I didn't even think that the bats would come back and maybe with a vengeance. So this year, my I've, I've got a bat guy now, bat guy says this has been the year of the bat they were off the chain here in Maine I don't know if it was in other places as well which is good because honestly poor bats they're not doing well as a as a species you know they're not doing great there's several species in Maine and they're all doing poorly but um this my tenants in there the first tenant my I get my first tenant I'm so happy.

52:49She's like, I hear squeaking. I think you have mice. You need to get pest control over here. And I was like, yeah, it's probably bats. Like, does that make you feel better? But she actually did make her feel a little bit better because they were really afraid of rodents, which mice are also really common here. But I, it wasn't a super problem until the next tenant. This is the, now the season of the bat and they were, they came into the house and they called me, I got my son, you know, my 17 year old, I'm like, got the hoods, we got like gloves. And I got, you know, I go in there with a cup and catch it.

53:29And, you know, the proper PPE on, and we release the bat. No big deal. They're like, Oh, thank you so much. I'm like, yeah, you know, no problem. And then literally a couple of days later, there's another bat. And now it's in the main part of the house. And also, what if it has rabies? And I was like, yeah, probably doesn't, but let's check. So the state will come and gather your bat and send it off for testing, which is kind of sad. I think they, I think the bat does have to, you know, someone has to take one for the team. So they, they came over and caught the next bat. Actually, is this the third bat?

54:05I lose track. They came over and caught the bat, sent it to the state for testing. It is negative. So likely the colony is negative. And then my current tenants, now it's winter, they should be hibernating. My current tenants said, we heard mice. And I'm like, no, it's bats. That actually reminds me of like a childhood memory. When I was younger, we would get bats in our house sometimes. And I think I was like 15 and I was babysitting my siblings and we got a bat in the house. And I like threw a blanket over my little brother. And I'm like calling my friend down the street. And I'm like, I need you and your brother to come over here.

54:42We have bats. They show up like dressed in his hockey gear. We have tennis rackets, the full face mask on from hockey. We're like, okay, let's get this thing. And yeah, we obviously did it. I think we like chased it out the door maybe or something like that with a broom. But that was like my bat memory. But Sarah, thank you so much for coming on the show today and sharing your story, your experience as a real estate investor. Where can people reach out to you and find out more information. I'm on Instagram, family reno bees for like weather bee. Well, thank you so much. We really appreciate you taking the time to share your journey with the real estate rookies.

55:21I'm Ashley. He's Tony. And we'll see you guys on the next episode. Hey, rookies. If you're watching this, we want you to apply to be a guest on the real estate rookie podcast. That's right. Ashley and I are looking for amazing stories just like yours to be a part of our real estate rookie podcast. Now, look, you don't need to be an expert. You don't need to have done thousands of deals, even if you've done one deal, your story could help inspire the next listener. As a rookie investor, especially if you just got your first deal, it is all fresh in your minds and you are the best person to tell your story, give your experience on how you got it done to help someone else get their first deal.

55:55So head over to biggerpockets.com slash guest if you want to be a part of our show. Again, that's biggerpockets.com slash guest and we'd love to Have you on.

56:34Thank you.