ITF 14 | REI Start

 

Exceptional real estate investors have been interviewed in this podcast to share and learn from their journey to achieve financial independence. But in today’s episode, we would be taking it on a new turn as we interview one of the co-hosts, Nick Monge, about how he started in REI. His love for hunting deals, helping fellow investors achieve financial independence, and experimenting with different strategies have made him find his real estate niche and be the investor that he is today! In today’s episode, get to know who’s on the other end of the microphone as we dive in and pick his brains as he shares his investing story. He will also share how he found the perfect market for him – Alabama. Learn from Nick as he shares how he is building his team, managing his growing rental portfolio, and overcoming the obstacles to be a better investor.

Listen to the podcast here


 

Nick Monge’s Story On How He Started In REI

I’m here with my buddy, Nick Monge. Nick, what’s going on?

Just another day of dirt biking. That’s pretty much what we did all day. We went down to The Springs. We found a new track. We were going fast and taking jumps.

Be careful out there. Your head looks hard, but I’m suspecting that it’s no match against any rocks or dirt.

There was a couple of sketchy times. I was going up a little jump and then it was loose gravel. Luckily, I didn’t fall off.

You’re a braver man than me. We’ve got an interesting episode. I did not bring on a guest. Instead, we realized that we haven’t talked too much about Nick. We want to dive a little bit further into his investing story, who the heck he is, what is he doing and what his goals are. Nick, what’s your story? How did you get into financial independence?

I’ve never been a house hacker. I know that’s one of the big things that we talk about. The way I was raised, my dad was active duty Navy for 24 years. My mom worked retail. My entire life I didn’t even think that college was an option. I was told like, “Go in the military because you’re going to get your college paid for you. You can learn a skill or trade. You can do your twenty years and you can get out and have a retirement.” That was amazing to me. I graduated high school from Brunswick High School up in Maine in 2010. I waited about 7 or 8 months before I got the job that I wanted in the Air Force.

I enlisted in the Air Force in February of 2011. As soon as I got to my first duty assignment in San Antonio, I immediately started taking college courses. I’m so happy I did because, throughout my nine and a half years in the air force, I got my Bachelor’s Degree and my Master’s Degree. I do not regret that at all. My decision to get into real estate, I don’t remember how it happened, to be honest. We had bought a couple of properties with our VA loan, one in Texas and Maryland, in 2013 and 2014. In late-2018, because we had some debt, we had decided we wanted to pay it off. I wanted to be done with it. I learned about BiggerPockets. I stumbled across it on Facebook one day.

We decided to sell our house in San Antonio because at that point it’s been six years and the market there appreciated well. We ended up selling it. We made about $65,000. We paid off all our debt and then I started listening to BiggerPockets and I fell in love with it. That’s all I did every single day. I stopped listening to music. At the gym, I started listening to podcasts and reading books and all that stuff. That’s where it all took off. I quickly learned about the 1031 exchange. I happened to hear it on one of the podcasts one day.

It was the perfect timing because it was the same time we were selling our house. We took those proceeds and we rolled it into a quad in Huntsville, Alabama, but with 1031, one of the rules is you have to roll all of your proceeds in the next property. The way that I structured this to pay off my debt was to bring my dad into it. I rolled all of the proceeds into the next property in Huntsville, but what my dad did was he wired me half of it. With that half, I paid off the debt, and then we pretty much partnered with my funds on that quad, but that’s how we got into investing.

A lot of terminologies there and these are common acronyms within real estate, too. VA loans, that’s Veterans Affairs loan. Why don’t you describe it to everybody?

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The VA loan is probably one of the best products known to man. What happens is you go to a lender whenever you joined the military, you are given the right to purchase a property with zero down. When you search for a house, you go to a lender, you get your certificate of eligibility. If you’re a veteran or active-duty military member, you get to use that and buy a house with nothing down. Sometimes you have to pay closing costs, but it’s huge. You don’t have to pay PMI or any of that stuff, too.

As an agent that has worked with a couple of VA loans, there is small stuff. It is a great product, but when you are looking for properties that aren’t perfect, the appraisal is much harder to do. The inspections are a little bit more rigorous. If you’re going to do this with a VA loan, which you should, don’t be afraid to come in a little bit higher because your offer is not going to look as good as a similar offer with a non-VA loan purchase.

Don’t be afraid to come in $5,000 or $10,000 higher than you would normally. Don’t be afraid to cover that appraisal gap, if you can. Your down payment is $0, so if you are able to cover that appraisal gap by a $400,000 house, that’s still less than 2.25% down. It’s almost nothing and better than any other product out there. Things to be aware of, but sometimes you have to make the offer look a little better with a VA loan.

Especially in a hot market because if people have the option to choose a conventional over a VA, it’s probably going to be a VA because they do have those extra requirements. The stricter appraisal and all of that junk. For the most part, we’ve had nothing, but great times with the VA loan. We’ve used it twice and it’s been solid.

It is a great product, but stuff to be aware of. If you’re out there putting offers on deals and wondering why you may not get one like that, that could be the reason why. The second thing you talked about was a 1031 exchange. What exactly is that?

It’s a tax-deferred exchange. When you sell a property and you can take the proceeds of that sale and roll it into a property of equal or greater value and it’s tax-free so you don’t have to pay taxes on that money. The great thing is you can continue to do 1031 exchanges. Let’s say that you sell that second property and you roll the proceeds into a larger property. You can keep going over and over. The main takeaway with the 1031 is you can take your proceeds tax-free and roll it into a bigger property that may produce more income.

You went into the military. You came out. You got your VA loan. You purchased a house in San Antonio, that house appreciated as most houses do. You took the proceeds from that sale. You 1031 it so you took the proceeds, funneled that into that more expensive quadplex in Huntsville, Alabama. You partnered with your dad on that. Now you’ve got this property in Huntsville, Alabama. It’s a rental property. You sold the San Antonio property, so now you’ve got four units in Huntsville, Alabama. Where did you live? Where did you go next?

I kept that property for about a year and I’ve sold it since. I owned it for exactly one year. I closed February 2019 on that one. On paper, the numbers were great. It was a great property on paper. However, these are not the type of tenants that I wanted to have. These were people with lower income that worked part-time jobs in lower-class areas.

They did not pay rent all the time. Sometimes they would miss a month or they would pay half. I had a great property manager and she stayed on top of them about it, but it was more of a headache than I wanted to deal with. Luckily, Huntsville was growing like crazy and it still is. February of 2019, I ended up selling that property for $80,000 more than I bought it. I didn’t do anything about it.

That’s natural appreciation with the market.

ITF 14 | REI Start
REI Start: Think of life as something like climbing Mount Everest. You’re not going to do it all in one go. You’re going to take a break and look at some of the views and enjoy the trip up.

 

When you compare $80,000 there to here in Denver, it’s very different because here the market is much higher than it is there. Thirty-three percent went up in value over the course of one year.

On lower dollar amounts, a higher percentage than it would be in Denver. $80,000 for a Denver property would still be amazing, but it’s 20%, 25%. You got the fourplex there, it appreciated $80,000, then what happened?

I sold that house. It was a quad. I took that money and I did another 1031 exchange. I bought a brand new construction in Huntsville, Alabama. The goal of this transaction wasn’t the cashflow. At this point, I wanted a property that was going to appreciate well in a very nice brand new neighborhood. I wanted to park the money so I didn’t have to pay taxes on it and have something that I know would grow over time. That’s what I did with that money. Other than that, I have purchased other properties there in Alabama. I do BRRRRs. I’ve completed a few flips out there. I started doing some virtual wholesaling.

Why Alabama? There are millions of markets in the US. You have no ties to Alabama. How did you pick Alabama? Why did you end up going with that?

When I sold the San Antonio house, I reached out to my buddy. He lives in the Denver area. I let him know. I was like, “I’m selling my house.” We talked a lot. It was one of those natural things that came up when we were chatting. He was like, “You should check out Huntsville.” I did a TDY there. It’s a temporary duty. He went out there and heard great things about it. I did a little bit of research and it seemed like a great fit. I quickly interviewed a few agents and I went with the best fit for me, who to this day, we still work together. That’s pretty much how it happened. A little bit of research and I jumped in.

You found a connection. That’s the thing. Going out of state can be daunting because there are so many options. When you have so many options, there is not one particular one you can pick. It’s better to find somewhere where you’ve got a connection, find someone who knows someone and run with it and make the best at whatever price you pick, whether it’s Huntsville, Nashville or North Carolina. You’re in Alabama and you brought your new builds. You sold the fourplex, you got the new builds. Is that the property that you got some flips going on? What’s your rental portfolio looking like?

We have that one. We have a duplex in Sylacauga, Alabama. It’s right outside of Birmingham. I have another property in Huntsville. It’s a smaller property. I bought it for $61,000 and I bought this in May of 2019. It’s now worth about $95,000. There is that. That’s four doors. We finished a flip. I have four buy and holds and we’re working on two flips.

It’s all in Alabama?

Yes.

What year did you have that San Antonio home?

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2013.

2013 you bought that and stayed there for a few years. When did you sell that?

December of 2018.

You stayed there for a while. Sold it 2018. That’s when your real estate investing started to take off. December 2018, you got the quad. You sold that a year later in December 2019. You got the new build in early-2020. That’s where you are. Now you’re working at doing some side stuff. You build a portfolio through fix and flips and BRRRRs and stuff like that.

That’s what I’m focusing on. I’ve found my niche. I’ve spent plenty of time building my team there in Alabama. I’ve gone through some good contractors and terrible ones. I can go off on a tangent on a contractor, but I have a great team and I feel super comfortable with my strategy. My main focus is to start getting some more cashflow. We’re going to start doing some more BRRRRs and build that portfolio. My initial goal was $5,000 a month in passive income. Once I get there, be ready to go higher because when do you want to stop? That’s my initial goal.

Climbing Mount Everest, you’re not going to do it all in one go, you’re going to take a break and look at some of the views and enjoy the trip up. You took a little bit more risk when you’ve got $5,000, $10,000. You’re no longer playing not to lose. You’re playing to win because you’ve got enough income to cover your expenses. Now you’re able to go without income for a few months. What’s next for you?

I started getting into wholesaling. I think it’s so fun. I enjoy hunting deals. That’s probably one of my favorite things to do. I’m a realtor here in the Denver area, so I use a number of strategies. I probably won’t go into it right here on the show, but if anybody wanted to reach out about it, I’m more than happy to discuss my strategies for finding off-market deals. That’s it. I love helping people achieve financial independence. I love looking for those house hacks, but aside from that, it’s finding the deals that excite me and putting those things together.

Give us a rundown of how you find these off-market deals. We don’t have to go super deep. Is it door-knocking or mailers?

I don’t do door-knocking. I would never do that because I’m not that type of person. I target either expired listings or there is the software that I use called PropStream. For wholesaling, I pull up multiple lists, whether it’s vacant properties, absentee owners or people in pre-foreclosure. I download the list. I skip trace them and I use Batch Skip Tracing. It’s a texting software that you can use to text all these people. You can click through 100 texts and blast people. A lot of people get pissed at you and they never want you to text them again.

Once in a while, you’re going to get people that are like, “How much are you going to give me? What’s your offer?” I don’t care if people get mad. At the end of the day, it’s a text, but you have to be turned down a couple of times because it toughens you up. It builds your character. Especially in this business, you need to have a pretty solid backing. You need to be tough because people are going to tell you all the time, “Go away. Screw up.” That’s it. I text blast people. I get people under contract. I take that contract, go assign it to somebody else and make a good little check.

ITF 14 | REI Start
REI Start: Financial independence allows you to have enough passive income to be able to make your own daily decisions, and not have to worry about hitting the clock.

 

Wholesaling is a fun thing to get into if you like deal hunting. Personally, I don’t love that. That’s why wholesalers can be valuable, especially if they’re good ones is that I don’t want to spend my time finding a deal. I want to spend my time analyzing a deal or growing the agent business. That’s what I like to do. That’s why you got teammates.

I got into subject to. Here is my strategy. I’ll jump right into it. I was in the Air Force for nine and a half years, so I understand the VA loan. It’s very highly leveraged. To be honest and upfront, I target VA loans. I go on the MLS and I look for properties that have been on the market for over 40 to 45 days. I’ll reach out to the agent and be like, “It looks like you may be having issues selling this house. Would they be interested in like an assumption or a subject to?” They’re like, “What’s a subject to?” I explained it to them. Subject to is when it’s an assumption, the only difference between a true assumption and a subject to is within assumption. The buyer has to go to a lender and get their own financing.

With a subject to, you don’t have to do that. The financing stays in place. I tell these sellers, I’m like, “The loan is going to stay in your name, but you’re going to sign the deed to me. I’m going to make those payments on your behalf.” You can close it with the title company. You can pay $200 and have a notary come out and do it for you. It’s a huge cost savings right there. What happens at closing is the seller signs over a limited power of attorney and an authorization to release information. Those two documents gives the buyer or me the ability to go to their lender and make those payments for them.

If you were to not make those payments, will the seller be responsible?

That’s the downside. That’s a risk those sellers have to take, but sometimes those sellers have to put their current situation, whatever it is, and put that in the front and consider what they’re going through in their life. People have different things. I closed one up in Severance, Colorado, to give you an example of what type of sellers may be motivated to do these types of deals. This property has been sitting for a while. I looked at the history of the property. It’s a VA loan. They bought it for $388,000 and the property was only worth about $405,000.

They barely had any equity in it and they had to mark it up to try to break even. I ended up reaching out to the agent and I explained to him the whole shebang and he was like, “They may be interested in this.” About a week later, he got back to me. He was like, “They want to close on this as soon as possible.” The husband and wife were going through a divorce. Each of them went to their own apartment. I don’t know why one of them didn’t stay in the house, but they were paying three mortgages. One for each apartment and then the house. They didn’t have the money to pay for it.

I went in there, I bought a subject to the existing financing. I seller-financed that thing. I wrapped it and I seller-financed it to an end buyer. I got $22,000 down and I’m seller financing it at 6% interest with a five-year balloon. I got $22,000 down. I’m cashflowing about $400 a month on this thing because I marked it up. I assumed the loan at $388,000 and I sold it for $409,000.

$20,000 increase on your down payment and that’s in your pocket now. You got the $400 a month. That’s passive income and in 5 or 4 years you’re going to be the rest of that, which I guess you have to pay off the loan still.

I take it back. I listed it for $419,000 not $409,000. In the end, I should be getting another $9,000 check after paying off the loan.

That’s how you make money appear out of nowhere. If you’re seeking out problems and you’re solving those problems and anyone gets paid to solve a problem. That’s what you did. Is there anything else we should talk about or can we head out to the last part of the show?

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We’re good.

Let’s head on to the final four. I’ll ask you all four questions. What book are you reading now?

I started reading The Obstacle Is the Way by Ryan Holiday. I’ve only got two chapters in. Based on what I’ve read so far, it’s a pretty cool concept how overcoming those obstacles is how you become better. That’s pretty much what I’m picking up from this book so far. I enjoy it. I bought the whole set so I’m excited to get into it.

Ryan Holiday is a great author. That guy is next level. The second question is what is the best piece of advice you’ve ever received?

A piece of advice that I hear a lot is you want to have a solid foundation in whatever it is that you want to do. At the end of the day, I know a lot of people have analysis paralysis and take forever to make a decision on what they want to do. The best piece of advice that I got was to jump in. Go for it. If you’re going to try something new, don’t half-ass it. Jump in and do your best. Put all of your efforts into it. That’s the best piece of advice I got.

The third question is what is your why?

My whys are freedom and time. I want to have passive income, whether it’s through BRRRRs or the subject to deals. My goal is to have enough passive income to make my own daily decisions, do what I want, not have to worry about hitting the clock and be able to spend time with my kids and wife.

The fourth and final question is where is the strangest place you’ve ever urinated or defecated?

In 2011, I was blackout drunk. We call ourselves the A-team in tech school. It was me and three other friends. There were certain girls that were allowed to be in the group. We went out every single weekend. It was the same routine, every single weekend. Every weekend, I was probably way drunk than I should have been. One weekend, we went to this place called The Grove. It was an apartment complex in San Angelo, Texas. There was this guy and he let us hang out at his apartment. It was a big party apartment. I don’t remember this, but I peed all over his wall.

I’m sure you’re not allowed back in his place ever again. We’ve all had embarrassing things happen. That’s funny. I’m glad we drew that out of you.

ITF 14 | REI Start
REI Start: Seeking out problems and solving them is how you make money appear out of nowhere.

 

I still remember the next morning I woke up, I do not remember anything. My buddy, James, was explaining to me what happened. Somebody was in the bathroom and I couldn’t go in there. I’m looking behind my shoulder and I’m smiling at my friend. My buddy James was like, “Nick, what are you doing?” I’m smiling at him. At the same time, I’m walking up and down this wall.

Where can people find out about you?

You can hit me up on Facebook. It’s Nick Monge. I’m not as big on Instagram as I should have been, but if you want to hit me up there, it’s @Ceo_Me_Designs. A little backstory there. I used to build rustic furniture. I had a rustic furniture company and I made a lot more money doing that than I did from the Air Force. I got tired of doing that and I quit it, but that’s the story behind that handle.

It was great talking to you, as always. I will see you here again, but until then be careful on that dirt bike and we’ll get going.

It was good talking to you. I appreciate your time.

 

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