Emily Du Plessis  02:43

We started investing. Once we bought the first property, I realized how powerful it was and how it really could help us reach our lifestyle goals that we were really aiming for. And we were really intentional about setting those goals early in our marriage. And so it just ever, ultimately, maybe four or five years after getting started, I was able to leave my job as a teacher and now kind of manage our portfolio. So pretty crazy journey. I never imagined this is where we’d be.

Kirk Du Plessis  03:07

Yeah, pretty fast. So my background a little bit for those of you who didn’t listen to the other podcast is I was a finance guy. Always been a finance person always interested in numbers. Literally, you can’t get me to read anything but finance, money, economic textbooks, so went to work in Wall Street or on Wall Street for Deutsche Bank, as an M&A banker for a little bit and mergers and acquisitions.

Kirk Du Plessis  03:30

And decided didn’t want to do that. Then I switched over jumped over the Chinese wall and went to work at BB&T Capital Markets as a REIT analyst. So I was in a group that was analyzing a bunch of multifamily reads and some industrials and a couple specialty REITs. And it was really, really fascinating.

Kirk Du Plessis  03:47

So to me, you know, real estate is a combination of investing, generally and broadly, which I love. But then also I have this background and reads where I got a chance to talk to CEOs and CFOs and understand the whole capital allocation model and the capital structure and what their business plan was. And it was a fascinating experience for me. So I very much try to consider ourselves a mini REIT. And we try, you know, we’re trying to build up our little mini REIT portfolio. And yeah, that’s where we are.

Robert Leonard  04:15

Was that experience as the REIT analyst what really got you guys into real estate because I mean, Kirk, you invest in the stock market heavily and you even have your own business about options trading. So why real estate?

Kirk Du Plessis  04:26

So for my side of it, my family’s always been involved in real estate. So they were in the mortgage industry forever. And I held my parents in the mortgage industry for a little bit as well. And you know, like our family trips jokingly, but not jokingly, at the same time were two houses and open houses like that. That’s what I remember doing as a kid, we would drive around town and we would go to open houses and I was eight or nine years old and we walk through these houses and talk about them.

Kirk Du Plessis  04:50

So I’ve never not known the experience of having real estate in my life. And so, you know, like when I think about options trading or investing generally, I’m always of the opinion that you have to have multiple streams of income. So as great as I think that options trading is, and as much money as we have allocated to options trading, you know, we’ve also decided, look, we need something that is also as not as correlated to the options market, and what we’re doing there. And that can grow on its own, you know, separately. And so. So that’s how I think about real estate.

Robert Leonard  05:18

So Emily, I’m going to use your own word here. So I didn’t come up with this. And I’m not, I’m not calling you this. This is what you wrote on your website. And that word is clueless. You’ve mentioned that you were clueless when you bought your first rental property. And I bring that up, because a lot of listeners haven’t done their first deal yet, because they’re nervous, or they just don’t think they know enough. And I know, I felt the same way when I bought my first ever property.

Robert Leonard  05:40

So how can someone listening to the show today overcome that fear or nervousness and just get started and buy their first deal?

Emily Du Plessis  05:48

Well, I definitely think that there is a lot of us that suffer from analysis paralysis. Luckily, I was not one of those because of this guy, I would say, I really leaned on him because he was a numbers guy. And I didn’t know anything. Like I said, my background was in teaching and English, I lived in my same house until I was 18 years old, like we never move. Like I didn’t have really a lot of experience with investing.

Emily Du Plessis  06:11

And so I think if you’re out there, and you’re wondering, like, I want to do it, but I’m scared, I’m nervous. I think that the first step is knowledge. Like you have to start with teaching yourself some stuff. If you don’t have somebody that you can lean on to really help you and guide you, then I think you need to have knowledge, knowledge is power.

Emily Du Plessis  06:29

And I think more importantly, knowledge is confidence, the more that you can, by listening to podcast episodes, and reading books and doing getting in communities, I mean, any more today, we don’t have to go to in-person communities. There are so many great communities online, where you can go and ask questions and learn and so that you can get yourself a little bit of knowledge that’s going to build a little bit of that confidence to be able to get out there and start taking action.

Kirk Du Plessis  06:53

And I would say like even I mean, no offense, but like, you were like less than clueless. Yeah, I mean, it was like, I was like, we were going through numbers. I’m like, listen, the ROI on this is the 25%. You’re like, what are you talking about that? What is an ROI?

Emily Du Plessis  07:05

I didn’t know what an ROI was.

Kirk Du Plessis  07:07

And I was like return on investment? And you’re like, again, I don’t know what you’re talking about now.

Emily Du Plessis  07:10

We used to argue about it. Like, I was like, why would we put all this money in to just make $500 a month like we have $15,000? Why would we put it into make five, you know, and I just didn’t understand. But once I got the knowledge, and I was able to understand it, it changed everything.

Kirk Du Plessis  07:25

Yeah, there’s a quote that I heard that thing is really powerful, especially for newbies. And I think it really relates same thing. But this idea that knowledge is abundant, but the desire to learn is scarce. And so if you have just a little bit of desire, the knowledge is out there, you know, like there’s abundance of it.

Robert Leonard  07:42

I think it’s really funny that you mentioned that $500 Emily, because my family is not a real estate investors, I kind of just stumbled into it myself. They think I’m the first one in my family to ever make any type of investment at all. So when I tell them, I’m investing this money in a property and I’m happy, I’m getting $300 rent or $50 a door and I’m, I’m excited about that, right? My return is really good. It’s over 20%. So I’m sorry. And they’re like, you’re only getting 300 bucks a month. Like, what? That’s nothing right? So it’s too funny you mentioned that.

Robert Leonard  08:10

So how Kirk and Emily, your opinion to what did you focus on to learn first? And how were you able to learn that in a way? I mean, you didn’t like you said you didn’t know anything? So how were you able to learn that successfully without getting overwhelmed without giving up? How can someone who comes from a similar background to you follow the same path that you did and learn?

Emily Du Plessis  08:29

Well, we got started, and I jumped in with full trust in him. And so I think it really is about, I think you have to start with figuring out kind of what your goals are within and what you want it to look like, even if you aren’t sure, like you invest because you want to get something out of it. Right? So whether that’s a money return, whether it’s a lifestyle goal, whatever that is.

Emily Du Plessis  08:49

So I think first really, you got to start there, you know, what are you looking to get out of it. And I always say like, start locally, start looking around locally, start figuring out, like, just start paying attention to your market. Whether you rent your own home, or own your own home, start just kind of seeing what is happening in your local area, an area that you know, an area that you’re comfortable with. And so you can just start getting a feel for, like the market itself and properties and what they sell for and what they’re listing for.

Emily Du Plessis  08:49

I think that’s kind of a low barrier of entry to so to speak, where you’re working in an area where you understand it, and you know it. And so I think starting in your own area, just kind of learning is really key.

Kirk Du Plessis  09:25

Yeah, I would say starting with a small property. And a small deal would probably be my biggest thing. You know, the first property we bought was a small two bedroom condo. And I like that two bedroom condo, not only because it was really cheap, and that’s all we could afford at the time. But also because it was a condo, you know, like we didn’t have to worry about the outside maintenance. You know, it needed some repairs inside for sure. And so for us, it was a it was a manageable property. You know, it wasn’t overwhelming.

Kirk Du Plessis  09:51

We didn’t start with a 14 unit apartment building with a management and a clubhouse and a pool, right? And I think people feel like they have to start there. You know, like our portfolio has changed quite a bit from where we started. And I don’t think it’s a bad idea to start with training wheels, buy a small property team up with somebody to go in on a partnership with somebody, buy a property that has good bones, it’s a solid house. It’s a small, small house, good location, small townhouse, condo, whatever, and learn and you learn so much. Yeah, just doing that for a couple years. And you’ll be okay.

Emily Du Plessis  10:24

I think if you’re gonna do anything, get your numbers right. If you don’t, you haven’t learned all the tenant screening tips and you haven’t learned all of that stuff. I think if you can get your numbers right to start with, that’s what we did. We had our numbers, we didn’t know how to screen candidates, we didn’t know where to list, we didn’t know any of that stuff. We had our numbers, we did that. And then honestly, we learned like trial and error we got out there we made mistakes we learned. And then we were able to take the things that we learned and you know, apply it to the acquisition or next property.

Emily Du Plessis  10:51

So to me, the key is like the numbers have to work. And if you can figure out that part, the rest of it. Yeah, the rest of it is a little bit easier, not pressure, not stress of like, am I gonna make money? Am I not gonna make money like, that’s out? Then you can focus on the other stuff.

Robert Leonard  11:06

I really liked that advice you gave Kirk about starting small, because I think and I talked about that a lot on the show, because I feel the exact same way. When you hear a lot of people talk about go big, you know, I wish I started bigger sooner. And I mean, that’s all great. But I feel like you need to start small first, like you said, and I relatively recently went long distance.

Robert Leonard  11:23

And I did the exact same strategy I, I told myself, I’d never buy a single family property, I didn’t want to go to that asset class, I only wanted multifamily. I got stuck, and I wouldn’t buy a deal. I couldn’t find a deal that fit me perfectly. And I was getting frustrated. So a great deal came across my table that was single family. And I said, You know what the whole mortgage all in is $300 a month. It’s a small property. I said, if everything goes bad, I can cover $300 a month if I have to. So the risk is small, it’s going to be a huge learning opportunity. And the return numbers are good. So I’m going to jump. Whereas if that was a 50 unit apartment complex, I probably wouldn’t have done that. So I think that’s a really good advice.

Robert Leonard  11:59

And when we talk about getting started in the different numbers, is there anything specific that you started with to learn? What were the most important things that right from the beginning you wanted to know?

Kirk Du Plessis  12:09

To me, well, as I’ll answer this question, maybe like how I used to look at it before, and then maybe how I look at it now, I think that before, I was really concerned about the numbers, and I didn’t look at all the numbers, I was really looking at kind of scratching the surface of the analysis that we could do. And it’s funny because like, I came from a REIT background, and a REIT background when you’re doing models and whatever. I mean, you’re taking into consideration everything.

Kirk Du Plessis  12:35

But most of the numbers are kind of given to you, right. So like, you don’t necessarily need to go out and visit 1200 properties, right? They know what the capex is going to be. So you throw in capex. And so initially, I was more concerned with rent and payment. And that’s it. And I didn’t really look at things like utilities, I didn’t really look at, you know, the capex that was coming down the line a year or two years or five years from now, I didn’t really factor that in, I really wish I would have bought a lot of properties, I probably would have offered a lot less.

Kirk Du Plessis  13:04

So I think initially, I was probably wrong and just looking at the surface level stuff. I think it could have spent a little bit extra time and dug a little bit deeper into the numbers. I also think that we didn’t pay attention to the flow of properties, like we recently sold a property that was, that we’d never should have bought, like I literally hate the property for a million reasons. And one of the biggest reasons is that it had a terrible layout, like it was just super choppy. But the numbers worked at the time. So we were like, hey, the numbers work, you know, but I didn’t think about the flow and the layout. And it always took forever to get a renter in there. It was like a terrible layout didn’t work for anybody people didn’t really say. So things like flow and location. I mean, all the things that you hear people talk about all the time, that are important, are really important.

Emily Du Plessis  13:44

I think locations really big. Honestly, I really think it is. And I think that goes back to the idea. But then beginning thinking about what you want out of it, the type of tenants that you want to have, you know, it’s these little things that maybe sound foofoo. But at the same time, it’s like think about like, what kind of tenants do you want to attract? Do you want to have to go and knock on the door and pick the rent up every month? Or do you want to trust that they’re gonna send it whatever vehicle that you want to come? Right?

Emily Du Plessis  14:09

So I think really spending time to think about that, because location plays into that, you know, you could maybe get a really great like a really do, quote, unquote, I’m using air quotes, but like something that seems really cheap. Yeah, that looks awesome on the surface, and then you dig in, and it’s in a terrible part of town, and it’s gonna attract terrible tenants. And like, that’s just headache after headache after headache.

Emily Du Plessis  14:26

And granted, there are people out there who do that and love that those headaches. And that’s great. I’m so thankful that there are because most people need a place to live. So I’m thankful that there are people out there who will do that. But I think that you have to benefit from thinking about that ahead of time and location. I think if we’ve learned anything in the years, we’ve been doing this location, it’s really important.

Robert Leonard  14:42

A lot of people fall into that trap too, because it’s, I call it the spreadsheet trap because people look on paper and it looks so good. And the numbers you know, you just I gotta do this deal. It looks so great. And then you buy it and you realize, oh, my vacancy is higher than I expected. My rents are lower than I thought, my repair costs are much higher because the tenant quality is lower, and they’re ruining my house. So my returned numbers don’t actually end up being as good as they seemed anyway, I definitely agree. Now, when you’re looking at location, Emily, what are the specific things that make up a good location? What are those characteristics that somebody should really focus on?

Emily Du Plessis  15:14

I think you want to pay attention, when you’re kind of like doing your audit of an area, you want to pay attention to things, like put yourself in their shoes, like things they want to go do, what kind of industries are closed? Like, where do people work? Like you have to pay attention to the community itself, and not even just like pigeonhole on the street, like in that community, what are the main employment industries that are there that people are being employed? Maybe you want to be close? People don’t want a long commute a lot of time? So are they close to that? Are you paying attention to the crime in the areas? You know, to some people that’s really important, and to some people it’s not. Are they close to grocery stores, and coffee shops, and all that sort of stuff?

Emily Du Plessis  15:48

I think you have to really think about the community as a whole and like, what’s the vibe of the community? What do people who come here want? And like, ask around, if you’re not sure, I mean, ask your friends. Ask people who you know, that read, like, what do you look for when you’re looking for a rental? What are like your five key things, and take that information and use it as you’re starting to kind of figure out where you want to be.

Emily Du Plessis  16:07

I think it’s easy, like everybody kind of knows their bad part of the neighborhood. But it’s a lot more than just being like, okay, I want to stay away from the bad part of the neighborhood. But now all this other areas are good. So where do I go? So I think you have to pay attention to that, you have to pay attention to sometimes like some areas are mostly renter, like there’s a lot of renters in my area versus areas or communities where it’s mostly homeowners. So like all that stuff kind of should play into making your final decision about location.

Kirk Du Plessis  16:31

Yeah, I think one, you know, a cool tip that I learned, and I still do now is when I was working in the REIT business. REITs are fascinating. You have 12 to 20 people running a multi-billion dollar company, I mean, literally just a very small handful of people. And what they would do when they were looking at properties as they would send out person to look at the property. And they would one company in particular would ask them to record their dashboard and drive a mile in each direction. That’s it. They’re just driving miles in each direction, they’d watch as a team, that video and just see what was around that property a mile.

Kirk Du Plessis  17:05

So it’s really cool now is and Emily will see me doing this all the time. So I’ll get on Google Earth, and I will drive the streets in Google Earth for like 45 minutes, I’ll go up and down the streets, I’ll be like, okay, there’s a Kroger. There’s like, you know, eight homeless people sleeping there. So like, you know, what does that does that tell me anything new about the property? Or you know, or whatever, there’s a five stores that are all broken windows and are boarded up. Okay, what does that tell me about their property?

Kirk Du Plessis  17:28

I think doing just even a little bit of analysis like that, if you don’t want to go to that area, if you don’t feel comfortable in that area, just driving on Google Earth, like, how are you going to feel having a renter.

Robert Leonard  17:39

I do that exact same thing on Google Earth. I think that’s a great way to do it. And I’ve even had people say that they if they’re looking at a specific area, maybe they don’t live there, it’s too far to go, they’ll put an ad out on Craigslist and say 50 bucks, just use your cell phone, walk around, take videos, and then just send it to me upload it to Google Drive. And technology is amazing. These days, it helps so much. And it’s so huge. And I stress that a lot in the podcast, I think it’s really great that you guys are doing something similar.

Robert Leonard  18:03

So did you guys initially start with rental properties? And if you did, why did you choose that strategy?

Kirk Du Plessis  18:10

Besides our house?

Emily Du Plessis  18:10

Yeah, besides our house that we bought way back when we first got married, and you’ve always our been in the stock market? But yeah, I mean, we’ve been in the red light when we got started in whatever year that was, 20 something. We bought our-Yeah. Well, that was our first house. 2009. Yeah.

Emily Du Plessis  18:25

But our first trueblue rental property was in 2012. Yeah, I mean, that’s been the route now. It’s changed a lot. Kirk has mentioned like our portfolio, we have kind of dabbled in a lot of different asset types. So a lot of times people will say, find one that you like, and stick with it. And I think that’s great advice. But I also think there’s a lot to learn when you try a few out because you might find that you like one more than the other. And that’s what we’re learning now as we’re further along.

Emily Du Plessis  18:49

Life has changed a bit since we first got started, like, we’re starting to see that there are different asset classes that maybe we would have never thought of having. So I mean, like our portfolio, we’ve had condos, we’ve had townhouses, we’ve had single family, we have duplexes, we have student rentals, we have vacation rentals. So like we have dabbled in a little bit of everything. And it’s, yeah, we’ve done like short, like we flipped and then put long term renters in it. I mean, so we’ve done a lot of the different types that are out there. And I think there’s a lot to learn whenever you kind of go that route. So yeah, we’ve been like rental property

Kirk Du Plessis  19:20

the whole time that we’ve been starting to dabble more in syndications. We have yes, we’ve added some of those. But um, but I think ultimately, I see the value in a rental property as being a rental property as as what it should be. I think there’s value in flips, obviously, but for us, you know, the core of what we do is still rentals.

Robert Leonard  19:37

Why do you start with rentals? Flips usually garner a lot of popularity or interest from people for various different reasons. So why do you start right with rentals?

Kirk Du Plessis  19:45

You know, to me, it was like it was always a long term plan. So I knew what the rental property you know, flip property is interesting because when you flip a property, you have a pretty good idea of what could happen and there’s a lot of ways that you can kind of get out of the deal or be flexible in the maneuvering around it.

Kirk Du Plessis  20:00

But when you get into a rental property and the numbers work, I mean, it’s almost to the point at which it’s not going to go broke unless you do something stupid. Like, if you take care of the property, if you put in good tenants, and you have good tenant screening, and you run it well, and you bought it right, it’s almost a no brainer, right? Like it’s going to take care of itself.

Kirk Du Plessis  20:20

And so to me, I thought it looked the best way that we can start when we were young in our marriage, and put a lot of what we had at the time. Right? Well, we didn’t have much leftover after you put that first property, I knew that that was going to be a safe investment, if we held on to long enough. And so for me, I would rather go with something that potentially made a little bit of money, that was a lot safer. As you know, from probably our last conversation, I’m a pretty conservative person and trader, and I’d rather put money into something that was a little bit less income have way more conservative, higher probability of success, than to try and shoot for something that was a homerun I can do once and maybe not repeat for another two or three years.

Robert Leonard  20:56

Emily, you mentioned all the different strategies that you guys are doing now all the different asset classes that you’re in, and I definitely want to talk about all of them. But before we do that, which asset class within rentals did you start with? Did you go with single families? Did you do small, multi, large multi, and I’m guessing based on Kirk recommending going small that you probably started with some smaller properties. But what did that look like? How did you decide exactly what type of property you wanted within the rental property strategy?

Emily Du Plessis  21:24

We actually started with a condo. And actually the first four properties that we bought, were either a condo or a townhouse. So I know that there’s a lot of sometimes people say, don’t go that route, fees, association fees, stuff like that. But it really worked for us. And when we were in our life, we didn’t have a lot of money, we actually had to buy a property, we were pretty much forced to buy a property that was about 45 minutes away from us, because we couldn’t afford to buy one where we live.

Emily Du Plessis  21:46

And we didn’t let like let that stop us, which a lot of people do. They’ll be like, oh, I can’t afford it in my area. And I hear it in my community a lot like, oh, man, what do I do? Well start looking, branch out a little bit, like it was a little bit scary to do that. But there was another area that we knew until we did it. And it was a two bedroom, two bath, it was a hot property. So it needs work, lots of sweat equity, we carry ceramic tile was a ceramic tile of like flights of steps. I remember like the sweat equity we put into it, because we couldn’t afford really to bring in other people to work on it.

Emily Du Plessis  22:14

So we started where we could. And I think the key is not overextending yourself on your first deal. And that is like so incredibly important. Because I think that’s a recipe for just disaster. If you overextend yourself on the first deal, you’re getting into it, you don’t know everything that you need to know. So to me, it’s play it safe in the beginning and get something that fits.

Emily Du Plessis  22:34

And if you can’t find anything, wait, there’s always another deal. Like you do not have to just jump on it. Because you feel like there’s nothing else out there, there will always be another deal. So find something that really fits with what you can afford, like worst case scenario, you have a backup plan, like that’s where you guys start.

Kirk Du Plessis  22:50

Yeah, I think you know, another reason why we did this small singles, just to start was was financing. I mean, like, we haven’t really talked about financing a lot yet. But you know, financing when you’re starting, you don’t have a history as a landlord, maybe you’re short on cash, you don’t have a lot of cash. You know, single families and townhouses and condos are going to be one of your best choices because they’re easier to finance.

Kirk Du Plessis  23:11

It’s much harder to finance for, you know, four plex, five plex or a house that needs to be torn down and renovated, than it is to finance something that’s already standing and just needs a little bit of like lipstick. Right? And so I think for us, too, it’s as a cash thing, it was we didn’t want to start too big. And it was a financing, you know, component too, we didn’t have enough money to buy these in cash. So we had to finance them, we had to do it small.

Robert Leonard  23:34

My first property was actually a condo as well, it was a house hack. So it wasn’t necessarily a straight up rental. But it was a condo and I actually have a person that I know that I talk about real estate with sometimes. And he lives in my local area, he owns 60 to 70 condo units. And I was amazed to learn that when I talked to him, yeah, I said the same thing as you Emily. But he just he knows his niche. He knows and they’re all in it like two or three complexes. So he knows it can if it sells at this price, I’ll buy it. And if it’s anything higher than this dollar amount, I’m not interested. And so he spends no time on it ever. He just gets alerts or people send it to him. I mean, he owns so many units that if anybody wants to sell they go right to him.

Kirk Du Plessis  24:13

Oh, yeah, I think condos are awesome and that’s the perfect example. Like, you know, condos to me are like you have to really know the building and the area, you know, and so much so that you have to know the occupancy and how much is owner occupied versus non owner occupied. And there’s a lot of things that go into it. But if you do know it, it’s very powerful because you have a strategic advantage over somebody else who does.

Robert Leonard  24:33

Now all of that said, we do need to be careful to look for HOA fees, because that is a big component of it. And they can change kind of quick if you know just by way of how it works.

Kirk Du Plessis  24:46

And I agree and not even HOA fees. I would say one of the other things that is a major component is the ability to get financing at the FHA and Fannie and Freddie level. You know, the property that so the condo that we owned was a HUD property. And so we bought it directly from HUD had a lot of issues. I didn’t know at the time that and this was an a complex of there’s probably 10 or 12 buildings, so probably 120-ish units. For some reason, our building was subdivided into its own mini condo association.

Kirk Du Plessis  25:18

So we only had, I think 10 units in our condo association. And so immediately if one other person in that building started to rent out their unit, then we were going to lose our FHA financing ability, we were no longer going to be FHA approved, which meant that the value of our condo would have dropped like a rock, if that would have happened. So it’s the fees, it’s the FHA approvals, it’s the reserves. I think there’s a lot of things that go into it, that you just, it’s not that they’re bad, you just have to be aware of them.

Robert Leonard  25:49

Yeah, I ran into those exact same situations that you said it wasn’t a separate entity within the whole complex. But still, when the, it’s very different than a single family house, you just kind of go through the appraisal, the inspection, everything comes back, okay, you’re good. With the condo, like you said, the homeowners association has to be run properly, they have to have enough reserves. And if they don’t, the bank won’t go forward with it. Yeah. And I don’t know if you had this experience. But if there was too many non owner occupied units in the overall complex, they wouldn’t rent out at either.

Kirk Du Plessis  26:19

We were one over. And I told Emily, I was like, I didn’t know this, I was like, we have to like, you know, we have to rent this thing out. And we have to watch this really closely. Because if one person turns it into a non owner occupied, we’re done. Like the whole complex loses. And that was scary.

Emily Du Plessis  26:33

I mean, it all worked out, though. It did, we sold it eventually, and made a great return and great profit on it. But it was, we didn’t necessarily know all those things when we bought it. So we were fortunate in how everything shakes out. But we definitely those are the kind of the three main things we really tell people to look for, whenever they’re looking at associations.

Robert Leonard  26:50

I mean, they can be good, you just have to be aware of those things. Like you said, Kirk, if the number went high, and then you tried to sell, then that person’s gonna have the same financing issues that you would have had. And so you’re not going to have an easy time selling it.

Kirk Du Plessis  27:03

Which is why and this get like I could be on a soapbox all night about this. This is why it gets back down to making sure that if you, you know, like, you’re not going to know everything about every property, right? Like even if you think you know everything about every property you’re not, but you know, as much as you know, and then you fall back on the numbers and the analysis that you did, and you buy it at the right price and right, you know, time and the right terms.

Kirk Du Plessis  27:27

Because like say in this example, with that condo, say the worst case scenario happened and we couldn’t get FHA financing so that all the values in the condo went down. Well, so what we can fall back on our 25% return ROI, you know, rental, and so after a couple of years, you know, we would have recoup all of the money that we have put into it. So it’s not that bad if you have a fallback plan. But I think a lot of people what they do is they skate so thin with a deal because they want to get a deal more than they want to get a good deal.

Robert Leonard  27:54

And on the thinness of the deal, it’s important to is that the homeowners association can raise the fee if they need to. When I bought mine, it was 290, which is high to begin with. And I knew that they were putting a special assessment on so I built that into my numbers. But if you didn’t know that was coming, they added $150 a month to that. So we ended up close to $450 a month. I thankfully had built that in so I wasn’t surprised still if you if you didn’t know that. And you didn’t build that into your numbers. And like you said, if you were really skinny on your numbers, yeah, you’re gonna get crushed. If you got $150 in, say cash flow. It’s all gone. Yeah.

Kirk Du Plessis  28:27

And besides even okay, so that can happen to with non condo properties. We just had actually the house that I hate with all my guts that we sold, right before we sold it, the town decided that they were going to redo the entire sewer system. We had no idea we were on this property for a couple years. And the town sends us a letter, we got to go to this meeting. And they’re like, hey, we’re gonna redo this entire sewer system. And you are required to replace the entire line from your house, connect to the sewer, dig up your yard, dig up the sidewalk, everything and it cost us $5,000 to do that process.

Emily Du Plessis  28:59

For two, we have two properties in that town. And that was like, close to, it wasn’t all about it netted for a year, but it was close to it. So like that one year nearly wiped out.

Kirk Du Plessis  29:09

But again, because we had built in such good numbers, it did not kill us. Right. Definitely stung, was a bee sting. Yeah, we did not like it.

Emily Du Plessis  29:17

It didn’t make us go negative on you know, profit, but still. Yeah. So it can happen anywhere.

Robert Leonard  29:23

Yeah, that’s a good point. I mean, we talked about this in the context of condos where it’s definitely common or can happen more frequently, but it can happen in non condos too. I mean, they could raise taxes.

Emily Du Plessis  29:33

In the town that we live in. Yeah, in the town that we live in, they did a major tax assessment and just killed.

Kirk Du Plessis  29:39

And they hadn’t done a tax reassessment in our town Since like the 60s, right. And so the taxes went up, like two reacts in some places. I mean, so again, like, I know, we sound like real estate’s like the worst thing in the world on this podcast at this point, but, but it’s just like being in like keeping in mind that like all of these things can and possibly happen.

Emily Du Plessis  29:45

And I think that, the more that you can learn, like people that are listening to this can be, I think these are things that you could easily learn ahead of time, like, okay, so I need to ask my agent about when the last tax reassessment was, and what that usually looks like, you know, what does that typically be, or maybe call your county borough or ordinance and just make a phone call?

Emily Du Plessis  30:16

Same thing I tell a lot of people in our community, like with the sewer thing, before you buy a property, hey, maybe just call the local like Town Council and say, hey, are any major projects coming up that I need to be aware of, you know. It’s a five minute call, but it could save you from getting a bad deal, it could save you a lot of money. So I think the more that you can learn some of these little tips, just the better you are, you know, the better off you are as an investor.

Robert Leonard  30:38

Yeah, I mean, we are talking a lot about the negatives. But I think that’s really important. I’m actually really enjoying the conversation. Because these things do happen. I mean, they’re a reality. And I think a lot of times on a lot of podcasts, I’ve listened to a lot of podcasts. And there’s a lot of great ones out there. So I’m not talking negatively about them. But a lot of times, it’s just only the good stuff. And we don’t really talk about all of these different things that could happen.

Kirk Du Plessis  30:57

And we got all night if you wanna talk about it. Don’t worry. We’re good to go.

Robert Leonard  31:03

Yeah, I mean, it’s so true. And we’re dealing with a Black Swan event, you could say in the stock market right now. And so, Kirk, you’re you’re in the market, just like I am. And I think I’m the real estate podcast, they always talk about how real estate’s the only asset class. But one of the things I like to do on the show is talk about how there is a place in your portfolio for the stock market too.

Robert Leonard  31:20

So I think this whole conversation is really good, especially for real estate investors to realize that real estate is a great asset class, it’s a great way to invest, but you do need to consider all of these different things that we’ve been talking about.

Kirk Du Plessis  31:32

Of course, you should. And it to me, it’s, it’s a no brainer. Like I tell people all the time, just like I’d say, you know, I think options are great. I think you should also have your money someplace else, right? Because what if you just run into a bad string of trades? Like right now, the black swan event right now is literally crushing people. And if you don’t have enough capital available to withstand that type of pressure, what are you going to do? Like, just if you had all of your real estate in one particular area, in one asset, you know, I am terrified right now are for all of the landlords who have just student rentals, and all of these colleges that are closing down.

Emily Du Plessis  32:06

Yep. Our kids gonna be coming after you for some reason. They’re trying to get money, or we were actually at dinner before recording this. And we said, like, what about Airbnb is that people have really been that are like in metro cities that have been really on like the tourism route and with the shutdown and all of that, and flights and people stay in home, like how does that impact people who maybe just have Airbnb rentals.

Emily Du Plessis  32:27

So I think there’s a lot of, I get the whole, find your niche and stick to it. But I think it is a good thing to also kind of diversify in that way you can withstand, like, we have student rentals. So we will see if our university shuts down, like how that’s going to impact us, we have some vacation rentals. Luckily ours are a little bit not so much Metro. So I don’t think they’ll really take a hit. But it’s just something that unforeseeable is now happening.

Robert Leonard  32:54

I’m not sure if you guys are familiar with this, I think relatively new strategy called Airbnb arbitrage. And it’s when someone will rent a property as a tenant, and then they Airbnb it out to someone and they essentially make the spread. That was one of the crusher, that exactly that was gonna be exactly my next thing is a lot of people went into that because it takes really no money to get started. And that’s a good way you know that it was considered a good way to be able to get started in real estate without having a lot of capital. But now you look at an event like this, and those people are, they’re going to get crushed, especially if they don’t have the money to cover the rent.

Kirk Du Plessis  33:27

I think it’s, I mean, look, this is like this is the problem with I think just investing in general is this idea that if it is a little bit of money to get started then it is, you know, worth all of the upside potential. And I don’t necessarily always agree with that, it’s a little bit of money to get started, because you just don’t see all of the downside risks.

Kirk Du Plessis  33:46

And I think all these people who are doing Airbnb arbitrage, especially in some of these very expensive cities, and probably, you know, sign lease agreements for pretty healthy terms, because they knew they could rent at the time, these higher, you know, rents to Airbnb, they’re going to get crushed. Not only are they going to be responsible for the lease, but then if you know, the landlord goes after them in court, because they broke the lease, and then they have legal fees. And there’s so much that goes into this. I just don’t believe that it’s so simple to say, oh, you should do this strategy, because it’s easy and low, no money down.

Kirk Du Plessis  34:20

And you really have to look at all of the possible things that could happen. Like one of the things right now that’s really important to me, and has been for the last like a couple of years is really taking a look at like the liability risk of all of our properties. Like where do we really have the most liability risks. And now when we move forward and we start buying new properties, how can we layer protection in front of ourselves, so that we don’t have as much liability? And if that means we have to take a little bit of a haircut in return, then so be it because it’s worth it.

Robert Leonard  34:50

Yeah, a lot of people are always so concerned or are only concerned with the total return number and don’t consider other things and that’s not always the most valuable thing. I mean, of course, just like everybody I want to make as much money on my money as I can. I’m sure you guys do as well. But there’s a whole other component of this.

Robert Leonard  35:05

And I just recently did a Bitcoin episode on my other podcast. And on that, that episode, I told the story where I bought a Bitcoin a couple years ago, I owned it for a couple of days. And I literally sold it right away because I felt sick. I didn’t understand it. I couldn’t sleep well at night. And I know that sounds kind of crazy, but it’s just one of those components, maybe then the returns, it ended up going to 20,000 after that, like, almost right after I sold it. So the returns were there. I just, it just wasn’t worth the upside. Just wasn’t worth it for me.

Kirk Du Plessis  35:31

Yeah, I think I mean, yeah, like, right now, I’m super, super interested in just liability risk of everything, and just, you know, all the little ancillary things that you don’t really take into consideration until you start really tracking it. And, and I think that there’s a lot more to the password number than people would expect.

Kirk Du Plessis  35:49

So if you start factoring in, I mean, I’m even going as granular as saying, you know, how much does this cost to me from my CPA? You know, like, because I have this property and now requires my CPA to do yet another schedule, how much is that time costing me, you know, how much is all the attorneys fees? And I’m paying to do the leases and any evictions that we need to do. You know, how are we factoring those inappropriately, now that we have more data, we can do that. But it’s, it’s hard to do.

Emily Du Plessis  36:18

And you’re just, you’re not going to be able to do all that analysis. Now, so I think you have to really find, like I said, find the things that are the location, the numbers, and you’re going to learn a lot as you go, and you’re going to make mistakes. And that’s okay.

Robert Leonard  36:31

I don’t often get a guest on the show that’s as involved in the stock market, as well as real estate as I am. So Kirk, I’m curious to hear your opinion as to why you think, and I think it’s more common in real estate than it is in the stock market, at least in my experience, my anecdotal experience, people in the stock market seem to be more open to other investment strategies, but it seems like in real estate, they’re only real estate. And they almost feel like it’s mutually exclusive, and they can’t do anything else.

Robert Leonard  36:55

Why do you think there is such that dynamic in the real estate space where people in the real estate space think the stock market’s gambling, or it’s just not a good place for money?

Kirk Du Plessis  37:03

I think it comes down to the question of control, you know, so like, you hear a lot of times that people say, well, real estate is in your control, and you can control your real estate and you can, you know, manipulate the property. And to a certain degree, that’s totally accurate.

Kirk Du Plessis  37:17

But right now we’re seeing the actual antithesis of no control. I mean, if you’re in a real estate, you know, market that’s on the East Coast, or the West Coast or student area, or near convention center, you just had all the control stripped out of you in three days. And now you have no control over your property. So you could do all the painting and all the upgrades, but that’s not going to bring those people back to that piece of property, right?

Kirk Du Plessis  37:41

And so, I think that when people are in the stock market, they understand that they have a limited amount of control over what they can do and how they can choose to allocate their portfolio. And then they associate the risk in investing in the market to the things that they can’t control. Trump, China, Coronavirus, whatever.

Kirk Du Plessis  37:59

I think in real estate people have this false sense of control that they know they can control all of these different aspects when the reality is they can’t. That’s why you have to do things besides real estate. Real estate can be a core component. And you can love it, you can do 80% of it 90% of our whatever you want. But just like don’t do all of it. Right? Because eventually the big Black Swan is going to come and it’s going to get you at some point.

Robert Leonard  38:21

Yeah, I agree. I agree completely. That’s exactly how I think about it, as well. So Emily, I’m curious to hear about the time when you quit your full time job. How many deals have you guys done? How many units did you own before you decided to quit your full time job and go full time in real estate?

Emily Du Plessis  38:37

I think we were about, we had done what do we say, I think six deals at the time, which resulted in about eight doors. We had two duplexes and four, just like single they were the condos and the townhouses. And so yeah, we were by no means had this massive portfolio. So it was definitely scary. But as a teacher, you don’t really make all that much either. Because you’re very low. Yeah. So it was a low threshold that we necessarily had to get to.

Emily Du Plessis  39:06

But I can say that it wasn’t an easy decision. It was a very trying decision because I loved it. I love teaching, love my kids. But we had just like when we were newly married, we had a lot. We talk a lot at vineyards, I would say. But we talked a lot about what we wanted our life to look like. And so it was very much a lifestyle decision. We were at a point where Kirk was working now remote at home. And so being able to have income come in that replaced my income as a teacher allowed us to have three, three and a half years before our oldest Molly started kindergarten where we were totally living like a lifestyle by design.

Emily Du Plessis  39:45

So we could go and spend three weeks in Florida in the winter and escape the cold and no we could travel when we wanted to when we weren’t stuck to a normal schedule that we wouldn’t be once our kids start school. And so it was really a lifestyle decision. It was, I loved my job. I loved my kids.

Kirk Du Plessis  40:02

It was super scary. And everyone told us we were crazy.

Emily Du Plessis  40:04

And we were losing my insurance. We had to navigate that whole thing with like, teachers insurance is awesome. So like, we had to navigate that. I mean, people told us we were crazy. I thought we were crazy. Yeah. Where we live in western Pennsylvania, like, teaching is a very good job. And people get it and they stay there, like 30 years, and then they retire from there, like so they, whenever I said I was leaving my job, it was like, like your students so taboo, yeah, so taboo, but like, the time that we spent as a family and being able to travel and do the things that we did, you know, when I walked my daughter to the bus, that first day of school, the three years where I had, did I make the right decision? Should I have left teaching? I mean, when she got on the bus, I was like, I can’t get that time back. It was totally worth it.

Kirk Du Plessis  40:43

Yeah, I don’t think you’ll ever make a bad decision. You know, like, if you set yourself up, right? I don’t think you should jump into it, and just, you know, just wing and be like, alright, you know, Kirk and Emily said, we should do this, and we should do it, you know. But I don’t think that it will ever be a bad decision.

Kirk Du Plessis  40:56

Because, you know, like, now as an employer and hiring people, I would love if somebody came in and they said, you know what, I tried to start a business and it totally flopped and I learned a crap ton of, you know, stuff and I would love to, you know, bring that knowledge to you. I would look at that, as an employer and be like, yeah, that’s really powerful. So I feel like people have this idea that if I fail at this, like, I’m gonna be a failure. And you could learn so much from doing this. And so what if you fail? Because the idea is if you tried to do it, and let’s say you’re successful, like, how would that change your life?

Robert Leonard  41:25

You know, I’m glad you mentioned, the low salaries that teachers generally have, because I was thinking that but I was not going to be the one to say.

Emily Du Plessis  41:33

Yeah, we don’t make very much.

Robert Leonard  41:36

I mean, everything you guys said, I think it’s so true that that’s why it’s so hard is you’re giving up all the insurance, you’re giving up all the benefits. I think that’s probably one of the biggest things. And you know, like you said, it was your passion, you probably went to college for a while for it. I’m not sure if you have a master’s degree or not. But if you, yeah, so you do. So you spent five or six years in college, probably a lot of money on it. And so when you when you’re giving up something like that, it is a big decision. But there’s a lot of like you said lifestyle benefits that come other than just the salary. So definitely a really interesting dynamic for people to consider.

Emily Du Plessis  42:06

I think a lot of people get into real estate, like they want to get into it for the financial thing. But I think today, from what I gather, just from people I talk to, a lot of it is that lifestyle thing. I feel like lifestyle, like living that life by design is very much a component of what people want today versus maybe back when like our parents were. Because I don’t necessarily like telecommuting wasn’t there that the ability to have flexibility wasn’t around 20, 30 years ago. And now it is becoming so much more mainstream that I think people really look for not only the financial aspect of it, but the ability to kind of have some freedom with their lifestyle.

Robert Leonard  42:41

And you mentioned that one of the big thing that was hard for you was giving up your passion of teaching, you love teaching the kids. But what’s great is I know you have your own community, you have your own podcast, you have all of these things going on where you’re still teaching people. So now technology has allowed you to still be able to do that passion. Maybe it’s not kids, you’re probably not teaching real estate to kids, but you’re still teaching, right? So you’re still getting that passion out there. And you still get to do real estate and have that lifestyle that you want. So I think that’s that’s super amazing.

Robert Leonard  43:08

Alright guys, so that wraps up part one of my conversation with Kirk and Emily. Like I said in the intro, this will be a two part series. We will pick up in next week’s episode for part two right where we left off today. See you guys next week.

Outro  43:21

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