Whitney Elkins-Hutten  03:18

And then 11 months later, I sold the property and it wasn’t until that time that I finally realized, this was amazing. Like I have money in my pocket. Even though I’ve been sweating bullets the whole time. My roommates have been paying the mortgage for me. I was even pocketing $300 on top of that. And I was like how many more deals like this can I do? That’s really what got me started.

Robert Leonard  03:41

Yeah, when you have a really good first deal like that, that makes you certainly really interested in real estate. 

Whitney Elkins-Hutten  03:45

And somewhat overconfident. My second deal did not go nearly as well. It went a little sideways. As we’re all you know, I think you’re bound to have as a real estate investor, something go a little sideways. I got it on my second deal. I came out that was leading right up until the 2008 crisis. So I actually wasn’t invested in in mountain town on my second deal. So that was 2006. And things started softening there but got out somewhat unscathed. And then just started to kind of take a little hiatus for a while. 

Whitney Elkins-Hutten  04:17

At that point in time I’d met my husband. And my husband was like, “Thank goodness, we got out from underneath that house.” and like, I got it. I got this thing figured out. And now I know what to do to make a deal go right. And I know what not to do to make a deal go right. And then you know, we just kind of launched into a couple more 11 flips after that.

Robert Leonard  04:36

And did you use your 401k to get started?

Whitney Elkins-Hutten  04:39

I did not. Actually my seed money was $7,000 that I borrowed from my grandfather and paid him back with the equity out of the house on my first purchase. So there started may seed money. We did four live in flips that way. After our fourth flip, my husband and I took kind of a pause. I was in the middle of finishing up my doctorate. The housing crisis in 2008, to 2010, had really kind of taken a grip on the country. And we both decided to kind of focus on our careers and actually building a family at that point in time, too. So, in the capital we’ve built up, that’s what actually started our investing career into buy and hold rentals away from the live in flipping into buy and hold rentals. But then we quickly realized that we were going to run out of capital. That’s when I learned how to unlock my 401k.

Robert Leonard  05:27

So I do want to definitely talk about the 401k piece. But before we do, define what a live in flip is, for someone who may not have heard that before.

Whitney Elkins-Hutten  05:36

It’s an interesting concept, I guess I was doing a combination of live in flipping and house hacking. So to define both terms. House hacking is where you buy a house and you put roommates in it, if it’s a single family house, you run out your rooms, or if it’s small multifamily unit, like one to four, you rent out the other units, and you have the rent cover your mortgage as well, all or most of it, so you’re reducing your housing costs. So that’s a house hack. 

Whitney Elkins-Hutten  06:01

A live in flip is where you move into the house, you’re renovating the house. And then you’re living there for a year or two to qualify for your capital gains exemption. And we can go over that a little bit, because that’s what makes this tactic so powerful when you’re getting started. And then you move the property after two years. Take that capital, harvest it and then go get traded up for another deal.

Robert Leonard  06:25

I actually started in the exact same way. My first deal, I stumbled into a house hack accidentally. And then I ended up selling that. And then I live in a current live in flip right now. It’s very minor. It’s not like a big rehab, volka or anything like that. But it’s definitely a live in flip. Talk to us a little bit about what you were mentioning there of the two years to avoid capital gains tax.

Whitney Elkins-Hutten  06:50

So there’s a capital gains exemption. So currently, as it stands right now, and I always like to just anytime that you’re working with taxes, or legal or anything like that, consult somebody that’s professional in this area. So if you talk to your CPA, you will figure out that a single person can buy a property, any property, it doesn’t have to be one that needs to rehab and flipping. 

Whitney Elkins-Hutten  07:12

But if you buy a property, any gains that are acquired in that property, over the course of five years, you only have to live in the property to at a loss five years. And you can actually, if you sold the property, you get all those gains tax free up to $250,000 for a single person, and $500,000 for a married couple.

Robert Leonard  07:35

And are those amounts of the profit or the same price?

Whitney Elkins-Hutten  07:37

Of the game. So the game would be whatever your basis is. So if you bought the property, say for $200,000 and you put $50,000 in rehab, and then sold it for $500,000 a few years later. You actually your gains $250,000 because you actually had your purchase of $200,000 and then your rehab costs of $50,000. And that’s your basis. So you could essentially clear $250,000 tax free.

Robert Leonard  08:08

And so is it anything above that starts to begin being taxed? Or if it’s above that, then the whole amount is taxed?

Whitney Elkins-Hutten  08:15

Great question. I would talk to your CPA about that. I think it is a sliding scale. We actually, our third live in flip, we sold it actually before two years. Our last live in flip, we’ve been in for 10 years, this house phone I’m sitting in right now. We flipped it so loud that I wanted to keep it. That might change the summer because the market is really taken off here. So we’ll see. But our third live in flip we sold at 23 months. We didn’t actually didn’t have it for as long. 

Whitney Elkins-Hutten  08:45

And so we paid a sliding scale difference between the what we would have paid in the full game had we just sold out right, versus what the clock ticks down. I guess I should say. I’m just saying that changes all the time. So that’s why I always say to a CPA, because if you’re doing that six months later, it could change.

Robert Leonard  09:03

Yeah, definitely. We’re recording this late March. By the time this comes out, things could be different, especially with everything we have going on. So what we want to do on the show is give you guys ideas, start thinking about the creative different ways you could think about tax strategies, not necessarily go file your taxes based on the information that you hear on the show. Get some ideas then go talk to your CPA and handle the actual tax filings with them. But at least get some looking ideas. Yeah, some base knowledge from us here. So what

Whitney Elkins-Hutten  09:31

That’s a powerful strategy. 

Robert Leonard  09:33

Yeah. That’s what I did with my house hack, my first one and probably do the same with the live flip that I’m in now. I just crossed two years tomorrow, actually. Yeah, so I plan on doing the same thing

Whitney Elkins-Hutten  09:45

Happy birthday!

Robert Leonard  09:46

Yeah. Yup. So what do you think is the best way for a new investor to get started? Should they do a house hack, live in flip, go straight for a rental? What do you think is the best? 

Whitney Elkins-Hutten  09:59

It depends. I know, that’s kind of like the classic real estate answer. It depends, well, it does depend, it depends on your interest as an investor, what are you interested in doing. And it also depends on the amount of time you want to put it involved into an investment, especially if you’re going to be living in it. Like you can’t step away, you don’t finish the kitchen that weekend, it’s gonna be forever a reminder in your face. And then also like what your capital that you have to get started, what is that capital piece to get started. 

Whitney Elkins-Hutten  10:30

So, you know, if somebody is really new to investing, very little capital to get started, I would probably encourage them to do some sort of house hack, if they can gather up a three and a half percent down payment on a first time homebuyer purchase plan. Or I would even encourage them to maybe partner with me on their family to pick up their first property. House hacking is so powerful because you actually eliminate one of your largest or significantly reduced one of your largest bills. 

Whitney Elkins-Hutten  10:59

So if you’re doing that, and then you’re actually saving what you would have paid in housing on top of what you’re collecting and the house hack, you can actually catapult your investing career.

Robert Leonard  11:11

Yeah, I agree. I think house hacking is probably the best way to get started. And if you want to do a deep deep dive into house hacking, go back and listen to my episode with Craig Carlock. I think it was episode three or four, he wrote the book on House hacking. So definitely go back and listen to that one, we do a deep dive into it. Now I want to talk about your 401k strategy. I know a lot of people are looking for creative ways to come up with money to buy their deals. And I would classify as using your 401k money as a creative way. So love to learn a little bit more about what you did and how you access your 401k money for real estate.

Whitney Elkins-Hutten  11:44

I took full possession of my or almost full possession on my 401k. So within a 401k, my employer at the time offered a Ross side of my 401k and a traditional side of my 401k. So I, you know, just take a moment to go over the different pieces. The traditional side is pre tax money that gets set aside, okay. So you’re kind of kicking the can down the road. Getting your income to grow now tax free, and then you’re paying taxes when you withdraw it. On the raw side, you’re paying the historically low taxes that we have now. 

Whitney Elkins-Hutten  12:18

And then it grows tax free. So it’s after tax money. And then later on down the road, when you get past 59 and a half, you can withdraw the money tax free. Up until 59 and a half and our current laws you get penalized when you take the money out then of the rough out of your 401k. Now there becomes a there’s an a crazy little nuance here that if you leave your job or you are let go from your job to separate employment, you now can move that entire 401k into a self directed environment, if you would like. 

Whitney Elkins-Hutten  12:53

I highly suggest if you, you know separate from an employer, moving it into rolling it over, don’t cash it out, okay, until you know what you want to do. That’s called a rollover and kind rollover to Vanguard or fidelity or something like that. But you can even do what we call a self directed provider, meaning that they don’t just offer stocks, bonds and mutual funds, they also allow you to they’re a trust company that helps you invest in other asset classes. Maybe metals, or syndication deals, or, in this case, real estate. 

Whitney Elkins-Hutten  13:24

Now what I did was, I looked at what I had put in my Roth, we’ve been maxing out my Roth side of my 401k $18,000 to $19,000 for almost, I think eight years at that point in time, so there was a good chunk of money in there. I could take out my entire basis on that Roth side tax free. So that basis is what I put in. So my gains I could take out. But I of course I got penalized, right, because I took them out early. So again, I partner with my CPA, and I actually, I mean, I was crying when I got like, oh, I mean, we all knew that that was coming. 

Whitney Elkins-Hutten  14:01

Because my entire operations team and I’ve been let go, I was the last one left. So I was upset that day, you know, because I had two properties in my name under contract, and I didn’t think I was gonna be able to close on them. But we got that all figured out in a couple hours. But then by the end of the day, I was kind of doing the happy dance because I was like, Oh my gosh, you know, my husband was like, we’re pausing. We don’t know what we’re gonna do. 

Whitney Elkins-Hutten  14:21

Are we gonna continue investing? Are we gonna pause here? What are we going to do? And I’m like, I just got my 401k back. We’ll find more properties. Anyways, that was a new way that I did. However you can, like I said, there’s so many different things that you can do if you can get your 401k into a self directed environment.

Robert Leonard  14:39

Yeah that’s funny, I actually did again, something very, very similar. I rolled over my 401k to a Roth IRA and then I was able to withdraw the contributions tax free, not the gains, but contributions. And I use that to buy a piece of real estate. That was what I used to buy my first house hack. And that was a great way for me and I think it could be a good strategy for a lot of people listening to the show. Do you think using retirement accounts in this way could be a good way for new investors?

Whitney Elkins-Hutten  15:05

I think it’s definitely something to consider. Especially you have to look at the opportunity cost of what you’re going to do with that money. So if you have enough money in there to still have reserves set aside for your own personal situation, now, that can be other funds that you might have like a cash account or something like that. If you have funds for your own personal situation, let’s say literally three to six months of reserves, and then you have reserves for whatever property you’re going to purchase, I think that’s a great starting place. If your Roth account is the only thing that you have, and you’re relying on it to play reserves and rainy day fund and all that sort of stuff, no, no, not at all.

Robert Leonard  15:45

Yeah, definitely. You have to take in to consideration your whole financial picture before you just use that. Yeah, I agree. What do

Whitney Elkins-Hutten  15:53

we have COVID? We haven’t even talked about that the elephant in the room. But, you know, I think even now, like in the middle of this pandemic, it’s just a great reminder that reserves and cash are King still. You can investment in position or at strength that way.

Robert Leonard  16:11

Yeah, I think, I think having reserves especially now and we’re recording this March 31, which is in the myth of COVID-19 Coronavirus Pandemic. We were looking I run I’m an accountant by trade. So I run all the financials for our rental properties, and I was looking at ours, I invest almost exclusively with my business partner. And we both work full time corporate jobs, so we don’t necessarily need to live off the cash flow. So when we started investing together a couple years ago, we made the conscious decision to not take any money out of the rentals. 

Robert Leonard  16:37

We decided to leave it all in the business. So we were looking at it today, we have almost nine months of reserves in our portfolio, and we have our mortgage paid ahead by three months. So we have essentially a year set of reserves. So even if we don’t get any rent from our tenants for next year, we’ll be completely fine.

Whitney Elkins-Hutten  16:55

We can kind of debate all we want, if our tenants are going to pay tomorrow will be the.. April Fools! No, just kidding. But I mean, tomorrow will kind of be the telltale sign of what’s going to start, you know, we’re gonna get visibility on what’s actually really, truly going to happen. Again, I think this is a great reminder, to go back to the fundamentals, you know, make sure that you have your own personal financial situation, that emergency fund built up. That’s what’s gonna help you sleep well at night. 

Whitney Elkins-Hutten  17:21

And even if you’re still nervous as an investor, that’s good. I’m glad people are nervous right now, even though they have reserved funds. I mean, a it tells me you’re human be it tells me that you’re not going to just kind of not think about how to optimize the performance than your asset right now.

Robert Leonard  17:37

We were actually a bit surprised. We had all of our tenants pay us a week early for all of our properties. Oh I checked, we use cozy, and we got the email notifications for our properties. And we had all our payments come in. And I think it was like 23rd of the 24th. We both looked at each other. And we were just like, “Did that just really happened. Do we actually really just get all of our April rent a week early?” We were contemplating going back and forth. 

Robert Leonard  17:57

Like are we actually even going to get any of our rent this month, just like you said, I mean, that’s obviously the the big issue that a lot of landlords are dealing with. But yeah, and I now I’ve recorded it. I have two podcasts. One, called Millennial Investing and the one we’re on today about Real Estate. And I released an episode on that show all about COVID. And it’s an Invest Stock Investing Podcast, and I spent almost the whole episode talking about personal finances. Because I think whether you’re doesn’t matter what you’re investing in, you need to have your personal finances in order, you have to come to the table, the investing table with from a place of financial strength.

Whitney Elkins-Hutten  18:29

And in understanding of how money actually works, right? Even if it’s just basic, I mean, I don’t think you have to be. I think on the real estate investing journey, somebody is just starting out, they’re going to pick up a lot of tips and tricks and tactics and strategies, they’re going to, you know, become very ingrained in that. But just to get started. I mean, I see so many people, you know, in various forums that I’m a number of that are like, “Hey, I got $5,000.” and, you know, my day job, how do I get started? 

Whitney Elkins-Hutten  19:01

And it’s not to say that you can’t, you just have to, if you don’t have the money, you have to partner with somebody that does because I think it’s you know, today aside, you know, the current situation aside, being very overleveraged, you’re putting yourself in a kind of behind the eight ball, you’re just kind of setting yourself up for a world of hurt.

Robert Leonard  19:18

Yeah, just because you don’t have a ton of money to get started doesn’t mean you can’t, you certainly can. There are ways but that doesn’t necessarily mean you should. I always say I always

Whitney Elkins-Hutten  19:29

 Because you can do…

Robert Leonard  19:29

Exactly, exactly. People need to make sure they have reserves, I think that’s the biggest thing and I want people to know that your first deal is never going to make you rich, but it can put you in a big hole to start with. Try to not lose big on your first deal. So if you don’t have a ton of money, and maybe it’s not the best time to get started if you don’t have the reserves because then if you end up going into a big deep hole, that second deal is going to be so much harder whereas if you just hit a single on your first deal, then you can continue on.

Whitney Elkins-Hutten  19:57

Another kind of piece of the mathematics that I think people miss is I do too, I use leverage with all my properties. Leverage can cut both ways. So you hear two different things. One that you know, the value of real estate never goes to zero. That’s what makes it better than stocks, bonds and mutual funds. And that, you know, leverage can actually accelerate the profits on an investment. Yes, it can. However, if you use leverage on a property, you can go negative. 

Whitney Elkins-Hutten  20:22

And it can go negative pretty darn quickly, especially if a new investors starting off using leverage partner with somebody that’s already done it before get some really great guidance. I mean, you know, like we said, we can’t drive the point home enough, have reserves so you can kind of dig yourself out of that.

Robert Leonard  20:38

If you set yourself up appropriately with the right amount of reserves, you can take advantage of that leverage that you can get in real estate that you can’t necessarily replicate in a lot of different ways. And you can be pretty aggressive with that leverage as long as you have the reserves aside, like our portfolio overall, we’re pretty levered. We’re at 85% overall loan to value across our portfolio. I’d say that’s pretty levered. But we have a year of reserves, so we’re fine. But if you are levered 80 to 85%, you can’t have no reserves.

Whitney Elkins-Hutten  21:09

Exactly. You know, case in point, I was speaking with an investor a couple of weeks ago. And very nervous about whether his tenants were going to pay on April 1st, and I was kind of digging into situation, like, “Okay, well tell me more like what’s really, really going on here?” Nine properties in Idaho, you show me all the numbers on I’m like, “This looks amazing.” And two things were wrong. One, all of his tenants were in the hospitality or food and beverage industry. 

Whitney Elkins-Hutten  21:34

And not to say that it’s necessarily wrong but like both industries are on the sidelines right now. And then two, he only had $6,000 in his bank account for both his own personal situation and his property. That’s where you have to kind of take the big inhale, exhale, you’re just like, “Oh, wow.” Yeah, that’s a challenge.

Robert Leonard  21:54

Yeah, that’s the issue. and I try to teach people to is, it’s a couple months without cash flow, of course, that’s gonna hurt like, that’s not great. You know, nobody wants that. Of course, as investors, rental property investors, specifically, we want the cash flow. But if you have to go two, three, even four months with no cash flow. As long as you hold on to that property, and you’re able to make it through that dip, then that’s the important part right? 

Robert Leonard  22:16

Is you’re not going to have a bad deal, just because you missed two or three months of cash flow, if but if you are forced to sell at a loss or you just can’t hold it forever, that’s where the deal just starts to go south that way. So now, I want to talk about one of my personal favorite topics of real estate investing, and that’s investing out of state, why did you decide to invest long distance. 

Whitney Elkins-Hutten  22:35

And it goes back to you don’t know what you don’t know. When we decided to make the transition from doing live in flipping in just grid in buckets of cash, and then really putting in that cash to use to create cash flow. That was a whole like mind blowing concept to us, like, we can take this we can get a bucket of cash and get an income with it. “What?” but we just had no concept of that. What drove us to do that was my husband works for the government. And then in 2016, the election happened. 

Whitney Elkins-Hutten  23:05

And for whatever reason, it dawned on us and that election, his benefits were just totally at the whims of political play. It didn’t matter who was in office. Just did not matter. So we decided that we had to take matters into our own hands. So we had that going on. And then also at that point in time, my company that I worked for, we brought on a new CEO, who we knew was going to reposition the company for sale. And generally, operations teams do not survive this type of transition. 

Whitney Elkins-Hutten  23:36

So I knew my job had an expiration date on it. So combine those two factors, remember, like we need an investment strategy that’s going to create cash flow for us and then also a future value of appreciation. So I was like, guess what, I nodded my head. We’ve looked into buying more property in order to rent. However, all the people in our close network bought property locally, and they were totally happy if they just made 100 or $200 a month on an $80,000 downpayment or $100,000 downpayment.

Whitney Elkins-Hutten  24:09

You know, do the math that is very poor, poor return. I mean, we were one toilet breaking a plumbing issue away from having negative cash flow on that property. Anyways, we did it, we invested so we got going, we put a renter in place and then the toilet broke. First two months, we didn’t have cash flow. I’m like, oh boy, this is not going to get us to our goal like we’ll achieve our appreciation goal. But as the more I learned about real estate and the more I learned about money, that is not putting ourselves in a position and investing in strength. 

Whitney Elkins-Hutten  24:41

The other thing, my daughter, we were dragging her to open house, after open house, after open house. She actually could evaluate a property very quickly. She was three at the time. So she would run in the house and she’d be like “Mom, it has no shiny things” and the you know, “Appliances in the kitchen and the bathroom smells and the carpet funny colors. Can I go sit with Car?” like we don’t have our time back. And that was the other reason why we wanted to invest. 

Whitney Elkins-Hutten  25:04

And so at that point time, we only had our first asset probably held it, we’re a month two or three, I just pushed pause. I was like, “Listen, we don’t have the cash flow, we will eventually get the appreciation but how many more houses do we have to buy in order to achieve what we want to get there?” and then we don’t have our time back. So went back to the drawing board. And I was like, “We have to figure out how to buy houses were less expensive.” So I started combing all over Colorado. 

Whitney Elkins-Hutten  25:33

And eventually, I ran across a couple of forums, some forums on bigger pockets, and somebody said, they can buy a cash flowing house. In Indianapolis for $100,000, it would pay $1,100 in rent, I was doing the math and like, OMG, that $100,000 House made more cash flow than my $335,000 house here in Colorado. And I had less money invested in it, I’m like, and then somebody else gets to manage it. So I get my time back. So once we kind of put all those things in place. 

Whitney Elkins-Hutten  26:06

Again, understanding what we were interested in, what our investing strategy should be like how to create that alignment, and then understanding how we were going to take our capital and invest it, it just was a no brainer to go out of state.

Robert Leonard  26:20

You talked about those other investors only making $100, maybe $200 a month in cash flow. And I bet that that’s probably not even taking into consideration any reserves for capex, repairs, vacancy, you know, anything along those lines. I’m sure that’s not included in there. So when you take those into consideration, it’s most likely a negative cash flowing asset? 

Whitney Elkins-Hutten  26:39

Oh, yeah. 

Robert Leonard  26:40

I’m familiar with that because people will just run the mortgage payment, and then the rent and say, Oh, that’s gonna be my cash flow. But that’s not quite how it works, of course. And I know, I definitely know what you’re talking about there. And it’s funny because I live in the greater Boston area. Prices are similar to Colorado and I had came to the same realization is we can buy a $400,000 property here, make $100, $200 a month in cash flow, or we can go and buy assets across the country and get significantly better cash flow. And so I invest as well exclusively long distance now at this point, unless it’s like a live in flipper house hack.

Whitney Elkins-Hutten  27:14

So we closed on our first property here in Colorado. And we put it under contract on Christmas Eve, that was fun. Great time to buy real estate, by the way, closed on it ended January, we actually ended up selling it 11 months later, and we quadrupled our cash flow with that one transaction. Actually, and I should clarify it just by taking the equity we had put down our down payment. We quadrupled the cash flow. We actually did get some gain off of the sale of that property and so we were able to insert that too but our down payment here, we were able to for asset that in another market. With proper numbers in place too, with your capex, your vacancy and your maintenance and all of that.

Robert Leonard  27:55

Talk to us for someone who is new to the concept of long distance investing. Why does this even work for someone say somebody I know a lot of people listen from the bay area or in New York City. And they might hear you’re buying these assets for these prices, and you’re getting this much cash flow? How does this even work in other parts of the country?

Whitney Elkins-Hutten  28:13

I kind of sense two different questions there. People have to live everywhere, they have to work everywhere. So really what we’re doing is we’re trying to find a cashflow market where a growth market right? Where the population’s growing, the jobs are growing, businesses are moving and incomes are growing. Vacancy is coming down. So we are able to find market that meet those metrics. Again, you’re stacking all of the investing cars in your favor. 

Whitney Elkins-Hutten  28:37

So if you’re investing in a market like that, then you have to treat it like a business and build your team as if it were a business. So a business owner doesn’t necessarily, you know, if I’m opening a retail chain, I don’t have to be at every one of those store locations every single day for it to work, I just need to know how to a pick the location, and then hire the right team to run that location. That’s a very similar concept when you’re doing out of state investing. 

Whitney Elkins-Hutten  29:05

Most people don’t invest it from a business mindset like that. But essentially, that’s what you’re doing. You’re picking your team players. You’re a.k.a. the operators that are going to run your business and very strategically and markets that are going to stack this investment pars in your favor.

Robert Leonard  29:21

How are you finding those team players in those long distance markets?

Whitney Elkins-Hutten  29:25

There’s a whole list of ways that you can do it, you know, referrals, this one talking to other investors. There’s some like really covert ways that you can do it by doing online research as well. And you know, I mean, Zillow will give you a ton of information and so will Trulia. I would refrain from just like doing a Google search and taking the top five people that pop up in your search. Now, that might yield you a couple names to look at. But really your number one source is going to be other investors. 

Whitney Elkins-Hutten  29:51

Okay, going on forums like bigger pockets asking around whose quality they’re not necessarily which companies are posting their services but really digging into see who’s using them. And then you know, get online and do some research, you know, who’s posting properties on Zillow and Trulia for listings? Do you like their listings? Are they appealing to you as a potential buyer or a potential renter? There’s so many different ways. I teach all my students or clients like about 15 different ways to find different team members.

Robert Leonard  30:20

Do you think long distance investing is a strategy that a relatively new investor could implement? Or do they need to have quite a few deals under their belt before they consider it?

Whitney Elkins-Hutten  30:30

No, I think it’s definitely something that a new investor can implement, I do challenge. I would highly suggest if you’re going to invest out of state to get some sort of support in order to do that, whether it’s a mentor or a coach, or actually flying into the market and getting boots on the ground and finding the team members yourself there and interviewing them one on one. You do need a lot of support in order to get going with that. 

Whitney Elkins-Hutten  30:54

The biggest mistake that I see with newer investors, is they just, again, do that Google search, do a Yelp search, pick the first property manager, the first realtor that comes up and they’re not seeing the results that they want.

Robert Leonard  31:08

What are some of the most common misconceptions you found surrounding out of State Investing? How do you debunk those misconceptions?

Whitney Elkins-Hutten  31:16

I think the number one misconception that I generally have to work with on people is, especially you know, somebody is like in the Bay Area where their home cost $2 million or three, I mean, I could be worth three $4 million. It kind of like what you mentioned earlier, they’re like, “How can I buy $100,000 property in the Midwest?” people actually like live there. Like their frame of mind, they have a location bias. And that’s going on. I did a couple of high end flips last year. 

Whitney Elkins-Hutten  31:42

I mean, in these high end flips in Kansas City, I mean, they made put my house in Boulder to Shane, and they were amazing. We flew out to Kansas City took a look at it. You know, personally watched a couple of them, you know, after the team finished them up, and I’m like, “Can we transfer those? I would love to live here.” But yeah, it’s just the land value hasn’t been driven up like it has another areas. But I would say the number one thing is location based bias. 

Robert Leonard  32:06

Yeah, I think the same thing. And a lot of the properties we own, we own in Texas, and their 4,5,$600,000 houses where I live. And I do not live in those types of houses here. So like the properties we buy down, there are $75,000, but up here, they’re $400,000 or $500,000 houses. So it’s just the deals are out there. You just You just need to know where to look.

Whitney Elkins-Hutten  32:29

Yeah, so speaking in Texas, my mom passed away a couple years ago, and we had to deal with her property. And her property was five times the size of our property, very high end, and it costs half as much. Now the taxes and taxes.

Robert Leonard  32:47

It’s crazy the sum of the prices that you can find when you go long distance. That’s exactly what I realized when I was a relatively new investor going long distance. I saw the prices and I almost thought they were too good to be true. I was like, I could buy a $65,000 property is gonna cashflow $300 a month on a single family property. That’s not bad. You know, you’re not gonna find anything like that in the greater Boston area.

Whitney Elkins-Hutten  33:08

Well, you also have to think, you know, there’s a lot of millennials right now that are geo arbitraging. For example, Indianapolis is really developing their tech side of their industry. Somebody can work in New York City, pay out the Wazoo, or a single bedroom flat, or they can move to Indianapolis, and it’s still hold the same job. And they’re renting out like a primo house. The other thing, you know, when we talk about different biases, there’s a class bias too. 

Whitney Elkins-Hutten  33:36

Sometimes people have had to kind of take off the rose colored lenses, which you know, if you’re coming in, and you have, you know, say like you’re more seasoned professional, and you might have some assets to your name, you kinda have to take off those rose colored glasses, because majority of the population you live in a C plus or B class asset.

Robert Leonard  33:58

Yeah, one of my favorite things about long distance investing is always live where you want to live, invest where the numbers make sense. It’s just it’s pretty simple. Really. I mean, for me, it’s just kind of how I approach my investing and how I approach my portfolio. No, absolutely. Working with all the clients that you have, what do you find to be some of the most common limiting beliefs for relatively new real estate investors?

Whitney Elkins-Hutten  34:23

Well, I guess let’s start the beginning. You know, I think one of the first limiting beliefs is that they don’t know what they don’t know. And then that’s gonna hold them back. Another thing is, when somebody is trying to think about getting into real estate, I mean, really there I you know, I’ll rephrase the question in my head. I mean, it’s really about what are their objections to getting started? It’s either the vehicle of itself, right? Will real estate actually yield me the results that I won? Is it really too good to be true? 

Whitney Elkins-Hutten  34:51

Can you actually buy a house? Put a tenant in that house than they pay rent? Like can you trust that vehicle? Then it’s a matter of controlling the outside forces, you know, these are also the things that you cannot control, we cannot control that a COVID pandemic was going to happen. This is a black swan event. And we’ve already talked how beaten to the ground what we need to do in order to prepare for those type of events in the future. 

Whitney Elkins-Hutten  35:14

But those are things that how can you set yourself up investing from a position of strength to mitigate those external events? Then you have to overcome your internal belief. Can you actually execute on the strategy and this is where I find a lot of my work is done within new investors is actually helping them understand that yes, you can, we’re going to create a roadmap, we’re going to create a business plan, it’s going to be grounded in numbers, not exactly what you read on, you know, not what you read all over a forum or in a book. 

Whitney Elkins-Hutten  35:45

We’re not having to synthesize all that information. We’re going to create a very structured roadmap plan, that you’re going to know exactly how to execute on a daily basis. That way, when we have a external event that does happen, we can Bob and we can adjust from there.

Robert Leonard  36:01

When you create that plan, what are you including in it? What does that plan look like?

Whitney Elkins-Hutten  36:05

You want me to give you out all my goods? Now I’m just kidding. I people when they get into real estate, or they jump on a forum, such as bigger pockets, there’ll be like, “Hey, you know, I’m so and so I’m from, you know, Arkansas and getting a new to investing. Where should I start?” Somebody goes, “Oh, what’s your goals?” To me, That is the worst place to start. Because we haven’t asked all those internal questions. So really, we have to pull back and ask ourselves why we’re getting started. 

Whitney Elkins-Hutten  36:30

When you ask yourself, why don’t do it just one time, you have to do it multiple times. I mean, this is one of my favorite exercises that Tony Robbins does, and a lot of other mindset coaches do. But usually your first why you’re going to actually find that you’re running from something that’s going to be the fear motivator, that’s going to keep you working, maybe it’s getting out of a job, or you have to like pay a bill or I don’t know, like there’s some sort of fear motivated drives to get away from a pain or a situation. 

Whitney Elkins-Hutten  36:56

But the deeper that you dig, you’re actually finding out that you’re running towards something. And majority of the people that I end up working with, we’re attracted to work with each other, because we’re trying to take control of our time to spend it how we want to maybe it’s the family, friends, traveling the world to go do something more purposeful that they’re passionate about, but they want control of their time. And you have to start with that process to figure out what you’re running from and what you’re running towards. 

Whitney Elkins-Hutten  37:21

Then we’re switching to the numbers piece, like, what is it that we’re trying to achieve? Okay, when we know what we’re running towards? What’s going to fund us being able to have that choice in our life? And most people get attached, though, like “I want 10 houses, by the end of the years.” Wait what is 10 houses give you? It’s generally $1 amount. So we’re breaking all of that down on, you know, the dollar amount that’s actually going to get them to their end goal, but creating, working backwards to create milestones along the way, where that actual path is far more achievable for them. 

Whitney Elkins-Hutten  37:56

And it’s only after we’ve done that hard work that we’re diving into. What are you interested in? What time do you have? And what is your capital? That’s actually the third step. Once we have those three pieces together, and the third step, then we’re getting into setting our goals for the first year. Again, you know, mapping out the whole business vision for the next 5 to 10 years. And then we’re building the business. We’re getting into the how, which is where a lot of people actually start is the how.

Robert Leonard  38:25

Yeah, I love that same structure. I actually do something similar because and I forget where I learned it but someone, I remember I heard someone say once that I needed to make a list of like the wildest things that I ever want in my life. Figure out how much they cost, and then just see what the total was. And they said that I would be surprised because it wouldn’t be as much as you thought, even the most crazy things you could think of. 

Robert Leonard  38:48

And it’s true. I mean, when you start thinking of all these ideas, that seems like it’s going to be like incredibly unattainable. But when you start to look at the numbers, I mean, it is a lot of money, right? Like if you want a mansion, it’s gonna be a lot of money, but it’s something that’s achievable. Like for me, I’ve always loved supercars have a big car guy, I love motorsports, things like that. I’ve always wanted to own something like that.

Robert Leonard  39:08

So I always thought it was gonna be unattainable. But when you start to break it down into numbers, you’re like, Okay, well, that’s only four units, five units, six units, it starts to be a lot more realistic, then, you know, I have to save $500,000 or, you know, whatever that number is.

Whitney Elkins-Hutten  39:22

I know Tim Ferriss has four hour workweek, he has like an hour and process like this, and there’s Buying Your Dream, and then there’s renting your dream, right? Like, do you have to own like five cars? Or can you just build up the cash flow to where you can like rent a car a month? There’s so many different ways to achieve a goal. But unfortunately, I see too many people start at the goal piece when they don’t actually know what it is that they want.

Robert Leonard  39:48

Yeah, I mean, it’s impossible to build if you don’t know what you’re building towards, right? 

Whitney Elkins-Hutten  39:49

Yeah. 

Robert Leonard  39:53

So I like to ask the guests to give the audience an actionable step to take when they finished listening to this episode.  I think listening to the podcast is great learning everything that we talked about is obviously important. You need the educational piece of this. But for someone who hasn’t done their first deal yet, but they’re passionate about real estate, they want to get started. What is the first action step that they should take when they’re done listening to the podcast? When this ends, what is the first thing they should want to do? That’ll get them one step closer to their goal of buying their first rental property?

Whitney Elkins-Hutten  40:27

Yeah, rewind five minutes work those first three steps of those plans. I mean, really, I mean, I laid out a very high level what that recipe is, so figure out what your why. Don’t just ask at once, like your first time you ask, it’s gonna be something that you’re running from. We want to dig deep and find out what you’re running towards. So ask why, like 4,5,6,7 times, challenge yourself. Sit with that question, figure out what that and why is. Dig deep on your numbers. I understand what your finances are, okay. 

Whitney Elkins-Hutten  40:57

Oftentimes, people will pick a number out of the air. Their like, be on an investor call, and I’ll be like, Okay, like, you know, “What kind of capital are you looking to have like that will fund this why?” And they’re like, 10,000 a month, and I always interrogate reality, I’m like, Okay, why 10,000? And 99% of the time, they cannot justify why 10,000. So we’re backing into that number. 

Whitney Elkins-Hutten  41:17

The worst thing you can do as an investor is understand that your financials, you pick your financial goal based on what your income is, not actually understand what your expenses are, and what will actually get you financially free. Because a lot of times people will replace their income only to find out that their income was not enough. And then third step, you know, understand what real estate investments are you interested in? Understand what time that you have to put into this real estate investment. Make sure those two are aligned. And then we can start setting goals around that.

Robert Leonard  41:52

I think those are great action steps. So everybody listening to the show. When you’re done listening to the episode, go take action on those things that Whitney just mentioned, and get started. One step closer to your real estate goals and make 2020 your best year yet. Whitney, thanks so much for coming on the show. I really enjoyed our conversation and I know the audience is going to gain a lot of value from it. For those interested in learning more about you, connecting with you, and just learning all about what you have going on, where’s the best place for them to go?

Whitney Elkins-Hutten  42:20

You can find me at Ashwealth.com. So a-s-h-w-e-a-l-t- h.com. You can also email me at ash wealthceo@gmail.com.

Robert Leonard  42:32

I’ll be sure to put links to both those in the show notes so everybody can go connect with you there. Whitney, thanks so much.

Whitney Elkins-Hutten  42:39

You’re welcome. Thank you for having me.

Robert Leonard  42:41

Alright, guys, that’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

Outro  42:47

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