From Parents’ Basement to Full-Time Investor and $2,500/Month with ONE Rental

Ashley:
This is Real Estate Rookie episode 327.

Noah:
Three years ago, my fiance and I were living in my parent’s basement when we decided … that we wanted to buy a fixer-upper house. And fast-forward to today, we have a small portfolio of single family and multifamily properties. We have a mixed batch of short-term and long-term rentals. We self-manage everything together. I work in the business and she works full-time at her W2 job to kind of provide us with a secure paycheck while I’m able to risk the income we make from the business and continue to grow the business.

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

Tony:
And welcome to the Real Estate Rookie Podcast where every week, twice a week, we bring you the inspiration, motivation and the stories you just really need to hear to kickstart your investing journey. And today we’ve got one of those really good stories to kind of give you that kick in the butt that you need to get started.

Ashley:
There is a super inspirational story that just touched mine and Tony’s hearts about our guest today. Noah going to BP Con in 2021, but Noah today is sharing how he rehabbed properties. He worked several different jobs that helped him a little bit understand construction for real estate, but not really. And he goes through how he was able to learn. He talks about his second property being with a partner, and of course, we love partnerships here. Make sure, if you haven’t already, visit biggerpockets.com/partnerships to see mine and Tony’s new book Real Estate Partnerships.

Tony:
Noah also shares a really interesting story, and you’re going to love hearing this about some creative ways to finance your real estate deals. Ash and I talk a lot about different strategies we’ve used, but I really love what he did, so you’ll really want to make sure to pay attention for that piece as well.

Ashley:
Noah, welcome to the show. Thank you so much for joining us today. Can you kind of get us started with how you got started in real estate and maybe even before that, what were you doing before real estate?

Noah:
So first, I just want to thank you guys for having me on. This podcast has been a huge inspiration to be over the years, so to be on here speaking, it’s really surreal. But yeah, a little bit about me. My name is Noah Sprimont. I’m 25 years old. I was born and raised in Dubuque, Iowa. Three years ago, my fiance and I were living in my parents’ basement when we decided that we wanted to buy a fixer-upper house. And fast-forward today, we have a small portfolio of single-family and multifamily properties. We have a mixed batch of short-term and long-term rentals. We self-manage everything together. I work in the business and she works full-time at her W2 job to kind of provide us with a secure paycheck while I’m able to risk the income we make from the business and continue to grow the business.

Ashley:
Noah, there is a lot I want to get into on that, but first of all, congratulations on being a real estate investor and actually taking that leap and growing your portfolio. What about when you were living in your parent’s basement, before you took those steps to start investing in real estate? What were you doing before that?

Noah:
So I mean, out of high school I was pretty frustrated. Most kids probably that can’t really find what they want to do and maybe feel indemnified for it. So I spent a lot of time probably watching YouTube videos and doing stuff like that. During those early days, I actually stumbled into some of the earlier BiggerPockets stuff a long time ago and would watch Brandon Turner talking about doing those things. So that’s really what kind of got the gears turning. I guess right before we lived in my parents’ basement, we rented a house with five other friends of ours, and we were the ones that kind of put the deal together. So that really kind of got us thinking about if we can get creative with our living arrangement, I guess we can potentially lower the cost, our monthly living expense.
And one thing led to another, we basically said, okay, if we can do that with a rental property, maybe we can do this with a house that we buy and own and instead of paying rent each month, we can be paying a mortgage down. Just from my parents’ basement, we moved into there after that rental house to start staving money and we really just started learning, talking with the bank and listening to more of the podcasts and stuff like that and talking with realtors, looking at houses and then really just pushing. We didn’t have a whole lot of money at the time, so we kind of felt like we were doing something that we shouldn’t be doing, but we just really kept pushing until we got into that first property.

Tony:
No, you talked a little bit about not knowing exactly what you wanted to do with your life, which is a super common feeling for a lot of people. I know Ash went to school for one thing, she’s doing something different. I switched my majors during my junior year of college, so I think everyone kind goes through that phase. But I guess once you were done with high school, what did you put yourself into from a work position? How did you decide how to spend your time, I guess?

Noah:
So yeah, out of high school, towards the end of high school, I was really money-motivated and I wanted to find somewhere where I could be just making more money and that led me to just hop on the internet and Google what’s the highest paying job for somebody that doesn’t have any experience and is under 18. And the first thing that popped up was concrete laborer. And I’m like, no emotion. I just didn’t think about it or anything. I googled concrete companies in Dubuque and I just started calling everybody asking if they had a spot open or if they could hire a kid like me. And the first few were like, you could come and sweep the shop once or twice a week for 10 bucks an hour or something. They really didn’t want to put me on because I was not old enough to operate equipment and stuff like that yet. And then the third one I called, I think they just looked right past it and were like, “Be here at 5:00 AM tomorrow morning and you got a job.”

Tony:
Nowhere.

Ashley:
I feel like that would happen today because I’ve been waiting for concrete to get poured forever, but my contractor keeps having trouble finding people he can’t get jobs done fast enough because he needs laborers. But what timeframe was this? How long ago was this when this happened?

Noah:
So I was probably a junior in high school, so it was like a year before I ended up graduating and was … I think I started in the summer in between two years and that’s how I was able to be there at 5:00 AM the next day.

Tony:
I just want to pause here for a second though because I think there’s a lesson for our rookies that are listening. So even though 99% of our audience is probably not a junior in high school, I think the lesson that we can take away from this is that A, if you want to find some skills that are relevant to being a real estate investor, just pick up the phone and start calling people. That’s a super just gritty way to get that job experience. But B, it’s like you can use this work experience to fuel your ambitions of being a real estate investor. There are a lot of people right now who aren’t in love with their day job. And if that’s the case and you’re not in a position to go into your real estate business full time, then why not transition into a line of work that will set you up to be a better real estate investor?
And that doesn’t necessarily mean becoming an agent. It’s like if you could pick up skills like concrete work … I guess no, did you do any other work that was related to real estate investing that kind of helps you build that confidence?

Noah:
So yeah, over the years since then I’ve worked in a few different construction trades, which really kind of hammered out the hard work aspect. But after the construction stuff, I ended up getting into some sales spots, which was really awesome. I kind of got the hard work thing figured out and then I wanted more out of life I guess, and seeing some of my friends with their more cleaner jobs, they didn’t have to get their hands dirty and I kind of wanted to get into that a little bit and started getting into … Well, I actually ended up getting my health insurance license and started working for a supplemental health insurance company, which we were selling supplemental health products door to door on the road. So I was basically on the road staying in hotels Monday through Thursday and I would be knocking on doors. And that kind of piled on top of the hard work, allowed me to get a lot better at that face-to-face interaction and talking with people and dealing with people. And now …

Ashley:
I bet there’s a lot of investors listening right now and be like, Hey, you want to come source deals for me. You already have that-

Tony:
That’s exactly what I’m thinking right now.

Ashley:
[inaudible 00:09:35].

Tony:
Yeah, exactly what I’m thinking right now. But I think Noah, you got into the point that I was making is that you did these different things, you took these different jobs obviously with the intention of putting food on the table, but also with this idea of like, okay, can these skills support me in this bigger vision? And the point that I was making earlier was that if you’re in a job right now that you don’t like, why not try and find a slightly different career path, still a day job, still a W2 job, but one that’s going to support you in being a better real estate investor. Can you go work for, like you said, a roofing company? Can you go work for your local HVAC company? Can you go work for, I don’t know, a flipper who needs help managing their projects or sourcing their deals? I would assume, Noah, that between all these different jobs you kind of took, some of those skills transferred over, some of the lessons you learned on those jobs transferred over. If you think back, what are some of those moments for you?

Noah:
So the wildest part about that is it kind of ended up giving me the skills I need, but I mean really during the time, I had no idea I was gaining those skills. I was really just ending up in these positions where I was chasing the money and then I was handed these things that I had to get over, getting over, knocking on the door, getting over a little bit of sweat and pain while at work. And over time, it’s crazy how it’s kind of all come together. And it definitely wasn’t planned by any means, but when I was handed those things that were probably a little difficult, I just kind of kept running at them and kept my head down and just kept doing what I thought I should do. And then when you finally kind of look up, you’ve gotten over those things that were once scary to you.

Ashley:
So, Noah, is there a certain principle that you live by that you follow is kind of how you lead your life?

Noah:
Yeah, Ashley, that’s a great question. After the concrete or in-between kind of some of that, I ended up working on a roofing construction job site and that was just a whole other ball game. In terms of hard work. I like to say when you’re doing concrete, you’re kind of lower. When you’re on the roof, you’re a lot closer to the sun, so it’s a little hotter up there. But totally different ballpark when it comes to the labor. I ended up working for my fiance’s mother’s boyfriend. He had ran this roofing company for a while, small company, just one crew. And basically he would pick up a few guys from jail every morning on work release. And it was basically me, him, two other guys that were probably facing some wild sentence and just had a little bit of time between now and their court date to work. And we would go around in rural Wisconsin actually and do these roofs.
And I really picked that up easily because I had done the concrete in the past, so I fit right in there and over time he would have these people coming and going. And eventually, one day this mom actually dropped off her son, he looked a little bit too young to be working with us, and I’m up on the roof working and the boss kind of yells down to this kid, the kid that probably shouldn’t have been there, and he starts yelling at him to pick up the shingles because stripping the shingles off the roof and this pile, it’s probably five or six foot tall, it’s like a huge pile of shingles. I’m just working away. And eventually, I’m just kind of wondering, it’s not being picked up. I look down the kid’s crying, he’s sitting there just kind of bawling his eyes out. And I look over at Ben and I’m just like, “What’s going on?” And he looks at me and he’s just like, “Noah, if you look at something you’ve never done in your life, it just is going to play games with your head. It just messes with your head.”
And he sent me down the ladder to go pick up that pile of shingles. And I kind of had a little bit of pride because he called me in to go do the job or whatever, and I climbed down the ladder and just start picking up those shingles as fast as I can like I always did, and the pile was gone in 10 minutes. If you just focus on it for a little bit and kind of ignore the big giant thing, it disappears. And it really, really kind of set into me that no matter what it is, if you come across something that’s just like making your mind spin, it’s probably just your mind playing games with you.
So you take that and apply it to a fixer-upper house, you get into this project that you probably thought you had no business in, and if you just do it one shingle at a time is kind of what I taught myself, pick it up one at a time, do the thing that you know can do and do your best at it eventually, on a rehab, it’s a list of items. That pile of shingles, it’s a pile of shingles, so you could connect it to one shingle is one item off that list. And over time, if you keep picking up shingles, keep crossing items off those lists, eventually you’re going to run out of shingles to pick up and you’re going to run out of things to do on that list and that’s when the deal’s going to be done and you can go to the bank and refinance it.

Ashley:
So, Noah was your first property, did you have to do a rehab for it?

Noah:
Yeah, so the first property we bought, I had a little bit of experience in construction, but I had really no experience in renovating a house. So we had done new construction mostly. And it sounds like those skills should be directly transferable, but I was pretty lost when I got into the first project.

Ashley:
Well, it seems like you did specialty skills too instead of general contractor. You had worked in the specialties. Yeah.

Noah:
Yeah. No, the first project we bought from my parents’ basement, we can go back to there, single-family fixer upper house, not really … It was on the MLS, but it probably shouldn’t have been a wholesaler had gotten ahold of it through a lady that was behind on her taxes and he just basically took the old MLS pictures and listed it. He never even visited the property, he just put it on the market. And I circled past it four or five times and eventually, it was like, this looks like it’s probably something that we could try. And the big problem with it was the sewage pipe was cracked, so the bank didn’t want to finance it, just resident-

Ashley:
And did you know that ahead of time? Did the wholesaler tell you that or that’s something you found out during an inspection?

Noah:
So yeah, I mean the pipe was visibly cracked in the basement. So during the walkthrough, I could see the crack and I kind of just was emotional probably about it and was like, “OH, I can fix that,” or “I’ll get that fixed, it’ll be easy.” And we just really kept pushing. But when the inspection came back or the appraisal came back for the bank, they classified it as C5 or something like that. It’s basically just out of the threshold to be resold on the secondary market for a mortgage or whatever.

Ashley:
Let’s talk about that real quick. So when you go and do bank financing, you have the inspection period from if you’re doing an FHA loan or maybe a construction loan, something like that. But if you’re doing just a conventional loan product, there isn’t really typically any kind of inspection. So what you’re talking about was done from the appraisal. So when the appraiser actually comes to the property, he’s classifying it, and that’s how the bank is deciding if they’re actually going to loan on the product too. So kind of talk about that process. Did you expect that that could even happen, that the bank wouldn’t loan on the property? And what loan product were you using?

Noah:
Yeah, so I really had no experience in this stuff, so I had really no idea what they were talking about when they came back to me with, we can’t finance this, it’s a C5. And the loan product we were using was just a standard residential owner-occupied loan. So in order to qualify and push it through, they really had to make sure that it was a livable residence. And we can kind of go into detail about how we got around that.

Ashley:
Yeah, yeah, let’s do that.

Tony:
I just want to call out one thing, Noah, because you said that the loan couldn’t get resold on the secondary market. Can you just explain what that means for folks that aren’t familiar with that?

Noah:
So I’m probably not the person to explain this, I’m just repeating what they kind of told me, but …

Ashley:
That’s perfect.

Noah:
Yeah, it’s to my understanding that these smaller banking institutions and credit unions are basically just making these mortgages and they’re selling them to larger institutions that use them as a vehicle to make an investor a return. So in order for them to be able to resell my mortgage, the risk has to be low enough for the investors that are on the other end of that deal to take it on.

Tony:
Yeah, great description though. And yeah, like you said, most of these banks, usually when you get a mortgage, the person who sold you that mortgage, they might service it for a month and then you’ll get a new loan servicer shortly there afterwards. So they’re just kind of originating that loan and then selling it off to someone else. So yeah, a lot of these banks do have guidelines that aren’t even necessarily their own banks, but it’s like, hey, if we want to be able to resell this, whether it’s a Fannie or a Freddie loan, there’s certain boxes they have to check to be able to push that loan off to someone else. Now there are some-

Ashley:
I found it really common that if you use a mortgage broker that it’s more likely to be resold than if you’re actually going to a smaller bank that will kind of keep it in-house too. I’ve had one loan that has changed four times. I got in 2017, and it’s changed four times. Different loan service.

Tony:
Just moving it around. But you made a good point, Ash. That’s what I was going to comment on is that sometimes the smaller banks, they’ll keep those loans in-house. Like the bank that I worked with in Shreveport when I first got started, they didn’t resell any of their mortgages, they kept it in-house. So depends on which bank you’re working with.

Ashley:
So knowing you couldn’t get the financing and how did you end up getting around that?

Noah:
So I was kind of told no. Really they basically just said, “No, we’re not going to finance this. Keep looking, sorry.” and I went to some of the investors from the local REI meetup that I attend and just asked them like, Hey, you told me to come to you when I had a question. I got a question. And I don’t know how to get this pushed through. I really think the house is a great deal and I really think I can make it work, but the bank won’t finance it.

Ashley:
Noah, did you put in any kind of earnest money when you got this property under contract that you were worried about losing if you didn’t make this deal go through?

Noah:
So I think it was like $500 in earnest money and earn. I wasn’t really even thinking about losing it because I was going to make it go through. So it never crossed my mind.

Ashley:
Yeah, that’s awesome mindset to have.

Noah:
But yeah, so my one friend ended up saying, well, what if you approached the bank and you said, here’s a contractor’s bid of all the items that need to be done to fix the house up to get it to a C4, so it’s livable and stuff. And then what if you took that money and just gave it to them, put it in escrow account, and said, if I don’t close on this house and fix these items to get it to a C4, you guys can take that money, execute it with this contractor and fix the house yourself. If I do fix it with my money and everything, you guys can just release those funds back to me.
So I went to the bank and asked them if they do that and they said, “Sure, yeah, get us the bid.” And being in the profession I was in previously, I had a lot of friends that were contractors. So I just called up one of my better friends and went to his house and sat down at his dinner table and we wrote out this nice long bid that … We were able to make the bid a lot smaller because I’ll say in quotations, “I had a lot of the materials already.” So we were able to make the bid look a lot smaller than it actually probably should have been that way I didn’t have to set aside too much money because I didn’t really have a lot of cash at the time.
So it was said and done. It was $900 to get it to be a C4. And I submitted the bid, the contractor’s bid with the bank, and I honestly don’t think they even looked at it. They said, okay, we’re good. It’s all good to go closing dates here. And that’s when I was just like, whoa, this is crazy.

Ashley:
So that big takeaway right there, don’t take no for an answer, find how to overcome that obstacle.

Tony:
But I think it’s also, and Ash, we talk about this a lot too, it’s just the flexibility you get when working with some of those smaller local banks. It’s like I couldn’t walk into Bank of America and offer that same deal and the teller would be like, yeah, I can make that work. But it’s like when you go to a smaller local bank, you have that. So, Noah, what happens next? You figure out the whole financing piece with this really creative strategy, what happens from there?

Noah:
So I would hate to gloss over this, but we actually ended up working seller credit into the deal and then the bank that we were working with offered a class to lower the, I think they call them the LLPAs. There were some little fees associated with the closing cost. So if I took this class, they would take $1,200 off or whatever. And then we got a $7,500 seller credit.

Ashley:
And what was that class about? What did you actually learn in it that they would take those closing fees off?

Noah:
It was just a 30-minute online class about homeownership. So it was basically-

Ashley:
$1,200 for 30 minutes?

Tony:
For 30 minutes.

Noah:
Yeah.

Ashley:
Yeah. And it was still about owning a home and how to be responsible and make your mortgage payment?

Noah:
Right. You got to have-

Tony:
I got to-

Noah:
Go ahead.

Tony:
No, I got to ask the question because I feel like every rookie listening to this is going to want to know what’s the name of this bank that you were working with?

Noah:
So this is Dupaco Credit Union, so they’re Rock Stars.

Tony:
Dupaco Credit Union. All right. Dupaco Credit Union just got put on the map by the Real Estate Rookie podcast. When I was a guest back on episode 10, I talked about the credit union that I used in Shreveport for my first deal, and I literally got a call a few days after my episode aired from the vice president of that bank. She was like, “Tony, I don’t know what you did or what you said, but my phone has not stopped ringing all week.” So there you go, man. We’ll do the same for that credit union.

Noah:
That’d be awesome.

Ashley:
So what happened next?

Noah:
Yeah, we got the house closed. It was the wildest day probably of my life during the time. Just shortly before we ended up closing on the house, we went and got a small personal loan to kind of stock up our cash pile, and it was only like $3,000. And then when we ended up closing on the property, having no experience going into a closing, I didn’t ask for a closing statement ahead of time or anything, or never really even got it. We didn’t really know how much money we had to come up with until we were there the day before and they showed us that number and it was $3,200. And it was so eyeopening for me to have spent so much time renting and everything like that to just put that small amount of money down, which isn’t getting thrown away anyways, it’s going into that loan and it’s a down payment and just have a mortgage payment the next month that’s smaller than my old rent payment. But yeah, from there-

Tony:
That’s amazing.

Noah:
From my parents’ basement, I was actually working as a motorcycle salesman at a Harley Davidson dealership, and I would get off at four or five o’clock and come straight to this. I would actually change in the bathroom there and then come straight to this property to renovate every night. And it was probably a long slow process because I had no experience with doing the sequence of events properly and stuff like that. So I’m bouncing around this house painting one wall and then painting the other wall and tearing some flooring out and just doing what I thought I had to do to get it up and running. And over a little bit of time, we kind of had it to the point where it wasn’t moving ready, but I was at work one day and my fiance just got tired of living in my parents’ basement and she just went around me and just started moving the stuff in and she’s like, “Yeah, we’re all moved in.”
And I got off work that day and we were all moved in, At the time, we had only renovated the main floor of the house, so the top floor had still sat looking like how it’s looked since probably the ’60s. So we moved right into the lower unit and continued to work our W2s and continued to kind of learn about real estate.

Ashley:
Noah was that your plan is to push off moving in so that you didn’t have to help move and that your girlfriend had to do it all?

Noah:
Honestly, it was totally against my wishes. I had to caulk some trim yet, and I knew that if she started moving stuff in, that that stuff would never ever get done. And to this day, I’m sitting in the unit right now and I can look around and the trim is not caulked and it kind of drives me nuts. And I bite her.

Ashley:
That is so true though. I am sitting in the cabin that I remodeled and I was like, “I’ve got to get stuff in here.” And so there are little things that are not done. The water isn’t hooked up to the fridge for the ice maker. I feel like that’s just never going to happen because the fridge is full of food, whatever little that … You are so right about that, once you move into the property, it’s like how much stuff is actually going to get done, those little tiny things. So let’s continue to talk about your real estate journey. So tell us about some of the other properties and experiences you have had as an investor.

Noah:
So yeah, from there I kind of knew I liked fixing houses and stuff like that. I really didn’t have a complete idea that it was what I was going to do. I had started attending the local REI meetup listening to more BiggerPockets podcasts, and eventually, one of the guys from the meetup kind of approached me and was like, “I got this deal I’m looking at, I really want to do it.” Another guy from the meetup brought it to him and he was just kind of telling me about it and asking me if I thought he should do it. And I just responded with, “I’m in, I want to be a part of this.” And it’s just a totally gutted duplex, $30,000 purchase price, and the roof had just been done and the previous owner had gutted it and packed it full of materials for the rehab.
So we’re looking at this really creative situation where we could potentially save a ton of money by using the materials that are already here and the purchase price worked out for the ARV, the after repair value. Basically, he approached me and he was going to do it himself. I told him I wanted to partner with him on it, which is kind of a little different how that went. But basically we kind of landed on him being the money and me being the labor. And I was kind of faced with this difficult decision. The only way that I was going to be able or be able to bring to the table what I needed to bring to the table was if I quit my W2 job and just went kind of full force into this deal to kind of get it done.

Ashley:
I was just going to say, Tony and I love talking about partnerships, so we definitely want to dive into that partnership. But before we go further into this partnership and what happened with this property as to what strategy are you turning these properties into? So your first house hack and then this one, are you doing short-term? Are you doing long-term rentals, midterm rentals?

Noah:
At the time, the short-term rental thing had never even crossed my mind, so it was entirely just going to be a long-term rental thing.

Ashley:
So with the first property, your house hacking, you turned that into a short-term rental?

Noah:
I started the second deal in the middle of renovations at this project, so we renovated the main floor, moved into it, and I had every intention to renovate the top floor until this friend of mine approached me with that next deal and asked, we kind of worked out the situation where I’d get half of the equity if I was the labor end of the deal, and then he brought the money or erased the capital. And I didn’t have to worry about any of the money. I was able to buy the materials I needed to do the rehab throughout the whole process, and that was his deal. And then, yeah, it’s a long four months of me. At the time I had a 1991 rusted-out S10 single-cab five-speed pickup that barely made it to the job site, and I had no tools. So I was actually borrowing tools from my money partner.
So he had tools because he was an HVAC technician, so he had all these regular tools that everybody really needs to do pretty much anything. And he loaned those out to me in a book bag. And basically, I had a few battery chargers and a book bag and a little tool bag that I would carry from my house to my truck bed to the job site. And then at the end of the day, I’d have to load all that back into my truck and then drive it all home. And took me four months. I was the only one that really worked on the project. We had licensed subs for the plumbing and electric, and throughout the process, it’s pretty funny, there was a auto shop right across the street from this property. And one of the days my truck didn’t start when I went to leave, so I actually went over to the auto shop, got some help, pushed it across the street and walked home. And got a ride to the job site the next day, worked all day and then went and paid for my truck bill and drove the truck home.

Ashley:
So while you’re doing this, this is where you also finish up the project at your house hack too. And so what made you decide to turn that into a short-term rental, and how did that kind of end up the numbers?

Noah:
The house hack project was still … the second floor was still just sitting pretty disgusting. And we ended up wrapping up the duplex with the money partner. And we had it all lined up with the bank from the get-go. So we basically told them, here’s what we’re going to do. Here’s what we’re going to come to you and try to refinance or finance because we did it all in cash, and then here’s the timeline. So since we did that ahead of time, it just worked out so magically. We hit the nail right on the head in terms of the timeline. Reached out to the bank, said, Hey, we need an appraisal. This place is all done and leases are signed and everything. And they triggered the appraisal. Two weeks later, the appraisal comes back at 130,000, which is a little bit beyond our expectations. We cashed out like 26 grand and split it.
And that at the time was the biggest payday I’d ever experienced in my entire life. So it was really mind-boggling and life-changing, and that’s kind of when I realized that I did that. And sure, $12,000 in four months might not seem like a lot to other people, but to me at the time, it was incredible. I walked away with a turnkey duplex that was cash flowing, close to a thousand dollars a month. And then, yeah, I got the $12,000 paycheck. I basically was like, “Yeah, this is definitely what I’m doing for the rest of my life.” So I took that 12K and now we’re indemnified or we have a bunch of money in our bank account. And that’s when I dove into the upper unit here and really just started renovating. There was kind of this mother-in-Law Kitchen up there. So that’s what really gave us the idea to put the kitchen back and kind of make it a second apartment. And there had already been a deck on the backside with a set of steps that went down. So we ended up-

Ashley:
You had your entrance so that they didn’t have to go the same way as you?

Noah:
Yeah. Yeah. And then it’s crazy. We had the big idea to make it a duplex. We thought, okay, it already is a duplex, but we ended up redoing all that stuff anyways, so I mean, basically all the plumbing, all the electric, we had to rebuild the deck and put a new door in and everything. And then we got that done. Actually, it was pretty interesting timing. I ended up going to the BP Con 2021 and I actually got a picture with you there, Tony, which was super cool.
You really inspired me. I was in the middle of renovating the unit. I think I had the idea to turn it into a long-term rental. And then BP Con in 2021 happened right before I was able to finish that unit. And I think you said, I don’t know, something about getting to X amount of short-term rentals in two years. And I was just like, “What if you can get to that? I can get to 10.”

Ashley:
I love this story right now. This is amazing. So that’s what you did.

Noah:
But yeah, no, it really inspired me. And if I think back on it, I mean, I was so excited to just get home and turn this into the coolest Airbnb ever and list it.

Ashley:
So did it work or did it ended up being a bad or good?

Noah:
Got home, went crazy, got super creative with the furniture and decoration budget and ended up listing it. I think the first month it did like 2,500 bucks in gross income.

Ashley:
And how much did you pay for this house again, and you were all, and with your rehab costs, everything, what was the total amount?

Noah:
So it was $107,000 purchase price.

Tony:
That’s insane.

Noah:
1800 square foot, single-family house with one car garage, and it had two HVAC systems before I got into it. So two furnaces, two ACs, two thermostats.

Ashley:
What’s your mortgage payment on that?

Noah:
I think it’s like 600 and something.

Tony:
No way.

Noah:
[inaudible 00:38:12]. Amazing.

Tony:
And that is insane.

Noah:
And then one of those three-point something interest rates.

Tony:
Yeah. No, dude. First, I appreciate that story, man. And I had no idea that our interaction had that impact on you, brother, but kudos to you man, for taking the action because Ash and I talk with tons of people at BP Con, and I can guarantee that the majority, unfortunately, probably don’t take action on what happens and what’s said there, but the fact that you came back home on fire pays dividends, man, 2,500 bucks on a $600 mortgage. Crazy. Crazy. Good man.

Ashley:
And let me ask you this, is there any kind of attraction near you? Why is your short-term rental doing so good?

Noah:
At the time there hadn’t been any in this area and really kind of asking. A lot of my friends, they were really like, “You’re crazy for that.” But just seeing kind of in bigger markets how they’ve been more successful and seeing other hosts like yourself have success, I was really willing to take the leap and have faith in the platform and the amount of people that actually visit that platform. There’s probably not a lot of tourist things for people to visit this city, but everybody wants … people have family and families get married and have birthdays, and they do all these things and everybody … I have this belief that if you don’t stay in Airbnbs, you just need to learn that you probably want to stay at Airbnbs or short-term rentals.
So over time, I just think more and more people will be converting from that hotel mindset to just the short-term rental mindset. And that’s pretty much kind of what I was focused on capitalizing on, was just people moving and wanting a better way to stay when they move around.

Ashley:
Well, that’s exactly to my short-term rentals. There is no attraction. There’s a ski resort maybe 30 minutes away. Niagara Falls is like an hour away, but there’s nothing centrally located right there. But the majority of our guests are coming for a wedding. We had grandparents stay for two months because they were visiting their grandkids for the summer, coming for the all-class reunion. A lot of it is just, there’s one tiny little rinky-dink hotel that has awful reviews, and there’s maybe three or four other short-term rentals, and some of them are just a bedroom or they’re not updated at all. So that’s just another opportunity there, just like you had Noah as to, there’s not a ton of options, and you can capitalize on that.

Noah:
We do got the field of dreams.

Ashley:
Oh really?

Noah:
That’s like a half.

Ashley:
Oh, cool. Yeah, that’s an attraction for sure.

Tony:
I don’t know what that is. I’m sorry. No, educate me. What’s the field of dreams?

Ashley:
Tony doesn’t know movies.

Noah:
So it’s a movie, a baseball movie that was shot really close to Dubuque in a city called Dyersville. And it was, I don’t know the exact year they released the movie, but it was before I think I was bored. And throughout my entire life, the place has been not that popular. And then just in the last few years, they started really dumping a lot of money into it and hosting Cubs games and all these games. And now I think even our city spends money on that whole operation because they bring people into Dubuque too, just because of all the … It’s really blowing up out there. I haven’t been out there to visit since they’ve kind of blown up. But yeah, I want to get out there.

Tony:
But it just goes to show, and this is something that I’ve been talking a lot about, is that I think the next shift in the short-term rental space is going after some of these kind of secondary and tertiary markets that maybe wouldn’t be your first guest at is like, Hey, here’s a good place to set up a short-term rental. So it seems like Dubuque could be one of those places, man. So you’re going to have people coming into Dubuque setting up short-term rentals and then going into that credit union that you talked about, man. So you’re building some of your own competition right now.

Ashley:
Okay. So, Noah, let’s kind of wrap up here with the rest of your portfolio. So you did the short-term rental, the second one that you did with your partnership, did that end up being short-term rental too?

Noah:
So that ended up just being a long-term rental.

Ashley:
Oh yeah, the flip, I’m sorry. Yeah. Yeah. So that was a flip. And then what have you done since then?

Noah:
Basically got the Airbnb going upstairs at the place that I live at, and then we had that place totally wrapped up in terms of renovations. So we were looking to refinance it and pull out some of that equity. So we went to the bank and told them we were ready to try to do a refi. And actually, it’s a funny story. Basically, the bank that we were banking at seeing us, they see two kids that are 20 years old at the time or 21, and they said, “There’s no way in that short amount of time that you improve the value this much.” And we said we wanted or said that we guessed it would appraise around $170,000. And I don’t know if anybody’s ever dealt with this, but I’ve never even heard of it. The bank, they didn’t necessarily say no, but they were just like, “It’s not going to appraise for that,” just over email, which being not that experienced was kind of like, okay. They said no. When we refinanced the second property, we did it with a different bank.
So at the time, I’m banking with two banks, I just went over to the other bank and said, Hey, this first place won’t refinance my loan. I think it’s worth $170,000. Would you guys like to refinance this project? They’re like, “Sweet, we’ll send an appraiser out.”

Tony:
I think what’s even crazy there though is that the first bank didn’t even want to send an appraisal to get the appraisal done because I mean, that’s business for the bank. At a minimum, they want to at least validate that, but now you just took your business somewhere else and was able to get what you needed there.

Noah:
For me, it was just confusing because it’s like I pay for the appraisal anyways. So moving forward, I only work with banks and people who are oriented like that. Okay, let’s not get emotional about it. Let’s just do the thing that we need to do. So anyways, this second bank sends the appraiser out and appraisal comes back at 190,000, which was a good amount more than what we anticipated on.

Tony:
Did you go back to that first bank and say, I told you so?

Noah:
No, no, but it’s funny because over time-

Tony:
I just would’ve emailed them the appraisal with no subject line, no nothing.

Noah:
That’s kind of funny because over time, I’ve actually ended up working back with that original bank for the last few projects, so. Yeah, anyways, we were able to cash out a lot more than we expected we would, which was another one of those moments where it really set into me that this is what I love to do and this is what I’m going to do. And it’s up to this point, it had given me more freedom than anything in my life, and although it had probably been harder than anything in my life, I felt compensated.

Ashley:
So, Noah, to end this here, what is some advice that you can give our listeners as far as maybe three things that they should be doing today to manage a rehab project or anything to do with the rehab? What do you think are the three most important things an investor should be doing today to make it a successful rehab?

Noah:
So number one, in my opinion, it has to be taking action. A lot of the time we want to sit on the sidelines or procrastinate. We might not even know we’re procrastinating just because we think we can’t do that laborious thing. I come across it so much where some of my investor friends are like, well, I have to wait to get this done because the grass needs to be mowed or something. And it’s like, just go do it. And especially when you’re trying to get started and you’re starting from not a lot of capital, even if it’s not your thing or you’re not good at it, it’s probably a little counterintuitive to a lot of the advice given out on the show, but I mean, a lot of the times you just have to go do it and get it done and then hope that someday that you’ll be able to pay people to do that monotonous task.
Another one would be, and I always told myself if I was ever asked this question by you guys, I would say this, you got to listen to this podcast. I mean, you got to consume as much information as you possibly can consume, especially when it’s free. In today’s day and age, there’s not a lot of people out there that are given out handouts, and I really feel like this platform, this podcast gives out a lot of handouts, and you got to take them when they’re given out. And the third one would be those phone calls are going to come in and everybody knows what I’m talking about, and they have their own version of whatever that phone call is. You got to stay positive when you get the bad news, you have to, and there’s going to be days where you want to sell it all, and it’ll be gone in a short amount of time if you just stay positive. So just keep in mind that in a short amount of time, I’ll be laughing that I wanted to sell everything.

Ashley:
Yeah, I feel the same way, is there are those difficult phone calls that you can get? And one thing I’ve learned is, okay, every rehab is baking in that extra 20% of overages, and I am expecting to spend that amount. So when something does happen or something comes up, it’s like, okay, yep, here’s the money, I have it set aside. This is what this money is for, because money can fix a lot of problems. So if you have your reserves in place, that makes me feel a lot better and I sleep better at night. And also I don’t get myself so worked up and emotional about, oh my God, why is this happening to me and want to sell everything? So that’s been a big help for me. And then if those things don’t happen, like, yay, I went $10,000 under budget. Yay, this is awesome. So that’s helped me a lot is having that money as set aside and having in my mindset that that money is to be spent on those things.

Noah:
Yeah, so another few great lessons I learned during that time was one of the projects I closed on was right in the middle of the coldest part of the year in this part of the country. And it was a really valuable lesson where I thought, I can tough this out, but it was probably -20 the day I closed, and I had a long rehab ahead of me that we had no heat and the house actually had no windows and no electric at the time. So there was a lot of days where basically I really had no choice but to stay moving.

Ashley:
Had layer up. I did a rehab on a four-unit, and I mean, it was probably 20 degrees out. It was cold, but not that cold at all. And I’m still in full Carhartt gear. I can’t imagine below 20 degrees. Oh, my gosh.

Tony:
My brain can’t even comprehend what negative 20 feels like. And I’m saying this as I’m sitting on the beach in California watching the waves crash.

Noah:
So it probably wasn’t actually that cold, but it felt like it was that cold. This was probably right around zero.

Ashley:
Yeah, with the wind chill and everything, I’m sure. Yeah.

Noah:
Yeah, yeah. No one day during that rehab, I’m just trying my hardest to get this project done and a little bit out of my comfort zone in terms of the level of rehab, and I was really trying to work as fast as I possibly could. I ended up breaking a window and a bathtub in the same day on one of those really, really cold days. And I am not going to lie, I sat down and I cried. I just curled up in a ball because I was cold. And the cool part about that cold is you can only sit down for so long. So I really kind of had to just get up and continue to move around. And that made me get up, push that window out, tear that tub out, and that night, I was able to get up and kind of get that stuff actually replaced before I went home. And I ended up going home probably at 10:00 PM that night, but kept me moving, kept me positive.

Tony:
I appreciate the transparency, brother. And you mentioned something I just want to highlight before we kind of wrap up here, but you talked about being a little bit outside of your comfort zone, and I think it’s a really important concept for our Ricky’s to understand is that all of us have some comfort zone that we live within, and the dangerous part is when we only stick with inside of that comfort zone. Now, you also don’t want to go too far out where you’re maybe overextending yourself to the point where it’s reckless, right? Or you’re kind of in that danger zone putting on too much to your plate, but just outside of your comfort zone is a growth zone. And that’s where you kind of want to try and focus, and that’s where you find growth and that’s where you get better, and that’s where you find success and that’s where you find just building new skills and all the things that are required to be successful.
So if you’re listening to this podcast and you feel like you haven’t stretched outside of your comfort zone in a while, it’s a sign that you might be stagnating a little bit. So appreciate you sharing that, Noah. Now I want to take us to our rookie request line before we let you go. If you guys are listening and you want to get your question featured on the podcast, head over to biggerpockets.com/reply and we just might use your question for the show.
So today’s question comes from Steven Rutherford, and Steven’s question is, for a proper bird, you have to buy the house 100% cash and pay 100% cash for the rehab and then do the refi, or can you do 20% down for the house and pay all cash for the rehab and then do a refi? So, Noah, what’s been your experience?

Noah:
So I actually read David Greene’s BRRRR book pretty early on, and I’m not going to lie, it kind of rubbed me wrong when he was really totting that the best way to do a BRRRR is to come up with all the cash ahead of time and do it that way and then finance it. Now, this might be just because I’m dealing with smaller banking institutions and credit unions, but I have never ran into any sort of issues with seasoning periods. So I see a lot more performance or success and putting the 20% down financing the house originally and then going back and refinancing it, that allows you to, instead of having to come up with all the cash for a hundred percent of the purchase price, you can maybe save the cash that you have and spend that on the rehab and then put 20% down and then the project’s probably going to take three to six months anyways if you’re a rookie.
So as long as you kind of chat that out with a bank beforehand and they know your intentions and you don’t work with a bank that won’t refinance in that short period of time, I don’t see why it’s not a better way to-

Tony:
Necessity.
And just to add to that, Noah, for everyone that’s listening, you can use whatever kind of debt you want for a BRRRR. What’s most important is that the spread between your purchase price and your rehab is big enough with your ARV. Even if you pay cash for a house, if you pay cash for a house and say you buy it and you’re all in for $100,000 for your purchase and your rehab, but the house is only going to appraise for $80,000, that’s still a failed BRRRR, right? But say that you use all debt and you’re only in for 40,000 and the house appraises for a hundred thousand, then you’ve got a decent spread there. So what’s most important is the spread and can you get your perch in the rehab done at a certain number.
Just one thing I want to clarify really quickly, Noah, you mentioned seasoning period. And I don’t think all of our rookies know what that is, but I’d say most of the banks that I work with, even the smaller ones, required some sort of seasoning. So basically what this is that when you purchase a home, typically, banks want to see that you’ve owned that property for at least six months before they’ll allow you to do a cash-out refinance. A lot of times you can just do a refinance where you’re changing the rate and not pulling any cash out. But if you want to do where you’re pulling equity out of your property, typically, they want to see six months. But Noah, you’re saying that some of these smaller banks that you’re working with, they don’t even hold you to that six month standard?

Noah:
Yeah, no, I’ve been pretty fortunate to been able to get in and out of a project where I financed it and then refinanced it within even four months. And the banker might say something about, that’s crazy, or you approved the value that much, and that’s when you can just fire back at him the list of items that are completed and maybe some before and after pictures and say, if you don’t want to refinance it, maybe I can take a walk down the street. They might want to. This is worth a lot more money now. But yeah, I don’t know. I kind of over time, and this might change, but I’ve always told myself the best bank is probably the next bank, and that’s kind of how I’ve been treated. The next bank always wants to win your business and get you over there. So worst-case scenario.
Like Tony said, I could piggyback off that a little bit. As long as your margins are there, it really doesn’t matter how you finance it or buy it and everything like that, as long as you have a great deal on your hands, you should be able to either A, borrow money to take that thing down or B, get the money from the bank or whatever. And if for whatever reason you’re kind of running into walls when it comes to that, your deal probably isn’t making the returns it probably should, and you might need to go back to the drawing board.

Ashley:
Yeah, it’s like the example, a lot of people do this with interest rates too. Like, oh, I’m not going to buy property, I don’t want to pay hard money, 12% interest. Well, if you have no other way to buy the property, isn’t it better to make $25,000 than nothing and making something off of it if can the deal still works? But if you’re like, Nope, I’m only going to do it if I get 30, but this interest rate is only going to make me 25,000. If this is your first deal and you are going to make some money instead of nothing and it’s still worthwhile, what doesn’t matter what interest rate you’re making, if you’re making what you want to make.
Well, Noah, thank you so much for taking the time today to come on the podcast. We really appreciated you sharing your journey and your story with us and giving us lots of advice. Can you let everyone know where they can reach out to you and find out some more information about you?

Noah:
Yeah, so I’m most active probably on Instagram at NoahSprimont. That’s N-O-A-H-S-P-R-I-M-O-N-T, no spaces. And then you can find me on Facebook and stuff like that. And yeah, if you ever have any questions about what we do, we are completely transparent even with all of our numbers and stuff, and we love to provide value in any way or shape or form that we can. So yeah, please feel free to ask, and yeah, I would love to chat.

Ashley:
Awesome, Noah, thank you so much. I’m Ashley at Wealth from Rentals and he’s Tony at Tony J. Robinson, and we will be back on Saturday with a rookie reply.