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David: Alright guys, welcome back to the discount property investor podcast, I am your host David Dodge. Today I am joined by Josh Bauerle, and Josh is out of Ohio and I don't really know Josh that well but I was impressed with something that he had done recently and he posted in a group about how he had used the BRRRR method and some other methods to acquire a bunch of property and a bunch of real estate over a short period of time and then how he was able to use some tricks to you know, basically pull money out of equity to keep building and I was like holy cow, I like this guy already and then he sold some of his portfolio and just all in all, I thought you know what? This is really cool, what this guys doing. I want to get him on, I want to learn a little bit more about him and here we are. So Josh, thanks for joining me today. This is the discount property investor podcast, we teach people all things real estate. We start with wholesaling and we really, we start with you make your money when you buy, you get paid when you sell. That's really the concept here, right? All things fall into place when you get a deal on a property, buddy you know this, you know this.

Josh: That's how it works.

David: Yes, so welcome and thanks for coming on dude. Tell us a little about yourself.

Josh: Yeah. So like you said, I'm located in Ohio, pretty rural area of Ohio. If anyone's heard of Cedar Point, we're kind of about 35 minutes from Cedar Point and properties are really low priced. So way back in 2006, I got into the game. I was in college, I bought what was supposed to be a flip back in the good old days when I had no income and they still approved me for a loan.

David: And this is when?

Josh: What's that?

David: This is when?

Josh: This is 2006.

David: So that's right where you got started.

Josh: Yeah.

David: That's funny because that's when I got started.

Josh: Yeah, and I-

David: I think it was- I think it was late '05 or '06 literally.

Josh: That's the-

David: Same time, [inaudible].

Josh: I got under contract in December of '05 and bought it in '06.

David: Boom. Same.

Josh: Yup yup. Yeah, so it's crazy, as you know, the market was crazy. I had literally zero income as a college student and they're like oh loan? No problem, you have a down payment, here's your mortgage.

David: Yeah, back then it was stated income, stated assets.

Josh: It was amazing, yeah. So I got this-

David: Man, I wish we could go back.

Josh: Oh yeah, it was great. But then, the reason we can't go back is because what happened next, the market crashed and I couldn't flip it.

David: Yeah.

Josh: So I had to sit on it as a rental. It was cash flow negative like $300 a month.

David: So wait, you bought it to flip it?

Josh: I bought it to flip it. Yup yup. So it was basically the plan was going to have to do nothing, paint floors and make $30,000 on a flip, right?

David: Okay.

Josh: And literally a few months later, the market crashed.

David: Back then you could do that too, yeah.

Josh: Right, exactly yeah. And the market just crashed and then I had to hang on to it, it became a rental and rents were low in that area at the time so it was just, it was- it was a bad investment. I mean, it was- looking back, it was stupid- it was a stupid plan, like I had no idea what I was doing but it was real estate so I sat there and kept it as a rental for, let's see, 14 years, 13 years.

David: Isn't that the coolest thing about this game is that you're willing to play it out.

Josh: Yep.

David: The price doesn't really matter, you know?

Josh: Exactly, yeah.

David: If you have a long-term mindset.

Josh: Yep, yeah so I lost some little bit of money each month but technically that was just paying down the equity, right? And then in 2019, I sold it, made like 55 thousand dollars on it.

David: Nice.

Josh: I'll end up okay.

David: Long-term hold.

Josh: Right, for a terrible investment but yeah, so then I- in 2017, I got back into it. My dad owned some rental properties he was looking to get rid of. I bought one for $30,000, just this little two-bedroom house, brought in 550 a month rent, and right after I bought it, things started going wrong like the sewer line went out, the roof needed something, electric needed something. I was putting like 4 thousand dollars into this house.  I was like this sucks, either I need to sell this and get rid of this thing that's money pit.

David: This is the one you bought in '17?

Josh: Yes, yup. So I needed to either get rid of this because it's costing me money or I can go buy-

David: And you bought that to flip it too?

Josh: I bought that one as a rental.

David: Oh you did buy that one as a rental. Got it, okay.

Josh: Yeah. It was bringing in 550 so it's good- I mean it's bringing 550 a month cash flow.

David: Nice.

Josh: But there's- everything started going wrong so I was like either I need to sell this or get a bunch of rentals so that they make money to pay for this money pit.

David: Yes.

Josh: And right around that time, I found a seller, local seller- or a landlord that he was actually a realtor. He heard I was into properties like hey I got some deals, I'll sell them to you. He had 13 units, some single-family, some duplexes and worked it out with him. He wanted like something like 430 thousand, I talked to him all the way down to 341 thousand for all the units, and he financed 92% of the deal at a good interest rate too.

David: So how did that conversation go? Usually when people are going to finance high percentages of deals, they're wanting their price, but you got them to do your price and finance.

Josh: Yeah, so it was a pretty, like I went all out on this one, right? First of all, you have to understand in rural Ohio, even if this was in 2000- late 2017, houses still were not selling so he didn't have too many options. If you want to get rid of 13 properties, de didn't have too many options. So I used my leverage there but then I went all out like I got on the Bigger Pockets calculators, I calculated everything like showed him this is how much money I'd make, this is how much I think they're worth, I cannot pay more than these.

David: Right.

Josh: And I went like all out showing him like this is why you're protected, here's my income outside of real estate to show I don't need the rent. If something goes wrong, I can still pay you. Here's my credit score, even though he doesn't care, like stuff like that just to show him like look, I know what I'm doing, this isn't gonna be- you're gonna get your money.

David: Sure.

Josh: We went back and forth for a while and he finally agreed on the price of I think my ask was like 330 and we end up agreeing on 341.

David: Damn, that's pretty great though.

Josh: Yeah, so he financed 92% of it, I think it was like 4% interest which was crazy for seller financing. And for the other 8%, I went and got a personal loan from LightStream so I end up having no money into the deal.

David: Okay.

Josh: And they're just ca- I mean, they was bringing in 4 thousand a month cash flow after paying everything.

David: What's LightStream?

Josh: So it's just, it's a site that gives personal loans. You can do it for like home remodel, purchase, buy a car, whatever but it was- it was actually super easy to use. Just fill out your credit report, send them a tax return and they approved me for I think $45,000 and I used that for the other 8%.

David: Holy cow. So what did you do for the 11 years between '06 and '17 man? What happened there?

Josh: So I finished college, I'm a CPA. I did the tax world for a while. I have a couple of tax businesses. So just not a lot of real estate but everything else.

David: Everything else. Okay so you basically just had a job that time then, right?

Josh: So yeah, I started my own tax business in late 2012, 2013. So I've been self-employed since then but yeah.

David: Nice, nice. Okay, very cool. Alright, so we are back to this package that you bought.

Josh: Yep.

David: And you got him to agree to a price basically a hundred thousand less than he was asking originally it sounds like, give or take.

Josh: Yup, close to it. Yup.

David: Okay, close to it. And then you go and you buy this 13 pack of properties and what's next after that?

Josh: So then they were cash flowing, like it was bringing in 4 thousand a month after paying everything because he gave me crazy terms of it was- he amortized it over 10 years so the payment wasn't too high and interest rate was low. So it was bringing in quite a bit, I just used that to start fixing up the properties because some of them had gotten pretty rundown which increase the values quite a bit and then in 2019, I did a cash out refi and took out 300 thousand dollars of equity.

David: So tell me about that process. So I hear people doing this all the time and I personally do a lot of refi's with banks.

Josh: Yep.

David: And they don't typically like the cash out refi.

Josh: Oh really?

David: It's not something that they typically like, but I'm sure there's lenders out there that do like those type of things.

Josh: Yeah.

David: So did you go to a local lender to do this or how did you go about doing that?

Josh: Yeah so I did two different cash out refi's actually at two different points, and I never had any pushback on the cash out. The first bank I went to, it's a local bank and they were starting to not like rental properties so they only gave me I think 65% loan to value.

David: Okay.

Josh: But the second company that did the big one for the 300 hundred thousand cash out, they went all the way up to 80% and they've never pushed back.

David: Nice.

Josh: As long as it's 80% of the value of the houses, we don't care if it's cash out or paying off or whatever you're doing with it.

David: Wow. I love how you got it owner financed too man. That's amazing.

Josh: That was huge, yeah. So then I used a portion of one of the cash outs and I bought another package. This guy had- so one of my contractor's was like, he started seeing what I was doing, he's like hey you should buy my place because I own a house and it's right next to a laundry mat and the laundry mat has two units above it and I think my landlord would sell all of it. So I just contacted him and he sold me the laundry mat which wasn't functioning at the time but had all the equipment, two apartments above it and a single-family house for 63 thousand combined for everything, and he financed 18 thousand of it so then I just needed to use whatever that 45 thousand cash to do it. I use a cash out refi to do that.

David: Nice man. So how many units are- did you get up to?

Josh: At the point before I sold everything, I was up to 28 total units.

David: Dude, that's awesome.

Josh: Yup, and I-

David: And what was 28 units cash flowing roughly?

Josh: That was- by the time- it's hard because I did the cash out refi at different points but by the time I sold everything, I was bringing in 35 hundred, 38 hundred a month in pure cash flow.

David: That's pretty good man. And then what happened? You sold some of these? All of these?

Josh: Yeah, so then the market finally turned around in my favor. See in rural Ohio, didn't kind of catch up to the rest of the country. It wasn't this crazy market until this past summer and spring. It just blew up.

David: Okay.

Josh: and at that point-

David: Yeah, there's a nationwide low inventory or lowest inventory we've seen, right? In like, I don't even know but a really, really long time.

Josh: Right.

David: So even out in rural Ohio.

Josh: Yeah, which is cra- like my town, we're talking 6 thousand person town, right?

David: Okay.

Josh: So- and more people moving out than moving in, so just the inventory shortage wasn't hitting us but then for whatever reason, it just did this summer, this spring and I kept seeing these values go up so I was like, I'm just going to put this on Craigslist and I'm going to sell these. I was selling 25 units and to see what's out there, I listed it for like 1.25 million and a realtor contacted me, he's like dude this is underpriced, I can sell this. So I was like all right, I'll give you 3 months to sell it and he got it under contract for 1.3 and we just closed two weeks ago.

David: Wow, who did he sell it to? Was it an out of town buyer?

Josh: No, another investor that's a couple towns over.

David: Really?

Josh: So all in, I had 5- roughly I think 558 thousand in all these units then he sold them for 1.274 is what it ultimately was.

David: Dude, that's- what was the net or the net profit on it?

Josh: It's profit after his commission, like 625.

David: Dude, that's massive.

Josh: Yeah, it was crazy.

David: So dude, that's- all right, so I would much rather have 625k over 38 hundred bucks a month in cash flow.

Josh: Right.

David: Right?

Josh: And as you saw in that in that group that I posted, and a lot of people were like oh you'll regret this, you never sell real estate but like there comes a point you do, right?

David: Oh, there always becomes a point that you do and that's the thing. You make your money when you buy but you get paid when you sell it. If you don't ever sell, you don't ever get paid really, like cash flows great but it's- it trickles in, right?

Josh: Right.

David: And you had 28 units you said, after multiple cash out refi's, you still had 38 hundred bucks a month.

Josh: Right.

David: I love it, right? I'm at about 60 houses right now, I got another 30 under contract, our cash flows nearing 20 grand, right?

Josh: Wow.

David: That's a good chunk of change.

Josh: Right.

David: However, I would probably still trade that for 625k.

Josh: Right.

David: Eh maybe, maybe not, right? It depends, but that's a big number.

Josh: It's more interesting than that though. Right.

David: If it was 100 or 200, I'd be like no way, get out of here, you know?

Josh: Right, right.

David: But dude, that is crazy. And here's another thing that I really want to kind of highlight too is that you did- you acted very creatively when you were buying all these with the owner financing and the cash out refi's and essentially, were you rehabbing anything?

Josh: Yeah. That's and- as well, I was using- I wasn't taking out any of the cash flow, I was just putting it right back into the property so like yeah.

David: So you're keeping the properties up and you did that for basically what? 5 years give or take?

Josh: Like 3 years. This is all in the last 3 and a half years yeah.

David: 3 years? Okay, you bought the first one a couple years ago, cool. So only 3, see that's the power real estate guys. I love it, that's awesome. So at this point, you know, one would say well what are you gonna do? Put that right back into the market? And due to the fact that you have done such awesome creative plays, I'd imagine that you're going to keep doing creative plays and not necessarily gonna have to leverage all of your money.

Josh: Exactly, right.

David: Use as much money of everybody else's as you can Josh, very cool.

Josh: Yep. That's the exact plan, I want to get- find someone that'll do like a line of credit on the assets that we have and not touch that money for a little while or put it into other investments and see how far we can expand it.

David: Man, I absolutely love it man. That's very very cool, very cool. Well somebody that's starting out and that's listening to this show right now, you know, what would be some advice that you would give them, right? Because a lot of people that are listening, they are new and they're wanting to learn more about real estate investing as a whole and how to buy properties right, you know, and some of our listeners are really diving deep into wholesaling, some of our listeners, you know, are landlords, right? What would be some advice that you would give somebody, you know, just starting out to be able to get into deals, how to find them and you know, how to get creative with them?

Josh: Yeah. I mean the number one starts with getting educated which if they're listening to this podcast, they're on their way to that. Read everything you can, listen to everything you can and then from there, you just got to start taking action like you see in those groups, right? So many people are just forever listening to podcasts and reading books and never actually doing anything. At some point, you have to jump in and get started and for me that started with finding the unique opportunity, right? Obviously, we're in a different market now that there's not landlords desperate to get rid of a 13 unit package, but there's something out there if you get creative, right? Like go find this person that needs to sell and for whatever reason he can't, be willing to take on something that other people can't, you know, maybe it's this house that smells god awful when you walk in but there's ways to get rid of that.

David: Take a little risk, you know?

Josh: Right, exactly. Yeah.

David: Risk equals reward, right?

Josh: And if you're in a position where you can't just go out and put 50 thousand down on a house, then that's what you have to do because right now there's a lot of cash in the market, there's a lot of cash buyers so you have to be able to offer something that no one else is being able to offer if you don't have that cash.

David: Right.

Josh: In every market that's different what that is, right?

David: I love it man. I tell a lot of my students you know, there's really only three things that matter. Its marketing your business which can be done by you paying for the phone to ring or you ringing the phone out, right? Making offers and following up, and that's the thing like you know, both of these deals that you had acquired, it doesn't sound like you met the seller and like bought it two days later, like there was a lot of back-and-forth in negotiations and I think it's worth this and here's the most I can pay and then eventually, you had to have the conversation of maybe you can finance it to me on top of that, right? Like these things don't happen overnight.

Josh: For sure.

David: Following up takes a ton of time and- but that's you know, arguably the most important part of the business in my opinion if you're trying to scale. If you're just trying to do one or two deals a month or even a couple deals a quarter even, right?

Josh: Right.

David: You know, your follow up isn't necessary- necessarily as important, right? But if you are trying to scale your business and do lots deals, you got to keep those relationships up with all those people.

Josh: Right.

David: You got to be there. Josh-

Josh: Well, and the other thing I'd add to that. Once you do that first one like you- then I could go to the next one that I want to do seller financing and like hey, you can contact Roger, I just did this with him, he'll tell you I paid every single month.

David: Oh yeah, that's great.

Josh: And it was like, he becomes a reference for you.

David: It becomes a reference for you. Man, that's cool. So you basically can build your resume with you know, people that you've done business with that has succeeded, right? And it's like here's a testimonial or straight up call that- this guy. See how he likes getting these payments every month, you could do the same. Man, I love that. That's really, really awesome. Well Josh, thanks for coming on the show today man, much much appreciated. I'm super grateful for your time. You're doing big things. I love it. You know, most people wouldn't necessarily know how to get into these deals because they just don't- they just don't think it's possible and when I hear stories like this, I love it because I certainly know it's possible, you certainly know it's possible, so hopefully some of the listeners and the viewers out there can realize for themself that these type of things are possible. You just got to get out and take action, work hard and you can find these deals too. Josh is doing these deals in rural Ohio guys, so they can be done anywhere. I love it. Josh, thanks for your time. Thanks for coming on the show today. Your story is really, really cool. Guys, listen to what Josh says, his advice: get educated, take action and don't be afraid of taking a little risk. I love it. Josh, how can people contact you if they want to connect? What's your favorite way to communicate? You got a social media platform or a website or anything like that?

Josh: Yeah so I actually have a website that I told a bunch of these stories on, smalltownhustle.com.

David: Love it.

Josh: So they can get more details on some of the stuff I did with these deals.

David: Very cool. Guys, go check it out, smalltownhustle.com. Josh, thanks for coming on the show today.

Josh: Thanks for having me.

David: Appreciate you. Guys, until next time. Thanks for listening. Signing off.

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