Investor Update: The “10 Deals on $20K/Year” Investor’s Explosive Growth

David:
This is the BiggerPockets Podcast, show 674.

Ashley:
I put myself in a position of the tenant, right? The number one thing that I did, I kind of overimproved my properties, and again, investors, you’re new here, that’s not always advised. It just depends on where you’re at. But obviously I may spend 3 to 5,000 more on a project, but this person wants to stay forever or at least three to five years. I know it’s a business, but I constantly relate to my tenants that, hey, I’m a single mother, or I’ve been in your shoes, and I feel like letting them identify with me versus I’m just a big box landlord, that really helps me with turnovers.

David:
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast, here today with my co-host, Rob Abasolo, bringing you a FIRE episode. In today’s show, we bring back Ashley Hamilton, one of our most popular guests we’ve ever had on the podcast. Ashley is a Detroit, Michigan investor who is crushing it in her space and has evolved quite a bit since the last time we had her on. She has a fantastic story that I know you’re going to love. Rob, what were some of your favorite parts of the show?

Rob:
Honestly, this is a crazy full circle moment for me because I remember the first episode that she did. I was in my garage. I was cleaning my garage. It was like 7:00 PM. It was in the dark. People are like, “Why is this guy cleaning his garage at night?” And I was listening to this, and I remember thinking her story was so insane, one of the most inspiring stories. So, my favorite part about this episode is that we had her back on and she’s actually able to top the original episode which I think was episode 331, if I’m not mistaken.

David:
Yes, it was 331, and Ashley did not fail to deliver. You’re going to love this story, especially if you’re someone who’s had a hard time getting traction or you can’t figure out which market to invest in, or you don’t know why it’s so hard to get a deal, Ashley has a lot of good advice from all those perspectives. Today’s show went a little bit long, so I’m going to make the intro short here, and I’m just going to remind you, you don’t have to listen to a whole podcast in one setting. It’s okay if you have a 45-minute commute to listen to a 55-minute podcast. Just listen to the last 10 minutes on the way home. Before we bring in Ashley, today’s quick tip is consider, because all of us don’t like high rates, interest rates have been going up, just consider that the lower that the price point of the home is and the lower the loan balance, the less important the interest rate is. When you get into these lower priced homes, really high rates have much of a smaller impact on the mortgage than when you’re at a high price point.

Rob:
Ooh, I have a quick tip as well. Can I throw it in?

David:
Yeah, let’s hear.

Rob:
All right. I’ve got a, or as I like to say, a quick, quick, quick tip. When you’re thinking of an acronym and you want to brand yourself in the real estate industry, just make sure that you think through all the different possibilities of what that acronym can mean before you go out and mass market it. If you’re wondering what I mean by this, just stick around until the very end of the episode and I think it’s going to make a lot more sense.

David:
Very nice. Rob, I like you bringing it out. So, make sure you guys listen all the way to the end because we have a very, very fun and entertaining moment at the end of the show.

Rob:
Hey, by the way, I think that’s the most I’ve ever laughed on BiggerPockets, BTW, so just stay tuned for this.

David:
It was pretty good. Ashley, you did a great job. All right, let’s bring in Ashley. I remember when we did our first episode with you, you made such an impression on so many people, I think because like 98% of our audience was like, “I see myself in her. I’ve been there. I’ve felt that I’ve done that.” So, in the past we would focus more on tell me the strategy, tell me what you did, right? We’re going to get to that, but we want to start off with more this is why it mattered, this is what my journey was like, this is what changed when I finally decided I’m going to use this strategy.

Ashley:
Right, yeah. So, everybody says, “Oh, I want to get in real estate for my kids,” right, but I had to get in real estate for my kids. So, at age 18, I was a single mother of two, and I got marched to the welfare office, right, because I needed government assistance, I needed food stamps, I needed childcare. When my daughter just turned 18 in December, I marched her in a bank. She has a business of 700 credit score. You know what I’m saying? She has her college debt completely paid off, and all that was done by one property, right? So, I had four pillars for my kids, and it’s for them to own an investment property, to have their car free and clear, to have college with no debt, and to have a good credit score. So, that was just a big change, right, me at 18 versus my kid at 18.
So, then that would go back to why, why it’s so important, and a lot of times we don’t see that because we’re waiting five, 10 years from now, but just because I was blessed for my daughter to just turn 18, now I can see my why and why it was so important, but it was really to break the generational curses. Where I started in life and in real estate with a severe disadvantage, my daughter is now starting with a severe advantage, and even if she chooses to work at McDonald’s, she’s still there. So, when I was 17 years old, I had my daughter. She was premature. She was two pounds, seven ounces, 27 weeks, and I had to leave her every single day at the hospital, right? I was a senior in high school. So, I knew early on that I had to change my life. I didn’t know it was going to be real estate, but that was because I didn’t want to leave my daughter again every night or hand her over to daycare or anything like that.
So, I knew that, for one, I had to change my life so that I could have freedom to spend time with my kids, and for two, I needed whatever I chose to be where I can still be at home with them and I didn’t have to hand them over. So, to fast forward, when we got our first property, they were three and five. My son held the flashlight and my daughter was with the screwdriver, and we were changing the locks ourselves. So, I didn’t have a babysitter, but I still got that, didn’t have to drop her off. So, real estate was able to do that for me.

Rob:
Yeah, that’s a very inspiring story, Ashley, and let me just say, as a former listener of the show, now I’m the cohost, so this is an interesting experience for me, your story is perhaps the most remembered story that I’ve heard on the BiggerPockets Podcast because way back when, I listened to it every day, I remember hearing your story and thinking, “Oh my god, she is killing it. What she has created is something that’s just so inspiring.” It really did push me in my journey. I truly mean that.
I remember your story so clearly, but for those of us that are just catching up, can you remind us, you got into your first property, how did that happen? Because I know that you said it was difficult and I think you were waiting tables. I know that there’s some adversity there, and so, I’m kind of curious, how hard was it to get into your first property knowing that something like this, it’s a big risk, right, and when you’re working so hard, any crack in that system could really, really crumble your daily routine. So, what was that like even jumping into your first property?

Ashley:
Absolutely. Thank you for that. So, to be honest, it wasn’t a scary situation because where I came from, I had no real estate investors, no business owners. So, I never really had anybody to say, “Oh, the people can not pay their rent. The contractors can run off with your money.” So, I’m thinking, “This is a piece of cake.” I had heard a saying, be greedy when others are fearful, right, and that has literally stuck to me for my whole investment journey. I left the seminar, cut on the radio and everybody’s like, “Don’t buy in Detroit.” Right? Cut on my headphones, BiggerPockets, Josh Dorkin, who I love and I literally hackle to this day, “Don’t buy in Detroit.” So, I took that as this is the sign. People are being fearful of Detroit, but I live here and I see it’s nothing I see on TV.
So, that was like, hey, this is confirmation, right, that Warren [inaudible 00:07:48] quote, and turning on the news and everybody saying not to buy in Detroit. So, I literally picked up the phone on the first listing I see and they were like, “The house is $6,300.” That’s it. So, that’s another reason why it wasn’t so much as fearful because if everything went wrong, essentially I only lost six, seven grand. You know what I’m saying? Obviously, it was detrimental to me because I was significantly under income or lower income, but I was spending my tax returns every year anyway and didn’t know where they were going in three months. So, if I lost everything, it would’ve just been the same as if I went out and went and took a fancy vacation or bought a car that only would last three to five months anyway.

Rob:
Okay, so you buy this house in the six thousands and then you’re like, “Okay, I’m good. I’ma to call it in. I’m good with this one house.” What actually happened? What happened after that?

Ashley:
Yeah, absolutely. So, when I got it, it was just like take the problems as they come. So, I needed new plumbing, furnace, hot water tank. So, I said, “Hey, I need new plumbing. Let me find some plumbers.” So, that’s what I did, just basically handled problems as they came, but this was not your dream house, right? So, when everybody’s younger, you watch HGTV, you’re like, “Oh, my house’s going to have granite countertops and beautiful view.” No, it was not a house that I was proud for everybody to be at, but it was safe. There was no vacancies, no burnt down houses, and there was a park right close to the house. So, it was a perfect location, It just wasn’t like glamorous.
So, I said, “You know what? I’m going to do this every single year for seven years. When I turn 30 years old, I’ll have 10 properties and I’ll retire like free.” Right? So, my whole goal was to stop working really, really early. I didn’t know about FIRE, none of that stuff, but the goal was to stop working. So, I’m kind of like the lazy, being lazy motivated me, but I mean, I call it lazy, but more so control and freedom, right? Control and freedom.

Rob:
Yeah, I don’t think you can ever really say that you went full-time in real estate to stop working. I mean, obviously, there’s a lot of work that goes into it, but maybe it just doesn’t feel that way because obviously you’re really good. Can you give us a quick snapshot? When you did the last episode, I believe that was episode 331, where did your portfolio stand at that moment and where are we at today? Can you just give us a little snapshot just to refresh everyone at home?

Ashley:
Yes, I would love to. So, this is so funny. So, when I was on the first BiggerPockets, I thought I was done, honestly. I was probably, I think I was 33, something like that, 34, and I had 10 properties free and clear, and I was cash flowing though. So, what’s most important that I was cash flowing 7,000 a month and I owned my primary free and clear. So, you don’t have to be a multimillionaire to retire early, right, you just have to live below your means. So, my expenses were like 25 to $3,000, right, and I’m making 7,000 a month, whether I wake up, brush my teeth, whatever. No matter what I did, I was going to make that monthly. So, I thought I was done and that was 7,000 a month, but those were free and clear. So, I didn’t have any debt on the properties, right?
So, David, I got his book and just talking to them, I feel like David beamed down on me some stuff in my mind but didn’t say it, but I just felt it and I just got on a frenzy. I was like, “You know what? I’m not done. I need to use this thing called leverage and BRRRR what David teaches.” So, read the book literally. So, the interview came out in May 2019. In August 2019, I decided to start buying again, and when I looked up in August 2020, so that was one year, I had purchased 11 more doors. So, talk about 10X with Grant Cardone, I collapsed time by 10 years, right? So, what essentially took me 10 years to do, I was able to do it in one year by using leverage, right? So, that was the one year. So, from 10 doors to 21 doors in one year just from being on the BiggerPockets and David secretly beaming down that I need to use BRRRR in my mind, right?
So, today, I have 35 units, so 35 doors. So, in the last three years, I’ve bought about 22 properties and then I’m under contract, it’s a quick closing because I already had knowledge of the deal, so I’ll probably be closing about 20 days on a 31-unit apartment building that I’m buying all cash for 300,000 in the city of Detroit. So, that’s where I’m at today.

Rob:
Okay. Wow, that is highly impressive. You have scaled up very, very quickly. I mean, you said that was in 2019?

Ashley:
Yeah, absolutely. So, what I feel like is that people thought that because I was on there saying I own all my properties free and clear that that was my strategy and that I chose to do that. No, when you’re poor and you’re starting with a severe disadvantage, my disadvantage was I didn’t have time, I didn’t have money, I didn’t have credit, or I didn’t have knowledge, right, the four things that you need. So, I didn’t have any of those things so I had to buy all cash. I was blessed enough to be in a market like Detroit. I had never had a thousand dollars in my bank account at one time in my life except for when I got my tax returns, right? So, it all just worked. Somebody that’s severely disadvantaged, never have any money at one time, making 20,000 a year as a waitress, and just a fun fact, I make 20,000 a month just in cash flow off of my portfolio. So, that’s the big aha.
So, going from 20,000 a year to 20,000 a month in real estate was able to do that. But again, a lot of people assumed that I chose to do free and clear and they’re like, “Oh you could have did it much, much faster. You could have owned triple what you own now if you just had used leverage.” But everybody is not in that position, not physically either with credit, money, and stuff like that, but the mindset, right? You cannot just go into this journey without having a strong mindset. So, yeah, I could have went out, used leverage, and bought 30 properties in 10 years, right, or a hundred properties in 10 years, but would I would’ve had the foundation, that solid foundation to sustain to make it through two recessions and COVID, right? I don’t think so. Especially when I first started, I wasn’t even interested in Section 8, but to have people not pay their rent in two years, I could have literally lost my shirt and so many investors did, and I literally tripled my income during COVID to I couldn’t even qualify for anything.
But that’s just my strategy. You have to be able to conform, but I want to do it longevity, right? So, yes, I delayed gratification in the beginning, but it has allowed me to do so, so much more versus starting off very, very high at the top and then have to scale back.

Rob:
Totally. David, what’s this like, man? I’m sure you hear a lot of people that reach out to you and they’re like, “Dude, I love your book,” but what’s it like hearing someone like Ashley with the success she’s had using the BRRRR strategy and scaling up? How does that feel? How does that make you feel over there?

David:
It made me think about, Brandon often said when he first read Rich Dad, Poor Dad, he said something like, “This book put to words the feeling that I’ve been having the whole time and that creates a connection.” What Ashley was saying is that. I don’t know if it was just the content itself was helpful. I mean, that was part of it. It sounds like it was more David is thinking the same thing I’m thinking, he’s feeling the same thing I’m feeling, we’re looking at the world from the same perspective, and that is really what a connection tends to be. When you meet a person and they see life from the same perspective that you see it from. When you meet somebody who looks at it very differently, it can make you think, it could challenge you, but you don’t usually feel close to them.
I was thinking it’s funny that Ashley says that because when she told her story in episode 331, I felt what she was going through. I resonated with her struggle. I was like, “Oh, those are very familiar emotions.” Growing up, seeing everybody around you that thinks a certain way, living under this thought or this belief that never goes away that you don’t deserve more out of life, and you’re lucky to even have what you have, and you’re never going to be those people that you see that have either a better body or a better car or a better life or something, right? Well, that’s just for them. I never will belong in that world and always be in the window looking in like, “Where could I get it?” and that desire being so strong.
And then you find the doorway. You stumble across the door when you’re looking through the window, and you’re like, “Oh, I could get in there too.?” And you just hit it with this fury, like, “I’m going to do everything I can.” When Ashley told her story, I remember just thinking, “Oh, I know what that felt like.” It created that connection to where we’re on the same page, and the next thought I had was, “Isn’t it cool that real estate, something as boring as buying houses, can actually create such a connection between the people that are doing it?” Because we’re all on this journey to go from where we don’t want to be to where we are, and so, I live on the West Coast, Ashley’s out in Detroit. Is that considered East Coast?

Ashley:
Well, Midwest.

David:
Midwest but closer to the east, right?

Ashley:
Mm-hmm.

David:
We come from very different backgrounds, we don’t look the same, but we have the same heart that beats inside of us, and real estate brought us together. So, it’s cool to hear that my book did that, but it’s also cool that we get to have Ashley on the podcast so that everyone listening who I know, we’re not the only two that experience those emotions or go through that, they get to relate as well.

Rob:
Yeah. So, Ashley, I know that you’re a really big believer of having to go slow to go fast. Can you take us a little bit through that philosophy and how that guides your real estate journey now?

Ashley:
Yeah, absolutely. So, it’s a little bit what we just talked about before about just doing the one property a year, right? Most of it’s because what I could do, right? So, a lot of investors overextend themselves, and obviously, I was listening to a podcast before and David talked about this a lot, where you want to go out and buy 10 doors all at once, or you want to go buy a lot, but then you’re not really going to cash flow. So, the deals that David’s doing now, he’s not expecting to get the cash flow or the benefits right now. He’s expecting to get that in three to five years, right? So, obviously, when I was on the podcast I had a ton of people reach out to me, and a lot of people bought properties in Detroit or just anywhere, and they were expecting to use the BRRRR method and just keep adding fuel to this which is great, but they also wanted to quit their job as well, right? So, you cannot do that. That’s the biggest thing I would say as far as going slow.
So, when I bought my first investment property, I didn’t just say, “I’m going to quit my job tomorrow.” I essentially had a plan that I was going to buy another house every year until I was 30 and then that’s when I would consider quitting. So, at one point, I was making more than my general manager, right, on cash flow, but I still went to work. So, that’s another big thing. People are so quick to just leave their job right away. So, essentially, I feel like the solid foundation and what really helped me was essentially for the business after each investment property I bought, I reinvested the profits. So, I essentially took a job for seven years without taking a payment, right? Can you imagine being on your job, getting a paycheck for seven years straight, and never spending it?
That’s what added rocket fuel to my second journey because I delayed the gratification. I wasn’t depending on the 10 units free and clear for my income. I still worked, right? And it wasn’t because… Well, first of all, it was because I was young and I just believe in hard work, but mostly it’s because I wanted this to last longer, right? And then also, another mistake I feel like people make is that when you’re starting at a disadvantage, you cannot just go and do everything. So, as soon as you make your first hundred grand, you’re going out to buy a Ferrari or whatever the case may be. No, because sometimes you have to reach back and you have to help your family, or you have to delay the gratification again so that you can break those generational curses.
So, again, I know everybody wants to start fast, but really think about what is it really meant, right? What does it really mean when you be real with yourself? So, for an example, when I told you guys when I first came on the show, I had 10 doors free and clear, that was seven grand a month. I know people that own 40-unit apartments that don’t even make seven grand a month, right? So, that’s another aspect to it, just being clear what you want and delay the gratification so you get what you want. Sorry for the long windedness.

David:
No. No, I actually just got done at a retreat teaching on this concept that I called portfolio architecture. I don’t hear it talked about very often, but it’s the idea of looking at your investing as opposed to an individual property, like, what is this house, what does this cash flow, what does this do, and then the next property is its own thing. Instead, it’s having several properties that are like a form of a living organism. If you have a human body, you don’t want 14 feet and then you don’t have a hand. So, different asset classes build wealth in different ways, and balancing them all out is kind of how you build a successful sports team, a successful business. Even in a family, you have people that perform different roles.
In Detroit, I think when you started, Ashley, you were sort of limited in the type of asset that you could get your hands on. It was like get it and then pay it off, and then at a certain point you realize, “Okay, I don’t want to do this forever, this one method. Let’s bring some diversity into this and then maybe develop some synergy.” So, can you tell us how did your portfolio develop, and then what made you choose the assets that you were going to bring in? Because like you said, some of the properties that I buy cash flow right away, but many of them, I already have enough cash flow, those are set to be more valuable three to five years down the road. What’s your perspective on that?

Ashley:
Yeah, absolutely. So, I am a diehard. I identify myself as a DIY buy and hold investor, and I know it’s frowned upon, right? I know it is, but just on my lifestyle, that’s the way that it works for me. So, my philosophy is cash flow is the only thing that helps you quit your job. First of all, I’m an equal opportunist. If I see a flip that I can do, I would love to do it, but Detroit isn’t that market, right? And then another thing is I could buy in the heavy appreciating markets like the California and stuff like that, but because I’m still a parent and still have other activities, I want to be closer to my invest investments as well. I just feel like it’s a greater way to be more successful.
So, number one, cash flow helps you quit your job, right? So, if you’re flipping properties, and let’s say you make a million dollars this year in flipping, right, January 1st, you start working again because you’re using that million dollars to support your lifestyle, to pay your lenders, or maybe you live for two or three years, but eventually you will have to start working again. If you have 20,000 a month in cash flow and your expenses are 10,000, then you’re essentially retired, right, and again, I wanted to quit my job because I wanted the time freedom to spend with my kids and I wanted control.
So, that’s my strategy. Cash flow helps you quit your job, and then tenant turnovers kills cash flow, right? So, those were the two things that I had to do. Get cash flow heavy so I can quit my job and eliminate turnovers because that’s going to kill the cash flow. So, those are the type of properties I look at and that’s still what I look at to this day. What’s changed now that I’m adding leverage and using other people money is I’m being able to do bigger flip quality projects, but I don’t know if it’s because I’m a woman, if I’m a nurturer, I have a hard time selling properties. I am not a flipper and I know David will like, “No, Ashley, if it’s there, it’s there,” because that’s what smart people do, but I’m still very emotional right now.
So, I have developed a strategy called reverse flip and it’s just like David’s BRRRR strategy. Honestly, it really is with one or two things different, but I call it reverse flip because even though it’s a strategy that’s been around for years, when you put a name to it, it’s catchy, right? Like BRRRR, obviously BRRRR been around for years, but until David said it, it’s like, wait, what is this thing, it’s like something new like we all thought. So, that’s what I’m doing now that I’m able to use other people’s money is I’m doing the reverse flip strategy, what I got my trademarks pending for, and I kind of coined, and I would love to talk to you about that, and then when we do the deep dive, I’m going to go into my reverse flip deal.

Rob:
Yeah, I do want to talk about that. One thing I wanted to hit on really quick before we do is you mentioned that you didn’t want or you have to really stop tenant turnover. And I’m curious, is there anything that you do specifically with that? Because I think that’s probably a pain point that like 99% of real estate investors deal with.

Ashley:
Absolutely. So, number one is, and I learned this from Brandon and David obviously, but for number one is I treat… Well, I put myself in a position of the tenant, right, and I remember growing up, we were on Section 8, and we were just getting treated badly, and we just got the worst properties on the block. So, I knew early on that no matter what I did, I wanted to have very nice, clean, safe, HG quality properties, and I was trying to fit that in a very low market, right? So, that was the number one thing that I did. I kind of overimproved my properties, and again, investors, if you’re new here, that’s not always advised. It just depends on where you’re at. So, don’t go out overimproving your properties saying Ashley told you, but obviously, I might spend three to 5,000 more on a project, but this person wants to stay forever or at least three to five years, and each turnover, even if it’s bare minimum and it’s two grand a month, when you’re only cash flowing five grand a year, it can really set you back.
So, that was my strategy which is making sure the property is as nice as possible, spending a little extra in the beginning to retain the tenants. I do other things like give them gift cards during the winter Christmas months, and just treating it, I know it’s a business, but I constantly relate to my tenants that hey, I’m a single mother or I’ve been in your shoes, and I feel like letting them identify with me versus I’m just the big box landlord, that really helps me with turnovers.

Rob:
I really like this. I remember listening to this and when you said that, I was like, it was so weird because I don’t ever hear anyone say this, like, “Hey, for Christmas every year I give my tenants a gift card for this and this.” Of course, I’m sure it’s been done, but a lot of the times, especially on the long-term rentals we’re talking about, the cash flow being so much smaller, yeah, a gift card could not set you back, but it’s definitely going to decrease things. So, really cool to hear that. I mean, you’re bringing a human element to real estate which I think is important. Do you still have any original tenants or any tenants from when you were first starting out that are still around today? I’m just curious.

Ashley:
Absolutely. So, I would say for that original 10, eight people are still there to this day. So, I know when I first started this, again, obviously no education, I thought, “This isn’t going to work. I’m going to have to find something else,” because I paid $1,900 for a house that… Obviously, that was the purchase price. I put about 17,000 in, so I was all in 19,000, but I was charging somebody 800 a month, and I was like, “Well, she’ll just save up her money for two or three months and just buy the house next door. This isn’t going to work. People are going to catch on.” That was in 2013. She still lives in that house to this day, and I’ve done that multiple times. And again, with tenant retention, I guess it was the nicest house on the block is why they stayed. But yes, that’s definitely what helps you with cash flow as well as everything else.

David:
Do you have any specific tips of things that you do in your house that make some nice, maybe things that don’t cost a ton of money but that go really far, as far as the impact on the tenant?

Ashley:
Absolutely. Oh my god, David, thank you for asking that. Yes, because I almost forgot. So, the simplest thing that I’ve done and it has been so rewarding to me is I get this Delta faucet that has an LED light on it, right, and it’s 69 bucks at Home Depot. Every time you cut the lights on, it glows in the dark. But this 60,000, I mean, $60 faucet literally lights up any kid that walks in that bathroom’s face, right? And if you get the kids, you get the parents, right? I mean, that’s just what it is. So, I don’t want to sound like a creep, but I always love kids anyway, and I’m like, “If these kids fall in love, they’re going to nag their parents like, ‘Mom, we got to pick that place. We got to pick that place.’” Even if it’s 50, a hundred dollars more a month than a place down the street, it has the light up faucets, right? So, that is literally a good tip that I can give you guys. Any new investors, do anything like that, wow, the kids, you get the parents.

David:
Rob, you’re in the short-term rental space and I’ve now recently joined it, and I got to say my strategy is very similar to Ashley’s. I’m trying to find something in the pictures that makes the kid go, “Oh, oh, oh, I want to go to that one,” because like you said, Ashley, you get the kid, 80% chance you’re getting Mom and Dad. So, what are some of the things you’re doing in your short-term rentals, Rob, specifically that will catch a kid’s attention and want them to stay there?

Rob:
Totally. So, every house I have, we set up a small petting zoo in the living room, and when people see that in the photos, it instant instantly books for a lot of people. But aside from that, there’s not really… So, okay, there was a house in Destin that we bought that we were so close to closing on, and then last second the appraisal came in like $300,000 below us.

David:
Oh, you told this story. This is the one that got away. Rob is so, so hurt about that.

Rob:
I still cry myself to sleep, but that’s okay. But one thing that we were going to do on that one is there was this garage space that was being unused and we were basically budgeting about, I want to say $30,000 to build a fully kidproof kind of bounce house. Everything is squishy in there and memory foam pillows and ball pits and everything like that, so that parents could see that because to me, that’s a really big frustration. So, we weren’t able to close on that.
However, one thing that I did in my Tennessee property when we were moving out of that house and turning it into an Airbnb is we actually left our nursery, and this was a big… Everything, we had two cribs in there. We had expensive kid pillow type, they were triangles and circles, squishy stuff basically. We left hundreds of dollars worth of kids’ books and everything that we had used to basically raise our kids, they were one-year-old, everything that we used in that one-year period, we left there, and it was going to be expensive for us to replace all that. But for me as a parent, I’m just so frustrated all the time when I go to a short-term rental and there’s like a glass coffee table or a super sharp wooden table where I’m like, “Oh, my kid’s definitely going to bust their head on that.”
And so, now whenever I’m formulating Airbnbs and trying to spruce them up, I try to add some kind of kid element to it that a parent can somewhat relax in, unless it’s just not a property meant for kids. But that’s one thing for me, it’s super important. So, on top of just doing that, we’re sacrificing a room. In Airbnb, it’s all about beds and heads. Most of the time an Airbnb host will leave a pack and play, but we decided to sacrifice the room, put two cribs in there, leave all our kids stuff, and honestly, people rave about it. A lot of people have reached out. We had childproofing locks on all the sinks underneath and everything, and reviews have been really nice. People are like, “This is by far the most kid-friendly place I’ve ever stayed,” and I would pay a premium for that just because it’s such a pain point for me. So, now I’m always trying to tailor any new Airbnb that I set up to be more kid friendly.

Ashley:
Yeah, that makes so much sense. So, I know I just talked to you guys about I’m just starting off my Airbnb journey, thanks to this guy. I was already a fan before he’s on the show. Amazing. So, what I did was I added the chalk wall. Obviously, I know it’s kind of probably done a lot, but I feel like that’s good, but it’s all the way down so kids can write on it, and then my daughter, she does custom paintings in the basement. But a friend of mine who’s in Airbnb convinced me, so I bought a Pac-Man machine for the basement, right? So, that’s like an arcade, and even if you don’t like it, oh well, it’s in the basement so if you don’t have kids.
And then lastly, I would say teenagers, I do QR codes. So, you can create a QR code and then you can put a sticker on there. So, I do that for the house book, I would say, which shows you how to work everything. But I also have it for fun videos and stuff like that. So, that’s just what I started, but I don’t know the return because I haven’t set it live yet.

David:
Yeah, I think this is the kind of stuff though that people need to be focusing on and hearing in podcasts because the days of buy a property, make it at Airbnb, sit back and collect the money, are gone. It’s getting more saturated. It’s getting more competitive. You’ve got to be the person that puts this creative thought into how you make your property stand out and how you make someone want to stay there. Moving on to another topic that I know that you’re passionate about is paying taxes. I know that you loved paying taxes, so tell me about why that is.

Ashley:
Right, absolutely. So, that’s funny, and I know, I was going to say it’s controversy. Nobody likes to pay taxes. So, I had a epiphany, right? I got my start, I truly account that to my income tax return, right, and I know obviously it’s not like, oh, it’s some free money, it’s what I put in, but once I started to have to pay taxes, I wasn’t upset. I was like, “Wait, I was getting 6 to $7,000 a year in a tax refund and now I have to pay three to five, I’m going to do that graciously. I’m going to do it with a smile. I’m going to write this check every year. I don’t care about all these tax-saving strategies because I want to do this for the government because they helped me.” Also, when you’re a buy and hold investor, I don’t do flips, so I don’t have that capital gains and stuff like that. My tax liability was already very low. It wasn’t until I added consulting and self-employment income that unfortunately I don’t like paying taxes now more, right?

Rob:
Yeah, yeah. That’s how it happens to everybody.

Ashley:
Because that’s 7,000 a year has turned into 60 and 80,000 a year. So, I was a person for the last, what, seven years that love paying my taxes, I’m like, “No.” So, the good thing was I just bought a Tesla, it was like 87,000, and that was a complete write off to offset that. So, now that I’ve hit that mark, I’m definitely, I booked three conferences to go out and talk to the best CPAs. So, now I’m all about tax strategies, tax savings now.
But for a good couple years, I love paying taxes, and everybody just thought I was so weird by saying that. And obviously I see now, but when your burden is 5 and 7,000 and you use it from a form of gratitude, first of all, not oh man, I have to pay taxes, to, what, I get to pay taxes now? I was happy to do it because I never made enough money to have to pay taxes. So, I just used that from a big point of gratification and gratitude. If the government got me started, my tax returns is what got me here, let me give back to the government, pay taxes. I get to pay taxes versus I have to.

Rob:
I had a quick question here because you’ve sparked my interest. Taxes to me are the thing that I nerd out a hundred percent on. I just paid a tax bill that was four times my annual salary, my salary from last year. So, it hurt. You said you bought a Tesla. What kind of Tesla was it?

Ashley:
Model Y, and I got the performance one because it was four months and the long range was a year. I can’t wait. I need instant gratification now.

Rob:
Sure.

Ashley:
But to be honest, I had never done research on Tesla. Literally, the gas had hit $5 and I was like, “Oh, I’m going to buy this car. In six months it’ll be worth like 10,000 more, then I’ll just hurry up and sell it or I’ll rent it out on a car site or something and I’ll get the benefits.” But I’ve already fell in love with it. It’s only been a month since I had it. But basically what it is, is I bought in a vehicle, I finance it through my company name, my consulting company, so that’s a hundred percent tax write off. My consulting business’s a self-employment business that’s taxed twice, but we need to hop on after because if you got kids, those are the best things. I know they’re still a little bit young, but you can pay your kids to save money on taxes. There’s so many other things you can do to max out 401(k). So, I don’t want you to pay those anymore. So, we’ll definitely have to connect offline.

Rob:
I was asking about the Tesla because there’s a section in the tax code called Section 179 and it’s goes to… It basically means if you buy any machinery or any vehicles that weigh over 6,000 pounds, you can completely write that off on your business. Now, obviously, you can still write off your vehicle in other capacities, but if you buy a vehicle for 6,000 pounds or heavier, you can completely write that entire purchase price so long as it’s being used for business a hundred percent. Obviously, if it’s used for personal and business, you have to kind of split that. But there are a lot of really fun tax strategies like that that I didn’t know, and that’s something that I think a lot of people are always like, “Taxes are so unsexy,” and I’m like, “No, no, no. Taxes are very sexy when you figure out how not to pay them,” because that’s the real game. You got to master real estate first and then you got to master taxes, and if you can save money on taxes, that’s extra money that’s going to go into your pocket.

David:
Especially when you start to realize that saving money in taxes you pay directly to the government actually makes the government more money through the jobs that you created from the assets that you bought and the people you gave jobs to. So, for every dollar you don’t spend in taxes, if you put that in a new short-term rental, now you just employed a house cleaner, a handyman, a person who can do the pictures for your listing, a person that’s going to build the chalkboard that you put in there, right? You actually amplify the money you pay to the government when you reinvest your money and you make it bigger, and so, it’s kind of a win win. You’re not actually screwing anybody over. You’re making your own portfolio better. You’re building jobs for other people, and the government gets more money.

Rob:
Well, David, tell that to my TikTok comments.

David:
I’m going to tell that to the new, what is like 80,000 new IRS workers that are supposed to be hired.

Rob:
87,000.

David:
Yeah, whatever it is. I’ll make sure that they listen to this episode and they can hear that. Ashley, I know you are in a controversial situation for a long time when Josh Dorkin and Brandon Turner were hosting this podcast. They were dumping on Detroit, and you are a staunch Detroit advocate. You actually bloomed right out of the Detroit concrete jungle and are doing great. You’re wearing your Detroit sweater right now. Tell me why you are bullish on Detroit and what you like about it?

Ashley:
Absolutely. So, Detroit to me knocks out all the what you can’t do in real estate, right? So, obviously, when people say, “Oh, you can buy cheap properties for 80,000,” well, typically that’s the highest you’re going to get for that property. It’s already at the top of the market. There’s no appreciation. Rents are low. Turnovers are high. Cash flow is still low. Detroit kind of knocked that all out of the park. What’s unique about Detroit though, and it’s because that back in 2008, 2009, a lot of lenders left. So, Detroit is a cash market though. So, I remember when I did my first podcast, people were like, “Hey, you are buying properties for 40,000, 50,000. I’m going to go buy six of them. I’ll put 10% down on each.” And I’m like, “No, no, no, no, no, you have to buy it with 40,000 cash.” And I call that “cash’ in quotation marks because it can be a credit card, right? Credit cards, those are the 25, $40,000. So, you can take two credit cards and purchase a property on it.
So, those are the good things, but because of the low price point to entry as well as the cash flow and the low expenses, those are all reasons why I’d invests in Detroit. Also, I don’t know, I did look at our population is definitely increasing because we did have about a million people leave throughout the years when we were doing bankruptcy. But now that Apple’s here, Google’s here, they’re building the first ever in the world electronic charging road in Detroit. It’s going to be released in 2023. So, as you’re driving on the road, you won’t have to get out of your car, it’ll actually charge it. So, they’re going to do a one mile. That’s here in Detroit.
And then on top of that, once COVID hit, I started to do research on Section 8, and I got really good with networking with Section 8 managers, and I realized that there’s 30,000 voucher holders with Section 8 that don’t have a place to go right now. So, they’re extending their vouchers. What normally takes them 60 days to find a property, it’s taking them 90 days. So, I’m like, “Wait a second, there’s 30,000 people that have guaranteed rent and they don’t have housing? Let me buy an apartment building.” So, those are all the reasons why I invest in Detroit. And most importantly, because it’s the underdog, right? There’s not a lot of investors here because everybody hear the horror stories or why shouldn’t you invest in Detroit. So, actually, that’s why I loved the show, and obviously, I didn’t agree with it, but I feel like yes, they’re taking another investor away from Detroit, more properties for me, right? So, it kind of worked in my favor that so many people were being fearful of Detroit, and that’s why I wanted to be greedy in Detroit.
But again, your expenses are pretty low. So, on average, I’d say now, especially if you’re out-of-state investor, someone like myself could do it a little cheaper, but you can be all in, I’m talking about purchase, renovation, consulting fees with a project manager, for 80,000 in Detroit. That property, even if it’s in a bad neighborhood, you’re going to get, if it’s a three bedroom, a minimum of 1,200 a month on rent. But if it’s good enough for Section 8, you’re going to get 14 to $1,600 a month in rent, right? But hey, that’s just the money, right? It’s not about how much you make, it’s how much you keep, and that’s what I love Detroit.
So, even though I’m making 16, or let’s call it 1,400, because that’s the average for a three bedroom, now let’s talk about our expenses. So, in other states, especially like Chicago which I love which has very low prices, their property taxes are outrageous. So, Detroit, on average, and I own 35 doors right now, so my property taxes are a hundred dollars or less per month. My insurance is $70 per door or less. So, if it’s a duplex it’s 140. So, a single family, $100 a month in property taxes, $70 in property insurance, and 1,400 in project management, if it’s a cash deal, that’s about $240, one, two, $320. And then if you refinance, use the BRRRR strategy on a $80,000 property, your mortgage payment probably be about another 300 bucks, right?
So ,all together you’re spending $600 a month, and because we’re buying these properties and we’re fixing them up, overfixing them in the beginning, our CapEx is lower, but of course we do, I always encourage people to save about 100, 150 for a single family per month. So, add that all up, you’re at about a $750 and you’re getting $1,400 a month in rent. That’s 650 a month in pure cash flow. But let’s say you use the 80,000, or you have it and you cash out on a 401(k) and you don’t have that mortgage, then that 300 goes back into your cash flow, so essentially you’re cash flowing a thousand dollars a month if you can buy a property for 80 grand cash and have a Section 8 tenant.
Now again, I don’t want people to leave their money in properties that is, well, it just depends on your goals, I would say, because even though I have essentially two portfolio, one that’s unleveraged and one that’s heavily leveraged, I see the benefits and the disadvantages of both, right, and that’s another thing I feel like with real estate investors or even people, they’re always like, “Well, I’m only a flipper because buy and hold is too slow, or BRRRR is this, or I only want to buy cash because I don’t want to overleverage.” There can be a happy medium, but based on my lifestyle and my goals which is to not work for anybody and have complete control over my time and freedom, I need cash flow, right?
Now that I’ve made all the, well, made all the mistakes and built that solid foundation, now I can go and invest in syndications and for appreciation because now I’m in a better position, but it’s not always smart to start off for appreciation if you’re new and you have to build that foundation because if you’re still working a 9 to 5, you’re limiting your time. So, that’s where I’ll say it then.

Rob:
So, I know you mentioned that Detroit is a really great market, but either you’re going to maybe have a tougher time doing the conventional thing or you might have to buy cash. For the people out there that may not have either of those options, do you have any steps that they can take to acquire real estate out there, or any tips for people out there with the maybe creative financing?

Ashley:
Yeah, absolutely. And now within the last three years, so there are banks and lenders that will do it, right? So, you can buy a $80,000 house on a mortgage, but you’re just going to run into people like me that’s going to put a offer and say, “Hey, I’ll close all cash in five days and wave all contingencies.” It’s because I prepped for this market, so I had to develop cash-heavy strategies. So, number one, I use hard money lenders. That is a strategy that works in Detroit. But most importantly, I like using credit cards, preferably business credit cards. So, if you have, like me, I have a property management business and a rental business. So as long as that’s generating income, you can walk into any bank and you have a 700 credit score and you can get business credit cards, right?
So, I might go into four banks on one business and get about 60, 70,000 in funding for that business, and then I can use those cards to buy a property and then I’ll go ahead and use the cash or refi to pay them back because it’s a year typically interest free. So that’s what I call “cash” in quotation marks is leveraging business lines of credit, business credit cards, personal credit cards. You can also use hard money and traditional lenders.
But I just, I’ve heard about subject to, right? I’ve always toy with that, but I just never thought that I could convince anybody to do that. But I was just lucky to pick up a duplex subject to, and I met a couple people that’s been doing them in Detroit. So, that is also another great way to purchase properties here in Detroit. And I feel like, I know obviously subject to has died down a lot, but with the market and where we’re heading at, where people bought and paid 20,000 over ask with their appraisal guarantee, in COVID, well, a lot of those jobs are being eliminated or now a lot of companies are realizing, “Hey, we can cut our expenses by keeping everybody working from home, but we’re going to lower their wages because they’re not commuting and traveling,” so people aren’t as qualified as they were two years ago. So, I feel like subject to is actually going to be a really great strategy to use in this upcoming market. But that’s just a couple of strategies, if that makes sense.

Rob:
Yeah, yeah, totally. Well, I think we’re going to get to the deal deep dive here in a second, but before we do, I also wanted to just ask because we didn’t go back to this, can you just briefly take us through the idea or the concept of reverse flipping?

Ashley:
Oh yes, yes, yes, and then I’ll break down my reverse flip. So, essentially, it’s just like what David did. So, you’re going to purchase a property using hopefully the “cash” in quotation marks method. So, the business credit, business credit card would be the best, or you can use hard money lenders though, but those are just typically the two. So, you want to actually buy the property and it’s going to be a rental property, but it’s going to be flip quality, right? So, you’re going to do it just like you’re going to do a flip. So, take out walls, full renovation, update kitchen, granite countertops, all that stuff. And then when you go, you rent it out obviously for top of the market because it’s the best house in the block. Instead of you refinancing it at a regular bank, and I guess it didn’t matter with the BRRRR strategy, but I am using hard money lenders or secondary lenders, not traditionals for the 30-year mortgage.
Now obviously if you’re a successful real estate investor, you’re like, “Wait, why would you use hard money on a long term because you’re paying 6 to 7% interest where you can go right to a bank and pay 3 to 4%?” Well, again, this is not an issue for any investors, so don’t use this as an excuse, but most people are only allowed 10 loans on their personal credit until you get maxed out. There’s this evil, evil creature that nobody really talks about is debt to income, right? The first time I feel like I got knocked out when I heard the word debt to income because I can’t hide that, right? It’s on your credit report. They can count it. They see your income on your taxes and they’re like, “Oh, you don’t qualify.” So I didn’t want limits. So, I was like, “Wait, I can only have 10 loans?’ And obviously if I would’ve talked to smarter investors like David, if I had people like that, they will let me know that that’s not a obstacle, but to me it was an obstacle.
So, my philosophy is if I’m refinancing with hard money lenders or private lenders, the debt is not shown on my personal credit. I’m a personal guarantee, but the debt and everything is to the business, right? So, now, I’m not limited to 10 loans. Now, I can go get a 4% interest rate on my primary because I don’t have any debt, right? So, yes, I am paying 2 to 3% more interest on the hard money side, but the available debt to income and benefits that I have on my personal credit by it being so less debt has been phenomenal for me which has allowed me to get more business credit cards or personal credit cards because again, you are personal guaranteeing this stuff, it just doesn’t show. That’s my strategy and that’s why I use reverse flip versus the BRRRR. And again, it’s not really different. I just made a name to it so it can be catchy. But I don’t use traditional lenders for the 30 year. I only use secondary hard money lenders.

David:
Fantastic. Thank you for sharing that, Ashley. Rob, did you have something you were going to say there?

Rob:
Yeah, I was just going to ask on the hard money thing, aren’t those lenders typically bridge lenders? They’ll only do the hard money note for like a year or two?

Ashley:
No. So, we didn’t talk about this. So, I have developed seven streams of income from real estate and just seven businesses, and one of those is I’m a hard money lender/broker. At face value or if you pick up the phone and call 10, yeah, they probably will tell you that, but all you have to do is find one, but I have about seven or eight that does 30-year loans. So, if you find one now, let’s say when COVID hit, some may suspend their program temporarily, but now I’m doing them, I did some during COVID. You just have to find a good lender, I would say to do it.

David:
You can highlight a little example here of why this is not a terrible strategy. So, tell me, Ashley, what would standard financing be, just a ballpark, and what would your hard money rate be?

Ashley:
So, far as the percentage-wise?

David:
Yeah.

Ashley:
Yeah, so standard would be like 3.5. Well, obviously, they’ve done two or three interest rate hits, so I don’t know yet, but around 3.5.

David:
And what’s your hard money rate?

Ashley:
7, 7%.

David:
And that’s today?

Ashley:
Yeah, that’s today on the long term, yeah.

David:
That’s not much different than we’re-

Ashley:
That’s what I was saying.

Rob:
I will call you right after this podcast.

Ashley:
That’s what I was saying. Back in 2019, I had one that the rate was like 8%, but again, it still made sense. But yeah, that’s today.

Rob:
I got quoted 7% yesterday on a second home loan.

David:
Yeah.

Rob:
That’s crazy.

David:
And that’s not terrible, Rob. I’m in the nine and a half percent for the stuff that I’m usually trying to get. So, here’s the point I want to make. When you have a lower loan balance, the interest rate becomes exponentially less important as when you have a high loan balance. All right, so we’ll do a little exercise here. On a $800,000 loan balance, if you have three and a half percent like Ashley said, your principal and interest would be just under 3,600 a month. If that jumps up to the 7% number, you go up to 5,322. Most deals don’t work if you go from 3,600 to over 5,300. It’s going to fall apart.
But let’s drop your loan balance down to $80,000, like what Ashley was saying, you could be all in on a… So, maybe you’re going to be borrowing actually less. You’re going to be borrowing like say $60,000. The three and a half percent payment on that is going to be $269 a month. And if you jump all the way up to 7%, that’s going to bring you up to 399. So, you’re going to jump from, what was the first number I gave there, 269 to 399, right? Like 120, 130 dollars. That’s not going to break most deals when they’re bringing in between 1,200 and 1,700 a month. It almost, I don’t want to say it doesn’t matter because you always want to try to get a better rate, but it becomes very insignificant, right? That’s less than the difference of insurance or property taxes at a higher price point. Someone may hear Ashley speaking and saying, “Well why would you pay 7%? I would never do that.” Well, it doesn’t really matter on a 65,000 house nearly as much as it matters on a $1.4 million property.
I’ve noticed there’s certain patterns that emerge in real estate like that. The 1% rule is very, very important at low price points. It becomes less important as the prices go up. The 1% rule was developed at a certain interest rate that we had, right? But if interest rates are lower than the number that we started with, say 7 to 10%, you can fudge off the 1% rule and be okay because interest rates are lower. So, when we’re giving you these examples, an overall way of approaching it, Ashley’s sort of looking at the details that other people are missing because you’re in Detroit, Ashley, and you know how that market works, where someone from the outside looking in might make false assumptions and say, “That market won’t work for me.”

Ashley:
Yes, and that’s why you have to speak to experts. You can’t do what I do if you don’t talk to me, even if it’s a DM, email me. Last time I did the show, people found me because I was a realtor, found my personal cell phone, but I’m not saying call me, obviously. But what I’m saying is if you’re going to mirror your investment strategy, like, “Oh my god, Ashley’s using reverse flip,” I’m accessible. Reach out to me first because there are caveats, like David said, that maybe we just didn’t share because we just forgot to talk about it, right?
So, yeah, that’s absolutely right and that’s why I love how David thinks. Literally he just, I don’t know how to explain, it’s just so crazy, but there are caveats that you have to do and that’s with any investment strategy. Obviously, if you’re invested in California, you’re doing it for appreciation. There’s different things. But yes, that is absolutely correct. It fits this market. It does fits a lot of other markets. My sweet spot is 250 to 350 max for the reverse flip, yeah. So, any market you can do that.

Rob:
For purchase price, right? 250,000 to 350,000?

Ashley:
Yes, absolutely, or all in, I’m sorry. Yeah, because the ARV, because the cash out refi. So, cash out refi based on the loan payment at 350, it’s like the max before it starts not to make sense, right? So, the reverse flip method and why I call it reverse flip because it does the exact same thing as the flip, but when you flip a property, okay, for all my flippers out there, and I come off as a anti-flipper, but again, I’m an equal opportunist. I have clients that are flippers. When you flip a property, how much money do you make on a property after you sell it? Zero dollars, right? You may make a hundred thousand, $200,000 profit, but the moment you sell that house, you will never get paid on it again, right? When you have a rental property, you’re going to get paid on that house for the rest of your life, for the rest of your kid’s life, and so on.
So, with the reverse flip strategy, and when we go through my deep dive, you’ll see it, I still get the benefits of a flip. So, maybe I won’t get a hundred thousand in profit, I’ll get 60,000 in profit just depending on the deal. So, I may have left 40,000, but I’m recouping that because I’m still getting 2 to 300 a month in cash flow, not to mention I’ve gotten 80% of my cash out of the deal. That’s the strategy why it’s reverse flip. So, it’s like, hey all you flippers out there, you can still do that, but why not try to finance it long term, get 60,000 instead of 100, but still get that 300 a month because, what, cash flow helps you quit your job. So, that’s the strategy.

David:
We are now going to move on to the next segment of the show, the deal deep dive, and in this segment of the show we’re going to dive deep into a particular deal that Ashley’s done. And Ashley, I’m curious to see which deal you have in mind and which strategy we’re going to be highlighting. So, do you have a property picked out?

Ashley:
Yeah, so initially I had wanted to do my subject to deal because it’s such a good deal, but I didn’t feel like I elaborated enough on it, and it does have some contents in the background. So, I would love to break down my reverse flip strategy on a deal that I did.

David:
That’s perfect.

Ashley:
Yeah, so that’s the one.

David:
I was secretly hoping we would get to hear a reverse flip in action.

Ashley:
Same, same. David’s currently scouting out the competitor to the BRRRR method right now. He’s like, “Yeah, tell us more about this reverse flip.”
Ah, David. Yes, and then we need to stand on stage at BPCON together with my reverse flip and David’s BRRRR, like, “Take your pick.” No, I’m just joking.

David:
Go Rock ‘Em Sock ‘Em Robots. That’s funny. I was actually thinking of how you would spell flip backwards because that’s reverse flip. So it’d be like the pilf method or something.

Ashley:
Oh, reverse pilf. That’s smart.

David:
It’s hard to spell a word backwards in your head without looking at it on screen. Took more time than I would’ve thought to try to do that.

Rob:
I don’t think that one’s going to work. I cannot [inaudible 00:56:30].

Ashley:
Oh my god.

David:
This is why we leave that up to Brandon and Rob. I frequently will come up with this idea and I’ll tell people and they’re like, “That’s brilliant,” and I’ll be like, “I know, but I don’t know how to market it because I don’t have Brandon here to come up with a name for it so no one will ever hear about this.” That’s a big problem of mine. I’m not creative like you guys. All right, question number one, Ashley, what kind of property is it?

Ashley:
Okay, and it is just a funny analogy, I’m so sorry to go back, but if you think about the pilf, P-I-L-F, and the MILF, what it really means, property I like to… Or we could take property I like to flip, right? So, I would [inaudible 00:57:04].

David:
That is awesome.

Rob:
Mobile home park I’d like to flip.

Ashley:
That instantly came to my mind and I could not hold it in.

David:
Property I’d like to flip.

Rob:
I’d like to flip. That’s going to be our merch at BPCON, pilf.

Ashley:
David is literally a genius. I mean, I know he knows it, but I know he’s fumbled, but it is just how he makes people think. Yeah, I don’t know, or just me and Dave, I get those names.

David:
I think you got some genius as well, Ashley, that you came up with that on the spot, really, really quick, like, yeah.

Ashley:
Yeah, because I was like, “Pilf, MILF.”

David:
Someone needs to give you a recording contract. You could be like BiggerPocket’s first rapper. That was very impressive that you came up with that, the pilf off the bat.

Ashley:
Speaking of rapper, since I’m not going to disclose the address, and this, I was going to get to this at the end, so when I first bought the property, the family, the neighbors came and introduced me, like, “Hi, if you need anything, my mom, my dad lives here, my brother lives here, my sister lives here.” So, it’s a family of four all around it. Well, if you are familiar with rap music and the rapper, Big Sean, Detroit native, his whole family including his dad is my neighbors, right? So, I won’t disclose their address or anything like that, but I’ve met them multiple times. They don’t know. I know, but I know because I’m a big fan of Big Sean, and they steal my contractors. I’m like, “Hey.” They don’t steal, but I got new guns.

David:
That’s a problem. You got to protect your contractors more than you got to protect your girl sometimes. People will grab those guys quick,

Ashley:
For sure, yes. So, I got new gutters, they got new gutters. They’re like, “Hey, your driveway guys doing work?” So, I’m like, “Hey, can you have your son shout me out?” But I’m playing it coy.

David:
What’s a song that people would recognize from Big Sean? Because see I don’t think he’s had a hit in a little bit, but I know who you’re talking about.

Ashley:
Yeah, absolutely, yeah. But he’s just known for just Detroit, right, and all the things that he does. So, it’s amazing, But yeah, I love Big Sean.

David:
All right. So, what kind of property is it?

Ashley:
Okay, it is a single family property in Detroit, Michigan.

David:
Rob? Rob?

Rob:
Sorry. I’m thinking of Big Sean. I’m still hung up on pilf. All right.

David:
Did you find him?

Rob:
I did, I did.

David:
Yeah, Big Sean was the one that dated Ariana Grande for a while, right?

Rob:
Yes, absolutely, yes. I love him.

David:
He had the mean breakup song that everybody that was bitter about a breakup was singing for years, yes.

Ashley:
Yes.

David:
Which we won’t say on the show.

Rob:
No.

David:
I don’t flip with you.

Rob:
We’ll leave that up to Deuxmoi. All right. That’s a gossip account on Instagram. That’s what the kids are doing. Doesn’t matter. Number two, how’d you find it, Ashley? How’d you find this property?

Ashley:
So, this was a wholesale deal, and I don’t do many of those, and essentially, so I was teaching a group of investors that wanted to get started in Detroit, and it came across my desk, and I didn’t want to buy it, but I felt like since this is a group, let me take them on live and tell them all the reasons why I’m not going to buy it. So, I went and did the video, and on the video it’s so amazing to look at it because I’m like, “Ha, never buy this. This is never going to work. Too much, too much work.” So, it was a wholesale deal that I was not going to buy. I just thought it would be a fun example to show a group of real estate investors a deep dive.

David:
It’s so funny how deals come across like that. I have one that’s a really, really good BRRRR in a super good city and someone had just asked me, “How did you find it?” And I’m like, “Well, there’s the answer I want to give you, like I use this criteria, and I searched the MLS, and I found it this way.” The reality is I was at a Round Table Pizza picking up some pizza to drop off for a group of friends, and they had a little advertisement running on a TV and it caught my attention. I literally just looked at the pictures and were like, “I can triple the size of this thing just by converting the basement.”, So for you, it’s the same thing. I was just looking at a property to show other people and something about it caught your eye.

Ashley:
Absolutely, yeah.

David:
So, next question is how much was this deal?

Ashley:
Right. So, that was the reason I wasn’t going to buy it. He was asking 85,000 for it. Yeah, and I ended up getting it for $50,000.

David:
Now, before Rob asked his question of how you were able to negotiate that price, I want to ask you how long ago did you find this deal?

Ashley:
I closed on September 2021. Oh, just about a year. Yep, a year ago.

David:
Okay.

Rob:
So, how did you negotiate this deal?

Ashley:
Well, I offered him 60,000, right, because I was teaching my group on how to be firm and not get excited about the numbers, make it make sense. So, I offered him 60,000 and he flat out denied me and I just told him, “Okay, no problem, but I’m still interested, you can keep it as a backup.” And his contract was expiring. First of all, and I’m sorry to say this, so when you’re doing deals out here, if you want to be longevity in this business, make sure you’re doing deals where everybody wins, right? So, I’m not saying this for the wholeseller, but the wholeseller got it under contract for I think 36,000 and he was trying to make 40 or 50,000 on the deal, and I’m like, “Make sure everybody wins,” but that’s neither here or nor there. So, he had a big spread in it.
So, either way I go, his contract was six days from expiring and if his wholesale contract expired, now I can go back to the buyer and buy it directly. So, he called me five days before the contract expired and said, “Hey, I’m willing to take your offer at 60,000.” I said, “Oh yeah, but the offer’s 50,000 now and I can close quickly in four days because I’m liquid, I’m cash.” So, that’s how I was able to negotiate it. He rejected the offer. His contract dwindled down. He knew I was liquid in cash and can close quickly, and he took the… But he still made 15 grand.

David:
The reason I asked about the timeline that you bought it is because opportunities like what you’re describing are becoming much more available in today’s market of higher rates than what they would’ve been two years ago, for the last eight years. It used to just be so many people wanted that house, someone was going to buy it. The sellers had a hundred percent the leverage. You were just hoping and praying that your offer would be accepted. But now that we’re seeing buyers that are kind of backing out of the market, demand’s decreasing, sellers have lost a lot of that leverage, and you can go in and start with the deal that you’re like, “80,000, that doesn’t work. It’ll work at 60.” You get them down to 65, you’re really close.
I got three deals right now. I look at it like the fish took the bait and I’m reeling it in the boat, but I’m not all the way there. I’m just waiting, and every week they come back and we’re getting closer and closer to the number that I wanted. That’s why I’m saying I’m having so much fun. I see you’re smiling. Yeah, that’s what makes this so much fun when we get to buy real estate this way. You haven’t been able to do that for a long time, but your strategies will work for everyone unless your market is red hot across the country.

Ashley:
Absolutely. And to be honest, I’m not saying go out and have a ton of cash, but being able to be a cash buyer in the smaller markets, that’s the leverage because where else could we have closed in five days. You know what I’m saying?

David:
Let me give you guys a little quick tip here.

Rob:
Quick tip.

David:
Yeah, quick dip. When you’re trying to get a loan for a property, it’s very difficult to get a loan for a low balance price. So, most lenders don’t want to go through the headache of having to originate a loan to lend out 50 grand, 60 grand, 70 grand. They will set a limit of a minimum of a hundred, minimum of 120. It used to be 50 before inflation changed everything. So, you can find this sweet spot, Ashley, like where you’re buying where the purchase price, if they were to borrow 80% of that, or even 90% of it is less than the minimum amount that a lender will lend on. So, financing becomes incredibly difficult to get for the house.
So, the seller doesn’t have a big pool of buyers, even though people would go by that property because they can’t get a loan for it. So, then they either have to take a cash buyer which is going to get a significant discount, or the buyer has to be like you and create creative financing options for themselves, like this line of credit, the business line of credit. So, now you’re getting the best of both worlds. You’re getting the price you want and you’re getting financing at the same time where your competition either had to pay cash for the property or they just couldn’t buy it.

Ashley:
Yes, absolutely, yes. And that’s the sweet spot. Maybe I need to focus on that and just tell her [inaudible 01:04:48].

David:
That’s what you’ve done is you found the chink in the armor, right? It’s weak right here, the Achilles heel. This was similar to how Rob and I got our Scottsdale property. It was on five acres and none of the lenders wanted to lend on that many acres. So, because I own a mortgage company, the One Brokerage, we were able to get a loan where other people couldn’t. But that’s really what good investors are looking for. They’re not just complaining, “Oh, it’s really hard to get a house.” Ashley’s like, “Oh no, no, I figured out.” You always see the movies where there’s a fortress that no one can get into, that’s the market. Rob, you should make a meme of this. You got this big wall, then at the top of it is great deals, and then at the bottom are all the little people trying to get into the fortress and that’s buyers, and then Ashley’s got the little, the little… What would it be like, like a little-

Ashley:
Like a ladder or a stairwell?

David:
It’s more like the little vent that they have where the water comes out and the good guys figure out like, “Aha, we can sneak in through this little thing.” There’s always a movie where that happens, and that’s what your Detroit method is.

Rob:
There’s always a movie. I remember 10 of those came out.

David:
Yes, exactly. All right, next question before I get too far down off this rabbit hole, how did you fund this deal?

Ashley:
All right. So, I used a business credit card, a business line of credit, I’m sorry, that I got probably two weeks before, and I funded the deal for 50,000 cash because again, I didn’t have to, I could have used my hard money lender, but because I only had five days to close, I had to self-fund it, right? So, it did need 55,000 in renovation. So, what I did was, and a lot of people, I don’t know if you can do this with hard money, this is why hard money is slapped on. First of all, when I found out, when I was looking at hard money for the short term, the one year, and I was getting rates like 11, 12, 15%, I was like, “Ah, that’s awful. I won’t pay 15%,” but that’s per month. So, it’s annualized for the year, I’m sorry. So, 15% interest rate on a year is really less than 2%. So, if you only hold the property for four months, you’re paying 8% interest and you’re making all this profit. So, you cannot look at interest just like David said.
But anyway, when you purchase a property cash and you have so much equity in it, you can get cash back at the table. So, because I purchased it cash and the ARV came up, when I rented the hard money lender to finance the rehab, not only did I get all the funds for the rehab, I actually brought back a check for 17,000 from the closing table. But that was just part of my 50,000 back that I put in it. So, that’s how I funded the deal, purchased it 50k cash on the line of credit, and then I used a hard money lender to do the refinance, I mean, to do the rehab, sorry.

Rob:
Awesome. So, we kind of know bits and pieces here, but what did you do with this property? Flip, rental, BRRRR reverse flip?

Ashley:
I reversed flipped this property. Yes, I did. So, one thing else that I discovered, one of my other properties I was really focused on making the basement look really, really nice, and then an appraiser came in and said, “Hey, the basement is great, but no matter what, because it’s below ground, we do not count the square footage. We can give you a boost on the finished basement, but we cannot count the square footage.” So, this property had an attic. So, I met a guy that was talking about, he’s a builder, and I decided for the first time ever in my career to do a dormer on the property on the attic and finish the attic off. So, because it’s built above ground level, grade level, I’m sorry, it allowed me to add that square footage in the square footage. So, this is where the big changes went.
So, first of all, for my first plan, 50,000 purchase price, 55,000 renovation, I would’ve been all in at 105. The hard money lender did an appraisal of the ARV in order to fund the rehab and it came back in at 265. So, that was the big wow. 105 all in, ARV 265. So, once I finished the dormer and finished that attic off, I can count the 400 square feet now into my square footage. So, properties in that area sell for about $175 a square foot. I did 135 because I’m conservative. So, $135,000 per square feet times 400 square foot added $54,000 to that 265 number. So, now the ARV was 319,000, but the dormer and the addition finishing that off only cost an additional 15 grand because I was already doing new plumbing, I was already doing electrical. So, it’s just a matter of running it to the extra space and it’s like a loft with a bathroom so it’s not finishing.
So, all in all, sorry, I spent all in 120,000. I spent 7,000 on rehab, 50,000 on purchase. The ARV is 319,000 and then I reverse flipped that thing. So, this is how it would work. So, the ARV is 319. My lender gives me 80%, but most investors won’t, so they’ll eat 75%, so I did the numbers at 75% so we all are fair. So, the cash out refi is $239,000 with a hard money lender at 7%, right, 4% more than I probably could have got on a traditional, but I only invested 120,000 in the property all in. So, I’m going to take the 19,000 for lender fees, obviously because they will charge me points. So, I was able to put in my pocket on the cash out refi a hundred thousand dollars which is a flip profit when you factor in taxes and the work and the time you put into it, you’re really make that 60,000 has quickly turned into 35,000 on the flip, let’s just be honest.
So, with the reverse flip, I put a hundred thousand dollars back in my property, but what’s more is that is a high-class rental for $2,200 a month. They don’t know that they’re right next to a celebrity, so they may see him one day, and I’m still cash flowing 200 bucks a month, but I’ve already put a hundred thousand back in my pocket and onto the next one, right? So, I used that property to get paid forever instead of stopping getting paid when I flipped it, if that makes sense.

David:
I love it. Yeah, you got all the profit of a flip without the tax ramifications and you kept rent property and you get to cash flow.

Ashley:
Yeah. All right, next question here. What lessons did you learn from the deal?
Well, I learned that the more negative I am… No, I’m just joking, how to pick a party. I really learned to always go look at a deal, even if you feel like it’s not going to make sense, right? It just depends. If it’s checking off two out of five boxes, you know what I’m saying, go ahead and do it because I feel like I believe in the law of attraction a lot. So, I feel like as long as I’m surrounded by real estate, so as long as I’m going look at deals, even if I don’t necessarily get that one, it’s going to attract the right deal for me.
So, again, I did not want to look at this property. I swear I was so unmotivated to look at this property and I stopped, I went ahead and did it, and that was the lesson I learned. Also, the price is the price, right? Always be in a position where you can be quickly liquidated so you can get that $30,000 off the asking price because you can close quickly, and obviously, that takes knowledge and being an expert in that area. But I would say those were the lessons.

Rob:
Awesome. And then lastly, I mean, it sounds like the answer is you on this one, but I’m still going to ask it anyways, who was the hero on your team for this deal?

Ashley:
It was me, unfortunately. Well, fortunately so.

Rob:
That’s fortunate. That’s all good.

Ashley:
Yeah, I say a lot of things, and I just want to say it’s not advice, right? It’s just what works for me. So, just with my personality, and I think I even talked to David about this after the show, I’m the type of person that kind of do everything theirself, not because I’m a perfectionist. I know you want to delegate. You can’t do everything yourself, but because I am able to do these things myself, I’m getting better deals and I know the process. So, now when I step back from the business and with this new great migration or great resignation, they’re so hard to find help now. So, if my VA decides to quit or my property manager decides to quit, I could still step in if I had to, to save my business, or if the recession gets really bad and I have to cut costs, I can do that because in real estate or in anything, it’s not what you make, it’s what you keep.
Now again, I know that I’m taking off years of my life because I’m doing this and not delegating, but I really can’t do much anyway because I still have a kid in high school. So, I can’t travel all over the world 24/7 and be a citizen of the world. I still have to be here because I’m at every single basketball game, every single football game. I want to be active in my kid’s life. So, it’s not such a rush to do things. So, that’s my philosophy. Sorry.

David:
All right, that was fantastic. We’re going to move on to the last segment of the show, the world famous (singing) famous four. Ashley, in this section of the show, as you know, because you probably listen to every podcast we’ve done, we ask every listener the same four questions. Question number one, what is your favorite real estate book?

Ashley:
So, in the first part of my journey, I didn’t get a chance to read a lot obviously. Now, I am reading. Real estate book, it would have to be The BRRRR Method by David Greene.

Rob:
Couldn’t agree more.

David:
Yes, that’s like the second time in the history of the podcast anyone ever said my book. So, thank you for that. I mean, the first time might’ve been the first episode we did with you.

Rob:
I say it every episode. Number two, Ashley, favorite business book?

Ashley:
Okay. And again, it’s just because I’m just starting my library. I really love the power of reading, but I read a book called Am I Being Too Subtle by Sam Zell, and oh my gosh, it’s literally changed my life, the crazy stories in there. So, I really love that book. I’ve listened to it twice already and ready to listen to it again.

Rob:
Okay, awesome. Number three, when you’re not building your real estate empire out in Detroit and mastering the art of the reverse flip, what are some of your hobbies?

Ashley:
So, right now, honestly, I’m in a transition in my life which I’m really grateful for and I’m trying to figure out what’s next for Ashley. So, right now, my biggest hobby is networking. I’m flying anywhere, go to any networking events, going to CPA conferences, real estate conferences, everything just to expand my knowledge and expand my network because I don’t want to be a one-woman show, right? I had to be because I didn’t have the knowledge, but now I want to meet people and partner with people and be a social butterfly. So, that’s number one.
Number two, I just still have a passion for kids and just trying to make their life a little bit better, just considering what’s really going on with life. Yeah, so just instilling in kids my four pillars on how to set your child up for success with just one real estate property. I know we were supposed to talk about that. Maybe if you got a second I’ll talk about it. But that’s my goal is deepening that message is educating more people on how to set yourself up for success with one property and networking.

David:
All right. In your opinion, what sets apart successful investors from those who give up, fail, or never get started?

Ashley:
I feel clarity. Clarity is what it is. So, obviously, when you first start you may not have clarity, but that’s where it goes into mindset and really having that conversation with yourself to figure out what you really want to do, right, because I do consulting and stuff like that and I’ll have people call me and they’re like, “I want to flip properties because I want to quit my job next year. I want to be just like you.” And as we said in this show, flipping doesn’t help you quit your job, right? So, I feel like because a lot of people don’t know what they don’t know or they’ll hear podcasts and don’t try to reach out to the person or try to really… If you’re going to mirror that person, obviously you need to talk to them and see all the caveats and stuff.
So, that’s what I feel is making people not so successful, sorry about that, is that they don’t have clarity, or they’ll say they want to do something but the reasoning why they want to do it does not align to what they’re able to do right now. Yeah, and putting on blinders, for sure, that’s what helped me be successful is sometimes you have to put on blinders and kind of blind out some things and just focus directly on that goal.

Rob:
Amazing. And lastly, Ashley, can you tell us where people can find out more about you?

Ashley:
Absolutely. So, my number one platform is Instagram and I’m @detroit_investor. I literally, the 11 properties that I bought in one year, if you were following me, you saw the renovation, the before and after, me standing out live while 10 people are trying to get in the property. You’ve seen it all. I showcase that daily on my Stories, actually doing seven renovations right now, like various levels. So, that’s the best place. I also do have a website. It’s Ashley Hamilton Consults, so my name, ashleyhamiltonconsults.com. Lastly, definitely, I am on BiggerPockets, for sure, so you can definitely message me on there.

Rob:
Awesome. Dave, what about you?

David:
You can find me at David Greene24 all over social media or on YouTube at David Greene Real Estate, and also beware because there’s tons of scammers. They’re popping up every single day. It’s a big pain in the wazoo trying to get that blue check mark to avoid this. I’ve tried about 25 times in Instagram, keep saying no.
So, don’t know what we have to do to change there, but please, please, please, please, please, I know that it’s cool when it looks like someone followed you and they start messaging you, and these people are very good at saying things I would say. They are listening to this podcast right now and hearing what David said, and they might even bring up the pilf method just to sound like me. I’m not asking you for money ever. If I do borrow money from somebody to invest into real estate, you will go through my assistant. We will have a form that you’re filling out. You will definitely know that it’s me. Don’t send money to any link that someone sends you. Good friends of mine, like legit good friends have actually sent tens of thousands of dollars to these scammers. They’re horrible people. So, please be careful about that.

Rob:
Yeah, so if you get a message from David Greene pilf, don’t respond. It’s not him. He’s David Greene24. You can find me over on Instagram @robuilt, YouTube on Robuilt as well.

David:
Alrighty. Ashley, thank you so much for joining us and updating us on your journey. Every time we talk to you, you seem to be doing better than the time before, and I love seeing somebody like you win because you’re doing it the right way. You’re learning, you are very persistent, and you share with other people so I appreciate you being here with us. I’ll let you guys get out of here. This is David Greene for Rob I don’t flip with you Abasolo, signing off.