6 Rentals in 5 Years and Fast-Tracking Financial Freedom

Ashley:
Would you trade your wedding for a rental property? Today’s guest did exactly that, swapping vows for equity, and now he’s building a real estate empire, long distance

Tony:
Filling, unfulfilled in the corporate grind. He made the bold leap to real estate investing halfway across the country, and today he’s breaking down exactly how he did it.

Ashley:
This is the Real Estate Rookie podcast. I’m Ashley Kehr.

Tony:
And I’m Tony j Robinson. And let’s give a big warm welcome to Dean Pinhas. Dean, thank you so much for joining today, brother. Thanks for having me, guys. I appreciate it.

Ashley:
Dean, you started your journey unconventionally trading your wedding budget for a house. Can you walk us through the emotions of making that choice?

Dean:
Yeah, I mean, to be honest, it was a fairly straightforward decision for us. I don’t want to play the victim or anything, but my wife and I, we never really felt that we were big partiers or really had that craving for a big wedding. And we said, you know what? We both, obviously you marry someone that you have shared interests and goals and a vision with, and we both had that kind of desire to start off on the right foot and set ourselves up for financial success. And we thought that was the best way to do it is we’re very fortunate to have parents that were willing to contribute what they would have for a wedding. And even to have done that much, we were going to have a wedding and so we found a house and it was a great way to start this whole journey.

Tony:
Did you have any pushback from folks on, man, you guys have to go the normal traditional routes, and if so, how did you kind of ignore those naysayers to stick with the plan that made the most sense for you?

Dean:
Yeah, in hindsight, it’s funny you bring it up because I think at the time there wasn’t any pushback of like, are you guys sure? Are you going to regret not having a wedding? It was less so that and more so after the fact when you go on a trip or we on, we saw a honeymoon and stuff like that. And then people ask, how was your wedding? Or where was your venue? And you go, well, I didn’t really have a wedding. And then you explain the whole thing of we used the money and we put it to a down payment, we bought a house. And everyone’s reaction is pretty much universally like, wow, that’s so smart. I should have done that. So it was actually I think pretty positive in hindsight telling the story and not so much pushback in the moment, which is I think great

Tony:
Ash. I think that’s just something for our Ricky audience to understand is when you’re trying to do things that aren’t normal in society, and I’d say building wealth through real estate is not necessarily normal aside from your primary residence. A lot of folks don’t invest in real estate or think of real estate as an investment. So when you’re doing something that’s not normal, sometimes you try and explain that idea to someone beforehand, right before the results are there. They kind of give you this weird look like, man, are you sure you want to do that? Or are you sure you don’t want to have a big wedding or you sure don’t want to do this? And I think at times we can get influenced by people whose ideas and values, like you mentioned earlier, Dean, whose ideas and values don’t align with our own. So just a word of advice to all of our rookies that are listening. You’ve got to be able to, I think, block out advice from people who aren’t thinking the same way that you think or from people who aren’t trying to achieve the same things you’re trying to achieve.

Ashley:
I think that goes along with even house hacking. You get married, you buy your first house, and I think some people have kind of the same reaction about that. You’re not buying a single family home, you’re going to buy a house and rent out the other rooms to each other or to other people, or you’re going to buy a multifamily and rent out the other units. I feel like people gauge that is almost the untraditional route of doing things, but then look back and that’s actually pretty smart that you’re doing that.

Dean:
Yeah, it’s funny actually, I was on social media and I stumbled across these people that moved out their house and sort of became homeless intentionally living out of their car. And they were like, we just couldn’t get ahead. We just really felt like this could help us get a leg up on our finances. We have jobs, we work full time, we could afford it. We just really wanted to take this step that, I mean, obviously’s a pretty dramatic one, but I mean there’s so many examples I think out there of people talk about the classic ditch your daily coffee or this and that, but sometimes going against the grain and doing those really unconventional big moves can have big payoffs

Ashley:
And too, you really have to think about why you’re going to do something or why you’re still doing something. Is it because of what other people will think or is it because it’s truly this is what you want to do. For example, moving out of your house and living in your car for a while to get ahead. That’s something I could see a lot of people not doing because they don’t want other people to see them as a failure or see them doing that. And that’s the only reason that they’re not making these hard decisions and choices that are going to set them up better in the future is because they’re afraid of what other people will think or say. And it’s like, who cares if it’s going to get you farther ahead in life? Go ahead and do it. Daryl, he drives this old clunker SUV, it died the other day and he’s so mad, but it’s like no car payment.

Ashley:
And it’s like, yeah, people probably look at him driving this thing and he dresses like a homeless man anyway, so he’s already got the persona, but it’s like he does not care what people think of him driving a car and we don’t care at all, and it’s because we don’t have a car payment. So I think it’s when you’re in these kinds of decisions, you really have to think about why are you doing something or not doing it? Is it because you care what other people think or is it because you genuinely really want to stay in your home for your kids and not uproot them or something? But yeah, I think a point where people kind of misunderstand what they really want out of life because if there’s something you really want to have financial freedom, these are the sacrifices you can make to actually get there so much faster.

Tony:
And Dean, I think you’ve done a great job even just so far of illustrating that. And Ash, I love everything you said, but I know for you, Dean, that you were working for the feds, you were working at the Federal Reserve and you realized that maybe it wasn’t the right fit for you, I guess, what was that specific moment that made you feel trapped that led you to seek something more?

Dean:
Yeah, I mean, listen, ultimately, I don’t want to sound like an egomaniac or very arrogant or anything like that, but ultimately I’m a pretty confident person and I have faith in my abilities in who I am, and I just didn’t feel like I was getting ahead at the Fed. I didn’t think at the Federal Reserve, I just felt like maybe I had more potential to give than what they maybe thought or saw in me. And I just didn’t think I was cut out for that cubicle life. And so again, it was all part of this big picture decision and it happened step by step. While I was working at the Federal Reserve, I actually tried to get, I got my real estate license and I thought maybe that’s something I’ll do on the side. Maybe it’ll help in learning how to invest in real estate. And so I just ultimately didn’t feel like I saw a future there and I didn’t really feel like they saw a future in me and one thing led to the other, and here we are.

Ashley:
So at that point in time when you decided to quit, where were you in your real estate journey?

Dean:
Yeah, so frankly nowhere, the jump was pretty extreme. My wife and I had this vision of one, I was kind of coming home at night and sitting down watching tv and I had the laptop in front of me and I was doing this real estate course school to become a licensed real estate agent. And then I achieve that and then it’s like, okay, well what’s next? Do I do that full time or not? And again, fortunately you’re going to hear me say that a lot because I really do. As life goes on, I think I’ve learned that circumstance and the people who you have around you and your network, it’s all very important in the success that you have. And I think that I’m very fortunate in those things. And I happen to have an uncle who owns a company doing home improvement construction in la and I happen to go out there just to visit family here where I’m at now.

Dean:
And a couple of things fell into place. I said, I don’t really want to be at the Fed. I’ve got this real estate license. I know I want to invest in real estate and I’ve got this opportunity to go and to be able to get a better income so I can afford to invest in real estate. And that’s ultimately kind of how it fell into place. So we had bought that first property using the wedding down payment, and then from there we said, okay, how do we grow our income? So whether it’s doing the bur method or fixer uppers or house hacking, but we knew we needed to get some sort of cash to be able to start with it.

Tony:
And Dean, I definitely want to hear about this move to Los Angeles because I think most people try and move away from high cost of living markets to kickstart their invest career, but you kind of did it the other way around, but I know that that growing up your family rented out their homes after moving. How did witnessing that passive investment influence this decision to really jump in full force into real estate investing?

Dean:
What’s really funny about that is I might tell you something that you may not have heard before, which is actually, so having witnessed it, I saw the potential that it had, and again, fortunately enough, my parents, we were able to, when I say they invested in real estate, basically what happened was is every home we lived in, they kept and then eventually would buy a new home. And so it’s not like my parents had an empire, but I think at the peep, we probably had three homes that my parents owned at any given time that were rentals. But funny enough, at some point my dad said, you know what? I don’t want to be a landlord. I’m tired of these tenants smoking in my houses and ruining everything and turning them over. And those are also the times of oh eight and big market crashes and equity going down. And so actually my dad was very much against me pursuing real estate investment as a venture personally. He cautioned me against it. He thought it might be better off to go into the stock market and invest in funds and individual stocks and things like that. So in one hand it was great because I witnessed it and saw the power that it had. But on the flip side, actually, I had a lot of pushback from my family from pursuing that as well.

Ashley:
That’s interesting. We usually never hear that side of it of saying, I do remember a couple guests saying maybe their dad or an uncle or someone had failed and completely gotten out of it and they say, do not do it or whatever, but your dad seemed like he was successful at it and he’s still telling you, no, don’t go this route.

Dean:
Right. And even to this day, I think I mentioned this to you guys when we spoke before, but we now have our sixth rental property, and every time I tell my dad we’re closing on another property, he’s like, you should diversify. I don’t think you should do this. Don’t get it over your head, which is obviously great advice. But it is funny that he’s very cautionary in that way with real estate.

Ashley:
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Dean:
So it’s actually kind of funny and it’s a weird picture to paint. I don’t think people really think of it much. So what I do now is home improvement. I’m a licensed salesperson in California and I go out and I help people who want to remodel their kitchens, bathrooms, do home additions, garage conversions, which are really popular here in la. And really what happened was at some point my wife went on a girl’s trip, I think it was to Nashville or something like that, and I said, if she’s going to go there, I’m going to go visit some family in la. And I went to go visit my two uncles that I have here, and they’re both in that industry of home improvement here. And I remember one of them took me down the Pacific Coast Highway in his Ferrari and we went to Nobu and he bought me a super expensive lunch at Nobu.

Dean:
This sounds like a great day. It was a great day. And to be honest, for many years I was very distant from that side of the family. We moved around a lot when I was younger. And so I think part of it was him intentionally trying to show me a good time. That wasn’t a normal occurrence to do with my uncle, but I remember asking him some details of, obviously I kind of knew in the periphery as a kid growing up, he’s in construction, but I didn’t really know what that meant. And I started asking him more particulars of how much does somebody make that works with you and what does that look like and what’s not even the average, but what is just the okay person doing? And the numbers he was telling me, I was like, this is crazy. I would never have thought that or imagined it.

Dean:
And I came back home, flew home to KC, and my wife and I were catching up from our trips and I think I said something kind of like if all things were the same, if I still would’ve met you and married you, it would’ve been great to start out my career in LA just based on what I was hearing. And she kind of gave me the nod of then go, and that’s what I did. So then obviously we made a plan, we spoke it over, I called my uncle, I said, Hey, would you be interested in hiring me? Could I work for you? And he was super open to it and went and gave my notice to the Federal Reserve and actually went out to LA by myself at first for three months to kind of test the waters and see how things were going.

Dean:
And then when it seemed all right though, the timing was really funny. That was right when COVID started, literally March 2nd, 2020, I moved out there and there was a brief conversation about literally I think I went out there and I can’t remember if it was the 17th or the 19th of March or something like that when everything shut down and there was a brief moment of I think I’m going to go back and try and get my job back, but decided to stick it to see it through and it was the best thing I could have done. And then three months later, I want to say in May or June, my wife, we packed up the house and she moved out and stayed with us.

Tony:
Dean, first I just want to say, what guts does it take to not only move halfway across the country, but to leave a career as steady as working for the government to go pick up a sales job? And obviously all the rookies that are listening, they won’t have the same opportunity in the exact same way, but I think for a lot of folks who are listening, they do have some opportunity in front of them that maybe if they did take that opportunity could propel them further down the road of actually achieving some sort of financial independence. So I’m sure you were fearful. I’m sure that you had some hesitation, I’m sure that you were like, is this actually going to work out? What did you tell yourself to get past those fears and actually make that move?

Dean:
In hindsight, it’s actually not my personality at all. I’m a very conservative, not a risk taker person, and I try and think back to those days, and I think part of it comes down to almost like desperation, the feeling of you got to get out of this position if you want to get somewhere in life. And it’s just kind of diving in head first and having the faith in yourself and saying, I’m not hoping for the best, but I’m going to make the best out of it. But honestly, I think back to those days, and I almost pinched myself like, this is so not what Dean does. It’s great that it happened because it also gave me the courage to do it again. Now we’re having thoughts of when is it going to be time to move back to KC where we have that side of the family and do we want to grow our family in LA or do we want to do that somewhere else?

Dean:
And now the thought of going somewhere else and moving and picking up and starting over again is less scary, less intimidating, done it before. So absolutely, I mean, based on what you said, and I said it a few minutes ago, the opportunities that I had are unique and I recognize that and I’m very fortunate for them. But I think that when you take a step back, and a lot of people might have something like that that they can do to try and take advantage of it and whatever it is, if it can shake things up and give you those opportunities, go for it.

Tony:
So Dean, you moved out right at the beginning of COVID, which could have potentially been maybe the worst time in recent human history to try and make a big life move. How quickly were you actually able to results? Obviously you stuck it out. How long did it take for you to feel like, okay, this is actually the right decision for us?

Dean:
Funny enough, it took me a really long time to see results, and not to get too much in the weeds, but just the mechanics of a sales job and commissions, which is a hundred percent the way that I’m compensated. I had, I haven’t had a salary since I left the Federal Reserve in 2020, and so I didn’t make a dime from home improvement until I think August of that year. So I went a good six months. And it’s kind of one of those funny coincidental stories of we pretty much got down to our last cent in the bank. And when I say, I mean, I mainly mooched off of my wife’s money At the time, the way that our finances worked is we were both working at the Federal Reserve and paying the bills from one account and saving in another account. And that savings account was just about dried up when I got that first commission check from home improvement. So it took a good six months or so. And there were definitely scary moments of like, is this going to work? Are we going to have to pull the emergency court here in a second? But it was tight.

Ashley:
So now that you’ve made the move, what did you do with your property that you had back home?

Dean:
So that property, we rented it out pretty quickly, and I think that’s actually one of the things that I learned from this whole process is my wife is funny. She says that I’m sort of more of the doer and she’s more of a planner, but with real estate, it’s almost the opposite. She’s very quick to say, this is a good property, we should get this one. And what I’m trying to get at with that is that property rented pretty quickly, which my hesitation kind of being conservative, the way that I am not a risk taker, like I mentioned a moment ago, is I would’ve guessed it’s going to take so long to rent these properties and I’m scared to get another one because maybe no one’s going to want to rent this particular property. We got the worst one ever. But that one rented quickly.

Dean:
And again, it’s like a light bulb moment. You go, huh, okay, well surely this isn’t like a fluke. And then as we started to make money in LA and doing what we were doing, then she’s picked every house that we bought and every house has rented very quickly. And so obviously that house that we owned beforehand, that was the first one we started with. And then it took us probably I think maybe a year or 15 months or so to get to the point that we could get the second property, which I kind of view as our first real rental investment property. And then from there it kind of steamrolled pretty quickly.

Ashley:
So during those next steps, how were you funding those next deals?

Dean:
So it’s a really good question. That’s the part that I feel like is maybe unique and in the sense that people in the real estate community are oftentimes taught all types of different tips and tricks and OPM and house hacking and HELOCs and different things to finance deals. The reality is that we were very lucky to be able to finance all of our deals just with cash. The strategy that we use is we put down 25% to lock in the best rates that we can from investment properties. We do them all on 15 year mortgages. And that’s really just the gist of it. And we are pretty dedicated to our strategy of intentionally losing money on these properties. When you put down 25% on a 15 year note in this today’s market, the cashflow isn’t there based on what rents go for. Even in a place like Kansas City, which I know is a very desirable rental area. So that’s what we’ve done and we lose anywhere from 200 bucks to eight or $900 per property that we own on a monthly basis.

Ashley:
We need to break this down as to why someone would do this. And I think the first thing is that people look at, you want a cashflow and property because you want the mortgage payment, you want the expenses covered and you want to make money, but explain to us how you are actually investing.

Dean:
So I think it’s a different philosophy and a lot of times those few hundred dollars are really crucial to stay afloat and to pay for CapEx expenses or whatever it might be. But for us, we viewed it in a way that we’re fortunate that our income allows us to support those losses, to be able to swallow them. And then by having them on 15 year notes, I mean obviously they’re going to pay off 15 years faster than a 30 year if we don’t pay down anything any quicker. And in doing so, I think we’re just accelerating our path to financial freedom. So instead of sitting back and saying, okay, I’m 30 years old today, if I buy a house today, I’ll be 60 when it’s paid off. That thought kind of scared me. I didn’t want that. That was really just, that was the ultimate factor in the decision of when do I want be financially free and I want to do it sooner rather than later.

Dean:
So the 15 year note was just so much more appealing when you look at it from the perspective of I don’t really want to work in sales my whole life. I don’t really want to work in an office job my whole life. I want to be able to enjoy time with my family, I want to be able to travel the world. I want to do all the things that most people want to do when they invest in real estate and become entrepreneurs, and I don’t want to do it when I’m old. So we’re very much investing in it now from that perspective of I want to lose the money now. I want to invest the money now so that I can enjoy it more quickly later on.

Tony:
And I think there’s something to be said too of maybe those deals aren’t making sense today, but that doesn’t mean anything 10 years from now as maybe rents have continued to increase and things like that. So it could be in a decade, all of those are printing money and you’re only five years away from getting them paid off. So I think it is a unique approach team because to Ashley’s point, most of the rookies who are listening are probably investing for cashflow today. But I think it goes back to the point that we touch on a lot, which is everyone has a different motivation for investing in real estate and you’ve got to understand what yours is in order for you to make the best move for you and for your future. And for Dean, the idea was I can tough it out for 15 or 20 years in this job, I just don’t want to tough it out for 30 or 40 years. So let me make a plan that works in that 15 or 20 year timeline and then let’s work that plan.

Ashley:
Dean, offhand, what is the total of your mortgage payments right now? So when you have those properties paid off, how much will you not be paying out anymore?

Dean:
I’ll give you the full outlay. I mean, so right now today our mortgage payments are about $17,000. Our rent payments are about 15,000. We lose about $2,000 a month on the houses. Now, I’ll pause there for a second just to explain another sort of point of perspective that I have, which is our portfolio is worth about two and a half million dollars when you take the market value of the six properties. I think that if I came to you or any other investor and I said, would you guys pay two KA month, a two KA month mortgage on a two and a half million dollars house on a 15 year note, I think anyone would take that deal. And so that’s my perspective. And I think that when we look 10 years from now or 15 years from now, I think if you take a standard rate of inflation and just market growth, I would hope that those rents instead of equaling 15 K today might be closer to 22 or 25,000, 10 or 15 years from now, if not more. And if those properties are paid off, then now I’m making 25 KA month in rental income. So when you take those three components together of being able to take the loss today and what is the value of that and does that make sense and then where’s it going to be in 15, 20 years? That’s why I look at it.

Ashley:
I think it is so interesting to get this perspective because one thing that I’ve learned so much since starting investing is just like, wow, the equity and the appreciation in the property, that’s the real wealth builder. It’s not the little bit of cashflow every single month. It is. That is what is building wealth for me is all of that equity. And I do have a couple properties that are on 15 year notes, and it’s like some of those properties it’s been, we just hit the 10 year mark and it’s like, oh my god, five years, 10 years went fast. They’re going to be completely paid off. So I think this is a really interesting perspective, and I think a word of caution is make sure you can afford to put that money in every month. And I think one way to look at it is a lot of people will put money into their brokerage account or they’ll invest money every month different ways, and you are investing it into your properties by just paying down the mortgage faster.

Dean:
Yeah, I think there’s something really to be said about people look at real estate and sometimes they think of it as a quick fix or an easy way to make an extra hundred bucks a month, which if that’s what you’re looking to do, that’s totally fine. There’s so many different strategies to invest, whether it’s real estate or any other avenue. But the thing that my wife and I really consider is we’re looking at this a business because ultimately it is a business. And I think the majority of businesses when they start from the beginning, they take losses a lot of times,

Ashley:
Or you’re putting in a lot of your own time

Dean:
And there’s tax benefits to losses, and then there’s a timeline that we just discussed. But even when you look at it from a business of owning six rentals is a lot of work. I think that’s also something that maybe goes underappreciated is there’s a lot that goes into filing rental licenses and getting tenants and cleaning after and turning over and repairs. And so we’re just looking at it like a business. It’s not just a quick way to make a few hundred bucks a month. It’s something that we’re investing in right now for the long run

Tony:
Dean, it really is a fresh perspective and I think that there are a lot of folks who are listening who maybe now see another path or another reason maybe to invest in real estate that they hadn’t considered before. So I love hearing that. And so I just want a 30,000 foot view overview of the portfolio. You said six properties are all six of those back in Kansas City?

Dean:
So they’re in sort of the greater Kansas City area. I would say none of them, funny enough are in Kansas City, but everything from, if you’re familiar with that area, you’ll know these places. It’s Overland Park, fairway Prairie Village, which are all kind of the main suburbs around Kansas City on the south.

Tony:
And are they all traditional single family homes or did you guys expand beyond, what was your previous primary residence?

Dean:
Yeah, they’re all single family homes and we’ve learned a lot, even just from testing the waters with different types of single family homes. So what I mean by that is the first one was a three two, it’s about 1400 square feet. That’s the one that we bought for ourselves that we lived in. And then funny enough, the first house we bought after that, our first real investment property was a three one. And I was always very hesitant on the one bathroom configuration, but my wife was very much said on, this is a good part of town, it’s going to appreciate a lot. We’re going to get a lot of equity in the long run and that maybe we’ll find somebody who’s single or maybe a young married couple that doesn’t need that second bathroom. And that’s basically what happened. So we got a three one at first, and then after that, the next one was a two one, which I also didn’t love.

Dean:
And I told my wife, this is the last one bathroom house that I’m buying. And then after that we got, I believe it was another three two, and then we got a really big house that was I think a five four. The numbers start to get blurred. I’m sure you guys can imagine of keeping track of all these things off the top of your head. So the point being that we have a lot of different configurations. I am definitely hesitant and I don’t regret it, but I still don’t love the one bathroom homes. I think those are harder to turn over as we’ve discovered over time, you do really need somebody, like an older person living by themselves. Really, that’s the main thing there is in one of those homes, a single mom living with a young child. So I think those are the kind of tenants that you’re looking for with just those types of tenants, there are less of ’em. So I think that the 3, 2, 4 threes in general are much more appealing and easier to turn over.

Tony:
And I want to talk a little bit Dean, because I know some of these projects came with rehab, they weren’t all turnkey and there were some lessons learned there. So we’ll touch on that right after. A quick word from today’s show sponsors. Alright, we’re back here with Dean and Dean. I know at least one of these rehab projects didn’t go maybe according to plan. What was maybe the toughest rehab job you took and what made that one so difficult?

Dean:
It’s ironic because of what I do. So I think part of it, there’s almost like, just to kind of preface it, there was a desire that I had, I think almost to make a point of I want to use my knowledge to add value to a home and I’m going to remodel it and I’m going to do this kitchen and we’re going to do it very affordably and I know how to sub out trades. And I think that there was more emotion that went into it than logic. And you quickly find yourself spending thousands of dollars on a project and you look at it and you go, wow, it’s beautiful. But then in hindsight, how much more rent did that get you on a monthly basis versus the cash that you spent on it? So that wasn’t worth it. I mean, I can look back and hindsight and say that, and in fact my wife and I, we did an interesting exercise of, we just recently started using a software for the first time to input all of our expenses specifically for each rental, and it has a way of collecting rental payments and things like that, creating contracts.

Dean:
And we summed it all up and we saw for all of the six houses over the course of the last five years or so, how much money we spent and what those big chunks were. And I think in a lot of instances it really wasn’t worth it. So it was everything from just that from a financial perspective that it didn’t pan out for us, but also it takes time away. And I think I went into hiring a contractor again, very ironically, very willy-nilly thinking that it was going to be somebody that maybe was as good or as trustworthy as maybe I would expect them to be. But then you have those instances everyone hears about of contractors that don’t show up or that do shoddy work and it creates headaches and your time is money also. So we learned from that a lot and I think that I’m much more interested now in the strictly turnkey properties and that’s what we’re shooting for

Tony:
Dean. So it sounds like there were two main issues that you bumped up against. One was maybe over rehabbing for the type of rinse you could actually command on the backend. And the second was, which is a general, I think, challenge, but it’s just finding good contractors. So if we can break down each of those separately on the rehabbing side, because I think to your point, a lot of Ricky’s get caught up in the emotional aspect of, I want something that’s beautiful looking back or with the experience you have now, how do you balance the desire for, I want a good product with knowing what you can actually get in your rinse on the backend? How do you balance those two things?

Dean:
Yeah, I mean ultimately like many things in life, I think it comes down to experience and you can’t really fake that. You got to just go through it and it is what it is. And we’ve learned that in that category of property, when you’re looking at sort of a, let’s call it an entry level rental, you’re not looking at high-end luxury properties in general. That difference in marketability is very little between a house that has a flipped kitchen. Maybe you’re talking about white shaker cabinets and quartz countertops and things like that, laminate or vinyl flooring. Doing those upgrades versus having a house that maybe has its original cabinetry from the fifties or sixties that have been painted over a couple times. Really you’re not talking about a huge difference in what those can rent for. And definitely not one that makes sense to do over the course of the home, unless if you’re looking at it things like just the equity in the home and maybe it will be something that you turn over very quickly and try and resell it or try and get a home equity line of credit, which I think that’s the part that we’re kind of struggling with next is maybe there’s a way to take advantage of these things that we’ve done to flip it in our favor to now create maybe a new strategy for investing in properties and how we source the cash for it.

Dean:
But in general, on this point specifically, yeah, we just discovered that it’s not really worth it.

Tony:
And I think that’s the important lesson for the Ricky’s that are listening is that the market will always dictate how high your rent can go. And to Dean’s point, I’m going to make up some numbers here, but if the maximum rent you see in a market is 1500, it’s probably at 1500, not because no one’s built anything nice enough for 1700 or 1800, it’s just that specific part of the market can only afford up to 1500. So it doesn’t matter how nice of a rental you give it, 1500 is the ceiling for that specific property. And whether you are renting, whether you are flipping, and we’re talking about ARVs, whether you’ve got a short-term rental or midterm rental, and you’re talking about average daily rates, they’re all impacted by the same upper limit within a certain market. So as a rookie investor, you’ve got to do your research to see, hey, what is that ceiling for rents for ARVs that I need to be aware of?

Tony:
And then what do I need to do to make sure I don’t go over that as I’m looking to rehab these different properties? I got one last question for you, but just for the rookies, we recently interviewed my designer, Brianna Michelle on a recent episode. It was five 90 something or other. You guys can look back and find it, but she talked a lot about the process for designing renovations and how to make sure you’re doing it the right way. So go back and listen to that episode. Dean, I’ve got one last question for you. And first I just want to say, you said you put down about 25% on most of these deals. So not only are you aggressively paying down your debt, but you also have a decent amount of equity to start with at 25% down that you’ve got 75% that your loan has taken up. So values are going to go up, so you’re probably going to get some equity growth as well. So it feels like you’ve got a really good plan in place. But I guess when you picture success in real estate, what does that look like for you?

Dean:
Success in real estate for me is just financial freedom, right? That’s the bottom line. I am not necessarily trying to build the biggest portfolio in the world. I’m not competing with anybody. I just want to be able to do whatever I want whenever I want to do it. And that’s really what it comes down to. So I haven’t pinpointed what specifically that is or what that number is or how many homes that equates to, but the success for me is just giving my family comfortable life that we all want to enjoy from. That’s it. That’s all it comes down to for me.

Ashley:
Well, Dean, thank you so much for joining us today and sharing your story, your journey, and giving such a cool perspective on what your strategy is. Can you let everyone know where they can reach out to you and find out more information?

Dean:
Yeah, of course. So my website is home build.com. I’d like my name, so it’s kind of like home building. And same thing on Instagram, homebuilding on Instagram. We try and help both homeowners here in California with any remodeling they need to do, but also we give a lot of tips and tricks for people all across the country that are investing in real estate or that need to do any remodeling of what kind of things they can look out for when they’re in those adventures.

Ashley:
Well, thank you so much. We really appreciate you taking the time to join us today. I’m Ashley. He’s Tony, and we’ll see you guys on the next episode of Real Estate Rookie.