He Built a Thriving Business: Now He’s Trading It for Financial Freedom with Rentals

0:00Hey, everyone. Welcome to the Real Estate Rookie Podcast. I'm Ashley Kerr, and I'm joined with my co-host, Tony J. Robinson. Today, we have a really special guest coming out of Buffalo, New York, a guy who's been cutting hair for over 20 years, runs his own salon, and somewhere along the way, decided that real estate was going to be his exit ramp from trading time for money.

0:24Justin, welcome to the Real Estate Rookie Podcast. Thank you so much for having me. I'm thrilled to be here. Well, Justin, I love your story because you're still in the thick of it. You haven't quit your day job yet. So before we get into the details of your journey, I want to know what was the moment where you looked in the mirror and said, I have to build something outside of the salon? The first thing was understanding that you can't do everything, right? And that there seems to be a shelf life, particularly in the beauty industry where, you know, you're on your feet a lot. And I've been doing this for 20 years and I'm fortunate to still feel good physically about it.

0:59But I think that as you look towards the future and you want to be able to pull back, you're pulling back to spend more time on things that you enjoy, like your family activities, things like that. I think that you start to analyze, okay, what can I get into? What can I divest into that's going to give me more freedom and more time? So I'm not sure if it was a particular moment, but I think that over the last 20 years, particularly the last five years, that you start to question, okay, what's down the road, right? So I don't think it was a particular moment, but I think it was a culmination of leading up to that.

1:39All right, but Justin, take us back, right? I want to go all the way back to 26. You're renting an apartment. Your parents dropped a piece of advice that really kind of changes everything for you. What did they say and why did you actually listen? Well, first of all, my parents are amazing people. And, you know, I think that when you are fortunate enough to have that, you lean into them because they're there. I was renting an apartment and my first thought was, oh, you know, I like, I still do. I mean, I like the apartment condo type of living. And when I was paying rent in an apartment, I thought, okay, maybe I should buy a condo and put my money there.

2:15And my parents wisely said, what about a double? and I didn't even know what they were talking about. I didn't even know what a double was. I thought they meant like a double wide. I was confused. A double? So when I was living in the city of Buffalo, the area that I was living in called the Elmwood Village, it was gaining a lot of traction and things were getting expensive. So there was an area a little north of where I was living called North Buffalo and there was a double there that I went to look at. And the whole idea of really what sold me was I could live there for free and have a tenant pay my entire mortgage and then some.

2:54I mean, of course, it certainly meant taking on the role of a landlord at the time, which, you know, it was kind of sink or swim. Just throw yourself in and see what happens, right? And also, I might add that you're speaking to someone who I barely know how to swing a hammer. So when things did go wrong, I had to make sure I had the funds to be able to call somebody to take care of those things properly and not me YouTubing everything that I have no idea how to do. I mean, what awesome advice from your parents to, you know, early on in your career to have you kind of lay that that solid financial foundation.

3:29Now, at 26, I mean, you know, I think about me at 26. I was like a couple of years out of college. I was so very much trying to figure life out. But you're like managing a tenant, right? Like you're a landlord at 26. What was that experience like for you going into landlord for the first time, especially being that they were your neighbors? The experience, to be honest with you, was easy slash easy because she was a wonderful tenant. Right. I and I was able to when I bought the house, it was empty. So I was able to screen people come in and interview. And she was a great, a great woman. And it made the it made the being a landlord.

4:06I mean, looking back now, really easy. One critical mistake I made was trying to save money. I didn't hire a plow service and I didn't get a snowplow. And I remember like our first major storm, she was like, is the plow coming? And I'm like, I don't know if they're coming. I didn't get one. And that was a problem. But, you know, as that parlayed into more properties, all of a sudden, you know, the problems compounded because it wasn't like, can you fix my, you know, can you call someone to fix this? The furnace isn't working where it was like, maybe I've got four of those phone calls now or five of those phone calls now, or it was just at the time, it was just myself.

4:46It was, it was much easier. So fortunately the transition of sliding into being a landlord at the time, it wasn't terrible really. But again, that's, I was very fortunate for that. That was like on my very first property. I forgot to add in when I ran the numbers, snow plowing and didn't account for it. And then it was, oh, time for snow plowing. That's actually a good chunk of the cash flow that's gone now. But I think one thing too that I've noticed is that you probably hadn't heard of BiggerPockets. You probably weren't involved in any real estate community or networking when you got this duplex.

5:22Is that correct? You're correct. Yes. I think that sometimes it's easier not to be surrounded with an overwhelming amount of information. And that's what puts a lot of people into analysis paralysis, where if you're not even exposed to all of the different ways that you can invest in real estate, all of the different ways you can fund the deal, all of the different ways you can property management, you know, like, it's almost easier to get started because you're not overwhelmed with information when you're first starting. For sure. And it's scary too. Like, I'm afraid now in 2026, I'm afraid to be on social media and be like, oh, look at this short-term rental in Austin, Texas.

6:00And I click on it. And then the whole night, I'm inundated with short-term rentals coming at you. It's like there is an analysis paralysis there because it's a double-edged sword, right? There's so much information out there. It's so good. And obviously, BiggerPackets being one of my main sources. but I think that you really need to maybe inch your way along and segregate what you like and what you don't like in terms of a pocket because to your point there's so much out there yeah you bring up a good point asher like we're not in an age where we have a lack of information um if anything I feel like what probably holds most rookies back is a lack of execution right maybe a lack of dedication but like the information it literally exists everywhere right but just maybe having the discipline to jump in and make things happen.

6:50But for you, Justin, you did. And I guess I'm curious. I mean, your first deal was a house hack. It sounds like you got a great tenant. The goal was to maybe not necessarily be paying rent. So if you recall, what were the numbers on that first house hack? What was your mortgage and what were you actually collecting in rent and what were you paying to live there? I mean, Ashley, being from Western New York, she's going to cringe when I say this, right? But I bought a double in North Buffalo for$92 ,000. and then that was 16 years ago and it was$92 ,000 I want to say my mortgage you know principal tax everything was insurance was around$600 and my tenant was paying me I think$850 at the time wow I know it was amazing that's very good run for that long ago I know that's right and I think I just honestly I think I just threw a number out there and she's like okay okay let's take it let's do it I mean but that like that's a perfect house hack because for a lot of folks the the goal is just to maybe subsidize part of their living expenses but you with just one other unit you were cash flow positive on on your mortgage right obviously you said other expenses there but like your rent was covering your actual cost of ownership so that is like a home run first house hack.

8:07Yeah. And again, it was nothing. It wasn't, you know, to be totally transparent, it was nothing me forecasting, like, oh, this is great. I studied all this. I know what I'm doing. I know. I didn't know anything. And I got very fortunate that that's the way it worked out. And then, you know, that was what? 2015, 2014, whatever it was. Well, it can't be right longer than that. And then that area started to grow and you started, then I started to do a little more research and understand the appreciation that was going on around me. So yes, to your point, I was very fortunate for that. Do you still have that property or did you end up selling it?

8:43No, I still have it. I still have it. What do you think it's worth today? I just did an analysis on it. And I want to say it's worth like 270, if I'm not mistaken. So like almost 200 ,000 in equity built up over. Yeah, which is great. And I did do a refinance on that property about three years ago to buy another one. But as it sits right now, I want to say it's around 270. And have you raised the rents at all? And what are the rents at currently? The rents are$1 ,300 for upper and$1 ,300 for lower. That is great. So now that you did your first deal, what does the rest of the timeline look like?

9:22How long until you got that second? And kind of tell us what that deal looked like. The rest of the timeline, I lived there for a couple of years before I started to explore other real estate purchases. And then I ended up primarily focusing on multifamily because of the return on the initial investment. So then they were there for a couple of years. And then I bought another double in Kenmore, which is about 10 minutes north of North Buffalo. And that was another multifamily, another double. And then that one I want to say, So two years later, I bought a double and it was already$148 ,000. So it was almost the same square footage.

10:06It was a little better of an area that I already paid. Then I had paid$60 ,000 more two years later for another double, basically the same size. So it showed you where the market was going at that time. Justin, let's talk a little bit about the mental side. You said your mental state before real estate was great, but clearly something was missing. how did you how did you hold both of those things at once loving what you do in your business being you know running your salon but also knowing you needed something more I don't know if it was needing something more as it was taking a step back from the beauty industry itself um I I've I've been in the beauty industry 20 years I started my own business 15 years ago um and I love it Don't get me wrong.

10:55But as you grow in life and I have a wife, beautiful, wonderful wife, I have two beautiful, healthy children. You start to understand that there's more to life than standing behind a chair, cutting people's hair and doing that, which I love to do. So it wasn't so much adding something as it was removing too much of a good thing. Like, you know, building a business, as you both of you know well, it takes a lot. And the sustainability of working 55 hours a week with a wife and children, it's just not healthy, nor is it something I particularly wanted to do. And, of course, as many people know, as you start to take a step back from your business, you inevitably lose a little capital that's coming because you're not working.

11:45So it was more about how can I supplement, but also make money while I sleep, if you will, and start to make my money work for me versus in addition to, you know, putting in the stock market and things like that. We're going to take a quick break, but when we come back, we're going to talk about a building that Justin bought that was vacant for seven years that had mold, termites, and so much more wrong with it. We'll be right back after a word from our show sponsors. Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of the smartest ways to protect and even improve your property's cash flow.

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14:02One uncovered claim can undo years of progress. Before your next acquisition, review your insurance. Talk to NREG and get investor-specific coverage from specialists who actually understand real estate at nreg.com slash bppod. That's n-r-e-i-g dot com slash bppod. Okay, so Justin, let's go into the deal that you're most proud of. So this is a commercial building that has been sitting vacant for seven years with mold, termites, the whole thing. So walk us through that from the very beginning. How did you find this deal? And what made you say yes, despite all of these red flags? I was right. So when I first left the salon, I was started my career.

14:42I was renting the space and I was in that space for five years. And, you know, you obviously it's much better to own than it is to rent. So I started to toy around with the idea of I should buy something and put my, you know, put the money to work that way. The hard thing about the town that I'm in is, A lot of the buildings were very expensive to buy, and it was out of my price range for sure. And then I happened to be driving along this main road where I live, and there was a building, a big giant for sale sign. And when I looked to the left, it was like, I couldn't imagine why anybody would want to buy this building.

15:25It was terrible. bowl. So then I looked it up and I thought, oh, and I saw the sale price and was like, okay, I'll go take a look. So when I reached out to the realtor and when we went to look at it and that gentleman opened the door to go into the building, the smell of mold, it was like a punch in the face. Like I, how can this building be standing? Right. So the backstory of the building is the gentleman who owned it prior to me was a um a doctor he a pediatric doctor and he owned it for quite some time and when i spoke to him about why he was selling he said he loves being a doctor he didn't love being a business owner and one thing after another he just didn't want to maintain the building and he wanted to be to go to the hospital and work and not be responsible for everything around him so he literally he had a water leak in the building he fixed that he shut shut the doors and literally the only thing for seven years he maintained on the building was cutting the lawn because he had to.

16:31So he didn't get a fine. Yeah, exactly. He didn't want to get a fine. Most people, it's weird. Most people didn't even know the building was here because I had taken down so many trees and overgrown bushes. I think I took down like five trees in the front lawn alone. So once we kind of got a clear view of what the cost was going to be, Then it was diving in and finding contractors and working with the town to get approval of everything. And we went from there. And the rehab, because I kind of meal pieced everything together, the rehab took about a year because I was funding it out of my own pocket.

17:05I didn't want to take out any loans or anything. So that took about a year. But it was the smartest way to do it financially. And probably the only way to do it for me at the time. Before we get into the details of the numbers on the deal, I wanted to ask specifically about the mold remediation and the termite extermination. So what were the costs for those two things? Because I think those are like big, scary things that people say like, no, I don't want to deal with that. But what were the actual expenses to take care of those issues? Yes. Well, so when there was a water, there was a crawl space underneath the building.

17:39And the previous owner, he did a really good job of getting rid of the mold of the water that was in the crawl space and drying it out. So it wasn't a terrible cost. I want to say the mold remediation for the area that needed to be done was around$2 ,000. And then the termite cost was about$1 ,200. It wasn't terrible. The only reason it was not bad was because he took care of the crawl space. But then where the water had risen to where the drywall sat, he cut out most of it, not all of it. Right. So if a piece of drywall got wet, he didn't make a flush line and get rid of where the mold he was.

18:19He kind of chopped into a little bit. So the mold that was left started to move up the wall. And that's where it started to grow. I mean, having the experience, compared to speaking to some people I have now, mold, termites, I mean, that's why these companies exist. You pay for it. It can be taken care of, right? You look at houses on Zillow, whether it's mold or foundation, like, oh, I don't want to touch that. But Google mold remediation. There's 10 ,000 companies that can do it. You just got to pay for it, unfortunately. Yeah, I've had several houses that I've purchased with mold and it is never as expensive as I think it's going to be.

19:01We did a whole, I think it was a 1500 square foot house, the whole house remediation,$5 ,000. So like, it's, I think you like before you're, if you're listening to this and you're afraid of an issue, a foundation issue, you're afraid of this, afraid of that, like actually figure out how much it costs. And like, Justin, in your sense, like, you know, the 2000, the, what the, what was the termite one? Like less than 2000, right? That was like 1200. Yeah. Yeah. So, you know, that's not that bad for when somebody maybe was first listening to this episode and thinking like, oh my God, mold termite, that's going to be$20 ,000 to think.

19:40And that's used to be what I would think also is that these are really, really big expenses and that's not always the case. So, you know, do your research and get somebody in there to actually quote something out for you before you say no to a property because of just these issues that you think are going to be expensive, but they might not be. And it's not to your point. It's not always right. Somebody will say, well, the house has mold or the building that we bought has mold. No, the building doesn't have mold. This area over here has mold. Let's remediate that area. Yeah. And that's how it was with the termites.

20:16There was an area where they were just eating everything. So my whole building wasn't infested. It was like a quarter of the building that they got rid of all that wood and then fumigated and whatnot. So to your point, yeah, I mean, it's not I don't think it's ever as expensive as you think it's going to be, particularly if you're like me and you blow up the number in your head like ridiculously. You're always pleased when it's like two grand. Like, great. I thought it was going to be half a million, but now it's$2 ,000. But Justin, going into this deal, had you already handled pretty heavy renovations in the past?

20:50Or was this the biggest renovation project you'd done up until that point? No, no. I mean, the renovations that we had done or contracted out to do were on our investment property, the first one that we bought. um and those were you know bathrooms um floor you know hardwood floor being refinished things like that so this was to me this was major it was major to look at an entire building and okay how where do i begin and so it was no this was the first yeah well that's my question right is like where did you begin how do you once you walk into that building you're getting punched in the face by the mold, how do you start to put together what a potential scope of work looks like and the budget for that before you actually close on the deal?

21:44Because I think where a lot of rookies make the mistake is that they don't do enough due diligence during their closing timeframe. And then once they actually close, that's where the rehab budget really starts to balloon. So how did you avoid that from happening on this deal? Or maybe it did. And if so, what were the lessons you learned there? I think I avoided it by ignorance, honestly. I bought the building and had no idea of the renovation costs. So you didn't even have a budget to go over budget on, is what you're saying? Yeah. Yeah, exactly. What I did though is I didn't want somebody else to get the building, right?

22:22So a little negotiation of the cost or the price and that was it. I didn't want someone else to get it because I knew it was going to be a great find and great deal if I could get it. I think for me, personally, I'm very good with discipline with numbers and money and things of that nature. So it wasn't so much about like, okay, let's dive into the renovation cost. This is projected. I didn't even know what that meant at the time. For me, it was about how much am I going to have to work over the next year behind the chair? And how much can I extract from that to have my life and also fund this rehab of the building?

23:05So that's, and then the first, the first thing I did was I met with an architect who was referred to me, who really kind of became, you know, a beacon to say, okay, this is what we're going to do. You know, and you said that, you know, you had to figure out how much care you had to cut and stuff to, you know, figure out to pull money out of the business to pay for this. All I could think of was Edward Scissorhands just going through it. That was about it. Like, funny for automation. But Pony, you probably never saw that movie either, did you? Actually, funny enough, we just rewatched Ezra Scissorhands this past year.

23:38So I'm with you on that one. But let's break down the numbers on that deal. So what was the purchase price? What was the rehab cost when you were all done? And what are you renting it out for now? And did you end up refinancing it or anything? Yes. So the purchase price on the property was$165. $165 ,000. A renovation cost rounds up close to about$96 ,000 all said and done. And I had refinanced about two years ago, and I didn't pull out all of the equity I had in there. The refinance price, they valued my building now at around$690 ,000, but I only pulled out$100 ,000 because I then was purchasing two more multifamilies.

24:23So I still had obviously equity in the building, but I didn't feel as though I needed to pull it all out. And to be honest with you, I didn't pull it all out because I didn't want my payment here in a balloon higher. Justin, can you just repeat those numbers again? So your purchase price and your renovation costs were how much? Purchase price was$165 ,000 and the renovation cost was$97 ,000. Okay, so you're all in for, just call it like$270 ,000, right? If we round up, add a little rounding there. Yeah, but it's probably more like two thirds or it's probably more like 300. I would say closer to 300.

24:54Okay, call it 300. You said it appraised for six, six 70, six 70. Man, that that is an amazing deal. To be all in at three and appraised for almost seven. So you were right. I mean, you said you didn't really know what the budget was going to be, but you had a gut feeling that it was actually going to turn out in your favor. Or how do you like, why do you think you were right? Because that's it's a big guess, but you were you were right. Like, what were you seeing that actually gave you the confidence that you would have so much equity in that view? Well, again, you know, I want to be transparent with everyone that's going to watch this that I didn't.

25:35I wasn't forecasting what the equity was going to be. That wasn't what it was about, because I didn't even know what that meant at the time. I was mainly looking for a place that I could run my business out of that was affordable. And to show you how expensive this area can be, the rent that I was paying in a thousand square foot space in the village where I was working was$300 more a month than it is for me to own this entire 3 ,000 square foot building. Oh my gosh. Wow. I know. But again, you know, I was very fortunate. The only thing that gave me hope that was a little bit of insight was if this building is a complete disaster and it's$165 ,000, the ones that I can't afford right now that are down the street, they're selling for$500 ,000 and$600 ,000, right?

26:28Like, why wouldn't mine be like that if I make it just as nice or almost as nice? That was the only thing I was going on, truly. That was it. Justin, I think I'm seeing a theme, though, in your story. like even going back to your first house hack, a lot of your investing is just driven by personal need, maybe is the right phrasing. But it's like, you needed a place to live. And you're like, hey, maybe instead of renting a place, I'll just buy a place and have someone else move in and do it with me. And then you basically did the same thing on this first commercial deal. It's like, I mean, I need a place to rent for my business.