If early retirement seems out of reach right now, try semi-retirement. Once you get there, you’ll only be halfway to early retirement, just like today’s guest, Jessie Dillion. At only thirty years old, she is semi-retired and has scaled her real estate portfolio to almost two million dollars in nine months, with five properties total!

When people think about high returns, they often think about a high unit count—but why have a lot when you can do the same with a few? Jessie is strategic about each property purchase she makes and has made a goal to make one smart investment each quarter. She currently has a single-family home and two duplexes. One of her duplexes is a house hack, and her portfolio sports a mix of long-term, short-term, and mid-term tenants.

Jessie’s success is due to how responsible she is with her finances. To finance her first property, she built up her savings to ensure she had enough to cover any surprises. As Jessie continues to scale, she has gotten more creative with her financing. She has formed great relationships with her lenders because of her ability to ask questions and carefully choose where and how she gets her funding. Now she is semi-retired at thirty years old and pays a measly fifty dollars a month towards her mortgage!

Ashley:
This is Real Estate Rookie episode 231.

Jessie:
So an FHA loan is a low down payment loan. You can often put down just 3.5%, or most often you can put that down and it’s intended for a property that you are going to live in. You can actually use the FHA loan multiple times in your life. You can just only have one at a time. So, we got into this with the FHA loan, but a fun fact that in all my 365 days of research somehow never came is that there are FHA loan limits.

Ashley:
My name is Ashley Kehr, and I’m here with my co-host, Tony Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we’re bringing the inspiration, motivation, and stories you need to hear to kickstart your investing journey. I’d love to start the podcast off by shouting out folks in our rookie audience who have left us a review on the Apple Podcast platform. This week’s review comes from Ellie0303, and Ellie says, “This is the best podcast out there. Tony and Ashley provide a great base for rookies to get started that keep it light and interesting throughout the episodes. Highly, highly recommend.” Ellie, we appreciate you. If you haven’t yet left us an honest rating review on Apple Podcast, whatever platform it is you’re listening to, look yourself in the mirror, ask yourself what you’re doing with your life and go do what you’re supposed to do. So Ash Kehr, what’s up? How are things going in Buffalo?

Ashley:
Well, this is the first that we have talked since we both got back from BPCon. So you guys missed an amazing time. Tony and I had three speaking engagements we had to do, and we ended up going above and beyond for you, guys. We actually recorded six podcasts too.

Tony:
Was there? I lost track. I couldn’t even keep track at a certain point.

Ashley:
We had no plans to even do this, and we just kept finding people like, “We want to interview them. We want to interview them.” It turned out to be amazing. So coming up, we have Jamil from On the Market Podcast. We have Pace Morby, who is the Subto and seller finance guru. I hate to word the use the word guru, but master, whatever you want to call him.

Tony:
Right.

Ashley:
We have Investor Girl, Brit, and we also have Ashley Hamilton, who I think maybe had the biggest downloads or the most downloads for the Bigger Pockets OG podcast, too, when she was first originally on several years ago and then they just had her on again too. So that was our first time meeting her in person, but what a whirlwind it was.

Tony:
It was a stacked day, a few days of recording. What I really love, because we are the Rookie Podcast, we wanted to make sure that even though all those guests were experts, we brought them in to break down very specific things that they’re experts in this space so that you as rookies can follow along and implement what it is. So it’s not necessarily about their backstories, it’s more so, “Hey, here are some tactical things you can do as a rookie to implement the things that those guys and girls are world class at.”

Ashley:
Yeah. We also did an Instagram giveaway that we just all of a sudden decided to do Monday on the conference and then picking a winner on Tuesday. We got super lucky because we hit a rookie rockstar with the winners completely random draw as to who led it. And so, we will also have Ethan Wilson on episode 240, and he is going to talk about his experience. He’s fresh out of college, and he already has his own house hack, and he has a six unit and an eight unit under contract, I think, it was, just amazing.

Tony:
Yeah. He’s just been on some amazing things.

Ashley:
Yeah. So make sure you guys watch out, and we definitely have to get him back on to do his own full episode too, but yeah.

Tony:
Well, today, we got Jessie Dillon on the podcast. Jessie, she actually took Ashley’s rookie bootcamp earlier this year, and she’s gone on to do some absolutely amazing things. Man, we just really enjoyed this episode, and I feel like we could have kept going on and on and on, but Jessie talks about how she scaled from zero to almost $2 million in less than a year, and just all the kind of things that went into that. She talks about getting her spouse on board and what that process looks like. She talks about some creative financing strategies that she use to scale. So overall, I think this will be one of our top performing episodes because she’s got such an amazing story.

Ashley:
And I love the personal finance piece too of it, that she really built that strong foundation that we always harp onto. So if you need help with that, this is a great episode to listen to.
Jessie, welcome to the show. Thank you so much for joining us. Can you start off with just telling us a little bit about yourself and how you got started in real estate?

Jessie:
Yeah. So, my name is Jessie Dillon. I’m 30 years old. I live in Central Mass. Aside from real estate, I’m a wife, a stepmom. I own two businesses. I’m semi-retired now, which is so fun to say. I brought my portfolio from $0 to a million and a half in nine months with five doors. So I’m excited to talk about that. Yeah, that’s a little bit about me. Outside of all the real estate stuff, I’m a yoga fanatic and that’s about it.

Ashley:
So I’m curious, what are your two other businesses?

Jessie:
One of my businesses that I’ve had for about five years is a permanent makeup studio. So we do permanent makeup and beauty services. There’s also a side of it where I do business mentoring for other permanent makeup artists and that side came about when we had to close the salon due to COVID. And then also I have the real estate investing business.

Ashley:
Okay. Let me ask you this real quick before we get into your portfolio and your real estate investing is with that experience as an entrepreneur already, how do you think that has helped you? What skill sets have you brought from your other business into being a real estate investor? Even though they’re two completely different businesses, how have things correlated and help you that you already have some kind of entrepreneurial background?

Jessie:
I think there’s three big things that I just thought of as you were saying that. So one is that the people in my life have already seen me build something from nothing. So a lot of times getting started in real estate, if you came from a W-2, the people in your life might be a little hesitant to support you, but I’ve already proven to my network that if I want to do something, I can start it from nothing on my own. And then another thing too is, and there’s definitely a tipping point where this isn’t a good thing anymore, but I’m not afraid of making investments. I’m not afraid of just jumping in and learning how to swim once I get in. You know what I mean? So the fear wasn’t really there for me when I was getting started. And then the third thing is that I know how to hire and delegate. If I didn’t have the help that I have and wasn’t able to delegate to people, I definitely could not have made all three of these purchases this year.

Tony:
Yeah, I love that, Jessie. Ash, I’m so glad you asked that question because I feel like so many rookies, they miss that they have these transferable skills. They’re like, “I do this thing for my day job,” which has nothing to do with real estate investing, but if you really take the time to think about the skills and the abilities that you’ve developed, a lot of those are transferable. I mean, Ashley, what do you think? I know your career as an accountant was short lived, but what do you feel you learned in that? It was what? Eight months ago. What are some things you feel you picked up in that time that helped you as a real estate investor? I’ll share mine afterwards.

Ashley:
Yeah. Well, definitely just how to do bookkeeping. Also, how to sit at a desk for eight hours staring at a computer screen, that gave me some discipline, I guess. But also, even besides that job, I’ve done a ton of different side hustles. I sewed baby clothes for a year in my basement and sold them on Instagram and I made $16,000 off of doing that in one year as a side hustle, but I learned social media skills. I learned how to grow an Instagram, how to market myself. And so, I think no matter, any kind of business or side hustle or even a hobby you do, those things can definitely correlate over somehow.

Tony:
I had no idea that you know how to sew. I just learned something new about you. I’m offended I haven’t gotten a hand-sewn black T-shirt from you yet, so we got to change it.

Ashley:
I said baby clothes.

Tony:
So six foot one, 200 pounds, you don’t make them. You don’t them that big.

Ashley:
Yeah.

Tony:
But no, I mean, like I said, it’s a really good point, Ash. I’m glad you brought it up because for me, in my day job, before I went full-time in real estate, I was a manager for a network of warehouses, like distribution centers. At surface level, there’s no correlation between running a supply chain network and being a real estate investor, but much like you said, Jessie, I got really good at finding and managing talent in that job. I got really good at building systems, and I got really good at solving complex problems. I got really good at managing budgets. All of these things, even though they’re not necessarily related to real estate investing, they are things that are important if you want to be a successful real estate business owner. I mean, I feel like we don’t talk about that enough, Ash, about how those skills translate, and we should probably ask our rookies those questions more often.

Ashley:
Well, think about when we did the meet and greet right at BPCon recently, where someone said, “I have this job now, but I don’t know how any of the skill sets I have in it can help me get started in real estate investing. Should I switch careers or what?” And then we ask them the question, “Well, what is your job?” They’re like, “I’m a project manager in the tech industry,” I think it was. We’re like, “Right there, the first two words, project manager. Everybody, who here is looking for somebody to manage their rehab project and put in those systemic process?”

Tony:
Everyone’s paying for that.

Ashley:
Yeah.

Tony:
Right.

Ashley:
That was too easy for us to answer that one. But yeah, I think there’s always some kind of skill set or something in your job. Even leadership, maybe if you’re a manager or like my business partner, Darrell, he was a foreman. So having people work under him is a skill set that he has that he brought to the table.

Jessie:
Yeah. I mean, the more we’ve talked about it, I feel like there are more skills that have translated from one business to another than skills that have not. Obviously, I’m not going out tattooing eyebrows on my rental properties. I could do a great job of that, but I think the social media and like you had said, learning how to use social media, learning how to hire and manage people and building the systems, those are things that I was already doing, so I feel like I didn’t have that many new skills to learn.

Ashley:
And then, Jessie, you already had these two successful business models going. What made you decide, “Okay. I’m going to take on another business. I want to get into real estate”? What was that moment like for you?

Jessie:
Well, so leading up to those three months that we had to close when the pandemic started, I was working probably four full days a week, but I was putting in 40 hours in that time, and that was just behind the chair, so to speak, or with clients. Plus, I was doing all the office work behind the scenes. So then when I was forced to take a three-month vacation, which was a lot nicer than it sounds like it would’ve been, I was like, “You know what, I can’t keep that up. That wasn’t sustainable.” I can’t see myself doing that until the traditional retirement age, right? So that’s when I developed my business mentoring program and when I was like, “You know what, I’m going to scale back with clients and just figure out how to make up that income somehow.”
It wasn’t long after that, actually, all of this came about because of a Facebook clickbait article. I saw this article from Business Insider and it said that a 26-year-old girl was retiring, and I’m like, “Wait a minute, I want to retire too.” So I read it and I connected with her and I discovered FIRE, this whole movement, and then a FIRE podcast led me to your podcast, and I just totally binged it. This was last fall, so this was only a year ago. I knew I had to get in on this because the work that you do in the beauty industry is so physical, you wouldn’t really think so, but most people I know in the industry have neck problems and back problems and wrist problems. I was at the point, because of those issues, where I was going to so many different physical health appointments every week, like twice a week, if not more, and it just wasn’t getting better. So I knew that I couldn’t keep doing that physical work forever.

Ashley:
Plus, that’s also you, you are the person that’s making money. I always give the example of a chiropractor. A chiropractor can own his own business, but he’s only making money if he’s there cracking your back and that’s sounds the same as your position, too, is that you have to give up your time. There’s no way to outsource that unless you hire people under you, but I’m assuming a lot of the people are paying for you to do their makeup and everything and not someone else. So yeah, I can see how that can correlate. So after you’ve done your research, you started binging these podcasts. What was it like with your spouse, getting your spouse on board with us? How did you approach him?

Jessie:
So my husband, Pat, and everyone else in real estate will be so jealous of this, he’s an electrician, so I have that in the bag whenever something goes wrong with the electrical, but I got so excited about it. At first, I didn’t really think to share that with him because we each have our separate passions and interests and hobbies. If you look at my books and then his books, they couldn’t be more different. So I didn’t really think to share it with him at first until it actually came time to use our savings for this, but by that time, he knew how much of a student I had become in all of this. He saw the time I was putting into reading the books and doing the research and everything.
Just five years prior, he saw me say, “You know what, I’m going to quit my full time job and I’m going to go off on my own doing this beauty stuff. How do you feel about that?” Of course, he was a little nervous, but he saw what I did with that over the five years and he was like, “If you really want to do this real estate thing, I have no doubt in my mind, go ahead.” So I’m just very lucky that I had such a supportive partner.

Ashley:
Okay. So you talked about your life savings a little bit. How was the initial funding? Because that is usually the hardest hurdle for somebody getting started is the deal analysis and also how are they actually going to pay for the property. So, what were the first steps you took? Okay. You and your husband decided you’re going to go through and do this. Did you line up your funding first? Did you find the deal first? Did you start to build a team? What were the steps that you took?

Jessie:
I think we lined up the funding first. So, we had a pretty decent savings already. Once I started with the whole FIRE thing and reading the books and watching the documentaries and stuff, I jacked my savings rate way up. I was fortunate to be a high-income person, so it was a little bit easier for me. So I jacked my savings right way up. Initially, I was going to start investing aggressively in index funds until I realized that was still going to take me 11 years to achieve early retirement and I’m like, “I can’t keep breaking my neck for another 11 years. There’s going to be another way.” So we built up a lot of savings that we were going to invest that way. I had done my research on what it was actually going to cost to get into a property. So once we had that plus a buffer, plus our personal savings, we felt good about making offers.

Tony:
So, Jessie, I just want to go back before we drew a little bit deeper into the financing piece, because you talked about getting your spouse on board, and I know that that’s a question that comes up so often for new investors because they listen to the podcast or they watch the YouTube channel, or they read that book and now they’re hooked and they’re going down the rabbit hole, but their spouse isn’t going on this journey with them. I just want to highlight what I heard you say, because I think it’s important for our rookies to really let that sink in.
So the first thing you said is that you became a student, right? Your husband saw you going on that journey of educating yourself and whether it was reading the books or whatever you were doing, but he saw you go on that journey of educating yourself. So at least he knew that this wasn’t some… You’re not going in blind to doing this, which I think is important. And then the second thing, and you didn’t really say this, but it is what happened is that you had built trust in that relationship over time. You said that he had already saw you have success with this original business venture that you had, so he already had the confidence in you to go out and try this new thing.
So for our rookies that are listening, if you are the kind of person that has a different hair brain idea every other week and you never commit to any of those things, then when you bring up real estate to your spouse, they might be a little bit questionable about how serious you are about that thing. But if you can prove to your spouse maybe in a lower risk setting that you are committed, that you can do this for the long term, that you aren’t going to change your mind in a week and you’re going to take your whole life savings and actually make it profitable, then I think that’s important. So just building that trust, and I’ve never really said that out loud, but after you said that, I realized just how important that is.

Ashley:
Tony, are you thinking of how your music career took off and told Sarah how well your first-

Tony:
That’s exactly what-

Ashley:
… bet your hood off that she trusted you in short-term rental?

Tony:
That was the juice that started it all. So if you guys want to get your spouse on board, drop two mix tapes in your early 20s, and that’s how it goes.

Ashley:
You know what, I think the trust was really built when Sarah stood on the side of the road with you handing out mix tapes to people that walk in ice.

Tony:
That’s when I was CDs, that’s how it goes.

Ashley:
Yeah. Yeah.

Tony:
That’s how it goes.

Ashley:
That right there is some of it. Yeah.

Tony:
That was trust. But one other thing I want to hit on, Jessie, you also… Actually, before we go too far, I know you touched on this already, but just what’s the current portfolio look like today? How many units and where are those units at?

Jessie:
Yeah. So first, we purchased a two family home, a duplex about 20 minutes away and that we have two long-term rental tenants in. So we closed on that this past January. And then next we purchased a single family home, which is up in the Lakes Region in New Hampshire, and we use that as a short-term rental and we closed on that in the spring. And then lastly, we closed on our house hack, which is also in Central Mass. It’s a two-family. So we have a long-term renter in the other side, and we actually have a midterm renter within our unit too, because our unit is more space than we need. So that’s what it’s looking like now. I am hoping to keep up the pace of making one smart purchase a quarter.

Tony:
You did this in what span of time?

Jessie:
Nine months.

Tony:
That’s amazing, right? But I think people here, “Oh, I went from zero to…” I think you said 1.5 million in nine months, and you’re like, “Oh, man, that’s amazing,” but they gloss over the fact of what you said about rapidly increasing your savings rate and really going hard in your business and building that thing out so you would have the funds to go out there and buy all these units in nine months time. So if there’s a lesson for our rookie audience, it’s that if you have a really clear plan around what you want to do and you pursue that plan aggressively, a lot of good things can happen in a relatively short period of time. I think you’re a great example of that, Jessie.

Jessie:
Thanks. Obviously, it’s a privilege though being someone who can save any money at all. Not everybody can save money from their weekly or monthly income. So it’s worth noting that there are so many ways to do this. Even if you can’t save money, that’s just the way that we happen to do it.

Ashley:
I think earlier when you were talking about this too, you discounted yourself in saying you’re lucky to be high income, so it was easier, but think about how many other people are high income and they live paycheck to paycheck or barely meet their bills. No matter what your income level is, if you are disciplined to save, that is a great achievement on itself, no matter what your income is to be able to save. And then also something cool that I noticed here is that… So, you are house hacking now. So you also picked up your life of where you were living previously, moved to a house hack. So, what did that situation look like? Were you renting an apartment? Did you have your dream home and you decided to move to a house hack? Paint that picture for us.

Jessie:
Yeah. So we were renting up until we moved into the house hack. So we bought the first two investment properties while we were still renting. The reason was, A, we lived across the street from my parents, which we loved. It was so convenient and I love being close with family. B, our rent was just so good. It was too good to be true. So I’m like, “We’re only going to rock the boat for the perfect situation.” I refuse to raise our cost of living just to splurge on a house that we like. But from going from renting, and again, we had really cheap rent for the area that we live in, Mass is definitely a higher cost of living, but from going from the apartment to the house hack, we actually lowered our monthly cost of living by five to $600 and that’s including saving for repairs and maintenance, vacancy and CapEx.

Tony:
You’re so impressive, Jessie. That’s so cool, right? How many people can go from renting an apartment to buying a house and spending less money doing that while also getting all these other benefits to come along with home ownership? So, the house hack I think is one example of how you’ve been able to increase your savings rate. Would you mind maybe sharing some other tips and strategies that you and Pat, your husband, employed to save more money as you went on this journey?

Jessie:
Yeah. I mean, increasing the savings rate, obviously the one big thing is that’s not just cutting your expenses, it’s also increasing your income. There’s an unbelievable… There’s a limitless number of ways that you can do that, it’s just a matter of are you going to get creative or not? So while we were at BPCon, I saw Rachel Richards’ presentation, so I immediately got both her books and I’m halfway through them already. In one of the books, there’s a list of like, “Here are really simple ways that you can increase your income.” So people forget about that, but as far as reducing your expenses to bump up that savings rate, it’s easy things. Just thinking about every dollar you spend, are you spending it intentionally? If I DoorDash dinner when I don’t really have to, that’s not intentional. It’s not something I would feel good about a week from now. So am I really being intentional in spending in ways that I actually really want to spend?

Tony:
Yeah. Just one quick shout out for Rachel Richards, she’s MoneyHoneyRachel on Instagram. I actually met her with the first time at BPCon as well, and she’s got a pretty incredible story. So if you guys aren’t following Rachel, definitely go check her out. Ashley, I know you talk about this a lot too, about having the right kind of financial foundation before you get started. Jessie, you mentioned that you guys saved up enough money for your rental investment, but you also saved up enough money for your own nest egg to make sure that if things went south that you had that. Ashley, I think that ties in so perfectly with what you always say about building that foundation first.

Ashley:
Yeah. I feel like not that it’s been easy for you, but for somebody that hasn’t built that foundation, you’re going to struggle a lot harder getting three deals in nine months than if you have that cash in place for those down payments, where you don’t have to go and find a private money lender. You don’t have to go and use hard money. You can still definitely do it having no money, but when you have the money for the down payment, you have the cash reserve saved up, it’s easier to propel yourself without having to rely on other resources to get that done. One thing that I’ve been noticing a lot is people are asking the question, “Do I find the deal first or do I get the money first?” If you get the deal first, if it’s a great deal, the money will come, but it is so much easier when you already have the money to take down that deal, so much easier.

Tony:
Totally, right? Because it’s like you find a good deal, you just pay the money, right?

Ashley:
Yeah. You just buy it. Go.

Tony:
You just buy it, right? We’ve talked about this before too, right? It’s like when you have the money to solve a problem, you don’t really have a problem. You just write the check, you do the thing and then it’s done. I feel like that’s such a mindset shift that new investors have to make. It’s like money, it doesn’t solve every problem, but money solves a whole heck of a lot of problems in most people’s situations.

Ashley:
Yeah. So real quick, I just want to go onto a rant real quick about money and stuff, what’s the [inaudible 00:25:12]-

Tony:
Rant away. Let’s do it.

Ashley:
… and financial freedom. So if you are sitting there listening right now and you are thinking, “There is no way I can save money. I have expenses. I have a family. I have things to do,” first thing I challenge you to do is sit down, grow through your bank statement, go through your credit card charges, any cash you used. Do you have receipts from the cash that you spend? But pretty much nobody uses cash. So you should be able to see all of your expenses through your checkbook, your credit cards, your bank account. Okay. Look at where those expenses are going. Okay. Are they going to streaming devices? Are they going to Monsters at the gas station? Are they going to eating out? Are they random splurges at Target?
Write them down and I think you might be astonished as to how much you are actually spending in different categories. And then think about how much do you really want that first property? Is it worth giving up some of those things to get that first property? If you’re going to look at everything, just be like, “No, I don’t want to give that up. I want to enjoy my life,” okay, fine, it’s going to be longer and harder to get to what you want. Obviously, giving up your chai tea latte every day is going to not be enough to get you there, but if you can find somewhere to save even a couple hundred dollars every month, that is definitely going to make a big difference.
Once you start to see those savings build, you’re just going to want to propel yourself faster and you’re just going to want to put more and more money once you get that momentum going. So, those are just some things that you guys can try and look at that I feel like has helped me and other people, too, when trying to figure out where your money is actually going and get a hold onto your money, because if you can’t sit here right now and tell me where exactly your money goes, it’s just gone, then that’s where you need to sit down and really look at your expenses.

Jessie:
You had mentioned, too, giving up the chai tea lattes, and I feel like a lot of people think of that stuff as a sacrifice, but it’s really not a sacrifice. What are you sacrificing instead by buying it? If you’re spending money so frivolously and delaying when you can retire and have that time freedom, you’re sacrificing that every time you spend money unintentionally. You’re not sacrificing anything, it’s just trade-offs that you’re making. You know what I mean?

Ashley:
That is such a good point.

Tony:
Yeah. So I don’t want to make this sound counter what you guys were saying because I totally agree with what you guys are talking about in terms of managing your spend, but I also think there’s a fine line between doing yourself a disservice by not hiring certain things out. Like me, I feel like my time is better spent podcasting, analyzing deals, creating content for YouTube, talking to our private money lenders, all these different things related to the business. We almost never cook at home. We have a meal prep company that we use that delivers 80% of what we eat. If we’re not eating that, we’re DoorDashing something from the local food.
But for us, it’s made more sense from a business perspective to not spend four hours every other day prepping meals for the entire week. For us, it makes more sense to source those things out. So I think as you’re building your business, and obviously everyone’s financial situation is going to be a little bit different, but if there are, I think, things that you can delegate out to other people so that you can focus on moving those big levers in your business, sometimes it might be worthwhile to just pay this person to do it so you can go out and focus on that more, I don’t know, income-producing activity in your business.

Jessie:
Yeah, definitely. Agreed.

Tony:
I want to talk a little bit more about the funding side because you talked a little bit through, I think, the first one. So you have the duplex, the short-term rental, and then the second duplex. So, did you use just your cash savings for all three of those purchases or were you doing some other kind of creative financing to fund those?

Jessie:
Oh, I definitely had to get creative. I feel like as you go, you have to get more and more creative. So with the first one, we did use our savings, but fortunately, we were able to put down only about 11%, which is kind of crazy for an investment property. The reason we could put down less was because I got the property under contract for significantly less than an appraised at. So with that lender that we were using, they said, “If you get it 10% below appraisal, you can put down just 10%.” So I really pulled out all the stops to get it under contract for less. Yeah. So that worked out around here. So that property, even getting it undervalued, we paid 357. And so, having to put down 20%, that would’ve been a huge difference.

Tony:
Was this a small local bank or was this Wells Fargo or Bank of America?

Jessie:
This was Civic Financial, and they’re based in California. I just really liked the guy that I was talking with. So I had talked to a ton of different lenders and I really wanted to go with somebody who was personable and just seemed like they were really on my team.

Tony:
Can we pull on that thread a little bit, Jessie? So you said you talked to a bunch of different lenders and you were looking for that… What kind of questions were you actually asking those lenders to see if they were going to be a good fit to work with you?

Jessie:
So I asked questions like, “What are you going to need to see from me? What does the property need to be doing for monthly cash flow? What are you going to be looking for from me? And then how long does it take to close?” But honestly, I wasn’t getting super into all the details like that. I was really just feeling for who is someone that I feel like is going to be easy to work with. Whose personality do I jive with? With all three of my deals, I didn’t go for the lender that gave the best interest rate or the lender who had the lowest closing costs. I went with the person who I really felt like was pulling for me and was going to get it done and was easy to work with.

Tony:
So just a couple things, right? I love that you spoke to a bunch of different lenders because I think for a lot of new investors, they get somewhat tunnel-visioned or pigeonholed than just talking to the ones that they already know, but it sounds like you really did a lot of research around, “Who is the right person for me to deal with?” The second thing I want to call out is that by going with the bank that’s a little bit smaller and has some more flexibility, a lot of times you can get better loan products than going to the Bank of America or the Wells Fargo, because this bank said, “As long as you can get it,” whatever you said, “10% below appraised value, then we can reduce your down payment.” A big bank might not have that same level of flexibility, but the small bank, they don’t have to worry about the same policies, procedures, et cetera. All they’ll want to make sure is are you getting a good deal?
Ashley’s had amazing lending options from those small local banks. My first four properties I bought with zero money out of pocket because the bank offered a really great loan product. So for all of our rookies that are listening, if you find the right bank, it can literally change your entire life. As a quick side note, Henry Washington and I from On the Market Podcast, we were chatting during BPCon and he’s got a bank out where he’s at in Arkansas and they offer amazing financing options to him, where he’s able to refi really quickly without a seasoning period and just do all these other crazy things, but it’s all because he found the right lending partner. So I think for a new investor, one of the most important things they can do at the beginning of their career is spend the time to find the right bank because it can make all the difference. So you’ve got this duplex that you got with your savings at 11% down. Walk me through that single family home you guys turn into a short-term rental. How did that lending come about?

Jessie:
Yeah. So the single family home, we started making offers in January or February. So right after we closed on the first duplex, I took maybe a week to relax and then I was like, “We’re paused. We need to keep going.” So we started making offers. I probably made 10 offers and I did use a realtor for this one because it’s about two and a half hours away, whereas I did not use a buyer’s agent for either of the other two properties. So for this one, we made about 10 offers. We actually got one under contract and I was so excited about it.
During the due diligence period, I spent probably $1,500, maybe $2,000 in all sorts of inspections and a lot of issues came up and we weren’t able to come to an agreement. So I actually had to lose out on that. But in retrospect, that was really smart because two days after I lost out on that, I got this one under contract, which is way better, way better deal. So for this one, we used a second home loan, also known as a vacation home loan. So I put down 10%. Because vacation home loans are tied to you as a person, my DTI had to support that, so my debt-to-income between myself and my husband.

Ashley:
So, what about the house hack then? What kind of financing did you do for that? Did you do FHA or-

Jessie:
Yeah, for the house hack, we did FHA.

Ashley:
Can you just explain what FHA is in case maybe someone doesn’t know just what the difference is from the other types of lending you did?

Jessie:
Yeah. So an FHA loan is a low down payment loan. You can often put down just 3.5% or most often you can put that down and it’s intended for a property that you are going to live in. You can actually use the FHA loan multiple times in your life. You can just only have one at a time. So we got into this with the FHA loan, but a fun fact that in all my 365 days of research somehow never came up is that there are FHA loan limits. So for each county, there’s a limit to how high you can go with the FHA loan. So because this property was on the pricier side, we actually had to come to closing with more like 8%. So that kind of threw us for a loop, but I think in real estate, there’s nothing but surprises, so we made it work.

Ashley:
So when did you find that out during the loan process, once had already committed to the loan or when did that surprise happen?

Jessie:
So that was maybe a week after we had the signed offer by both parties.

Ashley:
So that’s something right there is there’s always going to be those surprises that come up that you may not expect to and that’s why I think listening to podcasts like this, you get an idea of things you should be asking your lender so that these surprises don’t come up as to… There’s so many different moving pieces no matter what type of loan or what kind of lender you’re going with that even today still, I worked with a hard money lender and I had a surprise come up, where I couldn’t refinance out of the hard money loan unless there was five properties or five units in total on that loan. I would have to refinance with a different product, and so that one built in and all these things, and that was like, “Man, I never even asked that question because I just didn’t even think that there would be a limit as to how many there could be.”
And so, I always try to find out as much information up front as to what that loan product is actually going to be and any obstacles that are going to come up. So Jessie, do you have one particular property where you want to kind of walk us through the process of purchasing it and what the numbers kind of look like today?

Jessie:
Oh, yes. Definitely.

Ashley:
Okay. Which one did you want to do?

Jessie:
I’d like to do the house hack that we’re in right now. I think that one is most exciting because I think a lot of people start with house hacking, or if they don’t, they should. So, I’d like to go through that one.

Ashley:
Where did you find this deal? What market is it in?

Jessie:
It’s in Central Massachusetts.

Ashley:
How did you find the deal?

Jessie:
On Zillow, I found them all on Zillow.

Ashley:
Okay. How much was the asking price and what did you purchase it for?

Jessie:
The asking price was 590 and that’s what I purchased it for.

Ashley:
How did you finance this deal? I know we already talked about that, but…

Jessie:
Yeah. The FHA loan, and we did about the 8% down, but I actually got 12,000 in closing costs covered, so that offset some of the down payment.

Ashley:
Can you explain that a little bit further as to how would somebody else be able to do that?

Tony:
Yeah.

Jessie:
Right. So, one thing that I think was in our favor is that I went straight to the listing agent, which I did for three out of my five accepted offers. I think building relationships, we can’t say it enough, is so important. So I went straight to the listing agent and we really built rapport and he actually was also the owner who flipped the house. So we had very few cooks in the kitchen here and that really helped me just build a relationship directly with him.
I just said, “I’m happy to give you the asking price. I think it’s totally worth it and it will be for me because the value really is what someone’s willing to pay for it. I don’t care what other homes are selling for around here. If my bank will give me the loan and the numbers work for me, then I’m not trying to just get a deal to get a deal, right?” So I was like, “I’ll pay the asking price. We’re comfortable doing no inspection, but can you cover 12,000 of the closing costs?” Like I had mentioned, I don’t go for the cheapest lender, I go for the person who believes in me and is really on my team and is hustling to get the loan closed. So yeah, my closing costs were high. I had a $7,500 lender fee, but I didn’t pay for it, so that was fine.

Tony:
So Jessie, first, I loved the idea of going straight to the listing agent and asking them to represent you because now that agent is almost more incentivized to work with you because they get a chance to maybe double in that deal, right? But one of the things you mentioned as a leverage point between you and the seller was that you agreed to wave your inspections. So you mentioned earlier that you had some issues pop up around your short-term rental, or at least one that you were trying to purchase that made you walk away from that deal. What made you comfortable and confident to waive the inspection for this house hack, knowing you had just walked away from a deal because of the inspection on that property?

Jessie:
Yeah, I think because the other property was going to be a short-term rental and so far away, if issues were to come up, it was going to be devastating to us. Let’s say the septic failed, because there was a septic tank at that house where the inspection didn’t go very well, that would be devastating for a short-term rental business. Whereas this being our primary home, there wasn’t a septic. There wasn’t a well. It was recently flipped. We learned so much from going through the walkthroughs on our other inspections that we knew a lot of stuff to look out for and we knew that we’re going to be in this home for the long term. This isn’t something that we’re going to try and turn around right away or sell in a couple years. We planned to hold it forever. So we were just more willing to deal with things if and when they come up.

Ashley:
Okay. So now that you’ve moved into the property and you have tenants in place, can you talk about what your rental income is from the long-term tenant and the midterm rental?

Jessie:
Yeah. So for our long term tenant on the other side of the duplex, the rent is 2,100 a month and that includes heat. And then our midterm renter in our unit, in our furnished guest room pays 1,700 a month and that includes all the utilities, but I made it a little bit juicier to get that higher rate by saying that I will do laundry service because the laundry room is actually through my daughter’s room. So it just makes more sense for me to do it anyways. Since we allow pets, since I’m lavishly semi-retired at 30, I’m home all the time, so I was like, “If you bring a pet, I will help with pet care while you are at work,” because I know a lot of these people work really long shifts, so that made it juicier.

Ashley:
So you are almost getting the amount that the long-term tenant is paying for this unit in your house.

Tony:
In one room.

Ashley:
Yeah.

Jessie:
Yeah.

Ashley:
So, how does that interaction work? I mean, do they even come out and hang out with you guys or what’s it like at the cabin areas? Yeah.

Jessie:
So we moved in at the end of August. Our long-term tenant, we already had lined up. She moved in September 1st. Our midterm renter, she actually just moved in four days ago and this is our first time doing that. So far, it’s working out great. I mean, because our midterm tenant is in our unit, I really went above and beyond to vet her and make sure we vibed when we were on FaceTime and we did a credit and background check and a full application, a full lease, but just for three months and it’s worked out really well. I think the benefit to us is just so worth it.

Ashley:
I think this is the first time we’ve had somebody come on talking about renting by the room as a midterm rental. Usually, it’s a short-term rental or it’s a long-term tenant and I really, really like this because if a long term tenant, you’re stuck with them for a while. You have them probably in a six month or a one year lease, so if things are not going well, it’s going to be harder to get rid of them. A short-term tenant, even though you can shut it off whenever you want and not have somebody in your house, you’re having so much turnover that it’s so many different people coming in and out of your house. Also, you don’t have the time to vet and FaceTime and credit and background check to make sure they’re not a serial killer when you choose somebody for three months. I think that is such a happy medium is that you get to live with somebody for a while, but it’s not a super long commitment too, but you can also go through the appropriate steps to vet the person that’s actually moving into your home.

Jessie:
We can always try it this one time and if we don’t love it, we can not do it again, but at least then we’ll have had the experience.

Tony:
We’ve got to coin that strategy somehow, the rent by the room, medium-term rental. I don’t even know. I’m trying to bur that, but I don’t know what sound that would be, RBTR, MTR. I don’t know. We’ll figure it out, but you got to coin that one because I think that’s such a cool strategy. Like I said, Ash, I haven’t really heard of many people combining the midterm stay with the rent by the room, but it’s like, oh my God, if you do that in the right market, that could be so exceptionally profitable without the work that comes along with managing a short term. So one question for you, Jessie, how did you find this tenant? Was it like Furnished Finder? Were you on Airbnb or some Craigslist, Facebook groups? What method did you use to find this person?

Jessie:
A combination of all of those. So I listed on Airbnb, which I already had experience with because of our short-term rental, so that was easy. I also listed on Furnished Finder and I posted in all of the travel nurse Facebook groups. I also had my assistant go in and search for posts from travel nurses with the words Boston, Worcester, Providence, close by cities so that she could comment on the post with the Airbnb listing. Ultimately, I found this tenant through Airbnb.

Ashley:
That’s awesome. That’s really cool. Yeah. Well, Jessie, congratulations on that house hack and thank you so much for sharing that with us. That’s really cool. I think we all learned a lot right there.

Tony:
Yeah. Just one last follow-up question, Jessie, I know you said that you decrease your living expenses by a several hundred dollars, but what’s your mortgage on that 590 purchase?

Jessie:
So the principal interest taxes and insurance is 38.50, and we have left over to pay out of our pockets 50.

Tony:
Wow. That is amazing. How many people can say that they live for 50 bucks a month, right? That’s so amazing.

Jessie:
And in a $600,000 house too.

Tony:
House, right? Yeah.

Jessie:
Yeah, I wanted to make that point too. I feel like a lot of people house hacking, if they’re just lowering their cost of living and not zeroing it out, they don’t really feel like it’s an amazing house hack. But I’m also investing for the long term, for the future. So every month, let’s look at this 590 purchase price, right? If I look back 20 years, the average annual appreciation in Mass is 4.6% a year. So in my mind, I’m like, “Okay. Over $2,000 a month is going into this invisible savings account for later, plus the debt pay down, so whatever is going towards principal every month.” So even though it feels like I still have to pay to live, I’m paying for the utilities and the 50 a month and stuff and whatever goes wrong, but I also have all that money going into this invisible retirement account. So even when it feels like it’s not a gigantic home run win, when I remember that, I’m like, “Oh, wait. Yeah, it is actually a pretty big one.”

Ashley:
It is a gigantic big home run win. I think too that, yep, you are so right, people get caught up in that they should be cash flowing or that they should be living for free, but you can’t compare yourself to other people. I mean, there’s people living in $50,000 duplexes that maybe they’re living for free, but you are living in a $600,000 house that’s getting equity built into it by mortgage pay down appreciation, and you’re only paying $50. So it’s so hard to compare apple to apples. It’s kind of like when people shot out their units or whatever to how many units they have, that is not a status symbol. That doesn’t tell you what their cash flow is or how much they’ve invested into the property. There’s no way you can compare each other to that.
But yeah, Jessie, congratulations. That is a gigantic home run, that house hack. So I want to continue having you share your wisdom. We’re going to move to the rookie request line. This is where you can leave a voicemail at 1-888-5-ROOKIE. Tony and I will get your voicemail and we may play your question on the show for a guest to answer. Today’s question is from Erica Albert.

Erica Albert:
Hi, my name is Erica Albert. I have a question. I was just listening to the podcast and it was all about you have to run the numbers, which I 100% agree with. And then Tony said you have to trust the numbers. My question is in regards to that. I’ve begun to not trust the numbers after using five different algorithms to predict rental revenue for short-term rental properties. How can you quickly assess these and really trust what AirDNA or Data.rabbu or PriceLabs is giving you? That’s all.

Jessie:
You could only trust them so much. It’s not as much a way to predict what the investment is going to do, how it’s going to perform. I think looking at all those numbers, and she’s right to use five different data sources or calculators, but I think getting those numbers is a better way to just compare different potential short-term rental purchases, compare them to each other. There’s not going to be a guarantee. There’s not a perfect data source. If you use five and take the average, that’s probably the best indicator that you’re going to get. So at a certain point, you just need to take the leap of faith. If everything is saying that it’s probably a good idea, I think maybe she’s just getting analysis paralysis and just running numbers till she’s blue in the face and it’s freaking her out and making her go backwards, but it sounds like she’s doing her homework. At a certain point, you just have to trust that you are making a good investment, that you know what you’re doing.

Ashley:
I think, too, is if there are different numbers, go with the lowest.

Jessie:
Oh, yeah.

Ashley:
Be conservative, pick the lowest one. And then if you get more than that, that’s great. That’s bonus money. But if you are feeling that there is a wide range of those numbers that you’re getting from these different softwares and platforms, then take the lowest and use that as your number to analyze the deal.

Tony:
Awesome. All right. Well, Jessie, I want to move us on to our rookie exam. These are the three most important questions you’ll ever be asked in your entire life. So, are you ready for the exam?

Jessie:
Oh, yeah. I’m ready.

Tony:
So question number one, Jessie, what is one actionable thing a rookie should do after listening to your episode?

Jessie:
I think they should pick the person on the Rookie Podcast that they felt like they could relate to most and just message them on Instagram and start a conversation. I did that with guests that I had heard on the podcast, and I feel like the trajectory of my career with investing has totally blown up because of just reaching out to those people. So if you feel like there’s someone on the podcast that you learned a lot from, mine was Amelia and Grace, I reached out to them. Otherwise, I wouldn’t have even known what midterm rentals are. So because of them, I only pay $50 towards my mortgage. So making a connection with somebody that’s just a couple steps ahead of you is my biggest action step.

Ashley:
Jessie, can you script that out? What do you say when you first messaged somebody?

Jessie:
I’ve messaged a bunch of people from the podcast.

Ashley:
Yeah. Do you have a question of mind that usually asks them, or are you just saying, “I love the episode you were on. You did a great job. I found this interesting”? How are you making that connection to engage them back into a conversation with you?

Jessie:
I think for social media in general, it’s a good best practice to always do an open-ended question, but it should probably be based on what they were talking about on the podcast. For example, when I first read that Business Insider article about the girl who is 26 and retiring, I messaged her and she had spoke to a couple books that she read. I messaged her. I explained where I’m at in three sentences, and I was like, “If you could recommend only one book to me, what would it be?” She recommended the Simple Path to Wealth and that book-

Ashley:
I love that book so much.

Jessie:
That’s a favorite of mine. I loved it. And that led to the next thing that led to the next thing. So that DM really is responsible for a lot of what I’ve done in the last year.

Ashley:
Awesome. Okay. The next question is what is one tool, software, app or system in your business that you use?

Jessie:
The one that we use the most is Monday.com. So it’s like a task tracking software. I’m in Tony’s short-term rental Facebook group and I shared our list for everything that we do on a repeating basis for our short-term rental in there. We could never keep track of everything in both businesses without Monday.com. I live by it.

Ashley:
Tony and I use that too.

Tony:
That post you put in the Facebook group, I love that one. That’s one of my favorite things I’ve seen in there, so I appreciate you doing that. Also, your answers to that first question about reaching out to guests, I think that might be one of the best answers that we’ve had to that question so far. So far, you’re passing this exam with flying colors, just to sum that up.

Jessie:
Nice.

Tony:
So last question, Jessie, where do you plan on being in five years?

Jessie:
In five years, I definitely plan to be fully retired from working in my beauty business. I plan to be location independent, but probably still in Central Mass because obviously I don’t like to go that far. I plan to continue, at least for the next year and a half, making one smart purchase a quarter, but now I’m transitioning to hoping to make those purchases with silent equity partners. That’s the shift that I realized I need to make and BPCon really helped me come to that realization that that’s what’s next for me.

Tony:
Again, the power of networking and surrounding yourself with the right people, right? So before we close out today, Jessie, I just want to highlight this week’s rookie rockstar. This week’s rockstar is Paul Bettencourt and Paul says, “I closed escrow on my first ever triplex. Such a blessing to be able to accomplish that.” Paul says, “This time two years ago, I didn’t have any rentals.” He had $20,000 in credit card debt, had two car loans, and they had a three-month-old baby with no financial plan and whatsoever. In the last 18 months, they’ve acquired five duplexes, a single family house, and this triplex all in California. So Paul, congratulations to you, brother. It sounds like an amazing journey.

Ashley:
Well, Jessie, thank you so much for joining us on the podcast. You did an awesome job and we loved getting to speak with you and to get all your advice and knowledge that you’re sharing with everyone. Can you let everyone know where they can find out some more information about you and reach out to you? Just slide into your DMs.

Jessie:
Yep, slide into my DMs on Instagram. I’m JessieDillon_ with an underscore at the end and I’m very active on there. So if you message me, I will definitely get back to you.

Ashley:
Tony, you know what I think the editor should do one time is go through our podcast and do the top five phrases we say, and I bet slide them to DM-

Tony:
Slide them to the DMs.

Ashley:
… is one of them.

Tony:
[inaudible 00:55:02].

Ashley:
Well, everybody, thank you guys so much for listening. Make sure you slide into Jessie’s DMs if you guys have a question or just want to connect with her. I’m Ashley @wealthfromrentals and he’s Tony @TonyJRobinson on Instagram and we’ll be back on Saturday with a Rookie Reply.(singing)

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.