We Sold Our Home and Lived in an RV to Invest (It Worked!)

17:37AJ Frandanisa:And the same time that they're kind of dispersing other funds like to agents for commissions and the seller for their proceeds, they just have another bucket then they give money to whoever that person is. Yeah, let me ask one follow-up question because I know that there are limits on seller credits, but are there limits on this escrow holdback? Like if I wanted the seller to hold back 10 % of the purchase price, if they wanted to, could they do that? Or are there also limits on how much can go into that holdback account?

18:04Nichole Frandanisa:It's a great question. Can I speak to it a little bit?

18:06AJ Frandanisa:I was just going to say, I'll let Nicole defer to that side. She's an agent, so she gets to deal with that a lot more.

18:10Nichole Frandanisa:So it's my favorite tool when negotiating with sellers to use both of those, both seller credits and this holdback or this seller invoice. There's two ways to do it. The escrow holdback is where escrow holds those funds after close until the work's been done, and then they pay the contractor. And your remaining funds technically defaults back to the seller as their proceeds. So that's how that one works. but what we really love to do in addition to this we've done it several times with other projects too is where the seller actually pays an invoice to our contractor at the time of closing there is no limits on that amount there is limits on escrow holdbacks there's limits on seller concessions but there's not limits on the seller paying an invoice so the way this works is my contractor comes in and says gosh the kitchen's going to be you know forty thousand dollars to complete and we've negotiated that the seller is going to pay that contractor and that invoice.

19:04Nichole Frandanisa:So the contractor gets paid at closing. They get paid up front. This is where the risk is. Any rookies that are listening to this technique, the risk is you're paying your contractor up front. So you have to have a really great relationship, rapport, and trust with that vendor. We're paying them up front for the work right at the time of closing and there's no limits on that. It's a really great workaround to leverage negotiations, but still fit within the limits of concessions and escrow holdbacks. That's fine.

19:31AJ Frandanisa:I've never heard of that before. That's like something new that I just learned in this podcast today, Nicole. So thank you for sharing that with us.

19:37Nichole Frandanisa:Of course. Yeah. And this particular duplex too, I think one thing that's powerful about that particular property, if I can unpack it real quick, is we found this property on market. It was on market during a really hot spell in our local market. And we saw it and we saw the potential of it because of two reasons. One, the seller lived in the house. The seller had lived in one side of the duplex for 25 years and it looked like they had lived in it for 25 years. The second was there was a giant fish painted on the front of this home, like a mural of a muskie or something like that was painted across this house.

20:15Nichole Frandanisa:That's our heartbeat behind our investing is if I can smell the house through the photos, I want to go see it. This is when everybody was wearing masks, but you wanted a mask on in this house. And so we met, we got to meet the seller as a part of that process. One, they had a really, really old agent. I'm talking like we were faxing documents back and forth and she was difficult to get ahold of. And at some point she just said, how about you just go there and talk to the sellers? I said, no problem. That would be my preferred. But we got to sit down with the seller and figure out what they really needed.

20:49Nichole Frandanisa:And they were stressed about downsizing out of this duplex into their RV. They were about to go into their RV season of life. And they just didn't know what to do with all their stuff. And so we got to come in really quickly and go, how about we solve that problem for you? One of the other things that we love to leverage when purchasing is we go, hey, seller, leave everything you don't want. Take only the stuff you love and leave everything else. Let me take a giant barrier off of your plate on this idea of you moving out of there and let's solve a really big problem right up front.

21:18AJ Frandanisa:Nicole, it's so interesting that you share that story because we've heard a version of, I got a really good deal because I helped the seller figure out what to do with all of their stuff. We've heard a version of that so many times on the podcast from new investors to experienced investors. But I think the lesson for all of the Rickies that are listening is try and understand what the biggest pain point is of the seller. And obviously this is so much easier when, as Nicole said, you can go and have a conversation with them, but sometimes even, you know, you can get that information through your agent and their agent, but the more intel you have about why they're moving, what their challenges are, what their biggest goal is, what's most important to them, the easier it becomes for you to craft a deal that actually makes sense.

22:05AJ Frandanisa:So like my mind is blown. I feel like this is like deja vu because you've heard this so many times before.

22:09Nichole Frandanisa:AJ always says, I'll steal your quote. Can I? Yeah, go for it. You saw this one coming. I always steal his good stuff. AJ always says you get paid in proportion to the problems you solve. And I think that is absolutely true when negotiating a positive contract for yourself and for the seller. The more problems you can solve, what a win for them. And the more problems you can solve, the better deal you're probably going to get.

22:31AJ Frandanisa:One thing I want to go back to with the actual rehabs you guys are doing because you're moving in. You said 80K on the duplex, 120K on the first live and flip. How are you guys funding those rehabs? And maybe if we start with the live and flip because we didn't touch on that piece before the break. 120K, were you just cash flowing that out of your day jobs? Where did you guys get the funds to actually complete the rehab? Yeah. So up until recently, everything we've done with been with our own money, we hadn't used hard money for anything. And I mean, ultimately, that probably kind of slowed a little bit of what we could have done and kind of seeing that now that we're starting to dabble in that.

23:08AJ Frandanisa:But we had really just used proceeds. So we'd sold our initial primary house, got about$70 ,000 from that, had about$30 ,000 or so in the bank at the time. And then both of us made decent money at the time, too. And so we just kind of bankrolled it ourself out of our own savings. we were talking about this and there was probably about six months where we had less than 10 grand in our bank account at any given moment because we were just putting money into the house constantly. And so we just kind of have rolled those proceeds. And so that first live and flip, we took the proceeds from that, rolled that into the duplex and remodeled it, bought it, bought another duplex.

23:45AJ Frandanisa:And so we've just been kind of bank rolling it ourself with proceeds and trying to multiply money to get more properties. And ultimately, even now, right, we we've leveraged houses, you know, that we've sold to get money to flip that we then partnered with hard money to try to, you know, magnify what we can do a little bit. Yeah, I think it's such an interesting approach, right? Because you're getting all this money tax free, because you're doing it as 11 flip, which then gives you like a bigger chunk of cash to put into the next deal, which then gives you a bigger chunk of cash to put into the next deal.

24:15AJ Frandanisa:And it just kind of starts to snowball from there. So I guess let me ask guys, like, are you currently doing a live in flip? Yeah, we're just wrapping up a live in flip. So we bought it about two years ago, and did all the interior moved in and they're just kind of finishing up the exterior. Now we're like a sidewalk away from it being done. So yeah, we're just wrapping up one now and then working on a actual more traditional flip as well.

24:39Nichole Frandanisa:What's the overview of your portfolio and the deals that you've done so far? Yeah.

24:44AJ Frandanisa:So, so far we've done two live and flip single families, two duplexes. One of them was much more of a value add. We had to do work to both sides and gut it and rebuild it. The other one, we ended up remodeling one unit that was in a little bit more disrepair and doing a little bit of exterior work, but the other unit was in decent shape. And then currently working on a single family flip.

25:08Nichole Frandanisa:Now for all the rehab and stuff, you know, you had mentioned you're doing some work and you guys each have your own lanes that you're working in. And Nicole, we'll start with you. What are your roles and responsibilities in the business? Because you guys have tenants too. Are you guys acting as the property manager? Yeah, we are. And it's taken some time to figure out what our lanes are. We both did a lot. AJ, a lot more. I'll be honest. He swung a lot more hammers than I ever did. But your girl can paint some trim dialed. But now what it looks like today is that I support all of our property management when it comes to the coordination.

25:44Nichole Frandanisa:We use a third-party tool. We use RentReady to manage our tenants, help to onboard them. And we only have a couple, a handful of tenants. And it used to be that we didn't wanna know our tenants at all. I wanted it to be strictly business. And now the landlord tenant temperature has changed in our state, in Washington State. And so now it's the opposite. I want to know my tenant. I want them to sit next to me at church. I wanna know where their mama lives, right? I want to know them and have relationship. So it means that there's a little less veil in that relationship, but we do do our property management.

26:16Nichole Frandanisa:AJ will still do some of the low level kind of handyman items, but we're quick to call our favorite contractors and vendors now, just recognizing that we're buying back our time. So that's what I do on our rental side. And then in our acquisition side, I spend time with sellers. One of my favorite things to do is to catch a cup a cup of coffee at the local diner with this sweet old lady that has an absolute hoarder in her house and we can't meet at her house because it is dangerous to do so. So instead we go get a cup of coffee somewhere else. And just to get to know that person and their circumstance, learn about their story, spend time with them, and then start to dig out.

26:53Nichole Frandanisa:As you were saying, Tony, what are those problems that we can help you solve so that you can move on to a new stage and journey in your life, hopefully a better one, and we can support in bringing new legacy to this home. So that's my lane. I do all of our negotiation and contract review, and then, of course, help resell the properties when it's time as well, because I have my agent's license.

27:15AJ Frandanisa:Yeah. Yeah, and my side, definitely more of like the systems and processes side. So keeping track of things like paperwork and whatnot and managing the rehab portion. So I did a lot of work on all of our properties that we'd acquired up until recently and have slowly tried to kind of get out of that, you know, finding the things that are my best use of time. You know, I might be able to do that work, but it's going to take me longer and it's probably not going to look as good. So it's better to pay a contractor. So have slowly kind of worked out of most of that. And so, yeah, so I definitely managed the actual rehab portion of things and then, you know, running all of our numbers, doing our analysis and due diligence.

27:53AJ Frandanisa:All of that side of things is kind of where I like to stick my time. That's where my brain works best on all the numbers pieces of things.

28:00Nichole Frandanisa:Can I brag on AJ real quick? Because there's some more here that he does for this. AJ also has this special gift of building vendor and partnerships with great contractors. So he builds such rapport. There's such respect. I'm sure it's a combination of the biceps and the beard. But nonetheless, people love to work with AJ. And it means that we get really incredible pricing, pricing on our, you know, all of our materials and labor, but also even really great opportunities with our hard money, you know, negotiated based on relationship, just really great rates that way, too. So that's his superpower, even though he didn't mention it.

28:39Nichole Frandanisa:And that is a valuable tool to just know of and to work on is building those relationships with different people in the industry. Yeah.

28:48AJ Frandanisa:On that note, I think for a lot of rookies, finding good contractors is one of the hardest things to do. They can understand how to underwrite a deal and, you know, they can put all the numbers together on a spreadsheet. But when it comes to finding the people to actually do the work, that's where a lot of folks get stuck. So AJ, what would your recommendation be? If I dropped you into a brand new city, you had no contacts, no preexisting relationships, what are you going to do to rebuild that roster of great contract labor? Yeah, that's a great question. Yeah, I think probably the first thing I'd do is I'd find community.

29:19AJ Frandanisa:I'd find community of investors and I'd build a relationship with them first and I'd find out who they like, who they trust. Because if I can have a relationship with somebody that then opens up their Rolodex to me, that's going to change the game for me. I can go through a list of contractors and try to read reviews and maybe get some, you know, testimonials, if you will, from previous clients. But that's something that can be really easily defrauded and somebody could have fake reviews and testimonials, things like that. But if I can sit eye to eye across from another investor who says, hey, you should use my guy.

29:50AJ Frandanisa:He's great. He has fares prices. Here's his number. I'm going to take that with a little bit more weight because those are people that I'm also trying to be like. I'm trying to continue to grow investing. And if I can find good, trustworthy investors that then trust me to have their contractor's information, that would probably be step one for me.

30:07Nichole Frandanisa:AJ, I want to get your opinion on a rookie just getting started. What is like one of the first systems and processes that they should actually implement when they're investing?

30:18AJ Frandanisa:Yeah, I think that depends a little bit on kind of what the strategy is. You know, for us kind of initially, like didn't really have a whole lot of like spreadsheets. Like our first live and flip, it was like, yeah, I think we can probably do it for about X amount of dollars. And so I think having a way to track your budget and then knowing kind of what the total amount you want to spend is and getting a good idea of what that looks like on the front side will help you on the backside. So you're not spending more than you actually wanted to. And then for the landlording side, having a good system like a rent ready will make your life a lot easier.

30:48AJ Frandanisa:Having good way to track your rent, a good way to track your expenses, having a good way to keep your documents in one place. So you have your leases, you have all everything's coming into one portal. I think that's huge, too. It's going to take a lot of the brain damage out of things as you're trying to learn landlording.

31:05Nichole Frandanisa:And BiggerPockets Pro members get rent ready for$1, too. So if you're a pro member and it's also really affordable, too, if you're not a pro member. So check out rent ready. OK, we have to take a short break. And when we come back, we're going to discuss some more advice for rookies and what they can do if they want to get started.

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33:25AJ Frandanisa:But while I was there, I was thinking that while I'm on the East Coast, my home was sitting completely empty the entire time I was away. That's why Airbnb's co-host network is such an interesting idea. If you've ever considered listing your space on Airbnb, but don't want to manage everything yourself, you can hire a local co-host to help create your listing, manage reservations, message guests, and provide on-site support. Find a co-host at airbnb.com slash host. Tax season reminder for all the real estate investors listening. If you own rental properties, short-term rentals, commercial buildings, basically anything that's not your primary residence, you need to know about cost segregation.

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35:16Nichole Frandanisa:Okay, we're back. And thank you guys so much for taking the time to check out our show sponsors during these ad breaks. Okay, Nicole, so you've surrounded yourself with an investor community to help grow your investing. Throughout the episode, you've given us multiple examples of how that has really helped your business. Why should a rookie investor find a community or a group of investors to connect with? Why shouldn't they just go out and do everything on their own? Yeah, great question, Ashley. I think A.J. and I were just talking about that this morning. It's actually not about houses at all.

35:50Nichole Frandanisa:Everything we do in real estate almost has nothing to do with the property itself, but the relationships that surround the property, right? If you're investing and you're going to be a landlord, well, then your tenants are a crucial piece of what you have going on. If you're buying flips, then you have a relationship with the seller and the contractor. And if you want a good reputation, you should probably have a good standing with the future buyer, right? Relationships through and through are the heartbeat and the thread of real estate investing. And so finding a community and your footing in a real estate investing community can be such a game changer in setting you apart and ensuring that you don't make mistakes that a bunch of other people made before you.

36:29Nichole Frandanisa:So our version of that is we go to investor meetups. There was a longstanding meetup in our community that had been meeting already for years. We showed up, figured out how we could pitch in and be helpful. Once again, value add is the name of the game for us. Value add on properties and also value add in relationships. So we became so valuable to that investor community that we actually get to host that space now. So we gather anywhere between 60 to 200 investors every single month in the state of Washington. And we host spaces. We bring in great speakers to teach us all the things we don't know how to do.

37:03Nichole Frandanisa:And the plus side of being the host of that is I get to ask all the questions that AJ and I have. So it's like free consulting with top level investors. You bring them in to talk and you get to ask all your great questions. What do you think you're doing with you guys right now? Yes, exactly. But folks want to share what they know. And that has been such a big space. So that's called WARI, Washington Real Estate Investing. It's a Facebook group turned into an in-person meetup. And it has been hands down, probably the largest launcher for us in our investing because you build relationship with people that you can just ask questions to.

37:39Nichole Frandanisa:And they're so excited to give you all of their resources, right? The budget sheet that AJ is referring to that we use to build out the scope of our projects. Somebody else made that. We didn't build out that spreadsheet. Somebody else gave us that tool and we get to benefit from it every day.

37:55AJ Frandanisa:Yeah. I think community is such an important part for folks who are on the beginning part of their journey because for so many rookie investors, you almost feel like you're doing it by yourself. And you don't have maybe that best friend who's right by your side and doing it with you. You kind of learn real estate in a vacuum. But I think real estate becomes so much more approachable and tangible and realistic when you can have conversations with people who are actually doing it. And it feels like something you can actually accomplish when you can shake someone's hand who said, oh yeah, I just did this thing that you've been afraid to do for the last however long.

38:35AJ Frandanisa:So love the value of community. AJ, what about you? I know you said you guys have a flip that you're one sidewalk away from being done on, but maybe give us a quick update. What's been going on in this last project you guys are working on? Yeah, that was a, that was kind of a long, a long process to get to the closing tip on that one. And I think that's a lot of where Nicole really brings their value is, you know, being able to build relationships and build rapport and, you know, help kind of suss out what the problems are. And this particular property had about 10 to 12 people living there. Some of them not so invited.

39:07AJ Frandanisa:There was an RV that was on the property. And, you know, just some individuals that maybe weren't necessarily treating the people and the property around them with the same level of respect as maybe what the homeowner had wanted. And then the property had fallen into some disrepair as well. And so that one, you know, we got to the closing table. There were some family members that were really involved that really worked hard to also try to help this, you know, sweet older gal move on to the next stage in her life well. And part of that was helping her get some of these people off the property as well.

39:38AJ Frandanisa:We provided some resources to them. But, you know, they definitely stepped in to help take care of the folks that were around the property that shouldn't have been there. But they came back to the property and did take some things that after closing was kind of the we were going to keep. But in the end, it wasn't necessarily a huge impact to us. It was just kind of par for the course. It just kind of comes with the territory when you're dealing with properties that might have a level of distress. You know, distressed properties are typically just a byproduct of distressed people. And that's why taking care of the people are so important, at least to us, because those people are really the more important part of the process.

40:17AJ Frandanisa:That's the most important part for us, at least. So, yeah, that property, you know, we quickly, you know, got dumpsters onto the property before we even closed on it to give the family members a place to put things that they weren't going to take. And then after the fact, we quickly tried to remove everything from the inside of the house so that there would be less incentive for people to come back. Let me ask, guys, because you're mentioning some issues that I think as a first-time investor would have thrown you off your game. And it feels like, man, the world's coming to an end. But now as a more experienced investor, it just kind of rolls off your back.

40:49AJ Frandanisa:What do you guys know now after having done multiple of these types of projects, regular flips, living flips, your property managing? What do you know now that you wish you would have known on that first project that you stepped into? Yeah, I think what we know now, I kind of wish that we know a little bit more at the beginning was it's really not that serious. I think some of the things that feel like really big problems, once you've dealt with them a time or two, they ended up really not being that big. They're just another problem that you have to solve. And so when you find those problems, then you know at least how to solve them.

41:20AJ Frandanisa:At least that's for me. I don't know if you have something different.

41:23Nichole Frandanisa:Yeah, I think there's this concept of trust, but verify, right? That's something I wish we knew straight out of the gates. On our very first project, that live-in flip where we lived in the RV in the driveway, we had a contractor steal from us then too. So now as we've spent more time and we're a little bit more strategic in our investing, we trust but verify. If we have a new contractor or a new company working with us, or even if we're working with a seller and they've said they were going to go do something, we show up and go look. So we are local investors. We usually invest within 20 to 30 minutes of our personal home, which means we get to be on site.

42:03Nichole Frandanisa:And then the last thing I love about this is if you're investing anywhere, meet the neighbors. If you're going to buy a home, even if you're going to keep it as a long-term rental, short-term, or you're going to flip the house, meet the neighbors. They become your biggest resource, in my opinion. and if you build great relationship, I'm talking, I send the neighbors of our flip coffee cards every time our contractor pulls into their driveway accidentally, I'm sending them thank yous, I'm giving them phone calls, checking in on them, but they end up being your eyes and ears when you're not around.

42:37Nichole Frandanisa:So sure, you might end up with a few extra phone calls of complaints from a neighbor that says the hammer was swinging a little too late, but I'd rather them call me than them call the cops. So that's my other tidbit for a rookie investor is build a relationship wherever you go, have a high level integrity. And if you leverage that and keep that reputation, it's definitely gonna serve you in the end.

42:57AJ Frandanisa:Adding onto that just briefly too, part of that trust but verify process is to get everything in writing. If it's not in writing, you have nothing to go back on if it didn't turn out like you wanted or didn't turn out like you agreed. If you just had a handshake deal on something or you just talked about it when you're at the property with somebody but never got it in writing, ultimately that's on you. if it doesn't turn out like you wanted because you have nothing to go back on and stand on and say, no, we agreed to X. And the contractor or whoever that other person is says, well, I remember it this way.

43:25AJ Frandanisa:If you don't have it in writing, it doesn't, it's not real.

43:28Nichole Frandanisa:Well, Nicole and AJ, thank you so much for sharing your advice with rookie investors and coming on today. Can you let everyone know where they can reach out to you and find out more information about your journey? Absolutely. Instagram is probably the best way to find us. We're on Instagram. I'm at Nicole Fran Denisa.

43:45AJ Frandanisa:Yeah, and I'm at Anthony Fran.

43:46Nichole Frandanisa:And we'd love to connect. Hit us up in the DMs. We'll see you at the conferences out there in the wild. But truly, thank you guys. Are you going to be at BPCon? We want to go to BPCon. We might be there. Okay. Yeah, we'd love to see you guys there. And I'm sure everyone listening would love to connect with you guys at BPCon. Well, thank you guys so much for joining us today. I'm Ashley. He's Tony. And we'll see you guys on the next episode.

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