Most people assume they’ll achieve financial freedom after they make their dream salary, but what they don’t realize is you can’t out-earn your toxic money habits . Today’s guest, Daniel Shin, learned this quickly when he started making his full-time surgeon salary.
As a child, Daniel was fortunate enough to live the ideal suburban lifestyle, but when his dad got laid off during a recession, things quickly changed for the worse. After seeing his parents struggle to put food on the table, young Daniel decided he would do everything he could to prevent himself from being in a similar situation financially. Once Daniel started making his surgeon salary he assumed he’d be financially stable, but he began to expand his lifestyle to his salary and started drowning financially. It was at this point he decided to turn to real estate investing.
He started by listening to BiggerPockets and decided investing was for him once he realized he could reach financial freedom faster through real estate. The first couple properties he invested in were turnkey properties. With less risk, Daniel felt it was a comfortable start to his investing journey, but after a while he wanted more of the action. Over the last three years, he has acquired about twenty-eight units including four duplexes and two small apartment buildings. Daniel is now focused on building his “real estate empire” while becoming financially free.
Tony Robinson: Hey, before we get into the show, I wanted to mention BiggerPockets is hiring a full-time supervising producer for our podcast network. This is a remote position and a chance to work with an amazing team, if we do say so ourselves. We’re looking for someone with at least a couple of years’ experience managing production teams and someone who will feel confident taking the lead when launching new podcasts. So, would you or someone you know be a great fit? You can find the full job description at biggerpockets.com/jobs. Again, that’s biggerpockets.com/jobs to apply for our open podcast producer job. Now, enjoy the show.
Ashley Kehr: This is Real Estate Rookie episode 151.
Daniel Shin: I was driving and I was feeling burnt out and I was really hoping that I could pull back, but I couldn’t. I felt these golden handcuffs. And for me, that’s when I was like, “Okay, so what do I have to do to put myself on a path toward freedom?” And for me that was personal finance and getting into real estate.
Ashley Kehr: My name is Ashley Kehr, and I am here with my co-host, Tony Robinson. Tony, it has been like a month since we have recorded, so why don’t you just give an overview to everybody of what the Real Estate Rookie Podcast is?
Tony Robinson: The Real Estate Rookie Podcast is here to inspire, to educate, to motivate all of those new investors who want to get started in the world of real estate investing but aren’t sure where to start. So we break it down, give you the basics and help you get off on the right foot.
Ashley Kehr: When we were recording today, we have a great guest Daniel, and when we were recording, we had to go through our checklist because it’s been so long that we were recording, “What do we need to touch on? What do we have to do,” and review before we got started. But you guys will notice one thing different, my background, if you’re watching on YouTube, I am not in my closet. So I recently this past week I went snowboarding in Colorado and I hit a couple of trees.
Tony Robinson: Real, nice and casual about it.
Ashley Kehr: Yeah. So I ping ponged off some trees going in a woods trail and I am now sitting here on the couch and my leg elevated with some ice, knee brace, crutches, and waiting to go to an orthopedic surgeon on Monday. So we’ll see. But I think it’s a ligament that I tore. So we’ll find out.
Tony Robinson: Just another day in the life of Ashley Kehr, you never know what you’re going to get. One day it’s bull riding in New Orleans, the next day it’s ping ponging off the trees in Denver, you never know, but it’s a fun story. I’m glad I get a first row seat for all of this stuff though
Ashley Kehr: And there’s so many other things that have it on this trip. There was a windstorm in Buffalo so the flight was delayed, so I had to stay overnight in Buffalo because there was no sense of going home. Then on my way home, there was a windstorm in Denver, so I’d to end up spending the night in Detroit because I missed my connection. So it was interesting. Well, it’s my first time ever on crutches and then having to travel being on crutches is definitely interesting.
Tony Robinson: But there are some good things that happened while you’re in Denver as well. I hear something about some commercial properties, something’s happening. Give us the update.
Ashley Kehr: Yeah. So while I was in Denver, I was actually there with my business partner and we were meeting with Tyler Madden and his wife, Zosia. Tyler’s been on the podcast before, and you guys could probably have seen him on social media if you’re on Instagram @tylermadden, but we just had a brainstorming mastermind a whole day, Sunday. That was awesome. And then on Monday, we went to a real estate meetup, but also on Monday, my business partner and I got our offer accepted on a 700-acre campground. So we are beyond excited about this, and now the work begins.
Tony Robinson: I wouldn’t even know where to start on 700 acres. That’s so intimidating to me to think about that much land. So I’m all the more, I think, impressed with your courage on taking down something that big. It’s amazing.
Ashley Kehr: Yeah, it is. I was actually surprised how many people already doubt me. I have an agent that I’ve worked with on some other smaller deals and stuff and she even said to me, “Oh my gosh, are you sure about that?” And even when I had my check written for the down payment, the bank that I was using to get the check out of, I have a good relationship with that person and they were like, “Are you really sure about this? This is a big undertaking.” And I just haven’t had people doubt me like that for a while. So it’s going to be a good challenge.
Tony Robinson: There you go. Hey, I’m not doubting you at all, I got nothing but faith and confidence in you. And it’s nice when people challenge you in that way. I’ll never forget, just a quick side story. When we bought our first property in Joshua Tree, I told that agent, I said, “Hey, my goal is to buy one property every quarter.” And he looked at me and he laughed, and he was like, “Man, you’re pretty ambitious.” We ended up buying them one almost every month. We bought 12 in the last 12 months.
Ashley Kehr: It drives you.
Tony Robinson: Right.
Ashley Kehr: It gives you that little bit. Yeah.
Tony Robinson: Yeah. Well, that’s awesome, Ashley. I’m excited for you.
Ashley Kehr: Yeah. So what’s new with you?
Tony Robinson: Actually really exciting. We sold our first turnkey Airbnb flip about three weeks ago now, really excited to start building up this part of our business. We have second turnkey flip, we just listed about three days ago now. And if you guys want to see the flips, you guys follow me on Instagram @tonyjrobinson, I usually post them all there.
Ashley Kehr: Actually, the better place to follow is his wife, Sarah, because her Instagram pictures and her reels are amazing.
Tony Robinson: That’s true. That’s true. She’s got this recurring, like cropped image of us. So she just like plops on every house we buy. She’s @saraaraad, S-A-R-A-A, anyway, follow me on Instagram, you’ll find her profile pretty easily. But that’s been really cool to see because we’ve done renovations in the past, but we’ve never actually flipped before. It’s just like a different cooler thing for us to do, so we got the flips going on. And I spent a lot of time in the past couple of weeks just trying to get my goals in place for 2022. So we’ve got our single family stuff nailed down, putting my team together for our commercial business as well. So things are moving, exciting things.
Ashley Kehr: Yeah. Because you got to hang out with Brandon Turner a little bit in Vegas and also Tyler Madden, who I was just with, you were with him, making your goals, everything about the day before I saw him. So we had a joke the whole weekend that Tyler had been hanging out with Tony and Brandon, the two greatest podcasters so ever to going to slumming it with the okayest podcast so it was tougher. Very funny.
Ashley Kehr: Okay. We are going to bring on today’s guest, Daniel. Daniel is a doctor and he is going to talk to you guys about personal finance, turnkey properties, taking on your own BRRRR and what mindset shift looks like, starting to take properties on your own and moving away from that turnkey model. So let’s get to the show.
Tony Robinson: Daniel, welcome to the Real Estate Rookie, brother. Super happy to have you with us, man.
Daniel Shin: Yeah. Thank you for having me. I’m really excited to be with you guys today.
Tony Robinson: Yeah. And for those of you that are not watching this on YouTube, Daniel’s got like a really cool art history collection going on in the background. So putting mine and Ashley’s background to shame, but for a change, Ashley is not in her closet today, she’s in her living room. So she’s got like a pretty decent background there. But Daniel, we’re not here to talk about-
Ashley Kehr: Are you saying this is better than my closet, because usually it’s not decent?
Tony Robinson: I’ll let you read between the lines as you choose. But Daniel, we’re not here to talk about your art history collection, we’re here to talk about real estate, brother. So why don’t you give us the listeners little background who you are, how you got started in real estate?
Daniel Shin: Yeah, absolutely. Again, my name is Daniel Shin. I’m a surgeon, I’m a real estate investor and I’m a blogger and educator at Darwinian Doctor, sort of my alter ego. And basically a few years ago, I went through this awakening that I wanted to become financially independent. And although a lot of people think that it’s easy as a high income professional, it’s actually not, you have to make a lot of intentional steps. And that led me down the path of personal finance and then to real estate now. And over the past few years, I’ve grown a portfolio about 28 units.
Daniel Shin: And I say about because I hope that it’s going to be 27 next week because I’m selling off a problem property.
Tony Robinson: Yeah. I had a different comment, but you said you’re selling off a problem property, which reminds me, I still have a property for selling in Shreveport, Louisiana. We’ve reduced the price, I think two times in last week. We’re honestly now at this point, actually we’re going to sell it at loss. We owe like 130 on it, we have it listed right now for 129. So we’re literally just trying to get rid of it at this point. Anyway, sorry. Brought up bad memories for me, Daniel, but I wanted to go back to something that you said. You said that a lot of people assume that because you’re a surgeon that it’s easier to achieve financial freedom, but you said a lot of times it’s not.
Tony Robinson: And I think a lot of people would hear that and they question why you would say that because when people see big incomes, they automatically assume that there’s a really easy path to financial freedom. So let’s break that down a little bit.
Daniel Shin: Yeah, absolutely. And I think that’s one of the most common questions or criticisms I get on social media when I talk about money and everyone says, “You make a high income, you don’t have any right to talk. You’re set.” And it’s absolutely true that a high income makes it easier to do a lot of these things, but you can only use the money that you actually save. And I think that’s one of the things that people don’t realize, no matter how much money you make, you can spend above and beyond that. And if you’re not making those intentional choices to put yourself on that good financial path, you’re not going to be able to build wealth no matter how much money you make.
Ashley Kehr: Daniel, if you had to start all over again, was there something different you would’ve done in the beginning, maybe even the beginning of your career or when you were going to school to set yourself up. So maybe if somebody’s listening that’s going to med school right now or is a doctor, what would be your advice to them about getting started in real estate?
Daniel Shin: I think that’s a great question. I think for me, I don’t know if I would necessarily change anything. When I was young, I had a very idyllic early childhood. We were growing up in suburban New Jersey, my dad worked in New York. And I think he was doing commercial real estate actually. And then at the end of the ’80s, I’m dating myself, but at the end of the ’80s, there was a recession and my dad’s whole job went to crap. And all of a sudden we went from this nice idyllic, suburban life and things changed overnight. We lost our house to foreclosure, we had to move.
Daniel Shin: Literally load over everything up into a moving van one weekend, we moved across town to a rental. And there were some really tough years where my mom struggled to even put food on the table for dinner. Things were really tough. So one of my goals in early childhood was to get a job later on that would be well paying with good financial stability so my own family and my own kids wouldn’t have to spare experience that. And for me, I also wanted to help people and I understood what doctors did. So my goal early on was to become a physician. And to do that, I had to do the whole thing, like get good grades, go to good college, get into med school.
Daniel Shin: And one after another, I was able to do all that. And then once things finally got rolling, I got through six years of surgical training and then I started making that attending salary, in a lot of ways felt like I had finally done it, but then a couple of years into my practice, I was overworked, I was driving 10 hours a week with my commute here in Los Angeles, and I was feeling burnt out, but I was also feeling trapped because I had made that mistake where you expand your lifestyle to your paycheck. So we had bought the Dr. House, I was driving an expensive car, and I was really hoping that I could pull back in my practice a little bit, but I couldn’t, I felt these golden handcuffs.
Daniel Shin: And for me, that’s when I was like, “Okay, so what do I have to do to put myself on a path towards freedom?” And for me that was personal finance and getting into real estate. But by that point, I had the income to do that and make those changes. And so I don’t know if I would necessarily change anything when I think back.
Ashley Kehr: Daniel, when you did decide that you wanted to get more into learning about personal finance and real estate investing, what was the first action step you took towards getting your first property?
Daniel Shin: Basically it came from a lot of immersion into the world of personal finance and real estate investing. So I started listening to BiggerPockets. I had so much time in the car where I wanted to poke my eyes out because of the traffic, and instead, if I put on a podcast from BiggerPockets, I started thinking about and visualizing a life that was different. It was like a gateway drug. So I’d be able to listen to podcasts and start formulating a plan. So before that point, I was mostly into stocks. My plan to get to financial independence was to invest into stocks, do that for like 15 or 20 years and then have a big pot of money.
Daniel Shin: But what I realized is that you can get there a lot faster through the cash flow of real estate investing. So I actually sold $100,000 of stocks. I had a few stocks that had done really well, luckily, it was all blind luck, but I had some Amazon, Apple, etc. And I just sold it because I knew that I would incur a capital gains tax, but that’s what I needed. Because if I had this pot of money burning a hole in my pocket, I knew that would provide me the motivation to start down the real estate investing path
Tony Robinson: Daniel, you made a point that I want to go back to about lifestyle clip, that you put in all the hard work, you went to med school, did everything you needed to do. You finally got the salary, the financial security that you were looking for, but then you allowed your other expenses to meet that new income that you had. And I think that’s human nature. I think that that’s what everyone struggles with as their income starts to grow. But it just makes me think of this, I guess, these two competing path to financial freedom. If you listen to Dave Ramsey, Dave Ramsey’s all about controlling your expenses and eating beans and rice and selling the car and not doing this and not doing that.
Tony Robinson: And then if you look at someone like Grant Cardone. Grant Cardone’s like, “I’m going to buy as much coffee as I want, but I’m going to focus on selling hundreds of millions of dollars’ worth of real estate.” So there’s this school of thought that’s focused on living way, way, way below your means, almost to the point that it’s unbearable. Then you have this other end of the spectrum that’s all about just focused on the income, the expenses will take care of themselves. But what I’ve found is that you probably need a little bit of both. You need to be conservative with your expenses and find a happy medium of still enjoying life, but still thinking of your future, but then just as aggressively focusing on exploding your income, because I noticed my real estate life changed when I was able to blend those two things together.
Tony Robinson: So I’m just making a comment here, but I’m just curious, Ash, maybe you can start first, what are your thoughts on finding the balance between those two things?
Ashley Kehr: Yeah. When I actually was a Dave Ramsey’s follower, I wanted to pay off my debt, but I had already started real estate investing. So for me I was taking all my cash flow to pay off my debt. So I was still investing because I was doing the BRRRR strategy where I wasn’t using any of my own money and then just using that to pay off my debt. And now I just have mortgages, but no personal debt, not vehicles or anything like that, but I’m looking at it a different way even now. I just thought, “I don’t want to any personal debt. I want to own my cars free and clear.”
Ashley Kehr: But then you also hear people talk about, “Well, a car loan is only 3% interest. Why wouldn’t you take that money instead of paying cash for a car and go and put it into a property and have that cash flow pay for your car?” So it really is a mix of mindset and how would do the numbers work out? Because for me to keep a mortgage on my primary residence, that is super cheap money to me because that’s the lowest mortgage I’m going to get as I am on personal residence, but it’s also a mindset thing for me, I want to own my own free and clear. So I think it’s really just like a mix of both and what helps you sleep at night too.
Daniel Shin: Yeah, I absolutely agree. I think it’s a mix and I think that a lot of it actually depends where you are in your financial journey, because if you’re having a hard time making ends meet, you’re drowning in credit card debt, I absolutely think that Dave Ramsey will probably help you because you got to buckle down. You got to sell that car that’s sucking away your paycheck, you got to make some changes. But if you’re maybe a little bit along your financial journey where you have a bit more means, and you’re thinking about, “Where do I spend this extra that I have as a gap between my income and my expenses,” I think that it’s really relevant to start thinking about the worth of your money in terms of growing assets versus paying down debt.
Daniel Shin: I think this is especially relevant for people who do a lot of professional school and end up with hundreds of thousands of student debt. When I graduated residency, I literally had $300,000 of student debt. And then I could have spent the next five years aggressively paying that down, but instead, after a couple of years when I went through all of my financial awakening, I was like, “Look, I’m going to start investing that, I can make a much higher return investing that extra money that I have instead of paying down this debt that I had at like 3% interest rate.” So I know that a lot of personal finance writers and thinkers are all about getting rid of debt, but I think that it’s really important to think about the five or 10 year horizon.
Daniel Shin: You’re going to end up with a lot more money if you invest that smartly, in my opinion. You’ll probably have more risk along the way, but if you can stand that risk and it’s not going to be a psychological burden to you, I think you’re much better off investing.
Tony Robinson: Daniel, thanks for opening up that can of worms. And obviously, this isn’t the BiggerPockets Money Podcast. You guys can go hang out with Scott and Mindy when they drop those episodes, but Ash and I we talk about this all the time that your personal financial position plays a big and very important role in your ability to become a successful real estate investor. So I know there are a lot of people out there right now that maybe hear Daniel’s story and say, “Well, I’m not a doctor. I can’t get started in real estate investing.” And if that’s what you’re thinking, you’re missing the point.
Tony Robinson: The point is wherever you’re at focus on controlling your expenses, focus on growing your income, and you can follow a lot of what Daniel said here. I want to talk a bit about your portfolio. Did you have something to say, Ash?
Ashley Kehr: Yeah. I was just going to say, it’s not about how much money you have. It’s about how you manage the money that you do have. So even if you have a low paying job, living below your means, is what’s important and saving that extra little bit of cash that can help you get towards your first deal.
Tony Robinson: Maybe we need to have a side hustle episode where we just bring people on and talk about the different side hustles they’ve had to help fund through real estate career. That might be cool.
Ashley Kehr: Yeah. That’s a great idea.
Tony Robinson: Well, Daniel, let’s talk about your portfolio. You mentioned the top of the show, but just give us like a 30,000 foot view of where your portfolio is today, and then you can take us on the journey of how you got started.
Daniel Shin: Sure. My real estate portfolio currently is 90% long-term rental. I started out with a couple of turnkey, single-family homes, scattered in the Midwest and Southwest. And then I actually focused more active, real estate investing in Indianapolis, and I purchased over the last three years four duplexes and two small apartment buildings. One of the apartment buildings is seven units, the other apartment building was eight units, and I’m trying to make it a 10 unit, but it’s fighting me. And I just bought a short-term rental in Palm Springs that I’m furiously renovating now. And we just got the granite poured for the pool in the back. So that was a huge milestone.
Ashley Kehr: Daniel, congratulations. That’s an awesome portfolio and I can’t wait to be invited out to Palm Springs when that house is done.
Daniel Shin: It’s whole, hopefully going to be really awesome.
Ashley Kehr: Yeah. Cool. Let’s start from the very beginning. You started out with turnkey, so please tell everyone what a turnkey investment is. And then let’s talk about how you even found out that you wanted to invest in the Midwest in those markets.
Daniel Shin: Absolutely. A turnkey rental is, I think it’s a nice gateway in to real estate investing, especially if you have a lot of fear and anxiety about the process because a turnkey company will essentially take a lot of the guesswork out of it for you. They will find a distressed property, their team will renovate it and figure out what’s wrong with the property. And then they’ll sell it to an investor at a retail price, but they’ll take care of often finding a tenant and doing the property management and they’re selling you a whole package.
Daniel Shin: When I was thinking about getting into real estate investing, I didn’t know much about it to start and I wanted that hands-holding experience. So I focused on a couple of areas where I felt that the cashflow would be better, so the Midwest and the Southeast. And so my first property was actually in Birmingham, which is I think a well-known cashflow market. And a company down there basically sold me already a renovated house for $92,000. And this property, I think is a black sheep of my portfolio and I’m actually hopefully selling it on Monday, but it was the gateway that got me started. So I have a love-hate relationship with it.
Daniel Shin: It was my first deal, my worst deal, but it got the ball rolling. And now, I think I’m going to essentially net very little on the property because of septic tank issues, which I’ll talk about later, if you guys want me to, but it was what got the ball rolling.
Tony Robinson: Can I ask one follow up question? I guess first, what is the benefit of the turnkey model for someone like yourself? And then the follow question to that is, how did you find a turnkey operator that you trusted enough to invest with?
Daniel Shin: Yeah, great questions. Basically I think the benefit is that it takes a lot of the risk out of the renovation aspect. So since that experience, I’ve more focused on the BRRRR strategy, but if you’re buying a turnkey product, they’ve already done the renovation for you. So if someone is going to find out that its knob and tube wiring in the walls, or if the sewer line’s all messed up, it’s going to be the turnkey company. And then by the time they’re selling this property to you, they’ve figured everything out, they know how much it costs and they’re going to sell it to you at a price that makes them money and also gets you hopefully a pretty good return.
Daniel Shin: I think what I found in my experience at turnkey, you’re probably going to get about a five to 10% return, closer probably to the five to 8% these days than the 10%. So that is, I think, the benefit of it, it’s a reliable return. It’s not great, but you can learn about the process in a way that’s very safe. That being said, if you can do things smartly on the more active side of investing and you’re doing things where you’re renovating yourself and pulling money out via refinance, you can get much higher returns, infinite return, 50% return. And that’s something that I’ve seen in my own portfolio.
Tony Robinson: Once you decided that, “Okay, turnkey is the way for me to get started,” how did you find the right operator to invest with initially?
Daniel Shin: I’m sorry, you’ve asked that three times and I keep on ignoring you.
Tony Robinson: No, no, it’s all right.
Daniel Shin: I just keep on forgetting. But basically, it was through BiggerPockets. In the BiggerPockets forums, I started looking at what had been written about turnkey operators, and I contacted people who had bought properties from them and I asked them, “How did things go?” And I would say that nothing replaces actually going and meeting the operators. I make up that one of the reasons why this property didn’t do as well is that I didn’t fly down and meet the turnkey company. I did that for the second turnkey company that I used. I actually went and saw their operations and shook their hand and I was like, “These guys are great.”
Daniel Shin: And that property has done much better in Little Rock, but essentially, I talked to people, I asked around, I looked up people’s experiences and for reviews, and I called them and talked to them. And I think they have a good operation things, just did not go my way eventually three years down the road.
Ashley Kehr: Yeah. If anybody wants to learn more about turnkey, I’ll throw in there that we did episode 29 with Whitney Hutton on turnkey properties too, if you guys want to check that out. But Daniel, how much was your plane ticket? How much did you spend to go and check out and meet this turnkey property? This is a large investment that people are making, purchasing a property. And how is that value? How is that an opportunity cost for you to pay to go and fly out and meet these people?
Daniel Shin: I think it’s definitely relevant question. I had to take off a couple days from work, so I wasn’t making money in my job. Actually I think I got a paid vacation day or something like that, but I had to buy the plane, get out to Little Rock and I suffered the worst allergy attack of my life, basically flying out. The base of these guys’ operation was actually in Memphis. So I flew out there and as soon as I sat in the airplane in Los Angeles, the air from Memphis gave me the worst allergy attack of my life. I started sneezing and essentially didn’t stop the entire way.
Daniel Shin: And then I had to drug myself halfway to death. So I was able to talk to people and interact with people in Memphis. I don’t know if I could actually ever go to Memphis again. But it was really valuable because the plane ticket, I think it was about 500 bucks round trip. I got an Airbnb, but for me, I had already mentally allocated that money. This was education for me. I was getting in the game and I had already cash out those stocks, So I needed to figure out how to spend that money wisely. And for me, I wanted to actually learn about it firsthand.
Ashley Kehr: I think that’s something people forget about is those little tiny costs that are actually add so much value and save you so much money in the long run. And I know out of state investing, the idea is to not have to go to the property and things like that, but if this is your first time, don’t be afraid to spend that extra money to go and meet people firsthand, to go check out the property and make yourself feel more comfortable and confident. And then you can go ahead and purchase property site unseen and never actually ever see them in person, but if it makes you feel more comfortable and you really want to know who you’re going to be interacting with, what the property looks like, then spend that money to go and look at a property.
Ashley Kehr: I just looked at a property a couple months ago where we paid the maintenance guy on the property like 100 bucks to take us through and tours the property and tell us so much information. And yeah, that was $100 for a property we didn’t even know if we were going to get under contract, but we learned so much and were able to underwrite the deal so much better because we took the time to pay this guy. And that’s the same with an inspection, that is an opportunity cost so that you are learning as much as you can about the property and not end up, “Oh, there’s $20,000 I now have to spend after closing.”
Ashley Kehr: So add those into your number too. When you’re analyzing a deal, put in your travel, put in what the Airbnb is going to cost you so that you know what your total expenses are going into this property. And you actually get a better value, a better return on how much you’re putting into the property of adding those costs into it.
Tony Robinson: Ashley, I was just going to say you make a really good point because there’s so many people that ask, “How do I get this agent to take me seriously?” Or, “How do I as a new investor, get this general contractor to take me seriously?” Or, “How do I get this wholesaler to take me seriously?” I have a friend who was investing, he lived in California where I’m at. He wanted to invest in Huntsville, Alabama, was having a hard time with deal flow. Couldn’t find anything on the MLS, was getting ghosted by a lot of wholesalers. So he finally got in contact with one and he said, “Hey, what do I need to do to get on your list, to actually be one of the people that you send deals to?”
Tony Robinson: And the wholesale was like, “Come out here and see me.” And he booked the next flight out to Huntsville, Alabama, spent the whole day with him. They ended up buying like nine or 10 houses from this one wholesaler. So if you want to stand out as a new investor, show that you’re serious, show that you’re not just going to waste their time, hop on a flag, get out there, shake their hands and meet in-person. I love that advice, Ashley, really good point.
Daniel Shin: Oh, yeah. I think that is a big stumbling block early on because essentially when you’re starting out a side hustle or a new business, I think it’s really tempting to try to do everything on a shoestring and not spend any money. But if you think about it, people spend money on education because it’s worth it. And in the end you know that is going to yield you a lot more return. So for me, I mentally put aside some amount of money and I chalk it up to education. When I take a real estate investing course or when I fly somewhere and do hands-on research for me, that’s part of an investing into the business that I know in the long run is going to net me a lot more return.
Tony Robinson: Yeah. One more comment for me on the turnkey side, Daniel, because I love that you’re talking about the educational component, because I think if you get with someone that’s experienced with the right operator, they can be a source of education, of confidence building for you. I don’t know if I should share this widely because I feel like people might steal this idea, but we’re toying with the idea of doing this in the short-term rental space. There aren’t, I think a lot of, or really any that I’ve found so far that do this for short-term rentals.
Tony Robinson: So we started flipping houses in some of the markets we’re in this past summer and we’re not just flipping them and making them nice, but we’re flipping them, fully furnishing them, giving you really cool Airbnb experiences, so that way whoever we purchase that house pretty much on day one can take that property live and not have to worry about, “Oh man, how do I rehab? How do I design? How do I get it ready for guests?” So I think that there’s a big opportunity there to help people break into some of these spaces with really low risk. Obviously, the returns won’t be as good as the person that found the deal and did all the work, but you’re getting in with a lot less friction than what it would typically take someone,
Ashley Kehr: My business partner, Daryl, is here and he is actively writing down your idea right now and about to launch it.
Daniel Shin: I think that’s going to do great, Tony. Being on the renovating side of a pretty big rehab right now in Palm Springs, this thing has been torturing us. And I think it’s going to be worth it in the end because the market is just going bonkers out there, but there are these hours requirements that you need to do to get material participation in these things. Initially when my wife and I first bought the property, we were like, “Oh, we got to make sure to get these hours.” God, that is not a problem. We’ve been out there so much, this thing has been such a time suck, but it’s a labor of love at this point.
Ashley Kehr: Daniel, how did you get comfortable with making that switch from turnkey to your ready to take on a property on your own? What did that look like for you?
Daniel Shin: Basically I wanted more of the action when I ran the number. I was like, “This return is pretty good.” But then you read about infinite returns from a good BRRRR property where you’re buying, renovating, renting, refinancing the property yourself, and I wanted that and I knew that to really access that I would have to do it myself. And I wanted my money to go further because when you’re even buying a turnkey property at the price points in the Midwest and Southeast where you can buy a nice home for 100,000 or $120,000, that’s a lot of money. That’s 25 to $30,000 that you have to plunk down.
Daniel Shin: And even when you’re making a really good income as a physician or surgeon, you’re going to run out of capital at some point. So the most efficient way of growing your portfolio in my opinion is by that BRRRR method. And I wanted to be more efficient with my money. So when I was thinking about where to do that, through BiggerPockets again, I had a an acquaintance down here in Southern California who was investing in Indianapolis and we met for lunch at some point, we had some like Hawaiian pizza and he talked to me about out his team in Indianapolis, and then he made an introduction. And I was able to build my own team, I flew out there, I drove around, and I met a realtor.
Daniel Shin: And then on that same visit, on the very last day, we found the first duplex that I purchased there, which is still my like crown jewel property, I think.
Tony Robinson: I love that you mentioned that you guys ate Hawaiian pizza. That’s the key takeaway from today’s episode is that if you want to build good networks, you got to break out the Hawaiian pizza. And so I want to get into your psyche a little bit, Daniel, because it definitely is a lot more work, but we understand why you did it. But once you made that decision, once you found that duplex, and maybe we can use this for our Rookie review or our Rookie deal review, how did you actually go about executing on that vision of buying this asset, this distressed asset, getting it renovated, placing tenants, because I think that’s the part that a lot of people struggle with is, “Man, I’m halfway across the country, how do I on this part of the globe, renovate, find tenants, do all this thing on the other side of the globe?” So walk us through what your process looked like.
Daniel Shin: Sure, absolutely. Basically, I had probably a half dozen conversations with these people before I ever flew out to Indianapolis, but basically I had essentially a GC, a general contractor who was going to be able to manage the renovation that I had talked to and my friend had used him so I knew that he was trustworthy. And I had a real estate agent who was younger, hungrier to build her business. And when I flew out there, I met with both of them and I basically communicated… One of the biggest things that I wanted to do in that visit was to communicate to both of these people that I was serious.
Daniel Shin: I painted to them the vision of my portfolio in five or 10 years, which was going to be, jokingly on my blog I call it my real estate empire. I want an empire of real estate property. I painted that picture, I said, “Look, I have assets that I’m willing to invest. This is where I want to get to. I would love for you to be a part of that.” And I think that really helped give us all the trust to move forward. And then on the last day, my real estate agent, just showing me around, this one property came on the MLS, it popped up and she called me and I was getting ready to go to the airport, but I just was like, “Okay, I’m right by here.” So I just drove by it, I looked at it, I couldn’t go in, but I said, “Okay, let’s make an offer, let’s get it under contract.”
Daniel Shin: And just within an hour of it going on to the MLS, we had it under contract, and things just started from there.
Ashley Kehr: That’s so awesome. That’s really exciting, especially being in the city when you are looking to invest and you get your first property before you even leave.
Daniel Shin: Yeah. It was really exciting. And then basically, I could go into numbers now or I can talk more broadly about it. What do you think?
Ashley Kehr: Yeah, let’s go into the numbers of it.
Daniel Shin: Okay. This was a duplex and it was just east of downtown Indianapolis and an area that is rapidly up and coming called Arsenal Heights or Holy Cross. And basically, it was listed for $165,000 and there were three bedrooms on both sides. And the purchase price, looking back at this now, this would never happen today, but we offered $157,000 and we got it under contract at that price. Right now you have to offer usually 10% above what the list price is and they’re bidding wars, but this was, I guess, about two and a half years ago.
Ashley Kehr: How were you financing this deal? Were you using cash from your stocks or what did you use?
Daniel Shin: I used a loan, so I got a loan on it, but I put a down payment, I believe 25% since it was a duplex. And I was using cash to finance a down payment, and then I got a loan for the rest of it. So with the closing costs, it was about $161,000 total to buy the property, including a loan, and it was in pretty good shape. We didn’t have to do much of the roof, and some of the floor was messed up. One of the bathrooms was really weird. So we did a pretty thorough renovation actually, where we gave it a complete facelift, painted everything. We ran countertops, we completely redid one of the bathrooms, both of the kitchens were essentially completely upgraded, all new appliances.
Daniel Shin: And it looked really sharp when we were done with it. And that cost about $68,000 or $69,000. And that just blew my mind coming from Los Angeles where you fix your bathroom and it costs $30,000 to where you can renovate a duplex in Indianapolis for 70,000. That just blew my mind.
Ashley Kehr: Daniel, when you purchased this property, did you get this budgeted out before, or did you decide to do the rehab after you purchased it? And then, where did you kind draw the line? You said you put in granite countertops and at least near me, if you put in granite countertops in a lot of the places, you’re not going to get that value back, you can’t increase rents high enough to cover that kind of cost of putting these high-end finishes. How did you make that decision of what’s too much? What’s over upgrading the property as to where you’re going to get that sweet spot, where you can raise the rent and you’re getting a nice property?
Daniel Shin: Yeah. Great question. Basically I had everything plugged into a cash-on-cash return calculator. So using my real estate agent there, she also does property management. So I essentially asked her, “This is what I’m thinking with the property, what do you think we can get for rents?” So she projected her rent and my contractor there walked to the property and basically gave us a quote. And he said, “This is what it’s going to cost to renovate both units.” And using that information and knowing how much I put into the property, I was able to generate a projected return. And that was a projected return without the refinance portion. Just if I rent innovated it, put in the money and rented it, what was my return going to be?
Daniel Shin: And I was targeting 10% or higher. So my real estate agent thought that if we did the stainless steel appliances and the granite countertops, we would access a little bit of higher return because there’s actually a lot of young professionals in that area, because it’s right near downtown Indianapolis where there’s sales force and all this things. So there was definitely a market for that. In some places around Indianapolis, definitely you’re not going to really get your money back if you go that high end, but she thought we would and she was right.
Ashley Kehr: What does it look like today? What are the rents and what is the property value at right now?
Daniel Shin: Basically what I was able to do is about six months after I’ve renovated the property and got it all tenanted, I went for a refinance. And it was appraised for $256,000. So it was pretty good. So basically, we were able to cash out ReFi, almost all of the money. And at the end of the day, I only had $14,000 left in the deal. So 70% of that new appraisal amount was given back to me as a check and I used it to pay off almost all of the initial investment and the initial loan. And then when you count that against the rent that we were getting and including things like vacancy, property management, maintenance, property taxes, our return projected was 62%.
Ashley Kehr: Daniel, that is great. What did you say the value was again, 260-
Daniel Shin: $256,000
Ashley Kehr: Okay. So you have $14,000 into a property that’s valued at 256,000. I think so many times people get hung up that you should have all your money back out, and that’s the only way to do a BRRRR, but only having $14,000 into a house for 256,000, that is awesome. That is a great BRRRR. Congratulations.
Daniel Shin: Thank you. I was super happy with this. And basically, this was proof of concept to me because I’m a surgeon, I’m a numbers guy, so basically I needed to have proof of concept to really go all in. And I also wanted my wife to come on board. So this whole time, this took about a year, and this whole time I was doing it on my own, my wife was looking at me with skeptical expressions all the time when I was talking about what I was doing, because she’s also a spreadsheet person. So basically when I was able to show this and I showed her the returns that were projected to get, she was like, “Okay. All right. I think I get it now.” And actually she’s been my partner ever since in the real estate investing as well.
Daniel Shin: A couple of things ended up being a little bit more expensive than projected, the property tax went up a little more than we thought and I think one of the water heaters went out. But consistently over the last two years, we’ve been able to get about 50% return from this property, which is not as good as that 62 that we projected, but how can you not be happy with a 50% return on your money?
Tony Robinson: Daniel, what an amazing first BRRRR for you? And I think hopefully you’re just inspiring a lot of other people that they can do the same thing from multiple, multiple states away. I guess my last comment on the BRRRR, were there any lessons that you learned throughout that process that you applied to the next BRRRR and more like tactical, we’ll talk about mindset in a minute, but more like tactical things, like, “I missed this and we were doing this scope of work or I should have priced a property at this”? What are some tactical things you learned?
Daniel Shin: I think the biggest take away, this has just made a dream property, now, something’s going to go wrong with it, knock on wood. But what I have learned from the other properties is that you don’t want to skimp on the inspection part. As I learned in one of the next duplexes that I purchased, it was a wholesale deal and I was like, “Oh, I’m going to buy it cash, anyway, I don’t need an inspection. My contractor walked it.” I wish I’d paid for the inspection and I wish I’d scoped the sewer because both of those things ended up being problematic. There were things wrong with the plumbing that we didn’t foresee, there were things wrong with the sewer line. So that ended up being an expensive lesson. And I would say that was the takeaway, but it’s more on the second or third deal.
Tony Robinson: It’s a really, really great point, one that I think a lot of rookies need to hear. On all of our single, really on any purchase we make, we always get an inspection as well. And if we find something that’s far above and beyond what we had originally scoped out for our scope of work, we’re going to ask for some price reduction, and we hope that the sellers are reasonable and willing and understand that those things that can happen. So not only does the property inspection help you, I think, preemptively take down certain problems or at least plan for them appropriately, but it also could give you a price break on the property to get it at a slightly discounted rate.
Tony Robinson: So Daniel, congratulations, man. What an amazing first BRRRR, thank you for sharing those lessons with us, man. I just want to keep rolling with the portfolio really quickly and then we’ll talk mindset, but you said you bought that first property two and a half years ago. Did I hear that correctly?
Daniel Shin: I think that’s about right. Yeah. It was about two and a half. Actually, is it three years ago now?
Tony Robinson: It’s somewhere in that ballpark. Three years ago, right?
Daniel Shin: Somewhere in that. I feel like I’ve been a real estate investor forever, but it’s actually only been a few years.
Tony Robinson: But now you’re in the 20s approaching 30 units, which is absolutely amazing, man. There’s a certain level of momentum that comes along with being a real estate investor that I really want to make sure we highlight because there’s so much effort and energy, and courage, and time, and patience, and failure that goes into that first deal. But once you get that first deal done, you don’t have to start all over. You can carry that momentum into the second deal, into the third deal, into the fifth deal, into the 20th deal, into the 30th deal, so the most important thing for the rookies that are listening right now is to focus as much of your attention, as much of your energy as you can into getting that first deal done.
Tony Robinson: And then hopefully, three and a half years later, three years later, you can be like Daniel and be at 20, almost 30 doors, because that’s an amazing journey, man. So I want to go back though, to Daniel three years ago, before you got that first deal, before you burned houses halfway across the country and knocking it out the park, what were some of the misconceptions that you had about being a real estate investor? What were some things that you assumed to be true that turned out to be false?
Daniel Shin: I’d say one that comes to mind is that real estate and investors are sketchy individuals who don’t have the interest of their tenants in mind. When I make a TikTok video about real estate investing, a lot of my comments are like, “Real estate investors are awful. You’re parasites to humanity.” And I think that’s totally, totally BS. I think that real estate investors, and this is my approach in life in general, if you properly incentivize everyone, everyone can win. And I really believe that. And my property manager is the same way, when something’s going wrong, you can fix that as quickly as possible for the tenant, you can basically do everything you can to make it a great experience for the tenant. And you don’t have to be that typical what the general public might think of as a real estate investor, which is essentially a slum Lord.
Daniel Shin: That doesn’t have to be you. You can make a good profit, you can have great properties and provide awesome housing, and you can actually support the economy in a way that you can’t do in your W2 job. In a W2 job, you’re working and helping your company, but as a real estate investor, you’re employing dozens and dozens of people. You’re employing real estate lenders and brokers, and contractors, electricians, plumbers, and you’re providing a great place and supporting the housing market. So that I would say is the biggest mindset or realization, that you can be an ethical, good influence on society as a real estate investor.
Tony Robinson: Daniel, I’m so glad you mentioned that, and I’m also glad that you mentioned TikTok because people on TikTok are very angry, and my wife and I, we get a lot of hate on TikTok as well. But I think like with any profession, there’s good and there’s bad. And you prove that, just because there are some out there that are giving us a bad name on TikTok, doesn’t necessarily mean that that’s the path you have to follow as well. So you can be whatever landlord you want. So if you guys are on TikTok, try and find the positivity there, not so much the negativity.
Tony Robinson: Also, if you’re on TikTok, follow me and my wife, we’re @therealestaterobinsons. And if you’re on Instagram, follow me, @tonyjrobinson. Ashley’s @wealthfromrentals. And there’s lots of nice people on both the social media platforms talking about all the good that real estate investing is doing.
Ashley Kehr: I only have like 100 followers on TikTok, so I don’t get hate comments yet. I don’t get any comments yet.
Tony Robinson: Give it some time. Give it some time.
Ashley Kehr: Daniel, what is your TikTok?
Daniel Shin: All of my social media and my blog is thedarwiniandoctor on Instagram, thedarwiniandoctor on TikTok, as in just, thedarwiniandoctor, all one word, and add .com for my blog. It’s not the easiest name, but when I was thinking about what I was going to try to achieve, I wanted to evolve into a real estate investor, I wanted to evolve into a personal finance wizard, and so I thought it epitomized my journey.
Ashley Kehr: Yeah. We’ll make sure you guys check out Daniel’s social media. I’m going to take us right now to the Rookie Request Line. Today’s question is from Landon. If you guys want to call and leave us a voicemail that we will play on the show, you can call 1-8885-ROOKIE. So here’s today’s question.
Landon: Hi. This is Landon. I’m calling from Anchorage, Alaska. I have a fourplex out here and I’m house hacking as my first property, so I’m just getting started. I had a question regarding using other people’s money. I’ve heard so many podcast episodes and guests talk about the power of utilizing other people’s money for investing. I recently met a doctor and he has another friend who’s [inaudible 00:47:08]and investing with someone who knows a little bit about real estate, and they’re turning to me to ask those questions and to potentially partner up in the future.
Landon: And I just wanted to ask, what are some great ways to structure a partnership and also present the partnership in a profitable way to these people that are really just bringing the money to the table? And how can I add the most value to them as the investors to, I guess, both will mutually benefit. Thank you.
Daniel Shin: I think that’s a great question. First of all, I want to congratulate him for doing a house hack because that’s a fantastic way to get into real estate investing. And OPM, other people’s money, it’s like people, I think use this as a catch phrase, but essentially, I think a lot of real estate gurus out there are saying, “Invest 100% with other people’s money, don’t put any of your money in.” And I think that other people’s money doesn’t necessarily have to be money from a person, it can be money from a bank. So when you’re using a mortgage, you’re also using OPM. In this scenario, though, you have a typical scenario, I think, that is going to be awesome.
Daniel Shin: It sounds like this investor has a bit more time on his hands and a bit more hustle, and he has some partners who have funds, but not necessarily time. So it’s like a marriage made in heaven. He can basically look for deals, he can do the legwork to find them and get them under contract and maybe manage renovations, and he could utilize the cash flow that his partners have. And there’s ways to structure it so that they make a great return, but he also is able to grow his portfolio and benefit from that growth in a way that benefits everyone. Again, basically incentivizing both sides.
Tony Robinson: One comment for me on the OPM piece is that you can also structure this, Landon, as just like a debt-based partnership. It doesn’t necessarily have to be an equity-based partnership. So if you just say, “Hey, private money person, I’m going to pay you 10% interest paid out monthly, quarterly, annually,” whatever it is, that’s another way to structure the deal, so that way they don’t necessarily worry about how well the asset’s performing because you’re just contractually obligated to pay them a specific return. So there’s no right or wrong answer on structuring the partnership, Landon. Hopefully that works for you.
Tony Robinson: Daniel, you’ve been knocking out the park, brother. We really appreciate everything that you’ve brought to the table here so far. As we wrap it up, I just want to give a quick shout out to one of our Rookie Rockstars. And today’s Rookie Rockstar is from our Real Estate Rookie Facebook group, which is, I don’t even know, almost 40,000 people strong at this point, truly one of the most active, one of the most engaged Facebook groups out there. So if you guys haven’t joined, please make sure you do that. But today’s Rookie Rockstar is Bethany T. And Bethany said that she’s excited to get a nice big check from their first flip today, that she’s amazed at the power of real estate, and they couldn’t have done it without the group, the BiggerPockets group.
Tony Robinson: But they bought it for $100,000, the rehab only took six weeks. They were able to sell it for $165,000. And they had a few costs, holding costs, things like that, but they ended up profiting a total of $39,410. That’s a lot of people’s salaries. So to be able to make that on one transaction in six weeks is amazing. So Bethany, big congratulations to you.
Ashley Kehr: That is awesome, Bethany. Congratulations. Daniel, thank you so much for joining us today. Can you let everyone know again where they can reach out to you on your social media or your website or anywhere else?
Daniel Shin: Yeah, absolutely. I would say one of the best places to find me is at my blog, thedarwiniandoctor.com. And it has three years of my ravings about medicine, about personal finance, and now a lot of interesting real estate content. And I’m also on Instagram @thedarwiniandoctor, and I have a pretty amusing TikTok account now with some pretty interesting content there about personal finance in real estate, and it’s growing rapidly. So that’s also thedarwiniandoctor.
Ashley Kehr: Awesome. Thank you so much for sharing with us today, sharing your story and providing so much value to us and the listeners. I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson on Instagram. And lastly, before we close out, here’s a final word about how BiggerPockets can provide you value right now.