She Lost $85,000, Then Made It All Back with a Single Rental Property

0:00What if the thing that is silently sabotaging your real estate business has nothing to do with finding deals, getting financing, or even managing tenants, and everything to do with the fact that you have no idea where your money actually went?

0:14Tony J. Robinson:And what if the best person equipped to fix that problem is a CPA who also happens to be a real estate investor, a homeschooling mom, and someone who lost money on flips and lived to tell the tales?

0:30This is the Real Estate Rookie Podcast. I'm Ashley Kerr.

0:34Tony J. Robinson:And I'm Tony J. Robinson. Let's give you a big warm welcome to Grace. Grace, thanks for joining us on the Real Estate Rookie Podcast today. Hey, thank you guys so much for having me. I'm excited to be here today. Well, Grace, let's start at the beginning. So your husband was actually the one to convince you to buy your first property in 2018. So take us back to that conversation. And were you on board right away. Okay. So I was actually pregnant with my second child at the time. And since I am a CPA, well, not since it's really more like I am a CPA kind of because I am highly risk averse. And so buying houses and investing like that was totally not on my radar.

1:15I, you know, I went to school to get a good job and then be a stay at home mom to homeschool my kids. Like that was my plan and buying houses was not part of that plan. And my husband had been kind of hinting for a while that he had kind of wanted to buy real estate and try that out. And every single time I just kind of blew him off and was like, yeah, whatever, this is not part of our plan. We're, you know, we'll just, yeah, yeah, yeah. Okay, honey. And then in, well, really in 2017, because we actually bought our first property in January of 2018. He said that he wanted to go ahead and buy a house.

1:51And I was like, well, I guess we have our first home already. We have one child. We're, you know, we're doing okay financially. So if something blows up, you know, we'll be okay. Not a big deal. Yeah, sure. Go have fun, meet with a realtor, go buy a property. And so he went looking and he wound up finding one that was really close to our personal home. and my grandmother, kind soul that she was, she's passed away since then, but she decided to loan us the bulk of the money for that property and my parents decided they wanted to get in on it with us so we formed a partnership and that's been great but we went ahead and bought that first property and we thought we were getting such a huge discount on it and it was retail, like it was still just below market value.

2:44Now I know better. But at the time, we were so excited. But because our financing was 30-year, 3 % fixed interest with my grandmother, that's the best cash-flowing property we've ever had. It worked out in all the best ways possible. But at that time, we still didn't know what we were doing. So that was kind of the story of our first property. And after that point, I was starting to network and try and meet people who needed help with their books and their bookkeeping. And at the time, I wasn't really serving real estate investors. And we had just had just one property. I was like, hey, this is my husband's deal, whatever.

3:26So I was networking. And since I was pregnant, I was like, I have a deadline on this of bringing in new clients. So I was like really hitting the pavement trying to get new clients. And that's when I fell in with the real estate investor crowd here in Oklahoma City metro area. And that's kind of when it took off because I started hearing the same, you know, birth strategy, go read Rich Dad, Poor Dad, you know, listen to Bigger Pockets, all of these different messages. And I started doing that and it just kind of went from there in my brain.

4:00Tony J. Robinson:Well, Grace, I definitely want to talk about the transition from that first year and how you scaled up from there. But I want to go back to something you said, because it did really stand out to me. But you mentioned the thought process you went through when your husband said, hey, I'm ready to finally go buy a piece of real estate. And you said like, hey, you kind of thought about, okay, where are we at financially today? We've already got the certain foundation. What is the worst case scenario? The reason I want to highlight that is that there are a lot of people listening today who have maybe been listening for a while.

4:31Tony J. Robinson:And they've read all the books, listened to the podcast, they've watched the YouTube videos, and they themselves have already been convinced that real estate investing is the right next step for their family, but they haven't yet been able to convince their spouse that real estate investing is the right next step for their family. So given that you were kind of the person who needed the convincing, what is your advice to those rookies who are listening that want to get their spouse on board with the idea of buying their first real estate investment? For me, now, I did go ahead and allow him to buy that first deal.

5:01And I thought it's self contained, it'll pay for itself, you know, and if it goes under, we'll just lose that house and we won't do this ever again. No big deal. But really what made me okay with the idea of jumping in and buying more houses was hearing the same message from other people who had done it. So, and I know this is, this is a hard bridge for people to cross who are trying to convince their spouse to invest because what happened was I went looking for something else and then found the answer of, oh, you really should be buying houses and investing in real estate from someone who wasn't my spouse.

5:42And then I came home and said, look what we can do. We can do this. There's this thing called the BRRRR strategy and we can do all this stuff. And he goes, yeah, that's what I've been telling you for years. So somehow he didn't force me to go and talk to those people. But if they can see from the other people that you have been listening to, or from the books you've been reading, or from the podcasts, or whatever, wherever you're gleaning your information, if there is something that can speak to them, or even if you can find out why are they opposed to investing? For me, it was risky, and I'm risk averse.

6:26And now I know that it's probably the least amount of risk I could take in an investment if we do it right. You know, so if it's someone who's risk averse, you have to go and help them see why, like what actually reduces that risk and how you're going to overcome those risk scaling obstacles. So. Grace, I think that advice goes with kids too. It's like my kids, I will tell my kids the same thing over and over, but somebody else tells them and they're more like 100%. This is why we pay specialists to tell our children things that we have been telling them their whole lives. So yeah, costs a lot of money.

7:08So Grace, with that first property, you ended up turning it into a rental and you said it ended up cash flowing. Great. Did you try out any other strategies besides long-term rentals? Yes. So we have done just a handful of flips, three to be exact. And all three of those did not go as intended and not in a good way. So our first one we did, it was about an hour south of where we live. So that was the first zinger for me is I had two very small children and I wound up having to drive an hour one way to go to this property with like babies. And that was not ideal. But it also we put it on the market right after COVID hit and that just totally blew everything.

7:57And we held that we wound up holding that property for I think it was like either just shy or just over a year. And it was supposed to be a four month long project. So yeah, that was a little irritating and we lost$15 ,000 on that. And then our second property, we went from, we were supposed to make like$60 ,000 on it to losing 55K. So, and that was like a combination of, it was just, we were supposed to fix up what was there. And then it turned into rebuilding the entire property except for the foundation and the stairs. So everything was brand spanking new and the contractor that we had on it just kind of hung us out to dry on that.

8:47And everyone got paid except us. So yeah. And then you did it a third time, right? Yes. And so to recover from the first two flips, we were like, okay, we got, we know what we're doing now. Like we we've got like a really, because our list of repairs on that second flip was so long, we knew how much things cost and on the higher end, because our contractor was fun like that. And, um, so we decided to go ahead and do a third flip to try and recover. And, uh, we wound up losing another$15 ,000, uh, because of the market change, like right in the middle of doing it. And also that house would have made a fantastic rental if we had not decided to flip it when we were doing all the repairs.

9:32So, but once we put too nice of finishes in it, we couldn't keep it. So we had to get rid of it.

9:39Tony J. Robinson:I appreciate you sharing the challenges, but I think for a lot of rookies that are listening, or maybe even the rookies that are like listening in the car with their spouses, or they're trying to convince to invest in real estate, like the other spouses, like elbowing them saying, see, I told you like real estate doesn't work. Like, how do you how do you stay motivated after back to back to back kind of punches in the face in real estate and not just kind of throw, you know, throw in the towel on real estate investing in general? So there have been many times when we have wanted to throw in the towel.

10:11However, and and these flips were not all back to back to back. Like the first one was in 2020 and then the second was a couple of years later. And then this third one was a year ago. Yeah, about a year ago. And so it, you know, we do lick our wounds a little bit and try and recover and figure out what we're going to do. And then we go get another one. But I have had a mentor for the past few years in the area and that has really helped because She's pushed us and encouraged us and hasn't really pushed us to like, go get a deal, go get a deal, go get a deal. But she's helped us when things get hard to not just wallow in despair.

10:55And then, and she's also advised us on like how to different strategies we can use to recover. So like that initial house that we bought in 2018, we actually sold it this past year. We did not really want to. It was bittersweet, but because it had almost doubled in value, we were able to sell it and recover 100 % from all of our losses from the flips. So that's kind of a, you know, we were able to wash things clean. And since we were in partnership with my parents on all of those, I wanted to do right by them and not have them just losing money. So we were able to do that, and that was a good experience.

11:34And she helped advise us through that and, you know, said, you know what? But in order to succeed in real estate, you are going to have to take your lumps and you're just going to have to keep going because it will swing in two different directions. Now, you also tried the BRRRR strategy on a property, but this actually went really successful for you. So tell us about this one. Yes. So thus far, we've purchased four rentals. and we wanted to do the birth strategy, but our lender wanted us to keep some skin in the game on the first two. So the types of loans we've been getting, they fund the purchase price and the repairs up to a certain percentage.

12:20And the first bank that we were working with would only do it up to 80%, but it's the lesser of 80 % of ARV or 90 % of whatever we put in. so we still had to leave in 10 so it wasn't a true burr and then so we did that twice and then we got with another bank and this bank didn't require us to leave the 10 in and that was the first time and i was like oh we act we actually get to do a burr i don't have to leave any money in this this is so fantastic so we we did that and that's been great so yeah it just it just

12:57Tony J. Robinson:depends on financing well grace one thought on that right um a lot of folks when they get one direction from one lender. They kind of take that as the gospel. Okay, this is what it is. Do you, like, was it just two lenders that you talked to? How many lenders did you have to maybe communicate with to find the one that actually solved that problem for you? Okay, okay. So here's the other thing. Yes, I do have a mentor, and she tells me all the right things to do. I don't always listen to my mentor, which is usually not the right thing to do. So, you know, you should listen to your mentor. And so what they advise is to, you know, be talking to five lenders at a time all the time.

13:36And, you know, you date your lender, take them out to lunch, do all those things, um, and really shop around. And I didn't really do that. Um, I am, I don't know if it comes across or not, but I am actually an introvert and, you know, I am an accountant. I like to be in my hole and count my beans. So I tend to not like going out and reaching out to potential lenders. And that is my job in our real estate investing business. My husband goes out and finds the deals and I make sure they close. So financing is really in my wheelhouse. And I haven't done the best job of finding various lenders to talk to.

14:15So I try to make all the deals work with either one or two different lenders that we have in our pocket. So that's kind of where that is. So ideally, I should be going out and talking to a bunch of different lenders. But I have mostly just used my network and find out the best options that everyone else is getting and go talk to that one bank.

14:35Tony J. Robinson:Yeah, I like that approach. And just for the rookies that are listening, I do think there's a lot of value in speaking to as many lenders as possible as you go through this process. Because although every lender is selling you a mortgage, they all have very different versions and flavors and types of products they can sell you in terms of what that mortgage looks like at the end of the day. And I have a student that I'm working with right now who just bought a short term rental in and somewhere in Colorado. I can't remember the exact city, but he basically has a connection with the local bank that he knows that will fund 100 % of his purchase and his renovation.

15:10Tony J. Robinson:As long as the spread between what he's buying it for, like his all in cost and what the after repair value is, as long as there's a big enough spread there, they'll fund everything. right and that's actually how i bought my first deal was i found a bank that gave me 100 of my purchase price and my renovation costs but it was only because the spread between that total all-in cost and what the property is going to be worth was big enough but not every bank can do that right so i think the more lenders you can talk to you the more options you have the more flexibility you have to actually get some of these sales closed so all right we're going to take a quick break but when we get back race is going to get into the nitty-gritty details of what she does and honestly it's something that i wish someone had explained to me when i was buying my first property.

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17:33Tony J. Robinson:Find a co-host at airbnb.com slash host. When you buy your first rental property, there's usually a moment right before you pull the trigger where your brain starts spiraling a little. What if I'm making a mistake? What if I can't figure this out? What if this whole thing becomes way more complicated than I expected? Honestly, building any business feels like that at first. And for a lot of investors, that next step is creating a brand, a website, or even a business around what they're building. And I've learned this myself. Whether it's real estate, building a brand, launching a side business, or creating something online, the hardest part is usually just getting started before you feel fully ready.

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18:51Shopify also has AI tools that help write product descriptions, page headlines, and even improve product photography. And instead of juggling five different platforms, Shopify puts everything in one place from payments to inventory to analytics. Plus Shopify helps you market your business with easy email and social media campaigns. So you can actually reach customers. It's time to turn those what ifs into with Shopify today. 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. Okay, welcome back. So Grace, let's get into this thing that makes you really unique on this show, the bookkeeping side.

19:37I want our listeners to really understand why this matters so much, especially early on. So most investors may not know a lot about bookkeeping unless they're like you and have a background as a CPA. And they may not be able to afford to outsource this with just one rental property. So what exactly does bookkeeping cost them and what can go wrong if you don't have a bookkeeping system in place? Okay. So when you are new and you only have one property or no property, you're, you know, really less than five, uh, you have a couple of options. You can either outsource or you can try and do it yourself.

20:16Um, if you try to outsource now, there are bookkeeping firms out there that do advertise, like we'll do your bookkeeping for 100 bucks a month, run away screaming. Don't trust that. They probably aren't doing the best job that they should be doing. But if you're going to get a quality bookkeeper to outsource to that has a team and the right tools, it's going to be$500 a month minimum. That's like the basic, basic, basic clients. So you're looking at$500 a month minimum to hire a bookkeeper. And if you have than five properties, you probably can't afford that quite yet. Or you could, but you'd be at zero in your cash flow and you wouldn't have anything for repairs.

20:56So you could do it yourself. That's the other option, which is a great option. But like Ashley was saying, if you're a new real estate investor, most oftentimes you are not also going to have a bookkeeping background. I'm weird because I do. So, and I love bookkeeping and a lot of investors just want to stab their eye with a fork rather than do bookkeeping. So, which I totally get, I work with a lot of people like that. So that can also be expensive or it can be less expensive depending on how you go about it. Now you can, you know, do the different types of software that advertise that they'll do it for you, or they have a lot of AI capabilities and, you know, and a lot of stuff like that.

21:39And those can be valuable tools. However, if you don't have already have the understanding of what the, the really the bits and pieces that need to go into that system and what information is needed in that system. Let me rephrase that. If you don't know, already have the knowledge base to know what needs to go into a bookkeeping system, you are not going to get quality financial statements. And if you don't even know what needs to go on your financial statements to show to your tax accountant or your lenders or how to make strategic decisions, then you're going to get whatever goes into it. And who knows what that is.

22:22So my advice is to find someone that can train you on how to do your own bookkeeping first. and that way you can develop your own system that is custom and tailored to your business and your strategy. Whether you are flipping, whether you're doing buy and hold, or you're doing wholesaling, maybe you're doing short-term rentals, maybe you're doing apartments. I don't know what you're doing. But find someone that can train you on how to do specifically that. You can build your own system. And then when you scale large enough, you can hand that on a silver platter to a bookkeeper and it won't be an expensive transition because usually you'll have investors that have done it themselves and they've got some weird system going on that may work for them maybe, but they don't know whether or not it truly does.

23:19And then once they get to the point where they can outsource it to a bookkeeper, they're handing them a paper bag full of who knows what. And the bookkeeper has to take what they have. Usually there is an extensive cleanup that is involved in that. And that is, you know, usually thousands and thousands of dollars. And then on top of that, you've got, you know, the minimum$500 a month and on and on and on. So if you can eliminate that cleanup process once you're ready to outsource, if you have built the system yourself and then outsourced, that is the way to go. Unfortunately, if you look around, a lot of accountants or bookkeepers aren't really willing to teach investors how to do their own bookkeeping.

24:00And that's where I come in. Well, that was going to be my next question as to, do you think like, okay, for someone like me, who's very introverted, I hide when the delivery person is at my house and I would not, you know, want to go and sit with someone sharing the computer screen, training me to teach me how to do something. I'd rather do it on my own or figure out. Do you think AI is a good resource for somebody to learn the basics of bookkeeping? Or what are some free resources that are out there that a rookie listener could start with to understand some of these basics? Okay. Okay. So there are free resources.